What Determines Innovative Performance of International Joint Ventures? Assessing the Effects of Foreign Managerial Control

Abstract

International joint ventures (IJVs) have long been considered a vibrant venue for innovation, one source of sustainable competitive advantage. Nonetheless, there is a paucity of research that seeks to understand what determines their innovative performance. We draw attention to and examine the control structure of IJVs as a determinant of innovation. Using the complementary lenses of local embeddedness, the liability of outsidership, and open innovation, we argue that foreign managerial control reduces IJV innovation and that equity ownership balance between foreign and local parent firms and affiliation of IJVs with local market business groups weaken this negative relationship. Using panel data of 48 IJVs in Korea during the periods between 2000 and 2016, we find empirical support for these arguments. This study contributes to the literature by extending our understanding of how to design IJVs for enhancing innovative output and consequently improving their sustainability.