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International Joint Venture Ijv's (International Joint Ventures) have increased significantly in popularity in recent years (Beamish and Delios 1997) as firms find themselves under more pressure to expand internationally, to be competitive. However, international joint ventures (Ijv's) continue to be challenging to manage and, as a result, often lead to failure. In a meta-analysis of 12 past studies of Ijv's, Beamish and Delios (1997) found that the performance of between 32 and 61 percent of the Ijv's' in each sample was unsatisfactory. Consequently, both managers and academics are keenly interested in what firms can do to increase their Ijv's' chances of success. One of the most common reasons given for Ijv's not performing well is difficulties between parent firms. It is therefore essential to consider how such difficulties can be avoided.
One hypothesis is that the more dissimilar parent firms are, the more likely they are to experience difficulties with their joint venture. Several authors have suggested, but not tested, that interim diversity can severely impede the ability of companies to work together effectively (Harrigan 1988 a; Parkhe 1991; Perlmutter and Helena 1986). One way of measuring dissimilarity is to examine how firms' organizational climates differ. This is the approach chosen in this study, which focuses on the relationship between the dissimilarity in organizational climate between the parent firms and the joint venture organization (JVO) and the performance of the joint venture.
The importance of inter-firm organizational culture / climate similarity for firms involved in joint ventures has received little systematic attention in the literature. Some IJV researchers have alluded to the drawbacks of organizational culture / climate dissimilarity by suggesting that it is beneficial for the parents of an IJV to have similar organizational climates in order to obtain optimal IJV performance (e. g. Geringer 1988; Parkhe 1991; Similar 1983). However, we are not aware of any past research that has systematically empirically investigated this issue.
This study seeks to help fill this void. Throughout the paper, the term joint venture organization (JVO) will be used to refer to the joint venture, excluding the parents. This is in contrast to our use of the terms IJV and JV, which we use to represent the JVO and its parents. As discussed in the methodology section, this study is limited to Ijv's with two parents. The decision to focus on the importance of organizational climate similarity between parent firms and the JVO derives from three exploratory studies which investigated success strategies for Russian international joint ventures -- Rijv's. The studies were conducted to determine which relationships were important, rather than to test the importance of specific relationships.
The studies involved interviews with general managers from 42 Russian international joint ventures (Rijv's). In some cases, other managers from the JVO and parent firms were also interviewed. The importance of organizational climate similarity between parent firms and the JVO was one of the key success factors alluded to most frequently during these interviews. The central goal of this paper is to determine the advantages and disadvantages of forming an International Joint Venture.
Russia provides a good location to investigate this question, since Ijv's in Russia are often a meeting place for parent firms with diverse organizational climates. The paper first reviews the literature on Russian international joint ventures and then compares and contrasts the organizational climate and organizational culture literatures. Next, the variables used in the study are discussed, followed by an explanation of the methodology used. The results are then presented and discussed. The paper concludes with topics for further study. Russia's transformation to a market economy has not been easy.
However, with vast natural resources, a well-educated and inexpensive labor force, and 150 million people, Russia has nevertheless attracted the attention of foreign firms, despite high risks. The risks include organized crime, intractable bureaucracy, uncertain legislation, an arbitrary tax system, and an unstable political and economic system. These environmental factors are characteristics of the market place and are difficult for any single company to influence. In contrast, this paper seeks to examine the influence of a factor which firms can affect, the importance of organizational climate similarity. Several authors have conducted studies on Russian international joint ventures (they are largely small-sample, exploration / descriptive studies). Fey has conducted several studies relating to Russian Ijv's which have investigated success strategies, design characteristics, key success factors, and managing conflict.
Other authors have also made important contributions to our understanding of Russian international joint ventures (RIJVS). Ralston provided eight recommendations for IJV success based on interviews with managers from 16 Rijv's, and Cattaneo investigated how to avoid typical problems which arise. Lawrence and Vlachoutsicos (1993) wrote an important Harvard Business Review article based on several case studies, which suggested the importance of giving the RIJV a lot of autonomy due to the dynamic environment and the importance of utilizing local managerial talent. She and Pettibone suggested useful negotiation strategies when trying to form an RIJV and McCarthy provided a historical examination of the experience of 40 firms in Russia (which included using Rijv's) and described the future plans of these foreign firms. Hertzfeld (1991) described how vertical integration can be beneficial for Rijv's. Finally, Nigh and Smith (1989) investigated how foreign firms are managing political risk in Rijv's and Nigh et al. (1990) described the basic design characteristics of Rijv's.
Before turning explicitly to the literature dealing with organizational climate, it is worth considering the differences between organizational climate and organizational culture, because they are closely related constructs and the term organizational culture is currently more popular than organizational climate. Though a few authors have compared and contrasted the organizational climate and culture literatures (e. g. Denison 1990; Denison 1996; Schneider 1990; Schwartz and Davis 1981), most researchers have ignored the similarities and differences between organizational climate and organizational culture.
Organizational culture has traditionally focused on the unique aspects of a particular social setting, and has thus relied on qualitative methods. In contrast, organizational climate has explicitly focused on comparisons between different social settings and thus has traditionally used quantitative methods. Organizational climate researchers have normally placed greater emphasis on observable practices of the organization, while organizational culture researchers have traditionally placed more emphasis on the values of the organization. Also, compared to organizational climate, organizational culture is more oriented towards 'deeper' concepts such as organization values and the assumptions underlying these values.
In addition, organizational culture has traditionally been more concerned with the evolution of an organization over time compared to organizational climate which has focused on comparisons across organizations at one point in time. Many of these differences stem from the applied psychology background of organizational climate compared with the background of organizational culture in anthropology and sociology. In general, while there are some differences between organizational climate and organizational culture, we assert that the constructs represent very similar phenomena. As Denison states, 'The debate over organizational culture and climate is in many ways a classic example of methodological (and epistemological) differences obscuring a basic substantive similarity.
The argument is not so much about what to study, but how to study it'. Similarly, Schneider and Reichers (1983) state, 'We believe that climate and culture are very similar concepts' (p. 23). In recent years, the term organizational culture has become more popular than the term organizational climate. In contrast to the majority of the organizational culture instruments and articles which were published after 1980, most of the organizational climate instruments and articles come from the 1970 s. However, if the strict definitions of the two constructs are respected, this analysis is misleading, because a more thorough analysis will uncover that many articles purporting to discuss organizational culture actually come closer to discussing organizational climate. For example, as Denison questions, why is it that when Litwin and Stringer (1968) discuss the organizational trait of risk-taking, it is considered part of organizational climate, but when Chatman (1989) asks similar questions about risk-taking 21 years later, it is considered part of organizational culture?
Also, why is Joyce and Slocum's (1984) examination of person-environment fit called a 'climate study', but O'Riley et al. 's (1991) study of person-environment fit, a 'culture study'? These examples illustrate that many researchers, who, strictly speaking, are studying what has traditionally been considered organizational climate, claim that they are studying organizational culture, since that is the more popular term these days. To some extent, the meaning of the term organizational culture is evolving to include both organizational climate and organizational culture. This seems to demonstrate that language is changing.
However, for purposes of theoretical correctness, we will use the term organizational climate in this study. It is the phenomenon we are studying, and what the instrument we chose after careful consideration purports to measure. However, organizational culture research does have much to offer organizational climate and, as we have shown above, the differences between these two constructs are quite small. Litwin and Stringer define organizational climate as 'a set of measurable properties of the work environment, perceived directly or indirectly by people who live and work in this environment and assumed to influence their motivation and behavior'. Traditionally, organizational climate alms to capture a snapshot of an organization at one point in time.
Organizational climate research has had a long and active history, with much of its foundation drawn from psychology. Because of space constraints and the availability of excellent articles which review the extensive history of the organizational climate literature, we will only briefly review the organizational climate literature here. Organizational climate is largely based on Lewinian field theory, which is a result of Lewin's work on experimentally-created social climates (Lewin 1951; Lewin et al. 1939). This work was advanced by several early key studies including Litwin and Stringer (1968) and Tagiuri and Litwin (1968). Litwin and Stringer investigated how organizational climate affects individual motivation. They also suggested that organizational climate was comprised of nine dimensions: structure, responsibility, reward, risk, warmth, support, standards, conflict, and identity.
Taguiri and Litwin's (1968) book was comprised of a series of essays that treated climate in ways ranging from a subjective interpretation of organizational characteristics to an objective set of organizational characteristics. Other early studies were aimed at identifying the dimensions comprising organizational climate (e. g. Campbell et al. 1979; Halpin and Croft 1962; Likert 1961, 1967).
After the 1960 s and early 1970 s, the focus of the organizational climate field became more clearly defined. More recently, organizational climate researchers have begun to consider how organizational climates develop. Three schools of thought have developed: the subjectivism (Schneider and Reichers 1983), objectivist (Pane and Pough 1976), and interaction alist (Katz 1980; Which 1979) perspectives. Probably the most troubling issue that the organizational climate literature continues to face is defining the appropriate dimensions that comprise organizational climate. Organizational climate is a fairly general term which refers to a class of dimensions which can be critiqued for being too diverse.
In addition, the multidimensional nature of organizational climate makes it more difficult to define sharp borders (Guide 1973). Organizational climate scholars have responded by making empirical and theoretical arguments to distinguish organizational climate from various other constructs, such as structure (Payne and Pough 1976) and individual satisfaction. While these and other efforts have been helpful, some fuzziness around the borders and differentiation of the organizational climate construct still remains. Research on organizational climate has continued more recently, including Joyce and Slocum's (1982) study of person and organizational fit, Joyce and Slocum's (1984) investigation of the extent to which organization members agree about their organizational climate, Glick's (1985) discussion of the difficulties of measuring organizational climate, Denison's (1990) investigation of the relationship between organizational climate and performance, and Korea and DeCotis's (1991) work on measuring organizational climate. Even more recently, Denison has investigated the difference between organizational culture and organizational climate, and Griffin and Mathieu (1997) have looked at how perceptions of organizational climate vary with the hierarchical level in an organization. Anderson and West (1998) contributed to the literature by exploring the link between organizational climate and innovation.
In this section, we develop the hypotheses about the importance of organizational climate similarity for the success of Ijv's. We begin by reviewing some related empirical evidence which provides preliminary support for our assertions, and we then use transaction cost theory to develop our hypotheses. The joint venture literature only speaks to anecdotal suggestions of the importance of similar organizational climates (e. g. Geringer 1988; Harrigan 1988 a; Lane and Beamish 1990; Parkhe 1991)...
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Research essay sample on Organizational Culture Joint Ventures
