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Project performance in emerging market: The influence of cultural distance and business group affiliation

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Abstract

Although foreign multinational enterprises (MNEs) often collaborate with firms in emerging markets to help execute capacity expansion projects, the current literature does not adequately explain what factors influence execution performance of such projects. Drawing on the cultural difference- and partner selection literature we investigate in this paper how cultural distance (CD) between MNE’s home and host nation, and business-group (BG)-affiliation of host country partner influence duration and completion-likelihood of capacity expansion projects. Our analysis reveals that high CD is associated with lower project-duration and greater likelihood of project-completion. Results further suggest that BG-affiliation is associated with greater likelihood of project-completion. In addition, we find that BG-affiliation negatively moderates the relationship between CD and project-duration. These findings are new to the literature and enhances our theoretical and practical understanding of project execution in emerging markets.

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Notes

  1. The joint venture (JV) between Honda Motor Company (Japan) and Hero Group (India) lasted for about twenty-six years (1984–2010). Imagine what would have happened to this venture if the construction of its first factory in Haryana, India was delayed or abandoned or stalled. Both the partners would have probably reconsidered their JV prospects and success parameters.

  2. Interested readers may peruse meta-analytical review by Beugelsdijk and colleagues (2018) to know more about CD and firm internationalization.

  3. This is not to suggest that MNEs do not remain cautious when collaborating with non-affiliated firms. What we suggest here is that the dynamics become different when foreign MNEs select affiliated firms as partners in EMs.

  4. Few examples will make this clear. Consider, for example, the Delhi international airport modernization project that was announced in September 2003. Malaysia Airports Holdings Bhd. collaborated with Indian firm GMR Infrastructure Ltd. on this project. The project was successfully completed in December 2010 within the announced time-period. However, another project titled “colored coated steel project” between British Steel and Jindal Coated Steel private ltd. was announced in 1997 but was shelved two years later in 1999.

    An example of a project that was completed, albeit after substantial delay, is the “quadricycle project” between Renault Automobiles (France) and Bajaj Auto Limited (India). This project was announced in March, 2006 and was to be commissioned by June 2009. However, project implementation was stalled in December 2009 due to lack of promoter interest. It was finally completed in September 2015 (CapEx, 2016).

  5. We thank an anonymous reviewer for suggesting checking the effect of heterogeneity

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Authors and Affiliations

  1. Management and Quantitative Methods Department, College of Business, Illinois State University, Normal, IL, 61790-5580, USA

    Somnath Lahiri

  2. Indian Institute of Management Tiruchirappalli, NIT Campus, Thanjavore Main Road, Tiruchirapalli, Tamil Nadu, 620015, India

    Karthik Dhandapani

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Lahiri, S., Dhandapani, K. Project performance in emerging market: The influence of cultural distance and business group affiliation. Asia Pac J Manag 38, 179–207 (2021). https://doi.org/10.1007/s10490-018-9615-7

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