Internationalization of Family Businesses -
Evidences from Joint Venture FormationatDanfoss
Assistant Professor Britta Boyd
University of Southern Denmark, Department for Border Region Studies
Alsion 2, 6400 Sønderborg, DK
Tel. +45 6550 1756
Professor Toshio Goto
The Graduate School for the Creation of New Photonics Industries
Kurematsu 1955-1, Hamamatsu-Shi,Shizuoka-Ken, Japan
Tel: +
Associate Professor Svend Hollensen
University of Southern Denmark, Department for Border Region Studies
Alsion 2, 6400 Sønderborg, DK
Tel. +45 6550
Abstract
This article focuses on theinternational JVF process of family businesses. The reasoning behindDanfoss’ decision to cooperate with two competingfamily businesses in Japan and Chinaas well as two nonfamily businesses in Canada and Britain will be analysed. In-depth qualitative interviews reveal the driving forceson both sides and show how the psychic distance can be reduced between the different parent firms including the JV child.The purpose of this study is to compare equal split JVs of family and nonfamily firmsregarding the formation processincluding competences andcultures. The study indicateswhat core competences of a family business matter when cooperating in equal split joint ventures.Implications for family business practitioners and ideas for future research are discussed.
Keywords: Core Competence,Family Businesses, Joint Venture Formation (JVF).
Introduction
The JVF process is often compared with a marriage, because itintends to reduce the psychic distance and increase the mutual dependence between the parties leading to a commitment with shared values and structures. This marriage metaphor emphasizes the complexity and affective determinants of the process including the eventual dissolution phase compared with a ‘divorce’. In average, alliances like that only last for about seven years and nearly 80 % of the JV result in a sale by one of the partners (Dwyer et al., 1987; Chan et al., 2005;Hollensen, 2007).Therefore comparing the international JV relationships of family and non-family firms along this process seems to be an interesting task.
Theoretical Base
In family business research little is known about the process of international JVF. Different characteristics of family firms were identified that hinder or encourage cooperation. Shared values and goals can bridge cultural barriers, but family firms have to develop a positive and realistic attitude towards their own capabilities and risk propensity when cooperating (Roessl, 2005; Niemelä, 2004; Swinth/Vinton, 1993).
Regarding the JVF processsome authors tried to differentiate phases in the relationship from awareness, exploration, expansion and commitment to the termination of a relationship or dissolution phase (Dwyer et al., 1987; Kanter, 1994; Hollensen, 2008).Following these phases the core competencescan be explainedresulting in the development of different strategic approaches (Grant 2008, Prahalad/Hamel 2007).
Methodology and Sample
The questionnaire follows the five-phase relationship model from Hollensen (2008) asking for motives, shared values or goals and how to overcome cultural barriers or the ‘psychic distance’ but also for the perceived success of the JV in general.A qualitative data analysis is carried out to find the specific competences which lead to success or failure of the JV accompanied by secondary data analysis.
Personal interviews were carried out with Sanhua and the JV in China as well aswith the owner of Danfoss in Denmark. The owner of Saginomiyahas been contactedin Japan, but could not be interviewed. Telephone interviews were conducted with the manager of the JV in Poland and also with the two nonfamily businesses JV partners Turbocor and Senstronic,where the responsible persons were from Danfoss. Following research model shows theincludedfirms, the arrows representing equal split JVs:
Conclusions and Implications
First insights gained from the historical background and theinterviews carried out go along with the reviewed literature. The interesting part of the research will follow comparingthe statements of the family and nonfamily businesses including their associated JV partners and how they take advantage ofeach other’s core competences.
Key references:
Chan, S. H., Kensinger, J. W., Keown, A. J., Martin, J. D. (2005) When Do Strategic Alliances Create Shareholder Value?, Journal of Applied Corporate Finance, Vol. 11, No. 4, pp.82-87.
Dwyer, R. F., Schurr, P. H., Oh, S. (1987) Developing buyer-seller relationships, Journal of Marketing, 51, pp. 11-27.
Hollensen, S. (2007) Global Marketing, 4th edition, Prentice Hall.
Niemelä, T. (2004) Interfirm Cooperation Capability in the context of Networking Family Firms: The Role of Power,Family Business Review, Vol. 17, No. 4, pp. 319-330.
Swinth, R. L., Vinton, K. L. (1993) Do Family-Owned Businesses Have a Strategic Advantage in International Joint Ventures? Family Business Review, Vol. 11, No. 1, pp. 19-30.
Roessl, D. (2005) Family Businesses and Interfirm Cooperation, Family Business Review, Vol. 18, No. 3, pp. 203-214.
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