Revisiting Shareholder Value Creation via International Joint Ventures: Examining Interactions Among Firm- and Context-Specific Variables

Canadian Journal of Administrative Sciences, Jun 2004 by Merchant, Hemant

The Need for Examining Interactions

This study's focus on modeling patterns and associations among variables is principally motivated by the mixed findings reported in previous research. These findings underscore the "accepted", but mostly undertested view that multiple interactions among variables represent organizational reality more accurately than a series of simplistic interactions between them (Miller & Friesen, 1984). Indeed, a recent survey of joint venture performance studies concluded: "a range of factors demonstrates a consistent pattern of association with [IJV] performance" (Robson et al., 2002, p. 385). The need for examining interactions is also motivated by theoretical arguments as to how interactions among variables often occur in more than one way (Van de Ven & Drazin, 1985), and among several variables concurrently (Miller & Friesen, 1984).

Neither this study's gestalt approach nor the daunting task of comprehending resultant findings need dilute its intended contributions. This is because careful exploratory studies can also facilitate theory development (Ketchen, Thomas, & Snow, 1993; Miller & Friesen, 1984), as this study tries to do. Likewise, the current inability to specify hypotheses ought not to disappoint readers because a concluding section strives to develop an overarching framework which future researchers could find useful. The merit of this framework lies in its ability to highlight various types of tradeoffs and inter-relationships among influences on shareholder value creation via IJVs-linkages which corporate managers can leverage to their respective firms' advantage.

Theoretical Rationale

A gestalt approach increases a study's need to clarify its rationale behind variable selection. Such an explanation is indispensable given the variety of influences on IJV performance (Robson et al., 2002) and the nature of cluster analysis methodology. In this study, the common thread underlying selection of variables is that previous foreign direct investment and IJV studies have recurrently theorized these variables as influencing firms' economic performance. Thus, this section derives from: (a) review of the foreign direct investment literature, and (b) synthesis of work on shareholder value creation via joint ventures.

Why Focus on Certain Variables?

The above focus is necessary for at least three reasons. One, it is imperative to be consistent with previous work whose mixed findings this study tries to reconcile. The introduction of new variables may inject new sources of explanatory power, and so dilute a meaningful reconciliation. Two, it is essential to consider only those variables that are theoretically grounded in strategic management. Such theoretical guidance establishes a sound basis for empirical work and is crucial from a methodological standpoint (Ketchen & Shook, 1996): these elements uphold the validity of findings. Three, the selection of variables is driven by constraints associated with an ongoing economics-oriented (as opposed to behaviour-oriented) program on shareholder value creation via IJVs. Nonetheless, this emphasis fully agrees with that of previous work whose findings this study tries to reconcile.