Culture an Overused Term and International Joint Ventures: A Review of the Literature and a Case Study

Article excerpt

ABSTRACT

AOL TIME WARNER, Compac and HP, Enron and Anderson, and September 11, 2001. What do all of these have in common? A confluence of culture. Today, culture is an overused to term. What is culture? This literature review of culture and the accompanying exploratory case study of a newly formed international joint venture provide definition and boundaries for the discussion of culture and the role of culture in alliances. We have seen that the concepts of national and organizational culture play an increasingly dominant role as businesses manage in a global arena. Cross national and cultural research linking management practices to cultural differences and providing viable plans and strategies for successful management are in their infancy.

Key Words: Culture, Strategic Alliances, International Joint Venture, Literature Review of Culture

INTRODUCTION

As we approach the next century, a major issue facing business corporations is their ability to compete in a global marketplace. Expansion into global markets is creating tremendous change in how corporations do business. The old paradigms of organizational structure, management, and competition are no longer functional, given the nature of pressures created by globalization. The opening of the communist bloc countries, GATT, NAFTA, and September 11, 2001, have created new business opportunities. Innovative approaches and strategies are needed in this changing global environment of opportunities.

In order to adapt to a changing global economy, many corporations are forming cooperative business ventures that use the resources of two or more companies. These new ventures, called strategic alliances, are a type of cooperative agreement that has become increasingly popular. Strategic alliances vary in organizational structure, type, and purpose. They are seen as ways to increase resources, learning opportunities, and market share.

International joint ventures (IJV), one type of strategic alliance, are business enterprises owned by two or more companies that share resources and skills (Pekar & Allio, 1994). These enterprises have been increasingly used to create cross-border or cross-national cooperative business ventures (Geringer & Woodcock, 1989). International joint ventures, legal entities with one partner firm outside of the country where the joint venture resides, are widely used as a means of direct foreign investment (Inkpen & Beamish, 1997). Numerous websites such as http://jvseek.com-Joint Venture Opportunities present the potential investor with opportunities for co-development projects ranging from 250 thousand to 1 billion in Asia, America, Africa and Europe, are updated daily.

Although, international joint ventures are increasingly popular with "the number of cross-border deals in 2000 over 4 times the number in 1997: 9200 transactions vs. 2100 (Levy, 2001), their success rate is low. Estimates suggest as high as 60% of all alliances end in failure (Harrigan, 1988; Parkhe, 1991; Cullen, 2002). Numerous articles such as "New Opportunities versus Old Mistakes" (Fasol, 1999) highlight the benefits and risks of strategic alliances.

The impact of globalization and creating ventures across national boundaries requires an understanding of culture. This is especially true in the management of IVJs. It is conjectured that national origin and organizational culture play a significant role in the successful management of IVJs (Cyr, 1994). It is also hypothesized that culture can influence the timing of entry of ventures, their investment preferences, and performance (Li, Lam, & Qian, 2001). The bringing together of two established parent corporate cultures with different believes, values, and norms located in a country with a different national origin from one of the parent cultures is bound to create tension, misunderstandings, and opportunities for learning.

To re-explore the overused term of culture further in alliances, a brief overview of how scholars have defined culture over time is given. …