Mind mapping the topic of international joint venture

Mind mapping the topic of international joint venture (IJV)

Joseph Kim-keung Ho

Independent Trainer

Hong Kong, China

Abstract: The topic of international joint venture (IJV) is a main one in global business management. This article makes use of the mind mapping-based literature review (MMBLR) approach to render an image on the knowledge structure of international joint venture. The finding of the review exercise is that its knowledge structure comprises four main themes, i.e., (a) Definitions of basic concepts, (b) Major underlying theories and thinking, (c) Main research topics and issues, and (d) Major trends and issues related to practices. There is also a set of key concepts identified from the IJV literature review. The article offers some academic and pedagogical values on the topics of IJV, literature review and the mind mapping-based literature review (MMBLR) approach.

Key words: International joint venture (IJV), literature review, mind map, the mind mapping-based literature review (MMBLR) approach, global business management

Introduction

International joint venture (IJV) is a main topic in global business management. It is of academic and pedagogical interest to the writer who has been a lecturer on global business management for some tertiary education centres in Hong Kong. In this article, the writer presents his literature review findings on IJV using the mind mapping-based literature review (MMBLR) approach. This approach was proposed by this writer this year and has been employed to review the literature on a number of topics, such as supply chain management, strategic management accounting and customer relationship management (Ho, 2016). The MMBLR approach itself is not particularly novel since mind mapping has been employed in literature review since its inception. The overall aims of this exercise are to:

1.      Render an image of the knowledge structure of international joint venture  (IJV) via the application of the MMBLR approach;

2.      Illustrate how the MMBLR approach can be applied in literature review on an academic topic, such as IJV.

The findings from this literature review exercise offer academic and pedagogical values to those who are interested in the topics of IJV, literature review and the MMBLR approach. Other than that, this exercise facilitates this writer’s intellectual learning on these three topics. The next section makes a brief introduction on the MMBLR approach. After that, an account of how it is applied to study IJV is presented.

On mind mapping-based literature review

The mind mapping-based literature review (MMBLR) approach was developed by this writer this year (Ho, 2016). It makes use of mind mapping as a complementary literature review exercise (see the Literature on mind mapping Facebook page and the Literature on literature review Facebook page). The approach is made up of two steps. Step 1 is a thematic analysis on the literature of the topic chosen for study. Step 2 makes use of the findings from step 1 to produce a complementary mind map. The MMBLR approach is a relatively straightforward and brief exercise. The approach is not particularly original since the idea of using mind maps in literature review has been well recognized in the mind mapping literature. The MMBLR approach is also an interpretive exercise in the sense that different reviewers with different research interest and intellectual background inevitably will select different ideas, facts and findings in their thematic analysis (i.e., step 1 of the MMBLR approach). Also, to conduct the approach, the reviewer needs to perform a literature search beforehand. Apparently, what a reviewer gathers from a literature search depends on what library facility, including e-library, is available to the reviewer. The next section presents the findings from the MMBLR approach step 1; afterward, a companion mind map is provided based on the MMBLR approach step 1 findings.

Mind mapping-based literature review on international joint venture (IJV): step 1 findings

Step 1 of the MMBLR approach is a thematic analysis on the literature of the topic under investigation (Ho, 2016). In our case, this is the IJV topic. The writer gathers some academic articles from some universities’ e-libraries as well as via the Google Scholar. With the academic articles collected, the writer conducted a literature review on them to assemble a set of ideas, viewpoints, concepts and findings (called points here). The points from the IJV literature are then grouped into four themes here. The key words in the quotations are bolded in order to highlight the key concepts involved.

Theme 1: Definitions of basic concepts

Point 1.1.              “International joint ventures (IJVs) are a form of international cooperative agreement which bring together two or more firms to engage in a joint activity, to which each member contributes resources and hopes to extract resources of higher value” (Beamish and Berdrow, 2003);

Point 1.2.              “International joint ventures (IJVs) are separate legal organizational entities partially held by parent firms originating from different countries” (Nippa, Beechler and Klossek, 2007);

Point 1.3.              “An equity international joint venture (EIJV) is a separate legal organizational entity representing the partial holdings of two or more parent firms, in which the headquarters of at least one is located outside the country of operation of the joint venture. This entity is subject to the joint control of its parent firms, each of which is economically and legally independent of the other” (Newburry and Zeira, 1997);

Point 1.4.              “Joint ventures can be defined as legally and economically separate organizational entities partially held by parent organizations that collectively contribute resources to pursue strategic objectives …. Accordingly, international joint ventures (IJVs) constitute an organizational form founded and run by independent parent organizations from different countries” (Nemeth and Nippa, 2013);

Theme 2: Major underlying theories and thinking

Point 2.1.              “...learning in an IJV network has been viewed primarily as a transfer of knowledge between partners and from the partners to the IJV” (Beamish and Berdrow, 2003);

Point 2.2.              “An MNC faces numerous possibilities when investing abroad. International acquisitions (IAs) are currently the most popular form of net investment worldwide for American MNCs, except in the Asia/Pacific Rim where equity international joint ventures (EIJVs) are favored … International greenfield investments (IGIs) represent a viable alternative to these two venture types when suitable partners are unavailable, when desirable acquisition candidates do not exist, or when firms possess ownership advantages which they wish to protect” (Newburry and Zeira, 1997);

Point 2.3.              “Parkhe and Kim stress the role of ‘relational efforts’ by companies to moderate the influence of functional diversity on the performance of IJVs and include communication, mutual adaptation and cross-cultural training” (Mohr and Puck, 2005);

Point 2.4.              “The [IJV] network as an organizational form offers three types of learning opportunities. The first is the transfer of established knowledge. The second is transformation, the synthesis of contributed resources. The third type is the process of harvesting newly created knowledge from the network, providing internationalization capabilities to alliance partners” (Beamish and Berdrow, 2003);

Point 2.5.              “With foreign partners distanced from their national institutions, this isolates any cultural influence on strategies” (Buck, Liu and Ott, 2012);

Point 2.6.              “…. a wide range of factors of importance for the success of IJVs. These factors include: control, ownership structure, bargaining power, knowledge management, partnering skills, commitment and trust. A number of authors have suggested that inter-company diversity, i.e. the differences that exist between partners, also plays an important role in determining the outcome of international strategic alliance in general, and of IJVs in particular” (Mohr and Puck, 2005);

Point 2.7.              “….perspectives emphasizing the risk of appropriation and opportunism (e.g., transaction cost economics ….) accentuate the need for MNEs to ensure sufficiently high levels of control needed to allow them to confidently transfer advanced knowledge to the IJV for improved IJV productivity …. Perspectives stressing value creation (e.g., the knowledge-based perspective …), on the other hand, tend to place greater emphasis on the need for IJVs to have high levels of collaboration between MNEs and their local partners to ensure local partner engagement (a motivational issue) and local partner resource commitment (a mobilization issue), both of which are seen as critical for the successful utilization of knowledge transferred from the MNE to the IJV” (Li, Zhou, and Zajac, 2009);

Point 2.8.              “…intent guides behaviors by establishing desired outcomes.  Intent was found to be an important determinant of the efforts a firm puts into learning from a JV partner and the evolution of learning. Intent will arguably affect the resources that the parent contributes to the IJV, the controls put on the activities of the IJV, the evaluation of its performance and outcomes, and the degree to which the parent learns from the IJV” (Beamish and Berdrow, 2003);

Point 2.9.              “…principal agent theory … focuses on problems and risks inherent in delegation due to interest divergence, asymmetric information and opportunistic behaviour. In order to reduce or eliminate these inefficiencies, agency theory proposes different means such as goal alignment or imposing control structures” (Nippa, Beechler and Klossek, 2007);

Point 2.10.         “…specific IJV challenges have been frequently highlighted: Firstly, IJVs are prone to parental conflict, governance problems and cultural clashes …. and are easily destabilized by the changing strategies or objectives of one of their founding parent firms … Secondly, IJVs are unstable because they are frequently founded as temporary or intermediary organizations” (Nemeth and Nippa, 2013);

Point 2.11.         “…the relationship between foreign equity ownership and IJV productivity would not necessarily be a simple linear positive one; instead, we posit that control benefits associated with foreign ownership will increase, but at a decreasing rate, after the MNE has passed the threshold of holding a majority ownership level” (Li, Zhou, and Zajac, 2009);

Point 2.12.         “According to the resource-based view of the firm …, combining complementary resources in order to create competitive advantages for the founding partners is a major reason for forming IJVs” (Nippa, Beechler and Klossek, 2007);

Point 2.13.         “Acquiring knowledge has been reported as a primary motivation for forming JVs in numerous studies, as was the need for partner skills, and the need for local market knowledge” (Beamish and Berdrow, 2003);

Point 2.14.         “Cross-border strategic alliances are essentially cooperative activities in which companies share a certain set of skills. Such activities and skills include capital investment, transfer and management of knowledge and practices, technology transfer, and, not least, the exposure to cultural features that persist in the form of management behavior, style, and techniques” (Demir and Söderman, 2007);

Point 2.15.         “In an EIJV, the percentage ownership split can differ significantly from EIJVs with equal ownership by all partners to ones with unbalanced ownership patterns. Hence, control must be shared by the parent companies. Also, differences in the level of equity ownership have implications regarding the dominance of each parent” (Newburry and Zeira, 1997);

Point 2.16.         “Past literature on IJVs …. recognizes the control exercised by the parents over the IJV as a significant determinant of performance” (Selekler-Gökşen, and Uysal-Tezölmez, 2007);

Point 2.17.         “Professional expertise in marketing, like in other functional areas of management, requires substantial knowledge about facts (know-what) and procedures (know-how) … The integration of marketing know-what and know-how is especially meaningful in the context of IJVs in a transitional economy” (Evangelista and Hau, 2009);

Point 2.18.         “Some have suggested that IJV productivity derives from the MNEs’ contribution of valuable firm-specific advantages to the local IJVs, such as sophisticated technology, manufacturing skills, and managerial expertise …, but concerns are raised about the potential loss of transferred knowledge from MNEs to local partners” (Li, Zhou, and Zajac, 2009);

Point 2.19.         “The issue of trust is culture bound, and in some circumstances, a company may be willing to enter into an EIJV without trusting its partners if the perceived benefits from the EIJV outweigh the risks. However, this strategy does not seem appropriate for EIJVs with a long-term focus” (Newburry and Zeira, 1997);

Point 2.20.         “There are essentially four principal means of foreign market entry: (1) exporting; (2) licensing; (3) joint-venture partnering; and (4) wholly-owned foreign investment” (Gilmore, O’Donnell, Carson and Cummins, 2003);

Point 2.21.         “Transaction cost theory ... is used to propose and verify the economic rationale embedded in different entry modes such as licensing, contractual or equity joint ventures and wholly foreign-owned subsidiaries” (Nippa, Beechler and Klossek, 2007);

Point 2.22.         “… several sources have indicated that IJVs are particularly fragile, unstable business organizations … that perform poorly and often cause dissatisfaction on the part of the parent firms” (Nemeth and Nippa, 2013);

Theme 3: Main research topics and issues

Point 3.1.              “…while the importance of gathering performance assessments from all partners of a IJV is regularly acknowledged …., most existing studies have analysed and measured the performance of IJVs mainly from the MNE’s perspective. Performance indicators that may be of greater relevance to the local partner firm have been neglected” (Mohr, 2006);

Point 3.2.              “….no study has so far provided an overview and a critical discussion of how IJV exit determinants might vary in the light of different termination modes. … the quality and practical relevance of research insights of the existing IJV exit literature is limited by empirical and methodological shortcomings. Research, for instance, is dominated by studies that use archival data only, prefer cross-sectional rather than longitudinal analyses, and investigate IJV exit only from one partner’s viewpoint” (Nemeth and Nippa, 2013);

Point 3.3.              “…most existing IJV performance constructs are geared towards companies from developed countries without taking into consideration the perspective of IJV partners from developing countries” (Mohr and Puck, 2005);

Point 3.4.              “…the resource-based view (RBV) directs research interests to tangible or intangible resources as main drivers of IJV success” (Nippa, Beechler and Klossek, 2007);

Point 3.5.              “Although the great majority of empirical IJV studies do provide problem specific literature reviews …, they neither develop nor refer to a comprehensive framework” (Nippa, Beechler and Klossek, 2007);

Point 3.6.              “For decades, IJVs have been an important organizational alternative for firms pursuing internationalization and market entry strategies… that have particularly stimulated scholars’ research interests because levels of success and efficiency have varied greatly” (Nemeth and Nippa, 2013);

Point 3.7.              “Legitimacy is formally defined as “a generalized perception or assumption that the actions of an entity are desirable, proper, or appropriate within some socially constructed system of norms, values, beliefs, and definitions ….  Regardless of this importance of legitimacy as a requisite for local market penetration, we know little about how foreign firms can build legitimacy for their IJVs and how the earned legitimacy enables IJVs to penetrate local markets” (Alcantara, Mitsuhashi and Hoshino, 2006);

Point 3.8.              “While the numbers of IJVs are increasing, our understanding of how to achieve high performance through international partnerships such as IJVs is still limited” (Beamish and Berdrow, 2003);

Point 3.9.              “….there are three categories of institutions: regulatory (rules and laws that exist to ensure stability and order in societies), normative (social values, cultures and norms) and cognitive (established cognitive structures in society that are taken for granted)…. investigating the strategic behavior of IJV foreign parent is a good way to comprehend the reaction of firms with liability of foreignness to the institutional variation” (Li, Li and Liu, 2013);

Point 3.10.         “…the failure to adequately differentiate between intended and unintended IJV termination leads to bias, inconsistent findings, and, ultimately, inadequate conclusions” (Nemeth and Nippa, 2013);

Point 3.11.         “A review of existing research on JV performance shows little agreement on how to conceptualise IJV performance, although many researchers suggest that it is a multi-dimensional phenomenon” (Mohr and Puck, 2005);

Theme 4: Major trends and issues related to practices

Point 4.1.              “….forming joint ventures in China is no easy undertaking. Foreign companies are compelled to comply with a painful management process, encounter a myriad of problems and difficulties that range from external environmental problems to internal organisational conflicts of interest ….  The partners in IJVs may also wish to impose their own practices and use contractual and noncontractual resource power, internationalisation expertise and operational consistency requirements to gain relative decision advantage” (Lau, Chan, Tai and Ng, 2009);

Point 4.2.              “…expansion into emerging countries is a difficult decision because, while there are many opportunities for increasing profits, there are also many risks involved. These risks are due to the specific environmental uncertainty of emerging countries. In particular, a significant proportion of these risks is related to the political and economic uncertainty of these countries: government instability, political turmoil, debt default or rescheduling, fluctuating currency rates, discriminatory tax systems, and corruption” (Meschi, 2005);

Point 4.3.              “…functional differences have a negative impact on JV performance as their existence reduces the efficiency of the IJV operation in a number of ways” (Mohr and Puck, 2005);

Point 4.4.              “…the underlying strategy for Chinese firms to establish partnerships, such as joint ventures and strategic alliances, with foreign multinational enterprises (MNE) is ‘‘to extract and internalize the skills of their partners and thus either improve their own competitive position or reduce their partner’s capability for autonomous action within and outside the partnership’’.” (Demir and Söderman, 2007);

Point 4.5.              “Blodgett …. and Geringer and Hebert … have attributed this performance problem of IJVs to the lack of appropriate organizational control systems and effective mobilization of resources between partnering firms” (Alcantara, Mitsuhashi and Hoshino, 2006);

Point 4.6.              “In general, ….joint ventures involving expansion into emerging countries are formed and organized as follows: the foreign partner provides the joint venture with upstream resources such as funding, brand and production technology …., and the local partner provides downstream resources such as awareness of local markets, access to distribution channels, personnel …., knowledge of local regulations and preferential access to the State authorities” (Meschi, 2005);

Point 4.7.              “… engaging in a joint venture with a local firm is the only way to invest in markets that are already very competitive and crowded … Furthermore, in some countries equity ownership laws prohibit wholly owned foreign investment and so joint ventures are the only way that companies can invest in the region” (Gilmore, O’Donnell, Carson and Cummins, 2003);

Point 4.8.              “…expatriates running Sino-Western joint ventures have considerable problems in developing personal relationships” (Demir and Söderman, 2007);

Point 4.9.              “…it is important for EIJV partners to sustain their trusting relationship. One way to accomplish this is by avoiding abrupt changes in personnel by one partner after the other partner has gained a familiarity with a given management team” (Newburry and Zeira, 1997);

Point 4.10.         “…many IJVs – particularly in developing countries … – suffer from unsatisfactory performance and serious management problems” (Nippa, Beechler and Klossek, 2007);

Point 4.11.         “A firm that considers itself to benefit less from an IJV than its partner may increase its efforts to exert control over the venture and/or demand to be compensated by the other side for this lower performance” (Mohr, 2006);

Point 4.12.         “EIJV negotiations between potential partners generally do not have time limits and may sometimes last for several years” (Newburry and Zeira, 1997);

Point 4.13.         “IJVs are legally and economically distinct entities created by two or more organizations, at least one of which is headquartered in another country …. This hybrid, intercultural, interorganizational form of organization often suffers from high manager turnover rates, which are catastrophic to the venture's operation and performance” (Li, 2008);

Point 4.14.         “Marketing knowledge acquisition in IJVs is especially important in the context of transition economies. … As these countries move towards an open market economy, consumers are becoming more affluent. They are demanding to the extent that local firms are finding themselves in need of more sophisticated technological, management and marketing know-how” (Evangelista and Hau, 2009);

Point 4.15.         “Two of the major constraints that foreign firms confront when entering and penetrating local markets are the lack of local knowledge ….and access to local resources …. An important and often-used means of overcoming these constraints is the formation of international joint ventures (IJVs)” (Alcantara, Mitsuhashi and Hoshino, 2006);

Point 4.16.         “IJV parent firms can terminate an IJV in three ways: (1) selling its stake to the other parents, (2) selling its stake to a third party, or (3) liquidating the venture” (Nemeth and Nippa, 2013);

Point 4.17.         “In order to avoid the liability of foreignness, foreign firms prefer to choose joint venture as the mode to enter the local market, and these firms will prefer wholly owned subsidiary only after they have removed the liability of foreignness” (Li, Li and Liu, 2013);

Each of them has a set of associated points (i.e., idea, viewpoints, concepts and findings). Together they provide an organized way to comprehend the knowledge structure of the international joint venture (IJV) topic. The bolded key words in the quotation reveal, based on the writer’s intellectual judgement, the key concepts examined in the IJV literature. The referencing indicated on the points identified informs the readers where to find the academic articles to learn more about the details on these points; readers are also referred to the Literature on joint venture Facebook page. The process of conducting the thematic analysis is an exploratory as well as synthetic learning endeavour on the topic’s literature. Once the structure of the themes, sub-themes[1] and their associated points are finalized, the reviewer is in a position to move forward to step 2 of the MMBLR approach. The MMBLR approach step 2 finding, i.e., a companion mind map on IJV, is presented in the next section.

Mind mapping-based literature review on IJV: step 2 (mind mapping) output

By adopting the findings from the MMBLR approach step 1 on international joint venture (IJV), the writer constructs a companion mind map shown as Figure 1.

Referring to the mind map on IJV, the topic label is shown right at the centre of the map as a large blob. Four main branches are attached to it, corresponding to the four themes identified in the thematic analysis. The links and ending nodes with key phrases represent the points from the thematic analysis. The key phrases have also been bolded in the quotations provided in the thematic analysis. As a whole, the mind map renders an image of the knowledge structure on IJV based on the thematic analysis findings. Constructing the mind map is part of the learning process on literature review. The mind mapping process is speedy and entertaining. The resultant mind map also serves as a useful presentation and teaching material. This mind mapping experience confirms the writer’s previous experience using on the MMBLR approach (Ho, 2016). Readers are also referred to the Literature on literature review Facebook page and the Literature on mind mapping Facebook page for additional information on these two topics.

Concluding remarks

The MMBLR approach to study IJV provided here is mainly for its practice illustration as its procedures have been refined via a number of its employment on an array of topics (Ho, 2016). No major additional MMBLR steps nor notions have been introduced in this article. In this respect, the exercise reported here primarily offers some pedagogical value as well as some systematic and stimulated learning on international joint venture (IJV) in global business management. Nevertheless, the thematic findings and the image of the knowledge structure on IJV in the form of a mind map should also be of academic value to those who research on this topic.

Bibliography

1.      Alcantara, L., H. Mitsuhashi and Y. Hoshino. 2006. “Legitimacy in international joint ventures: It is still needed” Journal of International Management 12, Elsevier: 389-407.

2.      Beamish, P. and I. Berdrow. 2003. “Learning from IJVs: The Unintended Outcome” Long Range Planning 36, Pergamon: 285-303.

3.      Buck, T., X. Liu and U. Ott. 2012. “Long-term orientation and international joint venture strategies in modern China” International Business Review 19, Elsevier: 223-234.

4.      Demir, R. and S. Söderman. 2007. “Skills and complexity in management of IJVs:  Exploring Swedish managers’ experiences in China” International Business Review 16, Elsevier: 229-250.

5.      Evangelista, F. and L.N. Hau. 2009. “Organizational context and knowledge acquisition in IJVs: an empirical study” Journal of World Business 44, Elsevier: 63-73.

6.      Gilmore, A., A. O’Donnell, D. Carson and D. Cummins. 2003. “Factors influencing foreign direct investment and international joint ventures” International Marketing Review 20(2), Emerald: 195-215.

7.      Ho, J.K.K. 2016. Mind mapping for literature review – a ebook, Joseph KK Ho publication folder October 7 (url address: http://josephkkho.blogspot.hk/2016/10/mind-mapping-for-literature-review-ebook.html).

8.      Lau, T., K.F. Chan, S.H.C. Tai and D.K.C. Ng. (2009),"Corporate entrepreneurship of IJVs in China" Management Research Review 33(1): 6 – 22.

9.      Li, J., C. Zhou, and E.J. Zajac. 2009. “Control, collaboration, and productivity in international joint ventures: theory and evidence” Strategic Management Journal 30, Wiley: 865-884.

10. Li, J.J. 2008. “How to retain local senior managers in international joint ventures: The effects of alliance relationship characteristics” Journal of Business Research 61, Elsevier: 986-994.

11. Li, Z., Y. Li and C. Liu. 2013. “Modeling the strategic mutation of international joint venture” Chinese Management Studies 7(3), Emerald: 470-487.

12. Literature on joint venture Facebook page, maintained by Joseph, K.K. Ho (url address: https://www.facebook.com/literature.joint.venture/).

13. Literature on literature review Facebook page, maintained by Joseph, K.K. Ho (url address: https://www.facebook.com/literature.literaturereview/).

14. Literature on mind mapping Facebook page, maintained by Joseph, K.K. Ho (url address: https://www.facebook.com/literature.mind.mapping/).

15. Meschi, P.X.  2005. “Environmental uncertainty and survival of international joint ventures: the case of political and economic risk in emerging countries” European Management Review 2, Palgrave: 143-152.

16. Mohr, A.T. 2006. “A multiple constituency approach to IJV performance measurement” Journal of World Business 41, Elsevier: 247-260.

17. Mohr, A.T. and J.F. Puck. 2005. “Managing Functional Diversity to Improve the Performance of International Joint Ventures” Long Range Planning 38, Elsevier: 163-182.

18. Nemeth, A. and M. Nippa. 2013. “Rigor and Relevance of IJV Exit Research” Management International Review 53: 449-475.

19. Newburry, W. and Y. Zeira. 1997. “Generic Differences Between Equity International Joint Ventures (EIJVs), International Acquisitions (IAs) and International Greenfield” Journal of World Business 32(2): 87-102.

20. Nippa, M., S. Beechler and A. Klossek. 2007. “Success Factors for Managing International Joint Ventures: A Review and an Integrative Framework” Management and Organization Review 3(2): 277-310.

21. Selekler-Gökşen, N.N. and S.H. Uysal-Tezölmez. 2007. “Control and Performance in International Joint Ventures in Turkey” European Management Journal 25(5), Pergamon: 384-394.

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[1] There is no sub-theme generated in this analysis on IJV.