Toward Validation of Partner Goal Achievement as a Measure of Joint Venture Performance

Abstract

Joint ventures offer a strategy to succeed in highly competitive environments. For example, in the computer software and telecommunications industries, firms are increasingly forming joint ventures (JVs) to meet the rapidly evolving challenges created by the merging of technologies. Firms are broadening their business domains and hedging their bets on their future competitive positions as they jockey to influence the forms that multimedia and interactive services will take. In such highly competitive environments, successful firms are finding it advantageous to build their futures on foundations of JVs. Among the more prominent JV partners are Microsoft and General Instrument Corporation, Microsoft and Tele-Communications, Apple and IBM, Motorola and IBM, Reynolds Metals and Mitsubishi, Sega and Blockbuster-IBM, ATT Kogut and Singh, 1988; Pearce, 1982). In rapidly changing, highly competitive environments, the internal start-up option is costly in terms of resources and time, as are acquisition options that include an obligation to manage an acquired firm (Kanter, 1989). Joint venturing is faster, more flexible, less risky, and less costly than internal start-ups and acquisitions, while simultaneously increasing the partners' access to critical resources such as marketing, technology, raw materials and components, financial assets, managerial expertise, and political influence (Schillaci, 1987). Joint ventures allow firms to pool resources and complementary strengths to increase productivity and to improve competitive position in a way they could not do alone (Harrigan, 1988b; Pearce et al., 1987). They provide the opportunity to share costs and risks, to acquire knowledge, to enter new markets, and to gain economies of scale or to rationalize operations (Contractor and Lorange, 1988). On the down side, joint ventures lessen individual control, and can be slow in their responsiveness to environmental dynamics due to the complexity of joint management (Kanter, 1989; Killing, 1982). Partner firms run the risk of creating new competitors, damaging their original firm's reputation, and eroding their technological base (Gomes-Casseres, 1989). Reported joint venture failure rates range from 36 to 70 percent (Killing, 1983; Levine and Bryne, 1986). The increasing use and strategic importance of joint venturing, as well as the unfamiliar complexity, point to the need to know more about how to effectively implement this cooperative strategy option. While there have been several research efforts on joint venture performance which sought to identify success factors, there has been considerable disagreement as to the comparability of alternative joint venture performance measures. Consequently, there is no consensus on the appropriate definition and measurement of joint venture performance (Parkhe, 1993a). Our research attempts to empirically determine the most meaningful JV performance measure. In this article, we will first highlight the findings of previous research on the measurement of joint venture performance. This evaluation will conclude with two hypotheses about the interrelationships of these measures. A methodology for testing the hypotheses will be described, including how data was collected from 83 partners of 50 joint ventures. An analysis of the data they provided will be followed by an interpretation of the results and a discussion of the implications of the study for joint venture researchers and executives who wish to better evaluate the joint venture option. …