Examining the Antecedents to Inter-partner Credible Threat in the International Joint Ventures

Abstract

Since the 1980s, international joint venture (IJV) becomes a strategic tool enabling firms to escape from operational risk and cost. However, the IJV represents a voluntary cooperative relationship between partners; it is prone to risk of opportunistic behavior by one or both partners in this relationship. Therefore, some characteristics of the IJV are unstable and difficult to manage. Essentially, the inter-partner credible threat entails the certainty of a firm’s retaliation given its partner’s earlier cheating. This study explores the antecedents to inter-partner credible threat. The study develops an integrative framework to explain how economic mechanisms, business expertise, and relationship mechanisms affect the partner’s relative credible threat. The authors use 40 Taiwanese companies which engage in IJV activities as the sample and the returns-ratio is 12.41%. Evidence explores that the more in the investment size, technological capabilities and low dependency of the partner, this partner exerts more credible threat to the other partner.