The Effects of Inter-Partner Trust on Third-Country Relocation of International Joint Ventures in China

Yong-Sik Hwang and Kidong Kim
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Yong-Sik Hwang: School of Business, Sejong University, Seoul 05006, Korea
Kidong Kim: Korea Fire Facility Association, Seoul 06694, Korea

Sustainability, 2018, vol. 10, issue 7, 1-23

Abstract: This study explores how inter-partner trust in international joint ventures (IJV) affects third country relocation decisions as foreign partners face an uncertain business environment in China due to wage increases and competition from local companies intensifies. As the concept of third-country relocation is relatively new compared to other international business concepts, it is crucial to find a solid framework that can explain this phenomenon. A study of 232 Korean IJVs operating in China was used to assess the relationship between inter-partner trust and third-country relocation intention. Also, we measured moderating variables that strengthen (plant performance, asset specificity, coercive pressure) and weaken (mimetic pressure and normative pressure) the negative relationship between trust and third-country relocation intention. The main effect and interaction effects were significant in showing that inter-partner trust hinders decisions on IJV’s third-country relocation. In addition, the results show that trust and third-country relocation relationship interact with other moderating variables. In conclusion, our study suggests that foreign IJVs should explore various aspects such as inter-partner relationships and internal and institutional factors before making decisions on IJV relocation.

Keywords: trust; international joint venture; third-country relocation; foreign direct investment; asset specificity; institutional theory (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2018
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