Academic journal article Management International Review

Culture and Control: The Tale of East-West Joint Ventures

Academic journal article Management International Review

Culture and Control: The Tale of East-West Joint Ventures

Article excerpt

Introduction

International joint ventures (IJVs) are a rapidly increasing phenomenon as a way for companies to exert strategic capabilities (Harrigan 1986; Hergert/Morris 1988; Killing 1983; Lewis 1990; Lynch 1993). However, success has not come easily to this hybrid form of firm, and failure rates have been high (Collins/Doorley 1991). In many instances problems in the IJVs have resulted from people related rather than technology related issues, and have included partner perceptions of unequal costs and benefits, conflicts over decision-making and concerns resulting from inadequate information sharing (Cascio/Serapio 1991; Dymsza 1988; Killing 1983; Pucik 1988; Teagarden/Von Glinow 1989). Complexity is added when the partners are from diverse cultural backgrounds and when one is more powerful than the other (Lei/Slocum 1991; Yah/Gray 1994).

Joint ventures between Western partners and local partners in the context of Central East Europe present numerous opportunities as well as challenges (Cyr/Schneider 1996). Since 1990, Western companies have flooded into the previously Communist areas of Central East Europe to establish factories, gain the advantage of skilled local labour at more reasonable rates than in the West, and to have better access to the huge and largely untapped markets further to the East. Alternately, local managers and other workers in Central East Europe generally welcome foreign investment. With the influx of foreigners comes opportunities to rejuvenate older physical plants and acquire new technology. When done with long-term commitment from foreign investors, locals look forward to increased job creation, and a better place in the union of new Europe.

With the economic transformation of Central East Europe as a backdrop, this paper is focused on how international joint ventures operate in Poland, Hungary, and the Czech Republic. More specifically, the emphasis is on how power and control are shared between the Western partner and the local partner and how this has implications for firm performance. Further, effectiveness of communication between the partners, and the extent opportunities for learning occurred through training were related to whether locals were able to share responsibility in the venture (Cyr 1995; Cyr/Schneider 1996), will be elaborated. The degree to which the corporate culture in the venture supported local needs and conditions was an important element, and enabled locals to gain confidence to operate in new ways which also ultimately led to both locals and foreigners having positive perceptions about each other's role in the joint venture.

Theoretical Background

The complexity of joint ventures in the Central East European context merits a multidimensional lens for the purpose of observation. Of critical importance is the understanding of the processes which operate between the partner groups at the interface of the venture. As already mentioned, the issue of control is relevant to an understanding of how tasks are managed in the IJV, and depending on how power and information are shared influences partner's perceptions of each other, as well as mutual levels of satisfaction for working in the venture. Finally, how organizational learning occurs in conjunction with human resource management (HRM) practices in countries such as Poland, Hungary, and the Czech Republic merits attention as background to this investigation. Each of these topics is reviewed in the following sections.

The Role of Process in International Joint Ventures

From a process perspective, in IJVs as in other forms of companies, it is imperative to understand how common understandings are developed among diverse groups. This includes an emphasis on both formal and informal processes for how new corporate "sensemaking" is created. Although the role of process has largely been ignored in joint ventures, in recent years communication, establishing congruency of expectations as part of a "psychological contract" between the partners, and the establishment of mutual commitments has received attention (Ring/Van de Ven 1994; Borys/Jemison 1989). …

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