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Partner selection in international joint ventures: A framework for the analysis

of factors relevant to the selection of partners

Article  in  The Marketing Review · August 2017

DOI: 10.1362/146934717X14909733966182

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Introduction

Internationalisation is becoming a major trend in the development of business around the world due to factors such as the increase in and expansion of technology, primarily the web, the development of transportation methods allowing people and products to travel faster, cheaper and international financial services, and capital markets allowing access to capital all over the world (Daniels, Radborough, & Sullivan, 2009). This increase in speed and connections has allowed firms to gain a better perception of different countries’

The Marketing Review, 2017, Vol. 17, No. 2, pp. 199-215 http://dx.doi.org/10.1362/146934717X14909733966182ISSN1469-347X print / ISSN 1472-1384 online ©Westburn Publishers Ltd.

Partner selection in international joint ventures:A framework for the analysis of factors relevant to the selection of partners

Susana Costa e Silva, Universidade Católica Portuguesa, Portugal*Sandro Mota Oliveira, Universidade Católica Portuguesa, Portugal

The growing trend for companies to focus on geographical diversification implies a decisional process of how to face the opening of new markets and how best to make this entry. International Joint Ventures (IJV) are one of the major forms of market entry selected by companies for this internationalisation process, connecting with a local partner and using its resources to achieve successful entry. The partner selection is a primary factor for achieving success in establishing a joint venture (JV), since the high failure rate of relationships between companies is often due to an inappropriate choice of partner with a lack of proper due diligence and the potential for relationship problems. Trust, commitment, and congruent goals are highlighted as being important factors in the relationship with a partner when creating an IJV, and essential for the success of the relationship. This paper attempts to systematise the most relevant decisions concerning the international partner selection process.

Keywords International Joint Ventures, Partner selection, Internationalisation, Entry modes, Trust

*Correspondence details and biographies for the authors are located at the end of the article.

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needs and how to satisfy those needs efficiently. Internationalisation can be defined as “… the process by which firms both increase their awareness of the direct and indirect influence of international transactions on their future, and establish and conduct transactions with other countries” (Beamish, 1990, p. 77). Yet, entry to a foreign country is not a simple task, as firms tend to lack several resources, such as market knowledge and distribution connections (Hennart, 2013). These shortcomings can be mitigated by the selection of an appropriate entry mode. An entry mode can be considered an organisational arrangement that makes the entry of firm resources into a foreign country possible (Root, 1987).

Several market entry modes can be used depending on the resources that the firm is willing to commit, its internal and external risk exposure, and the control that it is willing to lose by entering the market (Nisar, 2012; Pan & Tse, 2000). The entry mode decision passes along a continuum of degrees of control from low to high (Gatignon & Anderson, 1988), where the intermediate control mode allows the company to split the risk and share both resources and knowledge (usually in international markets the market know-how is provided by the local partner). International joint ventures (IJVs) are, according to Hitt, Dacin, Levitas, Arregle and Borza (2000), one of the most common forms of cooperation in which firms engage, and are considered to encapsulate intermediate control levels (Anderson & Gatignon, 1986).

The selection of the right partner is an important decision when entering a foreign market alliance (Shah & Swaminathan 2008; Solesvik & Westhead 2010) as it allows the company entering the market to take advantage of the network that the partner firm may have, thus reducing the entry risks/barriers and allowing the company to obtain a superior position compared to competitors (Yan & Luo, 2001). Indeed, many IJVs fail due to the bad selection of partners, the absence of proper due diligence (Holmberg & Cummings, 2009; Huang, Tzeng, & Ong, 2006), lack of appropriate fit criteria (task and risk-related factors) (Cummings & Holmberg, 2012), or, in many cases, the inability to co-manage the relationship (Combs & Ketchen, 1999).

Despite the importance given to partner selection, there is still a need for further knowledge of partner selection criteria (Solesvik & Westhead, 2009) and how they may vary in different entry modes (Hitt et al., 2000). This paper proposes a framework for the analysis of factors relevant to the selection of partners in IJVs.

International joint ventures: An overview

Each organisation has a unique set of tangible and intangible resources, based on which it hopes to build competitive advantage through exploiting the differences between firms (Barney, Wright, & Ketchen, 2001). Thus, the main focus of firms is on attaining new resources, with the intention of creating value for the consumer and, in so doing, generating profit for the business organisation (Daniels et al., 2009). These important resources can be gained in two different ways: by developing them internally or by using an external source to acquire them, such as purchasing them on the market, by cooperating or acquiring/merging with another business (Bierly

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& Gallagher, 2007; Daniels et al., 2009). JVs aid firms in accessing new markets, knowledge, capabilities, and other resources (Beamish & Lupton, 2009). This paper focuses specifically on IJVs, as this is one of the most common strategies used to enter new markets and attain the resources that the firm needs (Hitt et al., 2000).

IJV characterisationIn order to provide a better characterisation of IJVs, it is crucial to understand their formation, the motivations for selecting this entry mode, their different typologies, and the different stages in their development. The establishment of a relationship provides the environmental foundations for initiating a learning process among firms. Based on such relationships, access to resources may also be obtained. JVs are not the only arrangements among partners that allow access to the required resources. However, IJVs make up a substantial portion of foreign market entry and they are normally preferred over licensing, contracting and other non-equity alliances (Beamish & Lupton, 2009). In any case, whether we are referring to equity or non-equity JVs, partner selection and the relationships between partners are always central issues. Moreover, in a non-equity entry mode and due to the lack of a third firm created with different capital and a different management team, these issues gain even more relevance.

A JV consists of the creation of a legally separate entity established when the scope of the alliance diverges in terms of the business area or geographically, the assets of the alliance are specific and in need of joint management, the alliance objectives can easily be measured, there is the need for a tie between partners, it is legally necessary, or the partners use a predetermined level of resources (Child & Faulkner, 1998). New market entry through an IJV can be defined as a relationship between two or more legally distinct organisations of at least two different nationalities, also known as parents, which own a firm, with the purpose of allowing partners access to resources and creating synergies in order to achieve an objective that otherwise they could not achieve on their own (Beamish, Morrison, Inkpen, & Rosenzweig, 2003; Geringer, 1991). In JVs, the inter-organisational linkage is a factor that must be taken into account, but in an IJV, other variables challenge the relationship, such as the cultural differences between firms, promoted by the psychic distance from the home country, the foreign country’s natural culture, market procedures, and personal/cultural characteristics. These all need to be considered in managing the firm, so IJVs represent an intercultural and inter-organisational linkage between two separate parent companies that join forces with different strategic interests and objectives (Yan & Luo, 2001).

Motivations

JVs exist primarily due to three main motivations according to Kogut (1988). The first concerns the transaction cost approach, in which JVs are formed to minimise the cost of production for a firm. When the production costs of internalising exceed the cost of external sourcing, the formation of a JV is a viable option. Second, there is the strategic behaviour approach, in which JVs are formed due to a response to external environmental pressures.

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Finally, the third motivation concerns situations in which JVs are built with the intention of acquiring knowledge from another firm (Kogut, 1988).

The motives for the creation of JVs can be divided into two main areas: general and international. Spreading and reducing costs, specialising in competencies, avoiding or countering competition, securing vertical and horizontal links, and learning, are some general motives regarding the formation of a JV (Daniels et al., 2009). Regarding foreign market entry, Beamish et al. (2003) proposed four main motivations for creating IJVs based on a matrix between markets (both new and existing) and products (new and existing, Table 1).

Several specific motives can be observed for the formation of an IJV. The main motivations identified by Daniels et al. (2009) are gaining location-specific assets, overcoming legal constraints, geographical diversification, and the minimisation of exposure to risky environments.

Equity/non-equity joint ventures

JVs may assume several formats depending on the legal organisation, partnership, cooperation, and capital invested (Daniels et al., 2009). There are two types of JV: (a) the equity joint venture (EJV), which involves the creation of a new firm jointly owned by two or more parent firms (Hennart, 2013); and (b) the contractual joint venture (also known as a consortium), a form of non-equity cooperation in which no joint firm is established with a distinct legal personality (Hennart, 2013).

An equity agreement on a JV allows an immediate “mutual hostage” situation, which means that the partners are required to make a commitment prior to the establishment of the JV, thus reducing the possibility of opportunistic behaviour and allowing a shared return among partners that is an incentive to cooperate (Kale & Singh, 2009). However, equity is not a guarantee of success in alliance governance. Indeed, formal governance and informal governance based on trust and the relationship between them are important complementary factors in promoting success (Kale & Singh, 2009).

Consortia are a difficult market entry mode to manage due to the complex set of relations established in different areas, differences in the partners’ objectives, different management control mechanisms, and distinct cultural differences. However, they are used when there is a specific challenge in terms of scope or scale, when a firm has a problem with credibility, when a complex set of skills is necessary which the two companies are unable to provide alone, and when there is a need to spread the financial risk or

Table 1 Motivations for creating an IJV

ProductsNew Existing

MarketsNew Diversify to a new business Take products to foreign markets

Existing Bring foreign products to local markets Strengthen the existing business

(Beamish et al., 2003)

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cover a wide geographical area (Child & Faulkner, 1998). According to these authors, several motives can be identified for entering into a distinct manner of learning collaborations, as can be seen in Table 2.

As we can see, what is common to different JVs is the existence of different partners, which inevitably raises governance problems and problems related to different cultures, trust levels, and the complementary resources at play. One of the core decisions to be taken in the formation of an IJV is the selection of the partner (Solesvik & Westhead, 2010).

Stages in creating a joint venture

There are several stages in the formation of a JV. According to Beamish and Lupton (2009), there are four identifiable phases: assessment of the strategic rationale, selection of a partner, negotiation of the terms and implementation, and ongoing management of the business. Each phase comprises several decisions, as can be seen in Figure 1. The main issues that arise from the first two phases - assessing the strategic rationale and selecting the partner - make up the internationalisation process, which takes into account the entry mode decision, international partner selection, industry selection, and parent firms’ international experience, as well as managing cultural differences, all of which are important in foreign market entry.

As can be seen from the main questions in Figure 1, the first phase of the creation of a JV is an internal decision, taking into account the rational thinking for the initiation of the JV process, the objectives for the firm to enter, the resources needed, the intent to acquire or simply access these resources, and whether a JV is the best option. Next, it is necessary to focus on the selection of a partner, which is the main focus of this study and one of the most important issues prior to engaging in an IJV in terms of deciding which partner to select and how to do it (Shah & Swaminathan, 2008). In this stage, environmental and corporate objectives should be considered (Figure 2). Only after this can the objectives of the alliance be set out.

Table 2 Motives for entering EJVs or consortium-based arrangements

Consortium Equity joint venture

Motives

Two partners cannot provide sufficient resources independently

Entering a new business

The alliance assets are specific and need to be jointly managedNeed for recognition from customers

Objectives can be measured in relation to the use of assets

Vast specific resources are needed and cannot be provided by the two partner companies independently

Need for ties

Legally necessary

Desire to commit resources to the ventureExtensive geographical coverage

The scope is not the core business or it is geographically differentNeed to spread and limit the financial risk

(Child & Faulkner, 1998)

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Figure 1 Phases and decisions in the JV partnering process

Adapted from Beamish & Lupton, 2009

Figure 2 Strategic motivation for entering into an alliance

Adapted from Cummings & Holmberg, 2012

Corporate Objectives

Desired outcomes in supporting firm’s strategy

Environmental Factors

Key economic, technological and other trends

Alliance Objectives

Key outcomes driven from alliance

Ass

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trat

egic

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part

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anag

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tWhat are ourobjectives?What sort ofresources do weneed to ahieveour objectives?Do we want toaccess or acquirethese resources?Are we in this forthe long or shortterm?Is a JV the bestoption?

Does the partnerhave the resourceswe need?Will they provideus with access tothe resources weneed?What are their goals?Are their goalscongruent withours?What are theirmotives?Are wecompatible?Do they haveexperience inmanaging JVs?

Is our managementin full support ofthe JV?What is bestfor the JV?What is the relativeimportance of eachof ourrequirements?What are thetypical practices inthe industry/country in whichthe JV is located?How should theperformance of theJV be assessed?Is each party awareof others’assumptions?What level ofequity isappropriate?Who will beresponsible formanaging the JV?Are there anyunresolved issues?

How do wehandle disputesthat may arise?Are we learningfrom our JV?How do werenegotiate termsif one or morepartner thinks itis necessary?Are we capturingand codifying anyJV managementcapabilities?If the JV does notperform asanticipated, how dowe turn it around?Under whatconditions shouldwe terminate theJV?

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Partner selection

In the partner selection stage, it is very important to define the desired partner’s characteristics in entering an IJV. The definition of the several steps that companies need to take to select the best partner is also very pertinent. According to Geringer (1991), partner selection is an important aspect for the formation of an IJV due to the possibility of skill transfer between firms that JVs allow. This is a distinctive phase regarding the formation of an IJV, in which it is necessary to identify and follow a set of selection criteria used by the entering firm in choosing the partner. Finding the right partner with the resources that the firm needs to enter into a new market and who is able to provide access to the distribution network and market knowledge are important foundations for a successful JV.

The selection processThe selection of the right partner can be undertaken through three different processes: (a) by using a rational decision process; (b) based on trust; (c) by using manager intuition or firms’ structured procedures/framework. The optimal partner selection process, according to Bierly & Gallagher (2007), is to use a rational process to select a partner with strategic fit. Strategic fit among partners can be interpreted as resource complementarity, and it is an important element to consider when seeking a partner (Shah & Swaminathan, 2008; Solesvik & Westhead 2010), as well as being an important driver for partner attractiveness. Therefore, resource complementarity is one of the main foci of attention in achieving a successful partnership (Brouthers, Brouthers, & Wilkinson, 1995), and in selecting a partner with complementary skills, the first step is to undertake a comprehensive search: it is important for a firm to take into account the partner’s experience, capabilities, and the ability to contribute to the venture (Brouthers et al., 1995). However, this option requires time and access to all information from the candidates, which are commonly not available to firms seeking entry to new markets. In the case of a lack of information, trust plays an important role in the partner selection process, especially when firms are facing an uncertain environment and without access to complete information (Bierly & Gallagher, 2007).

Trust between partners is an important precondition for learning, knowledge sharing, and success in JVs (Luo, 2002; Silva, Bradley, & Sousa, 2012), and can be understood as “the mutual confidence that no party to an exchange will exploit another’s vulnerabilities (…)” (Bierly & Gallagher, 2007, p. 138). Trust comprises two main components: a structural component concerning the absence of opportunistic behaviour by the partner and a social component related to reliability and integrity (Kale & Singh, 2009; Madhok, 2006). These two aspects of trust give rise to a new concept termed relational quality, which Ariño, de la Torre and Ring (2005, p. 15) defined as the “… extent to which the principals and agents of alliance partners feel confident with their counterparts’ organizations”. This perspective provides a new understanding of trust, with regard to both personal relationships and organisational relationships, but reinforces the point that personal understanding is more important at the beginning of the relationship and is essential in ensuring an efficient and equitable inter-partner relationship (Ariño et al., 2005, pp. 15-16).

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The development of trust among partners is not easy to achieve. There are four main modes of development of trust presented in Kale and Singh (2009): the first concerns the unilateral commitment of resources, passing the message of interest in the relationship; the second is to signal trustworthiness by honouring all commitments; the third involves the development of social relations in the interactions among partners; and the fourth and final way concerns the location and culture of the firms. Commitment is also a major factor in achieving inter-partner trust (Morgan & Hunt, 1994), and can be defined as tangible inputs or contributions that enhance cooperation among parent firms, which is especially important when they are competitors, reflecting the positive valuation of a collaborative relationship (Beamish & Lupton, 2009).

In addition to these two factors in decision making - rational selection and trust - Bierly and Gallagher (2007) structured a framework (Table 3) introducing a new factor using the notion of time, or lack of it, in deciding which partner to select. The third selection process is termed ‘strategic expediency’, which is important for decision making in an environment under time pressure.

To make a decision concerning partner selection in a time-pressured environment, Bierly and Gallagher (2007, p. 135) defined strategic expediency as “the capability to make rapid, high-quality decisions within a simplified, bounded framework”. Strategic expediency may be split into two perspectives: individuals’ strategic expediency and firms’ strategic expediency. Individuals’ strategic expediency is focused on managers’ intuition, supported by the executives’ experience, training, and prior learning, applied in a specific situation. Intuition is found to be effective in aiding skilled managers by producing rapid solutions using patterns of information kept in their memories. It is also considered to be a vital element in enhancing managerial productivity (Agor, 1986). Firms’ strategic expediency can be developed by establishing procedures and policies to accelerate decision making, establishing a categorisation scheme (image of the desired future for the firm) for the evaluation of potential partners, and providing managers with the ability to practise their decision making.

Qualitative methods provide a series of checklists that are normally static and fail to consider several strategic factors or cannot be operationalised as a partner selection tool (Holmberg & Cummings, 2009). Thus, to respond to the need for strategic expediency, these authors created the dynamic partner selection tool. This tool shows the basic steps to be taken in responding to limitations in terms of time and information that may be the basis of the selection process, and by this means providing a response to Bierly and Gallagher’s (2007) quest for a categorisation scheme, when thorough due

Table 3 Bierly and Gallagher’s (2007) framework for partner selection

Availability of information

Full Limited

Time pressure

High Need for efficient knowledge management Need for strategic expediency

Low Rational decision making Need for effective search mechanisms

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diligence is not possible. The dynamic partner selection tool consists of a four-step process, starting with the alignment of corporate and JV objectives and progressing to the weighting and scoring of the critical success factors (CSFs) for the partner selection process (Figure 3).

The first step of the dynamic partner selection process is the proper definition of the motivations for entering into the IJV and how they are aligned with the corporate strategy prior to entry into the new market. The second step is strongly linked to the first and the core intention is to establish a connection between the CSFs for partner selection and strategic objectives; this phase allows proper due diligence in finding the correct partner with the resources needed to fulfil the objectives reflected in firms’ motivations for JVs. The next step is to undertake a macro analysis of competitors, customers, suppliers, and associates, providing a complete market analysis and scouting for potential partners. The last step is the effective creation of

Developed by Holmberg and Cummings (2009)

Figure 3 Dynamic partner selection process

Develop anappropriate set

of Critical SuccessFactors

Map current andpotential alliances

on a Value Net

Analyse targetsusing Dynamic

Partner SelectionAnalysis Tool

Structuring the alliance purpose into the view of corporate strategy. Providing a description of corporate strategy and structuring whatthe firm needs from the potential partner .

Developing a set of critical success factors based on the alliancestrategy objective for entering a foreign country.

The value net seeks to identify broad industry groups(competitors, customers, suppliers and complementors)and opportunities to create value.

Using a dynamic partner tool to analyse the congruence offeredbetween different groups, segments and firms in a 5-step process:identify strategic objectives; identify and list CSFs with strategicobjectives; Assign importance weights for each CSF; rate theimportance of each group, segment or firm;weigh average scores and assign time based importance factors.

Align Corporateand Strategic

AllianceObjectives

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the dynamic partner selection analysis tool. This step is partially prepared in the previous three steps through the identification of strategic objectives and CSFs, only missing the definition of weights for each CSF (present and future), the extent to which firms may help to achieve these CSFs, and the weighted scores of the ratings for each time period.

The dynamic partner selection analysis tool provides managers with an analysis of levels of congruence between partners, and gives managers a framework for rapid decision making in the formation of an alliance, mitigating the common problem of executive managers choosing a partner speedily but without careful thought (Holmberg & Cummings, 2009). Despite being a framework developed to support rapid decision making, it also offers a solid tool to achieve well-structured decisions in all partner selection processes, providing alignment between firm, corporate, and IJV objectives, and giving a macro view of the market and partners’ desired characteristics.

Partner characteristicsThe importance of the tool provided by Holmberg and Cummings (2009) is not limited to the strategic objectives, explained in the previous paragraphs. Another key aspect concerns the important characteristics of the partner, or CSFs, required for a successful IJV. There are essentially five main factors on which the firms must focus when searching for a new partner: compatible goals, cultural traits, strategic traits, organisational traits, and financial traits. Buckley, Glaister, Klijn and Tan (2009) recognised the importance of identifying compatible international strategies at the beginning of the assessment of potential partners, as understanding the motivations for entering IJVs and the ability to provide key resources are crucial for the success of the venture (Beamish & Lupton, 2009). Paying attention to the potential partners’ motives for entering into the JV and the extent to which they are congruent with the focal firms’ interests promotes success and provides a way of obviating future conflicts among partners. The main causes of failure in cooperative ventures are confusion in terms of the direction to be taken and uncoordinated activities (Brouthers et al., 1995).

Goal compatibility or goal congruity provides a stable environment for an IJV, reducing uncertainty and allowing the commitment of resources (Yan & Luo, 2001). The compatibility of goals does not mean they are equal among partners, but rather that they are not in conflict and are understood by each of the partners. The motives for entering an alliance usually differ considerably among foreign and local partners (Dong & Glaister, 2006). If the strategic goals converge and the position vis-à-vis competitiveness diverges, the relationships formed in developing a collaborative environment will be more promising (Yan & Luo, 2001). Thus, the procurement of a partner must take into account the compatibility of goals as well as finding a non-competitive partner in order to have the best chance of achieving a successful IJV. There are two major groups of criteria in determining inter-partner fit according to Yan and Luo (2001): (1) a wider static set of criteria, such as cultural traits, strategic traits, organisational traits and financial traits, focused on the parent firm’s characteristics; and (2) operation-level criteria highly related to the dynamics of the relationship established between firms, such as the compatibility of goals, the complementarity of resources, commitment and partner capability.

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Cultural fit or compatibility promotes the cultural synergy between two organisations, thus reducing the friction that may exist between them (Child & Faulkner, 1998). Inter-partner conflict may be generated due to cross-cultural differences, strategic motives, and incongruent organisational processes that can be encountered in an IJV. Firm behaviour is broadly related to the political, economic and social context of the host country, which influences organisational procedures (Dacin, Ventresca, & Beal, 1999). Hence, forming an IJV differs from several other modes of entry as it concerns the creation of a new entity through the conjoining of two different firms from two different countries which will share their resources, creating a connection. Thus, if the cultural distance between them is great, establishing a common set of procedures among them is more difficult to manage (Cuypers & Martin, 2010). The institutional distance between the home and host country is a critical factor in terms of increasing pressure among firms, and can be viewed in relation to three dimensions: cognitive, regarding perceptions, memories and assumptions of how the social world operates; normative, referring to norms and values and the human behaviours of a given country; and regulatory, relating to laws (Li & Ferreira, 2008).

Organisational traits, according to Yan and Luo (2001), are mainly connected with the matching of administrative practices, control mechanisms, cultural practices, and personnel characteristics. These are the primary factors related to effectiveness and efficiency in partnerships, often included in partner compatibility. Partner compatibility refers to the fit between partners in terms of working styles and culture (Kale & Singh, 2009), and it is difficult to establish and maintain in two firms, especially if we consider the risk of one trying to impose its culture, norms and values on the other (Brouthers et al., 1995). Even the chemistry between the executives is essential to the organisational fit (Yan & Luo, 2001).

Strategic fit, according to Bierly and Gallagher (2007), is related to finding the right partner with the necessary resources and the proper intention to collaborate. Absorptive capacity concerning the acquisition and assimilation of knowledge and the integration of complementary needs, product relatedness, market power, and experience are important aspects to be analysed when selecting a partner (Yan & Luo, 2001). Relationships between producers/consumers and partners promote knowledge development/transfer, so the focus company will also take advantage of the connections of its partner (Johanson & Vahlne, 2009).

Financial traits comprise another factor, related to the cash flow position and capital structure. Aspects for consideration include the reduction of operational and cash flow risk regarding investment ability, risk management, understanding country volatility, and access to financing resources. These aspects are very important, especially when the parent company is entering a foreign market (Luo, 2002).

The fitness of a partner is subject to several factors, not only from the resources point of view. Normally the focus of concern when a partner is chosen also involves the analysis of cultural and organisational characteristics and the relationships between people, all of which are infused by a country’s culture and internal firm procedures. The volatility of the country and access to financing resources are also important variables to take into account when entering a new market, especially a foreign market (Figure 4).

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Partner selection criteriaThe definition of the selection criteria, task-related criteria and partner-related criteria is developed through a complete process of understanding environmental factors, as well as firm motives and the objectives of the JV. It is possible to distinguish two main dimensions in partner selection criteria according to Geringer (1991): (1) task-related criteria, which take into account the resource-based view (RBV) and organisational learning theory, and concern the search for resources desired by the focal firm, such as market knowledge; and (2) partner-related criteria, which are more focused on trust and compatibility (Dong & Glaister, 2006).

Task-related criteria are focused on a primarily operational dimension regarding competitive success (Tatoglu, 2000), and they can be tangible or intangible, human or non-human - technical know-how, financial resources, experience of managers, and access to marketing and distribution systems (Al-Khalifa & Petersen, 1998). Partner-related criteria are related to the efficiency and effectiveness of partners (co-operation) in multiple partner relationships, promoting the choice of the best partner to fit the focal firm, taking into account issues such as the partner’s national and corporate

Figure 4 Desired partner characteristics according to the fit between them

Environmental factorsKey economic, technological and other trends

• Complementary resources• Knowledge transfer

• Culture synergy among organisations• Goal compatibility

• Cash flow position and capital structure

• Matching administrative practices, control mechanisms

Corporate objectivesDesired outcomes in support of firm’s strategy

Alliance objectivesKey outcomes driven from alliance

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Strategicfit

Culturalfit

Organisationalfit

Financialfit

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Figure 5 Factors enabling effective partner selection

Critical success factorsFactors to evaluate

potential partners against

Task-related criteriaObjectives pursuedthroughout alliance

Partner-related criteriaRelational issues to beaddressed in alliance

Rationaldecisionmaking

Trust

StrategicexpediencyPartner selection

Environmental factorsKey economic, technological and other trends

• Complementary resources• Knowledge transfer

• Culture synergy among organisations• Goal compatibility

• Cash flow position and capital structure

• Matching administrative practices, control mechanisms

Corporate objectivesDesired outcomes in support of firm’s strategy

Alliance objectivesKey outcomes driven from alliance

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Strategicfit

Culturalfit

Organisationalfit

Financialfit

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culture, compatibility and trust among the management teams, and the structure and size of the partner organisation. The variables can be centred on the partner’s country and corporate culture, size, and structure, as well as on trust among management teams. According to Al-Khalifa and Petersen (1998), the history of the partners involved should also be taken into account.

Dong and Glaister (2006) reported that task-related criteria are strongly linked to the strategic motives for alliance formation, and the partner-related criteria are more generic in nature. The task-related criteria are more focused on the complementary resources provided by the partner firm to achieve success in the IJV, whereas partner-related criteria are predominantly focused on the cultural fit and compatibility among organisations. Thus, we can argue that task-related criteria are more precise and visible in the decision-making process, whereas partner-related criteria are more volatile and subjective by nature.

Hence, and overall, we can propose that when choosing a JV partner, it is very important for managers to base their decisions on rational selection criteria, while at the same time trusting their own experience and intuition, and they should act accordingly (Kuznetsov, 2015). By establishing all of the criteria related to partner selection, and unifying all the main decisions (environmental, corporate and alliance) and factors that need to be taken into account when selecting a partner, we can draw up a framework incorporating the necessary factors for effective partner selection (Figure 5).

Findings

We have aimed to provide a systematic representation of the criteria that are important in the selection of a partner for an IJV. Supported by the literature review, it has been possible to study the main concepts and definitions and thus describe what influences partner selection criteria. As described in several studies, the main proactive motive for entering a new market is to grow by diversifying geographically. In this regard, the most relevant resource normally required from a partner is market knowledge. Partner-related criteria, such as commitment to the relationship, and trust, are viewed as more important than task-related criteria in achieving success in an IJV.

Limitations and future researchIt will be important in future studies to test the framework proposed here, as it is solely derived from the IJV selection literature. For future studies, it will also be important to understand if the applicability of the framework is equal for SMEs and for large firms. Comparing firms with different core businesses would also be a worthwhile focus for studies on this subject, as would comparing the differences between the internationalisation processes in developed and emerging markets.

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About the Authors and Correspondence

Susana Costa e Silva is Assistant Professor at Católica Porto Business School in Porto, Portugal, where she is teaching International Marketing and marketing-related subjects. She obtained her PhD from University College Dublin, Ireland. She is currently the coordinator of the MSc in Marketing at Católica Porto Business School and is a member of the Research Center in Management and Economics. Susana is visiting professor at the University of Saint Joseph, Macao, China, and at the University of Wroclaw, Poland. She is also the National Representative for Portugal at the European International Business Academy.

Corresponding a uthor: Susana Costa e Silva, Catolica Porto Business School, Universidade Católica Portuguesa, Rua Diogo Botelho 1327, 4169-005 Porto, Portugal.

E ssilva@porto.ucp.pt

Sandro Mota Oliveira holds a Master’s degree in Management from Católica Porto Business School.

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