An Exploration of Cross Cultural Joint Ventures

Running Head: AN EXPLORATION OF CROSS-CULTURAL JOINT VENTURES
AN EXPLORATION OF CROSS-CULTURAL JOINT VENTURES
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Author Note

AN EXPLORATION OF CROSS-CULTURAL JOINT VENTURES1
Table of Contents
Introduction................................................................................................................................2
Research Background.................................................................................................................2
Research Question......................................................................................................................3
Research Objectives...................................................................................................................3
Literature Review.......................................................................................................................4
Theoretical Framework..........................................................................................................4
Joint Venture and Alliances...................................................................................................5
National Culture Implication on Joint Venture or Strategic Alliance Performance..............6
Implications of Organizational Culture on Joint Venture or Strategic Alliance Performance
................................................................................................................................................9
Succeeding in Cross-Cultural Joint Venture........................................................................12
Research Approach..................................................................................................................17
Conclusion................................................................................................................................18
Reference..................................................................................................................................20

AN EXPLORATION OF CROSS-CULTURAL JOINT VENTURES2
Introduction
The last two decades have seen an increase in corporate activities between the
organizations, especially between the transnational corporations. Different studies have
shown an increase in the activity of joint ventures, which provides further evidence of
globalization. As a consequence of which, corporative activity has now become a vital
element of the strategic behavior that acts as determinants of the competitive advantage. The
increasing globalization has also resulted in the forming of various alliances across the
national boundaries with great challenges of surmounting the linguistic and other barriers of
culture (Lau & Tovstiga, 2015).
Hence, this paper aims to address nature, applications as well as implications of the
cross-cultural joint ventures. The study area of this paper will focus on the concerns related to
culture, management, integration, conflicts, adaptation, longevity, performance and structure
of the Joint ventures. This paper will also identify the most common benchmarks adopted for
the successful integration and also provide the example of failures for making comparisons.
In the end, this paper will seek to identify best practices, which can be adopted to ensure the
best efforts for scoring a win-win agreement between involved parties.
Research Background
International joint venture for the past few decades has become a common mode of
the entry of foreign market and collaboration, all across the national borders. In today’s
situation, international joint ventures sometimes may not be the preferable choice for
internationally experienced and resource-intensive organizations, especially given the
liberalization of FDI in various countries (Gupta & Bhaskar, 2016). However, still, they are
considered to be a strategic option for organizations requiring supplementary resources or
knowledge for operating in the foreign markets. The success path by international joint

AN EXPLORATION OF CROSS-CULTURAL JOINT VENTURES3
ventures means it is not straightforward. It appears to be much discouraging if someone looks
at revealing statistical evidence, which indicates relatively high failure rate of the joint
venture. The most concerning reason behind such failure are the factors related to culture, for
instance, incompatibility of culture between the partners (Nguyen & Aoyama, 2015).
There is no doubt regarding the fact that culture plays an imperative role in the
management and operations of a Joint venture. The gap in research arises because researchers
do not have obtained adequate consensus on the level of cultural impact on the joint venture
or whether this impact is negative or positive. One of the studies explained that culture has
been loosely conceptualized in the studies of a Joint venture, which implies potentially
diversifying cultural views and thereby diversifying impact patterns. Hence, this report aims
to fulfill the gap in research by finding out the framework that will help in identifying the
issues related to strategic alliance and then finding out the best practices for successfully
curbing risks (Zhou, Lu & Chang, 2016).
Research Question
This research paper aims to answer the following questions:
 What do you mean by culture in the context of joint ventures or strategic alliances?
 What are the benchmarks of good Cross-cultural integration and how it is defined as
bad?
 What are the implications of good or bad culture in the failure or success of a Joint
venture or strategic alliances?
 How does an understanding of cross-cultural issues play a role in creating value for
the venture and what are the key measures of performance applied to ascertain the
most suitable cultural fit?

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Research Objectives
Following are the objectives of this paper:
 To define culture in a joint venture and strategic alliance context.
 To explain the benchmarks of good and bad Cross-cultural integrations.
 To explain the implications of good or bad culture in the success or failure of a Joint
venture/strategic alliance.
 To explain the role played by cross-cultural issues in creating value for the venture
and key measures of performance applied for ascertaining the most suitable fit of
culture.
Literature Review
Theoretical Framework
Internalization and Transaction Cost Theory
Both of these theories explain the origin and survival of IJV as differences in the
benefits over costs. Organizations aims to maximize profit by stretching its boundaries across
the national borders and internalizing the cost. It is because of high uncertainty, institutional
and legal requirements, pursuing cooperative arrangement cost is less, compared to forming
wholly-owned subsidiary (Yildiz, 2014). The strategic alliance or joint venture posses’ high
cost of transaction in the form of the asset specificity, uncertainty of environment and
uncertainty of behavior. Further, from the transaction cost theory lens, it can be said that
transaction cost minimization is the firm’s fundamental drive for adopting different
mechanisms of control in the inter-firm exchanges (Wong et al. 2014).
Resource-Based View
Resource dependency theory helps in providing an appropriate lens to analyze the
complex relationships between the partners of international joint ventures. This theory states

AN EXPLORATION OF CROSS-CULTURAL JOINT VENTURES5
that firms depend on different resources, for instance market access, raw material, capital that
are possessed often by the other firms; therefore, firms are required to take different strategies
for managing dependence and coping with the external constraints. In emerging markets for
international joint ventures, foreign partners highly depend on the local national partner to
obtain relationships of government, channels of distribution and knowledge of the customer
and these local partners depends on foreign partners for the advanced managerial and
technological knowledge (Wong et al. 2018).
Whereas the mutual dependence rises incentives for the local and foreign partners for
collaborating, the partners of strategic alliance still face the fundamental tensions because of
their differences in culture and incongruences of goal. These local and foreign partners join
as joint partners for multiple reasons and they hold different strategic objectives as well as
expectations regarding the development of a Joint venture. Moreover, they differ widely in
their practice of management, values and norms, which leads to different knowledge and
responses to the tasks. This could result in potential conflicts. These partners often contend
for the power of decision-making (Valliere, 2017). It is because of competitiveness
dependence influences the willingness of partners for contributing relevant proprietary and
resources know-how, it affects the allocation as well as the availability of resources in an
international joint venture. This theory states that the importance of power and discretion of
power are the two vital dependence components and captures different resource flow aspects
within the strategic alliance or joint venture. While discretion of power suggests that power
can be exercised by one partner for fostering or constraining allocation and utilization of the
shared resources, the significance of resources highlights the relatedness and relevance of
resources controlled by the partner of a Joint venture (Trivellato, Halevi & Antunes, 2014).