A Dual Parent Perspective on Control and Performance in International Joint Ventures: Lessons From a Developing Economy
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Dual
Parent
and
Perspective
Performance
Joint
Ventures:
in
Control
on
International Lessons
From
Developing Economy
a
Yadong Luo* UNIVERSITY OF MIAMI
Oded Shenkar** OHIO STATEUNIVERSITY
Mee-KauNyaw*** LINGNANUNIVERSITY
This study compares the controlperformance relationship for foreign versus local parents in international joint ventures in China. Transaction cost analysis is found more applicable to foreign than to Chinese parents. Both overall and specific controls are associated with performance for foreign parents, while only specific control is for ontrolhas longbeen a topic of interest in organizationtheory (Eisenhardt, 1985). It involves the use of power, authority,and other systems to monitorand influencethe activitiesand
Chinese parents. Under goal incongruity, Chinese parent control is associated with foreign parent dissatisfaction with venture performance, but not vice-versa. Having a majority stake improves performance from a foreign parent perspective, but not from that of the Chinese parent.
outcomes of a firm's subunits and its members (Pfeffer and Salancik, 1978). Scholars interested in international joint ventures (IJVs)and the multinational enterprise (MNE) also pay close attention
*YadongLuo is Associate Professor in Strategyand InternationalBusiness at the University of Miami **Oded Shenkar is Ford Motor Company Chair in Global Business Managementat the Ohio State University ***Mee-KauNyaw is Professor of Managementand Vice President of the Lingnan University, Hong Kong The authors gratefully acknowledge helpful comments by the anonymous reviewers of this special issue JOURNAL OF INTERNATIONALBUSINESSSTUDIES, 32,
1 (FIRSTQUARTER2001): 41-58
41
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JOINT VENTURE CONTROLAND PERFORMANCE
to control, especially in its relationship to performance (Geringer and Hebert, 1989; Mjoen and Tallman, 1997; Yan and Gray, 1994). In the context of IJVs,control refers to the process by which one entity influences, to varying degrees, the behavior and output of another entity through the use of power, authority, and a wide range of bureaucratic,cultural, or informal mechanisms (Geringerand Hebert, 1989). Research into the relationship between control and performancehas been controversial (Geringer and Hebert, 1989). It has been criticized for lacking both theoretical and empirical rigor (Mjoen and Tallman, 1997), as evidenced by the inconsistent results it has produced (Yan and Gray,1994). One key problem has been the tendency to take only one partner'sperspective, typically that of the foreign firm. A model based on a single perspective implicitly assumes that the impact of parental control on perceived venture performanceis the same for foreign and local parents, a hypothesis for which empirical support is not only lacking but unlikely. Respective parents differ in national and corporate culture as well as in their contributions to and
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