Knowledge acquisition from foreign parents in international joint ventures an empirical study in vietnam

ARTICLE IN PRESS international business review International Business Review 15 (2006) 463–487 www.elsevier.com/locate/ibusrev Knowledge acquisition from foreign parents in international joint ventures: An empirical study in Vietnam Phan Thi Thuc Anha,Ã, C Christopher Baughnb, Ngo Thi Minh Hanga, Kent E Neupertc a NEU Business School, National Economics University, Hanoi, Vietnam Department of Management, Boise State University, Boise ID 83725, USA c College of Business and Economics, Boise State University, Boise ID 83725, USA b Received 16 December 2005; received in revised form 19 March 2006; accepted May 2006 Abstract Drawing on alliance learning and absorptive capacity literatures, we propose a model-linking absorptive capacity, knowledge acquisition, and performance The model is tested in a sample of 173 international joint ventures (IJVs) in Vietnam The results show that all three components of absorptive capacity contributed substantially to the level of knowledge acquisition reported by IJVs Critical factors predicting knowledge acquisition included investment in training, employees’ ability to learn, and joint participation Knowledge acquisition, especially the acquisition of tacit knowledge, was found to contribute significantly to IJV performance Our model generally supports existing theories regarding the relationship between absorptive capacity and knowledge acquisition, as well as between knowledge acquisition and performance r 2006 Elsevier Ltd All rights reserved Keywords: Knowledge acquisition; International joint ventures; Absorptive capacity Introduction The importance of learning from foreign parents in international joint ventures (IJVs) has been attracting an increasing amount of attention from the research community ÃCorresponding author Tel.: +844 869 0055x126; fax: +844 869 1682 E-mail addresses: ptanh@bsneu.edu.vn (P.T Thuc Anh), cbaughn@boisetstate.edu (C Christopher Baughn), nmhang@bsneu.edu.vn (N.T Minh Hang), kneupert@boisetstate.edu (K.E Neupert) 0969-5931/$ - see front matter r 2006 Elsevier Ltd All rights reserved doi:10.1016/j.ibusrev.2006.05.004 ARTICLE IN PRESS 464 P.T Thuc Anh et al / International Business Review 15 (2006) 463–487 Learning from foreign parents is considered to be a determinant of the success of IJVs, especially IJVs in transitional economies since firms in these economies often lack the necessary knowledge and skills to compete in international markets (Dhanaraj, Lyles, Steensma, & Tihanyi, 2004; Lane, Salk, & Lyles, 2001; Lyles & Salk, 1996) Despite the importance of joint venture learning, it has been found to be a difficult and misunderstood process, often coupled with considerable frustration (Crossan & Inkpen, 1995; Martin & Salomon, 2003) This paper aims to increase our understanding of the field by proposing a model-linking IJV absorptive capacity, knowledge acquisition and performance, and testing it in Vietnam, an economy in transition The contribution of this paper is twofold First, while conceptually absorptive capacity has been recognized as a multidimensional construct (Cohen & Levinthal, 1990; Zahra & George, 2002), empirical research often equates it with the R&D intensity measured by the percentage of R&D spending in total sales This approach is too simple in that it cannot fully reflect the richness of the construct (Zahra & George, 2002) Two notable exceptions that have attempted to propose and test a multidimensional model of organizational absorptive capacity in the learning field are studies by Lane et al (2001) and Minbaeva, Pedersen, Bjorkman, Fey, and Park (2003) These models, however, could only capture a part of the construct The model proposed by Minbaeva et al (2003) addresses the human side including employee ability but not the organizational mechanisms Lane et al.’s model (2001) included organizational aspects but did not explicitly address the human side As pointed out by Cohen and Levinthal (1990), both human and organizational mechanisms are important aspects of organizational absorptive capacity In this paper, we contribute to the development of the construct by proposing a model of absorptive capacity that takes into account its multidimensionality, incorporating both human capital and organizational aspects Second, although knowledge is often conceptually classified into tacit and explicit types, empirical research to date largely seems to have ignored this fact and tested only general knowledge acquisition This offers limited insights into how different absorptive capacity components predict different types of knowledge as well as how different types of knowledge predict IJV performance By dividing knowledge acquisition into tacit and explicit knowledge (Nonaka & Takeuchi, 1995; Polanyi, 1958), this paper helps to clarify such relationships The paper is structured as follows: the next section is a review of theoretical foundations for the main constructs, followed by a section on hypotheses development We then briefly describe Vietnam, the research site The subsequent section is methodology of the research, then the research results The paper is completed by discussion and conclusion sections Theoretical foundations The theoretical foundation for knowledge acquisition in IJVs is the knowledge-based theory of the firm (Grant, 1996a, 1996b; Kogut & Zander, 1992, 1996; Nonaka, 1994; Nonaka & Takeuchi, 1995) According to this view, knowledge, especially tacit knowledge, is the most important strategic resource and the ability to acquire, integrate, store, share, and apply it the most important capability for building and sustaining competitive advantage Thus, an IJV effective acquisition of its foreign parent knowledge would determine the IJV performance (Dhanaraj et al., 2004; Lyles & Salk, 1996) Knowledge ARTICLE IN PRESS P.T Thuc Anh et al / International Business Review 15 (2006) 463–487 465 acquisition, in turn, is determined by a number of factors, especially absorptive capacity of the recipient firm (Lane & Lubatkin, 1998; Lane et al., 2001; Lyles & Salk, 1996) The following paragraphs provide detailed reviews of three main constructs in the IJV knowledge acquisition process 2.1 Knowledge Knowledge is defined differently by different authors For example, it is described as ‘justified beliefs’ (Polanyi, 1958), ‘valuable information in action’ (Grayson & Dell, 1998, p 2) Davenport and Prusak (1998, p 5) proposed a quite complete definition of knowledge: Knowledge is a fluid mix of framed experience, values, contextual information, and expert insight that provides a framework for evaluating and incorporating new experiences and information It originates and is applied in the minds of knowers In organizations, it often becomes embedded not only in documents or repositories but also in organizational routines, processes, practices, and norms According to the authors, knowledge is more than information—it is ‘deeper’ and ‘richer’, including various elements; it is fluid as well as formally structured; it is intuitive and therefore hard to capture in words or understand completely in logical terms Knowledge from the foreign parent(s) consists of the knowledge held by the parent’s employees as well as knowledge embedded in the parental organizations’ policies, procedures, norms, systems and processes Knowledge is commonly classified according to whether it is tacit or explicit Tacit knowledge was defined by Polanyi (1966) as knowledge that is non-verbalizable, intuitive, unarticulated Tacit knowledge is highly context specific and has a personal quality, which makes it hard to formalize and communicate (Nonaka, 1994) By contrast, explicit knowledge is knowledge that can be codified, articulated and easy to be communicated Explicit knowledge rests on a company’s policies, systems, guidelines, and procedures 2.2 Knowledge acquisition Knowledge acquisition is ‘the process by which knowledge is obtained’ (Huber, 1991, p 90) In this study, IJV knowledge acquisition from foreign parents is defined as a process by which an IJV obtains new knowledge from its foreign parent Acquired knowledge does not have to be newly created, only new to the organization (Davenport & Prusak, 1998) Knowledge acquired can be tacit, explicit or a combination of both Knowledge acquisition results from individual participation and interactions with tasks, technologies, resources, and people within a particular context (Bourdieu, 1990; Brown & Duguid, 1991; Garud & Rappa, 1994; Tsoukas, 1996) Individuals acquire knowledge, but organizations create a context for individuals to acquire that knowledge In IJV learning, the IJV and its relationship with the foreign parent is the context in which knowledge is acquired by the IJV’s individual members The acquired knowledge will become the IJV’s knowledge through the organizational knowledge creation process which is described by Nonaka, Takeuchi, and Umemoto (1996, p 834) as ‘a process that ‘organizationally’ amplifies the knowledge created by individuals and crystallized it as a part of the ARTICLE IN PRESS 466 P.T Thuc Anh et al / International Business Review 15 (2006) 463–487 knowledge system of organization’ Following Alavi and Leidner (2001) and Lyles and Salk (1996), in this study, knowledge acquisition is considered as an ongoing activity rather than a discrete outcome 2.3 Absorptive capacity Absorptive capacity has received a lot of attention from the research community since its first introduction by Cohen and Levinthal (1990) There are many definitions of organizational absorptive capacity, but probably the most widely cited is that of the authors: ‘the ability to recognize the value of new, external information, assimilate it and apply it to commercial ends’ (Cohen & Levinthal, 1990, p 128) Organizational absorptive capacity rests on individuals’ absorptive capacities but it is not simply the sum of individuals’ absorptive capacities Aspects that make absorptive capacity distinctly organizational include the structure of communication between the external environment and the organization as well as among the subunits of the organization, and the character and distribution of expertise within the organization itself (Cohen & Levinthal, 1990) Organizational absorptive capacity is a multicomponent construct For IJV learning, Lane and Lubatkin (1998) and Lane et al (2001) suggested three components based on Cohen and Levinthal’s (1990) original definition: (1) the ability to understand new external knowledge, (2) the ability to assimilate it, and (3) the ability to apply it to commercial end Minbaeva et al (2003) suggested that in the context of knowledge transfer within multinational corporations, an organization’s absorptive capacity should be comprised of its employees’ ability and motivation Zahra and George (2002) reconceptualized the construct as a dynamic capability to include four components: (1) acquisition, (2) assimilation, (3) transformation, and (4) exploitation capabilities Their model provides a promising avenue for research on absorptive capacity yet is not specially designed for IJVs and has not been empirically tested In this paper, we propose an integrated model of absorptive capacity that takes into account the most recent developments in construct building as well as its most relevant features in the IJV learning context The model consists of three components as originally conceptualized by Cohen and Levinthal (1990) with each component represented by a number of factors summarized in the left hand side of Fig 1, the conceptual model of the knowledge acquisition process in IJVs In the following section, we elaborate on each component by offering a more detailed review of studies on the relationship between factors representing IJV absorptive capacity and its level of knowledge acquisition and propose a number of hypotheses Hypotheses 3.1 Component 1: ability to recognize the value of new external knowledge Recognizing the value of new external knowledge is the first step toward knowledge acquisition An IJV’s ability to recognize the value of new external knowledge is represented by two factors: (1) relatedness between an IJV and its foreign parent’s business and (2) the IJV’s investment in training ARTICLE IN PRESS P.T Thuc Anh et al / International Business Review 15 (2006) 463–487 467 Fig The conceptual model 3.1.1 Relatedness between IJV and foreign parent’s business Cohen and Levinthal (1990) contend that prior related knowledge is necessary for an organization to identify the value of new external knowledge Prior related knowledge is described by the authors as various related knowledge domains, basic skills and problem solving methods, prior learning experience and learning skills, and a shared language Similarly, Zahra and George (2002) posited that prior related knowledge is a part of a firm’s acquisition capability described as the firm’s capability to identify and acquire externally generated knowledge Likewise, Eriksson and Chetty (2003) argued that a firm’s prior experience contributed to its absorptive capacity As relatedness between an IJV and its foreign parent business gives the IJV some prior knowledge of the industry, products, and customers that are related to the knowledge held by their foreign parent, it can be used as a proxy for prior related knowledge Indeed, business relatedness has been addressed in the IJV learning literature (Hanvanich, Richards, Miller, & Cavusgil, 2005; Lane & Lubatkin, 1998; Lane et al., 2001; Merchant & Schendel, 2000) as having the potential to affect an IJV’s knowledge acquired from its foreign parent Therefore: H1 Relatedness between an IJV and its foreign parent business is positively associated with the IJV’s level of knowledge acquisition from the foreign parent 3.1.2 IJVs’ investment in training It is important to recognize that merely having related knowledge is insufficient and intensity of efforts from the firms as learners is critical for recognizing the value of new external information (Cohen & Levinthal, 1990; Kim, 2001) As noted by Inkpen (2000), some firms take a very aggressive approach to knowledge acquisition in alliances, while others evidence a more passive approach Intensity of efforts is defined as ‘effort expended in knowledge acquisition routines’ (Zahra & George, 2002, p 189) A direct measure of this effort would be investment in training Committing financial and other resources to support the acquisition and sharing of information can build a learning capacity which may help to overcome barriers to knowledge transfer (Simonin, 1999) Such investments ARTICLE IN PRESS 468 P.T Thuc Anh et al / International Business Review 15 (2006) 463–487 may be especially important for knowledge transfer to developing countries, reflecting greater needs for technical support and adaptation (Contractor, 1980) H2 An IJV’s investment in training is positively associated with its level of knowledge acquisition from the foreign parent 3.2 Component 2: ability to assimilate new external knowledge ‘Assimilating foreign parent knowledge is a sense-making process whereby the IJV connects the new knowledge to its existing knowledge’ (Lane et al., 2001, p 1157) The ability to assimilate new external knowledge is captured by (1) its employees’ ability to learn and (2) the cultural distance between partners While ability to learn directly reflects the ability to assimilate new knowledge, cultural distance serves as the context that facilitates or inhibits this ability 3.2.1 Employees’ ability to learn Zahra and George (2002) asserted that measures of a firm’s absorptive capacity must capture its members’ capabilities Taking this insight, Minbaeva et al (2003) posited that a subsidiary’s employees’ ability is a critical component of the subsidiary’s absorptive capacity and is needed to facilitate the transfer of knowledge from multinational corporations to the subsidiary itself Extending the argument to IJV context, an IJV’s absorptive capacity must also reside in its employees’ ability, and employees’ ability to learn will influence the IJV’s level of knowledge acquired from the foreign parent Thus, H3 An IJV’s employees’ ability to learn is positively associated with the IJV’s level of knowledge acquisition from its foreign parent 3.2.2 Cultural distance Cultural differences can create various problems in IJVs, including communication difficulties, unsuccessful negotiations, and time-consuming problem solving In many cases, such incompatibilities can lead to JV instability, reduced ability to benefit from knowledge spillovers, and IJV failures (Parkhe, 1991, 1993) The sharing of knowledge and learning may be inhibited by such cultural boundaries (Hanvanich et al., 2005; Lane & Lubatkin, 1998; Salk, 1996; Simonin, 1999) Thus, H4 Cultural distance between partners in an IJV is negatively associated with the IJV’s level of knowledge acquisition from the foreign parent 3.3 Component 3: ability to apply new external knowledge ‘Applying external knowledge involves the ability to diffuse knowledge within the organization, to integrate it with the organization’s activities, and to generate new knowledge from it’ (Lane et al., 2001, p 1157) In our model, this component of absorptive capacity is represented by (1) joint participation of local personnel and expatriates in IJV activities and (2) the IJV’s written goals and plans Joint participation provides ARTICLE IN PRESS P.T Thuc Anh et al / International Business Review 15 (2006) 463–487 469 opportunities for knowledge diffusion as well as opportunities to immediately integrate new knowledge into the IJV activities Written goals and plans serve as an organizational tool to facilitate knowledge application Together, the two proposed factors reflect not only the IJV’s ability to apply new knowledge but also the organizational mechanisms through which assimilated knowledge can be applied As noted by Inkpen (1998), Lyles and Salk (1996), and Zahra and George (2002), learning requires appropriate organizational policies, structures and processes 3.3.1 Joint participation The structuring of tasks, decision-making authority and interaction patterns devised for the IJV may enlarge or limit the window of opportunity for knowledge flow At one extreme, the alliance may be crafted to facilitate high levels of joint collaboration and extensive exchange of information At the other extreme, alliances may involve a more modularized approach, in which certain activities or component production by one party are ‘walled off’ from the other (Hladik, 1988; Moxon, Roehl, & Truitt, 1988) As noted by Cohen and Levinthal (1990), pushing specialization too far may undermine communication and learning To the extent that the host country members of the IJV are simply following the directives of the foreign parents, they may not be exposed to the diverse information, new perspectives or opportunity to practice new patterns and associations A requirement for applying complex organizational knowledge may be the active engagement of both parties Structures that diffuse decision influence and reduce the distance between strategic decisions and the operational bases of strategic problems can facilitate learning (Fiol & Lyles, 1985; Shrivastava, 1986) The involvement of joint venture’s local personnel in shared activities and decisions with the expatriates should provide a larger window into the knowledge and understandings held by the foreign parent organization Indeed, the choice of the joint venture form rather than more arms-length, market-based alliance from may reflect a need to develop a more integrated relationship conducive to learning (Mowery, Oxley, & Silverman, 1996) Thus, H5 Joint participation of local personnel with expatriates in shared activities of an IJV is positively associated with the IJV’s level of knowledge acquisition from its foreign parent 3.3.2 Written goals, plans for the IJV Lyles and Salk (1996) noted that articulated goals and plans can facilitate the development of commonly understood goals, allowing employees in an organization to focus learning resources on a common vision and mission Moreover, they can serve as a mandatory communication tool which can facilitate knowledge sharing among subunits and individuals within the IJVs, an aspect that makes absorptive capacity distinctively organizational (Cohen & Levinthal, 1990) Thus, the extent of goals and plans’ articulation would affect an IJV’s level of knowledge acquired from its foreign parent organization H6 An IJV’s written goals and plans are positively associated with its level of knowledge acquisition from the foreign parent ARTICLE IN PRESS 470 P.T Thuc Anh et al / International Business Review 15 (2006) 463–487 3.4 Absorptive capacity, tacit and explicit knowledge The extant literature on the role of absorptive capacity in alliance learning has not specifically addressed the impact of different absorptive capacity components on different types of knowledge: tacit vs explicit knowledge We suspect that several absorptive capacity factors may have larger impact on one type of knowledge than the other However, at this stage, we not form any formal hypotheses for this and leave it as exploratory 3.5 Knowledge acquisition and performance Although theorists (Hedlund, 1994; Nelson & Winter, 1982; Winter, 1987) suggested that knowledge is a key determinant of firm performance, with few exceptions (Lane et al., 2001; Lyles & Salk, 1996; Si & Bruton, 1999; Steensma & Lyles, 2000), empirical research has not yet confirmed this argument in the context of IJVs Moreover, though knowledge acquisition is considered very important, its relationship with firms’ performance is still questionable since the strategic value of the knowledge acquired to the firms’ situation is sometimes not fully understood We hypothesize: H7 An IJV’s level of knowledge acquisition from its foreign parent is positively associated with the IJV’s performance The knowledge-based view of the firm posits that tacit knowledge is a primary source of sustainable competitive advantage in organizations because it is both unique and relatively immobile (Grant, 1996a, 1996b) Empirical research, however, has not yet confirmed this argument A study of 138 IJVs in Hungary in 2001 by Dhanaraj et al (2004) found that while explicit knowledge has a significant positive relationship with performance, tacit knowledge has a significant negative relationship This theory-contradictory result is very surprising Given that this is the sole empirical research published that explicitly addressed this issue in interorganizational learning context; we will retest the following hypotheses: H8a An IJV’s level of explicit knowledge acquired from its foreign parent is positively associated with the IJV’s performance H8b An IJV’s level of tacit knowledge acquired from its foreign parent is positively associated with the IJV’s performance 3.6 Knowledge acquisition, its antecedents and IJV performance Several studies (Lane et al., 2001; Lyles & Barden, 2000; Lyles & Salk, 1996) stipulate that knowledge acquisition is the platform through which the predictors of knowledge acquisition have their impact on IJV performance That is, absorptive capacity factors such as relatedness between an IJV and its foreign parent’s business and/or formal goals and plans not have a direct impact on performance, but facilitate knowledge acquisition, which in turn is a driver of IJV performance A different line of research (e.g Tsai, 2001), however, found that absorptive capacity had a direct effect on organizational performance We will therefore test the following hypothesis in a different country setting: ARTICLE IN PRESS P.T Thuc Anh et al / International Business Review 15 (2006) 463–487 471 H9 An IJV’s level of knowledge acquisition from the foreign parent mediates the relationship between the IJV’s absorptive capacity and its performance Research site We chose Vietnam as our research site because of two reasons First, Vietnam has only been recently known as an important player in the international market Over the last three decades, the country has turned from a food importing nation to the world’s second largest rice exporter and an important exporter in coffee, rubber, cashew, fish, textile, garments and shoes industries Despite the downturn of the world economy, this country has achieved an average annual growth rate of 7.5% over the last years (MPI, 2005) Vietnam has been completing its negotiations to join the World Trade Organization Second, academically, the country has been relatively unexplored represented by the fact that little academic research has been conducted in this country Historically, Vietnam has been known in the world as a ‘war-after-war’ country armed consecutive conflicts with China (prior to 1884), France (1884–1954), and the United States (1954–1975) Vietnam declared its national independence in 1954 but had undergone 30 years of war before its reunification in 1975 In the period from 1975 to 1985, the economy of Vietnam could be characterized as purely centrally planned All property was ‘collectively owned’ and no private ownership was allowed The economy was closed and trading relationships were limited mainly to countries in the socialist system Due to its central planning mechanism and closed economy in the mid-1980s, Vietnam suffered from serious economic crisis The crisis, coupled with the reform movements in China and the former Soviet Union, pushed Vietnam towards a large-scale economic reform beginning in 1986, known as ‘Doi moi’ (Harvie & Tran, 1997) The central idea of ‘Doi moi’ policy is to create ‘a socialist-oriented market economy’ that allows for the development of a multi-sector economy, in which the government, cooperative and private sectors co-exist with equal rights (Vietnamese Communists Party, 1986) Several measures were introduced in the ‘Doi moi’ process, of which, the encouragement of foreign investment is considered especially important for shifting Vietnamese economy from ‘closed door’ to ‘open door’, from a command-driven to a market-driven one The promulgation of the Law on Foreign Investment dated 29 December 1987 gave a solid legal basis for foreign investment activities in Vietnam As a result of this, thousands of foreign-invested enterprises have been formed in the country The total registered investment capital has reached USD 50 billion from nearly 70 nations, accounting for over 15% of the nation’s GDP, approximately 37% of the industrial output and 54% of the export turnover (Vu Khoan, 2005) The Vietnamese investment environment within which IJVs operate is characterized by a stable socio-political environment, rich natural resources, a large population, and an ambitious, young, hard-working labor force Yet it still suffers from weak institutional capacities, poor infrastructure and low level of income (JICA, 2003) As absorptive capacity is one of the major constraints for IJVs in transitional economies in acquiring new knowledge from foreign partners (Lane et al., 2001), testing the proposed model in Vietnam is relevant The results of this study will help to draw some managerial ARTICLE IN PRESS 472 P.T Thuc Anh et al / International Business Review 15 (2006) 463–487 implications not only for Vietnamese firms in particular but also for firms in transition economies in general in order to maximize the full benefits of IJVs in light of knowledge acquisition Methods 5.1 Sampling The sample for this study was drawn from a population of more than 1000 international joint ventures provided in a listing by the Ministry of Planning and Investment (MPI), the government authority managing Foreign Direct Investment (FDI) activities in Vietnam This is the most official and original source of information on foreign investment in the country The study focused only on Ho Chi Minh City and Hanoi, the two biggest economic centers of the country, where most IJVs are located The actual sample was drawn from a list of all IJVs (674) in both locations Our goal was to include at 25% of these IJVs in the study A stratified sampling technique was used to generate a sample based on location, industrial categories grouped by the MPI, and country of origins of foreign partners Our sample is representative of the overall population of IJVs in Vietnam 5.2 Data collection Data collection was conducted using a self-administered survey Following Lyles and Salk (1996) and Simonin (1999), in each targeted IJV we planned to collect information from the general director or the deputy general director who is responsible for the company’s overall performance and for the success of the alliance These top executives are in the best positions to observe and evaluate knowledge acquisition and performance in their JVs, or can direct the questionnaires to other individuals within the companies who may know the situation better (Simonin, 1999) Data were collected by field researchers who contacted targeted informants based on the list of all IJVs in studied areas If a contacted person agreed to participate in the survey, the field researcher delivered the questionnaire directly to him/her Most appointments yielded immediate responses In other cases, the field researchers left the questionnaires at the survey subjects’ offices and came back to collect them at another time In total, 260 appointments were made, 218 of which turned out to be successful (158 in Ho Chi Minh City and 60 in Hanoi) Of the 218 responses, 181 firms were represented by Vietnamese respondents and 37 firms were represented by foreign counterparts For this study, only the Vietnamese responses were used Eight surveys were eliminated due to missing data, yielding a final sample size of 173 Out of 173 respondents, 32 are IJV general directors and 85 are deputy general directors The rest (56) are department heads or directors’ executive assistants who responded to the survey according to the assignments of their superiors The surveyed IJVs had been in operation from to 14 years, with an average of 7.6 years In most IJVs, foreign partners held a substantially larger share of equity than their Vietnamese counterparts Table represents the responding IJV profile based on foreign partners’ countries of origin and sectoral groups ARTICLE IN PRESS P.T Thuc Anh et al / International Business Review 15 (2006) 463–487 473 Table Partner’s country of origin and sectoral groups Partner’s country of origin Sectoral groups Manufacturing, transport Japan Singapore Taiwan South Korea Hong Kong France Other European countries USA Other countries/multiple partners Total Total Business services 20 11 16 17 11 23 13 26 24 21 20 14 12 17 32 116 57 173 5.3 Measures 5.3.1 Dependent and independent variables Most of the measures for dependent and independent variables used in this study were drawn from the literature and used or adapted for the Vietnamese context The measures of ability to learn and joint participation were developed for this study Each of the dependent and independent variables were measured by multiple items using a Likert-type format (1 ¼ strongly disagree to ¼ strongly agree) All of the items in the scales as well as the source of the items are found in Appendix A The first version of the questionnaire was developed in English and reviewed by four academic experts in the field Several items were then reworded for clarity The questionnaire was then translated into Vietnamese by two of the authors and backtranslated to English by a separate translator Some differences in wordings between the original version and the back-translated version led to minor revisions, followed by pretesting and preliminary item analysis before final revisions and administration in the joint ventures 5.3.2 Control variables Control variables for learning models included (1) IJV age, calculated as the number of years in operation up to the time the respondents were interviewed, (2) Equity split (local) which is the proportion of equity in the venture held by the Vietnamese parent, and (3) Sectoral groups, a dummy variable (1 ¼ manufacturing and ¼ business service) Lyles and Salk’s (1996) study of Hungarian IJV’s found that the proportion of equity held by the Hungarian parent was (inversely) related to knowledge acquisition Lane et al (2001) found that service industry membership and IJV age affect IJV learning levels These possible relationships argue for the inclusion of the variables The same set of control variables was also used for performance models Previous research has found significant correlations between IJV age and its effectiveness (Newburry & Zeira, 2003), between equity split (Boateng & Glaister, 2002) as well as sectoral group (Lane et al., 2001) and IJV performance ARTICLE IN PRESS 474 P.T Thuc Anh et al / International Business Review 15 (2006) 463–487 5.4 Measurement assessment We use factor analysis and reliability analysis to assess the measures employed Results are shown in Table Table Results of factor analysis and reliability analysis Factors Items Loading Reliability Cronbach’s a Factor 1: performance Last Last Last Last Last Last Last Last 0.868 0.844 0.871 0.882 0.819 0.813 0.887 0.889 0.95 Factor 2: ability to learn Ability Ability Ability Ability 0.757 0.791 0.792 0.805 0.86 Factor 3: joint participation Joint Joint Joint Joint Joint 0.523 0.619 0.793 0.863 0.861 0.83 Factor 4: relatedness Relatedness—technology Relatedness—products Relatedness—industry Relatedness—customers Relatedness—basic skills 0.762 0.852 0.786 0.534 0.612 0.81 Factor 5: investment in training Investment Investment Investment Investment 0.762 0.783 0.780 0.597 0.86 Factor 6: explicit knowledge Knowledge acquisition—technological expertise Knowledge acquisition—manufacturing processes Knowledge acquisition—product development 0.590 0.878 0.80 Factor 7: cultural distance Cultural Cultural Cultural Cultural 0.587 0.521 0.856 0.838 0.68 Factor 8: tacit knowledge Knowledge acquisition—marketing Knowledge acquisition—cultures and tastes Knowledge acquisition—management 0.569 0.779 0.672 0.83 Factor 9: written goals and plans Written goals Written plans 0.836 0.859 0.77 year sales year market share year profits year overall goals 3-year sales 3-year market share 3-year profits 3-year overall goals to to to to learn—technology learn—marketing techniques learn—managerial techniques learn—overall participation—informed participation—contribute ideas participation—contribute work activities participation—making decisions participation—shared activities overall in in in in training—technology training—managerial skills training—overall training—cross-cultural skills distance—national distance—language distance—problem solving methods distance—management styles 0.724 ARTICLE IN PRESS P.T Thuc Anh et al / International Business Review 15 (2006) 463–487 475 Factor analysis was run on all independent and dependent items in the questionnaire, using the varimax rotation method and applying the standard cut-off point for eigenvalues of greater than 1.0 The analysis yielded nine factors, accounted for 72.2% of the total variance, with the first factor accounting for 16.8% As can be seen from Table 2, except knowledge acquisition measures, all other items are loaded into theoretical factors, with factor loadings of 0.521 or above For a sample size of 50 or larger, factor loadings of 0.30 and greater are considered significant, indicating that the original item is highly correlated with its factor (Hair, Anderson, Tatham, & Black, 1998) Measures for knowledge acquisition are loaded into two factors with three items each Three items loaded in the first knowledge acquisition factor (factor 6) are (1) new technological expertise, (2) manufacturing processes knowledge, and (3) product development expertise acquired The Cronbach’s a for this scale was 0.80 The second knowledge acquisition factor (factor 8) includes items measuring three areas of knowledge acquisition: (4) new marketing expertise, (5) foreign culture and tastes, (6) managerial techniques The a coefficient for this was 0.83 As discussed by Dhanaraj et al (2004) and Lane et al (2001), technology, operational processes, and product development expertise are more explicit as it is usually codified in manuals and procedures In contrast, managerial and marketing expertise as well as knowledge about foreign cultures and tastes has a higher level of tacitness than product development, technology and manufacturing processes because they are embedded and not easily codified in formulas or manuals Consequently, we label the first knowledge acquisition factor as explicit knowledge acquired and the second knowledge acquisition factor as tacit knowledge acquired Two conclusions can be drawn from the results of factor analysis First, as multiple measures of the same construct converged together and diverged with measures of other constructs, the measurement shows construct validity (Neuman, 2000) The results, coupled with the results of reliability analysis (Cronbach’s a ¼ 0.68 or higher) indicate that our measures of constructs are satisfactory Second, the identification of several distinct factors, coupled with the finding that the first factor did not account for the majority of the variance, indicates that a substantial amount of common method variance does not appear to be a problem (Podsakoff & Organ, 1986) In subsequent analysis, we use an overall index for each factor, calculated by the mean of loaded items For knowledge acquisition, we calculate three indexes: an index for explicit knowledge acquisition, an index for tacit knowledge acquisition, and an index for overall knowledge acquisition (Cronbach’s a ¼ 0.88) Results Table presents the correlation matrix assessing the means, standard deviations, and bivariate relationships among the variables in this study All variables show reasonable variance and normality with variable means generally in the middle of their range The variable regarding equity held by the Vietnamese parent, however, showed substantial positive skewness As noted by Tabachnick and Fidell (1983), either logarithmic transformation or square root transformation should be used to address this problem, depending upon the severity of skewness It was found that the square root transformation of the equity split variable adequately addressed normality assumptions As can be seen in Table 3, significant correlations were found between overall knowledge acquisition and joint venture performance, relatedness, investment in training, ability to 476 SD Knowledge acquisition (a) Explicit knowledge acquisition (b) Tacit knowledge acquisition 3.77 3.76 3.78 0.57 0.67 0.63 0.87** 0.87** 0.53** Overall performance 3.62 0.80 0.32** 0.22** 0.34** 3.51 3.47 4.01 3.23 3.81 4.20 0.80 0.80 0.53 0.73 0.60 0.66 0.25** 0.52** 0.58** 0.05 0.42** 0.28** 0.18* 0.34** 0.44** 0.04 0.31** 0.23** 0.27** 0.56** 0.57** 0.15* 0.47** 0.30** 5.98 7.55 0.98 2.72 Relatedness Investment in training Ability to learn Cultural distance Joint Participation Written goals and plans a Equity split (local) 10 IJV age 1a À0.10 À0.08 À0.05 À0.06 1b À0.08 À0.17* 0.19* 0.36** 0.27** 0.05 0.27** 0.12 0.05 À0.01 0.36** 0.26** 0.06 0.23** 0.24** 0.06 À0.15* 0.54** 0.18* 0.38** 0.28** À0.02 À0.06 N ¼ 173; *po0:05; **po0:01 a Means and SD for transformed variable Actual mean for equity split of the Vietnamese parent is 36.71 0.06 0.49** 0.25** 0.03 À0.04 0.07 0.13 À0.05 0.04 À0.05 À0.06 0.01 0.28** 0.11 À0.04 ARTICLE IN PRESS Mean P.T Thuc Anh et al / International Business Review 15 (2006) 463–487 Table Descriptive statistics and correlations among variables ARTICLE IN PRESS P.T Thuc Anh et al / International Business Review 15 (2006) 463–487 477 learn, joint participation, and use of written goals and plans These significant relationships were found for both explicit and tacit knowledge acquisition Hypothesis testing included examination of different multiple regression models for predicting knowledge acquisition and joint venture performance For each of the independent variables in the regression models, the variable inflation factor (VIF) was calculated VIF of independent variables in all regression models ranged from 1.003 to 2.277 As a rule of thumb, a VIF value for a variable of less than 10 is deemed acceptable (Gujarati, 1995; Hair et al., 1998) Thus, our data indicate no substantial problems with multicollinearity 6.1 Knowledge acquisition models Table presents the regression results for knowledge acquisition The first four models tested H1–H6 by regressing overall knowledge acquisition on different sets of absorptive capacity measures Models and examine the impacts of absorptive capacity on different types of knowledge acquired All models are significant with adjusted R2 ¼ 0:27, 0.35, 0.23, 0.43, 0.25, and 0.45 (po0:001) respectively Model examines the predictability of only the IJV’s ability to recognize the value of new external knowledge It appears that investment in training has a strong significant positive association with overall knowledge acquisition (po0:001) Model includes just the ability to assimilate new external knowledge Ability to learn is highly significant and positively associated with knowledge acquisition (po0:001) Model includes only the Table Multiple regression results for knowledge acquisition Variables Controls IJV age Equity split (local)a Sectoral groups (dummy) b Model Model Model Model Model Model À0.04 À0.10 0.09 À0.05 À0.12y 0.13* À0.04 À0.15* 0.15* À0.03 À0.13* 0.12* 0.01 À0.09 0.26*** À0.13* À0.08 À0.02 Ability to recognize the value of new external knowledge Relatedness 0.07 Investment in training 0.49*** 0.03 0.24** Ability to assimilate new external knowledge Ability to learn Cultural distance 0.59*** 0.01 Ability to apply new external knowledge Joint participation Written goals and plans 0.17* 0.40*** 0.08 0.17* 0.12 0.35 19.51*** 0.23 11.20*** 0.43 15.28*** Adjusted R2 F 0.27 13.83*** 0.35*** À0.04 0.02 0.10 0.32*** À0.07 0.10 0.06 0.25 6.92*** 0.01 0.29*** 0.29*** 0.07 0.20** 0.45 16.34*** N ¼ 173; ypo0:1; *po0:05; **po0:01, ***po0:001 Dependent variable: models 1–4, overall knowledge acquisition; model 5, explicit knowledge acquisition; model 6, tacit knowledge acquisition ARTICLE IN PRESS 478 P.T Thuc Anh et al / International Business Review 15 (2006) 463–487 ability to apply new external knowledge Both measures of this ability, joint participation and written goals and plans have a significant positive relationship with overall knowledge acquisition (po0:001 and po0:05, respectively) in this model Model tests the joint impact of three sets of absorptive capacity measures on overall knowledge acquisition As can be seen, there is much improvement in the predictive power of this model It explains 43% of the total variance in overall learning as compared to 27%, 35%, and 23% of models 1, 2, and Two of the control variables, equity split and sectoral groups remain significant in this model (po0:05) Three of the independent variables appeared to contribute significantly to the variance in the regression equation— investment in training, ability to learn, and joint participation Compared to the individual component models (models 1, and 3), ability to learn maintains the same level of significance (po0:001) while the significance level of investment in training declined from po0:001 to o0.01 and the significance level of joint participation drops from po0:001 to o0.05 Written goals and plans lost its significance in this model Taken together, models 1, 2, 3, and support Hypotheses 2, 3, and and partially support Hypothesis The results not support hypotheses and Specifically, relatedness and cultural distance are not significantly associated with knowledge acquisition in any of the models This is quite surprising given that the extant literature does support the relationships between these two variables and learning We will come back to this issue in the discussion Models and show that absorptive capacity explains 25% of the variance in acquisition of explicit knowledge and 45% of the variance in acquisition of tacit knowledge In model 5, ability to learn is the only independent variable that is significantly and positively associated with explicit knowledge acquired (po0:001) Meanwhile model shows that three out of six learning predictors, investment in training, ability to learn, and joint participation exhibit significant relationships with tacit knowledge acquired (po0:001, po0:001, and po0:01, respectively) The predictive power of investment in training and joint participation in explaining tacit but not explicit knowledge acquired should be noted This model also indicates that more tacit knowledge was acquired by younger IJVs (b ¼ À0:13 po0:05) 6.2 Performance models Table illustrates the regression results for IJV performance Model addresses the overall knowledge acquisition from foreign partners to predict IJV performance This variable contributes to 9% of the variance in performance, and is statistically significant (p ¼ 0:001) Hypothesis is supported It can be seen in model 8; however, that IJV performance is predicted by tacit knowledge acquired, but not explicit knowledge, supporting H8b but not H8a This is an important result that will be discussed later To test the mediating impact of knowledge acquisition (Hypothesis 9), we followed the steps recommended by Baron and Kenny (1986) The results were shown in models 9, 4, 10, and 11 Model is obtained by regressing performance on all the knowledge acquisition predictors (absorptive capacity) Model 10 regresses performance on the same set of variables together with the overall knowledge acquisition variable In model 11, knowledge acquisition is broken down into tacit knowledge and explicit knowledge acquired All models are statistically significant with adjusted R2 ¼ 0:11, 0.12, and 0.10, respectively Model shows that investment in training is significantly associated with ARTICLE IN PRESS P.T Thuc Anh et al / International Business Review 15 (2006) 463–487 479 Table Multiple regression results for IJV performance Variables Controls IJV age Equity split (local)a Sectoral groups (dummy) Knowledge acquisition Overall knowledge acquisition Explicit knowledge acquisition Tacit knowledge acquisition b Model Model Model Model 10 Model 11 0.01 0.08 À0.04 0.06 0.07 À0.02 0.02 0.04 À0.01 0.02 0.06 À0.03 0.05 0.06 À0.04 0.33*** 0.16 0.07 0.32*** Knowledge acquisition predictors Relatedness Investment in training Ability to learn Cultural distance Joint participation Written goals and plans Adjusted R2 F 0.07 0.21y 0.06 0.27** 0.05 À0.01 0.13 À0.02 0.09 5.07*** 0.10 4.45*** 0.11 3.29*** 0.06 0.23* À0.01 0.00 0.10 À0.03 0.12 3.27*** 0.08 0.17y À0.06 0.01 0.08 À0.06 0.10 2.54** N ¼ 173; ypo0:1; *po0:05; **po0:01, ***p ¼ o0:001 performance (po0:01) Model 10 shows that when the knowledge acquisition variable is added to the list of independent variables, the significance level of investment in training decreased from po0:01 to o0:05 and knowledge acquisition is no longer significantly associated with performance In model 11, where knowledge acquisition is broken down into explicit and tacit components, the impact of investment in training on performance declines from po0:01 to o0:1 and tacit knowledge has a weak association with knowledge acquisition (po0:1) To see whether knowledge acquisition variable carries the influence of absorptive capacity to the performance variable, we conducted Sobel’s test The purpose of this test is to assess whether a mediator carries the influence of an independent variable to a dependent variable (Preacher & Leonardelli, 2005) It was found that the indirect effect of absorptive capacity on IJV performance via knowledge acquisition is not significantly different from zero (p40:1) Thus, knowledge acquisition fails to mediate the relationship between IJV absorptive capacity and its performance Specifically, investment in training contributes to joint venture performance above and beyond the extent to which such investments provide knowledge acquisition from the venture’s foreign parent Discussion 7.1 Absorptive capacity and knowledge acquisition In line with existing research, our results reaffirm the important role of absorptive capacity in interorganizational learning context Different absorptive capacity components contribute to knowledge acquisition from foreign parents in different ways ARTICLE IN PRESS 480 P.T Thuc Anh et al / International Business Review 15 (2006) 463–487 7.1.1 Ability to recognize the value of new external knowledge Consistent with the theoretical establishments of absorptive capacity by Cohen and Levinthal (1990) and Zahra and George (2002), we found that intensity of efforts (which was measured by investment in training) was a critical factor in predicting knowledge acquisition This variable was also found to have an impact on joint venture performance beyond the impact of knowledge acquisition from the foreign parent itself This result is in line with the findings of Tsai’s research (2001) indicating that absorptive capacity has a direct impact on business-unit performance As noted by Cohen and Levinthal (1990), organizations with higher levels of absorptive capacity will tend to be more proactive, exploiting opportunities present in the environment Thus, as investment in training is a part of absorptive capacity, IJVs with higher level of investment in training may become more adaptable to environmental demands Such capacity can directly enhance performance, beyond those associated with acquiring foreign parent knowledge Indeed, Lane et al (2001) found that the IJV’s eventual development of its own training and development competence mattered most for the long-term success of IJVs in transitional economies We found that although relatedness was significantly associated with learning in the correlation analysis, it was not associated with learning in the multiple regression analysis (model 1) This suggests that while relatedness in itself is important for learning, its role may be mitigated by investment in training Insofar as the joint venture commits itself in training employees to master new knowledge, business relatedness is not as critical in determining the level of knowledge acquired Thus, the important role of investment in training is confirmed once again 7.1.2 Ability to assimilate new external knowledge The first factor representing ability to assimilate new external knowledge involves IJVs’ employees’ ability to learn This variable is found to be one of the most important factors predicting knowledge acquisition from foreign parents The results support Cohen and Levinthal’s (1990) tenet: an organization’s absorptive capacity depends on the absorptive capacities of its members The second factor of the ability to assimilate new external knowledge involved cultural distance This study found no significant association between cultural distance and knowledge acquisition The inability of the cultural distance measure to predict learning or performance does not seem to be a function of range restriction, lack of variance, or normality problems in the measure itself Several reasons are suspected to contribute to this non-finding First, it is arguable that the impact of cultural distance might be obscured by the fact that the foreign partners in this sample generally had more control over the IJV than the Vietnamese side due to higher equity contribution (136 of the 173 ventures were foreigndominant) Nevertheless, we did not find any greater impact of cultural distance for JVs with 50–50 equity splits (21 in this sample) or those few (16) dominated by the Vietnamese partner Second, it is also arguable that the non-significant relationship found between cultural distance and knowledge acquisition may due to the fact that a large proportion of the IJVs involved Asian partners, reducing the impact of cultural distance on learning However, we did not find a greater impact of cultural distance for IJVs whose foreign partners come from non-Asian countries (45 in this sample) Third, as Vietnam is a highpower distance country (Hofstede, 2001) and foreign expatriates usually hold management ARTICLE IN PRESS P.T Thuc Anh et al / International Business Review 15 (2006) 463–487 481 positions in IJVs in Vietnam, local employees will tend to follow their working methods Thus, although cultural distance exists, it might not translate into cultural difficulties that could inhibit learning This assumption certainly provides a promising avenue for future research Finally, it is also possible that the impact of cultural distance on learning might not be as important as we originally assumed, at least for the ventures included in this study All IJVs included this study are quite established; perhaps they have successfully adjusted to the cultural differences that did arise (Meschi, 1997) Future research could retest this hypothesis with younger IJVs or non-survivors who may not be as successful in dealing with cultural difficulties 7.1.3 Ability to apply new external knowledge The study results showed that the more Vietnamese employees were accorded a level of equal participation in the JVs’ activities, the more knowledge an IJV can acquire from the foreign parents On the one hand, joint participation enhances local employees’ confidence and motivation to acquire knowledge from expatriates in order to meet works’ requirements On the other hand, a higher level of joint participation gives local employees a chance to interact more closely with expatriates, increasing the level of knowledge acquired This study certainly supports the importance of social integration mechanisms in the design and management of joint ventures Future research could more specifically examine the communication structures and roles in IJVs (and between the venture and its parents) to link such structures and roles to the accomplishment of particular learning objectives Our findings provide partial support for the Lyles and Salk’s study results (1996) in that written goals and plans were positively associated with knowledge acquisition in the model predicting knowledge acquisition by just the ability to apply knowledge (model 3) but not in the model that included all hypothesized predictors of knowledge acquisition (model 4) The results suggest that while setting formal goals and plans can help to direct orientation toward learning, this general orientation may actually be translated into specific practices such as investment in training and joint participation that is more directly related to knowledge acquisition Another important result to note is that investment in training and joint participation is significantly associated with tacit knowledge acquired (model 6) but not with explicit knowledge acquired (model 5) This result supports the differentiation between explicit and tacit knowledge (Nonaka & Takeuchi, 1995; Polanyi, 1966) As explicit knowledge is often codified and written in manuals, it is easier for local employees to learn by themselves without formal training Tacit knowledge can be best learned through interpersonal interactions As higher level of joint participation gives local employees a chance to interact more frequently with expatriates, more tacit knowledge will be acquired Taken together, the results of this study indicate that all three components of absorptive capacity play important roles in the knowledge acquisition process taking place within IJVs Each component plays a unique role in predicting the knowledge acquired from foreign parent The ability to apply new knowledge is needed in the sense that knowledge acquisition and creation is not a one time, snapshot process whereby knowledge is acquired, stays there and waits until is applied for a commercial end Instead, it is a continuous process through which knowledge is acquired, assimilated, combined with existing knowledge, transformed, and used in order to generate new knowledge Through the application process, organizations learn more, and are able to acquire more new ARTICLE IN PRESS 482 P.T Thuc Anh et al / International Business Review 15 (2006) 463–487 external knowledge Huber (1991) refers to this type of organizational learning as experiential learning by which organizations acquire some of their knowledge through direct experience 7.2 Knowledge acquisition and performance Knowledge acquisition was found to predict joint venture performance, supporting the findings of Lyles and Salk (1996), Lane et al (2001), Crossan and Inkpen (1995), and Si and Bruton (1999) The fact that knowledge acquisition itself only accounted for 10% of the total variance in performance clearly suggests that knowledge acquisition from the foreign partner should be considered as only one of the factors contributing to the JVs’ performance Future research could examine other types of knowledge (those different from the foreign parent’s knowledge), other types of resources as well as the IJV’s strategy, structure, and systems that could contribute to its performance It was also found in this study that while tacit knowledge was a critical factor in predicting performance, there was no significant relationship between performance and explicit knowledge Our findings are in contrast with the results of Dhanaraj et al.’s (2004) study where explicit knowledge was found to have a significant positive relationship with performance and tacit knowledge has a significant negative relationship However, the results are consistent with the knowledge-based theory of the firm in which tacit knowledge is considered more important for performance (Grant, 1996a, 1996b) Future research could re-examine these relationships in different contexts and at different times 7.3 Implications for management and for future research This study highlights the importance of knowledge acquisition in IJVs and identifies several organizational practices to enhance the level of knowledge acquired from foreign parents As employees’ ability to learn is a critical factor, organizations should spend substantial efforts in recruiting and developing personnel To reach the highest level of knowledge acquired, managers of IJVs should pay attention to allocating resources to training as well as establishing organizational mechanisms through which IJVs’ employees can interact closely with expatriates and participate jointly and equally in the venture activities Joint venture managers may find a larger return on investment for their allocation of resources to training than had been anticipated, as training may contribute to organizational performance above and beyond training’s impact on learning from the foreign partner Future research could address several weaknesses seen in this and many other studies of organizational learning First, we have relied on one person to characterize learning in the whole venture Organizational members representing different levels and functions (including technical and administrative) may well have unique contributions to make in assessing learning by the venture Second, our sample includes established and relatively successful joint ventures As factors shaping learning and learning level in these IJVs may differ from those in younger ventures or those who did not survive, a replicating study could be conducted with a sample that includes these types of IJVs Longitudinal studies tracing IJVs from formation could be used to capture this information, and may also be useful in assessing rates of learning and the impact of learning on survival Third, although perceptual measures of firm performance have been found to be significantly correlated ARTICLE IN PRESS P.T Thuc Anh et al / International Business Review 15 (2006) 463–487 483 with more objective measures (Dhanaraj et al., 2004; Geringer & Hebert, 1989, 1991), it would have been better to have financial data to measure IJV performance as well The development and impact of the IJV’s own learning capacity was found to be of critical importance in understanding IJV performance We encourage further inquiry into the investment in training, the assessment of learning capacity, and the means by which such capacity is translated into competitive performance Conclusion Drawing on the alliance learning and absorptive capacity literatures, this study proposed a new model linking absorptive capacity, knowledge acquisition, and performance, and tested it in IJVs in Vietnam, an economy in transition The results contribute to the growing body of literature in knowledge acquisition in IJVs and provide some practical implications for managers working in IJVs Acknowledgments This research was conducted as part of a joint project between Boise State University and National Economics University It was funded in part by a Cooperative Agreement with the US Agency for International Development The US Agency for International Development administers, the US foreign assistance program providing economic and humanitarian assistance in more than 80 countries worldwide The authors also wish to acknowledge Marjorie A Lyles and other colleagues for their valuable advice and comments on this research Appendix A Questionnaire items All items used Likert scale from to (1 ¼ strongly disagree, ¼ strongly agree) Knowledge acquisition (from Lyles & Salk, 1996)       Vietnamese have learned a great deal of technological expertise from the partner(s) Vietnamese have learned a great deal of manufacturing processes from the partner(s) Vietnamese have learned a great deal of new knowledge about product development expertise from the partner(s) Vietnamese have learned a great deal of marketing expertise from the partner(s) Vietnamese have learned a great deal of new knowledge about foreign culture and tastes from the partner(s) Vietnamese have learned a great deal of managerial techniques from the partner(s) IJV performance (adapted from Lyles & Salk, 1996)     The venture achieved its target sales volume The venture achieved its target market share The venture achieved its target profits Overall, the venture achieved its planned goals ARTICLE IN PRESS P.T Thuc Anh et al / International Business Review 15 (2006) 463–487 484     There is a trend in increasing sales of the venture over the last years There is a trend in increasing market share of the venture over the last years There is a trend in increasing profits of the venture over the last years The venture has achieved a great performance overall Relatedness (adapted from Lyles & Barden, 2000)      Our Our Our Our Our technology was highly related to that of the partner(s) products were highly related to that of the partner(s) industry was highly related to that of the partner(s) customers were highly related to that of the partner(s) skill base was very similar to that of the partner(s) Investment in training (from Cao, 2000)     Every year the venture commits significant resources to educating and training Vietnamese personnel to master the technology brought by the foreign partner(s) Every year the venture commits significant resources to educating and training Vietnamese managers to master the managerial skills brought by the foreign partner(s) Vietnamese personnel in the venture have been provided with training in cross-cultural skills In general, before a new person can achieve a satisfactory performance level, the venture has committed significant resources for his/her education and training Employees’ ability to learn (developed for this study)     Vietnamese personnel in the venture are able to understand and use new technology brought by the foreign partner(s) Vietnamese personnel in the venture are able to understand and use new marketing techniques brought by the foreign partner(s) Vietnamese managers in the venture are able to understand and use new managerial techniques brought by the foreign partner(s) Overall, the Vietnamese personnel are able to understand and apply new knowledge and skills brought by the foreign partner(s) Cultural distance (adapted from Simonin, 1999)     Our national culture is very different from the partner’s Language differences are a major obstacle in communicating with, and understanding the partner Our problem solving methods are very different from that of the partner(s) Our management style is very different from that of the partner’s Joint participation (developed for this study)   Vietnamese personnel have been fully informed about activities in the areas they work Vietnamese personnel have been expected to contribute their ideas when they work with the foreign counterparts ARTICLE IN PRESS P.T Thuc Anh et al / International Business Review 15 (2006) 463–487    485 Vietnamese personnel have been assigned to activities of equal importance when they work with the foreign counterparts Vietnamese personnel have had equal opportunities to make decisions when they work with the foreign counterparts Overall, Vietnamese personnel have been deeply involved in shared activities between partners Formal goals and plans (adapted from Lyles & Salk, 1996)   The venture has very detailed written business objectives The venture has very detailed written business plans References Alavi, M., & Leidner, D (2001) Knowledge management and knowledge management systems: Conceptual foundations and research issues MIS Quarterly, 25(1), 107–136 Baron, R M., & Kenny, D A (1986) The moderator–mediator variable distinction in social psychological research: Conceptual, strategic and statistical considerations Journal of Personality and Social 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