A Contingent View of Partner

A Contingent View of Partner
Coopetition in International
Joint Ventures
Chengli Shu, Jason Lu Jin, and Kevin Zheng Zhou
ABSTRACT
Is coopetition between foreign and local partners good or bad for international joint venture (IJV) performance? This
study develops a contingent view to examine how the efficacy of coopetition is conditional on IJV characteristics
(i.e., foreign equity share and partner cultural compatibility) and environmental factors (i.e., technological turbulence
and market growth). The results from analyzing 194 IJVs in China reveal that coopetition fosters IJV performance under
the conditions of high foreign equity share, low partner cultural compatibility, high technological turbulence, and/or high
market growth. In contrast, coopetition hinders IJV performance at low levels of foreign equity share, technological
turbulence, and/or market growth, or at high levels of partner cultural compatibility. These findings support the authors’
contingent view of coopetition and provide novel insights for managing partner coopetition in IJVs.
Keywords: coopetition, cooperation, competition, contingent view, international joint ventures
I
nternational joint ventures (IJVs) represent a critical partners also tend to pursue individual interests, which
market entry mode whereby multinational companies may conflict with their common goals, so they compete
can enter foreign markets. As foreign partners in host heavily to gain control of the IJV (Jin, Zhou, and Wang
countries, multinational companies in IJVs often con- 2016; Khanna, Gulati, and Nohria 1998). Accordingly,
tribute advanced technology and management knowledge, IJV partners simultaneously cooperate in value creation
whereas domestic partners offer local expertise, such as and compete for power and control, making “coopetition” a
connections to the government and access to land, permits, salient feature of IJVs (Dagnino and Rocco 2009; Gnyawali
licenses, and so forth (Beamish 1993; Chen, Chen, and and Park 2011; Luo, Shenkar, and Gurnani 2008).
Zhou 2014). As such, foreign and local partners must
cooperate closely to share and use their complementary Coopetition, defined as the simultaneous presence of co-
resources and knowledge. Meanwhile, foreign and local operative and competitive interactions (Lado, Boyd, and
Hanlon 1997), has received increasing scholarly attention
Chengli Shu is Associate Professor, School of Management, Xi’an (e.g., Luo, Shenkar, and Gurnani 2008; Luo, Slotegraaf,
Jiaotong University (e-mail: cljshu@gmail.com). Jason Lu Jin is a doctoral and Pan 2006; Zhang et al. 2010). However, prior stud-
candidate, Faculty of Business and Economics, University of Hong Kong ies have provided contradictory arguments about its role.
(e-mail: ljin@hku.hk). Kevin Zheng Zhou is Professor of Strategy/
The “syncretic rent-seeking” camp views coopetition as
International Business, Faculty of Business and Economics, University
of Hong Kong (e-mail: kevinzhou@business.hku.hk). The authors thank
superior to pure competition or cooperation because
the JIM review team for their insightful comments and guidance. This coopetition helps firms develop new knowledge, maintain
study was supported by the General Research Fund from the Research strategic flexibility, and expand their markets (Dagnino
Grants Council Hong Kong SAR Government (Project No. HKU
17516516) and by a General Research Grant from the National Natural
Science Foundation of China (Project No. 71472150). The authors also Journal of International Marketing
acknowledge support from the Australian Centre for Entrepreneurship ©2017, American Marketing Association
Research at Queensland University of Technology, where the first author Vol. 25, No. 3, 2017, pp. 42–60
served as a research fellow when part of the revision of this manuscript DOI: 10.1509/jim.16.0075
was conducted. Seigyoung Auh served as associate editor for this article. ISSN 1069-031X (print) 1547-7215 (electronic)
42 Journal of International Marketing

2009; Gnyawali and Park 2011; Lado, Boyd, and Hanlon stage of IJV formation, but the latter force IJVs to make
1997; Ritala 2012). In contrast, the “tension” camp pro- adaptive adjustments. Foreign equity share reflects the per-
poses that coopetition may be dysfunctional because co- centage of ownership that foreign partners possess, which
operation and competition are inherently conflicting and determines the distribution of control and power in IJVs
unequal individual gains are unavoidable in coopetitive (Chen, Chen, and Zhou 2014). Partner cultural compati-
relationships (Das and Teng 2000; Dowling et al. 1996; bility refers to the degree to which local and foreign partners
Zeng and Chen 2003). Existing empirical evidence, though are compatible in terms of their organizational cultures and
sparse, is also inconsistent. Whereas some studies reveal a managerial and operating styles (Hoetker and Mellewigt
positive role of coopetition on firms’ market and innovation 2009; Meschi 1997).
performance (Gnyawali and Park 2011; Ritala 2012),
others find that it is negatively related to interfirm perfor- As for external environmental contingencies, technological
mance (Dussauge, Garrette, and Mitchell 2000; Kim and and market factors are two major representatives in con-
Parkhe 2009) or has a curvilinear relationship with financial tingency theory (Luthans and Stewart 1977, p. 184). In the
performance (Luo, Rindfleisch, and Tse 2007). Moreover, case of IJVs, a necessary endeavor for local firms to partner
while coopetition is prominent among IJV partners, prior with foreign companies is to access and learn the latter’s
literature has discussed it conceptually only in the trans- advanced technologies; in contrast, the primary motivation
national context (Luo, Shenkar, and Gurnani 2008), leaving of foreign companies is to expand their market realm and
the role of coopetition in IJVs underexamined. enjoy the rapid growth of the local market (Sun and Lee
2013; Tsang, Nguyen, and Erramilli 2004). Thus, we focus
To address these conceptual and empirical inconsistencies, on technological turbulence, defined as the rate of techno-
we develop a contingent view of coopetition in IJVs. As IJVs logical changes in the industry (Jaworski and Kohli 1993),
are legal entities established by both foreign and local and market growth, defined as the growth rate of market
partners that cooperate to share knowledge and risk as well demand and sales in an industry (Aaker and Day 1986).
as compete for power, control, and value division (Beamish
1993; Ding 1997), coopetition is more salient in IJVs than in This study makes three major contributions. First, it helps
other interfirm relationships for two primary reasons. First, reconcile prior contradictory perspectives on coopetition by
IJV partners originate from countries with different economic developing a contingent view. Although studies on coopetition
statuses, social cultures, and political ideologies (Beamish have continued to expand for more than two decades
1993; Calantone and Zhao 2001; Vanhonacker and Pan (Dagnino and Rocco 2009), a unanimous view of coopetition
1997). These economic, social, and political differences make has yet to be reached. Two inconsistent perspectives of
IJVs harder to coordinate and more likely to fail compared coopetition have emerged in the literature: one emphasizes
with joint ventures between domestic firms (Jin, Zhou, and the syncretic rents of coopetition, while the other focuses on
Wang 2016). Second, foreign partners must commit financial the potential tensions within coopetition. With a contingent
and/or other types of resources to IJVs in the host market. view, this study helps disentangle the prior debate on
Such commitments are often unrecoverable and rarely re- whether coopetition is good or bad for firms by emphasizing
trievable, which makes foreign partners more vulnerable to the functioning boundaries of coopetition theory.
local partners’ opportunism and expropriation than they
would be in a domestic context (Pangarkar and Klein 2004). Second, this study enriches the coopetition literature by
As such, coopetition in the IJV context is more complex than specifying the contingent roles of important IJV character-
in domestic settings (Gnyawali and Park 2011). istics and environmental factors. The results from analyzing
194 IJVs show that coopetition is positively related to IJV
Organizational contingency theory posits that “organiza- performance under the conditions of high foreign equity
tions are subjected to a variety of environmental and in- share, low partner cultural compatibility, high technologi-
ternal influences” (Shepard and Hougland 1978, p. 413). cal turbulence, and/or high market growth. In contrast,
Building on this theory, we argue that the effect of coopetition coopetition hinders IJV performance at low levels of foreign
on IJV performance depends on important IJV characteristics ownership, technological turbulence, and/or market growth,
and environmental factors. In particular, we focus on two IJV and at high levels of partner cultural compatibility. These
characteristics (foreign equity share and partner cultural findings suggest that important IJV characteristics and en-
compatibility) and two environmental factors (technological vironmental factors exert differing boundary effects in the
turbulence and market growth). These characteristics and relationship between partner coopetition and IJV perfor-
environmental factors hold different degrees of controlla- mance, substantiating the proposed contingent view of
bility for IJV partners: the former can be arranged at the coopetition in IJVs.
Partner Coopetition in IJVs 43

Third, this study extends the coopetition research to the IJV conjunction with different levels of competition jointly
context, in which the phenomenon of coopetition is per- define the degree of coopetition (Luo, Slotegraaf, and Pan
vasive but underresearched. Because foreign and local 2006). For these reasons, we embrace the indirect ap-
partners come from different backgrounds, and foreign proach to measure coopetition in IJVs.
partners face relatively higher risks of opportunism and
expropriation than local partners, partner coopetition is Different Perspectives of Coopetition in IJVs
more pervasive in the context of IJVs. However, previous
studies on coopetition have been bounded within the sce- Extant literature offers conflicting views on whether
narios of buyer–supplier relationships, strategic alliance net- coopetition is beneficial or harmful to firm performance.
works, and/or partnerships established by firms from the Lado, Boyd, and Hanlon (1997) introduce the syncretic
same country (e.g., Luo, Shenkar, and Gurnani 2008; Ritala rent-seeking perspective, arguing that coopetition creates
2012). By expanding this line of research to the IJV context, a positive-sum and efficiency-enhancing game that helps
this study offers novel insights on the role of coopetition and partners enhance knowledge creation and utilization as well
boundaries that allow coopetition to function favorably. as improve strategic flexibility, which in turn foster perfor-
mance (see also Gnyawali and Park 2011). First, coopetition
facilitates knowledge development and utilization in IJVs.
THEORY AND HYPOTHESES When IJV partners share their proprietary knowledge, a
The Concept of Coopetition primary concern is how to protect their know-how from
misappropriation by their counterparts (Mjoen and Tallman
At the core of coopetition is the concept of incomplete 1997). The coexistence of cooperation and competition helps
interest/goal congruence (Dagnino 2009; Luo, Shenkar, and address this concern. Because both partners are willing to
Gurnani 2008). In contrast with either pure cooperation cooperate, they pool their resources, knowledge, and skills
or competition, in coopetition, “the supreme interests of a and use them for their mutual benefit rather than only for
partner are not necessarily aligned with the supreme interests individual gains (Buckley and Casson 1988). Meanwhile,
of the other partner(s), but they can be partially coupled” competition between partnering firms motivates the firms to
(Dagnino and Rocco 2009, p. 29). As such, coopetition is learn, which in turn promotes knowledge transfer and
not a zero-sum game in competition or a positive-sum game greater efficiency in using resources and skills (Gnyawali and
in cooperation, but a variable positive-sum game in which all Park 2011; Ritala 2012).
players can gain mutual—but not necessarily fair—benefits
(Kumar 2010; Lado, Boyd, and Hanlon 1997). Coopetition Second, coopetition enhances IJVs’ strategic flexibility and
can occur within firms (Luo, Slotegraaf, and Pan 2006; Tsai ability to adapt to uncertainty, and it precipitates strategic
2002), between firms (Zhang et al. 2010), or between firms changes (Nadkarni and Hermann 2010). In coopetitive
and other institutions (Baglieri 2009). relationships, competition pushes partners to become effi-
cient in managing resources to address environmental
Prior studies have tended to operationalize coopetition in changes (Sanchez 1995; Sirmon, Hitt, and Ireland 2007),
one of two approaches: direct or indirect. The direct approach and cooperative intents motivate partners to invest the
conceptualizes coopetition as the competitive intensity within proprietary knowledge and resources necessary to imple-
collaborative relationships (Ritala 2012), or as the col- ment strategic changes (Dyer and Singh 1998; Lado, Boyd,
laboration intensity with competitors (Luo, Rindfleisch, and Hanlon 1997). Accordingly, coopetition enables IJVs to
and Tse 2007). The coopetitive relationship occurs along a be flexible in addressing environmental changes and un-
single continuum, ranging from complete cooperation to certainties and, consequently, to achieve better performance.
simultaneous cooperation and competition, or ranging from
pure competition to simultaneous cooperation and com- In contrast, the tension camp focuses on the inherent con-
petition. This direct approach is simple and straightforward, flicts between cooperation and competition (e.g., Das and
yet it does not take account of different intensities of Teng 2000; Luo, Shenkar, and Gurnani 2008; Zeng and
competition (or cooperation) (Lado, Boyd, and Hanlon Chen 2003). Cooperation suggests mutual interdependence
1997). The indirect approach regards coopetition as the and requires partners to refrain from pursuing individual
interaction between cooperation and competition (Liu benefits at the expense of common benefits (Dyer and Singh
et al. 2014; Luo, Slotegraaf, and Pan 2006). This ap- 1998). Competition, however, focuses on the pursuit of
proach treats coopetition as having two continuums and individual gains through efficient resource management or
suggests that different levels of cooperation and compe- exclusive market positioning; the gains of one firm in
tition can coexist. The various levels of cooperation in competition are often losses for other firms (Dagnino 2009).

Therefore, cooperation is driven by collective rationality, life cycle may enhance (or impede) the capacity of firms
while competition is driven by individual rationality. Ac- to develop and exploit rent-yielding organizational com-
cordingly, coopetition suffers from two major downsides: petencies through cooperation and competition.” Dagnino
difficulties in balancing cooperation and competition and and Rocco (2009, p. 10) state that “coopetition strategy is
unequal individual gains received from the coopetitive re- affected by external threats and opportunities.” In the
lationship (Das and Teng 2000; Zeng and Chen 2003). tension perspective, Zeng and Chen (2003) posit that al-
liance structural and motivational arrangements should be
First, because competition is self-oriented whereas cooperation considered to unleash the benefits of coopetition. Khanna,
is collective, it is often difficult to balance cooperation and Gulati, and Nohria (1998) explicate that the relative scope
competition. If the individual rationality behind competition of alliances determines the degree of cooperation and
overwhelms the collective rationality that underpins co- competition within the alliances. In a recent review, Bengtsson
operation, then knowledge leakage and misappropria- and Kock (2014) conclude that organizational and
tion can become major concerns (Zeng and Chen 2003). managerial factors are important for managing tensions
However, when cooperation dominates competition, IJVs in coopetition. Consistent with this line of inquiry, we
can lose their strategic flexibility and become vulnerable focus on two organizational factors (foreign equity share
to partner opportunism (Das and Teng 2000). In practice, and partner cultural compatibility) and two environmental
without appropriate governance, individual rationality factors (technological turbulence and market growth) to
often overruns collective rationality, leading Teece (1992, develop a contingent view of coopetition in IJVs.
p. 1) to state that “the challenge to policy analysts and to
managers is to find the right balance of competition and Moderating Role of Foreign Equity Share. Ownership
cooperation.” structure is one of the most important parameters in IJV
design, and it determines power and control distributions in
Second, the partially congruent interests and goals between IJV governance (Chen, Chen, and Zhou 2014). Because IJV
IJV partners likely lead to unequal gains from the coopeti- performance outcomes are difficult to specify ex ante, the
tive relationship (Dagnino 2009; Luo, Shenkar, and Gurnani ownership structure serves as a mechanism to make de-
2008). The inequity in individual gains forms a variable cisions and distribute gains (Teece 1992). As a result, for-
positive-sum game in which partnering firms might gain eign equity share reflects the relative power base for foreign
mutual but not necessarily fair benefits (Dagnino 2009, partners to exert collective control for common gains and
p. 31). As a result, the IJV partnership will be plagued by claim private control for individual benefits.
unfair perceptions, and IJV performance will suffer.
For IJVs, foreign and local partners possess different ex-
Taken together, coopetition creates “strategic dilemmas” pertise and goals (Li, Zhou, and Zajac 2009). Foreign
(Dowling et al. 1996, p. 165) such that it may benefit IJVs partners are equipped with advanced technologies, superior
through knowledge utilization and strategic flexibility but products and services, managerial skills, and global support,
harm IJVs because of difficult cooperation/competition whereas local partners have access to political connections,
balance and unequal individual gains. Whether coopetition distribution channels, and social networks (Jin, Zhou, and
can generate syncretic rents depends on whether the IJVs Wang 2016). Foreign partners aim to expand their business,
can enhance the benefits of coopetition and curtail its while local partners attempt to acquire advanced techno-
inherent downsides. Therefore, we do not hypothesize the logical and managerial know-how from foreign partners
direct effect of coopetition on IJV performance; instead, (Lau and Bruton 2008; Lee and Zhou 2012). Given the
we focus on developing a contingent view by examining institutional differences, foreign partners are often in a more
moderating effects of IJV characteristics and environmental vulnerable position with respect to potential knowledge
factors. leakage problems than their local partners (Calantone and
Zhao 2001; Vanhonacker and Pan 1997).
A Contingent View of Coopetition in IJVs
We propose that a high level of foreign equity share may
According to contingency theory, the efficacy of firm strengthen the positive-sum and efficiency-enhancing effects
strategies is bounded by organizational and environmental of coopetition in IJVs. With a greater equity share, foreign
factors (Shepard and Hougland 1978). Within the syncretic partners gain a dominant control of IJV operations and
rent-seeking perspective, Lado, Boyd, and Hanlon (1997, decisions (Li, Zhou, and Zajac 2009). So they are willing to
p. 130) also suggest that “differences in environmental contribute the much-needed and proprietary knowledge
context, organizational form, and stage in organizational and know-how that enlarge the resource repertoire for value

creation of coopetition (Tsang 2002). In IJVs, local ex- examines coopetition at the IJV level, we focus on orga-
pertise, such as network building and political ties, con- nizational cultural compatibility between local and foreign
tributes primarily to dealing with local institutional voids; partners, while controlling the effect of their national cultural
what matters more for value creation and operational ef- distance.
ficiency is technological knowledge and managerial skills
devoted by foreign partners (Lee and Zhou 2012). Because a We posit that a low level of partner cultural compatibility
dominant control protects the foreign partners from mis- fosters coopetitive benefits. First, it assists knowledge de-
appropriation of their know-how (Pangarkar and Klein velopment in IJVs. When partner cultural compatibility is
2004), they are less hesitant to contribute their know-how, low, local and foreign partners possess knowledge, in-
which enhances the effect of coopetition in enlarging the formation, resources, and capabilities that are significantly
entire common pie. As foreign major ownership ensures the different from each other (Morosini, Shane, and Singh
availability and exploitation of advanced managerial ex- 1998). Such diverse knowledge reservoirs, information
pertise and operational skills into the IJVs, it improves the banks, and capability tool kits can provide more oppor-
implementation of coopetition by enhancing operational tunities for knowledge exchange and combination (Collins
efficiency. and Smith 2006; Shu et al. 2012). Second, a low level of
partner cultural compatibility helps promote strategic
Moreover, a foreign dominant ownership may attenuate the flexibility. Establishing IJVs is challenging, especially when
potential downsides of coopetition. Compared with local local and foreign partners have low cultural compatibility
partners, foreign partners are more skillful in coordination (Chen, Chen and Zhou 2014). Differences between local and
and management (Calantone and Zhao 2001; Lee and foreign partners in organizational cultures and managerial/
Zhou 2012). When foreign partners hold greater equity operating styles likely create potential conflicts and necessary
share, they can utilize their managerial expertise to better compromises, which substantiate the need for strategic
coordinate the IJV operation under coopetition. However, if flexibility. Thus, low cultural compatibility enhances the
local partners hold more of the equity share, they may lack coopetitive benefit of strategic flexibility.
the management skills and expertise necessary to deal with
the complicated and delicate requirements of coopetition. Low partner cultural compatibility also helps mitigate the
Furthermore, whereas local partners rely heavily on per- potential downsides of coopetition. First, low partner cul-
sonal connections and implicit norms to conduct business, tural compatibility alerts partners to stay aware of co-
foreign partners tend to use more contract-based rules and operation and competition in IJVs. Due to the differences in
procedures (Li, Poppo, and Zhou 2010). Relatively speaking, organizational cultures, managerial and operating styles, and
contract-based rules and procedures make the link between cognitive structures, local and foreign partners tend to ac-
contributions to value creation and subsequent value dis- knowledge their similarities and differences (Vanhonacker
tribution less ambiguous (Poppo and Zhou 2014). As such, a and Pan 1997). On the contrary, when partner cultural
larger foreign equity share helps instill contract-based rules compatibility is high, local and foreign partners in IJVs may
and thus reduce the potential concerns of unfair individual focus more on cooperation while overlooking competition
gains from coopetition. Therefore, we predict the following: because there is less cultural conflict (Meschi 1997). Second,
when local and foreign partners in IJVs have low cultural
H1: The relationship between coopetition and IJV compatibility, important decisions such as the division of
performance is more likely to be positive when profits and other benefits are influenced by divergent or-
foreign equity share is high rather than low. ganizational cultures and managerial/operating styles. As a
result, neither the local partner nor the foreign partner can
Moderating Role of Partner Cultural Compatibility. In pursue extra private benefits at the expense of its coun-
IJVs, local and foreign partners must confront and deal with terpart. Thus, we propose the following:
foreign language problems, organizational cultural barriers,
differences in managerial and operating systems, and dif- H2: The relationship between coopetition and IJV
ferences in knowledge and skills (Pangarkar and Klein performance is more likely to be positive when
2004; Vanhonacker and Pan 1997). Cultural compatibility partner cultural compatibility is low rather than
between local and foreign partners takes place at two high.
levels—national and organizational (Barkema, Bell, and
Pennings 1996; Meschi 1997)—but the latter is more per- Moderating Role of Technological Turbulence. Techno-
vasive and powerful than the former in shaping organiza- logical turbulence features rapid technological advancements,
tional behaviors (Meschi 1997). Also, because this study unforeseeable directions of technological development, and

myriad technological options for developing new products H3: The relationship between coopetition and IJV
(Jaworski and Kohli 1993). While technological turbulence performance is more likely to be positive when
generates ample opportunities for firms to update their technological turbulence is high rather than low.
technologies and develop new products, it also creates
serious threats to firms by making their existing techno- Moderating Role of Market Growth. Market growth
logical bases obsolete (Zhou, Yim, and Tse 2005). represents the growth rate of market demand and sales in an
industry (Aaker and Day 1986; Jin, Zhou, and Wang 2016).
We suggest that coopetition is more valuable when tech- High market growth offers firms ample opportunities to
nological turbulence is high. First, the knowledge devel- expand rapidly and gain higher profit margins (Robinson and
opment benefit of coopetition is more salient at higher levels Min 2002). However, it can challenge firms with resource
of technological turbulence. Technological turbulence can constraints, distribution constraints, and aggressive com-
render existing technologies obsolete quickly, forcing firms petitive entries (Kuester, Homburg, and Robertson 1999).
to invest heavily in developing new know-how (Jaworski
and Kohli 1993). Because coopetition stimulates knowledge We posit that high market growth may enhance the value of
development and creation (Ritala 2012; Zhang et al. 2010), coopetition. First, when the industrial market grows rap-
it helps address the demand of technological turbulence idly, the knowledge benefits of coopetition become more
for technological innovation. Because coopetition also important. Market growth provides firms with opportu-
fosters knowledge utilization, it helps the IJV use its nities for expansion, but many firms fail in their rapid-
new knowledge to develop new products that better growth phase because they lack knowledge and skills to
serve the market. “handle the expanded business” (Aaker and Day 1986,
p. 417). To successfully grasp the growing opportunities,
Second, the coopetitive benefit of strategic flexibility be- IJVs must upgrade their production facilities, enhance their
comes more prominent when industrial technologies change management skills, and sharpen their marketing capabilities
rapidly. Because technological turbulence challenges the (Sun and Lee 2013). The coopetitive benefit of knowledge
status quo, IJVs must redefine, reconfigure, and redeploy development and exploitation can help IJVs meet these
their resources and skills to cope with such challenges requirements.
(Sanchez 1995). When partners compete and cooperate
simultaneously, they achieve a high level of strategic flex- Second, market growth makes the coopetitive benefit of
ibility (Lado, Boyd, and Hanlon 1997), which is instrumental strategic flexibility more pertinent. High market growth not
for coping with the challenges triggered by technological only offers ample opportunities for sales expansion but also
turbulence (Nadkarni and Narayanan 2007). In contrast, requires fast and increasing business investments (Aaker
when technological turbulence is low, the strategic flexibility and Day 1986). To capture the growth opportunities and
derived from coopetition is unnecessary because there is little stand out in an environment of market rivalry, firms must
demand for change and adaptation. be flexible enough to explore emerging possibilities, dif-
ferentiate themselves from competitors, and commit nec-
Third, technological turbulence may curb the potential essary investments (Sanchez 1995). For example, strategic
downsides of coopetition. In such an environment, not flexibility helps IJVs redeploy and reconfigure available
only are firms strongly motivated to update and develop resources to address emerging and unanticipated market
new technologies through cooperation (Kotabe and Swan demand (Zhou and Wu 2010). Strategic flexibility also
1995; Mjoen and Tallman 1997) but they are also likely to enables IJVs to recalibrate their competitive strategies and
suppress their intention to compete heavily, which, in turn, reposition themselves for better differentiation (Nadkarni
decreases the potential difficulties in balancing cooperation and Hermann 2010).
and competition (Zeng and Chen 2003). Technological
challenges also force partners to focus more on collective Third, market growth can curtail the downsides of coopetition.
interests rather than individual interests to ensure IJV Because future sales potential is high and the top priority is
survival (Li, Poppo, and Zhou 2010). Such an orientation to take advantage of growth opportunities (Robinson and
reduces the potential inequality in individual gains from Min 2002), both foreign and local partners are likely to
the coopetitive relationship. In contrast, without the emphasize long-term common benefits and refrain from
external challenges of technological changes, partners being overly competitive for short-term individual gains.
may become overly competitive and care too much about As a result, foreign and local partners will find it easier to
their individual gains, thus lowering the performance of balance cooperation and competition and achieve fair gains
the IJV. Thus, we predict the following: from coopetition.

However, low rates of market growth may augment the purpose of our research project, and promised a summary
downsides of coopetition in IJVs. First, a major reason for report upon completion. We administered the questionnaire
multinational corporations to form IJVs with local partners on-site to assess the suitability of the respondents and ensure
in emerging markets is to take advantage of the rapidly data quality (Zhou, Yim, and Tse 2005). The trained in-
growing demand (Beamish 1993; Ding 1997). But if the terviewers visited the IJVs and conducted the survey with
local market grows slowly, the multinational corporations two senior managers at each IJV. The first respondent
may seek alliancing opportunities in other faster-growing answered questions related to the IJV’s characteristics,
economies. As a result, individual rationality may overrun and the second addressed questions related to partner co-
the collective one, and the unequal gains from the coopetitive operation, partner competition, environmental factors, and
relationship may emerge. Second, when the market stag- IJV performance. In total, our data collection efforts yielded
nates, the revenue margin will fall and IJV partners may 388 valid responses from 194 IJVs, representing a response
become unsatisfied with their counterparts (Osland 1994). rate of 24.25%. We examined whether participating and
When partners are unsatisfied, they are likely to take a more nonparticipating firms were different. The results of t-tests
short-term orientation and prioritize individual rationality showed no significant differences in IJV age, number of
(Zeng and Chen 2003), leading to overly competitive behaviors employees, or annual sales. Thus, the nonresponse bias was
and reduced IJV performance. Thus, we propose the following: not a major concern.
H4: The relationship between coopetition and IJV On average, the responding IJVs had approximately 347
performance is more likely to be positive when employees, had existed for 13.5 years, and had annual sales
market growth is high rather than low. of US$23.3 million. Most of the foreign partners were from
developed countries/regions, including Canada, Europe,
Hong Kong, Japan, Taiwan, the United States, and others.
METHODOLOGY The IJVs were in various manufacturing sectors, including
Sampling and Data Collection high-tech industries (e.g., computer equipment, electronics,
pharmaceuticals, telecommunications) and low-tech indus-
To test our hypotheses, we conducted a survey of man- tries (e.g., textiles and clothing, construction, food processing).
ufacturing IJVs in China. During the past several decades, The managers had an average of 9.28 years working ex-
China has attracted a substantial amount of foreign direct perience with their firm and industry tenure of 13.63 years;
investment, much of which is in the form of IJVs (Chen, on a seven-point scale, the mean level of the respondents’
Chen, and Zhou 2014; Sun and Lee 2013). The industrial self-reported knowledge about their firm was 6.4, indicating
environment varies by region and location within a socially that the respondents were knowledgeable about the issues
and economically diversified economy, which provides under investigation.
significant variations to market and technological factors,
making it a rich context in which to examine the contingent Measures
role of coopetition.
We adapted measurement scales from prior studies; we
We prepared an English version of our questionnaire based report the items in Table 1. In line with the conceptuali-
on a thorough literature review. Two researchers inde- zation of coopetition (Lado, Boyd, and Hanlon 1997) and
pendently translated the measurement items from English prior studies (Luo, Slotegraaf, and Pan 2006), we measured
into Chinese and then back-translated them into English to coopetition as the multiplicative interaction of partner co-
ensure conceptual equivalence. To reduce respondent fa- operation and competition, reflecting the notion that the
tigue, we designed the questionnaire to include two separate two elements are interdependent and nonsubstitutable. We
sections and asked each respondent to answer only one adapted the scales from Luo, Slotegraaf, and Pan (2006) to
section. To ensure content validity, we pretested the survey measure cooperation as the degree to which IJV partners
with 13 senior managers; on the basis of the results, we exchange resources, improve communication, and seek
modified a few items and finalized the questionnaire. collective benefits, and measure competition as the extent to
which IJV partners compete for strategic resources, knowl-
We obtained a list of IJVs from the National Bureau of edge, and power.
Statistics of China. We restricted the sample to IJVs with
two partners only (i.e., one foreign and one Chinese). We Following prior studies (Gong et al. 2007; Zhou, Yim, and
randomly drew 800 IJVs from the list and then contacted Tse 2005), we used a perceptual measure to assess IJV
two senior managers in each IJV, explained the academic performance relative to major competitors, which has also

Table 1. Construct Measurement and Validity Assessment
Construct Item SFL CR AVE HSV
IJV performancea Overall profitability. .86 .87 .77 .11

Return on investment. .90
Cooperation Both parties share information frequently in our business. .74 .88 .64 .07
Both parties cooperate closely to make sure the venture will last .83
a long time.
Both parties contribute sufficient technological and manage- .81
ment know-how to the venture.
Problems that arise in this JV are treated by partners as joint, .81
rather than individual responsibilities.
Competition Both parties try to gain more strategic importance and power .64 .87 .63 .05
inside the JV.
Protecting one party’s turf is considered to be a way of life in the .63
JV.
Both parties try to guard their proprietary customers or tech- .94
nology information.
Both parties try to protect their own business networks to be .90
exposed to each other.
Partner cultural compatibility The organizational cultures of the two partners are compatible .81 .86 .67 .05
with each other.
The managerial styles of the two partners are compatible with .90
each other.
The operating styles of the two partners are compatible with .74
each other.
Technological turbulence The technology in our industry is changing rapidly. .82 .70 .44 .19
It is very difficult to forecast the technology development .54
direction in our industry.
Most technological developments in our industry are radical .60
changes over existing technologies.
Market growth Our industry market has grown rapidly in last year. .95 .91 .78 .19
Our industry has offered many opportunities for fast .89
development.
The market demand in our industry grows rapidly. .80
aThe IJV’s overall performance relative to major competitors.
Notes: SFL = standardized factor loading; CR = composite reliability; AVE = average variance extracted; HSV = highest shared variance. Overall model fit: c2(137) = 225.48,
p < .01; CFI = .95; IFI = .96; RMSEA = .06.
been adopted by a recent study (Jin, Zhou, and Wang and problematic enforcement of relevant financial reporting
2016). As Choi and Beamish (2004) note, perceptual per- regulations) in emerging markets (Hoskisson et al. 2000).
formance measures, when possessing strong validity and Although perceptual performance measures might involve
reliability, are highly correlated with objective indicators the risk of common method bias, our focus is on coopetition
(see also Ju, Zhao, and Wang 2014; Pangarkar and Klein (i.e., the interaction between cooperation and competi-
2004). A perceptual performance measure also helps avoid tion), which could create cognitive difficulty that would pre-
problems related to objective measures (e.g., inconsistent vent the respondents from inferring the exact goal of our

research and would thus reduce the risk of common method Construct Reliability and Validity
variance affecting our results (Aiken and West 1991).
Consistent with previous studies on emerging economies We followed Anderson and Gerbing’s (1988) approach to
(Gong et al. 2007; Ju, Zhao, and Wang 2014) and the assess the convergent validity and reliability of our mea-
recommendation from Katsikeas et al. (2016), managers sures. First, we conducted a confirmatory factor analysis to
were asked to evaluate their financial performance relative evaluate psychometric properties and convergent validity of
to major competitors on (1) overall profitability and (2) the multi-item measures. In the measurement model, we
return on investment, because profitability is a dominant restricted all the items to load onto their theoretically
element when assessing IJV performance. assigned constructs. The model fit indices indicate that the
estimated model fits the data reasonably well: root mean
We measured foreign equity share as the percentage of the square error of approximation (RMSEA) = .07, compar-
IJV’s equity owned by foreign partners (ranging from 0 to 1) ative fit index (CFI) = .95, and incremental fit index
(Li, Zhou, and Zajac 2009). We measured partner cultural (IFI) = .95. Furthermore, the t-values for all the items are
compatibility with a three-item scale from Hoetker and highly significant, at the .001 level, providing support for
Mellewigt (2009), reflecting the compatibility of organi- convergent validity. Second, all composite reliability values
zational culture and managerial/operating styles between are well above the recommended .70 threshold, and all
the partners. We measured technological turbulence using a average variance extracted (AVE) values, except for tech-
three-item scale adapted from Jaworski and Kohli (1993) to nological turbulence, meet the .50 benchmark (see Table 1).
capture changes in industrial technology. We measured Thus, the measures demonstrate adequate convergent re-
market growth with a three-item scale from Im and Workman liability and validity.
(2004) and Jin, Zhou, and Wang (2016) to assess industry
evolution and market attractiveness. We assessed discriminant validity using Fornell and Larcker’s
(1981) recommended procedure. All the 99.9% confi-
dence intervals of the cross-construct correlations are less
Controls than 1, thus providing evidence for discriminant validity.
We controlled for several factors that might affect IJV Furthermore, our results indicate that the AVE for each
performance. We controlled for IJV age (natural log of the construct is much higher than the highest shared variance
number of years since the IJV was founded) and IJV size with any other construct in the model, lending further sup-
(natural log of the number of employees). We used two port to discriminant validity (see Table 1). Overall, the results
dummy variables to control for the heterogeneity from two demonstrate that our measures have adequate reliability and
primary industries in the sample: electronics and bio- validity.
pharmaceuticals. Other industries represent the baseline
group. The IJV location matters because coastal and inland Common Method Variance
areas in China differ considerably in market demands,
technology development, and legal regimes. Therefore, we To address common method bias (CMB), we adopted both
controlled for location and measured it with a dummy var- an ex ante and an ex post procedure. To reduce evaluation
iable: 1 if located in coastal regions and 0 if located in inland apprehension, we ensured participants that their responses
regions. We controlled for cultural distance, which refers to would remain confidential and emphasized that there were
the cultural difference between the foreign partner’s home no wrong or right answers to the questionnaire. In addition,
country and the host country, China. We used a composite we collected information from two respondents to measure
index based on Hofstede’s (2001) four cultural dimensions: the focal constructs and assigned items for the independent
individualism, masculinity, uncertainty avoidance, and power and dependent variables to different sections of the ques-
distance. We constructed the following equation: tionnaire to create a proximal separation of measurements.
4 2
Iij - Iic Moreover, we pursued a rigorous approach to using the
CDj = i=1 4
Vi
, hierarchically nested structure models recommended by
Cote and Buckley (1987) to check the likely threat of CMB.
where CDj stands for the cultural distance of country j from We estimated three confirmatory factor models: a method-
China; Iij and Iic denote the index scores on cultural dimension only model (M1), a trait-only model (M2), and a trait-and-
i for country j and China, respectively; and Vi is the variance method model (M3). In M1, all items were loaded on one
of the index for cultural dimension i. Table 2 displays de- common method factor (c2(153) = 1,480.59, p < .01; CFI =
scriptive statistics and correlations between all the variables. .31; IFI = .32; RMSEA = .21). In M2, each item was loaded

Table 2. Descriptive Statistics and Correlations of the Constructs
Variables 1 2 3 4 5 6 7 8 9 10 11
1. IJV performance .20** .19** −.10 .10 .25** .32** −.11 .20** .00 .09
2. Cooperation .21** −.13† .03 .21** .05 .26** −.10 −.02 .13† .12
3. Competition .20** −.12 −.06 .06 .22** .02 −.04 .04 .01 .00
4. Foreign equity share −.09 .04 −.05 −.11 −.04 −.04 .03 −.10 .25** .09
5. Partner cultural .11 .22** .07 −.10 .04 .18* −.02 .07 −.08 −.01
compatibility
6. Technological .26** .06 .23** −.03 .05 .43** −.20** −.07 −.03 .18**
turbulence
7. Market growth .33** .27** .03 −.03 .19** .44** −.16* −.03 −.17* .10
8. IJV age −.10 −.09 −.03 .04 −.01 −.19** −.15* .24** .05 .11
9. IJV size .21** −.06 .05 −.09 .08 −.06 −.02 .25** −.19** −.02
10. Location .01 −.01 .02 .26** −.07 −.02 −.16* .06 −.18* .11
11. Cultural distance .10 .14* .01 .10 .00 .02 .11 .12 −.01 .12
†
Marker variable .19** .13 .01 −.13 .08 .19** .25** .02 .20** −.22 −.05
M 4.76 5.20 3.89 .43 5.19 4.67 5.12 13.52 347.00 .29 2.02
SD .94 1.00 1.18 .20 1.08 1.08 1.24 6.93 469.00 .46 2.34
Min 2.00 1.00 1.00 .05 1.00 1.67 1.00 5.00 50.00 0.00 .41
Max 7.00 7.00 7.00 .95 7.00 7.00 7.00 49.00 4,000.00 1.00 12.65
†p < .10.
*p < .05.
**p < .01.
Notes: Two-tailed tests of significance. N = 194. Zero-order correlations appear below the diagonal; adjusted correlations for potential common method variance are above
the diagonal.
on its theoretically assigned latent construct (c2(137) = We also employed Lindell and Whitney’s (2001) partial
225.48, p < .01; CFI = .95; IFI = .96; RMSEA = .06). In M3, correlation adjustment test. We used corporate social re-
one common method factor linking to all the measurement sponsibility (three items adapted from Maignan and Ferrell
items was added into M2 (c2(118) = 199.36, p < .01; CFI = [2004]; Cronbach’s a = .80) as a marker variable, which is
.96; IFI = .96; RMSEA = .06). theoretically unrelated to at least one of our focal constructs.
We used the lowest positive correlation between the marker
We compared these three models to look for any change in variable and the others (r = .01) to partial out this corre-
model fit due to the CMB and found that M3 and M2 lation from other zero-order correlations and to create a
demonstrate a better fit to the data than M1. However, the partial correlation–adjusted matrix. The results of the
results of the chi-square difference test indicate that M3 does partial correlation adjustment show no significant change
not show a significant difference from M2 (Dc2 = 26.12, among the correlations of the principal constructs (see
Dd.f. = 19, p > .10). Further, we calculated the mean per- Table 2). Therefore, CMB is unlikely to constitute a sig-
centage of variance explained by both the construct items nificant problem in our study.
and the method factors. The results show that 63.7% of the
variance in the data were due to the trait factors, while 4.1%
of the variance was accounted for by the common method ANALYSES AND RESULTS
factor, which is much less than the median of method
variance (about 25%) (Cote and Buckley 1987). A small In our model, partner cooperation and competition are
portion of the covariance originates from the common likely influenced by IJV characteristics and environmental
method factor, indicating that CMB is relatively minor factors (Dagnino and Rocco 2009; Gnyawali and Park
(Jean, Sinkovics, and Kim 2010). 2011). To correct for the potential endogeneity, we adopted a

three-stage hierarchical regression approach that has Stage II
been widely used in prior studies (e.g., Handley and Angst

6
2015; Luo, Rindfleisch, and Tse 2007; Slotegraaf, IJV performance = b20 + b20i Controli
i=1
Moorman, and Inman 2003). First, we regressed partner + b21 Foreign equity share
cooperation and competition on IJV characteristics and
+ b22 Partner cultural compatibility
environmental factors, respectively, and derived residuals
of cooperation and competition. Second, because such + b23 Technological turbulence
residuals tease out the effects of these moderators, we + b24 Market growth
used these residuals rather than the original scales in + b25 Cooperationresidual
further analysis. Third, we mean-centered the moderating + b26 Competitionresidual
variables to create the interaction terms with these re-
+ b27 Coopetition + e20,
siduals (Aiken and West 1991).
where Controli represents different control variables.
In the first stage, as specified in the equation, we regressed
cooperation and competition against all the moderators In the third stage, we added the interaction terms to assess
(foreign equity share, partner cultural compatibility, the moderation effects. To test the effect of each moderator,
technological turbulence, and market growth) to obtain we added interactions stepwise (Models 4–7 in Table 3).
predicted values. We used Cooperation residual and
Competitionresidual as the indicators of cooperation and
Stage III

6
competition in the subsequent models. We computed
IJV performance = b30k + i=1 b30ik Controli
Coopetition as the product of Cooperationresidual and
Competitionresidual. We present the details of the equa- + b31k Foreign equity share
tions next. + b32k Partner cultural compatibility
+ b33k Technological turbulence
Stage I + b34k Market growth
+ b35k Cooperationresidual
Cooperation = b110 + b111 Foreign equity share + b36k Competitionresidual
+ b112 Partner cultural compatibility + b37k Coopetition
+ b113 Technological turbulence + b38k Cooperationresidual
+ b114 Market growth + e110. · Moderator k
From this, we can obtain + b39k Competitionresidual
· Moderator k + b310k Coopetition
Cooperationresidual = Cooperation - Cooperationpredicted .
· Moderator k + e30k,
We also used
where Moderatork (k = 1, 2, 3, 4) represents different
Competition = b120 + b121 Foreign equity share moderators.
+ b122 Partner cultural compatibility The results of the first-stage regression indicate that part-
+ b123 Technological turbulence ner cooperation was positively related to market growth
+ b124 Market growth + e120 (b = .27, p < .01) and partner cultural compatibility (b = .18,
p < .05); and partner competition was positively related to
to obtain technological turbulence (b = .27, p < .01). These results
Competitionresidual = Competition - Competitionpredicted . show the necessity of using the three-stage model to correct
for potential endogeneity.
Then,
Coopetition = Cooperationresidual · Competitionresidual . We used the results in Table 3 to test the research hy-
potheses. Because the effect of coopetition (the two-way
In the second stage, we regressed IJV performance against interaction between cooperation and competition) is con-
the moderators, cooperation, competition, coopetition, ditioned on the level of the three-way moderators, we need
and a set of control variables to examine the main effect of to include two-way interaction terms when examining the
coopetition. effects of three-way interactions (Aiken and West 1991). If

Table 3. Standardized Estimates of Regression Analyses
IJV Performance
Model 1 Model 2 Model 3 Model 4 Model 5 Model 6 Model 7
Variables b t b t b t b t b t b t b t
IJV age −.11 −1.60 −.10 −1.45 −.10 −1.44 −.09 −1.38 −.09 −1.31 −.10 −1.53 −.11 −1.61
IJV size .26** 3.67 .26** 3.65 .26** 3.66 .24** 3.49 .26** 3.75 .25** 3.63 .24** 3.55
Industry type 1 −.04 −.62 −.04 −.61 −.04 −.63 −.04 −.65 −.05 −.71 −.04 −.52 −.04 −.61
Industry type 2 −.06 −.89 −.08 −1.22 −.09 −1.26 −.10 −1.43 −.07 −1.04 −.11 −1.55 −.09 −1.37
Location .14† 1.92 .14† 1.91 .14† 1.91 .15* 2.06 .13† 1.79 .15* 2.18 .13† 1.95
Cultural distance .08 1.11 .05 .80 .05 .81 .05 .69 .06 .87 .04 .65 .04 .63
Foreign equity share (FES) −.08 −1.15 −.08 −1.15 −.08 −1.14 −.06 −.78 −.06 −.92 −.07 −1.03 −.06 −.90
Partner cultural compatibility (PCC) .03 .45 .03 .42 .03 .40 .01 .16 .03 .37 .00 .04 −.01 −.21
†
Technological turbulence (TT) .15* 2.02 .15* 2.12 .15* 2.08 .15* 2.05 .16* 2.13 .14 1.93 .15* 2.08
Market growth (MG) .27** 3.48 .27** 3.60 .27** 3.58 .30** 4.00 .30** 3.81 .30** 4.05 .30** 4.03
Cooperation (COOPE) .15* 2.34 .15* 2.11 .13† 1.93 .15* 2.18 .18** 2.64 .14* 2.11
Competition (COMPE) .16* 2.56 .17* 2.57 .15* 2.27 .17* 2.58 .15* 2.35 .16* 2.52
Coopetition .03 .43 .03 .48 .05 .71 .06 .81 .01 .07
COOPE × FES −.01 −.13
COMPE × FES −.07 −1.09
Coopetition × FES .18* 2.41
COOPE × PCC −.09 −1.28
COMPE × PCC .00 .00
Coopetition × PCC −.12† −1.66
COOPE × TT .04 .58
COMPE × TT −.07 −.99
Coopetition × TT .20** 3.05
COOPE × MG .02 .28
COMPE × MG .02 .29
Coopetition × MG .26** 3.21
R2 .21 .26 .26 .29 .28 .31 .32
Change in R2 .05** .00 .03* .03† .05* .06**
F 4.96** 5.21** 4.81** 4.52** 4.38** 4.79** 5.31**
†p < .10.
*p < .05.
**p < .01.
Notes: Two-tailed tests of significance. N = 194. Maximum variance inflation factor = 1.53. Standardized coefficients are reported for b.

we included all the interactions, the full model would contain H1 deals with the moderation effect of foreign equity share.
13 interaction terms (see Table 3). The correlations among the The three-way interaction of foreign equity share, co-
interaction terms including the same construct or two-way operation, and competition in Model 4 in Table 3 is positive
interactions could be high, which would produce multi- and significant (b = .18, p < .05). Panel A of Figure 1 shows
collinearity and further render the regression estimates in- that the impact of partner coopetition on IJV performance
efficient (Dow and Larimo 2009). To deal with the potential shifts from negative to positive when foreign equity share
problem of multicollinearity and reduce spurious effects, we moves from low to high. Table 4 further shows that when
followed previous studies to evaluate the moderation effects foreign equity share is low, coopetition relates negatively to
block by block (Handley and Angst 2015, p. 1428; McGrath performance (b = −.18, p < .10), yet it relates positively to
2001, p. 125). We included the three-way and two-way performance at high levels of foreign equity share (b = .22,
interactions of each moderator in Models 4–7 separately. p < .05). These results provide support for H1.
According to this procedure, across these models, the largest
variance inflation factor was 1.53, far below the 10.00 bench- H2 pertains to the moderating effect of partner cultural
mark, suggesting that multicollinearity is not a major concern. compatibility. Model 5 in Table 3 shows that the interaction
of cooperation, competition, and partner cultural com-
As Model 2 in Table 3 indicates, cooperation is positively patibility is negative and marginally significant (b = −.12,
related to IJV performance (b = .15, p < .05). Competition is p < .10). As Panel B of Figure 1 shows, the effect of
also positively related to IJV performance (b = .17, p < .01). coopetition on IJV performance shifts from positive to
However, coopetition (i.e., cooperation × competition) is negative over the range of partner cultural compatibility.
not significantly related to IJV performance (Model 3: b = As Table 4 indicates, at low levels of partner cultural
.03, p > .10), suggesting the necessity of considering the compatibility, coopetition relates positively to IJV perfor-
contingencies of coopetition. mance (b = .20, p < .10), but the effect becomes negative (but
nonsignificant) when partner cultural compatibility is high
Hypothesis Testing (b = −.06, n.s.). These results provide partial support for H2.
To help interpret the three-way interactions, Table 4 reports H3 examines the role of technological turbulence. Model
how the effect of coopetition on IJV performance varies 6 in Table 3 shows that the interaction of cooperation,
across different levels of the moderators. To further illus- competition, and technological turbulence is positive and
trate the three-way interaction effects, we plot the partial significant (b = .20, p < .01). Panel C of Figure 1 shows
derivative of IJV performance with respect to coopetition that the effect of coopetition on IJV performance shifts
over the range of the moderators, following Schoonhoven’s from negative to positive over the range of technological
(1981) technique, in Figure 1. The value of the moderator is turbulence. Table 4 also shows that at low levels of
on the x-axis, and the regression coefficient of coopetition technological turbulence, coopetition is negatively related
on IJV performance is on the y-axis. to IJV performance (b = −.27, p < .05), but at high levels
Table 4. Effect of Partner Coopetition Across Different Levels of the Moderators
Foreign Equity Partner Cultural Technological

Moderator Level Share (H1) Compatibility (H2) Turbulence (H3) Market Growth (H4)
−2 SD −.18 (.095)† .20 (.106)† −.27 (.106)* −.21 (.087)*

−1 SD −.08 (.061) .12 (.066)† −.12 (.066)† −.10 (.053)†
M .02 (.045) .03 (.045) .03 (.045) .01 (.032)
+1 SD .12 (.061)* −.06 (.066) .18 (.060)** .12 (.048)*
+2 SD .22 (.095)* N.A.a .33 (.099)** N.A.a
†p < .10.
*p < .05.
**p < .01.
aThe mean + 2 SD for paternal cultural compatibility and market growth is outside of the scale. When partner cultural compatibility is at the highest level (partner cultural
compatibility = 7), coopetition relates negatively to IJV performance (b = −.12, p < .10). Further, when market growth is at the maximum value (market growth = 7),
coopetition has a positive effect on IJV performance (b = .15, p < .05).
Notes: Two-tailed tests of significance. Unstandardized coefficients are reported; standard errors appear in parentheses. N.A. = not applicable.

Figure 1. Contingent Effects of Partner Coopetition
A: Foreign Equity Share (H1) B: Partner Cultural Compatibility (H2)

0.4 0.4
(d IJV Performance/d Cooperation)
= .02 + .51
0.3 d Competition 0.3
0.2 0.2
0.1 0.1
0 0
\.05 .23 .41 .59 .77 .95 1 2 3 4 5 6 7
–.1 –.1
–.2 –.2
(d IJV Performance/d Cooperation)
= .03 – .08
–.3 –.3 d Competition
–.4 –.4
C: Technological Turbulence (H3) D: Market Growth (H4)
.4 .4
(d IJV Performance/d Cooperation) (d IJV Performance/d Cooperation)
.3 = .03 + .14 = .01 + .09
d Competition .3 d Competition
.2
.2
.1
.1
0
1 2 3 4 5 6 7 0
–.1 1 2 3 4 5 6 7
–.1
–.2
–.2
–.3
–.4 –.3
–.5 –.4
the effect is positive (b = .33, p < .01). Thus, H3 is characteristics and environmental factors as boundaries.
supported. Our findings show that coopetition is positively related to
IJV performance when foreign partners possess high equity
H4 assesses the moderating effect of market growth. The share, partner cultural compatibility is low, technological
interaction of cooperation, competition, and market growth turbulence is high, or market growth is high. In contrast,
is positive and significant (b = .26, p < .01; Model 7 of under conditions of low foreign equity share, high partner
Table 3). Panel D of Figure 1 shows that the effect of cultural compatibility, low technological turbulence, or low
coopetition on IJV performance shifts from negative to market growth, coopetition is negatively related to IJV
positive as market growth increases. Table 4 shows that performance. These findings contribute to the coopetition
coopetition relates to IJV performance negatively at low and IJV literature in several ways.
levels of market growth (b = −.21, p < .05) but positively at
high levels of market growth (b = .12, p < .05), in full First, our study develops a contingent view of coopetition in
support of H4. IJVs. Prior literature provides inconsistent theoretical
arguments and conflicting evidence for how coopetition af-
DISCUSSION AND IMPLICATIONS fects alliance performance. Whereas the syncretic rent-seeking
Theoretical Implications perspective emphasizes the positive role of coopetition
(Lado, Boyd, and Hanlon 1997), the tension perspective
Our study develops a contingent view of how coopetition focuses on its potential downsides (Das and Teng 2000;
influences IJV performance by considering important IJV Zeng and Chen 2003). We propose that coopetition can

benefit or hurt performance, depending on IJV characteristics partner coopetition in IJVs can function as a double-edged
and environmental factors. According to different levels of sword; it can both benefit and harm IJV performance,
controllability, our study identifies IJV characteristics and depending on different internal and external factors.
external environmental factors as internal and external
moderators. IJV characteristics are controllable and can be Finally, our study extends previous research by examining
designed purposefully to enhance the benefits and curtail the coopetition in an important but underresearched context:
downsides of coopetition. In contrast, uncontrollable envi- IJVs. Whereas the importance of coopetition in the IJV
ronmental factors create opportunities and challenges for IJVs context is well recognized (Dagnino and Rocco 2009;
and shape the efficacy of coopetition. Thus, our contingent Kumar 2010), extant research only discusses it conceptually
view of coopetition helps reconcile two competing perspec- (Luo, Shenkar, and Gurnani 2008). Foreign and local
tives: the syncretic rent-seeking and tension perspectives. partners in IJVs have a strong motivation to cooperate
through sharing complementary resources and operational
Second, our study extends the coopetition literature by risks; however, they also have a strong impetus to compete
showing that its value is contingent on particular IJV for value division. In this aspect, our study complements
characteristics. Lado, Boyd, and Hanlon (1997) propose prior studies that have primarily examined coopetition at
that new organizational forms and organizational life cycles the intraorganizational level (Luo, Slotegraaf, and Pan
may determine whether coopetition is beneficial. Luo, 2006; Tsai 2002) or the strategic alliance level (Gnyawali
Shenkar, and Gurnani (2008) suggest that goal congruity, and Park 2011; Luo, Rindfleisch, and Tse 2007).
resource complementarity, and bargaining asymmetry be-
tween partners are potential boundary conditions for the Managerial Implications
role of coopetition in IJVs. Our study focuses on two im-
portant IJV characteristics: foreign equity share and partner Our findings provide novel insights for managing coopetition.
cultural compatibility. We reason that in IJVs, because Managers must understand that coopetition itself is a
foreign partners often possess advanced technological and double-edged sword and may not always generate com-
managerial know-how, high foreign equity share helps re- petitive advantages for IJVs. The history of the Guangzhou
duce the tension of coopetition and enhances its value. As Peugeot Automobile Company (GPAC), an IJV between the
such, when foreign equity share is high, coopetition is Chinese Guangzhou Auto Factory (GAF) and the French
positively related to performance; in contrast, coopetition automobile manufacturer PSA Peugeot Citroën (PSA), il-
has a significant negative relationship with performance luminates this point. The IJV of GPAC achieved initial
if foreign equity share is low. We also suggest that when success. However, the competition for IJV control and
foreign and local partners share little in terms of organi- individual gains as well as organizational cultural differ-
zational culture and managerial and operating styles, low ences between GAF and PSA ultimately resulted in a pre-
partner cultural compatibility helps them take advantage of mature termination of the IJV in 1997, only12 years after
the benefits of coopetition. Indeed, when partner cultural its inauguration. GAF wanted to learn advanced car-
compatibility is low, coopetition is positively related to IJV manufacturing technologies, but PSA focused more on
performance. With these findings, our study extends the profiting from selling imported auto parts. Facing the
prior literature by identifying two firm characteristics that coopetition of foreign and local partners, GPAC was in-
condition the value of coopetition. adequately managed, and the accumulated losses amounted
to CN¥2.9 billion (Fernandez and Liu 2007).
Third, our study enriches the coopetition literature by
showing the contingent role of important environmental Regarding external environmental contingencies, managers
factors. Lado, Boyd, and Hanlon (1997) propose that should pursue a coopetition strategy only when industrial
coopetition becomes more salient in a turbulent environ- technologies are changing quickly or when the industrial
ment or a rapidly changing market. Empirical studies fur- market is growing rapidly; otherwise, coopetition can be
ther show that coopetition is beneficial under conditions of detrimental to IJV performance. The Chinese information
high market uncertainty (Ritala 2012) or high technological and communication technology industry has experienced
uncertainty (Bengtsson and Kraus 2013). Our results con- rapid technological upgrades and fast market growth in the
firm that coopetition is beneficial to IJV performance when past decades. Siemens and Huawei Technology established a
technological turbulence or market growth is high. Extending coopetitive IJV, TD Tech, to develop a 3G commercial
prior studies, our findings show that coopetition is harmful to network and broadband trunking enhanced network
IJV performance at low levels of technological turbulence or solution. High turbulence in industrial technology and
market growth. Taken together, our findings suggest that rapid market growth made the benefits of coopetition

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Keywords: coopetition, cooperation, competition, contingent view, international joint ventures

42 Journal of International Marketing

Partner Coopetition in IJVs 43

44 Journal of International Marketing

Partner Coopetition in IJVs 45

46 Journal of International Marketing

Partner Coopetition in IJVs 47

48 Journal of International Marketing

Construct Item SFL CR AVE HSV

IJV performancea Overall profitability. .86 .87 .77 .11

Partner Coopetition in IJVs 49

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Partner Coopetition in IJVs 51

52 Journal of International Marketing

Model 1 Model 2 Model 3 Model 4 Model 5 Model 6 Model 7

Partner Coopetition in IJVs 53

Table 4. Effect of Partner Coopetition Across Different Levels of the Moderators

Foreign Equity Partner Cultural Technological

−2 SD −.18 (.095)† .20 (.106)† −.27 (.106)* −.21 (.087)*

54 Journal of International Marketing

A: Foreign Equity Share (H1) B: Partner Cultural Compatibility (H2)

C: Technological Turbulence (H3) D: Market Growth (H4)

Partner Coopetition in IJVs 55

56 Journal of International Marketing

Buckley, Peter J., and Mark Casson (1988), “A Theory of

Partner Coopetition in IJVs 57

58 Journal of International Marketing

Partner Coopetition in IJVs 59

60 Journal of International Marketing

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