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IJRDM
35,10 Problems encountered within
international retail joint ventures:
UK retailer case study evidence
758
Martin Owens
School of Management, University of Bradford, Bradford, UK, and
Received September 2006
Revised December 2006 Barry Quinn
Accepted January 2007
School of Business, Retail and Financial Services, University of Ulster,
Coleraine, Northern Ireland

Abstract
Purpose – The paper aims to investigate the problems encountered in retail international joint
ventures (IJVs). It synthesizes and applies transaction cost economics and strategic management
theories to help explain the dynamics within the international retail joint venture (IRJV) process.
Design/methodology/approach – Applies a multiple case study approach based on a sample of
UK-based retailers during the retail internationalisation process.
Findings – Highlights the key problem areas encountered by retailers involved in IJV activity.
Concludes that in contrast to production-driven joint venture activity, retailers appear to have a
shorter and intensive adjustment period to effectively co-ordinate operational activity and bridge the
corporate and behavioural differences between themselves and the partner.
Research limitations/implications – Focuses on a sample of UK retail companies only. Given the
intensive instantiation process, a predetermined approach may be more appropriate for retail firms to
avoid problematic outcomes in IJV management.
Practical implications – Retail companies may experience post formation risk in joint ventures,
arising from partner resource limitations. Differences in management capability between the partners
may lead to ineffective collaboration and poor operational performance.
Originality/value – Addresses a previously neglected area of research and provides insights into
the management of IRJV. Examines the relevance of key theoretical perspectives in relation to the
problems encountered in IRJV activity.
Keywords Joint ventures, Retailing, International business, Transaction costs, Strategic management
Paper type Case study

Introduction
Over the last four decades, patterns of retail trade in relation to international retail
markets have permitted inter-firm collaboration of various permutations to exist
(Hollander, 1970; Robinson et al., 1998). Indeed, numerous researchers have established
that retail firms operate within a complexity of linkages at both intra- and inter-firm
level (Wrigley, 2000a; Davies and Ferguson, 1995; Lindblom and Rimstedt, 2004).
International Journal of Retail & International retail firms across the globe have been, and are, engaged in a myriad of
Distribution Management bilateral and multilateral co-operative arrangements to facilitate retail
Vol. 35 No. 10, 2007
pp. 758-780 internationalisation (Sparks, 1995; Robinson et al., 1998).
q Emerald Group Publishing Limited
0959-0552
International retail joint ventures (IRJVs) have often been associated with various
DOI 10.1108/09590550710820667 benefits such as access to local knowledge (Robinson et al., 1998), reduction of risk
(Wrigley, 2000b), increased speed of market entry (Dawson, 1994) and greater ease Problems
of government approval (Wang, 2003). Despite these potential benefits, the encountered
inter-organisational context presents added problems for retailers in that not only
are retailers confronted with complexities of internationalisation but also they are within IRJVs
additionally subjected to the trans-boundary complexities of inter-organisational
management (Palmer and Owens, 2006).
There is a significant gap in knowledge on the management and operationalisation 759
of joint ventures. While there is a developed literature base on joint ventures, this has
focused largely on the activities of manufacturing companies. Valuable insights into
IRJV activity have been provided by various authors (Robinson et al., 1998; Wong,
1998) however studies have yet to examine this particular entry mode in any depth
(Palmer, 2006). Recently, Palmer and Owens (2006, p. 169) outlined a research agenda
for future joint venture research within the context of retail internationalisation.
Focusing on the management aspects of joint ventures, they posed the question: “what
happens after relationships have been formed?”. Palmer’s (2006) recent study has
sought to address this question, through an examination of the lessons to be learned
from the international joint ventures (IJV) process. Palmer’s (2006) work identified
various “difficulties” arising during the implementation of the joint venture strategy
(e.g. a lack of complementarity), as experienced by retail multinationals, namely
Wal-Mart, Ahold and Tesco. These often led to failure and termination of the joint
venture agreement.
This paper will seek to contribute to existing knowledge on IRJVs by focusing in
depth on the problems that retailers experience when adopting the joint venture
operating strategy within the international marketplace. The paper will utilise
evidence from case studies to, firstly, identify the key problems encountered and,
secondly, to examine the nature of these problems. At the outset, it is important to be
clear that the focus of this paper will be on the problems encountered within IRJVs
rather than on the barriers that prevent joint venture formation. Furthermore, the
paper shall not seek to examine the termination or exit processes of IRJVs.
The paper is now organised as follows: first, the following sections will provide an
overview of some of the key themes from the retail internationalisation and joint
venture literatures. Pertinent theoretical perspectives developed from previous
joint venture research studies will then be discussed. The key tenets of the transaction
costs and strategic management theories are well documented in relation to entry
mode choice, however this paper will examine their applicability to the study of the
operationalisation and management of IRJVs. Following this, the case study
methodology employed in the present study will be discussed. The paper will then
present the main findings from the case studies. Finally, the conclusions, limitations
and managerial implications are presented.

Retail internationalisation
Reflecting the increasing incidence and importance of internationalisation for retail
firms, research on retail internationalisation has increased significantly over the last
decade (Rugman and Girod, 2003; Coe, 2004). Key themes in research have included the
motives for internationalisation (Williams, 1992; Alexander, 1995); the geographical
spread of expansion (Treadgold and Davies, 1988); international retail decision-making
processes and performance (Clarke and Rimmer, 1997; Evans et al., 2000); and retail
IJRDM entry strategy and entry modes (Doherty, 1999; Quinn and Doherty, 2000; Gielens and
35,10 Dekimpe, 2001; Picot-Coupey, 2006). More recently, several authors have focused on
divestment and corporate restructuring issues within the context of retailer
internationalisation (Palmer, 2004; Alexander et al., 2005).
Although offering significant value-creating potential, IRJVs often end in failure
(Burt et al., 2003). Indeed, several studies examining internationalisation in general, or
760 specific aspects of the process, have identified several factors contributing to their
dissatisfaction. These include: disagreement over strategy; management conflict over
control; resource constraints; inability to adapt to local market conditions and
under-performance (Hollander, 1970; Larke, 2003; Bianchi and Arnold, 2004; Burt et al.,
2005; Palmer, 2006). Although the complexity and difficulty of managing and operating
retail joint ventures has been recognised within the retail internationalisation literature,
little attempt has been made to examine any aspect of retail joint venture operational
activity through either static or dynamic analysis (Burt et al., 2003). Recognising that
IRJVs are undoubtedly challenging, this paper aims to explore the complexity of IRJV
operations through a more in-depth examination of the problems and difficulties
international retailers experience throughout IRJV management operations.

International joint venture research

The literature on IJVs has consistently grown over the last few decades (Reus and
Ritchie, 2004). The vast majority of attention has been given to motives and the
contextual conditions predisposing their formation (Kogut, 1988; Glaister and Buckley,
1996; Glaister, 2004); partner identification and selection (Geringer, 1991; Nielsen,
2003); governance and performance (Choi and Beamish, 2004); knowledge acquisition
(Lyles and Salk, 1996; Inkpen, 2000) and instability and restructuring (Hennart et al.,
1998; Gill and Butler, 2003). However, in recent times, research has considered the
management challenges and dynamics of IJVs (Buchel, 2000). Previous research has
shown that management of IJVs is extremely difficult, resulting in high levels of
instability (Demirbag and Mirza, 2000; Nakamura, 2005). Indeed, although there is a
plethora of studies that attempt to explain the determinants of IJV success and failure
(Demirbag and Mirza, 2000; Kale et al., 2001; Mohr and Puck, 2005), little research
exists on IJV management issues in the service sector (Chadee, 2002).

Theoretical perspectives
Studies on IJV behaviour can be categorised by a number of theoretical perspectives
that include, albeit not exclusively: transaction cost theory; resource dependency
theory; organisational learning; strategic management theory and game theory. Each
of these perspectives offers possible explanations for IJV management. Although the
IJV literature has been criticised for theoretical pluralism (Parkhe, 1993a, b; Robson
et al., 2002), the majority of studies may be linked to the transaction cost economic and
organisational learning perspectives. However, the transaction cost economics (TCE)
perspective holds little regard for the argument that IJVs are intrinsically strategic and
involve many different parental motives. International retailers who engage in IJVs
have at their nucleus the core issues of inter-partner relatedness, interdependence and
vulnerability. Therefore, the quality of interaction between retailers and partners
and the overall interactive environment within the IJV is likely to be influenced by
not only economic considerations but also by strategic and organisational issues.
Hence, in answering the recent call by Reus and Ritchie (2004) for consideration of other Problems
theories in IJV research, this study aims to combine insights from the rich explanations encountered
of the TCE perspective with the strategic management theoretical perspective to
examine IRJV management problems. Thus, such combinations of theories, it may be within IRJVs
argued, should provide a balanced view of the research question.

Transaction cost economics 761

IJVs entail problems of co-ordination and mutual dependence (Nooteboom, 1999).
These have been largely the focus of TCE. Doherty (1999) deployed internalisation/
transaction costs perspectives to illustrate how protecting strong intangible asset
bases of international retailers against potential acts of moral hazard and opportunism
constituted a key determinant in retail entry mode choice. Retailers that employ joint
ventures are always likely to be susceptible to some degree of partner opportunism
irrespective of the level of completeness in the contract (Luo, 2004). Thus, in addition to
the appropriation of knowledge, episodes of opportunistic behaviour can involve
harbouring hidden agendas, withholding or distorting information, shirking or failing
to fulfil promises or obligations and irregular accounting procedures (Parkhe, 1993a).
Exactly what influences joint venture partners to violate agreements this way has
commanded less attention. However, conflict over strategy is recognised as prompting
parents to behave opportunistically. Indeed, partners may behave opportunistically to
subvert the venture’s goals, if necessary, to achieve their own goals (Das, 2006).
Additionally, Johnson et al. (1996) explored how cultural backgrounds influence
management’s propensity to act opportunistically.
Opportunistic behaviour is largely considered detrimental to joint venture
performance (Parkhe, 1993a, b). Therefore, TCE theory suggests that firms perceiving
greater potential for opportunism are likely to incur more transactions in governance
and management (Williamson, 1985). Moreover, failure to move beyond short-term
optimisation of self-interest behaviour can impede co-operative effort essential for
alliance success (Das, 2006, p. 747). Nevertheless, as international retailers face a
multitude of unanticipated and unpredictable contingencies in internationalisation,
along with the need to preserve flexibility in retail operations, total mitigation against
partner opportunism is highly unlikely. It cannot be assumed, however, that partners
will always behave opportunistically. Thus, this perspective neglects the softer aspects
of IJV partnerships, largely ignoring the relational dynamic of IJV management
(Nooteboom, 1999).

Strategic management theory

While TCE emphasises partner opportunism in contributing towards co-operative
failure and hence management problems, strategic management theory draws
attention to the need to achieve “inter-partner fit” between joint venture partners. This
then allows integration between both partner’s cultures and systems (Faulkner and de
Rond, 2000). Harrigan (1988a, b) argues that a range of problems in joint venture
management result from the absence of inter-partner “strategic symmetry”. That is,
asymmetry in strategic missions, resource/managerial capabilities and bargaining
power stimulate inter-partner conflict. Adopting variables of inter-partner relatedness,
parent-venture relatedness, size, nationality and joint venture experience, she
reported significant relationships between strategic symmetry and performance.
IJRDM However, Hill and Hellriegel’s (1994) study discovered that dissimilarities in partner
35,10 resources did not exert a negative effect on venture performance. More recently,
Yan and Lou’s (2001) empirical study found that inter-partner fit consists of four
fundamental dimensions:
(1) compatibility of strategic objectives;
(2) complementarities and joint management of critical resources;
762
(3) consensus on the venture’s operating culture and strategy; and
(4) consistency between the partners’ perceptions of inter-partner relative
bargaining power and control.

Therefore, the issue of fit in IJVs is not necessarily driven by specific symmetries
among partners, rather sometimes the existence of complementary capabilities and
systems between partners. Nevertheless, inter-partner fit in IJVs is commonly
determined by common factors such as shared strategic intent and vision, mutual
dependency and common internal operating philosophies (Douma et al., 2000).
Moreover, these researchers believe that managing the dynamics of inter-partner fit
determines success or failure in alliance activity.
Having discussed the theoretical framework for this study, the paper will now move
on to examine the operationalisation and management of IRJVs in practice. The case
study methodology employed in the present study will firstly be discussed, followed
then by the main findings from the study. The case methodology was employed in this
study in order to provide insights into the management process of IRJVs by focusing in
particular on the problems that retailers experience when adopting the joint venture
operating strategy within the international marketplace.

Methodology
This empirical study applied the multiple case study method, which is usually used to
study complex phenomena in a real life context (Yin, 1994). The case study method
is useful because it allows an investigation to retain the holistic and meaningful
characteristics of real life events (Yin, 1994), such as the processes of IJV management
and development. The main form of data collection in this study was through
semi-structured interviews with senior retail management, directly involved in the
establishment and operation of the IJV. To corroborate the data and develop
convergent lines of inquiry (Yin, 1994), the interview data were supplemented
with multiple sources of evidence, including corporate documentation and archival
press material.

Case selection
Purposeful sampling was used to assist the selection of the cases underpinned by the
selection of “information rich cases” worthy of in-depth study (Patton, 1990). Criterion
sampling was also used to select information rich cases. The key criterion was that the
retailer must have formed an equity IJV in internationalisation. A joint venture is
considered international when it is formed by parent partners originating from
different countries or when a joint venture has significant levels of operations in
more than one country (Geringer and Herbet, 1989). The retailers studied were drawn
from a population of retail companies in the UK operating in international markets.
The key source in identifying UK International retail activity in retailing was the UK Problems
Cross Border Activities report (Corporate Intelligence Group, 1996) and the Retail encountered
Intelligence (2001) report. As there are no publicly available databases of JV or IJV
activity in retailing, the traditional source of IJV data from press announcements was within IRJVs
utilised. A total of 20 companies were contacted to participate in this study. Of these,
seven companies agreed to participate. A confidentiality agreement was signed with
the companies before the interviewing, which eased the interviewees’ concerns over 763
disclosure. For these reasons of confidentiality none of the participating companies will
be identified by name during the course of the paper. Table I provides further details of
the companies participating in this study.

Data collection and analysis

During the period of May 2003-June 2004, 40 interviews with directors and managers
(Table II) were undertaken across seven companies involved in the establishment and
implementation of the IJV. The interviews averaged the duration of around one hour
and ten minutes. All the informants were comfortable with being taped and interviews
were transcribed within five days of each visit. A detailed case protocol as suggested
by Yin (1994) was developed. Parkhe (1993b, p. 234) states “IJV research is a ‘messy
field’ in which factors may impact upon one another in a complex manner”. While a set
of questions were used to serve as a guide for the interviews, the interviews themselves
were not driven by any a priori conceptualisations or theoretical underpinnings.
Rather, the interviews were wide-ranging and allowed the retail executives substantial
freedom to express their views and opinions on the joint venture activity and the
problems encountered. Each case was studied thoroughly in the spirit of a series of
individual experiments (Yin, 1994). Cross case analysis was conducted by displaying
cases with the aim of identifying common explanations and patterns of the studied
cases, with similarities and differences noted.
The following section of the paper will utilise evidence from case studies to, firstly,
identify the key problems encountered and, secondly, to examine the nature of these
problems. The main themes arising from the interviews will now be discussed.

Findings
The empirical analysis identified several major problem areas encountered in the
management of IRJVs. These include: poor performance; disagreement over strategy;
disagreement over the operating process; poor senior management relationships;
partner and/or company resource weakness; partner inefficiency. Table III summarises
the problems, and their underlying causes, by case company.

Poor performance
From Cases 1, 2, 4, 5 and 6 it could be observed that poor performance in joint venture
development occurred due to the occurrence of environmental shocks. Cases 3 and 7
evaded this kind of disruption to joint venture operations. Both Cases 1 and 2, in their
Turkish joint ventures, experienced the effects of devaluation of the Turkish Lira, as
illustrated by the following quote relating to Case 1:
The major devaluation of the lira didn’t help things and so the business was not performing to
its business plan and it got to the stage that more money needed to be put into the business and
at this point we kind of thought do we really want to put more money in? (Director/Case 1).
 764
35,10

Table I.
IJRDM

companies
Overview of case
Ownership Date
Case Sector Market (s) Nationality of partner Partner type (at formation) established

1 Clothing Turkey Turkish Retailer (nc) 25:75 1999

2 Home improvement Taiwan Taiwanese Exporter/importer 50:50 1995
Turkey Turkish Retailer (nc) 50:50 1999
3 Mixed retail Europe British 50:50
Italy Italian Retailer (nc)
4 Home furniture Guyana/Trinidad Caribbean Retailer 50:50 1993
Indonesia Indonesian Retailer 50:50 1994
Madagascar and South Africa South African Retailer 33.3:66.3 1999
5 Home furniture Taiwan Taiwanese Retailer 50:50 2000
6 Food South Korea Korean Retailer (nc) 51:49 1999
Diversified manufacturing
Malaysia Malaysian and service company 70:30 2001
7 Music Japan Japanese Retailer 50:50 1991
Note: NC: Non-core retailer
Economic instability was a significant burden for Cases 1 and 2 as the environmental Problems
bolt appeared shortly after market entry, affecting retail sales, dramatically placing encountered
investment plans on hold, and dissipating joint venture momentum. With Case 2, these
economic conditions, along with poor choice of the first store’s location and within IRJVs
management difficulties, resulted in poor retail sales in the first “new store” and the
existing four stores. More significantly, there emerged inter-partner disagreement over
future expansion and partner inefficiency in upstream contributions. In the latter, the 765
partner deliberately shirked on its responsibility in finding sites for further expansion,
whilst aggressively directing this activity to other business units in its portfolio.
The company believed this behaviour was reflective of the partner beginning to assign
less importance to the venture. Nevertheless, the presence of strong social bonds
between partners and the perception of significant market opportunity provided robust
co-operation within the joint venture. Also dramatically, Case 4’s joint venture with its
finance partner in Indonesia experienced significant difficulties arising from political
and economic instability. As opposed to the economic shocks experienced by Case 5,
Cases 1, 2 and 6 encountered a regulatory shock. Case 6’s latitude for development in
Malaysia was severely curtailed by the Malaysian Government’s decision to
temporarily freeze new applications for foreign retail chain stores; thereby halting the
company’s expansion programme of 15/16 stores by 2008. This imposed substantial
restrictions on expansion with evidence to suggest that this was the stimuli for
inter-partner tension within the inter-partner relationship:
The partner did try and influence things there but because the government still blocked
hypermarket development it just didn’t make any difference. But we did have a number of
stores. But I do know in Malaysia there is a degree of tension with the partner, the business is
progressing slowly, there is a lot of capital needed and Malaysian legislation is difficult and
does not make it easy for foreign companies to take significant majority shareholding in retail
enterprises and there is a lot of tension between Case 6 and the partner and I don’t think that
one is working as well as the others (Director/Case 6).

Disagreement over strategy

Cases 2, 3 and 7 cited a lack of convergence over strategy. This problem was absent in
Cases 1, 4, 5 and 6. With Cases 2 and 3, disagreement over strategy emerged
post-formation while with Case 7 the divergence remained between the partners since
formation. The disagreement for Cases 2 and 3 pertained to rate of expansion, while for
Case 7 it pertained to how the venture would expand. For Case 2, inter-partner
disagreement over strategy was stimulated by market economic volatility, shortly after
signing the agreement. The partner, a diversified conglomerate in Turkey with

Case Date of interviews Personnel involved Location of interviews

1 August 2004 Directors UK Head Office

2 May and November 2003 Directors and senior managers UK Head Office
3 August 2004 Directors UK Head Office
4 August 2003 Directors UK Head Office
5 May and July 2003 Directors and senior managers UK Head Office
6 August 2004 Directors UK Head Office Table II.
7 August 2003 May 2004 Directors and senior managers UK Head Office Details of data collection
 766
35,10
IJRDM

Table III.

their causes
ventures: problems and
International retail joint
Problems Broad causes Specific causes Cases

Poor performance Environmental shocks Regulatory change restricting store expansion, 1, 2, 4, 5 and 6
leading to reduced sales and causing relationship
tension at senior level
Economic volatility causing poor store
performance
Disagreement over strategy Environmental shocks Inter-partner conflict over future expansion 2, 3 and 7
Incompatible motives Retailer large store strategy versus partner small
store/in-store strategy
Emerging divergence in strategic Retailer aggressive expansion versus partner
orientation cautious expansion
Disagreement over operating process Cultural differences National differences in sales/consumption 2, 4, 5 and 6
process leading to contrasting inter-partner
interpretations over marketing approach
Contrasting business philosophies Partner preference for operational funding
through cash-flow as opposed to retailer
preference for funding through retail profit
Lack of planning Failure to contract operating methods leading to
disagreement
Poor senior management relationships Competition for control Inter-partner conflict arising from the need to 1, 2 and 3
control joint venture strategy
Immediate implementation Intensive instantiation of the initial
retailer/partner relationship stage
Partner and/or company resource Planning Failure to provide adequate partner training 2, 3, 5 and 7
weakness
Cultural differences Asymmetrical levels of management capability
between partners
Partner inefficiency Lack of commitment Partner shirking on critical functional areas of 1, 2, 3
responsibility.
considerable interests in banking, experienced increased risk exposure from devaluation Problems
of the Turkish Lira. Thus, while the partner preferred to constrain expansion on encountered
non-core business areas such as its retail joint venture and concentrate the IRJV’s
activity within the existing four stores, Case 2 was keen to proceed with the business within IRJVs
plan of store network expansion. Case 3’s joint venture was moderately constrained by
the emergence of a divergence in strategy generating tensions at board level with the
partner perceiving higher risk to the venture, as expansion progressed. Divergence in 767
strategy also emerged in the case of Case 7’s US joint venture with the partner
aggressively expanding its own music stores; converting all the stores from the
acquisitions of several music chain stores to its own facia. That is, partner building
competitive capability created some tension, particularly over location decisions. Case 7
in Japan experienced the partner preferring to pursue small format stores either on their
own or within their own department store portfolio, as opposed to the preferred Case 7
strategy of large satellite stores. An explanation for this disagreement stems from the
mismatch in the strategic intents at the outset between both parties, as illustrated by the
following quote:
Japan’s retail landscape is different from ours. Specifically, department stores occupy a much
more important place in the general retailing sector. Here, there are only a couple of successful
department stores, most of them did well to survive and a lot didn’t survive and there is a
perception that they are yesterday’s format. In the case of Japan, they are very much in the
forefront and they are typically very large spaces and the best pitches, some of them they
sublet to other retailers and you will find a lot of concessions operating in those buildings and
the partner was one of the successful retailers in Japan and they saw the appeal of the brand
like Case 7. I think the primary motivation in entering into a joint venture was to get that sexy
brand into their shops. Case 7 on the other hand always wanted to open the large satellite
stores and that was always a thorn in the relationship (EX CEO/Case 7).
Moreover, as illustrated above, an additional cause for the divergence in strategy arises
from corporate culture differences. The company found the partner’s corporate culture
risk-averse, conservative and pedestrian.

Disagreement over the operating process

Cases 2, 4, 5 and 6 recognised that a key problem in joint venture operations involved
disagreement with the partner over aspects of the transferred operating process. This
problem for these companies is closely related to cultural differences negatively
impacting inter-partner interaction at operations. Case 5’s major problem in the
Taiwan joint venture was disagreement with the partner over aspects of the operating
model. The retailer experienced a considerable culture disparity in the buying
processes of the UK and Taiwanese consumer in this sector. Owing to a language
barrier, management were dependent on the partner to communicate to sales staff the
need for change from the old way and to adopt Case 5’s operating process. However,
this knowledge diffusion was impeded by the partner’s lack of complete acceptance of
the operating model. Furthermore, Chinese mentality encouraged submissive and
passive behaviour towards venture management that resulted in elementary mistakes
being made unnoticed. Thus, there has been some tension and annoyance resulting
from perceived discrepancies and incompatible wishes from both partners on
proposition delivery. Indeed, this cognitive conflict has impeded operational
effectiveness.
IJRDM Case 4’s joint venture with its partner in Indonesia language was a major
35,10 obstruction to joint venture operations, constituting an impediment in communication
between the company and the Indonesian management and staff. This cultural issue
contributed to the difficulty of the partner accepting the operating model. Case 6’s joint
venture in South Korea faced operating difficulties arising from low staff morale.
Following formation, the morale of the employees was quite low due to the immediate
768 transition in ownership and management causing language barriers and other
communication difficulties. Although Case 6 took over partner employees and
continued to hire locally, including workers and managers, there was no concerted
strategy to assist integration. Hence, local employees perceived the new management
process of the venture to be too rational and lacking humanity. Underlying this
problem was a lack of planning towards integration and adaptation that could manage
cultural disparity and hence, the inter-partner fit between partners.
Unlike Cases 5, 6 and 4, Case 2’s operating model problem in Turkey revolved
around a specific aspect of the operating model; that is, funding. Case 2 and its joint
venture partner held fundamentally differing corporate philosophies on how the
business should be funded. The Turkish partner’s corporate philosophy of retailing
asserted that the business be funded by cash-flow, not by retail profit. Details of
funding lacked clarity in the contract, compounding the disagreement:
The main reason why this joint venture has been difficult is that because the partners can’t
agree on funding. Thus, in the Turkish model, if the two shareholders can agree then it will be
fine. The issue was that the partner prefers finance, Case 2 prefers equity. Until you can reach
agreement on the financing of the business, it will be very difficult to move anywhere. So for
two years during the crisis they have stood still, we haven’t opened stores (Director/Case 2).
Case 2’s management recognised two reasons for this incompleteness in the contract:
First, they argued that the company was still learning the nuances of
internationalisation, and secondly, the tide of goodwill was so strong that funding
details failed to be fully contracted.

Poor senior management relationships

Cases 1, 2 and 3 reported the poor inter-partner senior management relationships as a
problematic issue within joint venture management. Cases 4, 5, 6 and 7 experienced
relatively stable and cordial individual inter-partner management relationships. Case 2,
in Taiwan, and Case 3 encountered cross-partner management tensions in the early
period. In Case 3 there emerged tensions between middle-management in the
early period of the joint venture. In other words, intensive instantiation of the joint
venture process detracted from management’s ability to harmoniously integrate beliefs
and values, establish clear modes of communication and reporting procedures, and
adjust decision-making styles:
In fact during the early days of the joint venture, some of the individuals in the partnership
just didn’t get on and it was agreed before my time actually that some senior people in some
senior positions from the partner would stop working because they were not just working
well so it took a while to gel and there is a bit of nervousness in the beginning but once the
first scheme was up and running and became profitable, everybody started to relax, so once
people saw that things could work, they started to relax. What you have got to remember is
that we work very fast, we are very entrepreneurial and thus we were keen to get on with the
developments and maybe in hindsight those involved from both sides didn’t get a chance to
 really to bed down but at the same time we still got things moving and it was through Problems
that exchange of information and working together that we could get things done
(Director/Case 3). encountered
These initial individual management tensions were partly indicative of the corporate
within IRJVs
culture differences in addition to, uncertainty surrounding the performance viability of the
developments. However, with Case 1 individual inter-partner relationships deteriorated
preceding the partner’s failure to comply with nominal debt provision and company 769
perceptions of under-support and commitments. This partner self-interest and
opportunistic behaviour exacerbated tensions that emerged post the economic shock.
With Case 2 in Taiwan, management found difficulty in reconciling the partner’s desire to
engage day-to-day operations. Unlike Cases 1 and 3, despite the upward trajectory in store
performance, joint decision-making and the inter-partner relationship was problematic.
Indeed, management admitted to “open warfare” culminating in the partner taking away
Case 2 staff work permits as punitive action in response to certain expatriates ignoring
communication channels. Thus, while personality issues were important in this case, the
underlying root of the problem pertained to competition over control:
We had a lack of understanding and communication with the Chairman of the partner as to
his need for involvement in the business, that is, we were ignoring him. So it did have a
particularly bad period which was personality driven. So when you got a 50:50, where you
have a corporate entity, like Case 2, although the partner is a publicly quoted company, it is
basically run in the family way. So husband and wife run it, they see it as their business, put it
to market and they are still the major shareholders. So you have corporate meets family in a
different country and it is very much personality driven. Some of the personalities in the early
days of running the business were not the right personalities from our side. We didn’t look at
personality, attitude and the good facility to work in an Asian context that we have today. So
most of my time I spent managing the relationship with the Chairman of the partner, not
managing the business (Director/Case 2).

Partner and/or company resource weakness

Four cases, Case 2/Turkey, Case 3/Italy, Cases 5 and 7, reported some dimension of
either company or partner resource weakness as a problematic factor. Within Case 3
the resource weakness emerged from the partner’s lack of adequate resources; as
opposed to the Cases 2 and 7 where the resource problem was derived from the
company itself. Within Case 5, resource weakness stemmed from both the company
and the partner. Cases 1, 4 and 6 reported no resource weakness in their joint ventures.
Case 3, in its Italian joint venture, reported a weakness in the partner’s development
skills. Case 5 reported that operational efficiency was impeded by Taiwanese partner
resource deficiency that related both to the partner and to the company. In particular,
management believed that the partner lacked strong market orientation, directly
contrasting with Case 5’s strong marketing orientation cultivated in a competitive UK
marketplace. This problem is again closely related to culture differences; decision
making in Chinese commercial activity is not strictly based on performance-based
values and systems as found in Western management:
The joint venture partner is particularly bad at P & L management, because their own
business has not really focused on it. There is no such thing as the manager getting an
incentive for profit. So I’ll give you an example, their beef noodles chain is open for 10 years
and it hasn’t made any money. To them that seems perfectly normal. Cash flow, cost control
IJRDM and P &L management has been a huge learning curve for these guys. I think in the initial
stages when we were setting up the business up or even prior to setting it up when this
35,10 particular partner came to the UK, they only came to the UK for a week. To try and get a
grasp of Case 5 in five days coming from Taiwan to the UK is impossible. It takes you to two
days to try and get over the jet lag. Maybe I would have more people in hindsight working in
the UK for longer period (Director/Case 5).

770 Additionally, management believed the experience levels of the company’s expatriates
was not sufficient. This is similar to Case 2 who asserted that unsuitable expatriates
contributed to initial management difficulties. Moreover, it appears that Case 5 did not
envisage the magnitude of, nor plan for, the difficulties and challenges of educating the
partner in its mode of operandi in a considerably different cultural and institutional
environment. Furthermore, management believed that UK training capacity needed to
be enhanced and adapted first before adequate training could be transferred to foreign
subsidiaries. Similar to Cases 5 and 7, this problem can be traced in Case 2 and its
Turkish operations. In terms of this joint venture, Case 2 experienced a “lack of fit”
between the management capability implanted and the retail proposition of the joint
venture which was a partner retail proposition. The following quote by a director of the
company captures this issue:
The guy who was running it was not the right person for a small home improvement
business. He was used to Big Box in the UK. So essentially we cleared a whole
management structure in the venture and brought in people who were longer term in the
project but essentially we took out some people. But sometimes the organisation DNA needs
splicing but we took out all the general management (Director/Case 2).
Therefore, in contrast to Case 5, the company failed to fully appreciate their “acquired
proposition”. In contrast to Case 2, Case 7 reported that due to asymmetrical resource
positions they lacked influence in the Japanese venture. Despite joint decision making,
the partner’s control would increase over the years through a greater proportion of
the partner’s people and more importantly the control of critical resources. Hence, the
partner gained greater bargaining power because the resources it contributed were
costly (debt capital and human resources) and were critical to joint venture success.

Partner inefficiency
Cases 1, 2, 3 and 4 experienced levels of partner inefficiency. Cases 3, 5 and 6 observed
no signs of partner inefficiency. Case 2 noticed partner inefficiency in the search of
property and sites in both the Turkish and Taiwanese joint ventures. With Case 2,
and Taiwan, ambiguity caused by lack of planning, co-ordination over roles and
responsibilities and uncertainty over performance in the early days generated
perceptions of partner inefficiency. Cases 1 and 4 emphasised specific areas of partner
incompetence while Case 3 reported partner inefficiency generally in terms of overall
task completion and development speed. The Italian partner’s slow attitude towards
development was explained by a cultural propensity towards non-aggressive
development. In the Indonesian joint venture, Case 4 reported partner inefficiency in
terms of legalising the operations of stores at market entry. As with Case 1,
management contend this was closely related to a lack of commitment to the venture.
Case 1 found shifting stock through customs difficult due to legal barriers to which
they relied on their partner for assistance and knowledge. However, the company
believed the partner shirked on this responsibility. The company believed that
underlying this partner shirking behaviour was a lack of commitment to the venture Problems
and asymmetry in terms of sector expertise: encountered
We had a major learning curve of going into Turkey in terms of exporting goods. There is within IRJVs
incredibly strict customs requirements which meant that we were forever getting stock held
in customs and so between the very sort of initial start of getting stock stuck in customs
because no one knew what the rules were 100%. Even our Turkish experts (Director/Case 1).
771
Discussion
The findings have shown that in the pursuit of viable retail joint venture operations,
international retailers experience many managerial and operating problems. IRJV
management problems are largely explained by the immediate implementation of the
IRJV process, strategic asymmetry, national and corporate culture divergence, and
environmental turbulence in the foreign retail market. Each of these factors will now be
discussed in more detail.
During the early period of the partnership, and in an effort to achieve operational status
of the first stores, levels of interactions and communication between retailers and partners
are highly intensive. These time pressures offer retailers limited time and recourse to
effectively clarify roles and responsibilities, to establish modes and patterns of partner
interaction and to explore how their management assumptions diverge from the partner.
Moreover, within this immediate implementation process, the retailer’s effort to develop
the inter-partner relationship and transfer the retail proposition is challenged further by
the partner’s lack of knowledge and understanding of the retail operating model. Retailers
in this study who partnered with non-retailers or non-sector retailers, either out of
necessity or preference, found themselves experiencing a lack of common understanding
with the partner. Thus, in some instances, procedural and cognitive conflict quickly
emerged over specific aspects of the retail proposition. Therefore, despite under-developed
relationships, retailers are immediately engaged in an intensive market and partner
learning environment, whilst simultaneously co-ordinating IRJV operational activity and
refining the retail proposition to suit local conditions.
The evidence points out that relational difficulties in shared management control
structures are often situated at a retail operational decision-making level where retail
managers and expatriates have been used to taking decisions with control as opposed
to day-to-day engagement with the partner. Expatriate management in IRJVs attempt
to mould the operational characteristics of the joint venture by enacting management
practices commonly used in the non-joint venture domestic retail environment. In fact,
failing to fully engage the partner in operational decision making leads to conflict,
slows down operations and curtails the flow of partner resources towards retail
operational activity. Therefore, expatriate management may be partly responsible
and/or compound the incompatibles with partners in terms of structure, culture and
planning. Indeed, in contrast to Gamble (2003), this study shows that cultural
insensitivity by retail expatriate management can severely jeopardise the integration
process with partners to the point where adaptation is necessitated through
management restructuring. This suggests that the issue of human agency in IRJVs
must be fully considered within the context of the IRJV’s governance structure.
Supporting Palmer (2006), the case evidence identified how asymmetry over
strategy can present problems in IRJVs. In extending this work, the findings revealed
IJRDM that strategic asymmetry can be determined ex ante by incompatible joint venture
35,10 motives or ex post by changing dynamics of the partner. Ex ante, the existence of
motive heterogeneity between retailer and partner during joint venture design can
often be the stimuli for an immediate lack of congruency between retailer and partner
over strategic objectives, and hence IRJV management team conflict. However, despite
motives diverging from one another, they may still be complementary, and hence
772 conducive to the strategic plan of the joint venture. Indeed, this allows both
management teams to progress retail operations within a common strategic framework
of understanding and direction. Nevertheless, while joint venture motives can either
converge or diverge, the diverging motives constitute a destabilising condition. Ex post,
strategic asymmetry can emerge during the development of the venture as corporate
intentions of either partner change. Therefore, the “fit” that has been established since
partner selection will be challenged by strategic and organisational changes within
either partner. This strategic asymmetry in IRJVs may relate to the form, location and
rate of expansion. From these findings, empirical work positioned with strategic
management theory appears highly relevant in explaining IRJV management problems
(Harrigan, 1988a).
The case evidence reveals the influence of cultural issues on IRJV management
problems. National cultural diversity within the sales and consumption process can
create misunderstandings and hence conflict within inter-partner multi-national team
situations. Indeed, this diversity can produce difficulty in knowledge exchange,
coordination and decision making when transferring the retail proposition. In addition
to national cultural diversity, contrasting corporate cultures between retailer and
partner often lies behind inter-partner conflict. These differences in corporate
assumptions and values can lead to differing inter-partner opinions over specific
components of the operating model and/or cause diverging perceptions over business
performance. Moreover, within shared decision-making structures, close contact and
co-ordination can compound these management sensitivities to operational differences.
Although Shackleton (1996, 1998) demonstrated how corporate culture influences
strategic decision making within retail diversification, this study offers initial insights
into how corporate culture can shape the level of autonomy managers can exercise with
respect to strategic planning and operating practices in an IRJV context.
The findings further indicate that IRJVs encounter environmental shocks leading to
periods of instability. This study has found that economic turbulence can invite
dysfunctional partner behaviour, notably partner shirking behaviour. This was
considered detrimental to joint venture progression especially in the early period of the
venture where international retailers placed a high premium on local partner
capabilities. Moreover, an acute sense of this self-interest behaviour is exacerbated
when retailers observe partner capabilities being channelled to other partner business
units outside of the joint venture. In this, joint venture partners by default signal a
negative change in their commitment to the IRJV and compromise the spirit of the
partnership.
This study found that environmental shocks impact IRJVs in several fundamental
ways. Firstly, the venture’s business plan can be postponed. Secondly, the continuous
flow of partner resources from the parent to the venture subsystems (property and
human resources) is curtailed due to partner shirking behaviour. Thirdly, management
enter into time-consuming, and sometimes confrontational, dialogue to debate future
expansion and restore partner contribution inertia within these sub-systems. Problems
Nevertheless, strong social bonds, the presence of significant market opportunity encountered
and other positive partner contributions help moderate perceived dissatisfaction from
partner shirking behaviour. Doherty (1999) discusses opportunistic concerns as an within IRJVs
antecedent in retail entry mode choice. The present study extends this work by
providing some initial insights into how partner opportunism actually occurs within
IRJVs. Indeed, although partner opportunism is problematic to co-operative behaviour 773
in IRJVs, the impact of violating an agreement appears to be determined by the
socio-economic context of the IRJV. Moreover, this preliminary evidence suggests that
partner opportunistic and self-interest behaviour in IRJVs are more related to the actual
access to partner embedded resources and capabilities, than the risk of retail know-how
appropriation.
From these findings, concepts of TCE appear relevant to the examination of IJV
management problems in retailing. The study primarily contributes to knowledge by
providing insights into the circumstances surrounding the occurrence of partner
opportunism. That is, the findings have established a relationship between partner
opportunistic action and asymmetry in strategic importance between partners. In IRJVs
involving diversified conglomerates as partners, asymmetrical levels of interdependence
and commitment may evolve over time. Thus, partner opportunistic action can ensue
when macro turbulence shocks affect joint venture strategy and partners prioritise other
business units over the venture. Although partnering with non-sector companies or
non-retailers can be perceived by management as a way to ensure control and protect retail
advantages, it may also weaken levels of interdependency, detracting potential synergy
otherwise feasible between retailer and partner. Thus, retailer-partner interdependency
levels have a strong bearing on continuing resource flows towards IRJV operations and
hence subsequent management problems. However, tensions arising from resource
under-utilisation and asymmetrical interdependency levels do not always correlate to
complete dissatisfaction within inter-partner relations. The study supports the work of
many researchers who argue that TCE largely ignores the influence of trust and bonding
between partners in reducing the effects of opportunism (Nooteboom, 1999). However,
although opportunism was prevalent, the management problems identified in IRJVs
within the present study may be more closely aligned with the concepts positioned in
strategic management theory.
The study has identified that many management problems in IRJV operations are
derived from dissimilarities in resources, operating methods and strategy. Retailers
partnering with companies outside of their retail sector, particularly in emerging
markets, have discovered that operational problems arose due to asymmetry in retail
skill and knowledge sets between partners. Despite the obvious fit in many of these
joint ventures, where each party contributes distinctive resources, insufficient mutual
understanding of the operating model causes immediate problems, especially under
shared governance. This is in direct contrast to the findings of Hill and Hellriegel (1994)
that dissimilarities in partner resources do not exert a negative effect on venture
performance. Furthermore, extending the works of Harrigan (1988a) and Yan and Luo
(2001), the underlying problem may not be inter-partner fit per se, but rather the
inability or reluctance to effectively manage inter-partner fit. This raises two issues.
Firstly, in IRJVs where an asymmetrical retail skills and knowledge position exists,
manageability of the inter-partner fit can be impeded by a lack of planning, training,
IJRDM organisational commitment and financial resources. Secondly, retailers’ ability to
35,10 manage strategic conflicts can be inhibited by changing strategic priorities and loss of
control through shifts in bargaining power to the partner. This finding therefore lends
supports to Douma et al.’s (2000) conceptualisation which suggests that the capacity to
manage the dynamics of inter-partner fit is what remains critical to successful alliance
development.
774
Conclusions
The management context of IRJVs constitutes an important and neglected area of
research on retail internationalisation. In light of this research lacuna, Palmer and
Owens (2006, p. 169) posed the question “What happens after these relationships are
formed?”. In order to move some way towards answering this question and addressing
the gap in the literature, the current paper identified and discussed the problems retailers
experience when adopting the joint venture operating strategy within the international
marketplace. The findings from this study indicate that retail companies encounter a
range of problematic issues in the management of joint ventures with international
partners. The key problem areas related to strategic and operational issues,
management relationships, resource capabilities and partner inefficiency. There
would appear to be several explanatory factors underpinning problem areas, namely:
the immediate implementation of the IRJV process; strategic asymmetry; national and
corporate culture differences; and environmental turbulence. Environmental shocks,
while directly affecting operating performance, also served to highlight problems in the
joint venture relationship. Perhaps, not surprisingly, cultural differences (both at market
and corporate levels) had a major role to play in contributing to both operating conflict
and incompatible differences over strategic direction of the joint venture. Beyond this, a
pervading explanation for many of the management problems encountered in IRJVs
may be the lack of IRJV experience. Inexperienced joint venture retailers find that they
lack the internal capabilities to immediately address the unique demands that joint
ventures create, such as determining suitable structures of joint authority, instigating
procedures for conflict resolution, interacting with culturally diverse partners and
finding solutions for unanticipated environmental contingencies. This capability void
has largely prevented retailers from proactively considering how internal operating
practices could accommodate partner decision-making and inter-partner diversity.
Retail international theorists have observed that retail firms are different from
production-driven firms (Dawson, 1994; Wrigley et al., 2005). The current study has
empirically identified a notable difference between production driven and retailing
joint ventures. The study concludes that in contrast to production-driven joint venture
activity, retailers appear to have a shorter and intensive adjustment period to
effectively co-ordinate operational activity and bridge the corporate and behavioural
differences between themselves and the partner. Therefore, a key conclusion that can
be drawn from the study is that implementation of the IRJV process appears
immediately intensive.
The findings from this study provide some further insights into the relevance of the
transaction cost and strategic management theoretical perspectives within the context
of IRJVs. While it was not the intention of the authors to test theoretical propositions
from these varying perspectives during the research with the case companies,
nevertheless an analysis of the findings indicates that both perspectives have merit in
helping to explain the nature of problems in IRJVs. It is particularly noteworthy that Problems
the themes to emerge from this study would appear to be more closely aligned with encountered
strategic management thinking. Despite the fundamental differences between the TCE
and strategic management perspectives, this study has identified possible linkages within IRJVs
between these concepts.

Limitations and future research 775

This study has produced several relevant findings for the management of IRJVs.
However, the findings should be evaluated in the light of several limitations. Such
limitations indicate a number of additional opportunities for future research on the
post-formation phase of IRJVs. Firstly, the research reported here draws on a very
small sample. As such, any analytical generalisations drawn from a limited number
of case studies, no matter how carefully sampled and researched, clearly deserve
healthy caution. Following on from Hyder and Ghauri (2000), if similar types of studies
are carried out with other foreign retailers, and in other countries also, more interesting
issues may surface and new insights in IRJV problems may emerge. Secondly,
interviews in this study were only undertaken with the international retail partner (in
this instance, UK-based retail companies). It is important to note that there are
significant logistical and access issues relating to this subject area, in that the retailers
and their joint venture partners are naturally reluctant to engage in discussion on the
negative aspects of their operations. Considerable efforts were made to secure access to
retailers for the purposes of this research. However, future research could attempt
to undertake a small number of cases involving the retailer and joint venture partner,
thus exploring each party’s viewpoints on the problem areas.
Further, empirical research into the joint venture form of international retailing should
be welcomed. Future research could undertake further empirical investigation into the
problem areas encountered and the root causes of those problems, with particular
attention to triggering factors. As the current study relates to problems experienced at
post-formation only, future research may seek to examine the barriers that retailers
experience prior to forming the joint venture. Further, studies should consider the nature
and scope of the problems encountered at various stages of the joint venture life cycle, and
indeed may consider joint venture problems within the broader context of the retailer’s
international development and key threshold periods (Palmer, 2005). Specifically, in terms
of the termination of joint ventures, further studies could examine the underlying causes
and reasons for termination. It would be incorrect to assume that IRJV instability leads to
termination or failure in all cases; the termination of the joint venture may have been
planned by the partners. Moreover, it should not be assumed that longer lasting IRJVs
equate with success. The problem areas identified in this study should not be considered
proxies for IRJV instability, but rather as process-embedded factors that surface, at some
point, within the evolutionary trajectory of the IRJV. These problems cause various levels
of managerial concern that in turn may constitute precursors for IRJV instability or
stability. It is hoped that this paper will help to stimulate debate and further enquiry into
the IRJV instability/performance relationship.
The appropriate utilisation of existing theories and concepts from a wide range of
management, economics and internationalisation literatures should help develop
conceptualisations of the factors influencing the success and failure of retail joint
ventures. In recent years, understanding on various aspects of retail internationalisation
IJRDM has been developed through the integration of various literature bases such as
35,10 divestment (Alexander and Quinn, 2002), institutional theory (Bianchi and Arnold,
2004), organisational studies (Burt et al., 2003), organisational learning (Palmer and
Quinn, 2005a), and stakeholder theory (Palmer and Quinn, 2005b). By utilising the joint
venture and TCE and strategic management theoretical perspectives, this study has
responded to calls for greater utilisation of the wider management and
776 internationalisation literatures to help develop insights into retail internationalisation
processes and activity. Some of the issues identified within the present study, (i.e.
conflict, trust, commitment and communication) are common themes highlighted within
the channels management and relationship marketing literatures. Future research
should continue to examine the relevance of these and other literatures and theoretical
bases to the IRJV context.

Managerial implications
The findings presented here should be of interest to retail practitioners. Retailers
partnering with strong local companies, despite corporate perceptions of careful
partner selection/due diligence, may experience post formation risk from partner
resource limitations. Retailers with limited experience of operating in Asian markets
may take for granted the possession of Western management techniques in local
partners, and fail to appreciate the ramifications of ignoring cultural and capability
differences. Thus, differences in management capability may lead to ineffective
collaboration and poor operational performance. The tailoring of the retail proposition,
and hence development of the franchise with the consumer, may be impeded by
managerial time being directed towards internal conflict within the venture.

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About the authors

Martin Owens is a Lecturer in International Business at the University of Bradford, School of
Management, Bradford. Martin Owens is the corresponding author can be contacted at: m.d.
owens@bradford.ac.uk
Barry Quinn is a Senior Lecturer in International Retailing, and Head of School, at the
University of Ulster, School of Business, Retail and Financial Services, Coleraine, Northern
Ireland.

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