How do ownership control position and national culture influence conflict resolution strategies in international joint ventures?

In the last two decades, strategic alliances including interna- tional joint ventures (IJVs) with local firms have become a central part of the internationalization strategies of most multinational corporations (MNCs) (Das & Kumar, 2010; Kale & Singh, 2009). A study by Partner Alliances reported that over 80% of Fortune 1000 CEOs believed that alliances would account for almost 26% of their companies’ revenues in 2007–2008 (see Kale, Singh, & Bell, 2009). However, results in several studies show high – 30% to 70% – rates of alliance/IJV failure (Bamford, Ernst, & Gubini, 2004; Hennart, Kim, & Zeng, 1998). One of the key reasons for high failure is that firms often have different goals and ways of communicating, inter-partner conflicts often exist, leading to dissolution of the partnership (Fey & Beamish, 1999; Pajunen & Fang, 2013). Thus, understanding conflict is crucial to organizations (Boonsathorn, 2007; Das & Kumar, 2010; Krone & Steimel, 2013; Yuan, 2010), since the conflict resolution strategy of parent firms affects organization effectiveness (Boros, Meslec, Curseu, & Emons, 2010; Xie, Song, & Stringfellow, 1998) and especially IJV performance (Fey & Beamish, 1999; Lu, 2006; Yavas, Eroglu, & Eroglu, 1994). Firms differ in their choice of conflict resolution strategy (CRS) (Wade-Benzoni et al., 2002) and the current literature does not 

provide much explanation on how MNEs select CRS in interna- tional business (Fainshmidt, White, & Cangioni, 2014), thus CRS is an under-explored area in international business and management literature (Nguyen & Larimo, 2011; White, Joplin, & Salama, 2007; White, Hadjimarcou, Fainshmidt, & Posthuma, 2013). Although previous research shows that there are some linkages between national culture and strategies that are used in conflict situations (White et al., 2013), researchers (e.g. Boros et al., 2010; Jehn & Weldon, 1997) noticed that there has been a lack of systematic study on the relationship between culture and conflict manage- ment. In IJV research, the conflict handling styles of partner firms have become an important topic (Wang, Lin, Chan, & Shi, 2005). Arin˜o (1997) and Krone and Steimel (2013) suggest that further studies are needed to investigate the effect of national cultures on the cooperative behaviors of partners in IJVs, since cultural values influence people’s preferences for different conflict management styles (Komarraju, Dollinger, & Lovell, 2008). Similarly, Ma, Lee and Yu (2008) and Doucet, Jehn, Weldon, Chen, and Wang (2009) maintain that further study is needed especially to investigate the impact of culture on CRS because understanding the way in which people from different cultures resolve conflict is very important (Wang et al., 2005). In addition to the influence of culture on CRS, more than twenty years ago, Yavas et al. (1994) suggested that further study should investigate CRS, taking into account the influence of parent ownership control strategies. In the same vein, more recently, researchers (e.g. Lin & Germain, 1998; Nguyen & Larimo, 2011) maintain that the relative power between partners (e.g. ownership share) in IJVs also seems to be one key influencing factor on partners’ choice of CRS. Thus these factors need to be further analyzed.

There are also other factors that may influence foreign firms’ decisions on their CRS such as the contexts of a dispute (Kozan, Ergin, & Varoglu, 2014; Tjosvold, 2008) including the importance of the issues under dispute, the importance of the relationship between foreign firms and local firms, and the behaviors of local firms and also of the competitors. However, like other researchers (e.g. Lin & Germain, 1998; Nguyen & Larimo, 2011) we argue that two key factors that are the most important for managers and firms and which influence their strategies in conflict situations are (1) their cultural background, which characterizes who they are and/ how they behave, and (2) their relative power which gives them ability to do what they think is good for them or is the right choice in various situations.
Therefore, to provide further new insights on conflict manage- ment in IJVs, the goal of our study is to investigate the influence of these most two important factors on CRS used in IJVs: foreign partners’ ownership control position (relative power) and their national culture. More specifically, this study aims to answer the research question: ‘‘How do the ownership control position and
national cultural background of the foreign parent firm influence their
choice of CRS conflict resolution strategy in their international joint ventures?’’ A key feature of earlier CRS studies has been that each of them has focused on only one factor such as culture or trust (e.g.
Boros et al., 2010; Ding, 1996; Doucet et al., 2009; Fainshmidt et al., 2014; Lin & Germain, 1998; White et al., 2013) or control position (White et al., 2007). These earlier studies have concentrated on the general level, as they just show whether there are relationships between the influencing factors, but the interactions between these factors have not been analyzed. Our study aims to contribute to this stream of research both in IJV and in conflict management by specifying how three different control positions (dominant ownership, equal ownership and minority ownership control) and different national cultural backgrounds (based on the five national cultural dimensions of Hofstede, 2001) of foreign parent firms influence their choice of CRS. In addition, our study differs from previous studies because we point out how both control position and cultural background interact in their influence on the selection of CRS. Furthermore, our study differs from previous studies because we are not only analyzing the main effects between our variables but also we study the interaction effects between them (see Section 3.3) to have a deeper understanding of the key influencing factors on the choice of CRS strategy. In the next section, first we present an overview of CRS studies. Then, we discuss how the ownership control position leads to a foreign parent firm’s choice of different CRS. After that, we continue with the influence of national cultural background on the selection of CRS. In the fourth section, we discuss the interaction effect of ownership position, cultural background and trust on the selection of the firms’ CRS. After that we discuss our methodology and the results of our data analysis. Finally, we conclude the paper by discussing the implications and limitations of our study, and indicating opportunities for further research.