Abstract
This thesis examines how successful international joint ventures (IJVs) manage cultural differences. Past research indicates that cultural differences influence the performance of IJVs, but why and how remain unclear. Cultural differences affect cooperation within IJVs, but it has not been established whether their impact is beneficial (fostering synergy) or destructive (encouraging conflict), or both. Prior research uncovered primarily negatives, resulting in calls to investigate the positive effects of cultural differences in order to make them a source of value-added in international business. Responding to these calls, the present study provides evidence of the conditions and processes under which cultural differences can contribute to synergistic outcomes.
The theoretical foundations for this thesis lie in social identity theory, specifically self-categorization theory, underpinned by transaction cost economics and the resource-based view of strategic management. Cultural differences are examined through the lens of Hofstede’s dimensions, instead of employing a simpler cultural distance measure, to highlight that it is the individual differences, rather than aggregate distance itself, that lead to varying effects.
Cultural differences arise from and affect multiple stakeholders in an IJV, including host-country employees and expatriates from the home country; each participant also holds their own perspective on the situation, leading to potential misinterpretation and miscommunication. This study focuses on the influence of cultural differences from the perspective of host-country employees, as they are typically the most strongly affected due to the nature of power relationships within IJVs. Qualitative data were collected representing four case studies of IJVs between Vietnamese and foreign partners, involving diverse levels of cultural differences while maintaining the cultural constant of the host country. Case selection was driven by the goal of representing a wide range of performance levels to analyze in light of the IJVs’ degree of internal cooperation.
The findings of this study open the black box of the mechanism by which cultural differences influence the performance of IJVs from the perspective of host-country employees. It is based on their perception of cultural differences that such employees form their cooperative or hostile attitudes toward members of the other partner’s culture. Individuals become aware of the other culture embedded in the IJV by making sense of the organization’s salience, experiencing the depersonalization process, and engaging in the comparison process via their experience.
To address whether cultural differences positively or negatively affect cooperation within IJVs, this study provides a deep explanation of how the effects of cultural differences vary according to the values of the cultures involved. Some cultural differences facilitate organizational identification and enable cooperation, while others impede it. Specifically, low Power Distance, Individualism, and high Uncertainty Avoidance are important factors in the development of practices and leadership styles that facilitate employee identification with their IJV. These cultural values have desirable impacts as employees are encouraged to participate in decision-making processes, are given opportunities to develop themselves to their full potential, and receive clear guidance regarding how to conduct themselves at work. In contrast, high Power Distance, strong Collectivism, strong Indulgence, and low Uncertainty Avoidance interfere with two-way communication, equal distribution of development opportunities and outcomes, and a shared work process. Thus, these cultural values are not ideal for employees’ organizational identification or cooperation between home and host country staff within IJVs.
By contrasting the cases in which cultural differences are seeds of cooperation with those in which they are a source of conflict, this study sheds light on how the impact of cultural differences depends on the governance of IJVs. In particular, a successful IJV utilizes cultural differences to facilitate organizational identification, generating management practices and leadership that foster an attractive working environment, where employees perceive a sense of justice, security, and support. By contrast, in IJVs that fail to manage internal cooperation, managers are not aware of which cultural traits are harmful to the identification process, resulting in management practices being unable to overcome the negative influences of cultural differences.
A significant contribution of this study is that it demonstrates an association between social identity theory, transaction cost economics, and the resource-based view, wherein social identity theory can explain the contradictory results found by previous studies using the other two theories. Cultural differences can become a source of competitive advantage for firms, as indicated by the resource-based view, when the culture of the host country partner facilitates organizational identification formation among the local employees. On the contrary, when cultural differences hinder the formation of organizational identification, it becomes a source of uncertainty, which can be explained by transaction cost economics.