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National and Organizational Culture Differences and International Joint Venture PerformanceAuthor(s): Vijay Pothukuchi, Fariborz Damanpour, Jaepil Choi, Chao C. Chen, Seung Ho ParkSource: Journal of International Business Studies, Vol. 33, No. 2 (2nd Qtr., 2002), pp. 243-265Published by: Palgrave Macmillan JournalsStable URL: http://www.jstor.org/stable/3069543

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Nat iona l a n d Organizationalu l t u r eDifferences a n d International J o i n t

V e n t u r e Performance

Vijay Pothukuchi*CONEXANTSYSTEMSNC.FariborzDamanpour**RUTGERSUNIVERSITY

JaepilChoi***HONG KONG UNIVERSITY FSCIENCEANDTECHNOLOGYChao C. Chen****

NEW YORKUNIVERSITY ND RUTGERSUNIVERSITYSeungHo Park*****RUTGERSUNIVERSITY

This study examines the effect ofdimensions of national and organi-zational culture differences on in-temational joint venture (IJV)per-formance. Based on data from asurvey of executives from joint ven-tures between Indian partners andG rowth in global markets and tech-nologies has led to a dramatic risein cross-national joint ventures eventhough joint ventures are considered to

partners from other countries, wefound that the presumed negativeeffect from culture distance on IJVperformance originates more fromdifferences in organizational cul-ture than from differences in na-tional culture.be risky (Blodgett, 1992; Geringer andHebert, 1989; Parkhe, 1993b). An esti-mated 37-70% of international joint ven-tures (IJVs) are reported to suffer from

*VijayPothukuchi is an ITmanagerat ConexantSystems Inc.,NewportBeach,California.**FariborzDamanpour is a professor at the Departmentof Organization Management,RutgersBusiness School-Newark and New Brunswick.***JaepilChoi is an assistant professorat the Departmentof Managementof Organizations,School of Business and Management.****Chao C. Chen is an associate professor at the Stern School of Business and RutgersBusiness School-Newark and New Brunswick.*****SeungHo Park s an associate professorat the Departmentof OrganizationManagement,RutgersBusiness School-Newark and New Brunswick.JOURNALOFINTERNATIONALUSINESSSTUDIES,33, 2 (SECONDQUARTER 002): 243-265 243

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CULTUREDIFFERENCEAND IJV PERFORMANCE

performance problems leading to costlyfailures (Deloitte, Haskins and Sells In-ternational, 1989; Fedor and Werther,1995; Harrigan, 1985). Culture differ-ences between joint venture partnershave usually been considered a majorfactor that might influence venture fail-ure or unsatisfactory performance (Cart-wright and Cooper, 1993; Harrigan,1985).This study adopts the notion of cul-tural distance to examine how the per-formance of joint ventures are affectedby the distance on given cultural dimen-sions at both the national and the orga-nizational levels. It departs from paststudies in two ways. First, joint ventureresearch has focused primarily on theinfluence of national culture distanceand has not adequately examined therole of organizational culture distance.Harrigan (1988, p. 222) notes: ".. .com-ments from interviewed managers leadme to suspect that cultural homogeneityamong sponsors is more important toventure success than symmetry in theirnational origins." By simultaneouslystudying cultural distance at both levels,we seek to: (1) gain more confidence thatthe findings at one level are not con-founded with potential effects of theother level; and (2) assess the relativeeffect of organizational versus nationalcultural distance on IJVperformance.Second, the majority of past studiesused macro measures of culture, such asnationality and ethnic differences (Adlerand Graham, 1989; Cullen, Johnson, andSakano, 1995), or a single culture dis-tance index (Kogut and Singh, 1988;Park and Ungson, 1997), which couldnot differentiate effects caused by indi-vidual culture dimensions. In this study,in addition to the general indices of or-ganizational and national cultural dis-tance, we adopt specific indices on mul-

tiple cultural dimensions. Having bothtypes of indices would allow us to un-pack cultural distance so as to better dealwith the possibility that different cul-tural dimensions may influence IJVper-formance differently.

CULTURAL DISTANCE AND JOINTVENTURE PERFORMANCE

Despite different definitions of cul-ture, there is a general consensus amongorganizational researchers that culturerefers to patterns of beliefs and valuesthat are manifested in practices, behav-iors, and various artifacts shared bymembers of an organization or a nation(Hofstede, 1980; Trice and Beyer, 1993).Because organizations are, in manyways, embedded in the larger society inwhich they exist, research on culture dif-ferences of cross-national businessesshould examine both national and orga-nizational cultures. But with few excep-tions (Hofstede et al., 1990; Newman andNollen, 1996; Weber, Shenkar, andRaveh, 1996) past studies have not beenconcerned with culture distance at bothlevels. Hofstede et al. (1990) found that,whereas organizations from different na-tions differ in fundamental values, orga-nizations from the same nation differonly in organizational practices. The au-thors therefore concluded that whenboth national and organizational cul-tures are examined, the former should beoperationalized in terms of values, andthe latter in terms of core organizationalpractices. Weber et al. (1996) also foundthat in international and domestic merg-ers and acquisitions, national and orga-nizational cultures are separate con-structs with variable attitudinal and be-havioral correlates. As such, althoughnational and organizational cultureshave been regarded as separate con-structs, it is also widely accepted thatJOURNALOF INTERNATIONAL USINESS STUDIES44

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organizational culture is nested in na-tional culture. Newman and Nollen(1996) reportedthat work units performbetter when their management practicesarecompatiblewith the national culture.They advocate that management prac-tices should be adapted to national cul-ture for high performance.In the context of both mergers andjoint ventures, scholars have generallyargued that alliances between culturallysimilar partners are more likely to besuccessful than alliances between cul-turally dissimilar partners. Cartwrightand Cooper (1993) define culture as "so-cial glue," which serves to bind individ-uals and createsorganizationalcohesive-ness. They state that in alliances "selec-tion decisions are generally driven byfinancial and strategic considerations,yet many organizationalalliances fail tomeet expectations because the culturesof partners are incompatible" (Cart-wright and Cooper, 1993, p. 57). Indeed,cultural incompatibility may cost morethan strategic incompatibility in organi-zational alliances. Different culturetypes create different psychological en-vironments for the joint venture or themerged company, and differences inpractices have a negative influence onperformance (Cartwright and Cooper,1993). Thus, "the degree of culture fitthat exists between combining organiza-tions is likely to be directly correlated tothe success of the combination" (Cart-wright and Cooper, 1993, p. 60).

National Culture Distance andIJVPerformanceCross-national joint ventures havebeen reported to suffer from communi-cation, cooperation, commitment, andconflict resolution problems caused bypartners'value and behavior differences,which in turn cause interaction prob-

lems that adversely influence joint ven-ture performance(Harrigan,1988; Mohrand Spekman, 1994; Parkhe, 1991; Ringand Van de Ven, 1994). Values and be-havioral differences between culturallydistant partnersinfluence interpretationand responses to strategic and manage-rial issues, compounding transactionaldifficulties in international joint ven-tures (Parkand Ungson, 1997).Lane and Beamish (1990) state thatthe problems in IJVs often stem fromthe unobtrusive influence of nationalculture on behavior and managementsystems that often create unresolvedconflicts. For example, cooperation-gen-erating mechanisms vary between indi-vidualist and collectivist cultures be-cause of the differences in their instru-mental and expressive motives (Chen etal., 1998; Wagner, 1995). In the contextof IJVs, diversity along each culturalcharacteristic can be instrumental inerecting significant barriersto effectivecooperation (Parkhe,1993c).Commitment generating mechanismsare also different among different cul-tures, and cultural differences make itdifficult to generate commitment be-tween partnersin joint ventures (Cullen,Johnson, and Sakano, 1995). For exam-ple, Cullen et al. (1995) found that whileboth U.S. and Japanese partnersrelatedtheir level of commitment to perceivedbenefits (satisfaction and economic per-formance),they differed in their percep-tion of satisfaction. The Japanese part-ners perceived long-term organizationalperformanceas an indicator of satisfac-tion and emphasized the nature of rela-tionships as an importantfactorfor com-mitment, while the U.S. partners wereconcerned with more immediate results.Further,on the assumptionthatpersonalrelationships based on trust would leadto commitment, the Japanese managers,

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CULTURE IFFERENCENDIJV PERFORMANCE

in contrast to the Western managers, pre-ferred to personalize business practicesand de-emphasize formal contracts(Cullen et al., 1995). Overall, cross-cul-tural partners seek commitment basedon different expectations and mecha-nisms.Shenkar and Zeira (1992) argued be-cause priorities and expectations of their

parent firms may be different, managersof joint ventures are prone to role con-flict. Methods of resolving conflicts mayalso vary across different cultures (Hen-derson, 1975). For example, whereasAmerican managers prefer to use directand confrontational legal tactics in deal-ing with other firms when other methodsfail, Japanese executives prefer to beflexible in responding to unfolding prob-lems and to avoid using formal, detailedcontracts that stress strict performanceand enforcement (Henderson, 1975). Re-search also suggests that conflict resolu-tion methods cannot be applied effec-tively from one culture to another. John-son, Sakano and Onzo (1990) studied therole of cultural differences in conflictresolution between U.S. and Japanesefirms and found that aggressive influ-ence, as practiced in western channels,is not effective with the Japanese coun-terparts.Overall, the underlying uncertaintydue to cultural differences makes itcostly to negotiate and transfer manage-ment practices and firm-specific technol-ogies. Since national culture is perceivedto be the fundamental differential factorin an IJV, even superficial differencesmight result in the partners choosing na-tional culture as a primary form of iden-tity (Salk and Brannen, 2000). A salientsocial identity leads to accentuation ofsimilarities and differences betweenpartners, perhaps causing individual dif-ferences to be associated with national-

ity (Salk and Brannen, 2000). Accord-ingly, IJV partners from differentnational cultures experience greater dif-ficulty in their interactions (Lane andBeamish, 1990), which would adverselyinfluence joint venture performance.

Hypothesis 1: National culture dis-tance between partners negatively in-fluences joint venture performance.Organizational Culture Distanceand IJVPerformance

Hofstede et al. (1990) suggest six coreorganizational practices that differenti-ate organizations in their managementorientation: process versus result; em-ployee versus job; parochial versus pro-fessional; open versus closed system;loose versus tight control; and normativeversus pragmatic. The organizationalculture dimensions outlined in these sixpractices identify managerial tendenciesin an organization, typified by a set ofdesirable and expected behaviors. Whenorganizations in a joint venture differ intheir practices, these differences resultin conflicting behaviors, leading to mis-understandings and interaction prob-lems. Below we highlight how each di-mension of organizational culture isgrounded in a management principle forwhich partners' differences would leadto interaction problems.The process versus result orientationdimension opposes a concern for means(process oriented) with a concern forgoals (result oriented), which are respec-tively associated with Burns and Stalk-er's (1961) mechanistic and organic sys-tems (Hofstede et al., 1990). These twomanagement systems represent oppositeways of approaching tasks. While mech-anistic systems focus on rigid divisionand allocation of tasks, organic systemsfocus on the overall task, allowing vari-JOURNALOF INTERNATIONAL USINESS STUDIES46

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ations in the organization of sub-tasks.When partners in a joint venture differon this dimension, they differ in themethods and practices adapted towardscommunication, goal achievement, ca-reer systems, power structures, and theyface a conflicting set of job roles, expec-tations and practices. These differenceslead to conflicting behaviors that wouldadversely influence joint venture perfor-mance.

The employee versus job orientationdimension contrasts a concern for peo-ple (employee oriented) with a concernfor getting the job done (job oriented).Hofstede et al. (1990) relate this dimen-sion to the managerial grid developed byBlake and Mouton (1964). The position(9,1) on the grid represents the task man-agement style in which a manager is anexacting taskmaster who expects sched-ules to be met and people to do whatthey are told. Disagreements are ruledout and suppressed rather than settled(Pugh and Hickson, 1989). On the otherhand, the position (1,9) on the grid rep-resents the employee management style,in which managers do not push peoplefor production and overlook their mis-takes because members are considered tobe doing the best they can. People try toavoid direct disagreements or criticismsof one another, and production problemsare glossed over (Pugh and Hickson,1989). Such differences between part-ners in an IJVrepresent opposing stylesof superior-subordinate interaction,which would result in conflicting com-munication methods and organizationalcommitment problems (Jablin et al.,1987), adversely affecting joint ventureperformance.The parochial versus professional ori-entation dimension analyzes organiza-tions based on whether employees de-rive their identity from the organization

(parochial) or from the type of job (pro-fessional), which corresponds to internalversus external frames of reference (Hof-stede et al., 1990). These two types oforganizations represent two differentforms of governance that are suitable andefficient in contrasting environments:"clan" form for parochial and "market"form for professional (Ouchi, 1980). Thedifferences in these two forms of gover-nance result in practical differences thatmake one set of objectives and practicesirrelevant in the alternative context (Ou-chi, 1980). When IJV partners differ onthis dimension, conflicts in their jobstructure, job expectation, reward sys-tems and coordination mechanismswould result in conflicting behaviorsfrom members and adverse conse-quences for IJVperformance.The open versus closed systems orien-tation dimension differentiates organiza-tions based on their communication cli-mate (Hofstede et al., 1990). An organi-zational communication climate isstructured around common organiza-tional practices (Jablin et al., 1987). Thatis, differences in organizational practicesare reflected in the communication cli-mate and vice versa in an ongoing dy-namic process of structuration wherecommunication climate and organiza-tional systems evolve continuously(Poole, 1985). Thus, in an IJV, when thecommunication climate is strained dueto incongruent organizational practicesbetween partners, differences in part-ners' expectations lead to conflicting be-haviors and cause a mismatch in inter-action processes (Jablin et al., 1987).The loose versus tight control orienta-tion dimension classifies organizationsbased on their amount of internal struc-turing and management control (Hofst-ede et al., 1990), and represents a conflictbetween individual autonomy and orga-

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CULTURE IFFERENCENDIJV PERFORMANCE

nizational control (Hofstede, 1967). Ex-cessive differences between control ori-entations of partners would influencetheir patterns of communication. Thesepatterns often become rigidly circum-scribed and formalized, fostering nega-tive attitudes, suspicion, and dissocia-tion between groups (Putnam and Poole,1987). Thus, a mismatch in the levels oforganizational control may cause inter-action problems between joint venturepartners.The normative versus pragmatic orien-tation dimension separates organizationsinto rule oriented (normative) and cus-tomer oriented (pragmatic) organizations(Hofstede et al., 1990). The organizationsin pursuit of excellence, according to Pe-ters and Waterman (1982), stick to theprinciple of staying obsessively close tothe customer, and organize their systemsand practices accordingly. Organizationsdiffer in their practices depending onhow committed they are to implement-ing this principle. The differences are allencompassing, influencing members' be-havior in every aspect of the business(Peters and Waterman, 1982). In jointventures, differences in implementingthis principle also cause pervasive dif-ferences in the partners' practices, re-sulting in conflicts between them.In summary, organizational culturedifferences differentiate partners basedon their management practices, whichare deemed essential for the functioningof their respective organizations. Differ-ences in practices represent conflictingexpectations and incompatible organiza-tional processes. Partners with dissimi-lar organizational cultures may expendtime and energy to establish managerialpractices and routines to facilitate inter-action, and may incur higher costs andmore mistrust than culturally similarpartners (Park and Ungson, 1997).

Brown, Rugman, and Verbeke (1989)also concur that compatibility in part-ners' organizational cultures and prac-tices could be a significant determinantof the performance of IJVs. Research onorganizational climate similarity andperformance also indicates that firms se-lecting a partner that has a similar orga-nizational climate will have superiorperformance (Fey and Beamish, 2001).Therefore, we hypothesize that differ-ences in organizational culture wouldadversely influence joint venture perfor-mance.

Hypothesis 2: Organizational culturedistance between partners negativelyinfluences joint venture performance.METHODS

SampleData were collected from executives ofjoint ventures between Indian partnersand partners from 21 other countries.Joint ventures were identified from theIndia Investment Center's (IIC) monthly

publication, Center for Monitoring In-dian Economy (CMIE), Business Todaymagazine, and suggestions from partici-pating managers. We identified most ofthe newly formed IJVs from the monthlyreports in IIC between 1992-1997 and theold IJVs from personal references andvarious reports about their current activ-ities in business publications. Smalljoint ventures were deleted from the listbecause they mostly represented tech-nology licenses and single owner firms,not suitable for this study. After deletingjoint ventures smaller than 0.3 milliondollars, a total of 334 joint ventures wereidentified, out of which 127 agreed toparticipate in our study. Most (75%) ofjoint ventures were located in four majorcities: Delhi, Bombay, Calcutta, and Hy-JOURNAL OF INTERNATIONAL BUSINESS STUDIES48

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derabad. The sample consisted of ven-tures of varying sizes ($0.5 to 2,000 mil-lion), ages (6 to 850 months), and indus-tries (25). To control for the influence ofindustry specific cultures, only thosejoint ventures in which both the partnersbelonged to the same industryhave beenincluded in the sample.The data were collected throughstruc-tured interviews by four graduate stu-dents, during which respondents filledout questionnaires. The interviewerswere offered substantialtraining priortothe interviews to maintain consistencyamongthem. The questionnairewas pre-tested in ten organizations, and wasmodified to accommodate relevant com-ments. A senior executive from eachjoint venture was requested to identifythree executives who were associatedwith the joint venture for a considerabletime and had ample interaction withtheir foreign counterparts.A total of 202executives participatedin the survey;61joint ventures had multiple participants,thus allowing a test of reliability of re-sponses.

MeasuresNational Culture Distance. Four di-mensions of national culture-individu-

alism, power distance, uncertaintyavoidance, and masculinity (Hofstede,1980)-were used to operationalize cul-tural differences between the IJVpart-ners. The individualism-collectivism di-mension refers to the tendency to putmore values on individual interest orgroup interest. The power distance di-mension explains the acceptance of un-equal power distribution among parties.The uncertainty avoidance dimensionregardsthe extent to which people per-ceive anxiety under uncertain circum-stances. Lastly,the masculinity-feminin-ity dimension refers to the tendency of

whether economic success based on ac-cumulation of material wealth is valuedor whether interpersonal sensitivitybased on concern for the welfare of oth-ers is valued.Differences in national culture werecalculated by the absolute differencealong each dimension; i.e., INI1- NI21where NI1 and NI2 represent respectivenational culture indices of the partnersfrom Hofstede's (1997) study. We alsoapplied an aggregateindex to measurenational cultural distance (NCD)follow-ing the Kogut and Singh's (1988) for-mula:

4NCDj= (Iij- Iid)2/Vi}/4,i=l

where Iijstands for the index forthe ithcultural dimension and jthcountry, Vi isthe variance of the index of the ith di-mension, d indicates India, and NCDj snational cultural distance of jth countryfrom India. Foreign partnersin our sam-ple are mostly from the U.S. (40 JVs),Japan (20 JVs), Germany (14 JVs), En-gland (13 JVs),and France(8 JVs).WhileNetherlands, Singapore, and Switzer-land represent three JVs, the rest of thecountries are tied with one or two JVs..Overall,about85 percent of the JVswerewith foreign partners from developedcountries.

Organizational Culture Distance. Sixdimensions of organizational culture re-ported by Hofstede et al. (1990) wereused to operationalize differences in or-ganizational culture, which were calcu-lated by the absolute difference alongeach dimension; i.e., IOI1 OI12 whereOI1 and OI2representrespective organi-zational culture indices of the partners.Three items for each dimension of orga-VOL. 33, No. 2, SECONDQUARTER,002 249

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CULTURE IFFERENCENDIJV PERFORMANCE

nizational culture were selected from thestudy of Hofstede et al. (1990), based ontheir relevance to joint ventures. Reli-ability coefficients (Cronbach-alphas) formeasures of organizational culture di-mensions (n = 202) ranged between .55-.64, which were similar to those used byHofstede et al. (1990); reliability coeffi-cients for multiple responses from thesame joint venture (n = 61) ranged be-tween .60-.79, which alleviate a concernfor potential self-report bias with ourdata.

We conducted confirmatory factoranalysis on six organizational culturaldimensions using LISREL 8 (Joreskogand Sorbom, 1993). We used all 18items, i.e., three items representing eachof the six dimensions. As seen in Table1, the overall goodness-of-fit indexessuggest that the six-factor model fits thedata well. Furthermore, loadings for allitems onto their respective intended la-tent factors are highly significant (p

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POTHUKUCHI,AMANPOUR,HOI,CHEN, ARK

TABLE 1RESULT OF CONFIRMATORY ACTORANALYSISOF D.FEKENCES IN

ORGANIZATIONAL ULTUREAFactors and ItemsProcess vs. result dimension

Typical employee is fast at workTypical employee takes initiativeStyle of dealing with each other is informalEmployee vs. job dimensionDecisions are centralized at topThere is little concern for personal problemsof employeesOrganization s interested only in the work of employeesParochial vs. professional dimensionPeople's private life is treated as their own businessJobcompetence is the only criterion in hiring peopleThink (plan) three years ahead or moreOpen vs. closed dimensionOnly specific kind of people fit in the organizationOrganization s closed and secretiveNew employees need more than a year to feel at homeLoose vs. tight control dimensionEverybodyis cost-consciousMeetingtimes are kept punctuallyEmployees always speak seriously of organizationand jobNormativevs. pragmaticdimensionEmployees tend to be pragmaticin mattersof ethicsMajoremphasis is on meeting customer needsResults are more importantthan proceduresGoodness-of-fit ndexes

Chi-square(df)p

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CULTURE IFFERENCENDIJV PERFORMANCE

TABLERESULT OF FACTORANALYSISOF DEPENDENTVARIABLESA

Factor loadingsSatisfactionItems with JV Efficiency Competitiveness

Satisfactionwith commitment of the partnerstowards each otherSatisfactionwith cooperationbetweenpartnersSatisfactionwith trustbetween partnersOverallsatisfaction of the Indian partnerwith the joint ventureSatisfactionwith commitment of the partnerstowards the joint VentureSatisfactionwith conflict resolution betweenpartnersSatisfaction with adequacy of interactionbetween partnersSatisfaction with communication betweenpartnersSatisfaction with management practices inthe joint ventureFixed cost reductionLowertotal capital investmentLoweraveragecost from largervolumeSourcing &Access to capitalProductportfolio diversificationAggressivejoint venture to increase costs orto lower market share for a third companyDefensive joint venture to reducecompetitionEigenvaluesPercentageof varianceexplained

.87

.86.84

.84

.80

.07-.03

.12

.19

.13.78 -.02.76.76.68.20.02.12

-.08.16.12.07

6.2138.79

.16

.11

.10.79.78.65.64.53

.07

.212.5415.90

.03-.03.05

.03

.12

.02

.08-.07

.15.04

.11

.19

.34-.18

.87

.871.388.65

aBold numbersindicate the items for each factor.

Control Variables. We controlled fororganizational size and age that wouldpotentially affect IJV performance (Parkand Ungson, 1997). We also controlledfor frequency of contact between part-ners and the number of executives fromboth partners that are involved in thejoint venture operation. These variablesaffect the process and level of accultura-tion between cross-cultural partners andpotentially the outcome of a joint ven-

ture (Berry et al., 1992). Equity sharinghas been studied as a critical factor in theoutcome of joint ventures (Geringer andHebert, 1989; Blodgett, 1992). While abalanced ownership, i.e., 50-50 equitysharing, may require an extensive levelof inter-partner communication, it wouldbe able to avoid dominance, and poten-tial opportunistic hazard, by one of thepartners. Along with equity sharing, wealso included the origin of foreign part-JOURNAL OF INTERNATIONAL BUSINESS STUDIES52

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ner as a control variable that may reflecta difference in partners' motivation inIJVswith Indian partners.We measured:size by investment or sales turnover($ inmillions); age by the number of monthsthat partnerswere interacting; requencyof contact by the number of averageweekly contacts between partners byphone, fax, or email; number of execu-tives by the total number of executivesfrom both partners involved in a jointventure; equity sharing by the percent-age of ownership by Indianpartners;andorigin of partner by a dummy variableindicating developed countries accord-ing to the OECDmembership.

RESULTSTable 3 shows the means, standard de-viations, and zero-order correlations ofall variables. The table also reports thereliability coefficients for organizational

culture and IJVperformance variables.We applied multiple regressionanalysesto test hypotheses against perceived per-formance at the individual level. Tables4 and 5 report the standardized regres-sion results for hypotheses testing basedon aggregatendices of cultural distancesand distances in each cultural dimen-sion, respectively. Because some of theindependent variables are highly corre-lated, we tested for the effects of multi-collinearity using variance inflation fac-tors. These factors for all the models inTable 5 are less than 10, a thresholdvalue indicating the presence of multi-collinearity (Neter et al., 1985, p. 392).Models 1-3 in Table 4 are the baselinemodels including only control variables.Size seems to have a mixed effect onperceived performance,with a negativeand a positive effect on competitivenessand satisfaction, respectively. Age ofpartnershiphas a positive effect on com-petitiveness only. While frequency of

contact has a strong positive effect on allperformancemeasures, number of exec-utives involved in venture operation af-fects competitiveness positively, but sat-isfaction negatively. These results implythat age of partnershipand frequentcon-tacts amonga largenumber of executivesin a venture are signs of commitmentfrom both partners contributing to itsperceived marketperformance(i.e., com-petitiveness). However, the negative ef-fect of number of executives on satisfac-tion may reflecthigh coordination costs,as more managers are involved in dailyoperations from both partners. Origin ofpartner has significant relationshipswith efficiency and satisfaction, suggest-ing that cooperating with partnersfromdeveloped countries in India works pos-itively forefficiency and mutual satisfac-tion. Equity sharing has no significanteffect on any of the performance mea-sures. Moreover, given the substantialmissing value for equity sharing, thiscontrol variable is dropped in subse-quent analyses for hypotheses testing.Models 4a-6a (Table 4) and Models4b-6b (Table 5) are to test Hypothesis 1on the effect of national culture distanceon IJVperformance.Models 7a-9a(Table4) and Models 7b-9b (Table 5) then in-clude organizationalcultural distance totest Hypothesis 2. Since organizationalculture is nested in national culture, it isintroduced following the model that in-cludes national culture.As shown in Models 4a-6a (Table 4),national culture distance has a positiveeffect on efficiency and competitiveness,but no effect on the level of satisfaction.On the other hand, organizational cul-ture distance has a strongnegative effectprimarily on satisfaction at p

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M E AS STA DARD T ABLE 3AMEAN,TNDARDEviATioNs, AND CoRRLATioNsMean s.d. 1 2 3 4 5 6 7 8 9 10 11

1. Size2. Age of partnership3. Frequency of contact4. Number of executiv-es5. Origin of the partner6. Equity sharing7. Individualism8. Uncertainty avoidance9. Masculiniity10. Power distance11. Normative vs. pragmatic12. Loose vs. tight control13. Open vs. closed system14. Parochial vs. professional15. Employee vs. job16. Process vs result17. Efficiency18. Competitiveness19. Satisfaction with joint venture

134.50 370.35-119.12 142.40 .05 -7.51 8.59 .17 -.00 -38.87 50.48 .72 .18 .32 -.93 .26 .07 .08 - .16 .14 -41.16 16.17 -.06 -.18 .06 -.23 -.17 -27.61 15.27 -.30 .02 -.03 - .26 .10 .07 -23.09 18.56 .33 -.06 .00 .31 - .02 -.25 -.86817.55 14.51 .28 .19 .00 .31 .15 -.12 -.56 .55 -32.58 12.00 -.22 .16 -.05 -.17 .30 .16 .37 -.64 -.17 -.66 .67 -.08 -.12 .03 -.04 .09 -.11 -.09 .04 .03 .12 (.55).90 .68 -.09 -.00 -.02 -.06 .07 -.16 .08 -.03 .0 .04 .50.63 .60 -.03 .05 -.12 -.04 -.13 -.12 -.03 .03 .03 .08 .40.74 .61 -.03 .05 -.08 -.14 -.14 .12 .08 -.13 -.03 .15 .24.75 .65 -.12 -.16 -.11 -.14 -.01 -.07 .0 -.02 -.09 .11 .29.81 .64 -.04 -.05 -.03 -.04 -.19 -.07 .02 -.01 -.12 -.08 .3110.64 3.92 .15 -.05 -.02 .08 .10 -.07 -.07 .13 .20 -.09 .029.32 5.38 .14 .25 .09 .33 .07 -.15 .03 -.07 .11 .12 -.053.60 .68 -.01 .01 .06 -.12 .06 .08 -.04 -.05 .11 .02 -.29

an = 198-202 without equity sharing; n = 142-149 with equity sharing.Parentheses on the diagonal contain reliability coefficients for the scales.r > .15 is significant at p < .05, and r > .19 is significant at p < .01.

Variable

(Z)uz17t-(ZI)4

o

I

bzl

U)cnCn1-iAU)

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z0

o TB~~~~~~~~~~~~~ABLESTANDARDIZED EGRESSIONRESULTSON THERELATiONSHiPBErwEmOF CULTUREDISTANCEAND IJ PERnuoIANCEA0z Model 2 Model 3 Model 5a Model 6a Model eaModel 1 Competi- Satisfaction Model 4a Competi- Satisfaction Model 7a Competi- SPredictors Efficiency tiveness with J.V. Efficiency tiveness with J.V. Efficiency tiveness

ControlvariablesSize .09 -.36* .35* .04 -.30** .13 .04 ..31**Age ofpartnership -.12 .20* .10 -.131 .121 .03 -.14t .11Frequency ofcontact .19* .18* .35*** .131 .23** .27** .11 .21Number of

executives -.06 .55*** -.58*** .04 .50* -.33** .04 .50***Originof partner .22* .09 .20* .01 -.02 .08 -.01 -.05Equity Sharing -.04 .03 .04National culturedistance(NCD) .15t .14* .04 .16* .16*Organizationalculturedistance(OCD) -.10 -.11itInteractionterms(NCD x OCD)F-value 1.981 6.72*** 4.77*** 1.67 9.43*** 2.99** 1.71 8.57***R2 .08 .24 .18 .05 .25 .09 .06 .26Change in R2 .02t .02* .00 .01 .01t

n = 137-139 for Models 1-3., and 180-184 for Models 4a-12.tp < .10; *p < .05; **p < .01; ***p < .001.

Ul

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o, TABLESTANDARDIZED REGRESSION RESULTS ON THE RELATIONSHIP BETWEENC

DISTANCE AND IJV PERFORMANCEsModel 6bModel 4b Model 5b Satisfaction Model 7bPredictors Efficiency Competitiveness with J.V. Efficiency

Control variablesSize .02 -.26* .09 .06Age of partnership -.13t .09 .00 -.08Frequency of contact .15t .21** .27*** .08Number of executives -.00 .52*** -.32** .00Origin of partner -.01 -.04 .18* -.15tNational culture distanceIndividualism .31t .06 -.44* *.40*Uncertainty avoidance .27 -.14 -.64** .38tMasculinity .25** .14t .20* .26**Power distance .05 .09 -.26* .11

Organizational culturedistanceNormative vs. pragmatic .16tLoose vs. tight control .05Open vs. closed system -.26**Parochial vs. professional -.07Employee vs. job .07Process vs. result -.11F-value 2.06* 7.04*** 3.60** 2.21**R2 .10 .27 .16 .17Change in R2 .06* .04* .07* .07*co"n = 180-184.

? tp < .10: *p < .05; **p < .01; ***p < .001.Lt3

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their effects differdepending on the typeof performancemeasures. National cul-ture distance appears to be a better pre-dictor of performancemeasures reflect-ing operationaland strategicoutcomes ofIJVs, while organizational culture dis-tance is closely related to performancemeasure reflecting psychological satis-faction of employees.Models 4b-9b in Table 5 present re-sults for specific dimensions of nationaland organizationalcultures. Masculinityis the only national culture dimensionthat has a consistently positive effect onall performancemeasures. All other di-mensions, however, have significantnegative effects on satisfaction at p

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CULTURE IFFERENCENDIJV PERFORMANCE

culture distance does not significantlyinfluence IJVperformance.For further validation of our hypothe-ses, we also conducted a series of post-hoc analyses for an objective perfor-mance measure (i.e., longevity) at theventure level (n = 112). Longevity wasmeasured as number of months from theinception of IJV up to the end of ourobservation, in June 1997. The resultsshowed a marginally significant positiverelationship with the aggregate measureof national culture distance, but a non-significant relationship with the aggre-gate measure of organizational culturedistance. Among the specific dimensionsof national and organizational cultures,masculinity was the only one that wassignificant at p

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venture performanceand recommendedthis data collection approach to pro-fuse research on joint ventures, it ismore desirable to collect data fromboth partners to limit biases. Recently,Sivakumarand Nakata (2001) have pro-posed a method for choosing countrycombinations to strengthen the applica-tion of Hofstede's national culture di-mensions.

Second, we have tested the direct in-fluence of culturaldifferenceson IJVper-formance but have not examined theirindirect influence through behavioralprocesses such as partnership trust. Anumberof studies underscorethe impor-tance of partnershiptrust in interorgani-zational relationships (McKnight,Cum-mings, and Chervany, 1998; Mohr andSpekman, 1994;Parkhe, 1993c; RingandVan de Ven, 1994). Because it is stillunknown how the different dimensionsof national and organizationalcultureaf-fect partnership trust, and, in turn, IJVperformance,we recommend studies ofpartnership trust in cross-cultural jointventures.Third, althoughwe tested longevity asa dependent variable,ouranalyses reliedprimarilyon perceptions of performance(by askingthe judgmentsof executives ofIndian partners)to examine the effect ofcultural difference on joint venture per-formance. Future research may explorethe effects of cultural difference on more

objectivemeasuresof organizationalper-formance,such as survival,productivity,sales or profit growth.In spite of these limitations, this studyis among the very few that simulta-neously examine national and organiza-tional cultures. As such it provides in-teresting results that have importantre-search and practical implications forunderstandingand managing IJVs.

Research ImplicationsIn view of the findings of this studyand previous research, organizational

culture distance generally has a nega-tive impact on organizational outcomesbut national culture distance can haveeither a positive or a negative effect.Research in mergers and acquisitions(even friendly ones) has consistentlyshowed negative effects of organiza-tional culture differences (Cartwrightand Cooper, 1993). The overwhelm-ingly negative effects may arise fromthe fact that organizational culture dis-tance captures the on-going opera-tional differences in the norms of orga-nizational practices and behaviors.Such differences result in conflictingexpectations, misunderstandings, andinteraction problems that are dysfunc-tional to the joint venture operation.In contrast, national culture differ-ences between partners can potentiallygenerate positive or negative effects be-cause differences in fundamentalbeliefsand values as reflected in the nationalcultures may turn out to undermine orreinforce partners' collaborative efforts(Shenkar and Zeira, 1992). While someresearchers found national culture dif-ferences causing conflicts and barriers(Lane and Beamish, 1990), others havefound national culture differences asource of admiration and challenge,leading to higher level of communica-tion and more sustained collaboration(Park and Ungson, 1997; Shenkar andZeira, 1992).The challenge for future research is toidentify the conditions under which na-tional culture differences between part-ners are or can become complementary.We identify three majorfactors that maymodify the effects of cultural differenceson organizationaloutcomes: the content

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dimensions of national culture, the na-ture of organizational outcomes, and thejoint venture organizational culture.National Culture Dimensions. Giventhe multi-dimensionality of culture, notall culture dimensions affect organiza-tional outcomes in the same direction.While differences in some dimensionstend to generate negative outcomes, dif-ferences in others could generate posi-tive outcomes. In our study, for instance,difference in masculinity showed con-sistent positive effect on all organiza-tional outcomes whereas differences inthe other dimensions showed mixed re-sults. Considering performance satisfac-tion, masculinity has a positive effectwhereas individualism and uncertaintyavoidance both had negative effects. Aclose examination of our data indicatesthat about 75 percent of our Indian re-spondents' companies are involved injoint ventures with companies from na-tions whose masculinity score is higherthan India. As defined earlier, the mas-culinity dimension refers to the extent ofaggressiveness for economic success. Wespeculate that there might be an admira-tion effect on the part of the Indian ex-ecutives who might have attributedhigher IJV performance to their foreignpartners' pursuit of organizational suc-cess. Exactly, which type of cultural dis-tance will have a positive instead of anegative effect depends on the instru-mentality of that cultural distance interms of achieving a given objective ofthe IJV.For example, according to Shen-kar and Zeira (1992), while differencesin individualism-collectivism and un-certainty avoidance helped IJV CEOslower their perception of role ambiguity,power distance and masculinity in-creased it. Shenkar and Zeira (1992) rea-soned that differences in uncertaintyavoidance stimulate more communica-

tion between the two parties, which inturn lower perceptions of role ambiguity.Whether the positive effect of a giventype of cultural distance is attributed tothe admiration of different cultural val-ues or constructive behaviors stimulatedby cultural differences, researchers inthe future should incorporate certainmoderators in their research model toexplicitly test these post hoc explana-tions.

Types of Organizational Outcome.While the directional effect of culturaldistance on a given organizational out-come depends on the cultural dimen-sions under study, it can also differ dueto the type of organizational outcomes.In our study, the effects of individualismand uncertainty avoidance were contin-gent upon the type of outcomes (Models7b-9b): positive on economic outcomes(efficiency and competitiveness) but neg-ative on socio-psychological outcomes(satisfaction). This pattern of findings isconsistent with diversity research in theUnited States, which found that hetero-geneous groups typically experiencemore conflict and less satisfaction thanhomogenous groups even though theformer might perform as well or evenbetter than the latter (Adler, 1991; Cox,1993).The differential results depending onthe type of outcomes could also be re-lated to resource complementarity, andsimilarly to the strategic intent in IJVs.1For instance, the negative effect of orga-nizational culture distance on satisfac-tion implies that differences in organiza-tional culture could be a serious interfer-ence in the creation of synergy resultingfrom resource complementarity as part-ners become dissatisfied with the coop-erative relationship (Dussauge, Garrette,and Mitchell, 2000; Kale, Singh, andPerlmutter, 2000). The success of capa-JOURNALOF INTERNATIONALUSINESS STUDIES60

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bility-transfer joint ventures (e.g., linkIJVs)thus could depend on compatibil-ity in partners' organizational culture.On the other hand, efficiency-seekingjoint ventures (e.g., scale IJVs)can stillbe effective despite significant differ-ences in partners' national cultures.However, our call for attention to thetype of outcomes goes beyond the broaddistinction of economic versus psycho-logical. We urge researchers to developsound theoretical expectations on why agiven national or organizationalculturedifference may be instrumental to oneorganizational objective but detrimentalto another.

IJV Organizational Culture. We offerthat the effect of any cultural distance ismainly generated in the interactions ofthe partnersand is influenced by the rel-evant parties'approaches to cultural dif-ferences. The approaches to cultural dif-ferences may themselves be part of anIJVorganizational culture. Previous re-search has found that cultural values ofdemographically diverse organizationsare more likely to have substantive (e.g.,product quality and timeliness) and re-lational (e.g., equality and respect differ-ences) components (Chen and Eastman,1998). In the internationalcontext, part-ners may approach cultural differencesthrough cultural domination, submis-sion, or integration (Adler, 1991). Thepartnerswho make conscientious effortsto explore integrative solutions, namelythose that are sensitive to and compati-ble with different cultures, are morelikely to be effective in solving culturalconflicts and maintaining positive rela-tionships (Adler, 1991). Similarly, onecould arguethat the potential benefits ofnational culture differences depend onthe extent to which the IJVpartnersde-velop a third culture of mutual accom-modation, respect, and cooperation. In

our study we examined perceived cul-tural differences between the parent or-ganizationsbut not the values of the IJV'sculture as an independent entity. Futureresearch should incorporate IJVorgani-zational culture and examine its moder-ating effect on the partners'national ororganizationalculture differences.The research implications proposedabove are exemplary and by no meansmeant to be exhaustive. We hope theyserve as a startingpoint to systematicallytheorize and research the potential pos-itive effects of national and organiza-tional culture differences,and help iden-tify conditions that creat'ethe benefitsand minimize the costs of culture differ-ences.

Practical ImplicationsGiven the high risk and high failurerate of IJVs, performance of joint ven-

tureshas always been the dominant con-cern of business executives. The findingsof this study highlight the importanceoforganizationalculturesimilarityforjointventure success, especially link IJVstoshare capabilities, and suggest that, informing IJVs, organizational cultureshould be considered along with finan-cial and strategicfactors.Among organizational culture dimen-sions, we found that distance in the openversus closed system dimension nega-tively affects all measures of IJVperfor-mance. As previously mentioned, theopen versus closed system dimensiondescribes the communication climate ofthe organization. Communication cli-mate is formed historically and is pri-marily determinedby the philosophy ofthe founders and top executives (Hof-stede et al., 1990). Some organizationsdevelop a tradition of being closed,whereas others have a tradition of open-ness. In a special reporton international

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alliances, Business Week (1999) notesthat the elements that make a joint ven-ture successful include listening, payingattention, spending time, humility, andwillingness to learn, and those that makeit fail include mistrust and arrogance.The positive elements improve the com-munication climate and the negative el-ements worsen it. The climate influencesthe shared perception of daily practices,which is the core of an organization'sculture (Hofstede et al., 1990), thus in-fluencing the behavior of managers andmembers of an IJV.A crucial characteristic of the openversus closed dimension is informationsharing. If one partner engages in highinformation sharing activity (open sys-tem) and the other does not (closed sys-tem), partners can not capitalize on thesynergy effect of joint venture, and theopen system partner may come to sus-pect the closed system partner's commit-ment and loyalty toward the venture. Asa result, IJV performance may suffer.Hence, the negative effect of the openversus closed system distance suggeststhat, in order to be successful, joint ven-ture partners should have a similar levelof information sharing tendency and fos-ter an open communication climate.

In conclusion, this study contributesto a better comprehension of the influ-ence of cultural differences, especiallythat of organizational culture distance,which has not been widely examinedbefore. The results suggest that whilejoint ventures have little control overeach other's national culture, they couldnevertheless engage in shaping similarorganizational practices. To the extent ajoint organizational culture can be devel-oped across national borders, researchon the processes through which IJVsovercome national culture differences oftheir parents and develop management

practices acceptable to both partners cansignificantly contribute to IJVs success.

NOTE1. We are grateful to an anonymousreviewer for this insight.

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