Global marketplace strategy and choice of interaction after termination of international joint venture

• Date: 01 May 2019
• DOI: http://doi.org/10.1002/jsc.2260
• Author: Sanjay Dhir,Nakul Parameswar
• Published date: 01 May 2019

RESEARCH ARTICLE

Global marketplace strategy and choice of interaction after

termination of international joint venture

*

Nakul Parameswar

1

| Sanjay Dhir

2

1

School of Management, Bennett University,

Greater Noida, India

2

Department of Management Studies,

Indian Institute of Technology Delhi,

New Delhi, Delhi, India

Correspondence

Sanjay Dhir, Department of Management

Studies, Indian Institute of Technology Delhi,

Hauz Khas, New Delhi 110016, India.

Email: sanjaydhir.iitd@gmail.com

Abstract

Foreign partner's global marketplace strategy significantly influences the choice of

interaction after international joint venture (IJV) termination as supplier–buyer, com-

plement, or competitor between terminated IJV partners. The domestic partner in

IJV enables foreign firms to pursue its global marketplace strategy—transnational,

multidomestic, global, or international. On IJV termination, foreign partner's per-

ceived value creation from IJV shall be rendered void and is required to either look

for a new domestic firm to collaborate or form an interaction after IJV termination

with IJV's domestic partner. This study examines the role of foreign firm's global mar-

ketplace strategy on the choice of interaction after IJV termination as supplier–buyer,

complement, or competitor using data on terminated two partner IJV headquartered

in India.

1|INTRODUCTION

With the advent of globalization, businesses are crossing national

boundaries in pursuit of creating sustainable businesses for the future.

Emerging markets across the world are attracting firms from devel-

oped nations to leverage advantage offered by the bottom of pyra-

mid. International joint ventures (IJVs) are considered as an important

mode to enter the emerging markets (Meschi & Riccio, 2008; Tong,

Reuer, & Peng, 2008; Zahra, Ireland, & Hitt, 2000). IJV acts as a plat-

form investment for foreign firms to check viability of business in the

emerging markets (McCarter, Mahoney, & Northcraft, 2011; Parkhe,

1993; Raff, Ryan, & Stähler, 2009; Stuart, 2000) at a lower resource

commitment and risk. Furthermore, IJVs also facilitate both parent

firms to effectively tap exploration and exploitation opportunities

(Dhir & Dhir, 2018a; Dhir, Mital, & Srivastava, 2015; Hasan, Dhir, &

Dhir, 2019; Lavie & Rosenkopf, 2006; Luo, Shenkar, & Nyaw, 2002;

Rothaermel & Deeds, 2004) and gain relational rents (Dyer & Singh,

1998). Moreover, IJV allows foreign firms to leverage domestic firm's

local market knowledge and unique competencies (Chang et al., 2008;

Hitt, Ahlstrom, Dacin, Levitas, & Svobodina, 2004) to meet regulatory

(Dhir, Ongsakul, Ahmed, & Rajan, 2019; Farge & Wells Jr., 1982;

Gomes-Casseres, 1989, 1990; Lecraw, 1984), cultural (Kogut & Singh,

1988; Makino & Neupert, 2000; Merchant & Schendel, 2000; Tihanyi,

Griffith, & Russell, 2005), and institutional challenges (Dhir & Dhir,

2017a, 2017b, 2018b; Dhir & Mital, 2018; Khanna, Palepu, & Sinha,

2005; Palepu & Khanna, 2013; Xavier, Bandeira-de-Mello, & Marcon,

2014) that influences pursuance of global marketplace strategy in the

host country. Extant literature has identified four different global mar-

ketplace strategies based on two factors—pressure to lower costs and

pressure for local adaptation (Bartlett & Ghoshal, 2002; Yip, 1989).

Domestic partner in IJV allows foreign firms to comply with the pres-

sures in the host country by contributing resources, capital, and

knowledge. However, IJV are considered as inherently unstable form

of organization (Das & Teng, 2000b; Nemeth & Nippa, 2013) with

50% termination rate (Franko, 1971; Lunnan & Haugland, 2008;

Makino, Chan, Isobe, & Beamish, 2007; Shenkar & Yan, 2002). On IJV

termination, foreign partner's perceived value creation from IJV shall

be rendered void (Corsaro & Snehota, 2010; Dan & Zondag, 2016;

Dhir, Dhir & Samanta, 2018; Dhir, Ongsakul & Batra, 2018; O'Reilly &

Tushman, 2013). On IJV termination, foreign partner needs to either

look for a new domestic firm to collaborate or form an interaction

after IJV termination with domestic partner of terminated IJV. The

interaction can be in the form of a supplier–buyer or a complement

interaction (Parameswar & Dhir, 2018; Parameswar, Dhir, & Ongsakul,

*JEL classification code: M16.

DOI: 10.1002/jsc.2260

Strategic Change. 2019;28:177–184. wileyonlinelibrary.com/journal/jsc © 2019 John Wiley & Sons, Ltd. 177