Firm performance, knowledge transfer and international joint ventures [1]

International Journal of Technology Management

Volumn 27, Issue 8, 2004, Pages 731-746

  Nakamura, Alice ^a   Nakamura, Masao ^b  

^a UNIVERSITY OF ALBERTA   (Canada)

^b UNIVERSITY OF BRITISH COLUMBIA   (Canada)

Author keywords

Japanese firm performance; Joint ventures in Japan; Multinational firms; Productivity; Technology

Indexed keywords

COMPETITION; COMPETITIVE INTELLIGENCE; INTERNATIONAL TRADE; INVESTMENTS; STRATEGIC PLANNING; TECHNOLOGY TRANSFER;

JAPANESE FIRM PERFORMANCE; JOINT VENTURES IN JAPAN; MULTINATIONAL FIRMS;

INDUSTRIAL MANAGEMENT;

EID: 4444289384     PISSN: 02675730     EISSN: None     Source Type: Journal    
DOI: 10.1504/IJTM.2004.004991     Document Type: Article

References (47)

1. This research was in part supported by standard and strategic research grants from the Social Sciences and Humanities Research Council of Canada. We thank the editors (Drs. B. Bowonder and Nick Vonortas) and anonymous reviewers of this journal.
2. Nakamura, M. (2001) The Japanese Business and Economics System: History and Prospects for the 21st Century, Palgrave Macmillan, Houndmills, Hampshire, UK and New York, NY.
3. Daniels, J.D. and Radebaugh, L.H. (1998) International Business: Environments and Operations, Ch. 14, 8th ed., Assison-Wesley, Readings, MA.
4. Nakamura, M. and Xie, J. (1998) 'Nonverifiability, noncontractibility and ownership determination models in foreign direct investment, with an application to foreign operations in Japan', International journal of Industrial Organization, Vol. 16, pp.571-599.
5. Unlike Japan, many developed countries have been seeking foreign investment for decades, most importantly, for generating local employment.
6. US Department of Commerce Bureau of Export Administration (2002) Technology Transfer to China, http://www.doc-bxa.bmpcoe.org/dmrr_chinatech.html.
7. Anand and Khana [8], Barkema and Vermeulen [9], Dyer and Singh [10], Gulati [11], Oster [12], Powell et al [13] and Barkema et al. [14]. A study by Hagedoorn et al. [15] provides empirical evidence that firms' experience in joint patenting increases their likelihood of increased activity in joint patenting in the future.
8. Anand, B.N. and Khanna, T. (2000) 'Do firms learn to create value? The case of alliances', Strategic Management Journal, Vol. 21, Special issue, pp.295-316.
9. Barkema, H.G. and Vermeulen, F. (1998) 'International expansion through start-up or through acquisition: an organizational learning perspective', Academy of Management Journal, Vol. 41, No. 1, pp.7-26.
10. Dyer, J.H. and Singh, H. (1998) 'The relational view: cooperative strategy and sources of interorganizational competitive advantage', Academy of Management Review, Vol. 23, pp.660-679.
11. Gulati, R. (1995) 'Social structure and alliance formation patterns: a longitudinal analysis', Administrative Science Quarterly, Vol. 40, pp.619-652.
12. Oster, S.M. (1992) Modern Competitive Analysis, Oxford University Press, New York.
13. Powell, W.W., Koput, K.W. and Smith-Doerr, L. (1997) 'Interorganizational collaboration and the locus of innovation: networks of learning in biotechnology', Administrative Science Quarterly, Vol. 41, pp.116-145.
14. Barkema, H.G., Shenkar, O., Vermeulen, F. and Bell, J.H.J. (1997) 'Working abroad, working with others: how firms learn to operate international joint ventures', Academy of Management Journal, Vol. 40, pp.426-442.
15. Hagedoorn, J., Kranenburg, H.V. and Osborn, R.N. (2001) 'Joint patenting amongst companies - exploring the effects of inter-firm partnering and experience', paper presented at the Strategic Management Society, San Francisco, October.
16. Hennart, J-F., Roehl, T. and Zietlow, D.S. (1996) Trojan Horse or Workhorse? The Evolution of US - Japanese Joint Ventures in the United States, The Carnegie Bosch Institute, Working Paper 95-3.
17. Nakamura, M., Shaver, J.M. and Yeung, B. (1996) 'An empirical investigation of joint venture dynamics: evidence from US-Japan joint ventures', International Journal of Industrial Organization Vol. 14, pp.521-541.
18. Specifically, the type of international alliances we study are formally incorporated joint ventures established by foreign and host country parent firms.
19. This acquisition of knowledge by firms may take place over time within as well as across organizational units. Alternative dynamic economic theories may provide theoretical frameworks based on optimizing and/or bounded rationality principles [20-22]. An important empirical implication of these model formulations is that history matters (e.g. our use of empirical methods for which explanations can be found in Heckman [23] and in Nakamura and Nakamura [24,25].
20. Arrow, K.J. (1962) 'The economic implications of learning by doing', Review of Economic Studies, Vol. 29, No. 3, pp.155-173.
21. Solow, R.M. (1997) Learning from 'Learning by Doing': Lessons for Economic Growth, The Kenneth J. Arrow Lectures, Stanford University Press, Stanford.
22. Nelson, R.R. and Winter, S.G. (1982) Evolutionary Theory of Economic Change, Harvard University Press, Cambridge.
23. Heckman, J.J. (1981) 'Heterogeneity and state dependence', in Rosen, S. (Ed,): Studies in Labor Markets, University of Chicago Press.
24. Nakamura, A. and Nakamura, M. (1985) 'Dynamic models of the labour force behaviour of married women which can be estimated using limited amounts of information', Journal of Econometrics, Vol. 27, pp.273-298.
25. Nakamura, A. and Nakamura, M. (1985) The Second Paycheck: A Socio-Economic Analysis of Earnings, Academic Press, New York.
26. Host country international alliance partners almost always expect such spillovers, even though the foreign parents may try very hard to prevent their intangible assets from spilling over from the factories of their international alliances.
27. Mitsubishi Heavy Industry (MHI) set up an IJV (Caterpillar_Mitsubishi) with Caterpillar in the construction machinery industry where Komatsu was the industry leader and another IJV (Mitsubishi Motor Corporation) with Chrysler in the passenger car industry where Toyota and Nissan were the industry leaders. It is interesting to note that Komatsu and Toyota, which are both still industry leaders, never had IJVs in Japan with foreign firms. MHI was not a player in either the construction machinery or passenger car industries at the time these IJVs were set up. Nevertheless, MHI (or, more broadly, the Mitsubishi keiretsu group) was desperate to enter these markets and establish separate companies.
28. Information on their foreign parent firms is particularly important for estimating the determinants of IJV performance. For example, the transfer of technology from its foreign parent, represented by the foreign parent firm's R&D capacity, contributes significantly to an IJVs profitability [29], We suspect that, once the presence of IJVs is controlled for, the impact of the foreign parent firm's characteristics on the performance of the local host country parent firm is insignificant, since skill spillover generally takes place through the IJVs. This is assumed for our econometric specifications in this paper. Foreign parent firms' characteristics, however, might be an important determinant of the probability that a local firm becomes the host country partner of an IJV. For example, technology-based foreign firms with a promising new product but with weak marketing skills may want to find a local partner with particularly strong skills to market and sell the product in that country. Without information on the foreign parent firms, the estimated probabilities might be biased. In our equations for these probabilities, we include the local partners' experience with IJVs. In so doing, we hope to control for some of the unobserved factors, including the characteristics of the foreign parent firms of the IJVs.
29. Nakamura, M. (1991) 'Modeling the performance of US direct investment in Japan: some empirical estimates', Managerial and Decision Economics, Vol. 12, pp. 103-121.
30. See Heckman [31] and also Amemiya [32]. Applications can also be found in Nakamura and Nakamura [24,25].
31. Heckman, J.J. (1971) 'Sample selection bias as a specification error', Econometrica, Vol. 47 pp.153-161.
32. Amemiya, T. (1985) Advanced Econometrics, Harvard University Press, Cambridge, MA.
33. See also Amemiya [32], Heteroskedasticity-corrected standard errors a la White could also be used for this purpose.
34. These years are fiscal years. Most Japanese firms' fiscal years end in March. So data for fiscal year 1990 were typically measured at the end of March 1990. A few firms have their fiscal years end in June or December. In these cases, data for fiscal 1990 were typically measured at the end of December 1989 and the end of June 1990, respectively.
35. Toyo Keizai Overseas Investments by Japanese Firms, (in Japanese), Tokyo, various years.
36. The economic decision model underlying these probit model specifications is such that a joint venture IJV is established if and only if the expected benefits associated with this exceed the corresponding expected costs for both parent firms. While reduced form specifications appear adequate for the purposes of this paper, we would need to specify the structure of the underlying economic decision model involving the behaviour of both foreign and host country parent firms for certain policy purposes. The econometric specifications used in this paper are in reduced forms.
37. We should be careful not to interpret this to mean that the advertising and marketing skill of the JP does not matter, since #JV may serve as a proxy for some of the IP's marketing skill.
38. It is not clear what kinds of economic reasons underlie the increased probabilities of IJVs for larger compared with smaller Japanese firms.
39. This is consistent with anecdotal evidence. See (For example [27]).
40. In fact many Japanese firms found little in the way of domestic investment opportunities and decided to go overseas to invest (outward FDI). The 1980s were the decade in which the most extensive Japanese overseas investments were made.
41. The massive appreciation of the Japanese currency due to the Plaza Accord in 1985 and the emergence of a financial bubble all took place in the 1980s.
42. See Nakajima et al. [43] for the estimation (regression) method used here to calculate TFP growth rates for individual firms. In estimating the TFP growth used in the regressions here were controlled for the effects of scale economies. In this sense, these TFP growth rates may be interpreted as representing technical progress. See also Diewert and Nakamura [44]. For other aspects of the measurement of productivity, see Diewert [45,46].
43. Nakajima, T., Nakamura, M. and Yoshioka, K. (1998) 'A method for estimating scale economies and technical progress: sources of total factor productivity for Japanese manufacturing 1964-1988', Japanese Economic Review, Vol. 49, pp.310-334.
44. Diewert, W.E. and Nakamura, A.O. (2003) 'The measurement of aggregate total factor productivity growth', in Heckman, J.J. and Learner, E.E. (Eds.): Handbook of Econometrics, Vol. 6, Elsevier Science.
45. Diewert, W.E. (1992) The measurement of productivity', Bulletin of Economic Research, Vol. 44, No. 3, pp.163-198.
46. Diewert, W.E. (1992) 'Fisher ideal output, input, and productivity indexes revisited', Journal of Productivity Analysis, Vol. 3, pp.211-248 (Reprinted as Chapter 13 in Diewert and Nakamura Vol. 43, pp.211-248).
47. Diewert, W.E. (1992) 'Fisher ideal output, input, and productivity indexes revisited', Journal of Productivity Analysis, Vol. 3, pp.211-248 (Reprinted as Chapter 13 in Diewert and Nakamura Vol. 43, pp.211-248).