The Trap of Continual Ownership Change in International Equity Joint Ventures

Chris Changwha Chung () and Paul W. Beamish ()
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Chris Changwha Chung: Korea University Business School, Korea University, Seoul 136-701, Korea
Paul W. Beamish: Richard Ivey School of Business, University of Western Ontario, London, Ontario N6A 3K7, Canada

Organization Science, 2010, vol. 21, issue 5, 995-1015

Abstract: This article examines how multiple ownership changes unfold in international equity joint venture (IEJV) evolution and how such repeated changes impact short-term performance and long-term survival. By theorizing a new concept---the trap of continual change---in the IEJV context, we challenge the adaptive viewpoint assumed in alliance dynamics research. We propose that partners sometimes respond to an initial dissatisfaction with the venture result with a dysfunctional repetition of rearranging the ownership control structure. This continual change locks the organization into bad choices and sends it into a downward spiral. Acknowledging the mixed motive nature of inter-partner relationships, we incorporate cooperative versus competitive dynamics manifested in shared control arrangements. We propose that shared ownership control lends stability to the IEJV until the initial IEJV agreement is renegotiated; this stability is a result of the cooperative forces of mutual interdependence and mutual forbearance between the partners. However, when the power balance breaks down, the potential for inter-partner conflict increases. When the ownership control structure of the IEJV is restructured, especially multiple times, shared control arrangements become increasingly unstable as behavioral, cultural, and managerial differences are amplified.

Keywords: alliances; change; competency trap; competition; control; cooperation; dynamics; equity ownership; evolution; governance structure; instability; international; joint ventures; performance; power balance; stability; survival; termination (search for similar items in EconPapers)
Date: 2010
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Citations: View citations in EconPapers (35)

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Persistent link: https://EconPapers.repec.org/RePEc:inm:ororsc:v:21:y:2010:i:5:p:995-1015

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