Firms use international joint ventures (IJVs) to access and learn from partners’ knowledge and thus enhance their new product performance, especially when the partners have complementary knowledge bases. Most of the existing literature assumes that knowledge complementarity can directly lead to enhanced new product performance, while ignoring the mediating role of knowledge absorption effectiveness and moderating effects of organizational structure and organizational culture to integrate and manage knowledge complementarity. Using dyadic data from 119 IJVs in China, this article suggests that knowledge complementarity influences IJV new product performance through the full mediation of knowledge absorption effectiveness. Also, the results suggest that an IJV's departmentalization of organizational structure significantly hurts the effect of knowledge complementarity on knowledge absorption effectiveness, while a strong learning culture of the IJV can significantly enhance such effects.
The last two decades have witnessed a surge of international joint ventures (IJVs) as firms and markets become more globally interconnected (Glaister, Husan, & Buckley, 2003). Rapid technological advances, shorter product life cycles, and the rising costs of simultaneously innovating in diverse sectors have increased the difficulty of relying solely on internally developed innovations (Narula & Hagedoorn, 1999). Although firms form IJVs for a variety of reasons, important motivations include access to new market knowledge and creation of new innovation knowledge to improve new product development (NPD) performance (Inkpen and Dinur, 1998, Narula and Hagedoorn, 1999, Si and Bruton, 1999 and Sinha and Cusumano, 1991).
From a resource-based view of IJVs, firms engage in IJVs to gain access to complementary resources and knowledge in sectors in which they lack a relative competitive advantage (Kwon, 2008, Lambe et al., 2002 and Narula and Hagedoorn, 1999). The existing literature advises that complementary knowledge resources provide potential opportunities for the local and foreign firms in IJVs to explore new and different ideas about product design, concepts, and development, as well as to break away from previously specified rules and procedures (Das and Teng, 2000 and Fang and Zou, 2009). Researchers argue that synergy may be created when firms bring complementary resources to joint ventures (Berdrow and Lane, 2003 and Stafford, 1994). Implicit in this notion is the belief that knowledge complementary is related to better NPD performance. However, much of the existing literature on the resource-based view of NPD performance in IJVs assumes a direct link between complementary knowledge resources and NPD performance, ignoring the intermediate role of knowledge absorption effectiveness to realize the synergy effect from complementary knowledge bases.
In this article, we advance the concept of knowledge absorption effectiveness, the aptitude of an IJV to organize and share existing knowledge, gather and assimilate each partner's complementary knowledge, and collectively generate new knowledge that otherwise would not have existed. Additionally, we submit that knowledge absorption effectiveness is the key mediating variable for the knowledge complementarity–NPD performance relationship. Moreover, since IJVs differ in their ability to transfer, integrate, and utilize new knowledge gained from external sources (Cohen and Levinthal, 1990, Park, 2011 and Tsai, 2001), we suggest that IJV culture (e.g., learning culture) and structure (e.g., departmentalization) are imperative in facilitating the development of knowledge absorption effectiveness ( Grant, 1996 and Kwon, 2008). Thus, we also examine how IJV learning culture and departmentalization structure can moderate the effect of knowledge complementarity on knowledge absorption effectiveness. This approach has significant theoretical merits since few studies have viewed IJVs as a living resource for partner firms to jointly develop their knowledge absorption effectiveness, and little empirical evidence is available to substantiate the moderating roles of organizational structure and culture on complementary knowledge bases and NPD performance.
The empirical context of this article is 119 IJVs in China. We select the context of China because, first, China has become the world's largest recipient of foreign direct investment (FDI), which is often absorbed via IJVs (Fang & Zou, 2009). Thus, IJVs in China are a growing and significant economic phenomenon that are of timely concern for managers. Second, most foreign firms and local Chinese firms establish IJVs to gain access to each other's complementary knowledge bases (Luo, 2000). In particular, local Chinese firms seek foreign partners’ R&D knowledge and engineering management, while foreign firms are interested primarily in local partners’ knowledge in managing customer and distributor relationships in the Chinese market. The results support our basic premise that knowledge complementarity improves IJV new product performance through the full mediation of knowledge absorption effectiveness. Also, the results suggest that an IJV's departmentalization structure can hurt the effect of knowledge complementarity on knowledge absorption effectiveness, while the learning culture of the IJV can significantly enhance such effects.
The remainder of this article is organized as follows. We first introduce our conceptual framework and individual hypotheses. Subsequently, we explain our empirical context, data collection procedures, and construct measurements. We then discuss our data analysis and empirical results. Finally, we illustrate the theoretical and managerial implications of the results, followed by limitations and future research directions.
