Socio-Cultural Distance and the Choice of Joint Ventures: A Contingency Perspective

Abstract

It is widely believed that firms choose joint venture forms overseas when confronted with high socio-cultural distance. However, the probability of choosing the joint venture form is expected to be moderated by the firm-specific characteristics of the investing firm as well as country-specific characteristics of the country of investment. This study examines the moderating role of some firm- and country-specific factors on a firm's choice of joint venture form in response to socio-cultural distance. The firm-specific factors examined in this study include size, multinationality, and technological intensity; and the country-specific factors examined in this study include country risk and market potential. Recent data from a sample of U.S. manufacturing firms is used to test the contingency hypotheses. Results indicate the usefulness of the contingency approach for modeling choice of joint ventures.