Role of Parent Control of International Joint Venture in Gaining Competitive Advantage

Abstract

This article aims to investigate role of foreign parent control of international joint ventures (IJVs) in gaining sustainable competitive advantages from partnership with local firm through achieving 1) accesses to local firms proprietary resources, 2) promoting knowledge and skills acquisition, 3) economies of scale and scope, 4) market position. Foreign parent firm control is conceptualized across three dimensions including the control mechanism, the control focus, and the extent of control. As foundation theories, resource dependent theory and organizational learning theory are employed. Our empirical evidence is based on the survey data collected from Finnish firms that established IJVs with local firms in the 1990s. The empirical evidence shows that in order to achieve successfully competitive advantages when entering IJVs, foreign parent firms need to have comparable IJV control structures which fit with their intended specific competitive advantages.