Understanding the Consequences of Control and Trust - A Three-Party Perspective on International Joint Ventures in China -

In order to sustain satisfactory international joint ventures (IJVs), it is necessary for parent firms to build control mechanisms and trust relationships. This paper explores the performance consequences of parent control and inter-firm trust in IJVs from the perspectives of three different parties, i.e., two parent firms and IJV management. It is hypothesized that parent control asymmetry, IJV autonomy, and inter-parent trust jointly affect parent satisfaction and IJV managerial performance. Using primary survey data on 117 IJVs in China, we find that a parent’s control dominance is positively associated with the achievement of its own goals, but not related with IJV managerial performance; and IJV autonomy is a critical factor for both foreign and Chinese parent satisfaction as well as IJV managerial performance. Study results also suggest that inter-parent trust is more important for Chinese firms in IJV operations, while foreign firms tend to be more concerned with gaining dominant control. Additionally, inter-parent trust can enhance the impact of foreign parents’ control dominance on their satisfaction towards IJVs, and subdue the positive influence of IJV autonomy on Chinese parent satisfaction.