The Effect of Organizational Cultural Differences on International Joint Ventures – A Case Study

Abstract

Background and problem The distinctive search after competitive advantage and new opportunities are fundamental characteristics of an entrepreneurial firm. The number of entrepreneurial corporations seeking competitive advantage through external corporate venturing, namely joint ventures (JVs), has increased drastically in the past few decades. Yet, the conflicts and problems arising at JVs are also on the rise, triggering high rates of failure. National and organizational culture differences between the partners are the main reasons behind the failure of JVs. But in relation to national culture, the organizational culture differences can be manageable and something that can be modified. Research purpose The purpose of the following research is to investigate the common problems arising at JVs and whether those identified problems are linked to the differences between the partners organizational culture. The findings would help companies involved in cross-organizational collaborations better mitigate the risk of failure and potentially achieve the entrepreneurial outcomes expected from such collaboration. Methodology The following research was carried out using a single case study of a JV in its post-formation phase. Qualitative research strategy was chosen to get a deeper understanding of the social phenomenon throughout both, empirical investigations and data analysis. The empirical data was collected through semi-structured interviews with 12 respondents from the parent companies along with observations. Results The results of the study show that JVs barriers to success are namely communication, commitment, trust and control which were also found highly linked to the similarities and differences identified between the JV partners. It was found that when organizational cultural similarities existed among the JV partners, there was no identified problem at the JV explicitly under commitment and trust. Whereas when differences were identified, specifically within communication and control, it signaled problems or potential problems that might arise in the future of the venture. Implications The findings of our study add to the body of research attempting to understand the underlying causes of the problems arising at JVs. Differences between the organizations cultures of the JV partners was found to be highly associated with the problems arising. Practitioners can use the framework constructed in this study to have a better understanding of the similarities and differences between the partners.