What are the challenges in implementing a global alliance. Once an alliance is reached, what steps are involved in strategic implementation of the venture?

Organizational culture and partner interaction in the management of international joint ventures in India

Fariborz Damanpour & Carlos Devece & Chao C. Chen & Vijay Pothukuchi

Published online: 23 April 2010 # Springer Science+Business Media, LLC 2010

Abstract Different from previous research that focused on the formation phase of partnering processes in joint ventures, this study focuses on the post-formation phase and argues that partner interaction processes of communication, cooperation, and conflict resolution play a key role in the implementation and management of joint ventures. We examine how organizational culture differences (OCD) and integration acculturation strategy (IAS) affect international joint venture (IJV) performance through the mediation of partner interaction processes. We develop hypotheses and test them by survey data from 202 executives of IJVs in India. The results suggest that the interaction processes fully mediate the negative effect of OCD but partially mediate the positive effect of IAS on partners’ satisfaction with the joint venture performance. We discuss the implication of these findings for research and practice on post-formation management of IJVs.

Keywords Management of joint ventures . IJV performance . India . Organizational culture difference . Integration acculturation strategy. Partner interaction processes

Asia Pac J Manag (2012) 29:453–478 DOI 10.1007/s10490-010-9204-x

F. Damanpour (*) : C. C. Chen Department of Management and Global Business, Rutgers University, 1 Washington Park, Newark, NJ 07102, USA e-mail: [email protected]

C. C. Chen e-mail: [email protected]

C. Devece Department of Business Administration and Marketing, Universitat Jaume I, Campus de Riu Sec, 12080 Castellon, Spain e-mail: [email protected]

V. Pothukuchi Midas Touch Infrastructure India Pvt Ltd, 401 Sarada 1, Road # 1, Banjara Hills, Hyderabad, India 500 034 e-mail: [email protected]

Interfirm cooperative arrangements such as strategic alliances, partnerships, and international joint ventures (IJVs) have grown exponentially since the 1980s and are now increasingly common (Beamish & Lupton, 2009; Das & Teng, 1998; Julian & O’Cass, 2004; Park, 2010). IJVs have been especially relevant in emerging economies, contributing up to 60% of foreign direct investment (FDI) in the last decade. In the case of India, IJVs have been an important part of the business landscape since economic liberalization in the early 1990s, although a stabilization in the growth of new joint ventures can be noted (Kale & Anand, 2006). In 2009, India ranked third in inbound FDI and is likely to remain as a top investor destination in the coming years (UNCTAD, 2009). It is a deliberate strategy of the Indian government to encourage IJVs between international and Indian partners with policy instruments such as a lower capitalization limit for IJV formation (Ministry of Commerce and Industry, 2003). In the context of FDI serving as an engine for generating growth on the one hand and the need for attractive markets for investment in the wake of a global economic downturn on the other hand, it is hard to overstate the significance of IJVs for India and other emerging economies.

The reasons for the importance of IJVs are varied. Joint ventures enable partner firms to create economies of scale, expand into new markets, manage risk and innovation, learn new skills and technologies, and develop new products or services faster and more reliably that either firm alone (Beamish & Lupton, 2009; Christiansen, 2000; Luo & Park, 2004; Sirmon & Lane, 2004). Despite these strategic benefits, IJVs can be risky and introduce unique management challenges during both the formation and post-formation phases of partnership processes. Research studies, however, have focused mainly on the issues associated with the formation phase (Brouthers & Bamossy, 2006; Schuler, 2001; Spekman, Forbes, Isabella, & MacAvory, 1998). Because continued sharing of resources, capabilities, and knowledge in an IJV is necessary for a mutually beneficial outcome for the partners, more research on the issues related to the implementation and management of joint ventures after they have been formed is needed to increase our understanding of why IJVs succeed or fail (Beamish & Lupton, 2009; Schuler, 2001; Spekman et al., 1998).

This study contributes by examining three research questions related to the post- formation phase of IJVs. First, do partner interaction processes of communication, cooperation, and conflict resolution affect performance of IJVs? Second, do these processes mediate the relationship between organizational cultural difference and IJV performance? Third, do they mediate the relationship between acculturation strategy and IJV performance? By focusing on these questions, this study aims at making three important contributions: (1) adding to scant empirical research on the management of IJVs in the post-formation phase; (2) highlighting the performance implications of partner interaction processes in IJVs; and (3) providing insight for overcoming the negative impact of culture differences on IJV performance through adopting an integration acculturation strategy and enacting organizational processes of communication, cooperation, and conflict resolution.

Cultural differences are inherent in international cooperative arrangements and have been widely studied for understanding of their performance. Prior studies have primarily focused on the impact of national culture difference (NCD) on

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performance (Ariño, 2003; Geringer & Hebert, 1991; Park & Ungson, 1997; Salk & Brannen, 2000; Tihanyi, Griffith, & Russell, 2005). Organizational cultural difference (OCD) between parent firms may equally, if not more, influence a joint venture’s performance (Fey & Beamish, 2001; Meschi, 1997; Pothukuchi, Damanpour, Choi, Chen, & Park, 2002; Sirmon & Lane, 2004). Hence, while accounting for the effect of NCD, we examine the impact of OCD on IJV performance. Moreover, contrary to previous studies that have mainly explored the direct effect of cultural differences on performance while ignoring interaction processes, we posit that OCD may both directly and indirectly affect IJV performance and examine the mediating role of partner interaction processes.

Another neglected area in IJV research is the influence of acculturation strategy on IJV behavior and outcome. Acculturation is the process of give-and-take and adjustment among the partners to work out their differences and reach agreement (Malekzadeh & Nahavandi, 1990: 56). Acculturation strategy refers to an overall approach that IJV partners choose for the management of cultural identities and relationships. Empirical studies of the impact of acculturation on firm performance are few, and the conceptual models are developed mainly in the context of a post- acquisition environment (Elsass & Veiga, 1994; Malekzadeh & Nahavandi, 1990; Weber & Schweiger, 1992). We argue that an integration acculturation strategy (IAS) would help culturally dissimilar partners reach congruency and achieve comple- mentarity, thus facilitating management of the IJV and driving its success (Selmer & De Leon, 2002).

In summary, this study’s thesis is that the success of IJVs, once formed, lies in managing the “execution,” not “formation” issues of partner cultural interaction (Beamish & Lupton, 2009; Brouthers & Bamossy, 2006: 203; Spekman et al., 1998). We argue that in the post-formation phase partner interaction processes mediate the effects of OCD and IAS on IJV performance. Consistent with past research (Gong, Shenkar, Luo, & Nyaw, 2005; Julian & O’Cass, 2004; Luo & Park, 2004), we employ partners’ satisfaction with the joint venture as the indicator of IJV performance. We test our hypotheses using survey data from 202 executives of joint ventures among Indian partners and partners from 21 other countries. The results suggest that although partner interaction processes fully mediate the influence of organizational culture, it only partially mediates the effect of integration acculturation strategy on IJV performance.

Theory

Joint venture partnering processes

Beamish and Lupton (2009: 72) identified four phases of joint venture partnering processes: “(a) assessing the strategic logic for creating the venture, (b) selecting a partner, (c) negotiating the terms, and (d) implementation and ongoing management of the business.” As envisioned in this study, the first three phases constitute the formation and the fourth phase the post-formation of the IJV. Managing a cooperative venture over time is different from forming it (Luo & Park, 2004). For

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example, the economic cost perspectives, which focus primarily on governance and optimal use of resources, are more applicable to the formation (anticipation, valuation) than to the management (operation, advancement) of joint ventures (Schuler, 2001; Spekman et al., 1998). Of the six management issues Beamish and Lupton (2009) identified in their review of research on joint ventures, five are salient at the post-formation phase, suggesting the crucial role of this phase for joint venture success.1

In the post-formation phase, IJV success depends on overcoming barriers due to NCD and OCD among the partners and creating organizational processes through which the partners resolve disagreement and integrate activities (Bell, den Ouden, & Ziggers, 2006; Malekzadeh & Nahavandi, 1990). Effective management of an IJV after its formation depends on its “coordination capabilities” that emerge from a process of interaction among the IJV’s members and units (Brouthers & Bamossy, 2006). That is, from the perspective of organizations as open systems, the IJV is a “collectivity,” a social system in which partners are interdependent parts, pursue common goals, and interact to perform their functions and tasks (Scott, 1992; Van de Ven, Dennis, & Koenig, 1975). We focus on three social processes of communi- cation, cooperation, and conflict resolution that are essential interaction processes for managing the effectiveness of an IJV. These processes are interrelated; each can influence the others, and together represent the interaction dynamics of the IJV partners.

Communication is a social process of broadest relevance in the functioning of any group or organization (Katz & Khan, 1978). It is particularly challenging to IJVs because partners from different cultural backgrounds tend to have different frames of reference, which lead to different ways of expressing and interpreting meanings (Gudykunst, 1994). There are also different preferences in verbal versus nonverbal communication and in style of assertiveness (Hall & Hall, 1990). Communication is the key aspect of information sharing among partners and can influence cooperation, trust, and agreement on the critical issues of control and conflict resolution in IJVs (Schuler, 2001). Effective communication among partners through sharing information, updating, and clarifying misunderstandings is therefore essential to IJV success.

Cooperation refers to partners’ willingness to work together to solve problems and to help each other when needed. Some scholars have argued that a joint venture’s success depends on a balance between competition and cooperation (Das & Teng, 1998; Luo & Park, 2004). We suggest that in routine partner interactions, cooperation should have a more positive effect than competition. Without cooperation, “mutual forbearance becomes less appealing to the partners” over time (Luo & Park, 2004: 143). Indeed, in examining the impact of both competition and cooperation on the performance of North American joint ventures with Japanese partners, Tiessen and Linton (2000) found that cooperative behaviors were positively

1 According to Beamish and Lupton (2009: 79), the six joint venture issues are performance, knowledge management, internationalization, cultural differences, governance and control, and valuing a joint venture; all of which, except internationalization, are salient for the implementation and management phase of partnering process.

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associated with partners’ satisfaction with a joint venture but competitive behaviors were not.

Conflict is increasingly viewed as natural and inevitable in human interactions. Previous research has studied how the amount of conflict and the types of conflict affect group performance (e.g., Jehn, 1995; Simons & Peterson, 2000). In this study we examine the extent to which IJV partners share a similar style of conflict resolution, as well as the amount of conflict encountered in their interactions. Although conflict in an IJV is a given because of cultural differences and opportunistic behavior of the partners, continuous interaction between the partners is pivotal to resolving conflicts, coordinating complementary business activities, keeping the venture on track, committing to future courses of action, and enabling the venture to adapt and grow (Bell et al., 2006; Spekman et al., 1998).

Organizational culture difference (OCD)

Hofstede, Neuijen, Ohayv, and Sanders (1990) distinguished between national and organizational culture by attributing NCD to differences in fundamental under- standings, values, and beliefs and OCD to differences in organizational practices. Organizational practices are commonly accepted organizational routines and actions that have evolved over time, have become institutionalized in the organization, and are considered appropriate in managing the organization and conducting its business (Danis & Parkhe, 2002: 426; Fang, 2010; Kostova, 1999). They are necessary for the efficient and effective functioning of organizations.

Whereas an IJV may not succeed because of economic, commercial, or strategic factors, most problems encountered by IJVs have been attributed to cultural differences, namely, incompatible organizational practices and behaviors (Meschi, 1997). When the partners in a joint venture differ in these practices, the differences may result in misunderstandings and conflicting behaviors, leading to interaction problems among them. For instance, differing approaches to management style (e.g., autocratic vs. participative) make the process of decision making slow and frustrating, resulting in less cooperation and creating more conflict (Schuler, 2001). Hence, OCDs may stand in the way of partners’ searching for and developing more effective interaction processes.

Partners with dissimilar organizational cultures differ in their communication methods and power structures and therefore lend themselves to differing sets of job roles and expectations (Park & Ungson, 1997; Pothukuchi et al., 2002). These partners tend to have problems agreeing on the joint venture’s management systems and processes (Tiessen & Linton, 2000). Self-categorization theory suggests that people categorize themselves into psychological groups, maintain in-group preferences in their interactions, and communicate differently with members of their own groups than with other groups (Salk & Brannen, 2000). Incompatible organizational practices strain the IJV’s communication climate, leading to differences in partners’ expectations and causing a mismatch in interaction processes needed for the venture’s success (Das & Teng, 1998; Hofstede et al., 1990).

Organizational culture similarity positively affects interaction processes by conveying a sense of identity to organizational members and encouraging the

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partners to adopt a more cooperative approach in dealing with conflict (Lin & Germain, 1998; Pablo, 1994). Differences in organizational culture, on the other hand, increase the cost of cooperation as partners need to spend greater time and effort to work with each other (White & Lui, 2005). IJV partners from culturally similar organizations presumably share similar problem-solving approaches and are tolerant of each other’s approach (Lin & Germain, 1998). Conversely, partners from culturally different organizations may hesitate to openly communicate and exchange information when they perceive a lack of common ground for social interaction and dissimilar organizational processes for problem solving (Lin & Germain, 1998).

In summary, IJVs with similar culture have a higher probability of success because OCD makes management of joint ventures more complicated (Beamish & Lupton, 2009). Whereas cultural differences increase the potential for conflict and the cost of cooperation among IJV partners, cultural similarity in the partners’ organizational practices facilitates communication and reduces conflict and cooperation cost (Julian & O’Cass, 2004; Tiessen & Linton, 2000; White & Lui, 2005). OCDs inhibit organizational processes that are required for combining and leveraging resources; hence, partners with dissimilar organizational cultures are less likely to effectively carry out the IJV’s value-creating activities (Sirmon & Lane, 2004).

Hypothesis 1 Organizational cultural difference negatively affects interaction processes in international joint ventures.

Integration acculturation strategy (IAS)

Acculturation occurs when a cultural group comes into continuous up-close contact with another cultural group over an extended period of time, resulting in changes in either or both cultural groups (Berry, Kim, Power, Young, & Bujaki, 1989; Elsass & Veiga, 1994). Berry and colleagues (1989) introduced four acculturation strategies: (1) assimilation refers to a strategy in which the focal party relinquishes its own culture and adopts the cultural values and behaviors of the other party; (2) separation involves maintaining one’s own culture and rejecting the other group’s culture; (3) integration refers to a bicultural strategy in which one seeks both to maintain one’s own culture and to embrace the other party’s culture; and (4) marginalization involves nonadherence to either one’s own or the other’s culture. Nahavandi and Malekzadeh (1988) applied “anthropological accultura- tion” to explain “organizational acculturation” and developed a theoretical model of acculturation for implementing mergers and acquisitions (Elsass & Veiga, 1994). Subsequent research has examined the role of acculturation in the success or failure of mergers and acquisitions (Elsass & Veiga, 1994; Larsson & Lubatkin, 2001) and on organizational acculturation as a means for controlling employees of foreign subsidiaries (Semler & De Leon, 1996, 2002). We extend this research by examining how IAS affects partner interaction processes in IJVs. We have selected to study the impact of IAS on the assumption that (1) the primary purpose of joint ventures is to form collaborative relationships to achieve synergy and (2)

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the IAS is more suitable than the other strategies during the implementation and management phase of the IJV partnering process.2

In the merger and acquisition context, researchers argue that, in addition to task integration, successful mergers require social integration for resolving issues of power, identity, and culture (Birkinshaw, Bresman, & Hakanson, 2000; Pablo, 1994). Larsson and Lubatkin (2001) found that achieving acculturation depends mainly on the acquiring firm’s use of social (nonauthoritarian) control and coordination efforts that emphasize cooperation, communication, and teamwork. Because IAS involves a relatively balanced adjustment of values and practices, Malekzadeh and Nahavandi (1990) advise that both the acquiring and the acquired firm pursue a multicultural (bicultural) rather than a unicultural approach. Similarly, Adler (1997) views a bicultural strategy as one of synergy, which seeks to utilize the strengths of both cultures. While the IAS may lead to the creation of a third, hybrid culture (Earley & Mosakowsky, 2000), the interest of this study, consistent with the acculturation strategy literature, lies not in the cultural content, which is captured in OCD, but in the overall attitude of partners toward each other’s cultural differences.

In the IJV context, successful integration requires both shared understanding of capabilities transferred from parents to the joint venture and behavioral dynamics which underlie the interaction among the IJV partners (Elsass & Veiga, 1994: 435). Biculturalism facilitates interaction processes because it encourages the IJV members to understand and merge their parents’ organizational practices into a common practice for the new venture. As such, greater biculturalism promotes more effective communication and greater cooperation and conflict resolution substantively and symbolically. For example, being integration oriented, the partner is more likely to interpret information from its own and the other partner’s organizational cultural perspective, thereby reducing communication errors and increasing both communication frequency and commu- nication effectiveness. Biculturalism also encourages sharing of information, increases trust and cooperation, and reduces conflict. The consideration and respect for each other’s culture fosters a sense of common identity and a commitment to the collaborative relationship (Barkema, Bell, & Pennings, 1996; Weber, Shenkar, & Raveh, 1996).

In summary, cooperative ventures are a form of hybrid organization in which success depends on managing interdependencies through the facilitation of the interaction processes (Luo & Park, 2004; Pablo, 1994). The adoption of an IAS requires that the partners develop managerial values and organizational practices for

2 We assume that separation and marginalization are not viable strategies in the post-formation phase because an IJV’s effectiveness depends more on achieving synergy than on domination of one partner. Domination is unappealing because unlike acquisitions (Nahavandi & Malekzadeh, 1988) or parent- subsidiary relationships (Selmer & De Leon, 1996) that are characterized by asymmetrical relationships of power differential, in IJVs, especially those with an evenly distributed ownership, neither of the partners can unilaterally impose its organization’s culture on the venture (Meschi, 1997). Moreover, researchers have observed that the partners of collaborative ventures face the dual pressures of maintaining their own cultural identity and adapting to their partners’ cultural practices (Selmer & De Leon, 2002). Overall, IJV studies suggest that either shared or split control is preferred to dominant control for the effectiveness of joint ventures (Beamish & Lupton, 2009).

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the joint venture that combine both partners’ original cultures (Meschi, 1997: 213; Olie, 1994). Therefore:

Hypothesis 2 Integration acculturation strategy positively affects interaction processes in international joint ventures.

Interaction processes and IJV performance

IJV performance has been measured by a host of financial (profitability, growth, shareholder value), survival (duration, dissolution), and perceptual effectiveness (satisfaction with IJV) indicators (Ariño, 2003; Beamish & Lupton, 2009; Merchant & Schendel, 2000). There is no consensus regarding the best IJV performance measure. Geringer and Hebert (1991) found that the objective and perceptual measures are positively correlated. The objective indicators (often financial measures) are based primarily on the assumption that the IJV has been formed to achieve a set of strategic goals to improve the partners’ competitive position (Mohr & Spekman, 1994). Ariño (2003: 74) compared strategic goal fulfillment with performance satisfaction and concluded that whereas the former captures the accomplishment of the initial goals, the latter captures the accomplishment of both initial and emergent goals. Anderson (1990) argued that subjective indicators are often more appropriate than objective ones because joint venture goals vary and cannot be always measured (Beamish & Lupton, 2009). Meschi (1997) distinguished between short-term and long-term IJV perfor- mance and argued that when significant cultural differences exist, an IJV may perform poorly in the short term, but its long-term prospects may differ because longevity moderates the adverse effect of the intensity of cultural differences. Accordingly, we focus on partners’ satisfaction with the IJV on the assumption that it indicates that the IJV will be viable over time (Lin & Germain, 1998; Mohr & Spekman, 1994).

As stated earlier, we examine partners’ interaction through interrelated processes of communication, cooperation, and conflict resolution. Effective communication creates a work climate that helps sharing of perceptions of daily activities and practices, fosters trust in the partnership, and facilitates the search for mutually accommodating solutions to capitalize on the synergistic effect of the joint venture (Das & Teng, 1998; Hofstede et al., 1990; Mohr & Spekman, 1994). These processes, in turn, enhance the partners’ satisfaction and commitment to the joint venture as they learn that cooperative efforts could lead to outcomes that exceed what each could achieve individually (Beamish & Lupton, 2009; Griffith, Hu, & Ryans, 2000; Mohr & Spekman, 1994).

Previous research on cooperation between partners provides equally compelling arguments. According to social exchange theory, exchange and cooperation have a social dimension that will benefit the relationship, especially when the business is under stress (Spekman et al., 1998). Mohr and Spekman (1994) found that whereas cooperative processes such as joint problem solving and participation in decision making affect the development of mutually acceptable solutions and satisfaction with partnerships, conflict resolution techniques such as domination, confrontation, and avoidance do not. Similarly, Lin and Germain (1998) found that while compromising and problem solving were positively associated, forcing and legalistic strategies were negatively associated with the IJV success. Power asymmetries, on one hand, increase

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coercive behavior and reduce the incentive for the more powerful partner to engage in a cooperative relationship (Lin & Germain, 1998). On the other hand, for the less powerful partner, a power imbalance causes the adoption of an approach to avoid conflict resolution and reduces willingness to actively participate in problem solving, thus making the relationship less satisfactory (Griffith et al., 2000; Lin & Germain, 1998). Power balance emanating from the IAS ensures a higher level of satisfaction for both partners because it motivates them to adopt a give-and-take attitude in resolving disagreements and aims at achieving mutually desirable outcomes for the IJV (Lin & Germain, 1998).

Effective interaction processes induce commitment to the joint venture. Committed partners are willing to forgo self-interests for mutual benefits, maintain membership in the joint venture, and expend greater effort on the relationship (Griffith et al., 2000; Weber & Schweiger, 1992; White & Lui, 2005). The interaction processes induce coordinating actions necessary to balance short-term problems and conflicts with the long-term achievement of common goals (Mohr & Spekman, 1994; White & Lui, 2005), leading to greater satisfaction with the partnership by reducing uncertainty and turnover (Griffith et al., 2000; Luo & Park, 2004). Conversely, lack of partner interaction can negatively affect a cooperative venture’s success even when the level of strategic and cultural compatibility is satisfactory (Meschi, 1997; Olie, 1994).

In summary, we propose that the success of a joint venture relies on the intensity of partners’ interactions. We assume that when a firm voluntarily enters into a joint venture, it wants to jointly manage the resources and capabilities with its partner (Beamish & Lupton, 2009). Open communication, cooperative problem solving, and mutual adaptation are features of high-performance IJVs (Brouthers & Bamossy, 2006; Danis & Parkhe, 2002). As time dependent as they might be, effective interaction processes positively influence satisfaction with the joint venture because they enable the understanding of the other partner’s values and practices, help identify solutions for overcoming differences, and facilitate a congruent development of the joint entity in the long term (Nahavandi & Malekzadeh, 1988; Ring & Van de Ven, 1994; Spekman et al., 1998). Thus:

Hypothesis 3 Interaction processes positively affect satisfaction with international joint ventures.

Methods

Sample and data

The hypotheses are tested using data from a survey of joint ventures between Indian and foreign partners from 21 other countries.3 Excluding small joint ventures of less

3 The data for this paper were part of the original data in Pothukuchi and colleagues’ (2002) survey. However, except for OCD, none of the major variables in this paper were used by Pothukuchi and colleagues (2002). In addition, this study addresses a set of different research questions and tests new hypotheses by employing a different analytical procedure.

Organizational culture and partner interaction in the management of international joint ventures in India 461

than US$0.3 million, a total of 334 joint ventures were identified from business publications in India from which 127 firms in 25 industries agreed to participate in this study. To control for the influence of industry specific cultures, only IJVs for which both parent firms belonged to the same industry were included. Foreign partners were mostly from the United States (40), Japan (20), Germany (14), the United Kingdom (13), and France (8); the Netherlands, Singapore, and Switzerland each had three joint ventures, and the rest of the countries had one or two. Data were collected through structured interviews by four graduate students, during which the respondents filled out the questionnaires. The questionnaire was pre-tested in ten companies. A senior executive from each IJV identified three experienced IJV executives who had ample interaction with their foreign counterparts. The sample includes 202 executives from the Indian partners.

Measures

The scales and items of the four theoretical variables are shown in the Appendix. All were measured perceptually on a 5-point Likert scale (1 = strongly disagree; 5 = strongly agree).

Organizational culture difference Pothukuchi and colleagues (2002) adapted the OCD scale from Hofstede and colleagues (1990) based on the relevance to joint ventures (see Appendix, Section I). To check the dimensionality of the scale, we conducted a confirmatory factor analysis (CFA) with Hofstede and colleagues’ (1990) six dimensions. Two pairs of dimensions showed high correlations—“parochial vs. professional” with “open vs. closed” (.90) and “loose vs. tight” control with “normative vs. pragmatic” (.89); however, we used the six dimensions separately to keep the original scale. OCDs were calculated by the absolute difference in organizational culture indices of the partners for each dimension. To validate the results of the six dimensions scale, we analyzed our models with a modified three- dimensions OCD scale including “process vs. results” (α = .70), “parochial vs. professional” (α = .70), and “open vs. closed” (α = .68). The results did not change (details below).

Integration acculturation strategy Based on the conceptual definition of IAS (Berry et al., 1989; Nahavandi & Malekzadeh, 1988), we developed a 3-item measure representing the extent to which IJV executives from the focal partner took a bicultural approach to the management of cultural differences with the executives from the other partner (Appendix, Section II). The Cronbach’s alpha for this scale was 0.74.

Interaction processes This variable was measured by the three dimensions of communication, cooperation, and conflict resolution. Each dimension was composed of at least four items (Appendix, Section III). To check the bias due to automatic, careless responses, we reverse-scored certain items. The convergence of positive and negative questions for the same dimension confirmed the internal consistency of the responses. The Cronbach’s alphas for the communication, cooperation, and conflict resolution dimensions were 0.70, 0.72, and 0.76, respectively.

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Satisfaction with IJV Previous operationalization of partner satisfaction have included social commitments and entanglement of partners, preservation of socially embedded relationships, and meeting the needs of partners over the long term (Geringer & Hebert, 1991; Lane & Beamish, 1990; Lin & Germain, 1998; Meschi, 1997). However, we used a 3-item scale (Appendix, Section IV), which reflects the focal partner executives’ satisfaction with the IJV’s profitability and management practices but excludes their satisfaction with other dimensions that have been included in our scale for partner interaction processes. The Cronbach’s alpha was 0.78.

Control variables We controlled for four variables that could potentially affect satisfaction with an IJV and its success. We controlled for the age of the joint venture because (1) it takes time to develop personal relations and consolidate routines and work procedures, (2) partners in an enduring joint venture often become more patient and comfortable in daily interactions, and (3) long-term partners are more tolerant of short-term imbalances (Lin & Germain, 1998; Swierczek & Dhakal, 2004). Age was measured by the number of months that IJV partners had been interacting. We controlled for the size of the joint venture because size is a key factor in determining the structure and processes of organizations (Kimberly, 1976), influencing their management capabilities and challenges. In IJVs, size also reflects the investment that is at stake, affecting the extent of partners’ involvement and control (Osland, 1994). Size was measured by sales turnover. We controlled for NCD because national cultural similarity among partners is a key factor in the endurance of global alliances (Lane & Beamish, 1990) and has been alleged to be an added potential difficulty in mergers, acquisitions, and cooperative ventures (Barkema et al., 1996; Lu, 2006). National culture difference was measured by an aggregate index developed by Kogut and Singh (1988).4 Finally, we controlled nonsatisfaction aspects of organizational performance reflecting financial, operational, and strategic measures (Ariño, 2003) by a five-item scale referred to here as efficiency. It reflects the focal partner executives’ perception of IJV performance regarding reduction in fixed cost, volume-cost ratio, sourcing and access to capital, capital investment, and product portfolio diversification. The Cronbach’s alpha was 0.72.

Analysis

We tested the hypotheses with structural equations, employing the software EQS 6.1 to estimate the model (Bentler & Wu, 1995). We used the maximum-likelihood method combined with the method of robust standard estimators to avoid restrictions on the normality of the data (Satorra & Bentler, 2001). The conceptual model consisted of two exogenous variables (OCD and IAS) and two endogenous variables (interaction processes and satisfaction with IJV). However, in data analysis we controlled for the possible effect of OCD on IAS because cultural difference may

4 NCD is computed by the following formula (Kogut & Singh, 1988): NCDj ¼ P4

i¼1 Iij � Iid � �2

=Vi n o

=4;

where Iij stands for the index for the i th cultural dimension and jth country, Vi is the variance of the index

of the ith dimension, d indicates India, and NCDj is national cultural distance of j th country from India.

Organizational culture and partner interaction in the management of international joint ventures in India 463

cause acculturation conflict, adding to acculturation stress and inhibiting integration (Elsass & Veiga, 1994; Nahavandi & Malekzadeh, 1988; Tadmor, Tetlock, & Peng, 2006; Ward & Kennedy, 2001). We introduced the four control variables as single indicators and assumed they did not contain measurement errors. We individually analyzed the measurement scales of the two multidimensional variables (OCD and interaction processes) by conducting confirmatory factor analyses (Bagozzi, 1981) before undertaking the assessment of the hypothesized model. We evaluated the overall fit of the models to the data by several fit statistics recommended by Hair, Anderson, Tatham, and Black (1992), and Joreskog and Sorbom (1993).

Results

Table 1 shows descriptive statistics and correlations. Figure 1 shows the hypothesized model.

Measurement models

Organizational culture difference We carried out a second-order confirmatory factor analysis (CFA) to assess the reliability, convergent validity, and discriminant validity of the OCD measurement model. We used all 18 items in six dimensions (three per dimension). The goodness-of-fit indices suggest that the models fit the data well (Hair et al., 1992; Kline, 1998): NNFI = .96, CFI = .96, IFI = .96, RMSEA = .026, NC = 1.13 (Appendix, Section I). Hence, the multidimensional structure of OCD as a second-order latent factor made up of the six dimensions identified in the theory was confirmed.

We also carried out a first-order factor model for each dimension of OCD to validate its unidimensionality. The reliability of each item can be examined by its factor standardized loading onto the respective latent factor. The threshold value for the loadings is 0.50 (Hair et al., 1992) and a loading greater than 0.70 indicates high

Table 1 Means, standard deviations, and correlations.

Mean s.d. 1 2 3 4 5 6 7

1. Organizational Culture Difference

0.75 0.44 (.87)

2. Integration Acculturation Strategy

3.05 0.70 −.21** (.75)

3. Interaction Processes 3.55 0.57 −.48** .45** (.89) 4. Satisfaction with IJV 3.50 0.70 −.47** .45** .64** (.78) 5. Efficiency 10.64 3.92 −.12 .14 .18* .21** (.72) 6. National Culture Difference 16.72 5.41 .05 .05 .12 .12 .11

7. Size of IJV 134.50 370.35 −.09 −.03 .03 .08 .15* .02 8. Age of IJV 119.12 142.40 −.06 .02 .03 .07 −.05 .22* .05

Reliability coefficients for the scales are in parenthesis.

* p < .05; ** p < .01 (two-tailed).

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reliability (Hulland, 1999). Only three out of 18 items had low loading (OCD3 = .47, OCD4 = .47, OCD8 = .49); however, we kept them in the scale because their loadings were close to the threshold value and they were included in the original scale (Appendix, Section I). The convergent validity, examined by the composite reliability of the construct (Werts, Linn, & Joreskog, 1974), was 0.87. Finally, we assessed the discriminant validity by testing the correlation between pairs of dimensions (Bagozzi, Yi, & Phillips, 1991), all of which were below the threshold value of 0.90.

Integration acculturation strategy This variable includes three items. The degrees of freedom were equal to zero, and the measurement model was saturated; hence, we could not evaluate its fit in an isolated way. Nevertheless, the Cronbach’s alpha was 0.74 (Table 1), composite reliability was .68, and the three standardized loadings were higher than 0.50 (Appendix, Section II). These results coupled with the fit of the measurement model within the global model (Figure 1) allowed us to assume the reliability and validity of the IAS scale.

Interaction processes The measurement model was initially composed of 13 items and three dimensions (Appendix, Section III). After conducting a second-order CFA, the analysis of the goodness-of-fit indices and the parameters’ reliability led us to the modification of the initial model until an acceptable fit was reached. Specifically, items IP3, IP6, IP9, and IP11 were suppressed because of their low factor loadings. The resulting measurement model of nine items (three for each dimension) provided an adequate fit to the data. All the loadings were greater than 0.50 and were statistically significant (p < .01). The correlations between dimensions were lower than 0.80, confirming the discriminant validity. Overall, CFA results adequately support that the three dimensions of communication, cooperation, and conflict resolution can be grouped in a higher-order construct capturing their common variance.

Model 1

R2 =.61

Integration Acculturation

Strategy

- .50**

.46**

Organizational Culture

Difference

.82**

.81** .83** .83**

Interaction Processes

R2 =.69

Satisfaction with IJV

Control Variables

Size Age NCD

.03-.001 .10*

Efficiency

-.01

-.30*

R2 =.09

68**

. .62**

.59**

.57**

.64**

.59**

Employee vs. Job

Process vs. Results

Parochial vs. Professional

Open vs. Closed System

Loose vs. Tight Control

Normative vs. Pragmatic

C om

m un

ic at

io n

C

oo pe

ra ti

on

C on

fl ic

t R

es ol

ut io

n

AS 1

AS 2

AS 3

.76**

.78**

.52**

.71** S 1

S 2

S 3

.61**

.91**

2 = 223.1; d.f. = 148; NNFI = 0.91; CFI = 0.92; IFI = 0.92; NC = 1.51; RMSEA = 0.053χ *p<.05; **p<.01

Figure 1 The hypothesized model

Organizational culture and partner interaction in the management of international joint ventures in India 465

Satisfaction with IJV We assessed the scale as a unidimensional construct of three items. The standardized loadings were above the threshold level of 0.50, and the composite reliability for the construct was 0.71 (Appendix, Section IV). Although the saturation of the model prevented the use of fit indices, these results and the fit of the global model (Figure 1) let us assume the reliability and validity of the scale. Because the correlation between satisfaction with IJV and interaction processes was high (r = .64, Table 1), we conducted a Harman’s one-factor test to check the common variance of the items of both variables (Podsakoff, MacKenzie, Lee, & Podsakoff, 2003). The exploratory factor analysis extracted two components, with each item of IP and Satisfaction assigned to their respective factor, confirming the discriminating power of the measurement tool and suggesting that common method variance is not a concern.

Structural model

The relationships established in the hypotheses were jointly assessed by the structural model (Model 1, Figure 1). In this model the three items of each OCD dimension and those of each dimension of interaction processes were aggregated in a single indicator to reduce the complexity of the model (Gribbons & Hocevar, 1998). Applying the maximum-likelihood method, all the indices indicated that the hypothesized model had adequate fit to the data (NNFI = .91; CFI = .92, IFI = .92; NC = 1.51; RMSEA = .053). Figure 1 also contains the parameter estimates for the main predictors, significance levels, and proportions of explained variance (R2).

Hypothesis 1 was supported by the negative path coefficient between OCD and interaction processes (−.50, p < .01). Also, the path coefficient between IAS and interaction processes was positive (.46, p < .01), supporting Hypothesis 2. The combination of OCD and IAS explains 61% of the variance of interaction processes, confirming these predictors’ explanatory power. Hypothesis 3 was supported by the positive path coefficient between interaction processes and satisfaction with IJV (.82, p < .01). The model explained 69% of the variance in satisfaction with IJV (Figure 1).

The path coefficient between OCD and IAS is negative (−.30, p < .05), confirming the relationships suggested by the previous conceptual models (Elsass & Veiga, 1994; Malekzadeh & Nahavandi, 1990; Nahavandi & Malekzadeh, 1988). Considering the four control variables, contrary to prior findings (Lin & Germain, 1998; Swierczek & Dhakal, 2004), NCD and IJV age did not significantly affect satisfaction with IJV. Only the path coefficient for efficiency was statistically significant (.10, p < .05). Overall, nonsignificant path coefficients for three control variables and a relatively low path coefficient for efficiency help confirm the explanatory power of our independent variables for satisfaction with IJV.

Alternative model evaluation

Model 1 is a fully mediated model predicting that OCD and IAS affect partners’ satisfaction with a joint venture through the interaction processes. Following the

466 F. Damanpour et al.

recommendations for the evaluation of causal models in management research (Piccolo & Colquitt, 2006; Rindova, Williamson, Petkova, & Server, 2005), we conducted additional analyses to test the validity of nonmediated and partially mediated models. Model 2 (Figure 2) is a nonmediated model and has the same number of paths as Model 1. It tests whether OCD and IAS have no relationship with interaction processes. Model 3 (Figure 2) is a partially mediated model and includes more paths than Model 1. It allows the comparison of direct and indirect effects of OCD and IAS on satisfaction with IJV. We tested the fit of the hypothesized and alternative models by the significance of change in both chi-square (for nested models) and the Akaike information criterion (AIC) for the models that are not nested (Kline, 1998).

Model 2 did not fit to the data as well as Model 1 (NNFI = .82; CFI = .84, IFI = .84), and the chi-square for the same degrees of freedom increased from 223.1 to 298.4. Because Models 1 and 2 were not nested, the change in the chi-square gave only a relative measure of the difference between the models. Hence, we evaluated the difference between the AIC scores of Models 1 and 2. The AIC score for Model 1 (−72.9) was lower than that for Model 2 (2.4), confirming that the hypothesized model represented a better fit than the alternative Model 2 (Kline, 1998; Rindova et al., 2005).

Model 3 fit the data well (NNFI = .91; CFI = .93, IFI = .93). The chi-square in Model 3 decreased with respect to Model 1 (215.9 vs. 223.1), but the difference was not significant at the 0.05 level (Δχ2 [2] = 7.2, p = 0.07). Any improvement of Model 3 over Model 1 resided in the relationship between IAS and satisfaction with the IJV. Whereas the direct effect of IAS on satisfaction with IJV was significant (0.22, p < .01) in Model 3, its indirect effect through interaction processes was greater (0.44, p < .01) and was similar to the path coefficient in Model 1 (.46). The direct effect of OCD on satisfaction with IJV was not significant (p > .05) in Model 3, and its indirect effect (−0.48, p < .01) was similar to Model 1 (−.50). Therefore, because the difference between chi-squares of Model 1 and Model 3 was not significant, and the addition of two new paths made Model 3 less parsimonious than Model 1, we consider the hypothesized model better than the alternative Model 3.

As stated earlier, we conducted additional analyses to test the validity of the hypothesized and alternative models with a 3-dimensional OCD scale that had greater reliabilities than the original 6-dimensional scale. The results were identical with those for the original OCD scale as the value and significance of path coefficients and the fit of the three models did not change from those reported in Figures 1 and 2. Overall, the analysis generally supports our hypotheses on the mediating role of partner interaction, which we discuss below.

Discussion

Different from previous research that focused on the formation phases of partnering process in IJVs, we examined the influence of OCD, IAS, and interaction processes on IJV performance in the post-formation phase. We advanced that the interaction processes of communication, cooperation, and

Organizational culture and partner interaction in the management of international joint ventures in India 467

conflict resolution mediate the relationships between both OCD and IAS and partners’ satisfaction with IJV. The results suggest that partner interaction processes fully mediate the negative effect of OCD, and partially mediate the positive effect of IAS, on satisfaction with IJV. These findings extend prior research on cultural difference and acculturation strategy for IJVs and provide additional insights for research and practice on management of joint ventures after their formation.

Culture difference, partner interaction, and IJV performance

Cultural differences among partners influence interpretation and responses to strategic and managerial issues, compounding transactional difficulties in IJVs and affecting partners’ trust and interactions (Park & Ungson, 1997; Pothukuchi et al., 2002). The problems resulting from ineffective management

Model 2

Model 3

Satisfaction with IJV

Integration Acculturation

Strategy

.28**

Organizational Culture

Difference -.28**

Interaction Processes

.62**

R2 = .60

.52**

R2 = .55 R 2 = .70

Satisfaction with IJV

Interaction Processes

Integration Acculturation

Strategy

Organizational Culture

Difference

.22**

-.22

.44**

-.48**

- .31*

-.31*

Control Variables

Size Age NCD

.07-.002 .09*

Efficiency

-.008

R2 = .10

R2 = .09 Control Variables

Size Age NCD

.06-.002 .08

Efficiency

-.004

χ2 = 298.4; d.f. = 148; NNFI = 0.82; CFI = 0.84; IFI = 0.84; NC = 2.02; RMSEA = 0.074 *p<.05; **p<.01

*p<.05; **p<.01

χ2 = 215.9; d.f. = 146; NNFI = 0.91; CFI = 0.93; IFI = 0.93; NC = 1.48; RMSEA = 0.051

Figure 2 Alternative models

468 F. Damanpour et al.

of post-formation, in turn, adversely influence partners’ satisfaction with an IJV and its success (Lin & Germain, 1998; Mohr & Spekman, 1994). Past research on IJV performance has generally assumed that increasing organizational culture similarity reduces performance problems (Ring & Van de Ven, 1994; Spekman et al., 1998; Very, Lubatkin, Calori, & Veiga, 1997). We provide insight by accounting for the mediating role of partner interaction, highlighting that the challenge of managing an IJV after its formation does not lie in the cultural differences per se but in how partners react to culturally different others in their daily activities of communication, cooperation, and conflict resolution. Our findings suggest that the relative high failure rate of joint ventures noted in the literature may be due in part to difficulties arising from partner interaction processes.

Effective management of interaction processes induces the partners to commit to shared goals, exert effort on behalf of the joint venture, maintain membership in it, work together to rectify problems and reduce conflict, and realize synergy through effective integration (Griffith et al., 2000; Mohr & Spekman, 1994; Weber & Schweiger, 1992). Although cooperative management of the IJV may involve some risks, it can help overcome barriers of culture difference, emanate commitment to the partnership success, and entice partners into delivering long- term performance goals (Anderson & Weitz, 1989). Open communication and cooperative problem-solving styles develop greater levels of trust among the partners and lead to higher satisfaction with the IJV (Brouthers & Bamossy, 2006). Like other cooperative alliances, when one partner signals positive expectations or favorable attitudes to the other, the other partner reciprocates those expectations (Butler, 1983), affecting the level of satisfaction of both partners with the IJV.

Sirmon and Lane (2004: 315) argue that OCDs have more influence on a joint venture than NCDs because “organizational culture is more proximal and salient to the behaviors of individuals that drive business performance in international alliances.” That is, the influence of practices embedded in organizational culture is more specific to interaction among the partners and IJV success than societal values rooted in national culture. When partners interact, they observe the visible and striking behavioral differences as opposed to unobservable latent differences (Bandura, 1977; Black & Mendenhall, 1991). Our results provide empirical support for this view, as they show that NCD does not significantly affect satisfaction with IJV and the influence of OCD on IJV performance is mainly through partner interaction processes. In addition to NCD and OCD, Sirmon and Lane (2004) argue that professional cultural differences (PCD) among IJV members influence their interactions. They propose that PCD (differences in the norms, values, and beliefs related to occupation) is the most disruptive to a joint venture’s effectiveness because it is the most relevant and salient cultural difference that IJV employees face in achieving the venture’s primary value- creating activity (Sirmon & Lane, 2004). Important future research can examine the relative influence of OCD and PCD on joint venture success. Furthermore, based on our conceptual model, future research can determine whether the impact of PCD, like OCD, is fully mediated by partner interaction processes of communication, cooperation, and conflict resolution.

Organizational culture and partner interaction in the management of international joint ventures in India 469

Acculturation strategy, partner interaction, and IJV performance

This study’s findings present preliminary evidence that IAS is an effective way of managing cultural differences among IJV partners. Partners that make concerted efforts to both maintain their own organizational values and embrace the partner’s organizational values are more likely to be satisfied with the joint venture. Our findings suggest that IAS has both a direct effect on satisfaction with an IJV and an indirect effect through partner interaction processes. Therefore, a strategy of biculturalism may be a symbolic and/or substantive gesture that, in and of itself, enhances satisfaction in international cooperative ventures.

The current scant acculturation research has examined parent-subsidiary relation- ships in which host-country local employees acculturate to the organizational values of foreign-owned parent companies (Selmer & De Leon, 1996, 2002). This literature is mainly concerned with cultural control of parent companies and has found evidence that local employees (Hong Kong Chinese) acculturate to some cultural values of foreign parent companies (Swedish multinational companies). However, prior research did not propose, nor did it find, evidence in support of the effectiveness of a unilateral assimilation acculturation strategy. In fact, Selmer and De Leon (2002) found that acculturation is greatest for those values that are most important to the parent company but least for those values considered important by the local employees. Our finding suggests the feasibility of a subsidiary adopting an integration strategy that combines elements of both host and foreign cultures. Nevertheless, we see research potential in integrating our cultural synergy perspective with the cultural control perspective to examine organizational acculturation in which cultural change occurs both ways (partners influence each other), selectively rather than pervasively (on certain instead of all cultural values), and synergistically (forming a common identity).

In the post-merger and post-acquisition literature, it is posited that cultural adaptation reduces acculturation conflict and facilitates the post-merger task integration (realization of operational synergies) and human integration (realization of attitudes for cooperation and advancement) processes (Birkinshaw et al., 2000; Elsass & Veiga, 1994; Nahavandi & Malekzadeh, 1988). Such studies, however, are scarce and are mainly conceptual. When the success of the merged company requires integration of organizational processes of the original companies, acculturation tension and conflict may increase and disrupt the integration (Elsass & Veiga, 1994). Whereas acculturation conflict is directly affected by cultural differences between the two companies, organizational performance following mergers and acquisitions is inversely related to conflict among members of the two companies (Elsass & Veiga, 1994). Our findings, namely, the negative effect of OCD on IAS and the positive effect of IAS on partners’ satisfaction with an IJV, support the applicability of these arguments from the merger and acquisition literature to the joint venture context.

According to Elsass and Viega’s (1994: 440) model of acculturative dynamics in post-acquisition, organizational performance can be both an outcome of accultura- tion strategy and an input to organizational processes for resolving cultural differences and facilitating integration. Larsson and Lubatkin (2001) reviewed determinants of acculturation in cross-national mergers and concluded that

470 F. Damanpour et al.

successful acculturation depends mainly on how the acquiring firm manages post- acquisition integration processes. Because we relied on cross-sectional data, we could not examine the interdependencies among cultural difference, acculturation strategy, and IJV performance. Using longitudinal data, important future research can generate new insights by examining the dynamic relationships among these factors. Research on the dynamics of cooperation in IJVs, as well as in mergers and acquisitions, will in turn provide organizational leaders with relevant, applicable knowledge for managing joint ventures (Bell et al., 2006).

Implications for management

The practical implications of our findings augment previous recommendations for effective management of post-mergers and post-acquisitions of companies with different organizational cultures and processes (Buono & Bowdwitch, 1989; Haspeslagh & Jemison, 1991; Very et al., 1997). Managers have to pay as much attention to the implementation and management of IJVs as they often do to its formation. They should be cognizant that an IJV’s success depends on managing equally, if not more, the human side as well as the strategic side. For instance, it is important for managers of an IJV to be aware that the selection of an IAS and the adoption of effective interaction processes can mitigate the adverse effects of NCD or OCD on joint venture performance. The IJV parent firms should be willing to take the time to allow the joint venture to operate as a stand-alone entity and develop its own managerial style and organizational processes (Julian & O’Cass, 2004). From this perspective, the willingness of the partners to pursue mutually compatible interests (partner cooperation) should take precedence over the individual partners’ competitive motives (opportunism) (Das & Teng, 1998; Luo & Park, 2004). That is, other factors being equal, cooperation, not competition, would play the crucial role in an IJV’s operation, change, and continuity. Although managerial capabilities and skills needed for IJV success might change through the IJV’s life cycle, we recommend that pursuit of an IAS aligned with open communication, cooperative problem solving, and nondominant conflict resolution will foster producing satisfactory outcomes over time.

In summary, this study contributes to research and practice by showing that partner interaction processes of communication, cooperation, and conflict resolution fully mediate the negative influence of OCD, and partially mediate the positive effect of IAS, on partners’ satisfaction with IJV. These findings both extend prior research on IJV formation and provide insights for future research on management of IJVs in the post-formation phase.

Limitations

This study has several limitations that should be considered in interpreting its findings. First, we focused on post-formation management of IJVs. Management of an IJV is a dynamic process in which formation and post-formation phases cannot be neatly separated. Future longitudinal research is needed to examine the interrela- tionship between different phases of partnering process. Second, data limitation did not allow controlling for several potential predictors of IJV performance such as type

Organizational culture and partner interaction in the management of international joint ventures in India 471

of joint venture (e.g., R&D vs. marketing), relative investment levels, and market competitiveness. Third, the data used in our analysis were collected from the Indian partners of IJVs only. In the IJV context, one partner respondent as the data source is a justifiable option and has commonly been used (Chen & Boggs, 1998; Geringer & Hebert, 1991; Tsang, 2002). Also, Beamish and Lupton (2009) observed that much of the research on joint ventures is biased over the concern of the foreign partner and advised that researchers take into account the local partner’s insight. Nevertheless, a fuller understanding of management of joint ventures after formation requires data collected from the executives of both partners. Fourth, we used executive level data in our analyses because cases-to-parameters ratios for the structural models were higher than the threshold value of 5.0 (Bentler & Chou, 1987) for the executive level, but not the IJV level data. Therefore, our findings should be confirmed by future studies with larger samples that could analyze the mediating effect of partner interaction processes with firm level data. Fifth, we chose the IAS on the assumption that IJV partners face dual pressure of maintaining their own cultural identity and the joint identity of the venture. However, it is possible that due to differences in size, technology, and market knowledge, the power balance can be tilted to one partner. Future research could include alternative acculturation strategies to test their different effects (if any) on partner interaction processes and IJV performance. Finally, our sample was limited to IJV operations in a single, emerging economy. Although no special characteristics of the Indian partners were considered to justify the hypotheses, generalizability of our findings would be enhanced by future research that expands to IJVs in other emerging economies or those in developed countries, providing extra external validity (Ahlstrom, 2010).

Conclusion

According to a recent review of research on joint venture performance (Beamish & Lupton, 2009: 79), of the 86 publications the authors identified as “high-impact research on managing joint ventures” only seven had focused on the impact of culture differences on joint venture performance. None of the publications included joint venture management issues related to acculturation strategy or partner interaction processes. This study is thus unique in examining the mediating role of partner interaction processes on the influence of organizational culture and acculturation strategy on joint venture performance. The findings underline the importance of understanding and managing partner interaction processes in international joint ventures. For instance, we found that despite the negative influence of culture differences on acculturation strategy, pursuing an integration acculturation strategy both directly and indirectly through partner interaction processes could contribute to a desirable outcome for joint ventures. The results also suggest that greater partner interaction can alleviate the negative effect of culture differences on IJV performance, as cultural difference might become secondary to partner interaction processes for joint venture performance. As more companies engage in international partnerships, they face increasing challenges of organizational culture differences, which, according to our findings, could be mitigated by effective communication, cooperation, and conflict resolution.

472 F. Damanpour et al.

Appendix

Table 2 Measurement model properties.

Item Dimensions and Indicators Loadingsa R2

I. Organizational Culture Difference b 0.87c

Process vs. result 0.68 0.46

OC 1 Typical employee is fast at work 0.73 0.53

OC 2 Typical employees takes initiative 0.70 0.49

OC 3 Style of dealing with each other is informal 0.47 0.22

Employee vs. job 0.82 0.67

OC 4 Decisions are centralized at top 0.47 0.22

OC 5 There is little concern for personal problems of employees 0.62 0.39

OC 6 Organization is interested only in the work of employees 0.73 0.54

Parochial vs. professional 0.84 0.70

OC 7 People’s private life is treated as their own business 0.51 0.26

OC 8 Job competence is the only criterion in hiring people 0.49 0.24

OC 9 Think (plan) 3 years ahead or more 0.69 0.47

Open vs. closed system 0.86 0.74

OC 10 Only specific kind of people fit in the organization 0.56 0.31

OC 11 Organization is closed and secretive 0.50 0.25

OC 12 New employees need more than a year to feel at home 0.65 0.42

Loose vs. tight control 0.86 0.74

OC 13 Everybody is cost-conscious 0.60 0.35

OC 14 Meeting times are kept punctually 0.59 0.35

OC 15 Employees always speak seriously of organization and job 0.53 0.28

Normative vs. pragmatic 0.78 0.61

OC 16 Employees tend to be pragmatic in matters of ethics 0.54 0.29

OC 17 Major emphasis is on meeting customer needs 0.51 0.26

OC 18 Results are more important than procedures 0.61 0.37

χ2=146.3; d.f.=129; NNFI=.96; CFI=.96; IFI=.96; RMSEA=.026; NC=1.13

II. Integration Acculturation Strategy 0.68c

AS 1 Learn and adapt to the practices followed in our partner’s organization while continuing the practices of our organization

0.72 0.51

AS 2 Familiarize our partner’s executives with the practices in our organization so that they can share our organizational culture

0.83 0.69

AS 3 Retain our organizational practices and also adapt partner’s organizational practices

0.54 0.30

III. Interaction Processes 0.94c

Communication 0.93 0.87

IP 1 Partners don’t care to inform each other of changes in policies well in advanced

0.76 0.58

IP 2 Partners have inhibitions or reservations in sharing full information with each otherd

0.63 0.40

IP 3 Partners face problems in understanding the real meaning of what is communicatede

– –

Organizational culture and partner interaction in the management of international joint ventures in India 473

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– –

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IP 9 Partners are conflicting in the way they organize and perform tasksd,e – –

IP 10 Partners have major arguments in their working relationshipd 0.66 0.43

IP 11 Partners have different styles of solving problems making it difficult to resolve conflictd,e

– –

IP 12 Partners have a great deal of conflict between themd 0.63 0.40

IP 13 Partners put in extra efforts to overcome the differences in their working methods

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IV. Satisfaction with IJV 0.71c

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Fariborz Damanpour (PhD, University of Pennsylvania) is professor of management at the Department of Management and Global Business at Rutgers University. His primary area of research is management of innovation and change. His articles have been published in leading management and technology management journals. He served as the chairman of the Department of Management of the Rutgers Business School and department editor of the Technology and Innovation Management Department, IEEE Transactions on Engineering Management. He currently serves on the editorial boards of the Journal of Engineering and Technology Management and Journal of Management Studies, and is US representative on the board of European Academy of Management.

Organizational culture and partner interaction in the management of international joint ventures in India 477

Carlos Alberto Devece (PhD, Universitat Jaume I) is assistant professor of management at the Universitat Jaume I of Castellon (Spain). Previously, he was a consultant in an engineering firm. His current research interests include organizational and cultural aspects of innovation and knowledge transfer. In addition, he has made significant contributions to research projects, funded by government agencies and private companies, covering diverse topics such as design and development of knowledge management and competency management systems.

Chao C. Chen (PhD, SUNY at Buffalo) is professor of management and global business, Rutgers University. He was recently elected to be the vice president of the International Association of Chinese Management Research and is the conference program chair of the organization’s Shanghai 2010 Conference. His research interests include rewards and compensation, organizational justice, leadership, networking, and cross-cultural management. He has published in leading management journals such as Academy of Management Journal, Academy of Management Review, Administrative Science Quarterly, Journal of Applied Psychology, and Organization Science. He has recently co-edited a book published by Cambridge University Press on Leadership and Management in China: Philosophies, Theories, and Practices.

Vijay Pothukuchi (PhD, Rutgers University) is CEO at Midas Touch Infrastructure India Pvt Ltd. His corporate expertise is in the areas of implementing enterprise wide projects, establishing new businesses, spin-offs, mergers and acquisitions, and negotiating strategic investments in Real Estate, IT, and Management Consulting with experience spanning across the US, India, and Africa, and for MNCs like Union Carbide, Mobile, Perkin Elmers, Ernst & Young & Rockwell Semiconductors/Conexant Systems Inc., US. He is currently heading a 4 million square foot mixed development project (residential & commercial) in Hyderabad, India.

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