International Joint Ventures: A Political Economy Framework

Abstract

Although International Joint Ventures (IJVs) suffer from a relatively high failure rate, they represent an increasingly important aspect of international business. A major criticism of the IJV literature is that it lacks a comprehensive framework for understanding the formation and maintenance of IJV relationships. It is suggested that this is due to the reliance on transaction cost theory and resource dependence theory that alone are not able to fully explain IJV relationship formation and maintenance. Drawing upon research in the buyer-seller and channels literature, the authors apply relational exchange theory to highlight important relational variables that are likely to impact IJVs. The political economy framework is then used to develop an integrative framework of IJV relationships that include these key relational variables. Implications for managerial action and future research are discussed.