The International Journal of Logistics Management
Understanding performance of joint ventures: Modeling the interactional strength of fit
between partners
Shiri D. Vivek R. Glenn Richey
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IJLM
24,3
356
Understanding performance of
joint ventures
Modeling the interactional strength of fit
between partners
Shiri D. Vivek
Received 15 October 2012
Revised 6 March 2013
Accepted 20 May 2013
Department of Marketing, Eastern Michigan University,
Ypsilanti, Michigan, USA, and
R. Glenn Richey
Downloaded by Eastern Michigan University At 12:27 21 May 2015 (PT)
Culverhouse College of Commerce and Business Administration,
University of Alabama, Tuscaloosa, Alabama, USA
Abstract
Purpose – The purpose of this paper is to contribute to the existing knowledge about joint ventures
(JV) by modeling the interactional strength of fit between JV partners. The paper integrates different
constructs from three theoretical perspectives most widely used in JV studies – trust and commitment
from the relational perspective; opportunism and specific investments from the transaction cost
perspective; and assesses the moderating role of fit from the contingency perspective.
Design/methodology/approach – Quantitative data from JVs were collected using the survey
method. Relationships in the moderated mediation model were tested using complex sets of
hierarchical regression steps.
Findings – Relational intentions of partners influence specific investments between the partners.
The two together drive JV performance and their impact is moderated by the extent of fit between the
partners. Thus, it is concluded that the strength of fit, as perceived by partners, influences the role of
other constructs from the relational, transactional and contingency perspectives, which together can
help us understand performance of JVs better.
Research limitations/implications – An assessment of longitudinal view of the relational
variables and subsequent performance can be captured in future. This research assesses fit based on
compatibility, which assesses similarity as well as complementarity, primarily by way of harmony in
different aspects. Future research could differentiate complementarity from similarity to further assess
the impact of fit.
Practical implications – The relational behavior of JV partners, or their rational approaches to
resource seeking, will be optimally effective only when the fit between partner characteristics is high.
While the relational or transactional approaches can evolve in JVs, the partners should assess the
extent of fit before getting into a JV relationship.
Originality/value – The research presents a holistic framework that draws from various theoretical
perspectives. The results establish that contrary to its peripheral treatment in the literature, fit plays
an important role and can modify the influence relational variables and specific investments can have
on the performance of JVs.
Keywords Strategic management, Decision making, Corporate strategy, Sourcing, Supplier relations
Paper type Research paper
The International Journal of Logistics
Management
Vol. 24 No. 3, 2013
pp. 356-379
r Emerald Group Publishing Limited
0957-4093
DOI 10.1108/IJLM-10-2012-0109
Alliances have long been an important aspect of strengthening supply chain
integration and providing sustainable competitive advantage. As supply chains
embrace the importance of closer alliances, practitioners and academics face the
The authors thank Dr Robert M. Morgan for providing the data and guidance for this research.
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challenge of understanding the factors that determine the success of alliances with
different levels of commitment from involved partners (Lambert et al., 1996), especially
those of Joint Ventures (JVs), which entail some degree of shared ownership and take
high level of commitment of finite resources, thus making their success critical for
involved partners. The existing literature primarily applies three theoretical lenses to
understand the performance of alliances, specifically JVs: transaction cost, relational
and contingency perspective.
Researchers following the transaction cost perspective have focussed on partner
characteristics as an explanation of alliance outcomes. Alliances are viewed as
alternative mechanisms to markets where resource exchange and value of accessed
resources is of central concern (Olavarrieta and Ellinger, 1997; Stinchcombe and
Heimer, 1985). Researchers with a relational perspective have focussed on the
interactive nature of cooperation between alliance partners (Cook, 1977; Cullen et al.,
2000). In contrast to a transactional focus, researchers in this tradition emphasize
the importance of relational characteristics in an alliance for understanding alliance
behaviors and outcomes. In contrast to an opportunistic focus on resource access and
bilateral idiosyncratic investments, the relational constructs of commitment and trust
(Svensson, 2001; Morgan and Hunt, 1994) indicate the behavioral intentions of the
partners in a relationship.
Several researchers have studied the third perspective, contingency, in the context
of alliances (Zajac et al., 2000; Griffith and Myers, 2005). The central theme of
contingency theory is that all partners in an alliance must be compatible, fit well or
complement each other for the relationship to perform optimally. Contingency theory
posits that effective alliances are achieved by matching alliance characteristics to
contingencies. “Contingency,” in the context of alliances, is defined as any variable
that moderates the effect of an alliance characteristic on alliance performance
(Donaldson, 2001). Researchers have identified a number of potential contingencies
in the literature, including technology, innovation, environmental change, size and
diversification (Morton and Hu, 2008).
Due to practical limitations, most researchers have tended to rely on one of the
three approaches, leading to inconclusive results. While it is true that alliances use
some combination of contractual and relational approaches (Vivek et al., 2008, 2009),
academic studies have largely ignored, or only peripherally treated the idea of
alignment of interests between involved parties that can influence the performance
of alliances in all situations. A balanced approach would suggest that alliance
performance is a function of the combined economic value of the involved resources,
a satisfactory relationship and an alignment of interests of the parties involved. This
research aims to contribute to the literature by addressing transactional, relational
and contingency factors that contribute to the performance of JVs. In so doing, we seek
to address the following research questions:
(1)
To what extent does fit influence JV performance, over and above the
explanations rooted in transaction costs, relationships and specific
investments?
(2)
How do these factors relate with each other to influence performance of JVs?
(3)
Does the relationship among, and the relative influence of transaction
costs, relationships and specific investments differ for firms that are highly
compatible from those that are not so compatible?
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While combining the transactional, resource and relational aspects of supply chain JV
partnerships to represent the integrative approaches followed by JV managers, this
study postulates that fit between JV partners influences the effect of transactional,
relational and resource-based approaches on JV partnerships.
Venkatraman (1989) identified six types of fit. These include fit as mediation,
moderation, matching, covariation, profile deviation and gestalt. Alliance research
that follows the contingency perspective has studied fit from the profile deviation
(Stock et al., 2000), matching (Fisher, 1997; Lee, 2002), or mediation perspectives
(Germain et al., 1994), which has led to mixed results about the role of fit in alliance
performance. For instance, Stock et al. (2000) found positive relationship between
operational performance and logistics integration-geographical dispersion fit, but
the same fit did not improve financial performance. Further, aligning logistics
integration with channel governance improved financial and service performance
but not cost efficiency. On the contrary, firms not achieving logistics integration
and channel governance had higher performance in Stock et al.’s (2000) studies. Griffith
and Myers (2005) found that fitting of one’s relational norms with cultural norms of
a supply chain partner is effective, but fitting for flexibility across culturally diverse
partners may not influence performance. Mixed findings in existing studies suggest
that the predictive ability of strategies differ in different environments. This could
be possible due to an interaction effect of various strategies on alliance performance.
This study therefore follows Venkatraman’s (1989) moderation perspective of fit and
studies strength of moderation of interacting variables on performance of JVs.
JVs are independent organizations formed by the pooling of resources and sharing
of equity by two or more firms to perform any of the supply chain functions. This
definition is consistent with international JVs defined by Tokman et al. (2007).
Conceptual framework and hypothesis development
Drawing from the existing literature, the conceptual framework and hypotheses are
developed in this section. The section begins with the discussion of relationshipspecific investments, which are hypothesized to influence performance of JVs. This is
followed by the discussion of fit. Subsequently, the constructs of commitment, trust
and opportunism are discussed hypothesizing relationships between these and
previously discussed constructs. Figure 1 presents the integrated framework.
Relational
characteristics
Commitment
Specific Investments
Resource
Sharing
Trust
Communication
Opportunism
Figure 1.
Integrated framework
of relationships
Fit between Partners
JV Outcomes
Performance
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Two constructs represent specific investments made by the partners, resource sharing
and communication. A high level of resource sharing can lead to costly coordination
and reduced flexibility. Adapting from Govindarajan and Fisher (1990), resource
sharing in this research is defined as the extent to which one partner shares various
organizational resources with the other partner.
The second form of specific investment is communication, the amount of
information exchanged by the partners relating to the development of the JV (Morgan
and Hunt, 1994). Porterfield et al. (2010) argued that information-sharing facilitates
coordination in the supply chain, where the characteristics of shared information
vary by the position of the firm in the supply chain. Environmental uncertainty and
interdependency further influence the extent of information shared between partners
(Yigitbasioglu, 2010), which has the potential to improve partners’ performance.
We begin by hypothesizing the influence of relationship-specific investments, resource
sharing and communication, on JV performance:
H1. Relationship-specific investments, resource sharing and communication
between JV partners, are positively related to JV performance.
The concept of fit underlies numerous theories at the individual, group and
organizational level of analysis (Venkatraman, 1989). Nadler and Tushman (1980, p. 40)
define fit as “the degree to which the needs, demands, goals, objectives and/or
structure of one component are consistent with the needs, demands, goals, objectives
and/or structure of another component.” Existing studies have explored different
forms of fit between alliance partners including cultural, network, social, etc. Previous
research has also emphasized the compatibility between the corporate strategy
and stage of strategic evolution of the firms and their supply chain (Cavinato, 1999;
Hofmann, 2010). Alliances might fail to achieve expected performance due to the
cultural incompatibility of the parties involved in an alliance. Cultural fit has been
conceptualized as consisting of strategy, chemistry and operations (Lynch, 1993).
Investigating the networks created by multiple alliances, Gulati (1995a) stressed how
a firm’s history of prior strong ties, along with the structure of its current network of
relationships, can have significant bearing on the performance of alliances.
Jemison and Sitkin (1986) argued that strategic fit, or similarities between partners
in terms of technology, products and markets should be distinct from organizational
fit, or similarities between organizations in terms of organizational processes such
as culture, HR policies and administrative systems. In order to enjoy expected
synergies, organizations must have similar cultures and approaches to strategic
decisions (i.e. organizational fit). Fit, then, determines the extent to which organizations
are compatible and realize anticipated synergies critical to a transaction’s success.
In JVs, good compatibility between partners should yield a number of benefits
(Madhok, 2006). However, when scholars have attempted to incorporate the element
of fit into their discussions of JVs, they have not treated it as a focal variable
(Sambasivan and Yen, 2010). Hill (1990, p. 507) observed: “the invisible hand of
the market is an evolutionary selection mechanism.” However, in situations where the
goals of the focal firm and partner are incompatible, commitment might be low and
thus the “shadow of the future” (Axelrod, 1984, p. 124), a long-term orientation, will not
work to prevent opportunism. Incompatible goals mean that too much compromise
is needed for a JV to function efficiently. The flip side of it is that the possibility of
opportunism always exists as the parties may place their individual goals above the
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venture’s goals, especially when they are incompatible (Das, 2006). Alliance partners may
not be willing to endure inefficiency for the long-haul, and so goal-incompatibilities can
create a climate of conflict, in which alliances often fail (Brouthers et al., 1995). Going
beyond its peripheral treatment in the literature, we follow Venkatraman (1989) to
hypothesize that the strength of fit is likely to moderate the influence that relationshipspecific investments can have on the performance of JVs. Therefore:
H2. The level of fit between JV partners is expected to strengthen the proposed
relationships between relational investments and performance.
A large stream of JV research has focussed on the interactive nature of cooperation
between organizations (Gulati, 1995b; Heide and Miner, 1992). In this relational
perspective, the focus of analysis is the link between the firms. Parkhe (1993) and
Levinthal and Fichman (1988) suggest that a history of trust and the relationship
between the firms engaged in an alliance, and not the structure per se, influence the
outcomes in a JV.
Commitment and trust are the two most widely researched relational characteristics
investigated in the context of alliances, and are closely related to each other (Svensson,
2001; Morgan and Hunt, 1994). Commitment relates to the intention to continue in
a relationship and make efforts to make it successful (Morgan and Hunt, 1994).
Favorable evaluation of the venture and expectation of future rewards are some of the
instrumental bases for calculative commitment in a JV relationship. On the other hand,
attitudinal commitment of any partner is the affective component of commitment and
is a sign of internalization of an alliance relationship. Partnerships with strong
attitudinal commitment are able to sustain periods of imbalanced exchange. If there is
only calculative commitment, the parties always make sure that the returns from the
exchange balance with the relative investments being made by both/all the parties.
Relationship commitment is an attitude that precedes and is logically prior to
commitments that take the form of actions made in the JV, including contractual
obligations or investments in assets specific to the JV. A lack of mutual commitment
to the JV is tantamount to a decision to terminate it, or, as Madhok (1995) maintains,
the sustenance of a JV depends on commitment. This research specifically focusses on
relational commitment. Based on the existing literature on commitment in strategic
alliances, we hypothesize the following:
H3. Commitment between JV partners is positively related to JV performance.
H4. Commitment between JV partners is positively related to relationship-specific
investments of resource sharing and communication.
H5. The level of fit between JV partners is expected to strengthen the proposed
relationships between commitment and relational investments of resource
sharing and communication.
H6. The level of fit between JV partners is expected to strengthen the proposed
relationships between commitment and performance.
Since JV partners are forced to rely on each other in the face of various uncertainties
(Madhok, 2006), the construct of trust is of special relevance in the context of JVs
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(Deitz et al., 2010; Inkpen and Currall, 2004). Benefits of trust range from low transaction
and governance costs (Dyer and Singh, 1998; Gulati, 1995b) to inducing desirable
behaviors (Madhok, 1995) and smooth resolution of conflicts (Niederkofler, 1991). Trust
also plays an important role in reducing the extent of formal contracts (Poppo and Zenger,
2002), and facilitating dispute resolution (Ring and Van de Ven, 1994). Drawing on the
social network theory, Gulati (1998) suggests that trust positively influences the outcomes
of a collaboration. Trust enhances the exchange of information relating to cooperation and
competition among firms, which flows through the networks they are embedded in
(Gulati, 1998). Goodwill and reliability of the trustee have a positive relationship with the
confidence of the truster in the potential cooperation between the two parties (Das and
Teng, 1998), leading to higher autonomy, discretion and delegation (Lyles and Reger, 1993).
Trust can be rational as well as emotional (Kramer 1999; Moorman et al., 1993).
Rational or credibility trust focusses on the intent and ability of the partner to meet
alliance obligations. This is the practical form of trust that weighs the reliability,
resourcefulness and expertise of the partner, which then forms the basis of trust.
Benevolent trust is without such instrumental bases. It is based on the belief that the
partner’s behavior will be in the best interest of the alliance (Johnson et al., 1996).
This belief is subjective and emotional.
Trust means that a JV partner has confidence in the reliability and integrity of
the other partner (Morgan and Hunt, 1994). Given that JVs are undertaken in
conditions of high uncertainty, trust becomes an important mechanism for ensuring
the venture’s survival and adaptation to changing circumstances (Madhok, 1995).
Trust is also thought to have efficiency implications for JVs by its value-enhancing
and cost-reducing properties. Buckley and Casson (1988) and Madhok (1995) have
underlined the importance of trust centered approaches to the study of JVs:
H7.
Trust between JV partners is positively related to JV performance.
H8.
Trust between JV partners is positively related to relationship-specific
investments of resource sharing and communication.
H9.
The level of fit between JV partners is expected to strengthen the proposed
relationships between trust and relational investments of resource sharing
and communication.
H10. The level of fit between JV partners is expected to strengthen the proposed
relationships between trust and performance.
Some studies have also seen the effect of trust and commitment on opportunism and
vice versa (Anderson and Jap, 2005; Hill, 1990). Deeds and Hill (1998) found that
a strong relationship between partners is a more effective deterrent to opportunistic
behavior than is the use of mutual hostages or rigorous contractual arrangements.
However, opportunism, due to its insidious nature, generates a high relational risk
that is evident from the vast literature on trust and commitment (Morgan and Hunt,
1994; Madhok, 1995; Das, 2004).
The existing literature has well established that trust influences the level of
commitment (Morgan and Hunt, 1994) and the possibility of opportunism in
a partnership (Gulati, 1995b), because “socio-psychological processes will create
a separate set of pressures to preserve the relationship” (Ring and Van de Ven, 1994,
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p. 95). Given that even very detailed and comprehensive contracts cannot anticipate
every contingency and that contracts cannot be rewritten every time the situation
changes, trust and commitment play a very important role in the functioning of a JV.
Firms are more likely to be committed to alliances that have longer term horizons.
When there is ongoing cooperation, opportunism is less likely (Dahlstrom and
Nygaard, 1999; Deeds and Hill, 1998; Heide and Miner, 1992), although not impossible
to find. Relational norms are likely to further reduce the potential for opportunism
(Gundlach et al., 1995) through the sharing of norms and values (Brown et al., 2000).
Because interactions will take place in the future also, there are enough opportunities
for all parties to retaliate against any opportunistic attempts and in this way punish
the opportunist (Axelrod, 1984). Strategic alliances attract substantial threats of
opportunistic behavior and are often a cause of their inherent instability (Das and
Rahman, 2002, Das and Teng, 1998). In fact, one of the major reasons for alliance
dissolutions has been the opportunistic behavior –“self-interest seeking with guile”
(Williamson, 1975, p. 6).
Wathne and Heide (2000) offered a framework with four forms of opportunism:
evasion, refusal to adapt, violation and forced renegotiation. Evasion and violation
are forms of opportunism under existing circumstances, whereas refusal to adapt and
forced renegotiation are opportunistic forms under new circumstances. Opportunistic
behavior occurring over a long duration could have a potentially negative impact on
opportunistic horizons, or confidence in the partner’s cooperation. This potential
negative impact might risk a partner’s commitment to mutual interests in an alliance
(Das, 2004).
Lee (1998) finds support that decision-making uncertainty, cultural difference
and economic ethnocentrism increase the possibility that the alliance partner will behave
opportunistically. The nature of opportunism will be affected by the life-cycle stage of an
alliance, and size of the firms involved (Deeds and Hill, 1998). In international JVs, the
threat of opportunism persists even after the relationship matures (Johnson et al., 1996).
Existing literature suggests the following consequences of opportunism in interfirm collaboration. First, firms facing the threat of opportunism experience higher
transaction costs due to a greater need for screening, negotiating and monitoring
partners’ behavior. Second, given that firms strive to maximize gains, self-interest-seeking
behavior is likely to be prominent in the context of JVs (Olavarrieta and Ellinger, 1997).
Even if one of the partner firms fails to look beyond the short-term optimization of selfinterest, the results of cooperation, if any, will be very few. Hill (1990) argues that
opportunistic behavior does not pay in the long run, even under conditions of high asset
specificity, because the invisible hand of the market punishes the opportunist by exposing
his/her characteristics and eventually driving him/her out of the market.
Transaction cost theory offers a perspective of “self-interest seeking with guile”
(Williamson, 1975, p. 6), and highlights the pursuit of gain with means that go beyond
the bounds of propriety and involve a measure of deceit. Such opportunistic behavior is
often to the detriment of any type of relationship between firms. Infact, JVs may be
thought of as a form of mutual hostaging that mitigates the incentive for opportunism.
Therefore:
H11. Opportunism in JV partnerships negatively influences JV performance.
H12. Opportunism in JV partnerships negatively influences relationship-specific
investments of resource sharing and communication.
H13. The level of fit between JV partners does not influence the proposed
relationships between opportunism and relational investments of resource
sharing and communication.
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H14. The level of fit between JV partners does not influence the proposed negative
relationship between opportunism and JV performance.
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We further hypothesize that fit, or the lack of it, moderates the mediating models,
where relationship-specific investments mediate the relationship between relational
variables and performance. We specifically hypothesize the following:
H15. Relationship-specific investments mediate the relationship between
commitment and performance. However, the mediating relationship
between commitment, specific investments and performance of JVs is
moderated by the extent of fit between partners, such that linear commitmentinvestment-performance relationship is stronger for high-fit partnerships
than for low-fit partnerships.
H16. Relationship-specific investments mediate the relationship between trust
and performance. However, the mediating relationship between trust, specific
investments and performance of JVs is moderated by the extent of fit between
partners, such that linear trust-investment-performance relationship is stronger
for high-fit partnerships than for low-fit partnerships.
H17. Relationship-specific investments mediate the relationship between
opportunism and performance. However, the hypothesized mediating
relationship between opportunism, specific investments and performance
of JVs is moderated by the extent of fit between partners, such that linear
opportunism-investment-performance relationship is stronger for high-fit
partnerships than for low-fit partnerships.
The conceptual model shown in Figure 1 represents these hypotheses.
Measures
Data were collected using surveys. Measuring performance of alliances can be
problematic (Saxton, 1997) due to several factors such as varied objectives of an
alliance, nature of the industry and nature of the relationship. Further, since financial
and operational performance may result from several factors other than a specific
alliance, some of which might be outside of the control of the JV being studied, it may
not be appropriate to measure success of a JV based on overall performance. For the
same reasons, measuring performance relative to other firms in the industry may also
provide conflicting results, such as those reported by Griffith and Myers (2005).
Moreover, alliance termination or longevity does not indicate the failure or success of
an alliance because not all alliances are created with the intent of significant longevity
(Zajac, 1998). To avoid these issues, we follow Ghosh and John (2005) and ask our
informants to report performance on various financial and market factors by
comparing the current partner with what they expected to experience with a closely
considered potential JV partner. The informants made this comparison in terms of
gross profit, sales revenue, production economies, market share and overall economic
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benefits. This allowed managers to rate the effectiveness of a given JV at meeting
goals established specifically for it, thereby minimizing many problems with
comparability (Edstrom et al., 1984). The factor of performance was measured on a
seven-point scale, but that scale compared the potential partner who was considered
before entering into the JV (1 ¼ “current partner is much worse” to 7 ¼ “current partner
is much better”).
Respondents recorded their responses on a seven-point scale (1 ¼ strongly disagree
to 7 ¼ strongly agree) for all other constructs. The measures for commitment, trust,
opportunism and communication were adapted from Morgan and Hunt (1994).
The development of measures of resource sharing, fit and performance was guided by
conceptual definitions, prior research and several pre-hash study interviews following
the measure development procedures recommended by Anderson and Gerbing (1988)
and Churchill (1979, 1995) and the best practices proposed by Hinkin (1995). Appendix
presents the indicative items, total items in a measure, and a reliabilities for each
measure used in this study.
Data collection
A preliminary list of 1,400 JVs was first taken from Corporate Affiliations Plus on CD
ROM. To ensure a homogenous sample that excluded extraneous sources of variation,
JVs that had more than two parents and those that had a partner with an equity share
of less than 25 percent were excluded from the preliminary list. For practical reasons,
at least one of the partners in the JV had to be in the USA. The final list had 700 JVs
that were then contacted by phone, once in order to identify the manager who was
responsible for the JV, and subsequently to solicit the identified manager’s
participation and cooperation in the survey, and to ensure him/her of complete
confidentiality and anonymity. This reduced the list to 550 identified JV partners
and managers, who agreed to respond to a questionnaire on the specific JV that they
managed. In total 320 of these 550 managers finally responded to a specifically
designed survey of JV relationships mailed to all 550 managers. Of the 320
completed questionnaires, 302 were usable, yielding a response rate of 55 percent.
Since the response rate was so high, testing for non-response bias was not considered
important.
Measurement analysis
All latent variables were subjected to a series of confirmatory factor analyses (CFA)
using LISREL 8.80, to ensure unidimensionality, reliability and convergent and
discriminant validity (Anderson and Gerbing, 1988). Each item loading was restricted
to it’s a priori construct and each latent construct was allowed to correlate with all
other constructs. The data fit the model with w2 961.06 (618) and RMSEA 0.064.
The comparative fit index (CFI) was 0.90, while the goodness of fit index was 0.73.
All standardized factor loadings were above 0.70 (all loadings ranged from 0.78 to 0.92)
and were significant in the predicted direction, in support of convergent
validity. Cronbach’s a for the constructs ranged between 0.76 and 0.96 (Appendix)
indicating acceptable internal reliability. We found that support for discriminant
validity by verifying the square root of the average variance extracted by each latent
construct was greater than its correlation with all other constructs (Fornell and
Larcker, 1981).
In the absence of a generally accepted method of testing moderated mediation
relationships indicated in the conceptual model, the Statistical Package for Social
Science (SPSS 18.00) was used for testing the relationships in this research. The
following section discusses the results.
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Results
This section details the results of a series of analyses performed on the relationships
laid out in the conceptual framework.
Correlation and moderation analysis
Table I gives the descriptive statistics and zero-order correlations for all variables.
All the constructs were significantly correlated at po0.01. The high correlations of
these constructs warrant further investigation into the nature of these relationships.
H1 predicts a positive direct relationship between relationship-specific investments,
namely resource sharing and communication, and JV performance. As evident from the
results in Table II, resource sharing (b ¼ 0.317, po0.01) and communication (b ¼ 0.285,
po0.01) have a significant influence on performance.
H2 predicts positive influence of a moderating effect of fit on relationships between
specific investment variables and performance of the JV. This moderating effect was
tested by separately applying hierarchical regression analysis to the two specific
investment variables: resource sharing and communication. To minimize
multicollinearity concerns, the variables of interest were centered prior to their
inclusion in the regression analyses (Aiken and West, 1991). Hierarchical moderated
regression analysis tests for the significance of the increment in criterion variance
explained by the interaction term beyond that attributed to the main effects. If the
interaction between specific investment variables and fit significantly changes
the squared correlation coefficient (R2), moderation would be supported (Aiken and
West, 1991; Baron and Kenny, 1986).
Variables
1.
2.
3.
4.
5.
6.
7.
No. of Items Mean SD
Commitment
Trust
Opportunism
Res.-Sharing
Communication
Fit
Performance
7
8
6
4
5
9
5
5.24
5.03
3.43
5.10
4.50
5.22
4.88
a
1.49
1.39
0.69
1.37
0.83
1.27
1.37
1
2
3
4
5
1 Resource sharing
2 Fit
3 Resource sharing Fit
1 Communication
2 Fit
3 Communication Fit
365
6
0.94
0.96 0.58**
0.81 0.47** 0.73**
0.88 0.57** 0.55** 0.49**
0.87 0.44** 0.80** 0.60** 0.46**
0.76 0.62** 0.62** 0.54** 0.58** 0.47**
0.92 0.45** 0.55** 0.50** 0.47** 0.48** 0.50**
Notes: n ¼ 302. **po0.01
Step and variable
Understanding
performance of
joint ventures
b
R2
DR2
0.317**
0.449**
0.259**
0.285**
0.412**
0.169*
0.224
0.299
0.347
0.230
0.326
0.352
0.224**
0.075**
0.047**
0.230**
0.097**
0.026*
Notes: n ¼ 302. Regression coefficients are standardized from the last step. *po0.05; **po0.01
Table I.
Means, standard
deviations, and
Pearson correlations
Table II.
Results of hierarchical
regression analyses
testing H1 and H2
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366
Table II presents the hierarchical regression results for interactions affecting
performance. As shown in Table II, moderation was supported for both the specific
investment variables, resource sharing (DR 2 ¼ 0.047, po0.01) as well as
communication (DR2 ¼ 0.026, po0.05). As shown in Figures 2 and 3, the positive
relationship of both resource sharing and communication with performance was
stronger for partners with high fit than for those with low fit, where it was very weak.
In the case of low level of fit, resource sharing, as well as communication did not lead to
a significant increase in performance.
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Relationship with commitment, trust and opportunism
Table III reports the standardized b-coefficients from the last steps of a series of
hierarchical regression models run to test the relationship of commitment, trust and
opportunism with specific investment variables (resource sharing and
communication), and performance. In each model, step 1 regressed the dependent
variables on independent variable of interest. Step 2 included fit as an additional
independent variable and provided a comparison model for hierarchically assessing
a moderator effect. Step 3 included the cross-product term as a test for moderation. The
cross-product term explains the incremental variance above and beyond that explained
by the main effects of the independent variable and the moderator.
H3 predicted a positive direct relationship between commitment and performance.
Results in Table III (b ¼ 0.292, po0.01) support the positive direct relationship
between commitment and performance. The results of H4 are also supported and are
consistent with previous findings in the existing literature. As predicted, when
commitment in the relationship increases, the partners not only communicate more and
openly (b ¼ 0.259, po0.01), but are also willing to share more resources with each other
(b ¼ 0.333, po0.01).
7.00
Low Fit
High Fit
6.00
Performance
5.00
4.00
3.00
2.00
Figure 2.
Regression plot
for relationship
between communication
and performance
moderated by fit
1.00
0.00
Low
High
Communication
Understanding
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7.00
Low Fit
High Fit
6.00
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Performance
5.00
367
4.00
3.00
2.00
Figure 3.
Regression plot for
relationship between
resource sharing and
performance moderated
by fit
1.00
0.00
Low
High
Resshr
Step and variable
Resource sharing
DR2
b
R2
1 Commitment
0.333**
2 Fit
0.344**
3 Commitment Fit 0.079
1 Trust
0.312**
2 Fit
0.396**
3 Trust Fit
0.014
1 Opportunism
0.264**
2 Fit
0.428**
3 Opportunism Fit
0.032
0.328
0.412
0.417
0.303
0.396
0.396
0.244
0.384
0.385
b
Communication
R2
DR2
b
Performance
R2
DR2
0.328**
0.259** 0.193 0.193**
0.292** 0.199 0.199**
0.084**
0.353** 0.254 0.062**
0.425** 0.281 0.081**
0.005
0.113
0.265 0.011
0.287** 0.349 0.068**
0.303**
0.842** 0.643 0.643**
0.409** 0.300 0.300**
0.093**
0.041
0.645 0.001
0.445** 0.347 0.046**
0.000
0.134* 0.654 0.009*
0.271** 0.384 0.037**
0.244** 0.479** 0.361 0.361** 0.309** 0.254 0.254**
0.141**
0.229** 0.395 0.034**
0.424** 0.336 0.082**
0.001
0.019
0.395 0.000
0.209** 0.373 0.037**
Notes: n ¼ 302. Regression coefficients are standardized from the last step. *po0.05; **po0.01
However, the results in Table III do not support H5, where we predicted a significant
moderating effect of fit on the relationship between commitment and relationshipspecific investments. Fit does not moderate the effect of commitment on resource
sharing (DR2 ¼ 0.005, ns), or on communication (DR2 ¼ 0.001, ns).
Table III and Figure 4 support the relationships predicted in H6. As shown in
Table III, step 3 of commitment, fit significantly moderates the relationship between
commitment and performance (DR2 ¼ 0.068, po0.01). When JV partners experience
a good fit, high level of commitment between the partners is associated with increased
performance. However, when the fit between partners is perceived as low, commitment
of partners fails to affect the level of performance (Figure 4).
H7 predicted a positive direct relationship between trust and performance. Results
in Table III (b ¼ 0.409, po0.01) support the positive direct relationship between
Table III.
Results of hierarchical
regression analyses
testing H3-H14
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7.00
Low Fit
High Fit
6.00
5.00
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Performance
368
4.00
3.00
2.00
Figure 4.
Regression plot for
relationship between
commitment
and performance
moderated by fit
1.00
0.00
Low
High
Commitment
commitment and performance. H8 predicting a positive linear relationship between
trust and specific investments was also supported for resource sharing (b ¼ 0.312,
po0.01) as well as for communication (b ¼ 0.842, po0.01). Supporting previous
literature, high levels of trust and commitment are associated with higher expectation
of resource sharing and more communication between JV partners.
However, results in Table III partially support H9, where we predicted a significant
moderating effect of fit on the relationship between trust and relationship-specific
investments. Fit does not moderate the effect of trust on resource sharing (DR2 ¼ 0.000,
ns), but significantly moderates the relationship between trust and communication
(DR2 ¼ 0.009, po0.05). This suggests that although partners might be continuing to
share resources irrespective of their perception of fit, communication does get
influenced by the level of fit between JV partners.
H10 predicts a stronger relationship between trust and performance for JVs with
high fit. The results from Table III step 3 for trust reveal that fit significantly
moderates the relationship between trust and performance (DR2 ¼ 0.037, po0.05).
As shown in Figure 5, H10 is supported in that the impact of high trust is higher on
performance for JVs which have better fit, as compared to those which experience
lower fit between the two partners.
H11 predicts a significant negative relationship between opportunism and
performance. Results in Table III (b ¼ 0.309, po0.01) show that high level of
opportunism can significantly drop performance. H12 predicts a negative relationship
between opportunism and specific investments, which was also strongly supported in
this study. The relationship between opportunism and specific investments was
significant, where an increase in opportunism led to a significant decrease in resource
sharing (b ¼ 0.264, po0.01) as well as communication (b ¼ 0.479, po0.01).
Results in Table III strongly support H13, where we predicted no moderating effect
of fit on the relationship between opportunism and relationship-specific investments.
7.00
Understanding
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Low Fit
High Fit
6.00
5.00
4.00
3.00
2.00
1.00
0.00
Low
Trust
High
Figure 5.
Regression plot for
relationship between
trust and performance
moderated by fit
The results shown in step three of opportunism (Table III) confirm our expectation that
fit does not moderate the negative effect of opportunism on resource sharing
(DR2 ¼ 0.001, ns), or on communication (DR2 ¼ 0.000, ns).
Further, as is evident in Figure 6, the analysis does not support H14. Contrary to
our expectation, the significant negative influence of opportunism on performance is
further affected by the extent of fit between the partners. Opportunism can
7.00
6.00
Low Fit
High Fit
5.00
Performance
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Performance
369
4.00
3.00
2.00
1.00
0.00
Low
High
Opportunism
Figure 6.
Regression plot for
relationship between
opportunism and
performance moderated
by fit
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370
significantly lower performance if the partners have a high fit. This is also evident
from the significant change in R2 (0.037, po0.05) as a result of interaction between
opportunism and fit (b ¼ 0.209, po0.01).
H15, H16 and H17 predict that specific investments will mediate the relationship
between the predictors and performance (Table IV). Further, these mediating
relationships will be influenced by the strength of fit between partners. Because
the potential mediator effect might combine with a moderator effect, following
Venkatraman’s (1989) moderation perspective of fit, an appropriate method of testing
for mediation was to create a median split on the moderator variable and to then
independently assess mediation in two sub-samples, one sub-sample reporting
relatively low fit, and the other reporting a higher fit between partners. The median
value for fit, 0.50, served as the splitting point for the two categories. The first category
of fit represented low fit between the partners while the second category represented
Independent variables
and mediators
Low-fit sub-sample
High-fit sub-sample
Dependent variables
Dependent variables
Resource
Resource
sharing Communication Performance sharing Communication Performance
Mediation test for Commitment Steps 1 and 2
Commitment
0.564***
0.288**
0.318
0.083
R2
Mediation test for Commitment Step 3
Commitment
Resource Sharing
R2
Commitment
Communication
R2
Mediation test for Trust Steps 1 and 2
Trust
0.451***
0.775***
0.204
0.600
R2
Mediation test for Trust Step 3
Trust
Resource sharing
R2
Trust
Communication
R2
Mediation test for Opportunism Steps 1 and 2
Opportunism
0.424*** 0.548***
0.179
0.300
R2
Mediation test for Opportunism Step 3
Opportunism
Resource sharing
R2
Opportunism
Communication
R2
0.190
0.036
0.228*
0.052
0.428***
0.184
0.132
0.109
0.044
0.119
0.183
0.064
0.337***
0.113
0.378***
0.436***
0.464
0.388***
0.436***
0.468
0.391***
0.153
0.775***
0.601
0.326**
0.045
0.120
0.375*
0.052
0.115
0.314**
0.099
0.285*
0.083
0.104
0.269*
0.086
0.104
Table IV.
Results of mediation
analyses testing H15-H17 Notes: n ¼ 113; n ¼ 189. *po0.05, **po0.01, ***po0.001
0.552***
0.305
0.599***
0.358
0.377**
0.343**
0.427
0.369*
0.300
0.395
0.351***
0.124
0.522***
0.272
0.544***
0.295
0.332**
0.406**
0.415
0.341**
0.387**
0.404
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high-fit partnerships. Separate regression analyses were conducted to further assess
mediation in each category.
The analysis was done following Baron and Kenny’s (1986) three-step procedure
for assessing the mediating role of specific investments. First, the independent
variables should be significantly related to mediator variables; second, the
independent variables should be significantly related to the dependent variables;
and third, the mediating variables should be significantly related to the dependent
variables, with independent variables included in the equation. If the first three
conditions hold, at least partial mediation is present. If the independent variables have
non-significant b weights in the third step, then complete mediation is present.
Models regressing performance on predictor variables were compared with
similar models in which the effect of specific investments was first controlled.
Table IV presents the results. H15 predicted mediation of specific investments
between commitment and performance. Partial support for the hypothesis was found
in the low-fit sub-sample, where the R2 of 0.036 (b ¼ 0.190, po0.10) for commitment
increased to an R2 of 0.044 (b ¼ 0.132, ns) when the effect of resource sharing
was controlled. In the high-fit sub-sample, a partial mediating effect of resource
sharing between commitment and performance was evident. In this sub-sample, the R2
of 0.305 (b ¼ 0.522, po0.001) for commitment increased to R2 of 0.464 (b ¼ 0.378,
po0.01) and the b dropped, thus showing partial mediation. When the effect
of communication was controlled in the low-fit sub-sample, the R2 of 0.036 (b ¼ 0.190,
ns) increased further to 0.064, while dropping the b-value to 0.119 (ns). There
was, however, a partial mediating effect of communication between commitment
and performance in the high-fit sub-sample. The R2 of 0.305 (b ¼ 0.522, po0.001)
increased to R2 of 0.468 (b ¼ 0.388, po0.01) when the effect of communication
was controlled.
H16 predicted mediation of specific investments between trust and performance.
This hypothesis is also partially supported. Effect of trust on performance was found
to be partially mediated by the specific investments made by the JV partners. In the
low-fit sub-sample, the R2 of 0.113 (b ¼ 0.337, po0.001) for trust increased to an R2 of
0.120 (b ¼ 0.326, po0.01) when the effect of resource sharing was controlled. In the
high-fit sub-sample, the R2 of 0.358 (b ¼ 0.599, po0.001) increased further to 0.427,
while dropping the b-value to 0.377 (po0.01). There was, however, no mediating
effect of communication between trust and performance in the low-fit sub-sample and
partial effect in the high-fit sub-sample. In the high-fit sub-sample, the b-value for trust
dropped from b ¼ 0.599 to b ¼ 0.369, along with the significance, which dropped from
o0.01 to o0.05. Specific investments thus partially mediate the effect of trust on
performance when there is high fit between partners.
H17 predicted mediation of specific investments between opportunism
and performance. As Table IV shows, partial mediation of resource sharing and
communication between effect of opportunism and performance for low as well as
high-fit sub-samples was found when the sub-samples were analyzed separately,
but not when the sub-samples were pooled together. For the low-fit sub-sample,
the R2 of 0.099 for opportunism (b ¼ 0.314, po0.01) increased to R2 of 0.104
(b ¼ 0.285, p ¼ 0.01) when resource sharing was controlled. The drop in b suggested
partial mediation. For the high-fit sub-sample, the R2 of 0.295 (b ¼ 0.544, po0.001)
increased to R2 of 0.415 (b ¼ 0.332, po0.01); the b-values suggesting partial
mediation. The b-values for communication also suggest partial mediation of
communication.
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372
Overall, we found partial mediation of resource sharing and communication in the
relationship of predictors (commitment, trust and opportunism) with performance. Our
results indicate that mediation works best when the partners perceive a great fit
between themselves. Further, investments in resources and communication will not
be instrumental in driving performance through commitment if the fit between
partners is low. Although resource sharing and communication do not fully mediate
the relationship of commitment, trust and opportunism with performance in high-fit
partnerships, there is partial mediation in all cases of high fit. High levels of
commitment and trust and low levels of opportunism can partially drive performance
through resource sharing and communication in highly compatible relationships,
but this does not hold equally true for partnerships that are perceived as less
compatible. Resource sharing did not mediate the relationship of commitment and
trust with performance in low-fit cases. Similarly, communication did not mediate
the relationship between trust and performance in low-fit cases.
Discussion
This study was conducted with the objective of assessing the moderating strength of
fit on relational and transactional constructs. The study integrated transactional
and relational perspectives with contingency perspective playing an interactional
role in joint-venture alliances. The constructs of trust and commitment from the
relational perspective and opportunism from the transactional perspective were linked
with specific resource investments made by the partners. It was hypothesized that
the specific investments mediate the relationship between relational intentions and
performance. This framework is influenced by the level of compatibility or fit between
partners in determining performance. As suggested by Venkatraman (1989), the
strength of fit plays a significant role in moderating the hypothesized relationships
in this study.
We found sufficient evidence to suggest that the mediating relationship of specific
investments, resource sharing and communication, with behavioral intentions and
performance is influenced by the extent of fit between partners. Commitment and
trust will increase resource sharing and communication, which in turn will drive
performance when there is high fit between partners, that is, when the partners have
compatible structures, corporate cultures and managerial styles, as well as common
goals and values. Firms might share resources out of commitment and/or contractual
obligations, but this will not increase performance if the partner characteristics are
not in alignment. If the overall fit is low, commitment and trust will not drive
communication, and the subsequent performance will be considerably lower.
We also found an interesting relationship of opportunism with specific investments
and performance. When the analysis was done on full set of cases, the incremental
variance caused by the interaction of opportunism and fit was not significant for
the specific investment variables, but this interaction term changed the R2 significantly
for performance (Table III). This is evidence that the specific investments do not
mediate the relationship between the cross-product of opportunism and fit,
and performance, but at the same time the interaction of opportunism and fit
influences performance significantly. However, when the low-fit cases were separated
from the high-fit cases, relational investments turned out to be partially instrumental
in driving performance based on the level of opportunism. Although opportunism
continued to have a significant negative influence on performance, mediation of
resource sharing and communication consistently dropped the b-values in all cases.
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This suggests that resource sharing and communication influence the effect of
opportunism on performance in cases of high or low fit.
Combining the moderation results with moderated mediation results give us
useful insights. Whether the fit is high or low, trust and opportunism influence a JV’s
performance significantly. Further, although commitment significantly adds to the
performance of JVs with high fit, high level of commitment does not contribute
significantly in improving the performance of JVs where the partner fit is low. This
suggests that the relational approach to partnerships can become secondary if the
partner congruence is not high.
In the past, all of these constructs have been studied individually for their impact
on performance, but the holistic relationship between these constructs has not been
empirically explored by researchers. The analysis in the present study showed that
in all cases, the contingent fit between JV partners has a significant effect in
strengthening/weakening the relationships. These relationships work positively
when the fit between JV partners is high. So if there is commitment and resources are
being shared, performance will significantly improve in those JVs where partner
interests are common and structures are aligned.
Our findings suggest that behavioral intentions of partners influence resource
sharing and communication between the partners. These together drive
performance based on the extent of fit between the structures, culture and values of
both partners. Thus, we conclude that the transactional, relational and contingency
perspectives together can help us understand performance of JVs better. While the
transactional and relational elements of a partnership can evolve over time, companies
seeking a JV need to pay careful attention to the level of congruence with their
potential partners. Once they have formed the partnership, increasing the fit and
alignment between the two parties is more difficult to achieve than changing
transactional and relational approaches. Therefore, companies need to pay special
attention to the alignment between parties in a JV relationship. Future researchers
can help with more detailed exploration of the effects of fit and misfit between partners
in alliances.
Managerial implications
As supply chains increasingly opt for alliances and JVs to achieve increasingly diverse
objectives, and as more JVs fail to realize parent expectations, the need for more
comprehensive conversation regarding the factors facilitating successful alliances has
become imminent. By developing and testing a model of JV performance grounded in
the varying roles of the diverse perspectives of businesses, this study adds to the
stream of research on comprehensive understanding of JV performance.
The findings of our study lead to significant implications for practitioners and
managers. First, we incorporate the view that businesses do have transactional
motives that go hand in hand with the signals of cooperation and contractual
obligations that they fulfill by pooling resources in a JV. However, our study shows,
that compatibility of cultures, processes and structures are issues that need to be
explored before the JVs are formed, or at least early in an alliance. Our results
demonstrate that a good fit is a necessary condition, if investments in a JV are to
convert into effective returns. While it is evident that merely commitment and trust
cannot facilitate the performance of a JV, their absence can further lower the
effectiveness of any resources that the parents invest in a JV.
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Second, as supply chains become increasingly dependent on alliances, it may be
understood that not all factors are equally important in all types of alliances. While
compatibility of partners may not be as important in an arm’s length relationship
or in distant partnerships, it plays a more important role in more involved
relationships, such as JVs, where all parents have invested in creating a new
independent entity for the achievement of joint objectives.
Third, our study also brings to the fore that negative attitudes and self-interest
might be more harmful to an independent entity like a JV than to distant relationships.
Acting on self-interest is not likely to benefit any partner. On the contrary, acts
of opportunism can negate the possible benefits that can be achieved from sharing
resources with committed partners. More so if partner fit was assessed in the
exploration phase of a JV relationship.
Finally, an integration of constructs from various theoretical perspectives presents
a holistic picture for the managers. While managers need to trust partners and
commit to the long term, in most situations, the positive relational behaviors will only
bear results if the alignment between partners is good. Since fit or alignment cannot be
changed easily after the relationship has been formed, while the approach toward
the relationship evolves in a partnership, it is important that managers closely study
the contingencies that determine the level of congruence with the potential partner.
Further, the effectiveness of specific investments in the partnership is subject to
effective selection of the right partner. To begin with, firms should ensure that the
goals, values, culture and structure of the prospective partners are congruent with
those of the parent.
Limitations and future research directions
This study was an effort to understand the nature of integration between constructs
that reflect different theoretical perspectives. Given the magnitude of the task, the
split sample in this research was relatively small to get findings with adequate power.
The strength of main effects, in and of themselves, is a probable reason for getting
only partial mediation in the relationships. We recommend doing future studies on
larger samples to gain more confidence in the findings. Moreover, in this study we
measured perceptions of performance. Partner variables were also measured through
perceptions of the parent. We would recommend use of dyadic data in the future
for this purpose. Future studies would benefit the topic more if a longitudinal view of
the relational variables and subsequent performance could be captured. Finally,
this research assesses fit based on compatibility, which assesses similarity as
well as complementarity, primarily by way of harmony in different aspects. Future
research could differentiate complementarity from similarity to further assess
the impact of fit.
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Appendix
Table AI.
Indicative items
and reliability for
each construct
Construct (indicative item)
Scale
Commitment (the relationship that my firm has with the JV
partner is something we are very committed to)
Trust (in our JV relationship, we have found that our JV partner
has high integrity)
Opportunism (our JV partner often refrains from cheating us,
even though the contract would not prohibit such cheating)
Resource sharing (future dealings between my firm and our
partner will likely involve both firms sharing resources that
the joint venture needs)
Communication (our JV partner keeps us informed of new
developments)
Fit (please note the degree of compatibility between your firm
and your joint venture partner in terms of corporate culture)
Performance (please compare your current partner with what
you would expect to have experienced with your alternate
partner concerning: Gross profit)
1 ¼ strongly disagree
to 7 ¼ strongly agree
Cronbach’s a
(no. of items)
0.936 (7 items)
0.962 (8 items)
0.806 (6 items)
0.884 (4 items)
0.867 (5 items)
0.759 (9 items)
1 ¼ current partner
is worse than the
alternative to
7 ¼ current partner
is much better
0.915 (5 items)
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About the authors
Dr Shiri D. Vivek is an Assistant Professor of Marketing and Supply Chain Management at the
Eastern Michigan University, Ypsilanti, MI, USA. Dr Vivek has published several research
articles in the areas of alliances, outsourcing, and customer engagement. Dr Vivek has published
over 40 research articles in journals across the world. These include Journal of Operations
Management, Journal of World Business and Journal of Services Research. Dr Shiri D. Vivek is the
corresponding author and can be contacted at: svivek@emich.edu
Dr R. Glenn Richey, Jr (PhD, The University of Oklahoma) is the Associate Dean of
International Business and Morrow Faculty Excellence, an Associate Professor in the
Culverhouse College of Commerce and Business/Manderson Graduate School of Business at the
University of Alabama. He is also an Associate at the University of Edinburgh Business School.
His specialty areas include inter-organizational exchange relationships, reverse and sustainable
logistics, resource management, and supply chain strategy. He has published over 60 articles in
refereed academic research journals. Currently, he serves as the co-editor of International Journal
of Physical Distribution and Logistics Management and is an Associate Editor of the Journal of
Business Logistics.
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