International joint venture partner selection and performance: The role of the host country legal environment

International joint ventures (IJVs) have certainly emerged as a compelling strategic option for multinational enterprises (MNEs). Unfortunately, as IJVs continue to proliferate across the globe and the economic health of MNEs and economies become ever more dependent upon these partnerships, their performance remains highly variable. Research has suggested that relationship capital, partner selection and the host country legal environment all influence IJV performance. However, we understand little about how these factors relate to one another to affect IJV performance. Thus, this dissertation takes an early step towards filling this gap by developing and empirically testing hypotheses on how: (a) perceptions of the host country legal environment influence IJV partner selection; (b) partner selection influences relationship capital; and (c) the host country legal environment affects the influence of relationship capital on IJV performance. Through the analysis of archival data and survey data collected from senior executives on 113 IJVs across forty-four countries this study revealed three key findings. First, host country rule of law perceptions negatively influence appropriation and coordination cost concerns, which in turn influence IJV partner selection criteria importance. Second, unlike partner selection criteria that apply to the operational skills and resources needed by a venture to achieve success in the market, criteria that are related to the effectiveness of cooperation between the partners positively influence relationship capital. Lastly, host country rule of law negatively moderates the influence of relationship capital on IJV performance. That is, relationship capital exerts a more profound positive influence on IJV performance in host countries characterized by weak rule of law than in host countries characterized by strong rule of law. The study's contributions, implications and future research directions are discussed herein.