Factors affecting the choice of interaction after the international joint venture termination in Africa: Total interpretive structural modeling

• Author: Sanjay Dhir,Nakul Parameswar
• Published date: 01 November 2019
• Date: 01 November 2019
• DOI: http://doi.org/10.1002/jsc.2302

RESEARCH ARTICLE

Factors affecting the choice of interaction after

the international joint venture termination in Africa: Total

interpretive structural modeling

Nakul Parameswar

1

| Sanjay Dhir

2

1

Indian Institute of Management Jammu,

Jammu & Kashmir, India

2

Department of Management Studies, Indian

Institute of Technology Delhi, New Delhi, India

Correspondence

Sanjay Dhir, Department of Management

Studies, Indian Institute of Technology Delhi,

New Delhi 110016, India.

Email: sanjaydhir.iitd@gmail.com

Abstract

The choice of interaction after the international joint venture (IJV) termination is

influenced by different factors in varying levels that can be hierarchically depicted.

On IJV termination, parent firms are deprived of value created during IJV. Parent

firms can attempt to create a whole or part of the value created during IJV through

an interaction post IJV termination. This study attempts to identify factors that influ-

ence the choice of interaction post IJV termination and categorize them hierarchically

based on their magnitude of influence. This study examines the factors that influence

the decision to interact post IJV termination by developing a total interpretive struc-

tural model (TISM) using data collected from managers of terminated IJV in Africa.

1|INTRODUCTION

International joint ventures (IJV) are an important domain of research

in strategic management and international business. The literature on

IJV has been increasing ever since the developed nation firms began

internationalization and were interested in partnering with domestic

firms of the target market. Organizations from across the world have

moved to Africa to exploit the potential market and also gain access

to an abundance of resources in the region (Amankwah-Amoah &

Debrah, 2011; Kuada & Buatsi, 2005; Parameswar & Dhir, 2018b).

Foreign firms have been cautious in their actions to access the African

market and have utilized IJV route to enter and function in the market

(Amoako, 2016; Dhir & Mital, 2013; Sheriff & Muffatto, 2015). By tak-

ing the IJV route, foreign firms safeguard themselves from the risk of

failure as well as gain access to the market knowledge and experience

of the domestic firm to gain competitive advantage in the African

market (Dhir & Mital, 2018; Julian, Ahmed, & Sefnedi, 2014). How-

ever, studies examining IJV formation, process and termination are

scanty in the extant literature and gradually as more IJVs are being

formed in the African market, researchers are shifting their attention

to focus on African market (White, Kitimbo, & Rees, 2018). In this

paper, we attempt to explore and examine the factors that affect the

choice of interaction post IJV termination in African context.

Interaction post IJV termination is an unexplored area in extant IJV lit-

erature, irrespective of the market context of the study. Interaction

after IJV termination denotes the kind of relationship that parent

firms maintain with their IJV. With the growth the number of IJV

being formed in Africa, the number of termination is also growing

since IJV are considered as a very unstable form of organization

(Das & Teng, 2000; Dhir, Mital, & Srivastava, 2015; Roy & Khokle,

2016). Literature denotes that 20–70% of IJV terminate within a few

years of its formation (Dhir & Sushil, 2017; Gulati, Sytch, & Mehrotra,

2008; Makino, Chan, Isobe, & Beamish, 2007; Mata & Portugal, 2015;

Paik, 2005). Post IJV termination, parent firms are devoid of value cre-

ated during IJV. Foreign firms have to forego domestic partner's mar-

ket knowledge and resources that helped IJV to tackle unique

challenges and gain legitimacy in the target market (Dhir, Dhir, &

Samanta, 2018; Dhir & Mital, 2018; Makino et al., 2007; Parameswar,

Dhir, & Dhir, 2017). On the other hand, domestic partner loses an ave-

nue for technology and knowledge transfer. Termination of an IJV is

detrimental for parent firms considering that their efforts to identify,

form, and establish the venture could not create or sustain value over

time. Furthermore, forming a collaborative venture with another firm

in the market is time- and resource-consuming (Reuer & Ariño, 2007).

In such a scenario, IJV parent firms can interact with each other and

attempt to replicate value created as during IJV (; Parameswar & Dhir,

2018a, 2019). This interaction post IJV termination can be conceptu-

alized in the form of a supplier–buyer interaction or a complement

JEL classification code: M16.

DOI: 10.1002/jsc.2302

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