Chris Changwha Chung presents his dissertation in the dissertation panel session at the Academy of Management 2007 Annual Meeting.
Change remains a constant factor in today’s business world—one that affects organizations of all types and sizes, including international joint ventures.
To succeed in this volatile environment, conventional wisdom suggests that managers should alter their organizational structures when internal and external environments change. Such adaptive structural change provides, in theory, highly feasible and potentially beneficial results because it maintains the alignment between environment and organizational structure.
Now, toss aside conventional wisdom—and consider a different point of view: even if an organization undertakes a potentially beneficial change, the resulting benefits may not come about because the process of change itself may greatly disrupt routines, undermine relationships, and require costly learning.
Chris Changwha Chung, assistant professor in the College of Business Administration’s Department of Management and International Business, digs deeper into this hypothesis in his recently completed dissertation titled “The Evolution of International Joint Ventures: Multiple Waves of Structure Change, Performance, and Survival.”
Chung argues that, when an international joint venture undergoes a series of changes, the unique nature of inter-partner relationships dictates that benefits may not occur because of the disruptive and deleterious nature of the change process itself.
“Regardless of the type of motivation behind a change or belief in the good effects of occasional change, continual structural change is not likely to be positive for international joint ventures.”
—Chris Changwha Chung, assistant professor, Department of Management and International Business
“The effects of multiple changes are particularly disruptive and deleterious because they continually destroy or render obsolete established structures and patterns of activities between partners,” Chung said. “In other words, regardless of the type of motivation behind a change or belief in the good effects of occasional change, continual structural change is not likely to be positive for international joint ventures.”
Chris Changwha Chung receives the” Barry M. Richman Best Dissertation Award” in the field of international business and management from Ravi Ramamurti, chair, International Management Division, Academy of Management, during the organization’s 2007 Annual Meeting.
Based on an analysis of 5,053 international joint ventures from 58 industries in 46 countries between 1986 and 2003, Chung’s research suggests that even if partners change their ownership control structure in an effort to improve the effectiveness of the venture in response to declining performance, they will not realize the benefits of change if the initial change action leads to multiple waves of structural change.
“The results of my study indicate that the hazards of unchanged international joint ventures initially increased and then declined over time, but the hazards of changing international joint ventures continually escalated as the number of structural changes increased,” he said. “With each sequential structural change, the likelihood of improving performance declined, failure increased, and the speed of movement toward relationship termination accelerated.”
What makes international joint ventures particularly vulnerable to change?
Compared to stand-alone organizations, international joint ventures are simultaneously cooperative and competitive by nature. While the participating companies bring together complementary skills and resources, divergent strategic objectives, cultural differences, and the potential for opportunism combine to drive conflict in a “mixed-motive” environment.
In his research, Chung examines the downward spirals of inter-partner and inter-group dynamics as international joint ventures experience multiple change processes.
“When ownership control is restructured—especially more than once—inherent tensions in the shared control arrangement are more likely to become salient, with cultural, behavioral, and managerial differences amplified as the number of waves of structural change multiply,” he said. “Shared ownership control forms the foundation on which to build cooperative international joint venture relationships, but it also can act as a source of conflict if the balance of power breaks down.”
Chung compares the situation to a tug-of-war game in which equally exerted forces from opposite ends maintain an equal balance of power.
“While this equal balance of power creates a seemingly stable relationship, it is, in fact, under constant tension,” he said. “When the initial balance of power breaks down, each partner jockeys for more control and more power, creating instability in the relationship.”
Chung recently won the prestigious “Barry M. Richman Best Dissertation Award” in the field of international business and management for his dissertation. He received the award at the 2007 Academy of Management meetings, held in Philadelphia, Pennsylvania, from August 3-8, 2007. The judges evaluated 38 dissertations, from which they selected four finalists, prior to naming Chung the winner.