International Joint Ventures: Implications for Organisation Development
| Published date | 01 January 1987 |
| Date | 01 January 1987 |
| Pages | 30-37 |
| DOI | https://doi.org/10.1108/eb055556 |
| Author | Oded Shenkar,Yoram Zeira |
| Subject Matter | HR & organizational behaviour |
International Joint Ventures: Implications
for Organisation Development
by Oded Shenkar and Yoram Zeira, Faculty of Management, Tel-Aviv University*
Introduction
Amidst the diverse forms of international direct investment,
the international joint venture (IJV) appears to have become
the fastest growing, most popular type of operation[l, 2, 3,
4,
5]. An IJV may be defined as "a separate legal organiza-
tional entity representing the partial holdings of two or more
parent firms(a), in which the headquarters of at least one
parent firm
is
located outside the country of operation of the
joint venture. This entity
is
subject to the joint control of its
parent firms, each of which is economically and legally
independent of the other"[7].
The growing popularity of IJVs may be explained by the
variety of objectives they serve:
(1) reducing antitrust objection[6];
(2) spreading the risks involved in starting new
ventures[8, 9];
(3) entering new or unfamiliar markets;
(4) getting vital raw materials;
(5) gaining rare technical and scientific knowhow;
(6) mobilising financial resources;
(7) employing qualified, experienced
staff;
(8) achieving co-operation with competitors[10, 11];
(9) overcoming nationalistic feelings towards foreign
ownership[12, 13], feelings which are frequently
translated into legal barriers prohibiting full foreign
ownership[14, 2, 15]; and
(10) making use of the laws and regulations devised to
encourage investment in developing countries.
While more and more IJVs are initiated and formed, quite
a few such ventures end prematurely, with ownership
assumed by one of
the
parent companies or with the ceasing
of
all
operations[16, 17,
18].
These failures are very costly
—
a possible loss of the initial investments as well as the time
and efforts devoted to the project, the cost of personnel re-
patriation[19, 20, 21], the need to look for another partner
or country of operation, hindrance of future operations in
the host country, and so on. IJV failures are probably
affected by the difficulty and complexity in managing this
form of
enterprise.
Young and Bradford[6] suggest that IJVs
contain "built-in, self-destruct devices" (p. 8) which con-
stantly threaten their effective operation. These devices stem
from the unique structures of IJVs as simultaneously multi-
partite and multinational entities.
The frequent failures of
IJVs
suggest an important role for
personnel and Organisation Development (OD) experts and
practitioners in assisting human resources management in
the ventures. Such assistance depends, however, on a
thorough familiarity
with
the unique structure and character-
istics of IJVs, a familiarity which, as in all OD work, is
essential to an effective assessment of needs and interven-
tions.
This article therefore attempts to familiarise inter-
national executives, personnel and OD experts with the
unique structure and processes typical to IJVs, point to the
various employee groups which take part in the IJV system,
summarise the personnel and managerial processes typical
of this form of operation and clarify several differences
between OD work in IJVs and uninational organisations.
Uniqueness of International Joint Ventures
Comprehension of the organisational climate in IJVs
depends on understanding the cross-national and multi-
partite nature of this form of enterprise. As is the case with
other forms of international operations, IJVs bring together
individuals who differ in national origin, cultural values and
social norms, with the attendant political, economic and
legal system differences. However, in the IJV context, these
differences take a unique form. In many
cases,
incongruence
of national interests is what produced the IJV in the first
place, obliging parents to accept joint ownership despite
their preference for complete control[12]. The resulting
suspicion towards the objectives of the other parent(s)[6]
adds to the tension between the parties.
Furthermore, whereas in wholly owned subsidiaries of
multinational corporations
(MNCs),
there
is
only
one
parent
and two major employee groups (parent country and host
country nationals), IJVs have at least two parents and may
have a great variety of employee groups. Each of the parent
companies has its unique goals and operation
mode,
and, by
definition, at least two of them are anchored in different
national or cultural environments. This complex structure
creates special human problems within the IJV which may
require intervention policies and solutions not yet devised.
Figure
1
compares IJVs with other organisational exten-
sions,
in terms of ownership and location. Only the IJV is
simultaneously owned by multiple parents and operates in a
country which is foreign to at least one of its parent firms.
These combined characteristics are a major source of the
complexity involved in the management of those enterprises.
*The authors wish to thank Dr. Asya Pazy and Dr. Daphna Izraeli for
their helpful comments on an earlier version of this article.
30 • PR 16,1 1987
To continue reading
Request your trial