The effect of group composition and autonomy on the performance of joint ventures (JVs): an analysis...

International Business Review 12 (2003) 17–39www.elsevier.com/locate/ibusrev

The effect of group composition and autonomyon the performance of joint ventures (JVs): an

analysis based on Spanish export JVs

Miguel A. Lopez-Navarro∗, Cesar Camiso´n-ZornozaDepartament d’ Asministracio d’Empreses i Marketing, Universitat Jaume I, Campus del Riu Sec,

12080 Castello, Spain

Received 22 May 2001; received in revised form 13 May 2002; accepted 30 July 2002

Abstract

This paper analyses the effects of group composition and autonomy on the performance ofexport joint ventures (JVs). The basic argument is that group composition has a significantinfluence on the performance of JVs and, at the same time, this effect is moderated by thedegree of autonomy held by the JV general manager. To lend support to this argument, wetake insights from two complementary theoretical approaches: the resource-based view of thefirm and the transaction cost theory. The hypotheses set forth are tested on the basis of asample of 83 Spanish export JVs. The paper contributes to the literature providing evidenceon the influence that export JV composition has on performance. It also suggests that autonomydoes not directly affect export JV success, but it does, however, have an indirect effect bymoderating the relationship between group composition and performance. 2003 Elsevier Science Ltd. All rights reserved.

Keywords: Export joint ventures; Joint venture composition; Joint venture performance; Autonomy

1. Introduction

In recent years, strategic alliances have taken increasing importance as a meansto control competitive forces and to enter into activities involving risks too high to

∗ Corresponding author. Tel.:+34-964-72-85-55; fax:+34-964-72-86-29.E-mail address: [email protected] (M.A´ . Lopez-Navarro).

0969-5931/03/$ - see front matter 2003 Elsevier Science Ltd. All rights reserved.doi:10.1016/S0969-5931(02)00086-0

18 M.A. Lopez-Navarro, e. Camison-Zornoza / International Business Review 12 (2003) 17–39

be taken as individual ventures. The joint venture (JV) is one of the most frequentlyused contractual forms in strategic alliances. However, JVs are often described ashighly unstable forms of organization, with high coordination costs and relativelyhigh failure rates (Harrigan, 1988; Hennart, Kim, & Zeng, 1998; Kogut, 1989).Consequently, one stream of research on JVs seeks to identify factors that enhanceor impede the performance of either the JV itself, or of the JV’s parent firms. Itsuggests that the success of both domestic and international JVs may be a functionof JV composition (e.g. Demirbag & Mirza, 2000; Hill & Hellriegel, 1994; Hitt,Dacin, Levitas, Arregle, & Borza, 2000; Park & Ungson, 1997; Saxton, 1997) andJV autonomy (e.g. Hill & Hellriegel, 1994; Lyles & Reger, 1993; Newburry & Zeira,1999; Zeira & Parker, 1995).

JV composition can condition the development of the relationship since it affectsmembers’ behaviour and, consequently, the dynamics of the collaboration process(Killing, 1988; Parkhe, 1993). The right composition is a necessary condition forattaining the goals set by the alliance because it provides a good joint workingrelationship and allows for the development of synergies and cooperative partnerbehaviour. However, empirical findings are limited and inconsistent and, as Sarkar,Echambadi, Cavusgil, and Aulakh (2001) note, further research in this area isrequired. In addition to alliance composition, governance structure plays an importantrole in the success of the relationship (Grandori, 1997; Ring and Van de Ven, 1994).Governance structure has often been used to describe the hierarchical chart of therelationship and, in the JV context, the relevant question in terms of governancestructure is autonomy—greater autonomy means greater hierarchical control. As Yanand Zeng (1999) note, in some JVs, managers from the parent organizations are veryactive in determining the strategic direction taken by the relationship, whereas inothers, the JV management team is able to make its own choices with little inter-vention from the parent firms. The effect of autonomy on the efficiency of JVs hasbeen extensively examined in the literature, and also reveals contradictory results(Newburry & Zeira, 1999). Hence, further research on this issue is also needed.

In this paper we attempt to develop a better understanding of the effect of JVcomposition and autonomy on performance by analysing data from 83 export JVsmade up of Spanish firms. Group characteristics are taken together with the JV man-agement autonomy to estimate their separate and combined effects on performance.We specifically suggest that autonomy and JV composition cannot be dealt withseparately, as only a balance between these two factors will render optimum levelsof performance. To lend support to this argument we take insights from two comp-lementary theoretical approaches: the resource-based view of the firm and the trans-action cost theory. By taking this theoretically pluralistic approach, we can attainmore thorough explanations of the complex phenomenon of JVs than would be poss-ible with a more unitary approach (Ramanathan, Seth, & Thomas, 1997).

Export JVs were the object of our study. Alliances have been suggested to be animportant means for overcoming resource and capability deficiencies and for enhanc-ing the likelihood of success in company internationalization (Beamish, 1999; Zach-arikis, 1997). Nonetheless, while JVs have become a highly popular strategy to gainaccess to international markets, most international business research has focused on

19M.A. Lopez-Navarro, e. Camison-Zornoza / International Business Review 12 (2003) 17–39

the cooperative strategies between one foreign firm and one local firm, the so-calledinternational joint ventures (IJVs). Very little is therefore known about domesticexport JVs as a strategic option to access overseas markets (Makino & Beamish,1998; Pan & Tse, 1996).

Following this introduction, we first analyse the elements related with group com-position that, according to the two theoretical approaches adopted, are decisive inexplaining JV performance and secondly, we analyse the moderating effect of auto-nomy on the relation between group composition and performance. This is followedby a description of the methodology adopted in the empirical analysis and the presen-tation of the results. Finally, some implications of the findings are discussed and themain conclusions put forward.

2. Theory and hypotheses

The resource-based theory and the transaction cost theory are two perspectivesthat have become considerably popular in recent years. Although both approachesaddress questions on interfirm cooperation, they differ considerably in terms of thefactors believed to influence organizational action and their consequences on per-formance.

According to the resource-based view, sustained competitive advantage derivesfrom the resources controlled by firms, which are valuable, rare, imperfectly imitableand non-substitutable (Barney, 1991; Wernerfelt, 1984). These resources can beviewed as bundles of tangible and intangible assets, including the firm’s managementskills, its organizational processes and routines, and the information and knowledgeit possesses. In an increasingly global competitive environment, it is difficult for asingle firm to possess all the resources required to develop and sustain competitiveadvantages while simultaneously trying to build new ones (Harrison, Hitt, Hoskis-son, & Ireland, 2001). According to Madhok and Tallman (1998), strategic alliancescan be taken as appropriate organizational mechanisms for gaining access to assets,competences and specific capabilities when (a) the firm does not possess the entirebundle of resources or capabilities needed for the sustainable earning of rents in aparticular field of activity and lacks the capability to develop them competitively in-house; (b) markets are unable to adequately bundle together these same relevanttacit resources and capabilities; (c) their potential acquisition from another firm isproblematic due to the fact that they may lose most of their value when separatedfrom the whole. Although the resource-based approach has not been systematicallyapplied to strategic alliances, it provides excellent potential for explaining the forma-tion and performance of JVs (Das & Teng, 2000). The resource-based view suggeststhat the rationale for JVs’ formation lies in the value-creation potential of theresources that have been pooled together (Combs & Ketchen, 1999; Eisenhardt &Schoonhoven, 1996; Madhok & Tallman, 1998). But where does the rationale forJV performance lie? The presence of an adequate combination of resources and theirsatisfactory integration are both arguments at the core of the resource-based debatein relation to JV performance (Das & Teng, 2000; Madhok & Tallman, 1998).


Whereas the resource-based view is concerned with the management of resourcesin a manner that increases competitive advantage (Peteraf, 1993), the transaction costperspective is primarily concerned with efficient transaction management through theadoption of the least-cost form of governance under the assumption of opportunism(Williamson, 1975, 1985). Partner resource interdependencies are not taken intoaccount, but rather all the emphasis is placed on the identification of actions thatminimize governance costs and that, in turn, maximize performance. Governancestructures are devised to economize on bounded rationality and to simultaneouslysafeguard transactions against opportunism of adverse selection and moral hazard.In transaction cost theory, the exchange conditions are not directly associated withalliance success, but only with the selection of the best organizational arrangementthat minimizes the costs of governing the relationship (Combs & Ketchen, 1999).However, as Park and Russo (1996) point out, transaction cost economics could beused to gain a comprehensive understanding of JV success/failure. As these authorsstate, a JV is an intermediate form of governance that shares properties from bothmarkets and hierarchies. It is therefore subject to analogous, hybrid forms of thetransaction hazards attributable to both ends of the governance continuum. JVs aredesigned to achieve the objectives of various individual organizations. However,partners may behave opportunistically in order to achieve their own objectives asopposed to the collective objectives of the relationship. As conditions of substantialuncertainty and complexity prevail, the more likelihood is that parties will behaveopportunistically. Hence, when the conditions associated to JV composition increasethe partnership complexity and the potential for destabilizing partners’ conduct, theprobability of JV failure is higher.

On the other hand, in the JV context, the relevant issue in terms of governancestructure lies in the JV’s autonomy. Greater autonomy implies greater hierarchicalcontrol and, according to transaction cost arguments, in situations in which the com-plexity and uncertainty of the JV are high, greater JV autonomy (more hierarchicalcontrol) can lead to higher JV performance. The rationale for more hierarchical con-trol as a response to the proclivity of parties to behave opportunistically under com-plex and uncertain situations is based on their ability to assert control by fiat, providemonitoring and align incentives (Williamson, 1975, 1985). Consequently, we suggestthat the direct effects of group-composition factors on JV performance will, in turn,be affected by the governance structure of the relationship—in terms of JV auto-nomy.

In summary, the position contended in this paper is based, on one hand, on theassumption that JV performance is influenced by group composition in two ways:first, when partner and JV management characteristics allow for an adequate inte-gration of resources for attaining synergies and the right development of the jointactivity; secondly, when group composition enables a decrease in conflict related toproperty-sharing and a reduction of opportunistic partner behaviour. On the otherhand, it is based on the assumption that the governance structure of the relationship,in terms of JV autonomy, moderates the effects of group composition on its perform-ance. Specifically, under conditions of high uncertainty and complexity, the resort


to a more hierarchical governance structure proves to be a more efficient alternativein terms of transaction costs.

2.1. Influence of factors related to group composition on JV performance

2.1.1. Interdependence of resourcesFrom a resource-based view, the advantage of JVs is based on the adequate inte-

gration of the resources provided by the various partners for their common use.Hence, the way these resources are linked will have a significant influence on theperformance of the relationship (Das & Teng, 2000; Madhok & Tallman, 1998).Research indicates the importance of firms complementing each other in terms ofresources and capabilities when formalizing a cooperative partnership (Dyer & Singh,1998; Hill & Hellriegel, 1994). The complementarity of resources creates mutualinterdependency and facilitates the effectiveness of alliances (Harrison et al., 2001;Madhok & Tallman, 1998; Parkhe, 1991). Complementarity may be understood asthe degree to which partners can provide the JV with resources and capabilities thatcould collectively generate higher rents than when put to use by each individual firmseparately (Dyer & Singh, 1998). In the case of export JVs, complementarity takesplace on the basis of a particular type of resource, namely the products the partnerscommercialize through the alliance. The greater the degree of product complementar-ity, the greater is the interdependence (Parkhe, 1991) and thus, given the chance ofgreater synergies in marketing and other group-related benefits, the greater the pros-pect of tangible profits for the partnership will be (Welch & Joynt, 1987). Greaterinterdependence among partners emphasizes the sense of mutual need, favourscooperation and promotes the effectiveness of the alliance (Sarkar et al., 2001; Smith,1997; Smith & Barclay, 1999). On this basis, we propose our first hypothesis:

Hypothesis 1: Resource interdependence among partners will be positivelyrelated to export JV performance.

2.1.2. Partners’ capabilitiesThe value of the partners in a relationship depends on resources in the form of

assets, but also on their capabilities in the alliance context (Nooteboom, 1999). Capa-bilities and familiarity of the partners with the tasks that are the subject ofcooperation must be considered (Killing, 1988). The greater the capabilities of thepartners in relevant areas of the cooperation activity, the less complex will be thetask that they are undertaking and performance of the JV will be enhanced (Killing,1988; Shamdasani & Seth, 1995; Stuart, 2000).

Export JVs have a specific purpose, namely the commercialization of the partners’products in foreign markets. International activity constitutes a specific aspect ofbusiness operations, characterized by a greater degree of uncertainty and greaterrequirements in terms of resources in relation to domestic activity. The inter-nationalization process of a firm has been classified as an evolutionary process(Johanson & Vahlne, 1977, 1990). Each stage is characterized by specific capabilitiesand by certain organization behaviour patterns, circumstances that create different


problems and different resource requirements. This leads us to consider in whichphase export JVs are presented as an appropriate strategic option. The first stage ofthe export process is characterized by an opportunistic behaviour towards exportactivity, where the firm has to overcome certain doubts concerning its capability tocompete at international level (Root, 1987). At this stage, managers show an attitudewhich is still not greatly committed to the development of foreign markets (Cavusgil,1984). According to these circumstances, export JVs do not appear to be a goodsolution for tackling this first stage. Its exploratory nature makes it difficult for firmsto commit resources to the collective activity and reduces their availability for thecoordination of group efforts. In general, it would seem that successful jointexporting venture performance arises where firms are already export marketing ori-ented and fully appreciate the benefits and limitations of the JV (Bradley, 1985;Strandell, 1985). Therefore, the formation of an export JV by firms that have noexperience at international level and, consequently, are not familiar with the tasksrelated to exporting, may not be an effective alternative. On the basis of the above,we hereby set out our next hypothesis:

Hypothesis 2: In the case of the partners, the absence of a minimum level ofexperience in international activity, which provides them with some basic capa-bilities related to this activity, constitutes a factor that will have a negative effecton the performance of the export JV.

2.1.3. JV management capabilitiesManagement capabilities are key contributors to the entire bundle of firm resources

that enable some firms to generate rents (Castanias & Helfat, 1991, 2001; Combs &Ketchen, 1999). Managerial capabilities represent some of the most valuable, uniqueand hard-to-imitate resources and, consequently, their quality has important impli-cations for firm performance (Castanias & Helfat, 1991, 2001; Peng, 2001).

General manager capabilities are a central issue in the JV performance (Harrisonet al., 2001; Killing, 1983; Schaan & Beamish, 1988). In particular, as the executivewho is ultimately responsible for organizing and directing the resources of the JV,the JV general manager has the potential to create rents by using his or her humancapital to make and implement strategic and operational decisions. Moreover, thetask of JV general managers is complicated. As Schaan and Beamish (1988) note:(a) JV general managers must simultaneously accommodate the interests of two part-ners; (b) they often face a great deal of ambiguity in terms of defining both partners’criteria of success and must deal with issues of commitment and communicationbetween the two partners. Hence, in addition to designing and to implementing theJV strategy, the general manager will perform the difficult task of maintainingcohesion within the group, acting as a mediator in resolving conflicts. In this way,his or her leadership and negotiation capabilities will provide an incentive for theactive behaviour of the members and will contribute to an appropriate level ofcohesion inside the group, which will also have a positive effect on the JV perform-ance. Accordingly, we propose:


Hypothesis 3: JV management capabilities will be positively related to exportJV performance.

2.1.4. Organizational compatibilityThe exploitation of the benefits (synergies) derived from sharing of resources from

different partners will be conditioned by the existence of a common organizationalfit (Dyer & Singh, 1998; Madhok & Tallman, 1998). From a resource-based view,value generated from JVs is enhanced when partners have different resource andcapability profiles yet share similarities in their organizational characteristics (Sarkaret al., 2001). Organizational compatibility reflects similarity in goals and objectives,as well as similarity in operating philosophies and corporate cultures (Bucklin &Sengupta, 1993). It creates an atmosphere that facilitates the achievement of jointgoals, reduces coordination costs between partners and serves as a means for behav-iour control (Das & Teng, 1998). In contrast, organizational incompatibility amongpartners is likely to impede their ability to make sense of each other, and lead tobehaviours associated with high levels of dysfunctional and political conflict, suchas reduced information sharing and the distortion of facts (Bucklin & Sengupta,1993; Sarkar et al., 2001). Furthermore, partners’ dissimilarities give rise to problemsof ambiguity (Zeira & Shenkar, 1990), thus creating a state of confusion that couldlead to the failure of the relationship. Consequently, we suggest that:

Hypothesis 4: Organizational compatibility between the partners will be posi-tively related to export JV performance.

2.1.5. Number of partnersThe number of parent firms constitutes a key factor in determining JV complexity

(Killing, 1988; Park & Russo, 1996; Zeira & Shenkar, 1990). First, as the numberof partners increases, the chances escalate that there will be ex-post disagreementsabout the original aims and statutes of the contract. In addition, as this numberincreases, it becomes more difficult to measure individual contributions to the collec-tive action—the transaction costs of monitoring contractual terms increase. Specifi-cally, this creates a problem of incentives; as for cooperation, since it might bedifficult to assess individual partner performance, they will tend to minimize theircontributions and benefit from the rest of the members, so-called free riding problems(Alchian & Demsetz, 1972; Garcıa-Canal, 1996; Grandori, 1997). These consider-ations lead us to propose the following hypothesis:

Hypothesis 5: As the number of partners increases, so does the probability of areduction in the performance of the export JV.

2.2. Moderating effect of autonomy

Group composition is important for JV success, but what is the most effectivegovernance structure to achieve higher performance? Governance structure is oftenused to describe the hierarchical chart of the relationship and, in the JV context, the


relevant question in terms of governance structure is autonomy. The question of howmuch autonomy can be given to the JV general manager is currently a major issuefaced by researchers (Hill & Hellriegel, 1994; Killing, 1983; Lyles & Reger, 1993;Newburry & Zeira, 1999; Zeira & Parker, 1995). By limiting autonomy, parent com-panies can guide the policy and actions of the JV as well as monitor, coordinate andintegrate their activities with those of the JV. However, autonomy is necessary toallow JVs the freedom of action required to successfully accomplish their goalsbecause multiple partners will often give confusing directions and there is also aneed to adapt to a changing environment.

Cooperative partnership complexity affects the adoption of any governance struc-ture in order to reduce incentive problems and achieve better interorganizationalsystem coordination (Grandori, 1997). Hierarchical control, as a more effectiveresponse under conditions of substantial uncertainty and complexity, is based ontheir ability to provide monitoring and to align incentives (Williamson, 1975, 1985).While the importance of behavioural uncertainty and appropriation concerns as arationale for hierarchical controls is well understood in the context of the transactioncost theory, the role of coordination costs and the uncertainty associated with themas a basis for hierarchical controls has been less developed and may be equallyimportant (Gulati & Singh, 1998). Specifically, both incentive and coordination costsconstitute the transaction costs (Milgrom & Roberts, 1992). In line with this, wemaintain that JV performance will increase if a higher complexity of the agreement(due to appropriation and coordination problems) is accompanied by greater hier-archical control.

Taking the variables related to JV composition, complexity is, first of all, a conse-quence of the number of partners. Thus, when this number increases, so does thecomplexity of the partnership (Killing, 1988; Park & Russo, 1996; Zeira & Shenkar,1990), which has led us to hypothesize that a negative relationship exists between thisdimension and performance. Nevertheless, this effect can decrease as the governancestructure becomes more adequate. The presence of a greater number of partnerscreates incentives and coordination problems, making it more advisable to resort togreater hierarchical control—i.e. more JV autonomy—to increase JV success(Alchian & Demsetz, 1972; Grandori, 1997). On this basis, we set out our nexthypothesis:

Hypothesis 6: When the number of partners is higher, an increase in JV autonomyis likely to be associated with higher export JV performance.

Greater complexity is also the consequence of the uncertainty associated withjoint activity. This uncertainty is conditioned by two of the factors related to groupcomposition, namely the capabilities of the partners and the capabilities of the JVmanagement. The partners’ capabilities related to the activity that is the subject ofcooperation affect task complexity (Killing, 1988). In fact, rationality in the decision-making process is viewed as a necessary condition for JV success (Shortell & Zajac,1988; Thomas & Trevino, 1993). Nevertheless, it would be difficult for rationalityto occur when the partners lack the necessary capabilities for making decisions


related to the matters that must be examined. It must be borne in mind that uncer-tainty is not only a consequence of the absence of information, but also of the organi-zation’s capabilities to process this information (Grandori, 1984). Previously, and asa basis for these arguments, we hypothesized that partners’ lack of the basic capabili-ties related to international activity has negative effects on export JV performance.Nevertheless, this effect can be reduced if the partners allow the JV management tocontrol the activities of the alliance. As partners’ capabilities become insufficient topredict not only the probabilities of the possible relevant events but also what theymight be, the uncertainty about their future behaviour increases and a higher hier-archical control is more appropriate. Additionally, the absence of the necessary capa-bilities in relation to joint activity makes it difficult for partners to be able to coordi-nate their interdependence appropriately. Thus, it seems reasonable to expect that agreater level of autonomy will allow better performance to be achieved. Previously,we also hypothesized that performance was determined by JV management resourceswhich are able to run the cooperation activity effectively. The greater the degree ofautonomy granted to the general manager, the greater the effect of his or her capabili-ties on performance will be. In situations where the JV management shows a highcapability in reducing parent companies’ uncertainty and in solving incentive andcoordination problems, a higher autonomy is more appropriate to achieve a betterperformance. For example, as Beamish (1988) argues, IJVs located in less developedcountries are generally granted less autonomy, due in part to a lack of managerialexperience or insight within the country, in order to avoid lower performance. Theabove arguments lead us to set out the following two hypotheses:

Hypothesis 7: In the absence of a minimum level of experience in internationalactivities, which implies lower partner capabilities in relation to this activity, anincrease in JV autonomy is likely to be associated with higher export JV perform-ance.

Hypothesis 8: When JV management capabilities are higher, an increase in JVautonomy is likely to be associated with higher export JV performance.

In addition to the greater effect of the level of uncertainty in situations wherefirms lack the necessary capabilities related to the activity that is the subject ofcooperation, the effect of ambiguity is also worthy of consideration. While uncer-tainty is linked to a lack of information, ambiguity is related to the existence ofmultiple and conflictive interpretations of information (Thomas & Trevino, 1993).Ambiguity suggests that decision actors understand and interpret existing informationdifferently. Previously, we hypothesized that a lower level of organizational compati-bility leads to more ambiguity problems, increasing uncertainty about partners’ futurebehaviour. Nevertheless, these transactional problems can be compensated byincreasing JV autonomy (Newburry & Zeira, 1999). On the other hand, similarorganizational values reduce coordination costs and serve as a means for behaviouralcontrol (Das & Teng, 1998), making it less advisable to resort to a higher hierarchicalcontrol. This leads us to our next hypothesis:


Hypothesis 9: When organizational compatibility is lower, an increase in JVautonomy is likely to be associated with higher export JV performance.

Hierarchical control in alliances can effectively address the incentive and coordi-nation costs resulting from interdependence (Gulati & Singh, 1998). However, incases where the interdependence of resources is high, it seems reasonable to assumea greater need for interaction, defined in terms of the frequency and extent of contactbetween the parties, given the greater need for cohesion and joint work. As Miller(1987) states, a higher degree of centralization/hierarchy leads to a reduction in theneed for interaction between lower level units in the organization, a circumstancewhich could entail a certain isolation or fragmentation among these units. Contactbetween managers from both firms is needed because they must work together toachieve synergies (Harrison et al., 2001). Consequently, it can be argued that incases where a high level of interdependence exists, resorting to a high degree ofhierarchy may not be an effective alternative. In accordance with the above, we setout our last hypothesis:

Hypothesis 10: When interdependence between partners is lower, an increase inJV autonomy is likely to be associated with higher export JV performance.

3. Methodology

3.1. Data collection: context and sample

Our empirical analysis is based on operative export JVs constituted under theInstituto Espanol de Comercio Exterior (ICEX) promotion programme. The totalnumber of JVs was 118, with 569 participating firms. The information was obtainedfrom two sources: (1) reports supplied by ICEX; and (2) a postal survey. Our infor-mation needs meant that responses had to be obtained both from the JV itself andfrom the partners, which made it necessary to design two questionnaire models.These were sent out to the general managers of the JVs and to the partners, whosecontact names were supplied by ICEX. Cases were only considered to be valid ifthe JV general manager and a significant number of partners had filled in the ques-tionnaire. With regard to the partners, the criteria were set out on the basis of theGladstein (1984) study on working groups: at least two responses for groups of threefirms; three responses for groups of four or five participants; four responses forgroups of six or seven firms; and five and six responses for groups of eight and ninefirms, respectively. After sending out the questionnaires, telephone contact was madewith non-respondents, and the document was re-sent where necessary. When thisprocess ended, 407 questionnaires had been completed, 89 of which were from thegeneral managers of the JVs and 318 from parent firms. These figures gave a total of83 valid cases in accordance with the previously specified criteria. This represented aresponse rate of 70.3% in terms of the JVs to whom the questionnaire had been sent,a rate that can be considered more than reasonable in terms of group representation.


3.2. Measures

3.2.1. PerformancePerformance was evaluated on the basis of a subjective indicator, namely the

degree to which the partners’ goals were achieved, as proposed in the work of Hat-field, Pearce, Sleeth, and Pitts (1998). Specifically, partners were asked to evaluatethe extent to which the goals set initially, in relation to their participation in the jointproject, had been achieved, using a 5-point Likert-type scale. The JV-related valuewas obtained from the average value of the marks assigned by the group’s variouspartners, in keeping with other studies, such as those of Gladstein (1984) andAlter (1990).

3.2.2. Organizational compatibilityThe work of Bucklin and Sengupta (1993) was taken as a reference in the evalu-

ation of organizational compatibility. Specifically, four dimensions representing com-patibility were evaluated by the partners on a 5-point Likert-type scale: (1) consist-ency of goals; (2) similarity in terms of management philosophies; (3) similarity interms of management styles; and (4) similarity of criteria when evaluating results.Our decision to use these measures as an indicator of organizational compatibilitywas corroborated by the high Cronbach’s alpha score (0.83) for these measures.

3.2.3. Interdependence of resourcesInterdependence of resources between the partners in an export JV relates to a

specific resource type, such as commercialized products. The approximation used toevaluate interdependence refers to the coordination needs of these products. Thisapproximation is based on the positive association established by the organizationtheory between interdependence and coordination needs (Galbraith, 1977; Thompson,1967; Tushman and Nadler, 1978). Specifically, the general manager of the JV wasasked to evaluate the extent to which coordination of the products offered by thepartners was required for the partnership to develop adequately, on a 5-point Likert-type scale.

3.2.4. Partners’ capabilitiesPartners’ capabilities in international activity were evaluated by export propensity

at the moment the JV was formed. This proxy was dichotomized from a minimumlevel, which guaranteed a certain commitment from the partners in terms of exportactivities, as an indicator of their experience at international level. Cavusgil (1984)highlights that active exporters market over 10% of total sales abroad. However, ourobjective was not to distinguish between active and passive exporters, but simply toset a minimum threshold, which reflected some company experience in internationalmarkets. To this end, we considered 5% as the minimum level to be achieved, sincethis amount could be indicative of the firm’s dealing with international related issues,thus reflecting some basic capabilities in international markets. Specifically, and bear-ing in mind that the measure had to be defined at JV level, a value of 0 was assignedto those groups whose export propensity average at the moment of their constitution


was lower than 5%, whereas the rest of the groups were assigned a value of 1.Additionally, in cases where, despite the group was presenting an export propensitygreater than 5%, more than half the participating firms presented values that fellbelow this minimum, a value of 0 was also assigned. The reason for this was todistinguish cases in which a high value was the result of the existence of a firm (orfirms) with a high level of export propensity. In such cases, and despite the fixedthreshold having been exceeded, the group would not be exempt from the negativebehaviours mentioned in the previous section, since a majority of the partners operateat lower levels.

3.2.5. JV management capabilitiesAs Schaan and Beamish (1988) indicate, general managers of JVs are evaluated

on the basis of a range of aspects concerning the tasks they implement. Specifically,partners were asked to evaluate the capabilities of the JV general manager on a 5-point Likert-type scale, with regard to three aspects: (1) export management capabili-ties; (2) capabilities in providing the group with dynamism and motivation; and (3)capabilities in providing the group with cohesion and mediating in conflict resolution.The high Cronbach’s alpha score (0.85) implies that the responses reflect a singlemeasure and can be collapsed into one variable.

3.2.6. AutonomyThe approach to autonomy used in this study is based upon the extent to which

JV general managers have the freedom to make decisions over certain key areas oftheir operations (Butler & Sohod, 1995; Hill & Hellriegel, 1994). The variable wasmeasured using a scale of 10 items, where the general managers were asked toevaluate their autonomy in the following export JV areas on a 5-point Likert-typescale: (1) budgets; (2) financing structure; (3) products; (4) target markets; (5) pricepolicy; (6) distribution policy; (7) promotion policy; (8) attendance at fairs; (9)foreign travel plan; (10) determination of JV staff remuneration. The decision to usethese measures as an indicator of autonomy was corroborated by the high Cronbach’salpha score (0.91) for these measures.

3.2.7. Partnership age as control variableGiven that the results of the cooperative activity, exporting, are usually attained

in the medium and long term, we incorporated age as a control variable. Otherwise,relatively young JVs, despite presenting favourable values for all the variables pre-viously referred to, could present somewhat poor values in relation to performance,generating inconsistencies in the results proceeding from the model estimation.

4. Results

Table 1 presents summary means, standard deviations and Pearson correlationcoefficients of the variables.

The hypotheses were tested in two stages. First, a simultaneous test within the


Tab

le1

Des

crip

tive

stat

istic

san

dco

rrel

atio

ns

Var

iabl

esM

ean

SD1

23

45

67

1.Pe

rfor

man

ce2.

970.

772.

Num

ber

ofpa

rtne

rs4.

491.

69�

0.04

03.

Org

aniz

atio

nal

3.45

0.54

0.23

2∗∗

0.00

6co

mpa

tibili

ty4.

Inte

rdep

ende

nce

3.19

1.22

0.25

4∗∗

0.18

3∗0.

294∗

∗∗5.

JVm

anag

emen

t3.

350.

690.

403∗

∗∗0.

126

0.13

70.

126

capa

bilit

ies

6.Pa

rtne

rs’

capa

bilit

ies

0.63

0.48

0.34

9∗∗∗

�0.

167

0.11

90.

119

�0.

078

7.A

ge39

.75

18.9

90.

318∗

∗∗�

0.00

7�

0.04

5�

0.05

30.

019

0.18

18.

Aut

onom

y3.

150.

840.

025

0.22

5∗∗

�0.

257∗

∗�

0.05

20.

358∗

∗∗�

0.19

0∗0.

100

∗p�

0.1;

∗∗p

�0.

05;

∗∗∗p

�0.

01.


framework of a multiple linear regression model was carried out to analyse the effectsthat the different variables related to group composition have on export JV perform-ance (Hypotheses 1–5). Secondly, the moderating effect of JV autonomy on therelationship between each of the variables related to group composition and JV per-formance (Hypotheses 6–10) was analysed using successive multiple linearregression models with an interaction term.1 Using an approach similar to that takenby Govindarajan and Fisher (1990), we first estimated an equation similar to thatconstructed in the previous stage, with the incorporation of JV autonomy as a newindependent variable, to test the absence or non-absence of a relationship betweenautonomy and performance. We then estimated successive equations incorporatingan interaction term. Support for a hypothesis would exist when (1) the results of agiven interaction model were significant, (2) an interaction term was significant andin the hypothesized direction and, (3) the values of the change in R2 resulting fromthe introduction of the interaction term and its associated F were significant. It isimportant to note that for equations estimated with an interaction, results vary withchanges in the points of origin of the two variables and therefore, the coefficientsof the independent variables are not interpretable (Govindarajan & Fisher, 1990).

Table 2 shows the results of the ordinary-least-squares regression analyses usedto test the joint effect on performance of the different variables associated with groupcomposition (model 1). Hypothesis 1, in which a positive relationship between thedegree of interdependence and export JV performance was postulated, was supportedby the results (b � 104; p � 0.1). With respect to Hypothesis 2, in which a minimum

Table 2Regression resultsa,b (model 1): effects of group composition on JV performance

Dependent variable: performance Model 1

Interdependence 0.104∗ (0.060)Partners’ capabilities 0.457∗∗∗ (0.148)JV management capabilities 0.440∗∗∗ (0.101)Number of partners �0.032 (0.042)Organizational compatibility 0.154 (0.133)Age 0.011∗∗∗ (0.004)R2 0.415Adjusted R2 0.369F 8.977∗∗∗

∗p � 0.1; ∗∗∗p � 0.01.a Entries represent unstandardized regression coefficients. Standard errors in parentheses.b We note from Table 1 that in our sample of JVs there is a positive correlation between organizational

compatibility and interdependence (0.294; p � 0.01), and between interdependence and number of firms(0.183; p � 0.1). However, diagnostic tests did not indicate the presence of multicollinearity to anyappreciable degree (specifically, the largest variance inflation factor (VIF) value is 1.16).

1 For detailed discussion on regression analysis with interaction terms and derivation of the relevanttest statistics, see Cohen and Cohen (1983) or Sharma, Durand, and Gur-Arie (1981).


of international experience as an indication of partners’ capabilities at internationallevel was linked positively to performance, the results also allow its corroboration(b � 0.440; p � 0.01). The results also reflect the existence of a positive relationshipbetween the JV management capabilities and performance (b � 0.457; p � 0.01),thereby supporting Hypothesis 3.

Hypotheses 4 and 5, in which the existence of a positive relationship betweentheir organizational compatibility and JV performance (Hypothesis 4) was postulated,together with a negative relationship between the number of partners and JV perform-ance (Hypothesis 5), were not supported. In both cases the signs point to a relation-ship in keeping with what was expected, which could contribute certain evidence inconcordance with the suggested hypotheses. However, the relationships in questioncannot be considered statistically significant in the light of t-tests associated to therespective regression coefficients.

Table 3 shows the results of the estimation of successive multiple linear regressionmodels with an interaction term (models 3–7) for the analysis of the moderatingeffects of the degree of autonomy on the relationship between each of the variablesrelated to group composition and performance. In the first column of Table 3, theresults from the model designed to evaluate the direct effect of autonomy on JVperformance in the context of the group-composition factors (model 2) are shown,and reflect the lack of a significant relationship between the variables in question.With respect to the moderating effect of the degree of autonomy, in all cases therelationship follows the predicted direction, a fact that could produce certain evidenceto support the various proposed hypotheses. Nevertheless, in only two cases (models5 and 7) can the relationship between the interaction term and performance be classi-fied as significant, which means that we can only accept the hypotheses related tothe cases in question (in both cases, the R2 value increases). More specifically,Hypothesis 8, in which we postulate that there is a more intense positive relationshipbetween the capabilities of the JV management and performance in cases in whichthe level of autonomy was higher, is supported (b � 0.333; p � 0.01). Likewise,Hypothesis 10, in which we suggest that the positive effect of the degree of interde-pendence on performance will decrease in the presence of high levels of autonomy(b � �0.152; p � 0.05), is also supported. On the other hand, the coefficients asso-ciated to the interaction term in the rest of the models, although showing the predictedsigns, are not significantly different from zero, and thus lack sufficiently strongempirical evidence to allow Hypotheses 6, 7 and 9 to be accepted.

5. Discussion and conclusions

Alliances have become increasingly popular in recent years, and for many firms.However, little is known about factors that lead to success in alliances, and researchsuggests that a substantial number of alliances produce dissatisfactory results (Hittet al., 2000; Madhok & Tallman, 1998). Based on two theoretical approaches—theresource-based view and the transaction cost theory—this study has focused on theeffect that group composition and autonomy have on JV performance. Using data


Tab

le3

Reg

ress

ion

resu

ltsa

(mod

els

2–7)

:m

oder

ator

effe

ctof

auto

nom

y

Dep

ende

ntva

riab

le:

perf

orm

ance

Mod

el2

Mod

el3

Mod

el4

Mod

el5

Mod

el6

Mod

el7

Inte

rdep

ende

nce

0.10

4∗(0

.060

)0.

102∗

(0.0

60)

0.09

8(0

.061

)0.

053

(0.0

57)

0.10

2∗(0

.061

)0.

587∗

∗(0

.249

)Pa

rtne

rs’

capa

bilit

ies

0.44

8∗∗∗

(0.1

50)

0.46

0∗∗∗

(0.1

52)

0.80

5(0

.633

)0.

406∗

∗∗(0

.139

)0.

452∗

∗∗(0

.151

)0.

431∗

∗∗(0

.147

)JV

man

agem

ent

capa

bilit

ies

0.46

1∗∗∗

(0.1

10)

0.45

6∗∗∗

(0.1

11)

0.47

0∗∗∗

(0.1

11)

�0.

500∗

(0.2

81)

0.45

7∗∗∗

(0.1

11)

0.51

3∗∗∗

(0.1

11)

Num

ber

ofpa

rtne

rs�

0.02

8(0

.043

)�

0.15

3(0

.206

)�

0.03

1(0

.043

)�

0.04

1(0

.040

)�

0.02

6(0

.043

)�

0.01

9(0

.042

)O

rgan

izat

iona

lco

mpa

tibili

ty0.

134

(0.1

40)

0.12

2(0

.142

)0.

131

(0.1

41)

0.18

8(0

.130

)0.

271

(0.4

13)

0.09

5(0

.139

)A

ge0.

011∗

∗∗(0

.004

)0.

010∗

∗∗(0

.004

)0.

011∗

∗∗(0

.004

)0.

011∗

∗∗(0

.003

)0.

011∗

∗∗(0

.004

)0.

010∗

∗∗(0

.004

)A

uton

omy

�0.

045

(0.0

95)

�0.

190

(0.2

52)

0.02

8(0

.160

)�

1.15

4∗∗∗

(0.3

14)

0.11

8(0

.475

)0.

461∗

(0.2

70)

Aut

onom

y×

num

ber

ofpa

rtne

rs0.

034

(0.0

56)

Aut

onom

y×

part

ners

’ca

pabi

litie

s�

0.10

8(0

.187

)A

uton

omy

×JV

man

agem

ent

0.33

3∗∗∗

(0.0

91)

capa

bilit

ies

Aut

onom

y×

orga

niza

tiona

l�

0.04

6(0

.130

)co

mpa

tibili

tyA

uton

omy

×in

terd

epen

denc

e�

0.15

2∗∗

(0.0

76)

R2

0.41

70.

420

0.41

90.

507

0.41

80.

446

Adj

uste

dR

20.

362

0.35

70.

356

0.45

30.

355

0.38

6F

7.65

0∗∗∗

6.68

7∗∗∗

6.67

7∗∗∗

9.49

8∗∗∗

6.63

1∗∗∗

7.45

7∗∗∗

�F

0.23

30.

384

0.33

813

.499

∗∗∗

0.12

43.

978∗

∗�

R2

0.00

20.

003

0.00

30.

09∗∗

∗0.

001

0.03

0∗∗

∗p�

0.1;

∗∗p

�0.

05;

∗∗∗p

�0.

01.

aE

ntri

esre

pres

ent

unst

anda

rdiz

edre

gres

sion

coef

ficie

nts.

Stan

dard

erro

rsin

pare

nthe

ses.


collected from a sample of Spanish export JVs, this study integrates both conceptsand analyses their separate and combined effects on JV outcomes.

Overall, our statistical analyses confirm some previous results and raise some newquestions, providing important insights into JV performance. First, and in line withthe literature, our analysis indicates that the mutual interdependence resulting fromthe partners’ complementary resources increases JV performance. This finding isconsistent with the evidence obtained by Sarkar et al. (2001) in their study on partnercharacteristics and alliance performance, and with the evidence obtained by Smith(1997) and Smith and Barclay (1999) in their work on performance in sellingalliances. These results suggest that interdependence facilitates the creation of syn-ergies and provides an incentive for the parties to work together to make theirrelationship a success.

We have also verified that the degree in which the partners’ capabilities are appro-priate to the activity that is the subject of cooperation constitutes another relevantfactor in explaining JV performance. This finding is consistent with Killing (1988)and Nooteboom (1999), who suggest that alliance performance depends on partners’capabilities within the context of the alliance. Parent firm capabilities in relevantareas of the cooperation activity reduce task complexity and increase JV perform-ance. In the case of export JVs, the partners’ absence of a minimum experience ininternational activity that provides them with some basic related capabilities is afactor that limits the JV performance. Consequently, an export JV should not consti-tute a valid alternative for groups of firms with no experience at international level,whose aim might be to initiate a stage of experimental exportation. The exploratorynature of this phase hinders the commitment of partners’ resources to the collectiveactivity, and also reduces their disposition to coordinate group tasks, both of whichreduce JV effectiveness. These results are consistent with studies by Bradley (1985)and Strandell (1985) about export JVs, where it is pointed out that successful jointexporting venture performance arises where firms are already export marketing ori-ented and fully appreciate the value of the JV.

The research results also reflect a positive relationship between JV managementcapabilities and performance, which prompts us to emphasize, as noted by Schaanand Beamish (1988), the important, but often-ignored role which JV general manage-ment plays in the development of a successfully cooperative partnership. JV generalmanagers should have the necessary capabilities to reduce partners’ uncertainty inthe cooperation activity and to implement the JV strategy. They must also be gooddiplomats, able to operate constantly within two or more frames of reference andsets of values, and capable of successfully managing the idiosyncrasies of their par-ent firms.

The analysis also suggests, contrary to the hypotheses, that neither the number ofpartners nor their organizational compatibility are outstanding factors in explainingexport JV performance. The lack of support for the proposed effects may be relatedto the type of agreements analysed. Export JVs correspond to a cooperative modelof resource concentration. These agreements are those in which there are fewerrequirements for interaction among partners (Grandori, 1997). Consequently, con-flicts and transactional problems among parent firms are minimized. Such circum-


stances can justify that the number of firms or their organizational compatibility hasno significant effect on performance, or at least that these factors are not as relevanthere as in other types of partnerships, in which there is a greater need for firms tointeract. In our opinion, contradictory results that have arisen from empirical studiesanalysing the effect of organizational compatibility and number of partners onalliance performance could be a consequence of the analysis of cooperative modelswith different interaction requirements in terms of the flows of exchanged resources.An interesting question for future research would be to analyse whether differenttypes of cooperation models can have different implications in the effects of organi-zational compatibility and number of partners on JV performance, with the aim ofcomparing the results and establishing definitive conclusions.

On the other hand, our data show that JV autonomy does not directly affect JVperformance. This result contradicts the ideas postulated in studies such as those ofKilling (1983) and Newburry and Zeira (1999). Nevertheless, the results demonstratethe importance of autonomy through its moderating effect on the relationshipbetween different factors related to JV composition and performance. Consequently,it can be argued that an optimal governing structure does not exist in terms of auto-nomy, but that JV performance depends upon its correct adjustment in relation tothe group composition. In particular, our results indicate that a more independentJV highlights the effect that JV management capabilities have on its results. There-fore, in situations where the JV management shows a high level of capability inrelation to the reduction of uncertainty and the solution of incentive and coordinationproblems, a high level of autonomy is appropriate. On the other hand, in situationswhere these capabilities are limited, resorting to highly centralized governing struc-tures would emphasize the harmful effects on performance resulting from thedeficiencies of the management in question. These findings are consistent with Beam-ish (1988), who notes that IJVs located in less developed countries are generallygranted less autonomy, due in part to a lack of managerial experience or insightwithin the country, in order to avoid lower performance. Furthermore, our findingsshow that in cases of a high level of partner interdependence, it is more efficient toresort to more participatory governing structures, i.e. less autonomy for the JV, withthe aim of not fragmenting the interorganizational system. Greater interdependencerequires more contact between managers from parent firms since they must worktogether to reach potential synergies. With reference to the moderating effects ofautonomy on the relationship between the other dimensions associated to group com-position and performance, although theoretically expected directionalities werefound, the relationships were non-significant. In the case of the number of partnersand organizational compatibility, the lack of significant support for the proposedeffects may be related again to the type of JVs analysed, an argument that wasanalysed previously. However, there does not seem to be any theoretical explanationthat justifies the absence of a significant effect in autonomy moderating the relation-ship between partners’ capabilities and JV performance. One possible explanationfor this fact could derive from the time gap in the evaluation of such measures. Infact, partners’ capabilities in international activity were evaluated by export propen-sity at the moment the JV was formed. These capabilities could have evolved from


the formation of the JV. However, the autonomy attributed to the JV at the momentthe study is carried out should be in consonance with the capabilities of the partnersat that moment and not at the moment of the constitution of the JV–autonomy is adynamic variable. So, this fact could justify the non-significance of the relation.

From a managerial point of view, our research provides insights into appropriatestrategies for firms seeking to form and manage export JVs. Findings suggest thatexport JVs prosper when projects have been well selected, partners and JV generalmanager carefully chosen and autonomy adjusted to the group characteristics. Whatdoes project selection imply? When a firm wants to make use of the export JVs, itmust establish the desired interdependence model in relation to the products commer-cialized. In this way, the firm can simply set out to join forces with other firmswhose products do not conflict, with the aim of sharing the costs involved in a jointexport infrastructure. As far as product complementarity is concerned, the minimumcondition necessary is that they can be commercialized through the same distributionchannels with uniform promotion strategies (Chandler, 1990). However, the impor-tance of resource interdependence shows that the achievement of results goes beyondmere cooperation between firms whose product complementarity is limited to thesharing of the same distribution channels. Greater complementarity implies, forinstance, a mutual reinforcement in the sales of products from the various firms, oreven offering the customer a joint and inseparable package of products from thevarious firms involved. All these circumstances imply a greater degree of interdepen-dence, which leads to the possibility of achieving greater synergies and a higherlevel of commitment to the cooperative activity.

Partners and JV general manager selection also appear to be two critical elementsin developing successful export JVs. Potential partners must have the basic capabili-ties associated with international activity. In contrast to what has been put forwardby certain sources, including public policy makers, export JVs are not the appropriatevehicle for firms about to start exporting. It does not therefore seem reasonable forpublic institutions to finance programmes which encourage this type of arrangementfor firms seeking to initiate international activity. On the other hand, a great deal oftime and resources must be spent on the identification of the JV general manager.Our results show that his or her selection is critical, bearing in mind that their capa-bilities will have far-reaching repercussions on the performance of the relationship.Furthermore, JV autonomy should be adjusted to the characteristics of the group.First, in situations of high interdependence, where greater partner contact is necessaryfor potential synergies to be achieved, parent organizations should retain a greatercapacity for decision-making in order to coordinate their actions. In contrast, in situ-ations where the relationship between the companies’ products is limited to, forexample, the use of the same distribution channel, the interaction between the part-ners may be minimum and a high level of autonomy may be assigned to the JV.Secondly, in situations where the JV general manager shows a high capability inreducing parent companies’ uncertainty and solving incentive and coordination prob-lems, a higher level of autonomy is more appropriate.

The findings of this research, as in all researches, must be viewed taking intoaccount the limitations of the study. The first of these concerns the sample used for


theory testing. Although a sample of 83 JVs is justifiable, larger samples wouldincrease confidence in the results. Secondly, the findings are contingent upon thecontext and the type of partnerships analysed. However, in our opinion, these findingscan be extrapolated to other types of JVs or alliances with due reservation. Addition-ally, the use of Spanish JVs may limit the generalization of the findings. Idiosyncraticfactors pertaining to Spain may render some of the results of this study specific toexport JVs in this country. In order to attenuate the limitations of this study, futureresearch should examine the relations between group composition, autonomy andperformance in different JV types and different countries. A third limitation couldbe a consequence of the measure used to evaluate the JV autonomy. Our conceptionof autonomy is based on the view of the JV general manager and in that sense itmight be biased. A more comprehensive measure is recommended, which wouldalso include the views of the parent firms, and we hope to accomplish this in futurestudies. Fourthly, relational aspects such as mutual trust, reciprocal commitment orbilateral information exchange may have an important influence on ventureefficiency, as they mediate the relationship between partner characteristics and per-formance (Sarkar et al., 2001), but they were not included in the current study. Futureresearch could incorporate these additional variables.

Acknowledgements

The authors wish to express their gratitude to the Instituto Espanol de ComercioExterior (ICEX) for funding this research.

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