Use of Minority and 50–50 Joint Ventures by United States Multinationals During the 1970s: The Interaction of Host Country Policies Corporate Strategies

Lawrence G Franko
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Lawrence G Franko: University of Massachusetts

Journal of International Business Studies, 1989, vol. 20, issue 1, 19-40

Abstract: This article examines geographical, sectoral, and corporate trends in the use of minority and 50-50 joint ventures by U.S. multinational manufacturing and mining firms in less developed countries (LDCs) during the 1970s. It is based primarily on data found in the Harvard Multinational Enterprise Data Base, as updated through the mid-1970s, and supplemented with corporate performance data for the 1975-1980 period from a new international Competitive Analysis (ICA) database developed with support from the General Electric Foundation.During the 1970s, there was a clear move toward U.S. Corporate acceptance of minority ownership positions in manufacturing operations in LDCs. This move toward minority joint ventures by American MNEs was, however, concentrated in a handful of specific countries that had activist government policies promoting local ownership. These countries are not now thought to be among the more successful LDC economies.Viewed from the perspective of MNE strategy and performance, our findings confirm Wells's earlier results that the firms most willing to accept minority or 50-50 joint ventures tend to be smaller, “second-rank oligopolists” in their industries. The hypothesis that “second-rank” meant “second rate” in terms of MNE growth and financial performance in their worldwide industry was also examined. Although there was some suggestion that LDC prominority-joint venture policies may have been ‘screening in” less successful firms in the computer and tire industries, there was no evidence of a systematic tendency across industries of a negative relationship between MNE acceptance of minority positions and company under-performance.© 1989 JIBS. Journal of International Business Studies (1989) 20, 19–40

Date: 1989
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