Parent company dissimilarity and equity international joint venture effectiveness

Based upon existing literature and research findings, the relationships between functional and dysfunctional parent company dissimilarity and equity international joint venture (EIJV) effectiveness are examined. Managers of potential EIJVs face a dilemma. While they want to work with partners that are similar, they need partners that are dissimilar in order to gain from collaborating. The findings of this research are important because they give managers some indications of which kinds of dissimilarities should be avoided because they are dysfunctional and which dissimilarities can be encouraged since they are functional. A cross-national study of 140 EIJVs shows that substantial differences in the primary industries of the parent companies contributed significantly to EIJV effectiveness, whereas substantial differences in the reputations of the parent companies detracted significantly from EIJV effectiveness. Also, cultural differences among the parent companies in individualism-collectivism and in uncertainty avoidance produced a positive impact on EIJV effectiveness. With respect to differences in parent company goals, this study found a consistently negative (although not statistically significant) correlation with EIJV effectiveness. Functionality and dysfunctionality of differences in equity distribution, parent company size, and ownership type were also examined with respect to five common performance measures and a general effectiveness index.