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International joint venture strategies and performance in the Baltic States

Jorma Antero Larimo (Department of Marketing, University of Vaasa, Vaasa, Finland)
Huu Le Nguyen (Department of Marketing, University of Vaasa, Vaasa, Finland)

Baltic Journal of Management

ISSN: 1746-5265

Article publication date: 5 January 2015

Abstract

Purpose

The purpose of this paper is to analyse investment strategies and performance of Finnish firms in their international joint ventures (IJVs) established in Baltic States.

Design/methodology/approach

The paper analyse performance of IJVs in Baltic States based on the IJV theory, international business literature, and foreign direct investments in Central and Eastern Europe (CEE) literature. The analysed factors include firm, investment, and inter-partner relationship-specific factors. To examine the propositions the paper used ten IJVs established by Finnish firms in various Baltic States between the period 1991 and 2005.

Findings

The results show that the level of uncertainties in the countries and the differences between partners are not related to firms’ commitments and the entry mode choice. Several Finnish firms preferred cost leadership to compete with other firms in the local markets. In most cases there was a positive relationship between the level of partners’ equity share, commitment to the IJV, and the level of trust between partners. The results indicated differences in the IJV performance depending on parent firms’ objectives, their competitive strategies, mode of entry, age of IJVs, control strategies, level of trust, and commitment between partners, as well as depending on the performance measures used.

Practical implications

This study suggests four observations that managers may need to take into consideration to improve IJV performance in the Baltic States. First, cost leadership strategy help to increase IJV performance in terms of sales. Second, social control mechanisms and narrow control leaded to better performance than formal and wide control. Third, minority ownership by Finnish firms in IJVs leaded to better performance based on sales, productivity and total performance whereas majority ownership had leaded to better performance in terms of total costs. Finally, the results confirmed that commitment to the IJV operation and trust on the other partner are very essential factors to IJV performance.

Originality/value

The study is the first one to analyse in more detail based on several cases the IJV strategies and performance of Finnish firms in the Baltic States. The analysed factors include several such factors which have not been analysed related to IJV operations in Baltic States (some also limitedly in the CEE context).

Keywords

Acknowledgements

The study is a part of the project “Value Creation in International Growth: Focus on Acquisitions and Joint Ventures (VCIG)” (project nr. 250613) financed by the Academy of Finland.

The authors wish to thank the financing organisation as well as the managers in the ten Finnish companies that participated in the study.

Citation

Larimo, J.A. and Nguyen, H.L. (2015), "International joint venture strategies and performance in the Baltic States", Baltic Journal of Management, Vol. 10 No. 1, pp. 52-72. https://doi.org/10.1108/BJM-12-2013-0189

Publisher

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Emerald Group Publishing Limited

Copyright © 2015, Emerald Group Publishing Limited