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Revisiting multinational firms' tolerance for joint ventures: a trust-based approach

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Abstract

In spite of the increasing popularity of international joint ventures, managers express a high level of dissatisfaction with them. This paper argues that overemphasis on the outcome has resulted in a neglect of the social processes underlying the outcome. The paper elaborates upon the rationale for a cooperative approach towards interorganizational collaborative relationships based on trust, and discusses it in the context of joint ventures. This is then applied towards understanding multinational ownership preferences and tolerance for joint ventures. It is argued that trust-centered logic is largely consistent with approaches that emphasize the issue of ownership, and deepens and enriches the insights provided by the latter. A shift in focus from ownership to relational dynamics is encouraged.

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Notes

  1. The structural and social components of trust are somewhat analogous to the two types of diversity within firms identified by Parkhe (1991). Type I referred to the ‘harder’ differences in the complementary contributions that occasioned the relationship in the first place, or what we refer to as the structural component of trust. Type II referred to the ‘softer’ differences that arose from differences in firms' culture and systems. Broadly speaking, the role of the social component of trust is that of smoothening the relationship by reducing the disruptive influence of Type II diversity through a more developed mutual orientation, while making it more resilient in the face of temporary fluctuations in Type I diversity.

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Acknowledgements

I thank Karin Fladmoe-Lindquist, Steve Tallman, Louis Hebért, Jan Jorgensen, and three anonymous reviewers whose comments significantly improved this paper. Steve Tallman's suggestions were especially helpful.

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  1. Schulich School of Business, York University, 4700 Keele Street, Toronto, M3J IP3, ON, Canada

    Anoop Madhok

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  1. Anoop Madhok
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Correspondence to Anoop Madhok.

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1Schulich School of Business, York University, Toronto, Canada

2Formerly of the University of Utah, Salt Lake City, USA

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Madhok, A. Revisiting multinational firms' tolerance for joint ventures: a trust-based approach. J Int Bus Stud 37, 30–43 (2006). https://doi.org/10.1057/palgrave.jibs.8400161

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