Foreign Parent Strategies, Control and International Joint Venture Performance

Abstract

This paper develops and expands upon an important connection between foreign parent firm strategies, the manner in which they control their international joint ventures (IJVs), and the performance of those IJVs. Parent firms’ strategies refer to strategic motives, importance, focus, and competitiveness. Foreign parent firm control is conceptualized across three dimensions including the control mechanism, the control focus, and the extent of control. Our empirical evidence is based on the survey data collected from Finnish firms that established IJVs with local firms in the 1990s. The empirical evidence show different strategies used in IJVs by foreign parent firms required different control structures in IJVs. In addition, the firms that adapted control structure in their IJVs according to their strategies were more satisfied with their IJV performance than those who did not. As such, the paper takes a step further from just being concerned about parent firms’ strategies and moves our thinking toward understanding how to realize such strategies through proper control.