Stability of international joint ventures: When experience and age overshadow host country risk

Abstract

This study examines how host country risk affects the stability of international joint ventures (IJVs). Besides, it examines the moderating impact of experience in the host country and age of the IJV on the association between country risk and IJV stability. We use transaction cost economics (TCE) to hypothesize a detrimental impact of host country risk and IJV stability. Additionally, we integrate TCE and knowledge-based theory (KBT) to develop the hypotheses suggesting that the negative association between country risk and IJV stability is moderated by experience in the IJV's host country and the age of the IJV. Using a dataset on 140 IJVs established between French and cross-border partners, and employing event history analysis to assess IJV stability over time, we find that host country risk has a detrimental impact on IJV stability. Furthermore, we find that the degree of experience possession in IJV's host country and the age of the IJV moderate the negative association between host country risk and IJV stability.