Chris Changwha Chung

The Trap of Continual Ownership Change in International Equity Joint Ventures

This article examines how multiple ownership changes unfold in international equity joint venture (IEJV) evolution and how such repeated changes impact short-term performance and long-term survival. By theorizing a new concept---the trap of continual change---in the IEJV context, we challenge the adaptive viewpoint assumed in alliance dynamics research. We propose that partners sometimes respond to an initial dissatisfaction with the venture result with a dysfunctional repetition of rearranging the ownership control structure. This continual change locks the organization into bad choices and sends it into a downward spiral. Acknowledging the mixed motive nature of inter-partner relationships, we incorporate cooperative versus competitive dynamics manifested in shared control arrangements. We propose that shared ownership control lends stability to the IEJV until the initial IEJV agreement is renegotiated; this stability is a result of the cooperative forces of mutual interdependence and mutual forbearance between the partners. However, when the power balance breaks down, the potential for inter-partner conflict increases. When the ownership control structure of the IEJV is restructured, especially multiple times, shared control arrangements become increasingly unstable as behavioral, cultural, and managerial differences are amplified.

Can FDI Location Choice and Operating Mode Choice Complement Each Other

We explore how firms approach the joint decision on location choice and operating mode choice when they are making an FDI, and evaluate its performance implication, using a panel data on industrial firms in China. In order to address the endogeneity issue inherent in comparing post-entry performances, we employ the propensity score matching in conjunction with difference-in- differences approach. Our findings suggest that firms perceive locating in a high-agglomerated location and operating with a local partner firm as substitutes in gaining local knowledge. When we investigate the post-entry financial performance, however, our findings suggest the complementary nature in these two sources of local knowledge.