INTERNATIONAL EQUITY JOINT VENTURES

According to a well-known definition by Shenkar and Zeira an IJV is:

A separate legal organizational entity representing the partial holdings of two or more parent
firms, in which the headquarters of at least one is located outside the country of operation of the
joint venture. This entity is subject to the joint control of its parent firms, each of which is
economically and legally independent of the other.

Challenge in IJV includes the following factors:

1. HR must manage relations at the interfaces between IJV and the parent companies. The
different partners that make up the IJV may possibly follow different sets of rules and this can
lead to critical dualities within the HR function.

2. The HR department must develop appropriate HRM practices and strategies for the IJV entity
itself.

3. the HR has to recruit, develop, motivate and retain human resources at the IJV level.

According to a literature analysis by Schuler, the main reasons for engaging in an IJV are as
follows:

• To gain knowledge and to transfer that knowledge. l Host government insistence.

• Increased economies of scale.

• To gain local knowledge.

• To obtain vital raw materials.

•To spread the risks (i.e. share financial risks).

•To improve competitive advantage in the face of increasing global competition.

• To provide a cost effective and efficient response required by the globalization of market.

The IJV has an good opporunity to leaarn the othe company with 2 ways,

1. each company has the chance to ‘learn the other partner’s skills’. This can include gaining
know-how and process knowledge in specific functional areas such as R&D or acquiring local
knowledge about a spe- cific market or culture.

2. Second, companies acquire working experience in cooperating with other firms. Thus, the IJV
can be used as a medium for organizational learning processes as well.

IJV development stages and HRM implications

As all learning processes include communication processes and are carried out by people, the
manage- ment of the human resources at this point is critical. This encompasses all activities of
the HR function including recruitment, selection, training and development, performance
management and compensation. A strategic approach requires not only a strong compatibility of
the various HR activities and practices, but also with the IJV strategy. The HR manager may take
on many roles in order to meet the challenges of interaction between the parent company and IJV

1. In the partnership role, HR managers should take the needs of all stakeholders into account
and demonstrate a thorough understanding of the business and the market.

2. As a change facilitator and strategy implementer, HR managers should be able to

conceptualize and implement new strategies involving trust-based communication and
cooperation with relevant partners. This also requires the creation of a stable learning
environment.

3. As an innovator, the HR manager should be able to identify talent for executing IJV strategies
and adapting to changes in the IJV stages.

4. As a collaborator, the HR manager’s strengths should lie in creating win-win situations

characterized by sharing rather than competing between the different entities engaged in the joint
venture.

The importance of cross-cultural management in international joint ventures

The implications of different cultural employee backgrounds coming together in an IJV have
been the center of interest. Which addresses the HR-related challenges of two different
institutional and cultural environments working together in a common venture.

The top management team and the role of expatriates in IJVs

The IJV’s top management team has a high impact on the performance of the joint venture. The
team’s main task is to control the daily business operations of the IJV.

In China the involvement of the managers in strategic decision-making processes and intensive
social integration measures as the most important measures for reducing turnover of high
potentials in IJVs. However, the effec- tiveness of these measures decreases with the increase of
the shares of the foreign partner.

INTERNATIONAL SMEs
SMEs are very important :

In EEA & Sweden:

 99+ % of 16 million enterprises in EEA & Sweden is SMEs

 Two third of jobs is SMEs

In Asia Pasific region:

 SMEs are 90% of all enterprises

 32-48 % employment id by SMEs

In US:

 80% of employment is by SMEs with less than 20 employees

barriers to access to international markets as identified by an OECD survey

on 978 SMEs worldwide include the following:

1. Shortage of working capital to finance exports.

2. Identifying foreign business opportunities.
3. information to locate/analyze markets.
4. to contact potential overseas customers.
5. Obtaining reliable foreign representation.
6. Lack of managerial time to deal with internationalization.
7. quantity of and/or untrained personnel for internationalization.
8. in managing competitor’s prices.
9. Lack of home government assistance/incentives.
10. transportation/insurance costs

IHRM features in SMEs

1. The importance of the founder/owner
in a globalizing SME the top managers responsible for internationalization decisions should
have sufficient international background and experience to be able to take informed decision
2. Recruitment, selection and retention.
many less-qualified employees are employed by SMEs because they do not meet the
recruitment requirements of large organizations and were forced to work for SMEs as their
second choice.
Because the SMEs cannot recruit qualified international managers they arenot as successful
in international markets as they could be.
3. Human resource development: The challenge of learning.
With respect to the specificities of the international environment, Brussig et al.116 suggest
that HRM should encourage staff in boundary spanning positions,117 (i.e. at the external
interface of the SME) to pay attention to aspects relevant to internationalization decisions.
4. Expatriate management.
When SMEs needed cross-cultural training for potential expatriates, these employees were
sent to external training institutions. Given the small number of expatriates, in-house training
is not a viable option for most SMEs.
5. Limited resources of the HR department and outsourcing.

The latter supports small suppliers with its know-how about expatriate management, the
environment of the relevan markets, and its relationships with relevant governmental institutions
for gaining visa and working permits.