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thesis entitled

THE ROLE OF CONFLICT AND CONFLICT POTENTIAL IN
INTERNATIONAL JOINT VENTURES

presented by
ZOLTAN DAROCZI

has been accepted towards fulfillment
of the requirements for the

Ph. D. degree in Marketi_ng

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6/01 cJCIRC/DatoDmpGS—sz

THE ROLE OF CONFLICT AND CONFLICT POTENTIAL IN INTERNATIONAL
JOINT VENTURES

By

Zoltan Daroczi

A DISSERTATION

Submitted to
Michigan State University
in partial fulfillment of the requirements
for the degree of

DOCTOR OF PHILOSOPHY

Department of Marketing and Supply Chain Management

2003

ABSTRACT

THE ROLE OF CONFLICT AND CONFLICT POTENTIAL IN INTERNATIONAL
JOINT VENTURES

By

Zoltan Daroczi

This study is concerned with the impacts of conflict and conflict potential
on the level of performance, longevity, stability, and trust in international joint
ventures. The primary focus is placed on the beneficial effects of conflict.
Following a conceptual integration of multidisciplinary conflict research and the
extensive set of international joint venture literature, the study also explores the
interaction between conflict and the major dimensions of culture.

International joint ventures represent a significant factor of
competitiveness in the global marketplace. The performance, success, survival
rate, and longevity of such collaborative ventures have been extensively
investigated over the last decades. Still, major questions remain unanswered
about joint venture performance. International joint ventures are inherently
instable business entities. They often do not perform up to their expectations.
Their success depends on numerous variables, and the current analysis of
conflict may significantly contribute to our understanding of international joint
ventures. The study emphasizes the potential positive role of the non-

antagonistic dimensions of conflict.

Instead of the widely applied measures of manifest conflicts, it argues for
the measurement of ex ante, perceived levels of conflict and conflict potential.
With this approach the apparent ambiguity around the measurement of the
construct may be greatly reduced.

This dissertation draws constructs and concepts from diverse scientific
fields such as sociology, organizational behavior, interorganizational relations,
new product development, and international business research. The study
contributes to interorganizational relations literature by its analysis of
international joint ventures from a new perspective. The units of analysis are
managers, and the practical investigation is based on a telephone survey among
international joint venture managers in Hungary. A new measure of conflict
potential is successfully introduced in the study. The findings, although
inconclusive, also suggest that further steps of model development need to be
taken to reliably measure beneficial effects of conflicts in joint ventures and other

business organizations.

Copyright by
Zoltan Daroczi
2003

Dedication
To My Family

ACKNOWLEDGMENTS

I would like to express my sincere appreciation to all the people who
helped me during my graduate studies.

First of all, I am forever indebted to my dissertation committee: the chair,
Professor John Allen with his fantastic personality and unbelievably supportive
approach, and the committee members, Dr. Tomas Hult, Dr. Thomas Page, and
Dr. Ted Stank. Without their guidance and continuous support this dissertation
could not have been completed. I have learned a great many insights from all of
them during the dissertation project. They really helped me as a team, and I also
consider them not only as my teachers, but also as my friends. Thank you!

Before I even started my dissertation, among many, many others, Dr.
Robert Nason, Dr. Tamer S. Cavusgil, Dr. Roger Calantone have introduced me
the skills necessary to become a well-prepared professional in academics. Dr.
Lloyd Rinehart and Dr. Preet Aulakh have to be credited with sparking some of
my research ideas. Ali Dastmalchian, John Usher, Debra Basil and Michael Basil
from the Faculty of Management at the University of Lethbridge provided
immense help too. Material support provided by The Research Excellence
Envelope Grant at the University of Lethbridge. I greatly appreciate the help and
the time these people have spent on me.

Of course, I would not have been able to pursue my studies without the
help of my family: thanks to my parents, my brother, my wife, Kati, and our baby

daughter, Adri, who is and always will be the dearest little girl to me.

vi

TABLE OF CONTENTS

Page
LIST OF TABLES ................................................................................. xi
LIST OF FIGURES ............................................................................... xii
CHAPTER
1. INTRODUCTION .......................................................................... 1
1.1. RESEARCH OBJECTIVES .................................................... 3
1.2. PERSPECTIVES ON CONFLICT ............................................ 4
1.3. PERSPECTIVES ON INTERNATIONAL JOINT
VENTURES .................................................................................... 7
1.4. PERSPECTIVES ON CULTURE... . .10
1.5. EVALUATION OF CURRENT LITERATURE ............................ 12
2. LITERATURE REVIEW ................................................................ 15
2.1. CONFLICT AND CONFLICT POTENTIAL ............................... 16
2.1.1. CONFLICT IN THEORIES OF SOCIOLOGY ..................... 16
2.1.2. CONFLICT IN ORGANIZATIONAL BEHAVIOR
THEORY .................................................................. 22
2.1.3. CONFLICT lN INTERORGANIZATIONAL RELATIONS
THEORY .................................................................. 29
2.1.4. CONFLICT IN NEW PRODUCT DEVELOPMENT
THEORY .................................................................. 32
2.1.5. THE CONSTRUCT OF CONFLICT POTENTIAL .............. 35
2.2. INTERNATIONAL JOINT VENTURES .................................... 39
2.2.1. THE ROLE OF CONFLICT .......................................... 42
2.2.2. PERFORMANCE ...................................................... 45
2.2.3. TRUST .................................................................... 48
2.2.4. LONGEVITY AND STABILITY ..................................... 52
2.3. INTEGRATION OF LITERATURE STREAMS .......................... 54
2.4. PROPOSITIONS ON THE HOLISTIC EFFECTS OF
CONFLICT ........................................................................ 58
2.5. THE ROLE OF CULTURE IN MANAGERIAL THEORIES ........... 62
2.6. SUMMARY AND RESEARCH HYPOTHESES ......................... 70

vii

RESEARCH DESIGN ................................................................... 75

3.1. DESCRIPTION OF THE THEORETICAL MODEL ..................... 75
3.1.1. ASSUMPTIONS AND THE MAJOR CONSTRUCTS.........75
3.1.2. OVERVIEW OF THE MODEL ...................................... 76
3.2. OPERATIONALIZATION OF THE VARIABLES ........................ 77
3.3. METHOD .......................................................................... 79
3.3.1. LOCATION AND SAMPLING ....................................... 80
3.3.2. DATA COLLECTION: THE SURVEY METHOD ............... 82
3.3.3. METHODS OF ANALYSIS .......................................... 83
SURVEY RESPONSES AND PROFILES ......................................... 84
4.1. SURVEY RESPONSES ....................................................... 84
4.1.1. TELEPHONE SURVEY METHOD ................................. 84
4.1.2. SAMPLING PROCEDURE .......................................... 87
4.1.3. ADMINISTERING THE DATA COLLECTION .................. 89
4.2. RESPONDENT PROFILES .................................................. 93
4.3. PROFILES OF THE INTERNATIONAL JOINT VENTURES ........ 94
4.4. SUMMARY ....................................................................... 99
RESULTS AND FINDINGS .......................................................... 100
5.1. ASSUMPTIONS AND THE RELIABILITY OF MEASURES. .......100
5.1.1. THE ASSUMPTIONS OF MULTIPLE REGRESSION......1OO
5.1 ..2 CONFIRMATORY FACTOR ANALYSIS ....................... 111
5.1.3. THE RELIABILITY OF MULTl-ITEM MEASURES.......... 115
5.2. PEARSON CORRELATION COEFFICIENTS ......................... 117
5.3. MULTIPLE REGRESSION MODELS AND THE
HYPOTHESES ................................................................. 120
SUMMARY AND CONCLUSION ................................................... 129
6.1. RESEARCH OVERVIEW ................................................... 129
6.2. RESEARCH CONTRIBUTIONS AND LIMITATIONS ............... 132
6.2.1. THEORETICAL IMPLICATIONS ................................. 132
6.2.2. MANAGERIAL IMPLICATIONS .................................. 135
6.2.3. LIMITATIONS OF THE STUDY ................................... 137
6.2.4. SUGGESTIONS FOR FUTURE RESEARCH ................ 139

viii

APPENDICES .................................................................................... 143
A. .COUNTRY SCORES ON HOFSTEDE’S DIMENSIONS OF

CULTURE ........................................................................... 143
B. .SURVEY INSTRUMENT ITEMS ................................................... 145
BIBLIOGRAPHY ................................................................................. 150

LIST OF TABLES

Table

Table 1:
Table 2:

Table 3:

Table 4:
Table 5:
Table 6:

Table 7:
Table 8:
Table 9:

Table 10:

Table 11:
Table 12:
Table 13:
Table 14:

Table 15:

Page
Interactions of Cultural Dimensions and Conflict ....................... 67
Construct Measures and References ...................................... 78
Summary of Respondent Characteristics: Position in the Joint
Venture .......................................................................................... 94
Joint Venture Partners by Nationality ...................................... 95
Descriptive Statistics of the Joint Ventures .............................. 97

Summary of Joint Venture Characteristics: Ownership Share of

Hungarian Partner Firms ....................................................... 98
Descriptive Statistics of Dependent Variables ......................... 108
Kolmogorov-Smirnov Test for Dependent Variables ................. 109
Kurtosis and Skewness Tests for Dependent Variables ............ 109

Summary of Factor Analysis: Component Score Coefficient

Matrix ............................................................................. 112
Reliability of Multi-ltem Measures ......................................... 116
Pearson Correlation Coefficients among the Main Constructs....118
Summary of Regression Equations ....................................... 122
Hypotheses 9 through 12: Pearson Correlation Coefficients ...... 127
Pearson Correlation Coefficients Referring to the Holistic

Model ............................................................................. 131

LIST OF FIGURES

Figure

Figure 1:

Figure 2:
Figure 3:
Figure 4:
Figure 5:
Figure 6:

Figure 7:

Page
Propositions on Confliot’s Overall Impact on Performance and
Trust ................................................................................ 61
0-0 Normality Plot of Multi-Item Performance ........................ 101
0-0 Normality Plot of Total Performance .............................. 102
0-0 Normality Plot of Strategic Performance ......................... 103
0-0 Normality Plot of Trust ................................................ 104
0-0 Normality Plot of Joint Venture Longevity ........................ 105
0-0 Normality Plot of Joint Venture Stability ......................... 106

xi

Chapter 1

INTRODUCTION

Is there such thing as a “good conflict” in business organizations? Well, if
the conflict is non-antagonistic, i.e., there is a potential solution available without
breaking up an organization or liquidating a partnership, and then the answer is
an ambiguous yes. There is some weight on the adjective: ambiguous. Research
interest in various dimensions and effects of conflict is on the rise. Studies
involve various fields of management, marketing, sociology, psychology, and
economics. However, there are no uniformly applicable models in those fields for
conflict measurement.

In marketing, there is an increasing significance of our knowledge about
conflict’s role in marketing. The era of relationship marketing is here. Our main
research focus should be the system of personal and organizational relations
(Webster, 1998; Harrell & Fraser, 1999).

New organizational forms, such as strategic partnerships and corporate
networks are replacing single transactions and traditional organizational forms.
The traditional paradigm of marketing has been the paradigm of profit
maximization from microeconomic theory. However, with the emergence of new
organizational forms, this traditional paradigm is gradually replaced by supply
chain management and strategic partnership management (Webster, 1992).

There are two major literature streams that provide direct motivation for

this research. The first one is a recent research direction within the international

joint venture literature. Parkhe (1996) called for a more systematic, fine-grained
research approach within the framework of international joint venture studies.
According to his observations, significant conceptual and methodological gaps
exist in this research field, offering numerous prospects for future research. The
complex roles of conflict in international joint ventures have been extensively
investigated before (e.g., Killing, 1983; Harrigan, 1985; Fey & Beamish, 2000,
and 2001); still the role of conflict in joint ventures is far from being completely
understood. Another important issue is the fact that most studies are exclusively
concerned about the hindering effects of conflict on joint venture performance.
As we will see, the construct of conflict may provide several beneficial effects for
organizations, in particular international joint ventures.

The other literature stream that motivates this current study is well
represented by the multidisciplinary studies of the lntemational Journal of
Conflict Management and several other publications. Conflict is not a recently
discovered scientific concept in social sciences by any means. Some of the basic
theories had been developed by philosophers of the 19th century (Turner, 1986).
On the other hand, some recent publications, for instance by Elsayed-Ekhouly &
Buda (1996); Rempel & Fisher (1997); or Polkinghorn & Byrne (2001), offer new
perspectives on the potential effects of conflict. The interaction of culture,
conflict, and conflict management is another interesting subfield to be explored.

Some of the publications have revived the classic approaches of
organizational behavioral scientists (e.g., Blake & Mouton, 1969; Tjosvold, 1988),

who primarily investigated the potential competitive advantages of conflict

management, while others have approached conflict from the point of view of
classic sociology (e.g., Eckert, 1997). The main research questions of this study

are derived from these two main literature streams.

1.1. RESEARCH OBJECTIVES

What, if any, kind of positive role is present or possible for the construct of
conflict in an international joint venture? If there is a positive role, how is it
modified by the dimensions of culture? Considering these questions, the current
study is partly exploratory. However, we will see the richness of existing conflict
and international joint venture theories as well. Thus, the exploratory nature is
not an obstacle to conducting a well-reasoned research project, which is
supported by salient research publications from various fields of marketing and
other social sciences.

The major factors underlying social conflicts are threefold: differences in
goals, interdependence, and differences in perceptions (March & Simon, 1958).
This study focuses on the latter two factors because international joint ventures,
by definition are business entities with two or more strongly interdependent
partners, who pursue similar business objectives. Major differences in the
partners” goals may lead to the elimination of the business entity altogether.
Perhaps the most interesting question of this study is whether the temporary or
ongoing differences in managerial perceptions are able to enhance the

performance of an international joint venture.

This study investigates international joint ventures and their role within the
emerging new paradigm of marketing. The research seeks answers to the
following questions. How is the level of trust, longevity, stability, and performance
affected by the different levels of perceived conflict in international joint
ventures? How are the relations among these constructs modified by the factors
of culture? Should we distinguish between the most often analyzed manifest
conflict and perception-based conflict measures, and the construct of conflict
potential? If so, how may we distinguish among these measures? Last, but not

least, what are the managerial and theoretical consequences of the findings?

1.2. PERSPECTIVES ON CONFLICT

Conflict can also serve to unite social sciences (Tjosvold, 1996, p. 1203)

Conflict has traditionally been considered as a “negative” construct in
social sciences. This image refers to all research attempts focusing on either the
prevention or elimination of conflict, or the minimization of conflict in different
interpersonal or intergroup relations (Anstey, 1989). However, the potential
benefits of the construct have been investigated as well. Beginning from the
works of nineteenth century philosophers and sociologists, such as Karl Marx
and Georg Simmel (Simmel, 1955; Coser, 1965), conflict has never been treated
as an unequivocally negative construct in social sciences. Still, largely due to the

fact that conflict has been identified with the antagonistic, manifest types of

conflict, the construct was mostly investigated for its hindering effects on other
sociological constructs, for instance, trust (Anstey, 1989).

One way or another, conflict has always been a major source of change in
social systems and social institutions. Coser revived the notion that conflict may
be even necessary in order to maintain a relationship (1956). Scientists of
Organizational Behavior theory have also accounted for the importance of
conflict in an organization’s attempts to create competitive advantages (Blake &
Mouton, 1964 and 1983b; Tjosvold, 1986a and 1991). Here the focus is mainly
on the management of conflict situation within organizations. With an appropriate
managerial approach, certain levels of conflict may be turned into a positive force
in organizational practice, In particular, in transitional periods. When
summarizing the results of conflict management studies, however, the question
still remains: what we may say about the presence of conflict itself?

Conflicts are always seen as dynamic phenomena, which need to be
investigated from the point of perceptions. In the interorganizational relations
theory, previous research has focused on the understanding of antecedents and
types of conflict (Etgar, 1979), life cycles of conflicts (Pondy, 1967), or conflict’s
relation to other major constructs of the theory, including trust, power, control,
and organizational performance (Gaski, 1984). Again, in spite of the dynamic
nature of those analyses, the continuum of conflict levels was not investigated
thoroughly or rather it was simplified in most studies.

At the same time, the positive, or as often called, constructive effects of

conflict have been investigated by Assael (1973) within automotive distribution

channels. Other authors also noted the potential constructive outcomes of
conflicts.

However, their research ideas and assertions have not been turned into a
consistent framework (Dwyer et al., 1987; Morgan & Hunt, 1994; and Weitz and
Jap, 1995). Channel relations are highly similar situations for an organization like
the constant process of negotiations within a joint venture. Both the continuum of
different levels of conflict and the context of international joint ventures seem to
be appropriate extensions of existing research.

The notion about the construct of Conflict Potential has been introduced
to organizational relations literature by Cadotte & Stern (1979). After elaborating
the threefold model of conflicts of March & Simon (1958), they assume that
potential for conflicts exists along the dimensions of goal incompatibility, domain
dissensus, perceptual incongruency, and interdependence. Cadotte & Stem
have also introduced the additive nature of conflict potential, and this notion will
be utilized in this study as well.

A perception-based measure of conflict potential may serve researchers
well as an alternative measure to the different levels of conflict. Finally, it is worth
the effort to review the literature stream of new product development, in

particular the publications in that subfield of marketing within the last decade.

1.3. PERSPECTIVES ON INTERNATIONAL JOINT VENTURES

Due to an increasingly competitive global environment, firms are facing a
great number of challenges in the international arena. The goals and motivations
of firms operating internationally vary extensively: from expansion to foreign
markets, to achieve economies of scale in production or marketing, through the
impact of international governmental regulations, to the consequences of the
development of regional trade blocks such as the European Union or NAFTA.

lnterfirm cooperation is both a key strategic task and an opportunity in
international marketing. The greatest change in international business in the past
several decades is the accelerating growth of relationships based on
partnerships rather than ownerships. Like marketing in general, international
marketing has been experiencing a paradigm shift from transaction-oriented to
relationship oriented marketing since the end of the 19803 (Webster, 1992).

This paradigm shift helped open new research directions for international
business scholars. Strategic alliances, partnerships, and collaborative
arrangements in general have received great attention from business
researchers (Buckley & Casson, 1988 and 1996; Anderson & Narus 1991;
Morgan & Hunt 1994; Doz & Hamel, 1998). Hamel, Doz, and Prahalad (1989)
have created a new term for long-term competitiveness that characterizes the
most successful international joint ventures as well: “competitive collaboration.”

An international joint venture is a unique organizational form, where the

potential benefits of cross-border relationships can be maximized, even when the

new business entity operates in a culturally different environment from that of the
home country of the firm. International joint ventures are unique in the specific
managerial requirements they demand from the partner firms.

Jolnt ventures are defined as legally and economically distinct
organlzatlons, created by two or more parent organlzatlons that collectively
Invest In the JV to pursue predetermined strategic objectives (by Pfeffer &
Nowak, 1976; and Anderson, 1990).

International joint ventures expand the definition by Introducing
partner organizations from different countries that are cooperating across
national and cultural boundaries (Yan & Luo, 2001).

Our understanding of international joint ventures can certainly benefit from
an extended focus on relationships. Characteristics of the partner firms, their
managers, and the environment in which the joint venture operates may serve as
key explanatory variables for its performance. The interaction between
interorganizational relationships and international business research is mutual.
Joint venture research has also provided valuable insights for the general theory
of business relationships.

The importance of international joint ventures is arguably increasing along
the various trends of globalization of business activities (Beamish & Killing, 1997;
and lnkpen, 2000). Alliances are considered as alternatives to wholly owned
subsidiaries and also as means of creating competitive advantages (Buckley &
Casson, 1988). However, international joint ventures have to face multi-level

tasks, relationships, and complexities.

Joint ventures are involved in the typical channel relationships along their
supply chains by cooperating and competing with other firms. Additional issues
include the relationship between the partners firms and their managers, cross-
national legal and managerial problems, and the everyday, problem-solving, and
ongoing working relationship among managers within the joint venture.

International joint ventures are arguably the most researched
organizational forms in international management literature. Beamish and Killing
(1997) provide a comprehensive summary on the major research directions.
There is quite an extensive list of publications which provide a general overview
of the research advances in the field (for instance, Beamish, 1987; Beamish &
Banks, 1987; Buckley & Casson, 1996; Geringer & Hebert, 1989 and 1991;
Harrigan 1987a, 1987b, 1988a and 1988b; Hennart, 1988; Kogut, 1988; and
Wallace, 1993). The richness and depth of the different research approaches is
certainly worth mentioning. Within this extensive list of publications, however,
conflict is mostly considered for its performance hindering effects (Shoham et al.,
1997; Ding, 1997; and Fey & Beamish, 2000).

There are several key research opportunities in the international business
research to be considered in the current study (Cavusgil, 1998). Performance of
intematlonal joint ventures is one of those opportunities. A great number of
publications are concerned specifically with the performance of international joint
ventures.

Summaries, categorizations, and reviews of a series of studies are

provided by Geringer and Hebert (1991); lnkpen and Birkenshaw (1994); Evirgen

(1995); and Hatfield et al., (1998). The key, and repeatedly discussed constructs
related to joint venture performance are the perceptions of managers, the level
of trust, the longevity and the stability of joint ventures. These constructs need to
be taken into account in the current study as well. The basic research question is
how conflict can help us understanding the complex issue of joint venture
performance. The literature review guides us in finding the appropriate

theoretical and measurement role for the construct.

1.4. PERSPECTIVES ON CULTURE

Geert Hofstede (2001) first published his seminal research on the
dimensions of culture in 1980. His work inspired some criticisms over the years.
It is, however, still the most widely used and the most generalized research in
this field.

The role of culture is significant in all international research domains. This
study attempts to highlight the role culture plays in conflict’s correlation to other
constructs within international joint ventures. Previous studies evaluated culture’s
influence on the initial attitudes toward international joint venture formation, the
partner selection process, the relationships between partners from different
countries, and, after all, the perceived performance of joint ventures (Parkhe,
1996)

Might culture serve as a resource in international business? The answer is

certainly yes, if we follow the logic of Barney’s analysis of organizational

10

resources (1991). It has been established for instance, that low level of
uncertainty avoidance supports entrepreneurship in a society (Hofstede, 2001).
However, research is still to be completed on the “fine-tuning” of such cultural
effects. This is a very promising field in international business research. Based
on the existing foundations (Hofstede 2001; Kogut & Singh 1988), new models of
managerial behavior may explain and measure culture’s impact on the key
constructs of international joint venture research. On the other hand, bridging
different cultures within management teams is a going to be a long and
challenging task (Beamer, 1998).

Severalexciting culture-related research streams seem to have emerged
recently. An example could be the location of business entities. Location
selection has long been a major competitive factor in international business, and
it has been thoroughly analyzed from an economic point of view (Krugman
1991). Location of international joint ventures is increasingly important as
globalization proceeds forward. However, economic theories are often unable to
account for intangible factors. Culture is certainly one of those factors. Updating
the role culture plays in managerial theories is an ongoing task of international
business research, and this is a point where the current study can make a
contribution.

A recent study states explicitly that culture may be a resource for
international businesses. Li, Lam, and Qian (2001) investigated the role of
culture as a resource for international joint ventures. Makino and Neupert’s

(2000) study about transaction costs is another excellent example of the

11

application of testable, culture-related hypotheses. Subsequent research projects
in this domain may build on each other’s findings in order to incorporate culture
into existing models of joint venture behavior. The current study attempts to join
the emerging stream of studies, targeting the demystification of culture in

international business research.

1.5. EVALUATION OF CURRENT LITERATURE

Although the number of recent publications focusing on the construct of
conflict and conflict potential is quite impressive and briskly increasing, only a
limited number of commonly accepted conclusions have emerged. Overall
effects of conflict are generally seen as negative, or performance hindering in
most situations. At the same time, the measurement of negative or positive
effects of conflict is an unresolved research issue, and perhaps needs to be
approached from a multidisciplinary point of view.

There appears to be a lack of integration of interorganizational
relationship and intematlonal joint venture literature. Perhaps this is the most
important research gap targeted by this study. The richness of constructs in
relationship literature is far from being fully utilized in international management
publications.

There is a certain degree of ambiguity about conflict’s role in international
joint ventures. Conflict’s overall effect seems to be clear from previous research

(Fey & Beamish, 2000). However, the reviewed research was not able to fully

12

explore the effects of different conflict levels on constructs such as performance.
This is the point where the need for fine-grained research comes up (Parkhe,
1996). The apparent ambiguity in research findings and publications always
presents an opportunity for marketing scholars. Convergent thinking focuses on
the synthesis of the development so far and significantly helps scientific
advancements (Kuhn, 1970). This study attempts to integrate the major literature
streams on conflict, and apply their findings and constructs to the highly specific
context of international joint ventures.

Buckley (2002) recommends three major directions for international
business researchers: the explanation of foreign direct investment trends,
analysis of multinational firms, and the globalization of business. This study,
again, follows Buckley’s recommendations.

There are two unexplored opportunities for the current study. First, instead
of the development of another analytical framework focusing on the wide variety
of managerial approaches toward conflict situations, the analysis of different
levels of perceived conflict should be pursued. Such an approach was strongly
encouraged by Pondy (1992). The context of international joint ventures provides
an appropriate field for such analyses because of the presence of at least two
partner organizations, who share at least one common goal, though their
relationships have been proven to be inherently instable (Harrigan, 1987a and
1987b). Theoretically, both the negative and positive effects of conflict should be

highly transparent and measurable in international joint ventures.

13

Second, the context provides an opportunity to further enhancement of
existing conflict theories by the introducing the role of cultural dimensions in the
relationship between conflict and performance. Although conflict has become a
hot research topic recently (e.g., Fey & Beamish, 2000 and 2001; Pothukuchi et
al., 2002), the primary research focus remains on the construct’s performance
hindering effects and conflict management methods. Investigation of different
conflict levels in international joint ventures may be a significant contribution of
this study. Gradual extension of current research findings is an appropriate way
to contribute to the development of marketing and management knowledge
(Bagozzi, 1994).

Analyzing the perceptions of international joint venture managers keeps
the research focused on the domain of marketing paradigms outlaid by Bonoma,
Bagozzi, and Zaltman (1978). Key research domains in the new paradigm
include social exchanges, interdependence, power and influence relations,
bargaining and negotiation, and mutual problem solving within organizations.
The current study also fits into the system of knowledge development in
lntemational marketing (Cavusgil, 1998). In particular, the study follows some of
the recommended research directions: international partnering, collaborative
ventures, and developing and coordinating partnerships, and also, the
recommended research methods, such as the application of comparable

measures and the methodological tools of cross-cultural research.

14

Chapter 2

LITERATURE REVIEW

Dyck, Bruning and Driedger evaluated the state of conflict research
across different fields of organizational sciences in 1996. They found that in spite
of the mass amount of previous research, “our understanding of the relationship
between organizational conflict and organizational performance begs for further
development” (p.295).

Sheppard (1992) also described the state of conflict research in
management sciences as “schizophrenic.” Even today, there are multiple
research approaches to be observed, multiple levels of analysis, competing
institutional perspectives, and the wide variations of findings regarding conflict’s
effects on the different aspects of organizational performance are seemingly
dividing social researchers. We may approach conflict in many ways; however,
the positive effects of the construct may be approached most effectively from the
point of managerial perceptions.

This research approach is not unfamiliar in marketing, since Pondy (1992)
and Eckert (1997) have made similar arguments after reviewing the major
conflict theories. Perception-based models were also reviewed and considered
as an alternative approach to analyze conflict by Lewicki, Weiss, and Lewin

(1992).

15

2.1. CONFLICT AND CONFLICT POTENTIAL

The advances of sociology, organizational behavior, interorganizational
relations, new product development, and international joint venture theory are
reviewed below. It has to be emphasized that the interaction and
interconnectedness of those fields really opens the doors for new discoveries.
The advantages of interdisciplinary research are quite obvious from the current

study.

2.1.1. CONFLICT IN THEORIES OF SOCIOLOGY
The clash of doctrines is not a disaster, it is an opportunity

(Alfred North Whitehead, 1925)

A general overview of the major findings of selected sociologists is
necessary for the purpose of this research because in their investigations of
conflict, organizational behavior, interorganizational relations, and all subsequent
business theories have extensively borrowed concepts, constructs, and
measures from the field of sociology.

In the early definitions of conflict the assumption of the construct’s
negative impacts on social relationships was implicit. Social conflict is defined by
Blalock (1989, p. 7) as the intentional mutual exchange of negative sanctions, or

punitive behaviors by two or more parties.

16

However, such definitions were not accepted unequivocally in the circles
of sociologists. Perhaps the position of Dahrendorf (1959, p. 135) highlights this
fact, and the current study also follows Dahrendorf’s views:

“I am using the term ‘conflict’ In this study for contests,
competitions, disputes, and tensions as well as for manifest clashes
between social forces.”

Obviously, the broader a definition, the more difficult it is to generate valid
and reliable measures for the construct. However, the review of sociologists
serves the purpose of understanding the potential positive effects of conflict, and
Dahrendorf’s approach is certainly a useful start there.

Without detailing the salient works of Georg Simmel, Max Weber and Karl
Marx, is must be noted that they were the first social scientists to include the
construct of conflict into mainstream sociology. Weber established that conflict
ls lnevltably present in all social organizations, while Marx explained why
conflict is a major driving force behind change in social systems and
organizations (Turner, 1986). Simmel’s conflict related works and hypotheses
are probably the most discussed ones within sociological literature. Simmel
(1955) emphasized that conflicts tend to mobilize groups and group members,
and also increase the cohesion of social groups. Although Simmel’s views
have been analyzed and criticized by researchers, (e.g., Mills, 1965, or Sorokin,
1965), his set of hypotheses were thoroughly further developed by Lewis A.

Coser (1965, see also in Anstey, 1989, and Turner, 1996).

17

A significantly streamlined outline of Coser’s propositions (1956) on the

latent, a potentially positive function of conflict is provided below. Only his

relevant hypotheses are discussed here.

1.

Conflict binds groups together by establishing and maintaining the
boundaries of groups and societies. This function is certainly a key one for
international joint venture stability and longevity.

Conflict may preserve the group as well, by freeing the feelings of hostility
among group members. Again, joint venture stability and performance may
be related to conflict here.

We need to distinguish between realistic (i.e., instrumental, goal seeking)
conflicts, and non-realistic (i.e., tension releasing, self-rewarding) conflicts. In
the context of joint ventures this study chooses the categorization of non-
antagonistic conflicts, defining such conflicts as not threatening the existence
of the joint venture itself.

Conflict encourages interaction and communication. This proposition,
although general, is potentially beneficial to all social organizations.

The closer the relationship, the more intense the conflict. Joint ventures, as
independent business entities need to be managed on a daily basis. These
organizations seem to be appropriate choices for units of analysis. They are
supposed to exhibit relatively higher levels of conflict than business
organizations in general.

Conflicts that do not contradict basic core values (again, referring to non-
antagonistic conflicts), tend to remove dissidents and reestablish group unity.
Such conflicts minimize the risk of the occurrence of antagonistic conflicts.
Joint venture survival and stability are the key affected dimensions in the
current study.

Conflict serves as an index of stability of relationships. Stable, close
relationships may be characterized by frequent conflicts. This is one of the
key hypotheses from Coser, and it has been tested by numerous studies
since the 19603.

18

8. Conflict may be a group unifier. Conflict may stimulate the establishment of
new rules, norms, and institutions, thus conflict serves as an agent of
socialization within a group. For instance, conflict may be able to reduce the
perceived cultural distance between joint venture managers with different
cultural backgrounds.

9. Conflict intensifies participation in social life and facilitates change and
readjustment. This is a similar function to statement #4 above.

10. Conflict establishes and maintains a balance of power. Conflict allows for the
evaluation of the relative strength of the partners. Conflict also may stabilize
and balance a group through the mutual adjustments by the partners
involved. This hypothesis is also directly relevant to joint ventures.

11. Conflict prevents structural rigidity and facilitates adaptive internal
reorganization. Flexibility is a key competitive advantage in international
business.

12. Finally, conflict promotes social transformation by modifying major
structures, values, and institutions. A similar statement like the previous one,
emphasizing the role conflict may play in creating flexible organizational
forms.

The basic premise of the current study is built on the set of propositions

of Simmel and Coser, as several studies have done so among the reviewed
literature streams (e.g., Dyck et al., 1996; Eckert, 1997). Based on the analysis
of Coser’s work, the categorization of conflict types emerged as the next stage in
the literature of conflict research.

Deutsch (1973) introduced the terms of destructive versus productive
conflicts. By his distinction, productive conflicts motivate problem-solving
activities, trigger creativity in a relationship, stimulate new ways of interactions,
and promote trust and understanding between the partners. One the other hand,

destructive conflicts may quickly or gradually destroy a partnership. Deutsch’s

19

findings originated in social-psychology, and his categorization is difficult to be
operationalized in a business research. However, his note about the correlation
between certain types of conflict and trust Is certainly in the interest of this study.

Kriesberg’s (1998) approach toward conflict provided a step beyond
Deutsch’s findings, and turns our attention to the management of conflict
situations. His point of view also appears in the works of organizational behavior
scientists, like Blake & Mouton (1964); Barker et al., (1988), or Tjosvold (1991).
The question is once more the identification and measurement of “positive”
versus “negative” conflict episodes. The managerial approach treats conflict as a
post hoc, discrete variable, and although this is a legitimate research approach, it
also counteracted the development of a uniformly applicable measurement
model.

The antecedents of conflict have been discussed in numerous
sociological publications (e.g., Turner, 1986; or Blalock, 1989), however, for the
purpose of this study a review of interorganizational relations literature will
suffice, since we intend to utilize the antecedents identified by Cadotte and Stern
(1979).

As a closing point at the overview of sociological approaches, we refer to
the book by Yarbrough and Wilmot (1995). They argued that in generally defined
partnerships and negotiations the process of the “Mediation Wheel” guides
individuals and organizations toward turning the inevitable and resolvable
conflicts into positive outcomes. Conflicts may generate creative changes within

the participating individuals and organizations through a cyclical process:

20

First, the partners enter into a conflict situation I? they diagnose the
situation and the possible outcomes :9 then the negotiation stage follows :9 the
partners reach some sort of an agreement cathe agreement is analyzed in the
follow-up stage ¢and finally a new entry occurs into a new conflict situation. It is
very important to note that the authors are concerned with non-antagonistic
conflict situations, i.e., there is always an agreement within the cycles of the
Mediation Wheel, and such agreements generate the positive changes in the
participants.

The book is based on communication theory, and it obviously offers
insights for members of a marketing channel or partners in an international joint
venture as well. If cooperation in conflict resolution indeed catalyzes creativity,
it indicates a potential source of competitive advantage. Such an advantage
may be accessed through the systematic recognition of conflict situations, and
the drive to resolve conflicts through intense negotiations. The book underlines
the importance of conflict management theories, and, at the same time,
reinforces the validity of Coser’s set of propositions.

Without the advances of sociology this study would not have been
undenrvay. However, sociology doesn’t provide us with a consistent framework

for identifying, estimating, or measuring the potential beneficial effects of conflict.

21

2.1.2. CONFLICT IN ORGANIZATIONAL BEHAVIOR THEORY

Conflict is the spice of life. ..

Lewicki and Spencer (1992) introduced the 1992 special issue of the
Journal of Organizational Behavior with this phrase. Lewicki, Weiss and Lewin
identified 44 major models concerned with various aspects of conflict (1992).
The dominant paradigm in the field is certainly that of Pondy’s. The current
study also approaches conflict from the point of view of Pondy’s original and
revised models (1967 and 1992). Pondy treats conflicts as organic episodes,
which evolve through five stages, such as: (1) Antecedent conditions; (2) Latent
conflict; (3) Perceived conflict; (4) Manifest conflict; and finally (5) the Conflict
aftermath.

The stages were further discussed and revised by Cadotte & Stern (1979)
during the development of the construct of conflict potential in interorganizational
relations. Pondy’s stages served as the basis for most organizational scientists
to assess the various effects of conflict. Based on his and Coser’s ideas, Rahim
and Bonoma (1979) generated the idea of a reversed—U shaped curve to
express conflict’s effect on performance. Their assumptions reinforced Coser’s
propositions. However, there is still a limited amount of empirical studies, even
less evidence for such assumptions. This is a point where the current study may

contribute to the organizational behavior literature.

22

The 1992 special issue of the Journal of Organizational Behavior provides
an exciting, and at the same time, challenging overview about the status of
conflict research in the field. In the various fields of management, the positive
effects of conflict have been the most thoroughly investigated by organizational
behavior scientists. In that sense, the names of Robert Blake, Jane Mouton,
Louis Pondy, and Dean Tjosvold highlight a long list of publications within the
domain. Understandably, their research streams focus on the management of
conflict situation, but, at the same time, they reflect on the findings of sociology
as well.

Blake and Mouton started a series of studies in the 19603 about the role
of human resources and organizational development in creating competitive
advantages (1964, 1969, 1980, 1982, 1983a and 1983b, 1984, and 1985). Their
basic concept is the Managerial Grid, an analytical tool assisting managers in
their efforts to apply proper managerial techniques at given situations. They
introduced the classification of managerial behavior toward conflict, describing
the styles of problem-solving, smoothing, forcing, withdrawal, and sharing (1964).
Emphasizing the importance of people-orientation of managers represents a
parallel trend to the paradigm change in marketing during the 19703. The
findings of Blake and Mouton provide support and external validity to the
assumptions and research findings of sociologists. Conflict and conflict
management appears to be a catalyst of change within the organlzatlons

(1964)

23

Blake and Mouton investigated multiple dimensions of managerial
techniques, including even the Presidents of the US into their studies (1985) or
the relations between unions and management (1983a). After all, the basic
concept of their analyses and findings is to acknowledge that conflict is present
in organizations, and it will always exist, but a really effective manager needs to
minimize conflict to create cooperation within the organization.

Pondy published his salient study about organizational conflict in 1967. He
identified three major types of conflict:

1. Bargaining conflict between members of any organization where members
have differing interests. International joint ventures fit into this category.

2. Bureaucratic conflict between parties who are in a superior-subordinate
relationship. Again, such conflict 3 may be characteristic in joint ventures
when the equity of the firm is not equally divided among parent companies.

3. Systems conflict between parties in an ongoing working relationship. This
category is similar to the task-related conflict term, introduced by Dyck et al.,
(1996).

The conflict categories by Pondy may all play a positive role in an
organization. Pondy’s other findings directly relate to the hypotheses of the
current study. He stated that the functionality (i.e., positive effect) of a conflict
may be measured by either the resultant improvements in productivity
(quantitative or qualitative measures may be employed), or the enhanced
stability of the relationship, or the Increased level of flexibility and

adaptability of the relationship. Just like many sociologists, Pondy treats

24

conflict as a discrete variable through a series of conflict episodes. However,
Pondy later revisited his original model and his insights are greatly invaluable for
the current study (1973 and 1992).

"T he central flaw of the 1967 model is, I believe, the
assumption that organizations are cooperative, purposive systems
which occasionally experience conflicts or breakdowns in
cooperation. [...] Let me suggest that an organization is precisely
the opposite of the cooperative system. Think of an organization
as a means for internalizing conflicts, for bringing them, within a
bounded structure so that they can be confronted and acted out.”
(Pondy,1992,p.259)

Pondy’s ideas reinforce the current study’s purpose of approaching
conflict as a continuous variable within organizations, and applying a conflict
measure accordingly. Furthermore:

“If organizations are arenas for internalizing and
staging conflicts, then we would expect organizations that exist in
conflict-rich environments to exhibit organized anarchy properties in
their internal structures. [...] Thus, within the alternative model,
conflict is not only functional for the organization, it is
essential to Its very existence.”(Pondy, 1992, p. 260)

The hypotheses of this study directly relate to Pondy’s insights, for which

the author is greatly indebted to the great organizational scientist.

25

March & Simon (1958) and Cyert & March (1963) approached conflict by
analyzing both the positive and negative effects of the construct. Their ideas are
based on the paradigm of rationalism. Although their findings are still relevant,
their general framework does not fit into the context of cross-cultural managerial
perceptions, at least not within the narrow framework of the current study.
However, their work must be mentioned, in particular because they greatly
influenced organizational behavior scientists. Simon has touched the domain of
Coser’s and Pondy's assertions, when he gave his insights to the management
of complex systems (1963 and 1973). He stated that problem-solving skills may
serve as a social-organizational equivalent to natural selection in biology.
Problem-solving is described as a selective trial-and-error process, and
organizations that exhibit skills in selectivity may have the best chances for
survival. Finally, experiences, including previous conflict situations, may provide
the desired skills in selectivity for organizations. Simon’s logical path is similar to
that of Steiner’s (1973). Further analysis would lead us far from our primary topic
however, we selfishly take note of his support of the potential benefits of conflict.

Another significant contribution to the external validity of managerial
theories has been made by the publications of Dean Tjosvold (Tjosvold &
Johnson, 1983; Tjosvold, 1986a and 1986b, 1988, 1991, Tjosvold et al., 1992;
Tjosvold, 1993, and 1996). His focus is even more specific than that of Mouton
and Blake. Tjosvold investigates various aspects of the management of conflict
situations in an organization (e.g., Barker, Tjosvold, and Andrews, 1988).

Tjosvold introduced new systems for categorizing conflicts, for instance

26

distinguished among competitive, avoidance, and cooperative conflict situations
within organizations. Conflicts may be turned into competitive advantages, when
managers realize that perceptions and aspirations, and not goals are
incompatible.

Tjosvold’s work supports one of the key points of the current study, that
unrecognized goal incompatibilities tend to lead to antagonistic conflict
situations, therefore our analysis needs to start with the differences in
perceptions (Etherington & Tjosvold, 1998). Avoidance of conflicts leads to an
Illusion of openness, where the real antecedents of conflicts remain hidden. A
competitive approach to conflict management leads to closed-mindedness, and
Incompatible behaviors and actions. Understanding conflicts should start
with understanding perceptions, and should end with the creation of a
cooperative environment where communication is natural, and arguments are
open-minded (Tjosvold & Lai, 1989).

Similarly, Pruitt (1992) also supports cooperative solutions to conflict
situations. Tjosvold summarized the value of cooperative conflicts as follows
(1988):

- Encouraging open communication between partners;

- Improving the overall level of communication skills in the firm;

- Forming subgroups within the organization, and such subgroups
take different sides, create different alternative solutions; and

- Indicating that major decisions will be made by consensus.

27

Tjosvold’s research is highly relevant to both new product development
and international joint ventures. His focus on both conflict and cooperation to
create innovative organizations provides insights for new product
commercialization successes and long-term survival of competitively operating
joint ventures.

David Brown (1983) offers an overview of the various organizational
changes that may be initiated by conflict situations or may be reduced by conflict
management. Conflict may alter perceptions, communications, actions, the
interface of communications, the character of one or both parties, and finally the
context in which it occurs. Again, like in sociology, conflict appears as a primary
agentofchange.

Brown (1992) also recommended several general research directions on
the basis of past achievements in the field of organizational behavior. In
particular, he noted the importance of globalization and global diversity as an
important research field for the future. This statement supports the perspective of
the current study as well. Kolb & Putnam (1992) have described the “disputing
perspective” toward conflict research. It refers to using disputes as the units of
analysis. The approach is very promising and is not fully utilized yet in
organizational research. The disputing perspective exhibits strong links to the
negotiation literature stream interorganizational relations literature. In this study,
a note must be made about the necessity to integrate disputing and negotiation

studies.

28

Robinson’s statements (1995) may serve as appropriate conclusions to
organizational behavior studies. Robinson introduced the term of conflict-
competent organization. The focus is on intra-organizational issues, and the
findings are highly relevant for intematlonal joint ventures. The inevitable
presence of conflicts is a continuous challenge to organizations. The more
experiences an organization is able to accumulate about dealing with conflicts,
the more conflict management skills it has. Therefore, the pure presence of non-
antagonistic conflicts may create a competitive advantage for the organization in
the long-run. Conflict management skills within a relationship or an organization

may minimize the risk of the development of antagonistic conflict situations.

2.1.3. CONFLICT IN INTERORGANIZATIONAL RELATIONS THEORY

lnterorganizational Relations or channel research originates from the
Functional (e.g., Weld, 1917) and Institutional scholars (e.g., Alderson, 1954) of
early Marketing research. Stern (1969) turned the main research direction toward
the investigation of behavioral dimensions of marketing channels. As Eckert
(1997) stated, power and conflict quickly became the key constructs in channel
research (e.g., Gaski & Nevin, 1985).

Conflict is an inherent behavioral dimension of marketing channels
(Rosenbloom, 1978). As in the case of other theories, conflict is primarily
approached as a negative factor of theoretical channel models. According to the

integrative work by Bowersox et al., (1980, p. 73), “conflict is a situation in which

29

one member of a distribution channel perceives another member as an
adversary engaging in behavior designed to injure, thwart or gain scarce
resources at its expense.” This definition indirectly implies that most channel
conflicts are antagonistic in the long-run, unless conflict management is able to
turn adversaries into cooperators.

Wall (1985) simplified, and at the same time broadened, the definition, by
stating that conflict is a process, where two parties attempt to frustrate each
other’s goal attainment. The term, frustration in the definition is a promising step
forward in the current study because it introduces a potential performance
enhancing aspect of conflicts.

For Etgar (1979, p.61) conflict is present when a channel member
perceives the behavior of another channel member to be impeding the
attainment of its goals. Again, the importance of perceptions needs to be
emphasized here. Conflict Is primarily a perception-based construct, and
then either the conflict Itself or its resolution might bring out performance
enhancing consequences from the parties Involved.

Stern and El-Ansary focuses on the perceptional dimension of conflict as
well (1977, p. 283), while Gaski (1984) provides an excellent review of the
evolution of conflict definitions in channel literature.

Molnar and Roberts (1979) introduced a revolutionary approach to the
construct of channel conflict. The positive aspects of conflicts that were first
discovered by sociologists finally re-appeared in organizational relations

research. Their term, operating conflict reflects the need for mutual

30

adjustments by the interacting organizations. Such adjustments are seen as
potential strategic or tactical moves by channel members within the framework of
long-term channel relations. On the other hand, they introduced the term of
structural conflicts, in which the basic roles and responsibilities of channel
members are questioned. Structural conflicts may be even created deliberately,
in order to have them serve as sources of operating conflicts, however, structural
conflicts have a tendency to escalate, and thus hinder channel performance.

Similar arguments led to the definition of the so-called functional
conflicts by Anderson and Narus (1990) and later Menon et al. (1996).
Functional conflicts were distinguished from antagonistic types of conflicts, and
they were defined as a process of healthy exchange of ideas, beliefs and
assumptions within a firm. The definition is obviously applicable to lnterfirm
relations as well, in particular when communication between firms is a key factor
of success. lntemational joint ventures are such organizations.

In terms of operationalizing the main constructs of channel literature, the
research of intra-, and interlirm negotiations provided a significant step ahead.
Publications by Rinehart et al., (1988); Dart (1988); Holmes & Glaser (1991);
Rinehart & Closs (1991); Rinehart and Page (1992); Novack et al., (1994);
O’Connor (1997); Rinehart & Handfield (1998); or Stulmacher et al., (1998)
delineated the domain of negotiation analysis within the context of generally
defined marketing channels. Their findings provide practical and theoretical
guidelines how future research can contribute to our understanding of the

operation of marketing channels.

31

Negotiation literature provides several sets of measures and
measurement approaches. Joint venture managers often conduct negotiations
due to the multiple relationships to be managed in such organizations. However,
most of the measures developed in the field of negotiations do not fit perfectly to
the context of international joint ventures due to the differences in organizational
and environmental settings. Also, the measures may not reflect positive effects
of conflict at all (Balabanasis, 1998; Ahmed & Al-Motowa, 1999). Other theory
streams might provide more apprOpriate conflict measures for the context of
international joint ventures.

The analysis of interorganizational relations also shows that the current
study may contribute to that literature stream along the recommendations of
Achrol (1997) by focusing on intematlonal collaborative ventures as parallel
organizational forms to international alliances, and thus taking a step toward the

emerging network paradigm in marketing.

2.1.4. CONFLICT IN NEW PRODUCT DEVELOPMENT THEORY

The apparent difficulties of the “schizophrenic conflict research”
(Sheppard, 1992) have been resolved with the advances of another key
theoretical research stream: new product development. Sheppard recommended
the development of a meta-model of conflict. Even if such a model is still non-
existent, another idea from Sheppard, the improved generalization of a conflict

model is already available.

32

Interfunctional conflicts are naturally and traditionally present in new
product development projects. The main focus of researchers here is the
success of a new product or the success of the commercialization process. For
decades, the systematization of new product development projects created a
competitive advantage for organizations however, as it is always the case in
management practices, systematization can be easily imitated. Their
intematlonal focus makes the current new product development studies even
more relevant to the current study.

Song and Dyer investigated the success factors of new product
development processes in a series of studies (1995, and Dyer & Song, 1998).
They have found that certain types of companies (defender firms) had relatively
high level of conflict within their organizations, and that fact may provide an edge
in the success of new product development and innovation. Thus the presence
of conflict may be even sanctioned by managers who strive for a competitive
advantage in innovative practices.

Furthermore, a general model of conflict may focus on measuring the
different levels of perceived conflict within an organization or in the context of
an interorganizational relationship.

The measurement design in the study by Xie, Song, and Stringfellow
(1998) supports the assertions of the current study. The authors investigated the
characteristics of interfunctional conflicts and the role it plays regarding new
product success. This study provides empirical support to some of Coser’s

(1956) propositions, and offers a uniformly applicable measure for assessing

33

conflict’s effects on other constructs. Since the original assumption of the
reversed-U shaped curvilinear effect of conflict on performance by Rahim &
Bonoma (1979), this is one of the first empirical evidences to support that
assertion. Xie, Song, and Stringfellow’s study is also concerned with the impact
of culture on conflict. However, unlike the current study, the authors were
focusing on culture’s impact on the selection of conflict management methods.
Such approach may be included in the future extension of this study.

Souder et al., (1998) and Song, DiBenedetto, and Zhao (1999) have
investigated the reasons behind competitive advantages in new product
development and early market entries. They have found that pioneering and
innovativeness is perceived to be associated with higher market share and
profitability (Song et al., 1999). This finding was supported by the perceptions of
managers across nine countries in their cross-cultural study. This is a further
indication that the potential benefits of conflict may be perceived and may be
observable globally. The question remains though, whether such perceptions are
modified by the given culture. This question is to be discussed below at the joint
venture literature streams, and it is also the subject of current investigations in
new product development studies (for instance, Montoya-Weiss et al., 2001 ).

Due to the similar requirements facing mangers in international joint
ventures and in multifunctional product development teams, and also due to the
uncertainties of performance assessment, this theory stream provides direct

support to the primary hypotheses of the current study.

34

2.1.5. THE CONSTRUCT OF CONFLICT POTENTIAL

As it is stated by K.W. Thomas (1992), there is still no generally accepted
definition of conflict in the management literature. Within a series of different
conflict-related studies the construct itself is interpreted in different ways as well.

In the current study conflict has been treated as a very broad and general
construct. However, for the purpose of the measurement model we need to
narrow the applied definition from the point of marketing research. The definition
we use in this study after this point is as follows:

Conflict is present In an exchange situation when there are real or
perceived differences in the Interests, views, or goals between the agents
(Kolb & Putnam, 1992). The recommended measurement approach in marketing
and business research should focus on managerial perceptions.

In the field of lnterorganizational Relations, the construct of conflict
potential was thoroughly conceptionalized and operationalized by Cadotte &
Stern (1979): Conflict potential ls defined as a continuous, antecedent
construct of conflict.

Cadotte and Stern approach the construct from the point of marketing
channels and negotiations. They divide conflict potential into four dimensions.
First, incompatible goals of channel members are potential causes of conflicts. In
this study, the incompatibility of highly important goals is not considered, given
the context of the research. If the partners’ goals are highly different in an

international joint venture, then the organization has a very short life expectancy.

35

The solution to this measurement problem might be a relative weight system of
incompatible goals, however such weighting remains to be developed in future
research.

The second dimension of conflict potential is called domain dissensus. A
domain defines the expectations for channel members about what an
organization will or will not do (Thompson, 1967, p. 29). Conflicts about domain
dissensus are considered task related conflicts, as it was stated by Dyck et al.,
(1996), and therefore they might bring performance enhancing effects. The third
dimension of conflict potential is perceptual incongruence. Differing perceptions
in a relationship may lead to different actions as responses to the same situation.
In other words, incongruent perceptions may generate a greater number of
alternatives to a given problem, and therefore may create competitive
advantages for an organization.

Finally, Cadotte and Stern describe the dimension of interdependence. lt
estimates the degree to which any two partner firms have to take each other into
account if they are to accomplish their goals (Litwak & Hylton, 1962). Similarly to
the dimension of goal incompatibility, we do not utilize this dimension in the
context of international joint ventures. The argument for that decision is that
interdependence of joint venture partners is inherent in the specific relationship.
Further analysis may be focused on evaluating the relative dependency of the
partners, by accounting for the size of parent firms.

The construct of conflict potential has been highlighted in a different

context by Dyck et al., (1996). In their measurement model, conflict potential

36

appears as an alternative to conflict itself. The authors describe an exploratory,
four-stage model, where conflict potential and conflict stimuli together determine
the level of conflict within the system or a relationship. Their approach is highly
relevant to both channel relations and organizational behavior literature because
it may raise the level of internal validity in the measures employed. However,
their study did not focus on relationship conflicts, rather on the potential for task
related conflicts (p. 301). If their observations about the overall effects of
relationship conflicts are correct, then we need to focus on the identification and
measurement of task related conflicts.

The construct of conflict potential has also been linked to the role of
culture. Robbins (1991) stated that the value differences between partners may
represent the most overlooked measure of conflict potential in the study of
organizational conflict in organizational research. Managers traditionally have
been instructed to avoid conflicts, minimize conflict potential, and eliminate
conflict triggering situations. According to the interactionist paradigm (Dyck et al.,
1996), managers may wish to increase the level of conflict potential within
organlzatlons in order to Improve organizational performance. This
observation is in accordance with the current trends driving organizations toward
diversity in many aspects of management, for instance human resources.

Based on the premises of Pondy (1967) and the findings of Dyck et al.,
(1996), conflict potential will be introduced in this study as an alternative

construct to conflict.

37

While conflict was often measured as a discrete variable (e.g., by the
frequency of conflict episodes), conflict potential is by definition a continuous
variable in managerial literature. The additive feature that is discussed by
Cadotte & Stern (1979) makes the construct a candidate for a flexibly, still
universally applicable estimator for predicting conflicts effects on major
constructs in the international management literature.

Conflict potential as a direct, complex antecedent of conflict may bring up
similar beneficial effects on organizational performance than conflict itself.
Therefore, this study investigates such effects by analyzing different levels of

both conflict and conflict potential.

38

2.2. INTERNATIONAL JOINT VENTURES
In the context of international joint ventures, Parkhe (1993 and
1996) and Cavusgil (1998) provided the most comprehensive overview of
research directions. The first of such directions is the motivation behind joint
venture formation (e.g., Tomlinson, 1970; Harrigan, 1985). A basic question
about international joint ventures is their pure existence. Why do firms choose
this organizational form to cooperate? The explanations are categorized into (a)
resource-driven, (b) market-driven, and (c) risk-reduction-driven joint ventures
(Contractor & Lorange 1988). Parkhe (1996) argues for the study of multiple or
multi-level motivations joint venture formation, including other ways of
categorization. One of those methods is distinguishing among internal, external,
and strategic motivations (Harrigan, 1985). Examples of external motivations
include political tensions and global competitiveness. Culture is part of the
external environment thus it simply cannot be ignored at this research domain.
Kogut’s categorization focused on organizational learning and transaction costs
(1988). Location is another motivation mentioned by Parkhe (1996). The role of
culture may also influence location choices for international joint ventures. From
the point of view of the current study the findings of this research direction have
implications for the future studies.
The second research direction is concerned with partner selection and
partner characteristics. In this stream the current study may provide some
contribution. A key strategic question for future joint venture managers is: who

we want to cooperate with (Root, 1994, or Woodside & Pitts, 1996)? Starting with

39

the seminal works of Geringer (1988 and 1991) a whole domain of joint venture
literature is focusing on partner selection issues. Geringer emphasized partner-
related dimensions of partner selections. National culture was found to be a
contributor to the efficiency and effectiveness of cooperation. That is a primary
reason why the current study also considers culture as an influencing factor at
international joint venture performance.

The third major direction is concerned with control and conflict in
intematlonal joint ventures. Constructs are transferred from interorganizational
relations theory as it will be discussed below. The desire for control is one of the
most important problems about lntemational joint venture management (Killing
1983; or Park, 1993). Thus, any culture-driven reduction in the level of desire for
control may be a significant performance enhancer in joint ventures. Conflicts
and the management of conflicts are influenced by the partner’s national and
corporate culture. Conflicts are natural in a relationship and they tend to arise
from numerous reasons. Partner differences and opportunism (Parkhe, 1996)
are emphasized in the literature as factors that lead to joint venture conflicts the
most frequently. Differences between two foreign partners can create Type I or II
diversities (Parkhe 1996). Type I diversity improves joint venture effectiveness
(e.g., reciprocal strengths or complementary resources), while Type II diversity
hinders joint venture effectiveness and performance (Parkhe 1991). Culture-
based differences are included in Type II diversity.

The fourth research direction improves our understanding the problem of

joint venture stability and performance. The literature of international joint

40

venture performance assessment is probably the richest within the domain
(Parkhe 1993). From the point of view of this study, important findings are the
culture-driven differences in perceptions about international joint venture
performance (Osland & Cavusgil 1998). Expectations about and criteria of
performance vary according to cultural dimensions. Thus, cultural dimensions
help understanding the complexity of joint venture performance.

International joint venture stability also is an extensively researched
construct. Instability is generally regarded as a negative factor in joint venture
performance estimations. However, as we may conclude from other literature
streams, instability does not necessarily indicate automatic joint venture failure.
This conclusion is supported by Gomes-Casseres (1987 and 1996).

Parkhe also recommends several approaches in order to accelerate
international joint venture theory development (1996). Focus should be placed
on the constructs of trust, opportunism, and forbearance as the key concepts in
the literature. As he writes (1996, p.440): “Forbearance becomes possible only
when there is reciprocal behavior and mutual trust, which, in turn, only come
about given an absence of opportunism.”

The characteristics, the presence or absence of such constructs in a
relationship are definitely influenced by cultural factors. Parkhe’s (1996, p.440)
other observation, that international joint venture life cycles are not “sequential
and linear, but rather iterative and circular” also calls for further investigations

into the role of culture in shaping those life cycles.

41

Conflict certainly has played an important role in subsequent streams of
lntemational joint venture literature. Even if conflict may only have a marginal
role in performance enhancing, the investigation is necessary. Beamish and
Delios (1997) serve with an example as further motivation for the current study.
They found in their meta-analysis of 12 international research publications that
between 32% and 61% of international joint ventures had unsatisfactory
performance. Madhok (1995, p.117) made a similar statement: “in spite of the
increasing popularity of international joint ventures, managers express a high
level of dissatisfaction with them.”

Theoretically, performance enhancing dimensions should be exhibited at
certain level of perceived conflict. Given the quite diverse general research
directions listed above, we focus directly on the key constructs of the current

study.

2.2.1. THE ROLE OF CONFLICT

International joint venture scholars have traditionally suggested that
conflict has a negative effect on joint venture performance (Killing, 1983;
Harrigan, 1985). Kogut (1988) stated that conflict was found to be a key factor
behind joint venture failures and instability in the research domain. This
perspective has not changed much according to a series of recent studies. Lin
and Germain (1998) presented conceptual frameworks to connect the context of
intematlonal joint ventures to satisfaction with the relationship and performance.

The authors’ focus is primarily on conflict management. A study by Shoham et

42

al., (1997) about lntemational distribution channels found that the lower is the
quality of the channel system the higher is the degree of perceived conflict
between exporters and their relevant channels of distribution. The authors, like
the current study, investigated the role of cultural distance as well. Lau et al.,
discussed conflict in the context of supply chain relations in China (1999). That
study also concerned with the management styles toward conflict. Their work
represents the typical perception of conflict in international joint venture studies.

Until recently, (Fey & Beamish, 2000) there has been no thorough
literature review available about the complex effects of the construct of conflict in
this specific research domain. The study by Fey & Beamish investigated joint
ventures in Russia. The authors analyzed manifest conflict situations. According
to their definition conflict is the interaction between parties involved in an
international joint venture, where the actions of one party prevent or compel
some outcome against the resistance of another party (Fey & Beamish, 2000, p.
142).

Again, conflict is considered as negative construct in joint venture
performance models. Empirical support is quoted from Tillman (1990) who found
in a study of Japanese-Thai joint ventures that conflict was negatively associated
with joint venture performance. The perspective of conflict investigation by Fey 8.
Beamish is perfectly legitimate, and their findings are being further developed by
subsequent studies (e.g., Pothukuchi et al., 2002). However, based on the
advances of organizational behavior literature, this approach utilizes Pondy’s

pre-1992 views.

43

Fey & Beamish also make a note, however, on the potential positive
effects of conflict on joint venture performance (2000). They refer to the study by
Cosier & Dalton (1990). Furthermore, they categorized the potential causes of
conflict in international joint venture. Their findings are directly relevant for
measure development in the current study. Fey & Beamish identified four major
categories of conflict sources:

- Cultural differences between the partners may lead to perceptual
incongruencies;

- The desire for control and autonomy may lead to conflict situations;

- The needs of parent companies may generate conflicts within a joint
venture; and

- The differences in goals may also create conflicts.
Based on the premise of this study, and with the exception of the fourth

source, the findings are incorporated in the survey instrument. High degrees of
the desire for control and autonomy may antagonize perceptual conflict
situations, and we need to control for that factor. The degree of pressure from
parent firms on joint venture managers will also be included in the instrument,
since such pressures may easily antagonize conflicts as well. Cultural
differences are to be approached from the point of major cultural dimensions.

As discussed above, lnterfirm diversity and opportunism were identified as
the primary sources of conflict in joint ventures (by Parkhe, 1996). Based on
these propositions, investigations were directed toward safeguarding against the
occurrence of conflicts in general. Obviously, when managers are exclusively

concerned with the prevention of any potential for conflict or any conflict

44

situation, both the research domain and managerial practice may fail utilizing the
advances of organizational behavior and interorganizational relations research.

However, as Parkhe states (1996, p. 438): “the costs of [conflict]
safeguards can be lowered, and perception of opportunism can be lowered, if
trust develops between joint venture partners.”

The current study may support the statement above by including certain
levels of conflict as a trust-building factor in joint ventures. There is a high degree
of observable overlap between international joint venture literature and
organizational behavior or interorganizational relations theories (Fey & Beamish,
2000). The current study however, adds new dimensions to the research stream
by incorporating the advances of new product development theory and by
placing the focus of its investigation to the perception-based measures of conflict

and conflict potential.

2.2.2. PERFORMANCE

Traditional performance measures for international joint ventures were
often found to be inadequate. A major reason behind this fact is the variety of
reasons even behind the formation of joint ventures. Another important issue is
the great variation in managerial expectations toward international joint ventures.
Even within the same firm, managers from different parent companies may have
highly differing expectations about what success means for the given joint
venture (Osland & Cavusgil, 1996 and 1998). The number of potential

performance measures and also the number of independent, explanatory

45

variables is higher in international joint ventures than in any other business entity
(Geringer & Hebert, 1989 and 1991, lnkpen & Birkenshaw, 1994, Osland &
Cavusgil, 1996). Various sources or antecedents of conflict have also been
considered (Ding, 1997) as predictors of joint venture performance.

The so-called objective performance measures include financial indicators
(such as return-on-investment), market share and market share growth data, and
joint venture survival, longevity, or duration, in terms of calendar years.

These measures were criticized because of their narrowness. Other
problems with such objective measures are that they do not account for the wide
variety in managerial performance expectations. For instance, international joint
ventures may serve as sources of learning for the parent company. In such
cases the profitability of the joint venture may not be a key issue, at least in the
short-run. Therefore, several perception-based measures of performance have
emerged in the literature.

Perceived satisfaction with the joint venture itself is widely applied as a
performance indicator (lnkpen & Birkenshaw, 1994). Hatfield et al., (1998)
analyzed the use of partner’s goal achievement as a performance measure in
joint ventures. Perceived fulfillment of strategic needs by the joint venture,
relative joint venture profitability (for instance, compared to industry averages), or
perceptions on joint venture performance were simultaneously employed in the
literature as performance measures. Application of reliable, perception-based
performance measures is recommended in order to overcome the difficulties with

traditional, “objective” types of measures (Parkhe, 1996).

46

The role of conflict is assumed to be similar on international joint venture
performance to that of in multifunctional new product development teams. The
challenges and the diversity of the management teams are highly similar in the
two contexts. Both contexts present non-routine activities and high degree of
uncertainty in the environment. Perceived conflicts serve as filters of incoming
information and conflicts also serve the creation of alternative solutions to
unexpected managerial situations (Xie et al., 1998).

Conflict’s helpful effects on innovativeness (Coser, 1956) may also serve
similar performance enhancement in case of both contexts. Conflict motivates
information mobilization by the partners (Gray & Starke, 1984), and thus helps
internal adjustments in joint ventures and may extend the survival, the longevity
of such business entities. Assael’s study about conflict situations between
General Motors and its dealers showed that relatively “small amount” of conflict
may be beneficial for channel performance (1973). Pondy’s propositions (1992)
assume that some degree of perceived conflict is necessary for joint venture
survival, while the propositions by Coser (1956) assume that certain degree of
conflict has performance enhancing benefits for joint ventures. Cosier and Dalton
suggested that a “small amount” of structured conflict may be constructive and
have positive correlation with the effectiveness of strategic decision making
(1990).

On the other hand, the several studies that measured conflict’s overall
impact on joint venture performance, have found that there is a negative

correlation within the holistic models (e.g., Tillman, 1990; Cullen et al., 1995).

47

Also, conflict may turn task-related problems into emotional issues, and thus
reduce performance in general (Pelled, 1996). Conflict between joint venture
partners may involve more parent firm management time and effort, thus even
reducing parent firm performance.

As an incorporated hypothesis of the multidimensional effects above, we
expect that there is an optimal, non-zero level of conflict and conflict
potential that optimizes perceived performance in international joint
ventures. That Is, conflict exhibits a concave relationship with the

perceived performance of joint ventures.

2.2.3. TRUST

Research projects utilizing the theory of trust and commitment provided
significant contributions to international joint venture research. Trust was found
to exhibit strong positive correlation with joint venture performance (e.g., Sarkar,
et al., 1997). The positive correlation between trust and performance is also
universally supported by management literature. Ross and LaCroix provided an
exhaustive overview of research approaches toward the construct in negotiation
and organizational relations literature (1996). Their summary proves the richness
of trust-related models in managerial literature. The variety of the models partly
originated in the variety of psychological approaches toward trust.

For the current study we primarily considered the relationship between

trust and international joint venture performance.

48

In their comprehensive work about trust by Das and Teng (2001) stated
that the definition of the multidimensional trust construct is unresolved. Within
the domain of international business alliance research they provide a perception-
based definition that is adapted by the current study: trust Is the degree of
positive expectations regarding the other party.

Doney & Cannon (1997) provided a similar definition, to reinforce our
choice of the perception based approach: trust is the perceived credibility and
benevolence of the target of trust.

In that frame, it is easy to see that too much conflict may erode all trust
between joint venture partners. According to Das & Teng (2001), the two major
dimensions of trust are goodwill and competence based. Goodwill trust is defined
as a construct about one’s good faith, good intentions, and integrity.
Competence trust is based on the resources and capabilities of the firm and its
managers. Such type of trust may directly benefit from the potential effects of
conflict situations and conflict management, in particular through the increased
competency through dealing with managerial problems (Coser, 1956). Goodwill
trust may benefit from the presence of conflict through the perception of the
other party as a sincere, straightforward partner in the relationship.

Trust was found to play three interrelated roles in partnerships such as
international joint ventures (by Aulakh et al., 1996):

1. Trust is a deterrent of opportunistic behavior in partnerships;

2. It may be a substitute for hierarchical governance systems in
partnerships;

3. Finally, trust is a significant predictor of performance in partnerships.

49

The study by Aulakh et al., (1996) found that performance and trust were
strongly and positively correlated in cross-border partnerships. The authors also
noted that trust was culture-dependent, or more specifically they found significant
differences in the role of trust across the investigated geographic regions. This is
a very interesting finding and provides further ammunition for future research.

Madhok distinguished between structural (resource compatibility) and
social (qualitative) components of trust in international joint ventures (1995). He
found that the two components reinforce each other over time therefore any
potential beneficial effect of conflict would enhance the holistic construct of trust.
More importantly, Madhok found that trust clearly exhibits performance and
efficiency improving, value enhancing properties, thus it is positively correlates
with performance.

The relationship between conflict and trust-based commitment was
investigated by Cullen et al., (1995). They provided partial support to the
hypothesis that increased level of conflicts implies reduced levels of commitment
by the partners in an international joint venture. Again, they found significant
support that trust and commitment positively correlates with performance. Their
research method was similar to the dyadic analysis of the current study as well.

Finally, there is a relevant finding from the research domain of
interdependency and trust in social organizations. According to Kumar & van

Dissel (1996), conflict potential and repeated conflict situations may create

50

reciprocal Interdependencies within a system, and therefore reinforce trust
among the participants.

Based on previous research, trust seemingly strongly and positively
correlates with performance (e.g., Lorange and R003 1991 or 1992). On the
other hand, the presence of some level of trust is necessary to benefit from
conflict situations. Trust may be the key construct in preventing conflict situations
from escalation (Dyck et al., 1996). Therefore, the construct of trust is suggested
to be present in all theoretical models that estimate positive impacts of conflict
on performance.

Also, we expect to find similar effects of conflict on trust such as the
effects of conflict on performance, that is the level of conflict and conflict
potential ls expected to exhibit a concave effect on the level of trust
between joint venture partners.

Furthermore, conflict Is expected to correlate positively with trust in
joint ventures characterized with the highest level of perceived
performance and conflict ls expected to correlate positively with

performance In joint ventures with the highest level of perceived trust.

51

2.2.4. LONGEVITY AND STABILITY

As we have seen, joint venture longevity or duration has often been
employed as a measure of international joint venture performance (Geringer &
Hebert, 1991; or lnkpen & Birkenshaw, 1994). Therefore, the longevity of joint
ventures is used in the current study as an alternative measure of performance.
Although it must be noted that joint venture duration might be associated with
high barriers to exit as well. With that side note, and with the existence of some
degree of trust between the partners, we expect to find a concave relationship
between the perceived level of conflict and conflict potential, and the
longevity of the joint venture.

Joint venture stability is a bit more complex issue in terms of research
objectives. Stability and performance assessment have been traditionally linked
together in international business research as well (Parkhe, 1996). However, the
evaluation of joint venture stability is not uniform in the literature (e.g., Gomes-
Casseres, 1987; Parkhe, 1996; lnkpen & Beamish, 1997).

Gomes-Casseres (1987) noted that joint venture instability has alternative
outcomes. An international joint venture might be liquidated completely; it may
be sold to outsiders, but keeps its operation going under a new ownership
structure; or a parent company may buy out the other partner’s interest creating
a wholly owned subsidiary this way. It is clear, that the alternative outcomes

might not have any reflections on the performance of the joint venture, i.e., the

52

joint venture might exhibit a good or satisfactory performance, and still its
ownership structure will be changed.

In their review of the relevant literature, instability is defined by lnkpen &
Beamish (1997) as a degree to which unplanned and premature major changes
occur in the partner relationship status. The prematurity of such changes is
evaluated from at least one partner’s perspective. The concept is static and
problematic as it was stated by Yan (1998). The definition ignores the potential
for joint venture development, since practically all structural changes are
considered as signs of instability. Yan & Zeng (1999) proposed a new definition,
and this is what is transferred to the current study.

Instability is the extent to which an international joint venture alters
Its strategic direction, renegotiates Its contracts, reconfigures its
ownership structure, or changes its relationship with Its parent companies.

Following the spirit of the process-oriented approach of the definition, the
use of secondary data is not recommended by the authors. Therefore, this
current study will employ perception based primary measures as well. The
definition of stability will be narrowed, referring to major strategic changes in the
joint ventures life. In that narrow sense, conflict may exhibit its change initiator
character (Coser, 1956). Thus, whether or not the partners trust each other, the
perceived level of conflict and conflict potential is expected to exhibit a
negative association with the level of perceived stability in International

joint ventures.

53

2.3. INTEGRATION OF LITERATURE STREAMS

A very important implication of this review is that the measurement of
conflict is somewhat ambiguous in the literature. Etgar (1979) provided the first
overview of potential conflict measures. His categorization is highly important for
the current study, since the different sources of conflict may serve as building
blocks for the construct of conflict potential (Cadotte & Stern, 1979).

- Manifest conflicts may be measured by the frequency of their
occurrence;

- Affective sources of conflicts may be measured through the level of
harmoniousness of a relationship, the level of satisfaction with a
relationship, and the relative willingness to change a relationship;

- Attitudinal conflict sources are the lack of clarity in roles within a
relationship, the divergence in perceptions, and communication
problems;

- Finally, structural, or “antagonistic” sources of conflict are represented
by the partners’ goal divergence, the drive for autonomy by individual
channel members, and the competition over scarce resources within a
relationship.

Rosenbloom (1978) summarized conflict measures similarly to Etgar

(1979); the only significant difference is the lack of general categories at
Rosenbloom’s work. Wall (1985), on the other hand, presents a simplified, and
perhaps more manageable system of conflict sources, focusing on (a) the
interdependence of the partners; (b) the differences in goals; and (c) the
differences in perceptions.

Wall’s summary represents a consensus among channel researchers.

Interdependence automatically leads to conflicts, goal differences typically lead

54

to conflict escalation situations, while perceptional differences are always
present, and the level of such differences seems to be the key dimension in
determining the force of the resultant conflicts (Cadotte & Stern, 1979).

Brown and Day (1981) focused on the outcomes of individual conflict
situations. They recorded a series of conflict episodes. However, their approach
leads us to a direction where each relationship should be analyzed individually.
The general validity of their findings might be questioned by some researchers.

Rinehart and Page (1992) compared the concession levels by the
negotiating parties. Their approach is certainly valid in the given environment
however, it cannot be applied to the context of international joint venture
managers due to the difficulties of estimating the concessions they make during
their regular, everyday negotiations.

The question is how to maintain the external validity of the research while
the measures applied exhibit a high level of internal validity and reliability as well
(Hair at al. 1995)?

For the purpose of this study the repeatedly used conflict dimensions are
the most interesting ones. However, antecedents that typically lead to
antagonistic conflicts have no value in detecting potential positive effects of
conflicts. As we have seen the various conflict measures have consistently
included the perceptional differences between partners, and such differences
may be the key dimensions of the mentioned “constructive,” “operating,”
“healthy,” or in general positive conflicts within a relationship. Therefore the

measures applied in this study are primarily based on managerial perceptions.

55

Based on the propositions by Coser (1956), Pondy (1992), and the
detailed analysis of conflict potential by Cadotte and Stern (1979), and within the
context of international joint ventures antagonistic conflicts directly tend to lead to
the liquidation of a joint venture due to the non-resolvable differences between
partner firms and partner managers. The insight by Serapio and Cascio (1996) is
considered very important for this study. The authors analyzed the reasons
behind the termination of international alliances. Joint ventures are narrowly
defined forms of alliances, and successful alliances often terminate after meeting
the partner companies’ goals. Thus, major goal differences will not be included in
the recommended measures of conflict and conflict potential in this study.

The lack of focus on major conflict situations may be explained by the
theories of escalation as well (Janssen & van de VIiert, 1996). Rapidly escalating
conflicts would likely rapidly dissolve an instable organization such as a joint
venture. Also, several conflict measures based on perceptual incongruencies
were found to provide significant results by the exploratory study by Rosenberg &
Stern (1971). Thus:

Non-antagonistic conflicts are conflict situations, which are
recognized by joint venture partners, and are based on interdependency,
task-related, or domain-related perceptual incongruencies.

Non-antagonistic conflict potential is a continuous, antecedent
construct to non-antagonistic conflict. In terms of measurement, non-

antagonlstlc conflict potential estimates managerial expectations about the

56

future occurrence of non-antagonistic conflict situations, when some level
of trust is present between the partners, so conflicts tend not to escalate.

Measures developed by Cadotte and Stern (1979) are to be modified
according to this definition to test the research hypotheses. As a control
mechanism, measures developed by Habib (1987) are also to be employed like
an alternative to purely perception—based measures. Manifest conflict measures
may not lead to the same results as the use of measures based on perceptions,
but they serve as a control for the current theory development. Habib’s
composite measure consists of the frequency of disagreements over key
managerial issues multiplied by the intensity of disagreements over the same set
of issues.

In the domain of lntemational joint ventures, Beamish and Banks (1987)
have emphasized the importance of our understanding of synergies In the most
successful joint ventures. Without a drive for understanding the elements of such
highly complex organizations, the real factors of success might remain hidden
from researchers. Insights provided by this study help identifying conflict’s role in
creating such synergy.

In this study the first set of hypotheses is concerned with the estimation
and measurement of the effects of conflict and conflict potential on performance,
trust, stability, and longevity in international joint ventures. Based on the
literature review, it is a reasonable to argue that the ambiguity about conflict’s
effects is mostly due to the differences in conflict categorization methods and

measurement approaches. If we were able to measure and evaluate the

57

potentials in conflict situations for beneficial effects, then we would be able to
turn full attention to fine-tuning management approaches. The new product
development literature stream provides a universally applicable approach for
management and marketing scholars. Summarizing the hypotheses discussed
above: the level of conflict In international joint ventures Is expected to
exhibit a concave relationship with both joint venture performance and
trust between the partners.

Robinson’s (1995) research and Yarbrough and Wilmot’s book (1995)
highlighted the long-term advantages of recognizing conflict situations within an
organization. Experience with conflict situations itself may prolong an
organization’s life expectancy (Simon, 1963) by continuously creating survival
alternatives in crisis situations and by preventing deep crisis situations
altogether. Again, the level of conflict is expected to exhibit a concave
relationship with International joint venture longevity.

Following the recent revision in the definition of stability by Yan and Zeng
(1999), the level of conflict and conflict potential is expected to correlate

negatively with perceived levels of International joint venture stability.

2.4. PROPOSITIONS ON THE HOLISTIC EFFECTS OF CONFLICT
It has been transparent from the literature review that the overall effect of
conflict is expected to be negative (e.g., Gaski, 1984). Therefore a simple,

holistic model is developed to assess such effects within the framework of

58

lntemational joint ventures. The model is intended to investigate the assumption
that coarse-grained research, which often ignores the impact of important
variables, such as different levels of non-antagonistic, perceived conflict, or
variables of culture, may consistently ignore potential benefits that are due to the
presence of conflict. Dart (1988) also notes that socioeconomic factors
seemingly played little role in our understanding of channel relations.

The major constructs of the model have been identified by the works of
Gaski (1984) and Gaski & Nevin (1985). Power, control, conflict, satisfaction, and
various measures of performance are the most often used constructs in
interorganizational relations or channel literature.

Based on Gaski’s (1984) findings, and considering the similarity of
channel research to joint venture research (Fey & Beamish, 2000), we assume
that conflict correlates negatively with both trust between the partners, and the
perceived performance of international joint ventures.

According to Lin & Germain’s study (1998), relative power is often linked
to performance and satisfaction in both supply channels and joint ventures. The
main reason behind that similarity is that perceived control over decisions
correlates with greater levels of satisfaction of channel members (Dwyer, 1980).
Joint venture partners may be more satisfied with the business entity’s
performance when they perceive themselves to be in a position of control.
Therefore we expect to observe similar relationship between the constructs, i.e.,
perceived level of power exhibits positive association with joint venture

performance and also a positive association with perceived control. There is also

59

an indication in the literature that the presence of different control systems has
some measurable, positive impact on channel performance (Bello & Gilliland,
1997), and this finding is being adapted to the context of joint ventures.

Gaski also noted that power has a two-dimensional impact on perceived
conflict, that is coercive sources and use of power generate higher levels of
conflict while non-coercive sources and uses of power generate lower level of
conflict. Since the various sources of power are not investigated by the current
study, and this relationship remains ambiguous in the simplified model (Figure
1).

Finally, the positive association between trust and performance has been
proven in a great number of various theoretical models (Ross & LaCroix, 1996),
thus, we assume that within the context of joint ventures the level of trust
between the partners exhibits a positive correlation with the level of perceived
performance. In the current study, the relationships explained above are included
as research propositions. With an appropriate sample size these relationships

may be tested within the framework of a structural equation model.

60

Figure 1: Propositions on Conflict’s Overall Impact on Performance and

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Trust

Control TI
+
A
V
+
Trust , Performance
+
+
Relative Power +/_ Conflict

 

 

 

 

 

 

 

 

 

 

61

2.5. THE ROLE OF CULTURE IN MANAGERIAL THEORIES

It is extremely difficult to attempt measurement or even definition of
conflict without accounting for the contextual circumstances (Kolb & Putnam,
1992). Culture is a key dimension of the context of this study.

The potential interaction between conflict, conflict management and
cultural variables was already discussed by Lewin (1948). Lewin’s book primarily
had a sociological interest, but It certainly created research interest toward a joint
investigation of conflict and culture. The role of culture in managing ambiguity
also received attention by Pondy (1973) and Thomas (1992), however, the focus
of selected articles was placed on organizational cultures instead of national
ones.

The practical side of business research has always been concerned with
culture’s Impact on International joint venture management (Lynch, 1993; Park,
1993; Barkema et al., 1997; or Buchel et al., 1998). In international business
research various interpretations of the construct of culture have always been in
the focus (e.g., Johanson & Vahlne, 1977). Interestingly, a great percentage of
recent publications is concerned with joint ventures In the economic regions of
the People’s Republic of China, including Hong Kong (a non-exhaustive list
includes important studies by Beamish & Wang, 1989; Beamish, 1993; Pan et
al., 1995; Yan & Gray, 1995; Baran et al., 1996; Child & Lu, 1996; Osland &
Cavusgil, 1996; Xuan & Graf, 1996; Ding, 1997; Luo & Chen, 1997; Lin &
Germain, 1998 and 1999; Yang et al., 1999; Pan & Li, 2000; Calantone & Zhao,

2001; Johnson et al., 2001; Tsang, 2001; Shi, 2001; or Wong & Ellis, 2002).

62

The research findings from these studies are incorporated into our current
knowledge about joint ventures. Without a doubt, the region of the Pacific Rim
and China is an exciting field for research and offers a high degree of richness In
terms of practical research of joint ventures. Another significant stream of
literature focused on the transitional economies, like China, but also including
such countries in Europe (e.g., Lyles & Salk; 1996, Lyles, Carter, and Baird,
1996; Si & Bruton, 1999; Steensma & Lyles, 2000; or Griffith et al., 2001).
Seemingly, transitional economies provide the most promising background for
enhancing our understanding of the management issues regarding international
joint ventures.

This study attempts to provide a complete picture on the interaction of
conflict and the major dimensions of culture, based on a survey of joint ventures
In one of those transitional economies, Hungary. The location Is justified in the
methodology section. Here we just make a note about the cultural richness of
joint venture partners available in Hungary. The variety of cultures present in that
country’s set of international joint ventures makes us able to test all major
hypotheses there.

In 1997, Shoham, Rose, and Kopp have estimated conflict’s role within
the context of International distributions channels. One of their significant
contributions to international business research is the introduction of the
relationship between perceived conflict and the construct of cultural distance.
Their hypothesis that cultural distance of the business partners Is positively

associated with the perceived level of channel conflict was supported by the

63

findings. In the current study, we attempt to measure the interaction between
conflict and the major cultural dimensions (Hofstede, 2001), and also cultural
distance (Kogut & Singh, 1988). According to previous research, cultural
distance is expected to be negatively associated with any positive effects of
perceived conflict.

As Hoftsede warns us (1994), managers and management scientists are
human. Yes, the role of culture matters In even narrow subfields of marketing,
such as electronic communications (Ross, 2001).

We need to account for the soft side of management in our measurement
models as well. Geert H. Hofstede, a Dutch social psychologist had outlined and
extended his theory a several times about the role of culture in international
business and culture’s influence on management practices (originally published
in 1980, then followed by subsequent studies in 1985, 1993, 1994, 1996, 1999
and 2001). Based on the definition of the dimensions, each has inherent
relations toward conflict and conflict management. Thus, the four major
dimensions of culture are expected to exhibit the following modifying effects on
the conflict versus joint venture performance relationships. The major
dimensions of national culture according to Hofstede are as follows:

Power distance is the difference between the extent to which a boss (B)
can determine the behavior of a subordinate (S) and the extent to which (S) can
determine the behavior of (B). In general terms, it is the extent to which less
powerful members of organizations in a country expect and accept that power is

distributed unequally. In relation to conflict, Hofstede’s definition suggests that

64

cultures where the respect toward power is greater will tolerate lower levels of
conflict than cultures where the respect for power is relatively low. Thus, the
lower the power distance, the greater is the positive effect of conflict on
performance.

Hofstede’s second dimension is uncertainty avoidance, and it is
defined as the extent to which the members of a culture feel threatened by
unknown or uncertain situations. In general terms, it is the relative willingness
(unwillingness) of members of a society to take risks. Similarly, uncertainty
avoidance represents the degree to which a society protects conformity to
counter ambiguity. Risk avoidance implicitly reduces any effects of conflict, let
alone its potential positive Impacts. Thus, the lower is the uncertainty avoidance
the greater is the perceived positive effect of conflict on performance.

The dimension of individualism is tied together with its opposing
construct, collectivism. In individualistic societies the social ties between
individuals are loose. People are expected to look after themselves and their
immediate families only. In collectivist societies people are integrated in strong
cohesive groups, which tend to protect them throughout their lifetime in
exchange for certain degree of loyalty. lndividualistic cultures have a higher
tolerance for conflict than socialistic cultures, therefore, the higher is the degree
of Individualism, the greater is the perceived positive effect of conflict on
performance.

Masculinity stands for a society where social gender roles are

clearly distinct, and primarily men are supposed to be concerned with the quality

65

of life. In feminine societies gender roles tend to overlap, both men and women
are supposed to e concerned with the quality of life. The problem with the
masculinity dimension is similar to the major goal differences at the construct of
conflict potential. There is an inherent risk in cultures characterized with high
masculinity that conflicts will rapidly escalate (Janssen & DeVliert, 1996).
Therefore, the lower the level of masculinity, the greater is the perceived positive
effect of conflict on performance.

In 1991, a fifth dimension was introduced. Long-term orientation
refers to cultures which are characterized by persistence, ordering relationships
by status, and also observing this order, respecting tradition, and having a sense
of shame. It leads to a strong work ethic where long-term rewards are expected
for today’s hard work. Cultures that tend to be short-term oriented are
characterized by personal steadiness. Changes can occur more rapidly in these
cultures because traditions and long-term commitment do not become
impediments to change. The relative speed of changes is a key dimension of
conflict’s beneficial effects in this study. Therefore, we expect that the perceived
positive effects of conflict will be greater in cultures characterized with short-term
orientation, than it will be in long-term oriented cultures. However, In an extended
model, considering the effects of conflict management methods, long-term
oriented cultures might utilize conflict’s beneficial effects more than short-term

oriented cultures. We need to accept this limitation of the current study.

66

Hofstede’s dimensions often interact with each other. Thus a
number of different combinations should be tested in order to understand their
complexity.

An example is presented in Table 1, based on the set of conflict

management models presented by Kozan (1997).

Table 1: Interactions of Cultural Dimensions and Conflict

(by Hofstede, 2001, and Kozan, 1997)

 

Dimensions Low Power Distance High Power Distance

 

Low Uncertainty Confrontational Model: Harmony Model:

Avoidance The role of conflict may The role of conflict
be an important factor might be very limited in
of maintaining maintaining or
relationships and improving relationships
enhancing performance

 

High Uncertainty Regulative or Regulative Model:
Avoidance Confrontational Model: The role of conflict may
The role of conflict may be highly limited or non-
be important when other significant

conditions are present

 

 

 

 

 

Kozan’s problem-approaching models serve our future research interests,
since such models implicitly account for the impact of cultural dimensions. Such
models may also serve us In categorizing countries according to their cultural
relatedness to different conflict management approaches. Similar models may
be developed along the works of Blake & Mouton (1964) or Tjosvold (1991).

However, to test a multidimensional model such as the one above calls for a

67

large-scale, multinational research project. In the context of this study, the
analysis along single-dimension is arguably appropriate, given that one partner is
always going to be from the same country, as it is discussed in the methodology
and research design section (Chapter 3).

Also, with the increasing complexity of culture-related hypotheses, we
might lose out on the strength of the expected correlations. For instance, Makino
and Neupert (2000) have not found any support to the investigated culture —
entry mode selection relationship. Similarly, Brannen & Salk (2000) found that
cultural variables may be explanatory variables only to the extent that they serve
as conceptual anchors to other constructs. Thus, the analysis of single-
dimensions would contribute significantly to current research.

The use of Hofstede’s dimensions has been criticized by international
business researchers, mainly because of issues about the measures Internal
validity. An alternative approach, assessing the psychic distance of countries
was presented by the Uppsala school of international business research.
Johanson and Vahlne (1977) used the construct to explain foreign entry
strategies within the general framework of internationalization process. However,
the use of the construct in measurement models has been criticized by O’Grady
and Lane (1996). They found that management and operation of firms in
psychically close countries was not necessarily easier to do than in countries
with large psychic distances from the home country. Use of the measure In

market entry models was also called as “sporadic and flawed” (Dow, 2000).

68

The concept of cultural distance has been also introduced. This construct
Is based on Hofstede’s scores, and at the same time provided an alternative to
Hofstede’s system of cultural dimensions (Kogut & Singh, 1988). Cultural
distance is a composite index incorporating country scores along the four
dimensions of Hofstede’s study. The construct of cultural distance has also been
criticized, for instance, for not exhibiting significant relationship with entry mode
choices (Brouthers & Brouthers, 2001). According to Shenkar, the construct of
cultural distance needs to be revised (2001).

Therefore, due to the contradictory research findings, in this study both
Hofstede’s original cultural dimensions (Appendix 1) and the measure of cultural
distance will be employed alternatively. Cultural distance may be estimated with
the perception-based measurement approach of Boyacigiller (1990). Another
alternative cultural measure was developed by Maznewski, DiStefano, Gomez,
Noorderhaven, and Wu (1997), as It was referred by Kirkman & Shapiro (2001),
however, this measure is not accessible by the author.

Cultural distance is very likely to exhibit significant interaction effects with
conflict, whatever is the chosen measurement approach. Conflicts may serve as
cultural practice situations (Weisinger & Salipante, 2000), and all parties may
learn through conflict processes. Conflicts, again, by definition, may be tolerated
better by partners who are culturally (psychically) close. Thus, as an alternative
attempt to incorporate culture’s impact on the conflict — performance relationship,
the role of cultural distance is incorporated into the current study as follows: the

positive effects of conflict / conflict potential on performance are greater in

69

international joint ventures where the cultural distance between the

partners Is relatively lower.

2.6. SUMMARY AND RESEARCH HYPOTHESES

In today’s management practice multi-departmental project teams create
new products. Labor and management groups negotiate on a daily basis to
Improve productivity and work conditions. Culturally diverse manager teams work
together to accomplish similar or common goals. Such practices run contrary to
traditional organizational philosophies that avoid conflict (Tjosvold, 1988).

Indeed, these practices implicitly prove that conflict can be constructive,
productive, operating, and positive in relation to the survival, and performance of
an organization.

Based on the literature review, three major groups of hypotheses are to
be tested. The basic premise of the study is to investigate conflict’s beneficial
effects, and to introduce the perceived conflict potential as an alternative
measure to conflict levels. In addition, the context specificity makes it possible to
investigate the interactions between cultural dimensions and conflict or conflict
potential. Propositions for a holistic model are also developed to support future
model development involving both conflict and conflict potential within the more

complex framework of power, control, trust and organizational performance.

70

Overview of the Hypotheses:

(1) Conflict-related hypotheses

H1:

H2:

H3:

H4:

The level of conflict has a concave effect on the perceived performance of
international joint ventures

The level of conflict has a concave effect on trust between international
joint venture partners

The level of conflict has a concave effect on the longevity of international
joint ventures

The level of conflict has a negative association with the level of perceived
stability of international joint ventures

Note: Hypotheses 1a through 4a are identical to Hypotheses 1 through 4 above,

employing a different measure of conflict.

(2) Conflict Potential-related hypotheses:

H5:

H6:

H7:

H8:

The level of conflict potential has a concave effect on the perceived
performance of international joint ventures

The level of conflict potential has a concave effect on trust between
international joint venture partners

The level of conflict potential has a concave effect on the longevity of
international joint ventures

The level of conflict potential has a negative association with the level of
perceived stability of international joint ventures

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(3) Trust-related hypotheses:

H9:

H10:

H11:

H12:

Note:

Conflict is expected to correlate positively with trust In joint ventures
characterized with the highest level of perceived performance

Conflict potential is expected to correlate positively with trust in joint
ventures characterized with the highest level of perceived performance
Conflict is expected to correlate positively with performance in joint
ventures with the highest level of perceived trust

Conflict potential Is expected to correlate positively with performance in
joint ventures with the highest level of perceived trust

Hypotheses 103 and 12a are identical to Hypotheses 10 and 12,
respectively, employing a different measure of conflict.

Culture-related research propositions:

P1:

P2:

P3:

P4:

P5:

P6:

The perceived positive effect of conflict on performance is greater in
cultures with relatively low level of uncertainty avoidance than it is in
cultures with relatively high level of uncertainty avoidance

The perceived positive effect of conflict on performance is greater in
cultures with relatively low level of power distance than it is in cultures with
relatively high level of power distance

The perceived positive effect of conflict on performance is greater in
cultures with relatively low level of masculinity than it is in cultures with
relatively high level of masculinity

The perceived positive effect of conflict on performance is greater in
cultures with relatively high level of individualism than it is in cultures with
relatively high level of individualism

The perceived positive effect of conflict on performance is greater in
cultures with relative short-term orientation than in cultures with relative
long-term orientation

The perceived positive effect of conflict potential on performance is
greater in cultures with relatively low level of uncertainty avoidance than it
is in cultures with relatively high level of uncertainty avoidance

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P7:

P8:

P9:

P10:

The perceived positive effect of conflict potential on performance is
greater in cultures with relatively low level of power distance than it is In
cultures with relatively high level of power distance

The perceived positive effect of conflict potential on performance is
greater in cultures with relatively low level of masculinity than it Is in
cultures with relatively high level of masculinity

The perceived positive effect of conflict potential on performance is
greater in cultures with relatively high level of individualism than it is in
cultures with relatively high level of individualism

The perceived positive effect of conflict potential on performance is
greater in cultures with relative short-term orientation than in cultures with
relative long-term orientation

P11: The positive effect of conflict on performance Is greater in international joint

ventures where the cultural distance between the partners is relatively
low, than in international joint ventures where the cultural distance Is
relatively high

P12: The positive effect of conflict potential on performance is greater in

international joint ventures where the cultural distance between the
partners is relatively low, than In international joint ventures where the
cultural distance Is relatively high

73

Research Propositions for a Holistic Model

P13:

P14:

P15:

P16:

P17:

P18:

Perceived relative power is positively associated with control in
International joint ventures

Perceived relative power is positively associated with trust in international
joint ventures

Perceived control is positively associated with international joint venture
performance

The level of conflict is negatively associated with trust between joint
venture partners

The level of conflict is negatively associated with international joint venture
performance

Trust between the joint venture partners is positively associated with

International joint venture performance

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3.1.

Chapter 3

RESEARCH DESIGN AND EXECUTION

DESCRIPTION OF THE THEORETICAL MODEL

3.1.1. ASSUMPTIONS AND THE MAJOR CONSTRUCTS

Several researchers, including Habib (1987); Shoham et al., (1997); and

Xie et al., (1998) recommended changes in the theoretical and measurement

models of conflict in international business contexts.

We assume that international joint ventures, by definition, should not

exhibit high levels of goal incongruencies (Cadotte & Stern, 1979) because it

would eliminate the business entity itself, i.e., it would lead to antagonistic types

of conflicts within the organization. Based on the review of conflict models by

Lewicki, Weiss, and Lewin (1992), and the propositions by Tjosvold (1991) the

following assumptions about joint venture conflicts are implicitly included in the

theoretical model and the survey instrument:

Non-antagonistic conflicts do not result in the elimination of the joint
venture Itself

Non-antagonistic conflicts are primarily based on managerial perceptions
Conflict situations are not zero sum games, win-win resolutions are
possible

All types of the investigated conflict situations are negotiable

Joint venture managers are willing and able to negotiate conflict situations

These assumptions clarify potential misunderstandings during data collection.

75

The major constructs of the model Include the perception-based conflict and
conflict potential, the perception-based and the financial performance of the joint
ventures, trust between joint venture partners, the longevity of the joint ventures,
the perceived stability of the joint ventures, the original four constructs of cultural
dimensions by Hofstede (2001), and the construct of cultural distance (Kogut &

Singh, 1988).

3.1.2. OVERVIEW OF THE MODEL

This study’s primary focus is on the estimation of potential positive effects
of conflict and conflict potential. Thus the main set of hypotheses attempts to
estimate such effects.

First, the associations between various levels of conflict and conflict
potential, and international joint venture performance will be tested.

Then the effect of conflict and conflict potential on the main constructs of
international joint venture research will be estimated, including trust, longevity,
and stability of the joint ventures.

Finally, in accordance with the survey responses, an estimation of
culture’s impact on the association between the main constructs of the study by
employing both Hofstede’s model of cultural dimensions (2001) and the
construct of cultural distance as outlaid by Kogut and Singh (1988).

The analytical steps are going to employ Pearson correlation coefficients

and multiple OLS regression models.

76

3.2. OPERATIONALIZATION OF THE VARIABLES

With the only exception of Conflict Potential, all the measures have been
previously developed, tested, and used in international management or
interorganizational relations studies. Conflict is measured in two ways in this
study. First, with the approach developed in this study, based primarily In
managerial perceptions on conflict and slightly modifying the measures of Dyer &
Song (1997). Second, as a control method, a measure from the traditional views
on conflict is included in the survey Instrument, according to the measures
developed by Habib (1987).

The construct of Conflict Potential is reexamined and defined for
the purpose of this study, although these are the only new measures to be
developed for this study. The measures have been tested in a classroom
environment with the help of second and third year marketing students at the
University of Lethbridge, in Alberta, Canada. They have been credited for their
time and participation.

A summary of the measures and their sources is presented in Table 2,

while the instrument items are summarized in Appendix B.

77

Table 2: Construct Measures and References:

 

Conflict

Measures developed by Habib,
1987, and by Dyer & Song, 1997

 

Conflict Potential

Developed for the current study
based on the work of Cadotte &
Stern, 1979; Dyck et al., 1996; and
Dyer & Song, 1997. Pilot
questionnaires have been
conducted. The measure has a
reliability of Alpha = .76

 

Control

By Ding, 1997

 

Cultural Distance

Shoham et al., 1997

 

Dimensions of Culture

The country scores serve as
proxies, by Hofstede, 2001

 

 

 

 

 

 

 

Longevity Survey-based variable: the length of
the joint venture’s operation, in
years

Performance Lin & Germain, 1998
(following the guidelines of Geringer
& Hebert, 1991; and Anderson,
1990)

Power Lin & Germain, 1998

Stability Yan & Zeng, 1999

Trust Aulakh, Kotabe, & Sahay, 1996

 

78

 

3.3. METHOD

In addition to the principal steps of marketing research (Bagozzi, 1994);
there are several key issues to pay close attention to when conducting cross-
cultural research. Cavusgil & Das (1997a and 1997b) provide extremely useful
summaries of such issues. First, the sampling design should ensure that the
targeted cultural or country variety can be achieved. In this study that would
mean an appropriate sample frame for all eight blocks of cultural dimensions.
However, given the accessibility and the characteristics of the sample frame,
there are only four blocks represented in the current study: high and low levels of
the dimensions of individualism and masculinity.

Cost factors are also highly important in the sampling procedure. This is
the point to thank the support of the Research Excellence Envelope grant at the
University of Lethbridge, since they generously supported the sampling and data
collection costs of the study. Equivalency of the administration will be ensured by
equivalency in timing and in the structure of the questionnaires as well.

There will not be a need to train local administrators, since the survey is
exclusively administered by the primary researcher by telephone. Internal validity
of the construct measures will follow the guidelines of Mintu et al., (1994). Factor
analysis and Cronbach’s alpha are employed In the evaluation of internal validity
and reliability of the measures of the survey (Cavusgil & Das, 1997a; Cohen and

Cohen, 1983, and Hair et al., 1995).

79

External validity of the study is based on the experts’ opinion before
administering the survey. Here a large number of studies in previous literature
will serve as proxies for experts. The external validity of most measures has
been thoroughly investigated by a series of studies (Rosenberg & Stern, 1971;
Cadotte & Stern, 1979; Rinehart et al., 1988; and Rinehart & Handfield, 1998).
Conflict potential is developed based on the tested model of Cadotte & Stern
(1979). However, external validity will be re-tested by in-depth interviews after
the data collection stage is ended. In terms of univariate and multivariate
analysis, international data should be managed with similar methodological

requirements such as a single country database.

3.3.1. LOCATION AND SAMPLING

The location of data collection is the European country of Hungary.
Hungary was a communist country for forty years. The country’s economy is in a
constant transition since the political system changed in 1989. Hungary provides
a rich base of international joint ventures, since thousands of such ventures have
been started there beginning even before the political changes.

Another methodology-based reason for selecting Hungary is that the
researcher’s nationality is Hungarian. Therefore the translation and back-
translation of the instrument may be managed and administered by the primary
researcher. In addition the commonly used language of business In Hungary is

English. Therefore, a bilingual survey instrument should sufficiently serve the

80

purpose of the study. This method is widely accepted in joint venture research
(e.g., Si & Bruton, 1999).

Hungary was also selected by Meschi (1997) as the location of
international joint venture research because of the large selection of partners
from culturally diverse backgrounds. This study tests the hypotheses from a
similar point of view to Meschi’s approach of surveying international joint venture
managers.

Language and translation problems are one of the primary difficulties with
cross-national surveys (Cavusgil & Das, 1997a and 1997b; and Mintu et al.,
1994). In this case, all the selected joint ventures all have Hungarian managers
and all managers use English in their everyday business practices. Therefore a
bilingual, Hungarian and English survey instrument will be developed. The
instrument will be translated and back—translated by bilingual Hungarian
professionals at the University of Lethbridge, Alberta, Canada.

Sampling is based on a stratified random selection approach. The list of
managers and international joint ventures are selected by a private, Hungarian
market research company, Kopint-Datorg. The firm previously was owned by the
state, and it has access to all major statistical data bases and business address
lists of the country. A list of a sample frame will be purchased from Kopint-

Datorg, and then the selection of respondents will be administered randomly.

81

3.3.2. DATA COLLECTION: THE SURVEY METHOD

The study involves primary data collection by telephone to test the
proposed set of hypotheses. Campbell (1955) stated that informants should be
knowledgeable about the phenomena under study and should be willing to share
their experiences, i.e., communicating with the researcher. These guidelines will
be followed during the selection of respondents. Surveys are widely used in
international management research. Their application has several setbacks
however; they are also accepted by all major international scientific publications.

In order to maximize the pace and effectiveness of data collection, a
telephone survey method will be employed. In this study the survey may not be
based on the Internet because a great number of joint ventures do not have
Internet access, while other firms do not use the Internet extensively or at all.

One of the major disadvantages of telephone surveys is their relatively
high costs. However, in this case, thanks to the reduced overseas telephone
rates and the generous support by various research grants from University of
Lethbridge, the overall costs per response was matched very favorably to that of
a mail survey.

Another important requirement for the researcher is to ensure consistency
across the answers and constructs. In this study, when it’s appropriate, all
measures will be presented in uniform, 7-point Likert scales. Likert scales tend to
provide a level of variation in the responses that is sufficient for correlation

analysis and multivariate analytical methods (Hair et al., 1995).

82

In an additional effort to improve response rates and participation, the
surveys are supported by the Budapest University of Economic Sciences, the
most respected academic institution in the fields of business and economics in
Hungary. The surveys will also include official supporting statements from both
the Department of Marketing & Supply Chain Management at the Michigan State

University and School of Management at the University of Lethbridge.

3.3.3. METHODS OF ANALYSIS

The analytical section begins with the widely applied methods of
univariate analysis (Hair et al., 1995). Cross-tabulation generates a snapshot of
the survey participants and the involved international joint ventures. Pearson
correlation coefficients are used to test the interdependence of the main
variables in the study.

The relationships among the main constructs of the study are analyzed by
multiple OLS regression models. In order to capture the non-monotonic curve of
the conflict-related hypotheses, these regression models follow the design and
recommendations by the study of Xie, Song and Stringfellow (1998) and by
Cohen & Cohen (1983). If the sample allows, interaction effects of cultural
dimensions are to be investigated with the help of dummy variables. To reduce
the potential problem with multicollinearity, all independent and dependent

variables are mean-centered (Jaccard et al., 1990).

83

Chapter 4

SURVEY RESPONSES AND PROFILES

4.1. SURVEY RESPONSES

4.1.1. TELEPHONE SURVEY METHOD

Telephone surveys are considered as valuable sources in exploratory
research, and quite frequently used in international business research projects
(Cavusgil & Das, 1997). Telephone surveys have numerous advantages over
alternative survey methods (Frey, 1983, Fowler, 2002).

In terms of administration of the survey, the sample size, the length of the
questionnaire, and the geographic dispersion of the sample help determine the
best method. In this study a sample size of about a hundred respondents was
targeted, and that number may be reasonably managed on the phone. The
questionnaire itself consists of thirty-eight questions however, some of those
questions may be answered by the data available within the joint venture
information set from the sample frame. Therefore, a 15 to 20 minute interview
seemed to be the average time necessary to complete a questionnaire. Again,
although there are certain cost factors to consider, telephone is a viable method.

In addition, the sample is quite dispersed geographically. Although the
joint ventures are all located in Hungary, a great many of them are in distant,
rural areas. Organization of personal interviews wouldn’t be impossible however,

it would call for a geographic stratification in the sample.

84

That would also be a quite costly approach. The telephone survey is a
more appropriate method in that sense as well.

In terms of the personnel requirements, even for a relatively small sample
size there would be a need for several trained interviewer. On the other hand,
the phone survey, as it has happened indeed, can be administered by the
primary researcher, and thus eliminate potential interviewer bias.

Considering the implementation time, telephone interviews are again,
more flexible than personal interviews, not even considering the time needed for
recruiting and training interviewers. In international research it is advisable to
complete a round of data collection within a time frame of 4 to 6 weeks (Frey,
1983). Mail surveys may take 2 to 4 months to be completed, that is to obtain an
acceptable response rate.

Telephone surveys also provide an opportunity to select the most
adequate sample coverage. In Hungary, and in general in Eastern Europe,
accessibility to the respondents would have been a serious challenge to
researchers in 10-15 years ago. However, thanks to the technological advances,
practically everyone is accessible by call phone in that region. Overall the
telephone networks have been improved dramatically, due to the privatization of
those networks and the liberalization of telecommunication markets. There is no
such technological challenge anymore.

An additional advantage of telephone surveys is the opportunity to follow-
up calls, and the improvement of response rates. With an appropriate timing of

the calls, response rates can be optimized within a certain sample frame. Even

85

refusals can be handled relatively easily, since the reasons behind a refusal can
be explained very quickly on the phone.

There are several concerns over the use of telephone surveys as well.
First, there is the issue of confidentiality. The assurance of confidentiality is a key
factor in successfully gathering information on the phone. In the actual survey
the guidelines of the University Committee on Research involving human
Subjects at both Michigan State University and at the University of Lethbridge
were strictly followed. In addition, Chairpersons and cleans of academic
departments in both universities have endorsed the study. As a third level of
support, the Budapest University of Economic Sciences provided valuable
support in convincing respondents about the academic nature of the study, and
the confidentiality of the survey results.

Every respondent was also offered a summary of the study, comparing
the overall sample means to their confidentially handled individual responses.
This offer has been mentioned at the beginning of the interviews, and it has been
received very favorably. Practically all respondents, with the exception of five of
them would like to and will receive that summary by either e-mail or snail-mail.

Timing and structuring of open-ended questions may run out of hands,
especially if the rest of the questionnaire is still to be completed when such
questions are asked. Here the key issue is the experience of the administrator,
and the consistency of the administrating procedures.

Practically all items in the questionnaires are close-ended too. Again, the

length of the questionnaire should not represent a major concern because it

86

should be completed within approximately 20 minutes, thus it does not take away
too much time from the respondent managers.
Overall the telephone survey should provide an appropriate method for

this study, considering all the related costs and benefits.

4.1.2. SAMPLING PROCEDURE

During the design and administration process of the surveys, the “total
design method” was followed, as recommended by Dillman (1978). Obtaining,
screening (clarifying), and selecting a sample from a list may be a very
challenging task for researchers, even with all the above-listed advantages of
telephone surveys.

The actual sample frame consists of 903 international joint ventures. The
source of the sample frame is a formally state-owned statistical service provider
and consulting firm, Kopint-Datorg in Hungary. Their list includes all joint
ventures that have had a mandatory report on their foreign trade activities in the
year 2001-2002, and other joint ventures that reported their contact information
or economic activities in a voluntary manner.

Here, I need to express my personal gratitude to "ma Nemeth at Kopint-
Datorg for her help in the compilation of this list. Omissions usually represent a
significant problem in sample frames in foreign countries. The only problem that
we have identified with this particular list was the relatively low number of
Chinese-Hungarian joint ventures. Many Chinese businesspeople have

established effective joint ventures in Hungary, however their statistical reporting

87

is often either inadequate or nonexistent. Also, China and Chinese-foreign joint
ventures have been extensively researched in international business literature.

This study also attempts to focus on the relatively under-researched area
of Eastern Europe. So, with admitting this potential omission problem, the
sample frame may still serve the purpose of the current study adequately.

To maximize variance within the sample, and also to help testing some of
the culture-related propositions, a stratified census method was employed. First,
the available foreign partners’ nationality was matched to the most characteristic
countries along Hofstede’s (2001) dimensions of culture. Countries with either
extremely low or extremely high scores were considered.

Within the actual sample frame, an appropriate number of foreign partner
firms (n > 30) exist only in the extremes of two cultural dimensions: high level of
individualism, and high level of masculinity. Therefore the sampling process
focused on a census within these “cultural extremes” of the sample frame. It
means that a census was attempted among joint ventures where the foreign
partner countries score high on either individualism or masculinity.

Screening or clarification of the sample frame was a necessary task as
well. In a transitory economy like the one of Hungary, firms often change their
ownership structure, name, or location, or all of the above. Altogether 42
addresses had to be cancelled from the list due to either multiple listings or non-

existent firms.

88

4.1.3. ADMINISTERING THE DATA COLLECTION

Within the broad sample frame of the 903 companies, joint ventures were

categorized according to the nationality of the foreign partner firms. Assuming

potentially similar response rates from the strata, and focusing on the two

cultural dimensions represented in a significant number of firms within the

sample frame, the following four partner countries were selected primarily for a

census-type survey:

Stratum A: Highest scores on Individualism: USA (n=52), United
Kingdom (n=37), and Canada (n=8). All three countries have been
consistently within the five highest scoring countries on individuality in
subsequent, updated publications of Hofstede’s original study
(Hofstede, 2001).

Stratum B: Highest score on Masculinity: Austria (n: 146). Austria is
consistently the highest scoring country on masculinity in subsequent,

updated publications of Hofstede’s original study (Hofstede, 2001).

Accordingly, a census was performed for joint ventures in the sample

frame, where the partner country is one of the four countries selected. The

following response rates have been achieved:

Stratum A (joint ventures, where the partner firm’s country is
characterized as relatively high on the individuality dimension): the
total number of 45 respondents out of the contacted 100 provided an

overall response rate of 45.0% within the stratum.

89

- USA: Twenty-five respondents out of the contacted fifty-two
addresses that is a 48.0% response rate. Due to a sample frame
error, one of the respondents represented an Australian-Hungarian
joint venture.

- United Kingdom: Thirteen respondents out of the contacted thirty-
seven addresses that is a 35.1% response rate. Due to a sample
frame error, one of the respondents represented a Swiss-
Hungarian joint venture, and another one represented a
Portuguese-Hungarian firm.

- Canada: Seven respondents out of the contacted eight addresses
that is an 87.5% response rate.

- Stratum B (joint ventures, where the partner firm’s country is

characterized as relatively high on the masculinity dimension):

- Austria: Sixty-five respondents out of the contacted hundred and
forty-six, that is a 44.5% response rate for the stratum. Two
respondent firms were German-Hungarian, while one firm was a
Belgian-Hungarian venture, due to sample frame error.

These partial rates resulted In an overall response rate of 44.7%. That
is a remarkable rate in Eastern European studies, and considered as a generally
highly acceptable rate in intematlonal survey research (Fowler, 2002). Although
there have been several errors within the sample frame, overall it has to be
judged as a reliable list of firms, in particular in the rapidly changing economic

environment of Hungary. Also, the response rate could have even been higher

90

than that (47.2%), but six responses did not include complete answers to several
key constructs, therefore those six responses had to be cutoff.

The relatively high response rate often demanded multiple contacts with
the joint ventures. As part of the protocol, each firm had to be contacted at three
different business days. If it was impossible to contact anybody within the firm,
then it was listed as a non-respondent. This rule helped a uniform treatment of
each joint venture, and thus the consistency of data collection rules. Actually, it
might have taken more than three different days and different calls to obtain a
survey because of the follow-up calls. However, the three days rule was
uniformly applied for the initial contacts.

In all cases, the requirement of key respondent theory (Campbell, 1955)
was fulfilled. It refers to the fact that all respondents were highly involved with
key areas of the survey, and they all had extensive and thorough knowledge
about working and dealing with foreign partners or owners of the joint ventures.

In order to ensure a high level consistency across the responses, a strict
administration protocol was followed at each phone call. As required by the
University Committee on Research Involving Human Subjects, respondents were
always read their survey-related rights and potential contact information in case
of any concern. Names of institutions that sponsor the study were also given to
the respondents. Some respondents also required a hardcopy of the study, and
they were automatically provided by a copy through either e-mail or fax.

Importantly, the consistency of questioning was also maintained

throughout the data collection process. In case of any uncertainty about the

91

meaning of an item in the questionnaire, each respondent received the same
examples. This way there were no variations in the interpretation of the single
items. Similarly, the time frame, which is often a concern for bias in international
studies, should not represent any problem here. The total administration of the
surveys took about four weeks, and there had been no significant international
event occurring during that period that could have influenced the respondents.
The equivalence of constructs and scales is a serious issue in
international research (Cavusgil & Das, 1997a), however it did not affect the

current study, given that all respondents were Hungarian managers.

4.2. RESPONDENT PROFILES

In terms of respondent characteristics, all respondents hold some kind of
a managerial position in the firm. It is also given by the data collection approach
that all respondents were of Hungarian nationality.

Seventy respondents were male that represents 63.6% of the total, and
40 respondents were female that is 36.4% of the total. In terms of the responses
to the main constructs, there were no significant differences found according to
the gender of the respondents.

The relatively high share (77% in Table 3) of CEOs, they are also called
as General Managers at these firms, might be surprising at the first sight.
However, the majority of the joint ventures are relatively small firms, where one
or a handful of managers performs most of their duties. Their personal attitude

was quite pleasant, given the relatively short version of the telephone survey

92

questionnaire. They seemed to be eager to share their thoughts and
observations, even beyond the range of items within the survey. Again, their
knowledge completely satisfied the requirements of key respondent theory
(Campbell, 1955). Often they were able to relate macroeconomic issues to the
challenges of everyday business conduct, and it will be helpful in further model
development. It has been certainly an honor of talking with so many highly
qualified individual business leaders. They also provided several ideas for

improving the study design in the future.

93

Table 3: Summary of Respondent Characteristics: Position in the Joint

 

 

 

 

 

 

 

 

 

 

 

 

Venture

Position Frequency Percent
General Manager or CEO 85 77.3
Sales Manager 6 5.5
Accounting Manager 5 4.5
Marketing Manager 5 4.5
Human Resource Manager 3 2.7
Financial Manager 2 1.8
Operation Manager 1 .9
Business Lawyer 1 .9
Logistics Manager 1 .9
R & D Manager 1 .9
Total 110 100.0

 

 

 

 

 

4.3. PROFILES OF THE INTERNATIONAL JOINT VENTURES

As was discussed in the description of the sampling process, most firms
have Austrian partner companies. The sample frame consists of a high number
of Austrian and German partner firms, which may be partly explained by historic
traditions. In case of Hungary and Austria the Monarchy had been created very
strong economic ties during several centuries. Germany is also a historic and

significant trading partner of Hungary, partly because of the two countries

94

geographic proximity. The distribution of partner’s nationality (Table 4) is mostly
determined by the stratified sampling method, with several single respondents
who were included in the sample frame by accidents, but they were willing to

answer the questionnaire.

Table 4: Joint Venture Partners by Nationality

 

 

 

 

 

 

 

 

 

 

 

Country of Partner Firm Frequency Percent
Austria 62 56.4
USA 24 21.8
United Kingdom 11 10.0
Canada 7 6.4
Germany 2 1.8
Australia 1 .9
Belgium 1 .9
Portugal 1 .9
Switzerland 1 .9
Total 110 100.0

 

 

 

 

 

The mean value of the years of operation is 11 years at the joint ventures
included in the sample, as it is shown in Table 5. This is again a highly important
and characteristic value in the region.

The transition from a socialist economy into a market-oriented one began

approximately 12 years ago, in the early 19903. Those were the years when

95

liberalization of the economy was very intense, and Eastern European countries
have experienced a boom in inward foreign direct investment activities (Hunya,
2002).

There were a few joint ventures where the ownership share of the
Hungarian partners could be considered as meaningless, in several cases less
than one percent. There were sixteen such firms in the sample. Obviously, in
these firms the joint venture as a market entry mode was selected only for
taxation benefits. Even though the longevity of such joint ventures is strongly
dependent on government policies, the respondents have been accumulating a
wealth of experience about dealing with the foreign owners and managers. In the
international arena it is a commonly observable phenomenon that the choice of
joint venture as a market entry mode is closely intertwined with changes in
economic policies by the host nation (e.g., Yang & Lee, 2002). Thus, this specific
finding should not be considered as a unique phenomenon in Eastern Europe.

Also, there were cases when the Hungarian partner had the vast majority
of shares. In nine firms had the Hungarian firm an ownership of 90 percent or
above. In that sense the sample is not perfectly balanced, but pretty evenly

spread.

96

Table 5: Descriptive Statistics of the Joint Ventures

 

Variables

Minimum

Maximum

Mean

Standard
Deviation

 

Years in
Operation
(Duration of
JV, years)

110

2.000

30.000

11.082

3.744

 

Share of
Hunganan
Partner (%)

110

1 .000

99.000

39.991

30.001

 

Number of
Partners

110

2.000

3.000

2.082

.275

 

Valid Sample
Size
(Listwise
deletion)

 

 

110

 

 

 

 

 

The mean value of Hungarian partners’ ownership share was about 40%,
and that value better represents the majority of the firms in the sample, than the
extreme value of 1%. As a final review, Table 6 provides a complete list of
distribution of joint ventures according to the ownership share data.

A final note is about the number of foreign partner firms in a joint venture.
It is an accepted fact that the complexity of managing such ventures is
significantly increasing with partners from multiple countries (Parkhe, 1996). In
this area, the sampled joint ventures seem to prefer the simplest, two-partner

countries formula. In the long-run this fact may help to preserve the stability of

the joint ventures as well.

97

 

Table 6: Joint Venture Characteristics: Ownership Share of Hungarian

Partner Flrms

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Hungarian Frequency Percent Cumulative
Share (%) Percent

1 16 14.5 14.5
2 3 2.7 17.3
3 2 1.8 19.1
4 1 .9 20.0
5 3 2.7 22.7
8 2 1.8 24.5
10 4 3.6 28.2
15 1 .9 29.1
20 6 5.5 34.5
24 1 .9 35.5
25 6 5.5 40.9
31 2 1.8 42.7
33 1 .9 43.6
35 1 .9 44.5
36 1 .9 45.5
40 7 6.4 51.8
48 2 1.8 53.6
49 2 1.8 55.5
50 13 11.8 67.3
51 2 1.8 69.1
53 1 .9 70.0
62 1 .9 70.9
64 1 .9 71.8
65 2 1.8 73.6
66 1 .9 74.5
67 2 1.8 76.4
68 2 1.8 78.2
70 5 4.5 82.7
71 1 .9 83.6
73 1 .9 84.5
74 1 .9 85.5
75 2 1.8 87.3
76 1 .9 88.2
78 1 .9 89.1
80 3 2.7 91.8
90 4 3.6 95.5
93 2 1.8 97.3
95 1 .9 98.2
98 1 .9 99.1

99 1 .9 100.0

Total 110 100.0 100.0

 

 

 

 

 

 

98

4.4. SUMMARY

In retrospect, the sample frame provided a quite reliable list of
international joint ventures in Hungary. The respondent firms are representative
of the current economic situation in the country and to the population of
international joint ventures operating there. The highly knowledgeable
respondents were extremely helpful in achieving the targeted response rate and
to ensure that, with the exception of six of them, all respondents who were
included in the final sample provided a completely answered questionnaire. They
also helped in identifying potential pitfalls in this survey, and gave several
reasonable recommendations for future studies.

In terms of the cost-benefit analysis, the choice of telephone survey was
extremely effective as well. Total costs have been managed to stay well below
the costs of an alternatively planned mail survey, and a mail survey might not
even have produced similar response rates.

Selecting Hungarian managers as subjects has been proven a very
effective way of collecting the current data set. The managers were generally
very cooperative and helpful. If there is any concern that is to be discussed in
Chapter 6 is the well-known fact of the Hungarians tendency to be pessimistic. It
is hard to quantify, but several respondents were very careful when selecting
their answers, like they were saying: “we need to select answers that are
politically correct.” This kind of attitude is inherited from the communist-socialist

economic systems, and, hopefully, slowly is going to disappear.

99

Chapter 5

RESULTS AND FINDINGS

5.1. ASSUMPTIONS AND THE RELIABILITY OF MEASURES

5.1.1. THE ASSUMPTIONS OF MULTIPLE REGRESSION

At a very basic level a researcher has to be sure that the measures use
in the survey provided a sound measurement (e.g., Hair et al., 1995). The survey
was administered exclusively by the primary researcher. This fact called for
multiple check-ups in the consistency of data collection, but also ensured a data
.base that is free of coding errors. It means we can be confident that all data are
generally as expected in terms of means and standard deviations. A summary of
descriptive statistics of all dependent variables is provided in Table 7.

Among the key assumptions of the multiple regression model,
multicollinearity has been the major concern for this study, given the interrelated
nature of the main constructs. However, multicollinearity has been implicitly
reduced by transforming all variables into mean-centered ones. It means that the
variable mean was deducted from all individual case and the variables centered
on the value of zero (Jaccard, 1990).

A commonly used approach to test the normality assumptions is a visual
one. In the 0-0 normal probability plots each observed value of the standardized

residuals is paired with an expected value from a theoretical normal distribution,

100

which is based on the rank of the observed value. We expect to find that the

observations fall more or less on a straight diagonal line (Figures 2 through 7).

Figure 2: 0-0 Normality Plot of Multi-ltem Performance

 

 

 

 

Normal O—O Plot of PERFSUVIC
2
1‘ V/B/I
xtj/
/
0. ’//’/o
,./o
/_.«6
/,8
C—0 -1- 0 D
o /
2 °//
'0 21 o O 1"
s . /
Q)
D.
:15 -3 ,
4 3 2 -1 o I 2'
Observed Value

101

Figure 3: 0-0 Normallty Plot of Total Performance

 

 

 

 

hbrnal O—Q Plot of PERFTOTALC
2
j
14 /
/ /l. 0 ’
o. // 6/
. “0/,
_ -1 I //
'5 D , /
z /
'0 ~2- /
2 o
0
G)
D.
lfi -3 I O O O U C I C II
-5 -4 -3 2 1 o 1 2 3
Observed Value

102

Figure 4: 0-0 Normallty Plot of Strategic Performance

Expected Normal

-1.0-

-1.5«
-20. . /

-2.5

Normal O-O Plot of PERFSTRATC

1.5

 

1.0*

0.0*

-.54

 

 

-4 33

Observed Value

103

 

Figure 5: 0-0 Normallty Plot of Trust

Normal O-Q Plot of TRUSTSUMC

1.0

 

.5'l

0.0 d

-.5- /

-‘I.0'| /

-1.5«

 

Expected Normal

 

A
(1,.
N.
__,.

Observed Value

104

 

Figure 6: 0-0 Normallty Plot of Joint Venture Longevity

Normal O-Q Plot of YEARSC

 

 

 

 

3
Cl
2'‘ D
D /
D /
z/
11 D
D//
a//
o. “5
X0
a »o
p

Z 9/
'0 “V
G) 21 x/
‘6
a) 0/0
D.
(If) -3

-10 0 10

Observed Value

105

Flgure 7: 0-0 Normality Plot of Joint Venture Stability

Expected Normal

-1.0 a

Normal Q-O Plot of STABSUMC

2.5

 

2.0 s

1.5'

1.0-l

.54 /

0.0 ' /

-.51 /

 

 

_L
0.

Observed Value

106

M.

Q)-

#-

 

The CO normality plots show that, with the exception of the joint
venture longevity variable (YEARSC), there are no major violations present in the
data set. Longevity has several extreme outliers, however, the rest of the
dependent variables are adequate candidates for regression models.

Kolmogorov-Smirnov tests were computed for all dependent variables to
test for kurtosis and skewness in the distribution. These tests are generally
recommended when performing multiple regression analyses (e.g., Hair et al.,
1995), in order to test the normality assumptions (Tables 8 and 9). In explaining
the results we partly utilize the analytical rules provided by the SPSS 10.0 (1999)
software package. The dependent variables in the series of multiple regression
analyses are: strategic performance of the joint venture (PERFSTRATC),
satisfaction with the overall performance of the joint venture (PERFTOTALC), a
three-item summated scale measuring the long-term satisfaction with the joint
venture (PERFSUMC), trust between the partners (TRUSTSUMC), the longevity
or duration of the joint venture as an alternative measure of success (YEARSC),

and finally, the perceived stability of the joint venture (STABSUMC).

107

Table 7: Descriptive Statistics of Dependent Variables

 

 

 

 

 

 

 

 

Varlables Minimum Maximum Mean Standard
Deviation

Strategic 110 -3.59 1.41 .001 1.191
Performance
(PERFSTRATC)
Total 1 10 -4.00 2.00 .000 1 .388
Performance
(PERFTOTALC)
Multi-item 1 10 -3.10 1.57 .000 1.034
Performance
(PERFSUMC)
Trust 1 10 -3.23 .77 .002 .937
(TRUSTSUMC;
Duration or 1 10 -9.08 18.92 .001 3.744
Longevity
(YEARSC)
Stability 1 10 -.92 4.08 .002 1 .076
(STABSUMC)

 

 

 

 

 

 

108

 

Table 8: Kolmogorov-Smirnov Test for Dependent Varlables

 

 

 

 

 

 

 

 

Varlables N Most Kolmogorov- Significance
Extreme Smirnov Z (2-tailed)
Absolute
Differences
Strategic 1 10 .280 2.935 .000
Performance
(PERFSTRATC)
Total Performance 1 10 .209 2.193 .000
PERFTOTALC)
Multi-item 1 10 .145 1.520 .020
Performance
(PERFSUMC)
Trust 1 10 .208 2.1 78 .000
(TRUSTSUMC)
Duration or Longevity 1 10 .145 1 .522 .019
(YEARSQ
Stability 1 10 .215 2.253 .000
(STABSUMC)

 

 

 

 

 

 

Table 9: Kurtosls and Skewness Tests for Dependent Varlables

 

 

 

 

 

 

 

 

 

Varlables N Skewness Kurtosls
Statistic Standard Statistic Standard
Error Error
Strategic 1 10 -1 .050 .230 1 .100 .457
Performance
(PERFSTRATC)
Total 1 10 -.713 .230 .347 .457
Performance
(PERFTOTALC)
Multi-item 1 10 -.730 .230 .207 .457
Performance
(PERFSUMC)
Trust 1 10 -1 .362 .230 1.428 .457
(TRUSTSUMC)
Duration or 110 1.034 .230 5.823 .457
Longevity
YEARSC)
Stability 1 10 1 .374 .230 1.670 .457
(STABSUMC)

 

 

 

 

 

 

 

109

The results of the Kolmogorov-Smirnov tests show that the normal
distribution assumption is violated, and we can reject the null hypotheses that the
variables are distributed normally. Subsequent Kolmogorov-Smirnov tests proved
that the variables follow a Poisson distribution that is characteristic in variables
where the items consists positive integer values.

Kurtosis signals the peakedness of the distribution (Table 9). A commonly
used rule-of-thumb test is that the test statistic divided by the standard error
should be within the range of -3 and +3 (Hutchison & Sofroniou, 1999). In the
current sample only joint venture longevity (YEARSC) violates this assumption
significantly, which means too few cases in the tails of distribution.

Skewness represents the tilt or the lack of tilt in a distribution. Again it can
be tested by dividing the test statistic by the standard error. Their values
are usually judged a bit more strictly, their acceptable range is between -2 and
+2. In terms of skewness, all dependent variables violate the rules of normal
distribution. Negative skewness represents a left-leaning curve, while positive
skewness represents a right-leaning curve.

The violated normality assumptions of multiple regression equation may
also be corrected by transforming the respective variables. Either various forms
of square-root transformations or logarithmic transformations are recommended
to correct skewness and kurtosis. Kolmogorov—Smirnov tests for other
distributions showed that the variables follow a Poisson distribution. Such
distributions may be usually transformed into normal distributions by square root

transformations (Hutchison & Sofroniou, 1999). However, second degree

110

square-root transformation of dependent variables have still not produced normal
distribution in the actual, centralized, dependent variables. Due to the
robustness of multiple linear regression models, in particular the F-tests (Hair et
al., 1995) the significance of partial regression coefficients tends not to be
influenced by such transformations.

Also, multicollinearity might represent a greater problem in this study,
given that independent variables are included as the first and second degree
form of the same variable. Therefore, any decisions about any necessary
transformation of the variables may be made after performing regression

analyses in all theoretical models.

5.1.2. CONFIRMATORY FACTOR ANALYSIS

Factor analysis is frequently used to uncover or highlight the latent
structure of a set of variables. The latent dimensions of a data set tend to refer to
the most important theoretical factors (latent constructs) behind the answers to
single items. In this study, a confirmatoryfactor analysis helps demonstrating
that constituent items load on the same factor. The analysis also indicates which
items tend to cross-load on more than one factor.

Table 10 presents a summary of the factor loadings among all items. The
table presents only eight extracted components, where the relevant Eigen-value

was greater than one.

111

Table 10. Summary of Factor Analysis: Component Score Coefficient Matrix

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ITEMS Components
1 2 3 4 5 6 7 8

C Potential 1 -.040 -.068 .242 -.026 -.044 -.007 -.059 .295’
C Potential 2 -.020 .002 .344 .049 .064 -.071 -.074 .068
C Potential 3 -.014 .020 .328 -.018 .039 -.083 -.030 -.079
C Potential 4 .002 -.002 .098 -.052 .061 -.186 .378* -.142
C Potential 5 .095 .001 .209 -.001 -.013 .086 -.130 -.374*
Conflict A1 .004 .029 -.019 .037 .008 .01 1 .491 -.007
Conflict A2 .050 .019 .067 .071 -.044 .136 .155 -.003
Conflict B1 -.066 .033 .002 .087 .049 .129 .191 .21 1*
Conflict B2 .108 -.036 -.003 .400 .046 -.025 .059 .120
Conflict B3 .072 -.036 -.006 .397 .035 -.078 .008 .107
Conflict B4 .066 .044 .014 .286 -.019 -.060 -.133 -.145
Conflict BS -.072 .076 .170 .187 .091 .002 -.451* -.162
Control .036 .266" -.076 .016 -.074 -.080 .1 12 -.029
Power 1 .002 .325 .031 -.028 .029 .070 -.028 -.053
Power 2 .038 .339 .003 -.013 -.005 .108 -.035 -.042
Power 3 -.O20 .186 .037 .056 -.011 -.034 -.115 .397*
Stability 1 -.027 .072 -.067 -.095 .020 .508 -.146 -.1 16
Stability 2 .113 -.023 -.045 -.050 -.060 .517 -.059 .033
Trust 1 .290 .052 .045 .081 -.010 -.029 .012 -.035
Trust 2 .347 .028 -.028 .107 -.039 .097 -.022 -.238
Trust 3 .305 .010 -.090 .047 -.086 .016 .169 -.037
Perf. 1 .215 .021 .121 .047 -.039 .044 -.221* .226
Perf. 2 .184 -.049 .046 .030 .021 .118 -.069 .324
Perf. 3 -.075 .012 .035 .037 .368* -.041 -.028 .035
Strategic
Perf. -.037 -.022 .027 .062 .382 -.012 -.031 -.071
Total
Perf. -.076 -.015 .043 .017 .413 -.011 .075 -.006

 

Notes:

 

* = potential cross-loadings on a given component
Extraction method: Principal Component analysis
Rotation Method: Varimax with Kaiser Normalization

112

In a strictly followed theoretical approach, only the two items of one factor
(Stability) might be considered as perfectly loading on the single component
(factor number 6). About the relationship between different sample sizes and
significant factor loadings Hair, Anderson, Tatham and Black provided a general
rule of thumb (1995, p. 385). In this study, with the sample size of 110
respondents, at least a factor load of .5 is recommended, in order to get
significant results. However, within the framework of this preliminary analysis, we
only seek support to the above detailed theoretical model building. Thus, the
requirement of a factor loading of .5 Is not applied here, if the factors (the
components make theoretical sense.

Furthermore, this study has several characteristics that may loosen such a
restriction on the outcome of factor analysis. The study is an exploratory
investigation in a sense that a new construct (Conflict Potential) and its effects
on different dependent variables are to be estimated. Tjosvold and Lai (1989)
recommended that the first step to understand the multidimensional nature of
conflict should be the use of a multidimensional approach in managerial
perceptions about conflict. In terms of academic research, it refers to the
preferred application of multidimensional scales.

Also, the study, given the relative sample size, is not going to employ a
structural equation model. There is a series of measurement models to be

estimated separately.

113

Consequently, the independent variables of conflict potential, and the two
conflict measures are to be employed in separate measurement models.

Similarly, the dependent variables are going to be applied in separate
measurement models as well, thus the cross-loading between two performance
measures does not impact the separate measurements, and such cross-loading
may even be supported by the theories reviewed.

According to the component score coefficients, component 1 refers to the
construct of trust. Component 2 refers to the construct of power. Here a cross-
loading with the one-item measure of control may be detected. This finding
makes theoretical sense, since control is usually strongly correlates with power.
(Gaski, 1984). Control is also frequently called as exercised power. Component
number 3 refers to conflict potential, with one questionable item (CP4). However,
as we are going to show, the five-item multidimensional scale exhibits a relatively
high reliability. Thus, we are going to keep the five-item scale for the analytical
section, with the condition that a four-item scale is also going to be used and
tested for major hypotheses. Components number 4 and 7 refer to the two,
separately applied conflict constructs. The cross-loading between these two
factors is noticeable however, it was also expected by theory. These are
measures that have been previously validated, both externally and internally.

The dependent measures, again, considering the sample size show an
acceptable pattern of factor loading. An interesting finding is the cross-loading of
a conflict potential item on the multi-item performance scale. Theoretically this

finding may refer to the potential positive correlation between conflict potential

114

and some aspects of joint venture performance, and that is exactly one of the
premises of this study. The cross-loading item asks about managerial preference
of working with partners who have different perceptions about business decision
making situations than the respondent. This item seems to be a key theoretical
aspect behind the analysis of conflict potential, thus it is going to be kept for the
analytical section (e.g., Dyck et al., 1996). Again, this decision is supported by

the reliability analysis in the next section.

5.1.3. THE RELIABILITY OF MULTI — ITEM MEASURES

The next task for researchers is to estimate the reliability of multi-item
measures. Cronbach’s alpha measures how well a set of items represents a
single, uni-dimensional latent construct. Practically all major constructs in this
study are characterized as latent constructs, based on managerial perceptions,
and estimated with multi-item measures. Two of the measures employ five-items.
Therefore it is extremely important that each of the constructs really measure a
single managerial concept. Cronbach’s alpha is a function of the number of
items, and the average inter-correlation among the items.

As summarized in Table 11, four of the five Cronbach’s alphas show a
value of higher than .7.

It is considered a satisfactory theoretical background behind measure
development, and an appropriate level of external validity of the new measure for

conflict potential. Performance items correlate less than the average measures

115

in the study however, the level of around .6 is still a reasonably acceptable value
(Hair et al., 1995).

Also, performance is alternatively measured with two other single-item
measures, thus there appears to be no conceptual problem with the construct

within the framework of this study.

Table 11: Reliability (Coefficient-Alpha) of Multi-item Measures

 

 

 

 

 

 

Name Variable Number of Items Alpha
Conflict Potential CPSUMC 5 .7525
Conflict CXSUMC 5 .7491
Performance PERFSUMC 3 .6091
Power POW ERSUMC 3 .8089
Trust TRUSTSUMC 3 .8040

 

 

 

 

 

 

There were two, two-item measure in the study, stability and a traditional
measure of conflict levels in joint ventures. The two items of stability exhibited a
strongly significant (.00 level) correlation coefficient of r = .456.

Similarly, the two items estimating the construct of conflict exhibited a
strongly significant (.00 level) correlation coefficient of r = .538.

In summary, the reliability of all multi-item measures can be considered

satisfactory for the purpose of this study.

116

5.2. PEARSON CORRELATION COEFFICIENTS

The assumptions of the hypotheses and the propositions of the holistic
models can be tested against the correlation coefficients as well. Table 12
provides a summary of the correlation coefficients among all major constructs
employed in this study.

Some of the correlation coefficients are used in testing several
hypotheses, and the study discusses those coefficients at that point. Here we
only focus on the significance level of these coefficients as they have important

consequences for the regression models too.

117

Table 12: Pearson Correlation Coefficients among the Main Constructs

 

Construct

CP

C1

CZ

YRS

PSUM

PSTR

PTOT

STAB

TRS

 

CP
Conflict
Potential

1.000

 

Ct
Conflict 1

.031

1.000

 

CZ
Conflict 2

.417“

.417“

1.000

 

Years
(Longevity)

-.096

-.098

-.115

1 .000

 

PSUM
MultI-item
Perf.

-.069

-.465“

-.365“

-.021

1 .000

 

PSTRAT
Strategic
Perf.

-.212“

.228”

-.248""

.043

.487"

1 .000

 

PTOTAL
Total Perf.

-.105

-.259*

-.102

-.078

.569"

.722“

1.000

 

STAB
Stability

.124

.261 “

.337“

-.108

-.136

-.051

.015

1.000

 

 

TRS
Trust

 

-.057

 

-.458"

 

-.264*"

 

.116

 

.555“

 

.314"

 

.313"

 

-.247“

 

1.000

 

 

The most interesting purpose of this study is the analysis of correlations
among the three major independent variables, the two measures of conflict
(CXSUMC and CSUMC) and conflict potential (CPSUMC), and the six
dependent variables under consideration.

The new construct of conflict potential exhibits a significant positive
correlation with the two-item traditional conflict, and a significant negative

relationship with the strategic performance.

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These relationships seem to indicate that the new construct might not be
discriminated significantly from the traditional conflict measure according to the
responses of the actual sample. Also, the two, traditional conflict measures seem
to correlate negatively with most performance measures, with the notable
exception of stability. The strong significance of these negative correlations (for
instance: CXSUMC vs. PERFSUMC, r = -.465, significant at the .01 level)
indicates that the hypothesized regression equations might not produce the
predicted concave relationships, at least not in the case of the traditional conflict
measures.

Based on the correlation statistics, we might argue for more complex
regression models. Possibly other independent constructs are going to be
needed in the regression models in order to estimate fine-grained impacts of
conflict on joint venture performance. Further analysis of correlation coefficients
is likely to provide more insights into future model building steps, however, at this
point of the study we focus on testing the hypotheses, then we may return to the
correlation coefficients at the future model development section.

An interesting finding is how the quadratic terms of the independent
variables correlate with selected dependent variables. The quadratic term of
conflict potential exhibits significant (.05 level) positive correlations with both
trust (r = .264) and strategic performance (r = .189). On the other hand, the
quadratic term of conflict (5-item) exhibits significant negative correlation with
trust (r = - .246 at the .01 significance level). Similarly, the quadratic term of

conflict (two—item) exhibits a significant negative correlation with the summated

119

measure of performance. These findings support the assumption that post-hoc
analysis of conflict situations tend to produce consistent negative perceived

relationships between the construct and performance or trust.

5.3. MULTIPLE REGRESSION MODELS AND THE HYPOTHESES
To test the series of main hypotheses, the following general OLS model

is applied in this study:
(Y, J) =a0 +a,(X,, —3{.)+a,(x,, —Z)2 +a,(X,,. —§2)+e,

Where:

0 Y" represents the dependent variables, namely multi-item
performance, strategic performance, total performance, trust,
longevity, and stability of the international joint ventures.

o X" represents the respective independent variables. In the different
equations there are two separately employed measures of conflict,
the construct of conflict potential, and a quadratic term included in

each equation in order to detect and estimate any potential

concave effects. The construct of trust (X2) is included in all

equations where trust is not a dependent variable itself, because its
presence is assumed to gain any benefits from conflict situations;
0 The “i" index runs from 1 to 110.
As it was mentioned above, all variables have been mean-centered in

order to minimize the impact of multicollinearity (Jaccard et al., 1990).

120

It was reasonably expected from the high number of insignificant results in
the correlation analyses that hypotheses related to the positive effects of conflict
may also produce insignificant regression coefficients.

Table 13 provides a summary report on the different regression equations
and their overall fit statistics. Conflict (1) is a perception-based, 5-item measure,
while Conflict (2) is a traditional, ex post type, 2-item measure. Independent
variables were separately tested against three different performance measures,
such as Strategic Performance (PERFSTRAT), Total Performance

(PERFTOTAL), and a summated scale on performance (PERFSUM).

121

Table 13: Summary of Regression Equations

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

l-ls Dependent Standardized Coefficients Model Fit
Variable
Y a. a: as F-stat Slgn. Ft2 Ad .
Conflict Conflict2 Trust R
H1 P ERFSTRAT -.222* .259 .265* 6.875 .000 .163 .139
PER FTOTAL -.224** .1 77 .254* 5.729 .001 .140 .1 15
PERFSUM -.303** .082 .436“ 20.669 .000 .369 .351
H2 TRUST -.437M -.O47 N/A 14.365 .000 .212 .197
H3 LONG EVITY -094 .085 .093 .782 .507 .022 .006
H4 STABILITY .258" -.163 -.169 4.339 .006 .109 .084
Conflict Conflict2 Trust
H1 a PERFSTRAT -.1 56 -.045 .266” 5.265 .002 .130 .105
PERFTOTAL -.012 -.019 .307" 3.857 .012 .098 .073
PERFSUM -.199* -.075 .490" 20.158 .000 .363 .345
H2a TRUST - .245* -.037 N/A 4.064 .020 .071 .053
H3a LONGEVITY -.O48 -.089 .089 .983 .404 .027 .001
H4a STABILITY .360" -.139 -.174 6.479 .000 .155 .131
Conflict Conflict
Potential Potential2 Trust
H5 PERFSTRAT -.1 77 .061 .288" 5.723 .001 .139 .1 15
PERFTOTAL -.084 .012 .305“ 4.166 .008 .105 .080
PERFSUM -.033 .015 .549“ 15.806 .000 .309 .290
H6 TRUST .023 .270“ N/A 4.029 .021 .070 .053
H7 LONGEVITY -.092 -.008 .113 .776 .510 .021 .006
H8 STABILITY .121 .038 -.250* 2.831 .042 .074 .048

 

 

 

Notes: X2 is Trust in each model

** = significant at the .01 level;

* = significant at the .05 level

122

 

Table 13 shows that only selected partial correlation coefficients are found
to be significant. However, most of the specific hypotheses cannot be evaluated
based on this analysis because of the insignificant results In the partial
coefficients of the quadratic terms. These are not listed in the table.

In terms of the regression models, Hypothesis 1 and H1a; H2 and H2a;
H4 and Ma; and H5, H6 and H8 are partially supported because the
regression line explains a significant amount of variation in the respective
dependent variables. This fact supports the logic of theory development, since
the independent variables seem to have a consistent impact on either
performance or trust. These relationships are the major propositions of this
study. Thus the theory, at least partly, is correct, and the model development of
this study may serve well as a basis for subsequent analyses.

However, due to the lack of significant partial coefficients for the quadratic
terms, we did not find the expected concave relationships of most hypotheses,
and a reverse relationship was found at H4 and H4a. What may this mean?
Based on the theory, all independent variables are supposed to have a
significant effect on the respective dependent variables. As a consequence, it is
very likely that more complex models are necessary to verify such effects. In the
forthcoming sections we will detail the possible revisions of model development.

We found partial directional support for Hypotheses 1 and 1a (negative
relationship between Conflict vs. Performance), H2 and H2a (negative

relationship between Conflict vs. Trust), H3 and H3a (negative relationship

123

between Conflict vs. Longevity), and H6 (positive relationship between Conflict
Potential and Trust).

The quadratic term of Conflict Potential ls proved to be significant
and exhibited a positive relationship with trust in the regression model for H6
(standardized beta = .270, significant at the .007 level). Here, the positive sign
for the quadratic term do not refer to a concave relationship, so H6 needs to be
rejected. However, the positive relationship between conflict potential and trust
was one of the presumptions derived from the literature review. These directional
links can provide guidance, ideas and encouragement for future model
development.

Hypotheses 2 and H2a predicted a concave relationship between
different levels of conflict and the level of trust between the partner firms. The
findings support a significant negative relationship between each conflict
measure and trust. This finding is not unexpected though, because that negative
relationship has been a main reason behind the development of a conflict
potential measure. These findings simply prove that traditional measures of
conflict seem to be inadequate to detect any potential positive impact of conflict
on trust, and thus joint venture performance.

Hypotheses 4 and H4a investigated the relationship between conflict and
stability of the joint venture. Interestingly, both conflict measures found to exhibit
positive association with the stability of joint ventures. This finding should be
taken with a grain of salt, since the stability measure is exclusively based on

managerial perceptions, and it was an exploratory investigation into a new

124

method of estimating stability. However, this finding adds another motivation to
encourage further, fine-grained investigations into the two-faced nature of
conflict. It suggests, in an indirect way, that conflict, by adding some stability to
the joint venture itself, may be in effect helpful in the performance of the
business entity as well.

None of the models explained a significant variance in the construct of
Longevity. As was suspected from the visual tests for normality (Q-Q plot),
Longevity is probably better explained by another set of independent variables.
In case of further research into the issue, the relevant macroeconomic changes
might be incorporated in a regression model explaining the duration or longevity
of joint ventures, perhaps as dummy variables. '

Due to the insignificant partial regression coefficients for the quadratic
terms within the regression models, we cannot make any reliable comparisons
about conflict’s positive impacts across the. different cultural dimensions, even
within the range of available cultural dimensions in this sample (Propositions 13
through 24).

Subsequent runs of the regression equations have been also performed,
including the use of groups (a) high on individualism, (b) high on masculinity, (c)
the inclusion of cultural distance, (d) the inclusion of interaction terms between
cultural distance and conflict potential, (e) the inclusion of interaction terms
between trust and conflict potential, and (f) finally, the use of a four-item scale for

conflict potential following up the results of the factor analysis.

125

However, these subsequent tests did not provide either significant partial
coefficients for hypotheses testing; or any significant improvement in the fit
statistic (F-test); or in the explanatory power of the models (R-squared). These
findings, including the relatively low level of R-squared values suggest that these
models omitted variables.

We have to return to the assumption of normality and the actual
distribution of variables according to the patterns of Poisson-distribution. The
theory suggested transformations of variables showing a Poisson distribution
was not fruitful in the context of this specific research. The transformations had
neither positive nor negative effects on the partial coefficients significance level.
Also, a repeated Kolmogorov-Smirnov test found the transformed variables still
distributed according to the patterns of Poisson distribution.

What can be the explanation behind the insignificant results? There are
several possibilities. In simple terms, the theory may be weak, the sample size or
sample selection may be inappropriate, and the variance within the current
sample may be inadequate as well. The most likely explanation, though, seems

to be the issue of omitted variables.

126

Table14: Hypotheses 9-12: Pearson Correlation Coefficients

 

 

 

 

 

 

 

 

 

 

 

 

Correlations Trust at Performance Conflict Conflict Conflict
High At High Trust 1 2 Potential
Performing JVs
JVs

Trust at High 1.000

Performing

JVs

Performance .319* 1 .000

at High Trust

JVs

Conflict 1 -.429** -.242* 1.000

(5-ltem)

Conflict 2 -.166 -.138 .417" 1 .000

(2-Item)

Conflict .107 -.031 .031 .417" 1 .000

Potential

 

** = significant at the .01 level

* = significant at the .05 level

Table 14 provides a summary of the second set of hypotheses, related to
the constructs of trusts and performance. Based on the sample size, the
responses on the two constructs were divided below-average and above average
groups, thus distinguishing between joint ventures with relatively high and
relatively low performance values, and, similarly joint ventures with relatively high
and relatively low level of trust between the partner managers. Splitting the
sample right at the average might seem to be somewhat arbitrary. However,

such divisions within a sample always carry some weight of subjectivity, and

127

 

approaching the data this way we employed our database the most economical,
most effective way possible.

Again, we have found only directional support for one of these
hypotheses: Hypothesis 10 states that conflict potential is expected to correlate
positively with trust in joint ventures characterized with relatively high level of
performance. With a cell-size of n=42, we found that there is a positive
correlation, however it did not prove to be significant at the .05 level.

Similarly, Hypothesis 12 states that conflict potential correlates positively
with performance at joint ventures characterized by relatively high level of trust.
Here, with a cell-size of n = 72, we found that there is a negative correlation
coefficient, but the coefficient is insignificant at the .05 level.

A reverse relationship was found for Hypotheses 9 and 11, where conflict
was expected to correlate positively with trust at the best performing and
performance at the firms with relatively high level of trust. Significant negative
correlations were found in both cases (five-item Conflict measure).

Once more, these findings suggests that traditional conflict measures
tend to hide any positive effects of conflict, and either a new measure or new
analytical approaches need to be introduced for that purpose. In the next chapter
we attempt to review what variables might be the most appropriate to be

included in an updated theoretical model.

128

Chapter 6

SUMMARY AND CONCLUSION

6.1. RESEARCH OVERVIEW

The current study has been built on a vast amount of findings in a
multitude of fields in social sciences. The review and analysis of accessible
literature consistently pointed toward a multi-disciplinary stream ofresearch
projects, where the focus is on the potential benefits of conflicts within
organizations and the quantifiable measurement of such positive effects. New
product development literature has produced a reasonable and well-designed
quantitative approach, where the benefits of conflict were estimated through their
relationship to new product success. The current study attempted to test some of
these multi-disciplinary propositions within the specific context of international
joint venture managers. Managerial perceptions provided a great support to the
theoretical propositions.

The most important findings can be summarized as follows:

- Traditionally employed, ex-post conflict measures tend to exhibit
negative relationships with key constructs of joint venture
success, such as perceived performance and trust between joint
venture partners

- The Introduction of conflict potential was successful In terms of
reliability of the measure, although the findings were inconclusive

In most of the hypotheses.

129

- Conflict potential, indirectly, through a quadratic form of the
variable, was found to have a significant, positive relationship
with trust. This kind of relationship ls certainly an important
addition to the existing research stream on the construct.

- Conflict potential, after a reinforcing verification of the constructs
external validity, appears to be a feasible measure to consistently

estimate beneficial effects of conflict on performance and trust

The main concave effects of the primary hypotheses could not be verified
by the employed OLS regression models. However, this fact does not take away
the research contributions listed above. As an additional research note, Table 15
refers to the findings in the current sample regarding the propositions of a holistic

model.

130

Table15: Pearson Correlation Coefficients Referring to the Holistic Model

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Constructs Power Control Trust Conflict Conflict PStrat Ptotal
1 2

Power 1.000

Control .61 1 ** 1 .000

Trust .035 .056 1 .000

Confllct1 -.017 .031 -.458** 1.000

(5-ltem)

Confllct2 .042 -.025 -.264** .417“ 1.000

(2-Item)

PSTRAT .009 -.139 .314“ -.228* -.248** 1.000

Strategic

Performance

PTOTAL .041 -.065 .313" -.259** -.102 .722“ 1.000

Total

Performance

 

 

** = significant at the .01 level

* = significant at the .05 level

Proposition 13 refers to a positive association between power and control
in joint ventures. The correlation coefficient significantly and strongly supports
this assertion (r = .611). The assumed positive relationship between trust and
power (Proposition 14) finds only directional support in the correlation analysis.
For Proposition 15, the correlation coefficient shows directional support only to

the assertions that trust and control would correlate positively.

131

Both conflict measures were found to be negatively correlated with trust,
and with performance (Proposition 16 and 17). The positive correlation between

trust and perceived performance has been proven again in this study.

6.2. RESEARCH CONTRIBUTIONS AND LIMITATIONS

The current study has introduced a new measurement approach to
estimate the potential positive impact of conflict in business organizations. The
specific research field of international joint ventures did not provide significant
results to support the main hypotheses. However, the construct and the verified
measure of conflict potential might have important consequences for subsequent
research projects. It is justified even within the limitations of this study, because
of the significant negative relationships among traditional conflict measures and

constructs of perceived joint venture success.

6.2.1. THEORETICAL IMPLICATIONS

Theoretically, the significant differences between the two, traditional
measures of conflict, and the newly introduced measure of conflict potential may
call for a parallel application of these measures in forthcoming studies. In spite of
the insignificance of most of the partial regression coefficients in this study, the
measurement of conflict potential may be a step ahead in understanding the
highly complex system of explanatory, moderating, and mediating variables
behind satisfactory joint venture performance (Parkhe, 1996). Parkhe’s call is

definitely justified. The current study might advance the theory of conflict by

132

showing that new measures need to be developed it we ever want to understand
the beneficial effects of conflict within organizations and to map the underlying
conditions of such effects (Pondy, 1992).

Some of the insignificant findings of this study may reassure Dean
Tjosvold’s (1996) gradual research approach toward understanding conflict
situations. Perhaps the most appropriate construct that was omitted from this
project is that of conflict management.

In terms of sociology and social-psychology theories, the findings are
encouraging. Sociological concepts always have found their justified place in all
social sciences. Marketing and management, in general, are no exceptions. The
constructs of conflict and the newly introduced term of conflict potential have
exhibited a high degree of reliability. The explanatory power of conflict and
conflict potential has been transparent as well, given the R2 results of the multiple
regression models. We may say with confidence that sociological concepts will
continue to enrich the science of management and to improve our understanding
of managerial concepts. This current study proved that there exists a great
potential of cross-fertilization between management and sociology. We may
make similar conclusions about the new product development theory stream.
Although explaining the performance of a joint venture and the successful
commercialization of a new product may not exactly require the same set of
independent variables, still there are numerous similarities between the two

CORStI’UCtS.

133

Organizational behavior and interorganizational relations theories
have been enriched by many international business findings in the past (Parkhe,
1996). In this study, these literature streams provided strong support for our
hypothesis development. The study, again, not conclusively, but seemed to
support Pondy’s note (1992) that the continuous presence of conflict and the
antecedents of conflict are inherent in organizations. The next big question is
how we may estimate their impacts on organizational performance. The first
stage of our journey to understand the benefits of conflict is very likely to be
finished. The comprehensive set of major constructs and modifier variables
described in this study may only be tested in subsequent studies, employing a
similarly comprehensive set of structural equations.

The study has several findings that reinforce the current state of
International joint venture literature. As it has been shown in subsequent
studies, the level of trust and perceived performance is strongly interconnected.
The presence of trust is also a necessary condition to understand the potential
role of conflicts in joint ventures.

The strong significance of the regression models seems to indicate that
further investigations onto the role of conflict in joint ventures always need to
consider the interaction effects between trust and conflict or conflict potential.
Durability or longevity of joint ventures doesn’t appear to be strongly influenced
by the new construct of conflict potential. However, this finding tends to be
somewhat inconclusive, and, of course, limited to the current data set. The

construct of stability was estimated by using a relatively simple, new measure.

134

Measurement of stability is likely to be the subject of further discussions in the
international management literature (e.g., Yan & Zeng, 1999).

The role of culture has remained untested in this study. However, the
research proposals have been developed on a solid theoretical background, and
they are going to be testable whenever the question of significance of partial;
regression coefficients is resolved.

Altogether, the findings call for an even more thorough theoretical review
of the literature, in order to identify all potential independent variables that might

have been omitted from this study.

6.2.2. MANAGERIAL IMPLICATIONS

Given the exploratory nature of the study, at least in terms of the new
measure of conflict potential, numerous, valuable managerial insights have been
gained from the telephone interviews.

The importance and the future of international joint ventures are still
debated by researchers and managers. International joint ventures offer
multinational companies the ability of using their partner’s capabilities in
generating profits. As long as this opportunity is present, the popularity of joint
venture creation seems to be maintained. Very often, as it has been the case at
some of the Hungarian - foreign joint ventures, these organizations are created
to satisfy demands from the host country’s government or simply to take
advantage of taxation benefits. However, such benefits are always temporary.

The real benefits of joint ventures may be in improved learning capabilities thus

135

an increased level of competitiveness in global markets. Even if these benefits
might be counterbalanced with the disadvantages of split ownership over the
firms’ assets, still the promise of long-term business benefits through improved
competitive capabilities seem to be the key motivating factor for multinational or
global firms to choose joint ventures as a market entry mode.

The current study highlighted the complexity of economic, business, and
psychological factors behind such ventures. We have, indeed, reached a stage
in international business research, where only fine-grained research methods,
and repeatedly tested and improved measures may bring further advancement.

Managers, justifiably, will not be satisfied with a research project that
establishes that conflict may be beneficial for performance and trust under
specific circumstances. It is the researcher’s task to clearly identify those
circumstances, and provide some form of practical guidance how to achieve or
how to create them.

Again, based on the recommendations of the respondents, we need to
refer to Pondy’s insights (1992). Everybody seems to accept the necessary
existence of conflict in the investigated managerial relationships. The majority of
the managers also realize that they may even use such conflict for finding the
best solutions to business problems. There are numerous challenges for
international joint ventures both in their everyday operations and their strategic
management.

The majority of managers were seeking diversity of opinions, diversity of

managerial attitudes. There was a subset of respondents who openly

136

admitted that they personally did not like to work within a diverse decision
making team. However, even these people seemed to acknowledge the
potentlal long-term benefits of such dlverslty. Thus the measure of conflict
potential has been, at least partially, validated by their responses. It is obvious
from the study, that future improvements in the measurement model may be
necessary to validate the complex theoretical model. During the administration of
the survey, respondents naturally did not know the purpose of the study.
However, the respondents, who really intended to discuss the individual
questions in some detail, expressed their agreement to the general direction of
the research. The study may provide some guidelines for future measurement
attempts within the framework of a seemingly appropriate integration of different

theory streams.

6.2.3. LIMITATIONS OF THE STUDY

Omitted variables appear to be the major limitation of this study as it was
shown through the limited explanatory power of multiple regression models. That
seems to be the most urgent research issue to be addressed by future research
projects.

External validity of the new, perception-based measures of stability and
conflict potential needs to be verified by managerial expertise. This limitation
may be easily corrected by conducting even a small-scale qualitative survey
among joint venture managers. This type of extension of the current research is

also the intention of the author of this study.

137

An obvious shortcoming of the study is the relative one-sidedness of the
responses. In future studies this shortcoming can be resolved. Following the
dyadic research approach (Bonoma et al., 1978), the respondent joint ventures
are to be provided with two questionnaires, and to be specifically asked that both
a Hungarian and a foreign manager should complete the respective English or
Hungarian surveys. On one hand this approach improves the requirement for
appropriate sample sizes, and also helps enriching the research stream by the
parallel analysis of answers (Cullen et al., 1995). Habib & Burnett also supports
the dyadic approach in the field of international joint ventures, since they found
significantly different levels of perceived conflicts and perceived satisfaction at
partner managers (1989).

Other analytical approaches are available, and might be employed when
detecting the relatively weak impact of conflict on performance. For instance,
with the application of alternative analytical methods, such as MANOVA, a
different set of joint venture specific hypotheses may be developed along the
ideas outlined by Song et al., (2000) in the context of new product development.

Due to its further limitations, this study cannot review the different conflict
management approaches and their interactions with the observed effects of
conflict. Incorporating the dimensions of conflict management is the task of
future research (Tjosvold, 1996; Tjosvold & Morishima, 1998; and Tjosvold et al.,

1999).

138

6.2.4. SUGGESTIONS FOR FUTURE RESEARCH

A step toward improving the current study would be the collection of a
greater, more comprehensive data set, preferably from countries representing a
greater variety in terms of cultural diversity. Increased variance in the variables
might itself improve the significance of predictions however, the main Issue
about Improving the design of the current study seems to be the omitted
variables.

A reappearing comment from respondents was the inherent necessity of
incorporating conflict management approaches into the study. There have been
a variety of approaches that introduced alternative, categorical variables to
estimate the role of the different styles of communication within organizations
(e.g., Mohr, et al., 1996; Salk & Brannen, 2000).

At the practical level, two alternatives are presenting themselves. First,
there are the three major conflict management approach as developed by
Tjosvold (1986). Although Tjosvold’s managerial approaches refer to a superior-
subordinate relationship, joint venture managers may often find themselves in
such a situation, and the estimation of power and control constructs helps us
evaluating the respective roles they play in such situations. Managers may
approach conflict situations by three, broadly defined ways. First, they can be
cooperative conflict managers. It refers to their willingness to accept and
develop other people’s ideas or arguments. These type of managers are the
most likely to create win-win situations in a firm. On the other hand, a

competitive conflict management approach means the openly conducted

139

debate and looking for not only arguments to defend one’s own ideas, but also to
find weaknesses in that of other managers. We may find many parallel
characteristics between the competitive approach and the approach of high
scoring managers Hofstede’s (2002) dimension of individualism. The third
approach is conflict avoidance, and it may have some relevance to the current
study as well. Hungarians are traditionally individualistic people, however, 40
years of communism have changed the attitudes of several subsequent
generations. A relatively high level of conflict avoidance might have been a factor
behind the insignificant regression coefficients as well.

Incorporating the three conflict management approaches into
questionnaires may be the segmentation that is needed for significant
measurement of positive impacts of conflict in international joint ventures. These
three approaches might even be used as alternatives to Hofstede’s cultural
dimensions or cultural distance, since these approaches may be easily
measured asking several questions directly from the respondents. Also, the three
major approaches provide an outstanding opportunity for dyadic research. It
would involve a matching the joint venture partners according to their respective
approaches toward conflict situations. It would be very interesting to see that a
cooperative - competitive or a competitive - competitive match of partner
managers would be more effective in terms of joint venture performance.

Secondly, the conflict handling strategies developed by Thomas (1992)
and Xie et al., (1998) might be employed in subsequent studies. The strategies

have been developed on a similar basis to that of Tjosvold, however these

140

strategies have already been tested and measured in several studies. The six
major strategies (avoidanCe, accommodation, collaboration, competition,
compromising, and hierarchical conflict resolution behavior are referred to by Xie
etaL,1998)

Several related literature streams might be incorporated in the theoretical
background of the current study. Future research should certainly consider
expanding the narrowly defined concept of conflict potential, along the
recommendations about the additive nature of the construct by Cadotte & Stern
(1979). A qualitative, exploratory study should verify the external validity of the
five-item measure employed in this study. Similarly, the relationship between
conflict and learning should be incorporated in future models, after a review of
joint venture learning theory (Barkema et al., 1997, Hult et al., 2000; lnkpen,
2000)

Besides the perceptions toward conflict, other constructs in the study may
be culture-dependent as well. For instance, trust is proven to be culture-
dependent by Aulakh et al., (1996). Such differences should be incorporated in a
more complex model on conflict with multiple interaction terms. It is a somewhat
distant project from the current state of this study, but the consideration of the
mechanisms of cross-cultural ethical conflicts and the role of institutions in
resolving conflicts are logical extensions of the current conflict model (Easterly,
2001; and Hamilton & Knouse, 2001). In case of joint ventures the most

important micro-level institutions are the partner firms, while a macro-level

141

analysis might incorporate the effects of host government actions through an
event-analysis or dummy variables.

As a closing thought, the study may certainly be developed in multiple
ways. In order to introduce higher variation in the sample, it may include
managers from more than just a few countries (Appendix A). However, the most
promising and feasible way seems to be to include conflict management
approaches as mediator variables. It is the author’s hope that the study has
contributed to the long-standing debate over the beneficial role of conflict and
also to the variety of measurement approaches available for future studies.

Hungary’s transitional economy may not have had enough time to make
most of its managers aware of the potential advantages of organizational
conflicts. However, in a more experienced, more competitive market economy,
managers may be more open to admit and utilize such advantages. That fact
encourages further extension of this study as well. Conflict potentlal might be
an Important dimension of diversity In business organizations. Thus,
certain degree of conflict potential might Improve the long-term

performance of organizations.

142

Appendix A: Country Scores on Hofstede’s Dimensions of Culture

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Country jpor jrov jMAs IUAI jLTo
Arab World" 80 38 52 68
figentina 49 46 56 86
Australia 36 90 61 51 31
Austria 11 55 79 70
Belgium 65 75 54 94

Brazil 69 38 49 76 65
Canada 39 80 52 48 23
Chile 63 23 28 86

China 80' 15' 55' 40' 1 14
Colombia 67 13 64 80

Costa Rica 35 15 21 86

Czech Republic 35' 60' 45' 60'
Denmark 18 74 16 23

East Africa“ 64 27 41 52 25
Ecuador 78 8 63 67

El Salvador 66 19 40 94
Finland 33 63 26 59

France 68 71 43 86
Germany 35 67 66 65 31
Greece 60 35 57 112
Guatemala 95 6 37 101

Hong Kogq 68 25 57 29 96
Hungary 45' 55' 79' 83' 50'
India 77 48 56 40 61
Indonesia 78 14 46 48

Iran 58 41 43 59

Ireland 28 70 68 35

Israel 13 54 47 81

Italy 50 76 70 75
Jamaica 45 39 68 13

Japan 54 46 95 92 80
Malaysia 1 04 26 50 36

Mexico 81 30 69 82
Netherlands 38 80 14 53 44
New Zealand 22 79 58 49 30
Norway 31 69 8 50

 

 

 

 

 

 

 

143

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Country Scores on Hofstede’s Dimensions of Culture (cont. )
Country IPDI IIDV jMAs IUAI ILTO
Pakistan 55 14 50 70 0
Panama 95 11 44 86

Peru 64 16 42 87
Philippines 94 32 64 44 19
Poland 55' 60' 65' ' 78' 37'
Portugal 63 27 31 104
Sigqapore 74 20 48 8 48
South Africa 49 65 63 49

South Korea 60 18 39 85 75
Spain 57 51 42 86
Sweden 31 71 5 29 33
Switzerland 34 68 70 58

Taiwan 58 17 45 69 87
Thailand 64 20 34 64 56
Turkey 66 37 45 85

United Kingdom 35 89 66 35 25
United States 40 91 62 46 29
Uruguay 61 36 38 100
Venezuela 81 12 73 76

West Africa“ 77 20 46 54 16

 

 

 

 

 

 

 

 

“Regions; these are estimated values:

Arab World = Egypt, Iraq, Kuwait, Lebanon, Libya, Saudi Arabia, United Arab Emirates
East Africa = Ethiopia, Kenya, Tanzania, Zambia

West Africa = Ghana, Nigeria, Sierra Leone

Abbreviations: PDI: Power Distance; IDV: Individualism; MAS: Masculinity;

UAI: Uncertainty Avoidance; and LTO: Long-Term Orientation

Source: ITIM, www.itim.org, December, 2002

144

Appendix B: Survey Instrument Items

(All items are 7-point Likert scales. R = Reversed scale)

 

 

Constructs Items
Conflict - The partners frequently argue over operational issues
by Habib, 1987 in the joint venture
Two-item - We feel that the disagreements between the partners

over operational issues in the joint venture are highly

 

 

intense
Conflict - There is little or no conflict between the partners (R)
by Dyer & Song - People representing the two parent firms rate the
1997 importance of the decisions the same way (R)
Five-item - PeOpIe representing the two parent firms share the
d = .74 same values (R)

- People representing the two parent firms feel that the
objectives of their respective companies are in harmony
with each other (R)

- People representing the two parent firm differ on the

goals of the joint venture itself

 

 

145

 

 

Constructs

Items

 

Conflict Potential
Five-item

d=.76

- I prefer working with a foreign partner who has different
perceptions about business decision situations than I do

- Different perceptions of the partner managers about
business problems may help find the best solution to such
problems

- Having different perceptions about business problems is

helpful for the joint venture in dealing with the challenges 0

a continuously changing environment
- Conflicts between partner managers may generate trust in
the long-run
- Some degree of conflict between partner managers is

preferable to no conflict at all in the joint venture

 

Control

We have more control over joint venture decisions than our

foreign partner does

 

 

Cultural
Dimensions

Proxies

 

Hofstede’s country scores serve as proxies for different levels

of the major dimensions:

High Individualism: USA, Australia, UK, Canada, Netherlands

High Uncertainty Avoidance: Greece, Portugal, Latin-America

High Power Distance: Malaysia, Mexico, Arab countries, Latin-

America

High Masculinity: Japan, Austria, Italy, Switzerland, Mexico

 

146

 

 

Constructs

Items

 

 

 

 

 

 

Cultural Please indicate on the scales how different is your home
Distance country from the country of your partner in terms of
Four-item - The overall cultural distance
a = .81 - Differences in terms of values
- Differences in terms of traditions
- Differences in terms of everyday lives
Longevity How long has been the joint venture in operation, in years?
Performance In terms of the performance of the international joint venture,
Three-item please evaluate these statements:
a = .85 - We are satisfied with our personal relationship with our
foreign partner
- We are satisfied with our overall relationship with our
foreign partner
- Performance of the joint venture is financially
satisfactory
Power - We possess more power in the joint venture
Three-item relationship than our foreign partner
a = .80 - Compared to our foreign partner we have a stronger
influence on joint venture decisions
- We are dependent on our foreign partner
Stability - Joint venture frequently changes its strategic objectives
Two-item - The joint venture frequently changes its ownership and

 

/ or management structure

 

147

 

 

Constructs

Items

 

 

Trust
Three-item

d=.77

 

Our business relationship with our foreign partner is
characterized by high levels of trust

Our parent firm and the partner firm generally trust that
each will stay within the terms of the joint venture
contract

We and our partner firm are generally skeptical of the

information provided to each other (R)

 

148

 

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