Factors influencing the transitioning of international joint ventures to wholly owned subsidiaries in Malaysia

Abstract

The main purpose of this study is to examine the factors influencing the transitioning of International Joint Ventures (IJV) to Wholly Owned Subsidiaries (WOS) in Malaysia. Specifically, it tries to identify the factors of differences between IJV partners that contribute to the level of conflict in IJV and conversion of IJVs into WOS. Among the IJV partner differences hypothesized by this study to be linked to the level of conflict are power imbalance, perceived cultural differences, objectives in entering IJV, business relatedness to IJV and different group of contributions. This study also attempts to determine whether the level of conflict in IJV mediates the relationship between these IJV partners' differences and IJV conversion into WOS. The Theory of Planned Behavior (TPB) forms one component of the conceptual framework of this research in a novel way. Namely, the behavioral intention or in the context of this study the intention to convert into WOS was used as a proxy of the actual conversion into WOS backed by the main postulate of the TPB. Among other theoretical underpinnings of the conceptual framework of this study are the Social Exchange Theory (SET) and the theory of Organization Learning (OL). The measurement instrument was adapted from the existing literature. A sample of 336 was obtained from the list of 1,041 IJVs that have registered with the Malaysian Investment Development Authority (MIDA) on the basis of simple random sampling. Analytical procedure was done via the full-fledged SEM modeling. The research finds that the hypothesized structural model that links IJV partners' differences to the conversion of IJV into WOS through the level of conflict as a mediator and also directly fits the data well. Identified mediating role of the level of conflict in the process of IJV conversion into WOS draws important implications for theory and practice.