Partner selection and venturing success: The case of joint ventures with firms in the People's Republic of China

It has been hypothesized in the international joint venture (IJV) literature that partner selection affects interpartner ‘fit’ which in turn influences a synergistic effect on IJV performance. This study investigates the relationship between IJV success and the strategic and organizational traits of local partners. We address this issue in the context of an emerging economy (P.R. China). Newly emerging economies have in recent years become major hosts of direct investment by multinational corporations (MNCs) because these rapidly expanding economies, characterized by an exploding demand previously stifled by ideologically-based government intervention, provide tremendous opportunities which MNCs can preempt. MNCs in such economies, however, face the challenges of structural reform, weak market structure, poorly specified property rights, and institutional uncertainty. Right local partners can help MNCs boost market expansion, obtain insightful information, mitigate operational risks, and provide country-specific knowledge. The analysis of the data obtained from China suggests that both strategic and organizational traits of local partners are significantly associated with some individual dimensions of IJV performance. Among strategic traits, absorptive capacity, product relatedness, and market power are favorable to IJVs' market and financial outcomes. Market power and experience significantly reduce IJVs' operational uncertainties. Of organizational traits, international experience and organizational collaboration are important for not only IJVs' profitability and stability but also local market expansion and export growth. Organizational form and size influence IJVs' local market performance.