A Contingent View of Partner

Coopetition in International
Joint Ventures
Chengli Shu, Jason Lu Jin, and Kevin Zheng Zhou

ABSTRACT
Is coopetition between foreign and local partners good or bad for international joint venture (IJV) performance? This
study develops a contingent view to examine how the efficacy of coopetition is conditional on IJV characteristics
(i.e., foreign equity share and partner cultural compatibility) and environmental factors (i.e., technological turbulence
and market growth). The results from analyzing 194 IJVs in China reveal that coopetition fosters IJV performance under
the conditions of high foreign equity share, low partner cultural compatibility, high technological turbulence, and/or high
market growth. In contrast, coopetition hinders IJV performance at low levels of foreign equity share, technological
turbulence, and/or market growth, or at high levels of partner cultural compatibility. These findings support the authors’
contingent view of coopetition and provide novel insights for managing partner coopetition in IJVs.

Keywords: coopetition, cooperation, competition, contingent view, international joint ventures

I
nternational joint ventures (IJVs) represent a critical
market entry mode whereby multinational companies
can enter foreign markets. As foreign partners in host
countries, multinational companies in IJVs often con-
tribute advanced technology and management knowledge,
whereas domestic partners offer local expertise, such as
connections to the government and access to land, permits,
licenses, and so forth (Beamish 1993; Chen, Chen, and
Zhou 2014). As such, foreign and local partners must
cooperate closely to share and use their complementary
resources and knowledge. Meanwhile, foreign and local
Chengli Shu is Associate Professor, School of Management, Xi’an
Jiaotong University (e-mail: cljshu@gmail.com). Jason Lu Jin is a doctoral
candidate, Faculty of Business and Economics, University of Hong Kong
(e-mail: ljin@hku.hk). Kevin Zheng Zhou is Professor of Strategy/
International Business, Faculty of Business and Economics, University
of Hong Kong (e-mail: kevinzhou@business.hku.hk). The authors thank
the JIM review team for their insightful comments and guidance. This
study was supported by the General Research Fund from the Research
Grants Council Hong Kong SAR Government (Project No. HKU
17516516) and by a General Research Grant from the National Natural
Science Foundation of China (Project No. 71472150). The authors also
acknowledge support from the Australian Centre for Entrepreneurship
Research at Queensland University of Technology, where the first author
served as a research fellow when part of the revision of this manuscript
was conducted. Seigyoung Auh served as associate editor for this article.
partners also tend to pursue individual interests, which
may conflict with their common goals, so they compete
heavily to gain control of the IJV (Jin, Zhou, and Wang
2016; Khanna, Gulati, and Nohria 1998). Accordingly,
IJV partners simultaneously cooperate in value creation
and compete for power and control, making “coopetition” a
salient feature of IJVs (Dagnino and Rocco 2009; Gnyawali
and Park 2011; Luo, Shenkar, and Gurnani 2008).
Coopetition, defined as the simultaneous presence of co-
operative and competitive interactions (Lado, Boyd, and
Hanlon 1997), has received increasing scholarly attention
(e.g., Luo, Shenkar, and Gurnani 2008; Luo, Slotegraaf,
and Pan 2006; Zhang et al. 2010). However, prior stud-
ies have provided contradictory arguments about its role.
The “syncretic rent-seeking” camp views coopetition as
superior to pure competition or cooperation because
coopetition helps firms develop new knowledge, maintain
strategic flexibility, and expand their markets (Dagnino
Journal of International Marketing
©2017, American Marketing Association
Vol. 25, No. 3, 2017, pp. 42–60
DOI: 10.1509/jim.16.0075
ISSN 1069-031X (print) 1547-7215 (electronic)

42 Journal of International Marketing

2009; Gnyawali and Park 2011; Lado, Boyd, and Hanlon
1997; Ritala 2012). In contrast, the “tension” camp pro-
poses that coopetition may be dysfunctional because co-
operation and competition are inherently conflicting and
unequal individual gains are unavoidable in coopetitive
relationships (Das and Teng 2000; Dowling et al. 1996;
Zeng and Chen 2003). Existing empirical evidence, though
sparse, is also inconsistent. Whereas some studies reveal a
positive role of coopetition on firms’ market and innovation
performance (Gnyawali and Park 2011; Ritala 2012),
others find that it is negatively related to interfirm perfor-
mance (Dussauge, Garrette, and Mitchell 2000; Kim and
Parkhe 2009) or has a curvilinear relationship with financial
performance (Luo, Rindfleisch, and Tse 2007). Moreover,
while coopetition is prominent among IJV partners, prior
literature has discussed it conceptually only in the trans-
national context (Luo, Shenkar, and Gurnani 2008), leaving
the role of coopetition in IJVs underexamined.
To address these conceptual and empirical inconsistencies,
we develop a contingent view of coopetition in IJVs. As IJVs
are legal entities established by both foreign and local
partners that cooperate to share knowledge and risk as well
as compete for power, control, and value division (Beamish
1993; Ding 1997), coopetition is more salient in IJVs than in
other interfirm relationships for two primary reasons. First,
IJV partners originate from countries with different economic
statuses, social cultures, and political ideologies (Beamish
1993; Calantone and Zhao 2001; Vanhonacker and Pan
1997). These economic, social, and political differences make
IJVs harder to coordinate and more likely to fail compared
with joint ventures between domestic firms (Jin, Zhou, and
Wang 2016). Second, foreign partners must commit financial
and/or other types of resources to IJVs in the host market.
Such commitments are often unrecoverable and rarely re-
trievable, which makes foreign partners more vulnerable to
local partners’ opportunism and expropriation than they
would be in a domestic context (Pangarkar and Klein 2004).
As such, coopetition in the IJV context is more complex than
in domestic settings (Gnyawali and Park 2011).
Organizational contingency theory posits that “organiza-
tions are subjected to a variety of environmental and in-
ternal influences” (Shepard and Hougland 1978, p. 413).
Building on this theory, we argue that the effect of coopetition
on IJV performance depends on important IJV characteristics
and environmental factors. In particular, we focus on two IJV
characteristics (foreign equity share and partner cultural
compatibility) and two environmental factors (technological
turbulence and market growth). These characteristics and
environmental factors hold different degrees of controlla-
bility for IJV partners: the former can be arranged at the
stage of IJV formation, but the latter force IJVs to make
adaptive adjustments. Foreign equity share reflects the per-
centage of ownership that foreign partners possess, which
determines the distribution of control and power in IJVs
(Chen, Chen, and Zhou 2014). Partner cultural compati-
bility refers to the degree to which local and foreign partners
are compatible in terms of their organizational cultures and
managerial and operating styles (Hoetker and Mellewigt
2009; Meschi 1997).
As for external environmental contingencies, technological
and market factors are two major representatives in con-
tingency theory (Luthans and Stewart 1977, p. 184). In the
case of IJVs, a necessary endeavor for local firms to partner
with foreign companies is to access and learn the latter’s
advanced technologies; in contrast, the primary motivation
of foreign companies is to expand their market realm and
enjoy the rapid growth of the local market (Sun and Lee
2013; Tsang, Nguyen, and Erramilli 2004). Thus, we focus
on technological turbulence, defined as the rate of techno-
logical changes in the industry (Jaworski and Kohli 1993),
and market growth, defined as the growth rate of market
demand and sales in an industry (Aaker and Day 1986).
This study makes three major contributions. First, it helps
reconcile prior contradictory perspectives on coopetition by
developing a contingent view. Although studies on coopetition
have continued to expand for more than two decades
(Dagnino and Rocco 2009), a unanimous view of coopetition
has yet to be reached. Two inconsistent perspectives of
coopetition have emerged in the literature: one emphasizes
the syncretic rents of coopetition, while the other focuses on
the potential tensions within coopetition. With a contingent
view, this study helps disentangle the prior debate on
whether coopetition is good or bad for firms by emphasizing
the functioning boundaries of coopetition theory.
Second, this study enriches the coopetition literature by
specifying the contingent roles of important IJV character-
istics and environmental factors. The results from analyzing
194 IJVs show that coopetition is positively related to IJV
performance under the conditions of high foreign equity
share, low partner cultural compatibility, high technologi-
cal turbulence, and/or high market growth. In contrast,
coopetition hinders IJV performance at low levels of foreign
ownership, technological turbulence, and/or market growth,
and at high levels of partner cultural compatibility. These
findings suggest that important IJV characteristics and en-
vironmental factors exert differing boundary effects in the
relationship between partner coopetition and IJV perfor-
mance, substantiating the proposed contingent view of
coopetition in IJVs.
Partner Coopetition in IJVs 43
Third, this study extends the coopetition research to the IJV
context, in which the phenomenon of coopetition is per-
vasive but underresearched. Because foreign and local
partners come from different backgrounds, and foreign
partners face relatively higher risks of opportunism and
expropriation than local partners, partner coopetition is
more pervasive in the context of IJVs. However, previous
studies on coopetition have been bounded within the sce-
narios of buyer–supplier relationships, strategic alliance net-
works, and/or partnerships established by firms from the
same country (e.g., Luo, Shenkar, and Gurnani 2008; Ritala
2012). By expanding this line of research to the IJV context,
this study offers novel insights on the role of coopetition and
boundaries that allow coopetition to function favorably.
THEORY AND HYPOTHESES
The Concept of Coopetition
At the core of coopetition is the concept of incomplete
interest/goal congruence (Dagnino 2009; Luo, Shenkar, and
Gurnani 2008). In contrast with either pure cooperation
or competition, in coopetition, “the supreme interests of a
partner are not necessarily aligned with the supreme interests
of the other partner(s), but they can be partially coupled”
(Dagnino and Rocco 2009, p. 29). As such, coopetition is
not a zero-sum game in competition or a positive-sum game
in cooperation, but a variable positive-sum game in which all
players can gain mutual—but not necessarily fair—benefits
(Kumar 2010; Lado, Boyd, and Hanlon 1997). Coopetition
can occur within firms (Luo, Slotegraaf, and Pan 2006; Tsai
2002), between firms (Zhang et al. 2010), or between firms
and other institutions (Baglieri 2009).
Prior studies have tended to operationalize coopetition in
one of two approaches: direct or indirect. The direct approach
conceptualizes coopetition as the competitive intensity within
collaborative relationships (Ritala 2012), or as the col-
laboration intensity with competitors (Luo, Rindfleisch,
and Tse 2007). The coopetitive relationship occurs along a
single continuum, ranging from complete cooperation to
simultaneous cooperation and competition, or ranging from
pure competition to simultaneous cooperation and com-
petition. This direct approach is simple and straightforward,
yet it does not take account of different intensities of
competition (or cooperation) (Lado, Boyd, and Hanlon
1997). The indirect approach regards coopetition as the
interaction between cooperation and competition (Liu
et al. 2014; Luo, Slotegraaf, and Pan 2006). This ap-
proach treats coopetition as having two continuums and
suggests that different levels of cooperation and compe-
tition can coexist. The various levels of cooperation in
44 Journal of International Marketing
conjunction with different levels of competition jointly
define the degree of coopetition (Luo, Slotegraaf, and Pan
2006). For these reasons, we embrace the indirect ap-
proach to measure coopetition in IJVs.
Different Perspectives of Coopetition in IJVs
Extant literature offers conflicting views on whether
coopetition is beneficial or harmful to firm performance.
Lado, Boyd, and Hanlon (1997) introduce the syncretic
rent-seeking perspective, arguing that coopetition creates
a positive-sum and efficiency-enhancing game that helps
partners enhance knowledge creation and utilization as well
as improve strategic flexibility, which in turn foster perfor-
mance (see also Gnyawali and Park 2011). First, coopetition
facilitates knowledge development and utilization in IJVs.
When IJV partners share their proprietary knowledge, a
primary concern is how to protect their know-how from
misappropriation by their counterparts (Mjoen and Tallman
1997). The coexistence of cooperation and competition helps
address this concern. Because both partners are willing to
cooperate, they pool their resources, knowledge, and skills
and use them for their mutual benefit rather than only for
individual gains (Buckley and Casson 1988). Meanwhile,
competition between partnering firms motivates the firms to
learn, which in turn promotes knowledge transfer and
greater efficiency in using resources and skills (Gnyawali and
Park 2011; Ritala 2012).
Second, coopetition enhances IJVs’ strategic flexibility and
ability to adapt to uncertainty, and it precipitates strategic
changes (Nadkarni and Hermann 2010). In coopetitive
relationships, competition pushes partners to become effi-
cient in managing resources to address environmental
changes (Sanchez 1995; Sirmon, Hitt, and Ireland 2007),
and cooperative intents motivate partners to invest the
proprietary knowledge and resources necessary to imple-
ment strategic changes (Dyer and Singh 1998; Lado, Boyd,
and Hanlon 1997). Accordingly, coopetition enables IJVs to
be flexible in addressing environmental changes and un-
certainties and, consequently, to achieve better performance.
In contrast, the tension camp focuses on the inherent con-
flicts between cooperation and competition (e.g., Das and
Teng 2000; Luo, Shenkar, and Gurnani 2008; Zeng and
Chen 2003). Cooperation suggests mutual interdependence
and requires partners to refrain from pursuing individual
benefits at the expense of common benefits (Dyer and Singh
1998). Competition, however, focuses on the pursuit of
individual gains through efficient resource management or
exclusive market positioning; the gains of one firm in
competition are often losses for other firms (Dagnino 2009).
Therefore, cooperation is driven by collective rationality,
while competition is driven by individual rationality. Ac-
cordingly, coopetition suffers from two major downsides:
difficulties in balancing cooperation and competition and
unequal individual gains received from the coopetitive re-
lationship (Das and Teng 2000; Zeng and Chen 2003).
First, because competition is self-oriented whereas cooperation
is collective, it is often difficult to balance cooperation and
competition. If the individual rationality behind competition
overwhelms the collective rationality that underpins co-
operation, then knowledge leakage and misappropria-
tion can become major concerns (Zeng and Chen 2003).
However, when cooperation dominates competition, IJVs
can lose their strategic flexibility and become vulnerable
to partner opportunism (Das and Teng 2000). In practice,
without appropriate governance, individual rationality
often overruns collective rationality, leading Teece (1992,
p. 1) to state that “the challenge to policy analysts and to
managers is to find the right balance of competition and
cooperation.”
Second, the partially congruent interests and goals between
IJV partners likely lead to unequal gains from the coopeti-
tive relationship (Dagnino 2009; Luo, Shenkar, and Gurnani
2008). The inequity in individual gains forms a variable
positive-sum game in which partnering firms might gain
mutual but not necessarily fair benefits (Dagnino 2009,
p. 31). As a result, the IJV partnership will be plagued by
unfair perceptions, and IJV performance will suffer.
Taken together, coopetition creates “strategic dilemmas”
(Dowling et al. 1996, p. 165) such that it may benefit IJVs
through knowledge utilization and strategic flexibility but
harm IJVs because of difficult cooperation/competition
balance and unequal individual gains. Whether coopetition
can generate syncretic rents depends on whether the IJVs
can enhance the benefits of coopetition and curtail its
inherent downsides. Therefore, we do not hypothesize the
direct effect of coopetition on IJV performance; instead,
we focus on developing a contingent view by examining
moderating effects of IJV characteristics and environmental
factors.
A Contingent View of Coopetition in IJVs
According to contingency theory, the efficacy of firm
strategies is bounded by organizational and environmental
factors (Shepard and Hougland 1978). Within the syncretic
rent-seeking perspective, Lado, Boyd, and Hanlon (1997,
p. 130) also suggest that “differences in environmental
context, organizational form, and stage in organizational
life cycle may enhance (or impede) the capacity of firms
to develop and exploit rent-yielding organizational com-
petencies through cooperation and competition.” Dagnino
and Rocco (2009, p. 10) state that “coopetition strategy is
affected by external threats and opportunities.” In the
tension perspective, Zeng and Chen (2003) posit that al-
liance structural and motivational arrangements should be
considered to unleash the benefits of coopetition. Khanna,
Gulati, and Nohria (1998) explicate that the relative scope
of alliances determines the degree of cooperation and
competition within the alliances. In a recent review, Bengtsson
and Kock (2014) conclude that organizational and
managerial factors are important for managing tensions
in coopetition. Consistent with this line of inquiry, we
focus on two organizational factors (foreign equity share
and partner cultural compatibility) and two environmental
factors (technological turbulence and market growth) to
develop a contingent view of coopetition in IJVs.
Moderating Role of Foreign Equity Share. Ownership
structure is one of the most important parameters in IJV
design, and it determines power and control distributions in
IJV governance (Chen, Chen, and Zhou 2014). Because IJV
performance outcomes are difficult to specify ex ante, the
ownership structure serves as a mechanism to make de-
cisions and distribute gains (Teece 1992). As a result, for-
eign equity share reflects the relative power base for foreign
partners to exert collective control for common gains and
claim private control for individual benefits.
For IJVs, foreign and local partners possess different ex-
pertise and goals (Li, Zhou, and Zajac 2009). Foreign
partners are equipped with advanced technologies, superior
products and services, managerial skills, and global support,
whereas local partners have access to political connections,
distribution channels, and social networks (Jin, Zhou, and
Wang 2016). Foreign partners aim to expand their business,
while local partners attempt to acquire advanced techno-
logical and managerial know-how from foreign partners
(Lau and Bruton 2008; Lee and Zhou 2012). Given the
institutional differences, foreign partners are often in a more
vulnerable position with respect to potential knowledge
leakage problems than their local partners (Calantone and
Zhao 2001; Vanhonacker and Pan 1997).
We propose that a high level of foreign equity share may
strengthen the positive-sum and efficiency-enhancing effects
of coopetition in IJVs. With a greater equity share, foreign
partners gain a dominant control of IJV operations and
decisions (Li, Zhou, and Zajac 2009). So they are willing to
contribute the much-needed and proprietary knowledge
and know-how that enlarge the resource repertoire for value
Partner Coopetition in IJVs 45
creation of coopetition (Tsang 2002). In IJVs, local ex-
pertise, such as network building and political ties, con-
tributes primarily to dealing with local institutional voids;
what matters more for value creation and operational ef-
ficiency is technological knowledge and managerial skills
devoted by foreign partners (Lee and Zhou 2012). Because a
dominant control protects the foreign partners from mis-
appropriation of their know-how (Pangarkar and Klein
2004), they are less hesitant to contribute their know-how,
which enhances the effect of coopetition in enlarging the
entire common pie. As foreign major ownership ensures the
availability and exploitation of advanced managerial ex-
pertise and operational skills into the IJVs, it improves the
implementation of coopetition by enhancing operational
efficiency.
Moreover, a foreign dominant ownership may attenuate the
potential downsides of coopetition. Compared with local
partners, foreign partners are more skillful in coordination
and management (Calantone and Zhao 2001; Lee and
Zhou 2012). When foreign partners hold greater equity
share, they can utilize their managerial expertise to better
coordinate the IJV operation under coopetition. However, if
local partners hold more of the equity share, they may lack
the management skills and expertise necessary to deal with
the complicated and delicate requirements of coopetition.
Furthermore, whereas local partners rely heavily on per-
sonal connections and implicit norms to conduct business,
foreign partners tend to use more contract-based rules and
procedures (Li, Poppo, and Zhou 2010). Relatively speaking,
contract-based rules and procedures make the link between
contributions to value creation and subsequent value dis-
tribution less ambiguous (Poppo and Zhou 2014). As such, a
larger foreign equity share helps instill contract-based rules
and thus reduce the potential concerns of unfair individual
gains from coopetition. Therefore, we predict the following:
H1: The relationship between coopetition and IJV
performance is more likely to be positive when
foreign equity share is high rather than low.
Moderating Role of Partner Cultural Compatibility. In
IJVs, local and foreign partners must confront and deal with
foreign language problems, organizational cultural barriers,
differences in managerial and operating systems, and dif-
ferences in knowledge and skills (Pangarkar and Klein
2004; Vanhonacker and Pan 1997). Cultural compatibility
between local and foreign partners takes place at two
levels—national and organizational (Barkema, Bell, and
Pennings 1996; Meschi 1997)—but the latter is more per-
vasive and powerful than the former in shaping organiza-
tional behaviors (Meschi 1997). Also, because this study
46 Journal of International Marketing
examines coopetition at the IJV level, we focus on orga-
nizational cultural compatibility between local and foreign
partners, while controlling the effect of their national cultural
distance.
We posit that a low level of partner cultural compatibility
fosters coopetitive benefits. First, it assists knowledge de-
velopment in IJVs. When partner cultural compatibility is
low, local and foreign partners possess knowledge, in-
formation, resources, and capabilities that are significantly
different from each other (Morosini, Shane, and Singh
1998). Such diverse knowledge reservoirs, information
banks, and capability tool kits can provide more oppor-
tunities for knowledge exchange and combination (Collins
and Smith 2006; Shu et al. 2012). Second, a low level of
partner cultural compatibility helps promote strategic
flexibility. Establishing IJVs is challenging, especially when
local and foreign partners have low cultural compatibility
(Chen, Chen and Zhou 2014). Differences between local and
foreign partners in organizational cultures and managerial/
operating styles likely create potential conflicts and necessary
compromises, which substantiate the need for strategic
flexibility. Thus, low cultural compatibility enhances the
coopetitive benefit of strategic flexibility.
Low partner cultural compatibility also helps mitigate the
potential downsides of coopetition. First, low partner cul-
tural compatibility alerts partners to stay aware of co-
operation and competition in IJVs. Due to the differences in
organizational cultures, managerial and operating styles, and
cognitive structures, local and foreign partners tend to ac-
knowledge their similarities and differences (Vanhonacker
and Pan 1997). On the contrary, when partner cultural
compatibility is high, local and foreign partners in IJVs may
focus more on cooperation while overlooking competition
because there is less cultural conflict (Meschi 1997). Second,
when local and foreign partners in IJVs have low cultural
compatibility, important decisions such as the division of
profits and other benefits are influenced by divergent or-
ganizational cultures and managerial/operating styles. As a
result, neither the local partner nor the foreign partner can
pursue extra private benefits at the expense of its coun-
terpart. Thus, we propose the following:
H2: The relationship between coopetition and IJV
performance is more likely to be positive when
partner cultural compatibility is low rather than
high.
Moderating Role of Technological Turbulence. Techno-
logical turbulence features rapid technological advancements,
unforeseeable directions of technological development, and
myriad technological options for developing new products
(Jaworski and Kohli 1993). While technological turbulence
generates ample opportunities for firms to update their
technologies and develop new products, it also creates
serious threats to firms by making their existing techno-
logical bases obsolete (Zhou, Yim, and Tse 2005).
We suggest that coopetition is more valuable when tech-
nological turbulence is high. First, the knowledge devel-
opment benefit of coopetition is more salient at higher levels
of technological turbulence. Technological turbulence can
render existing technologies obsolete quickly, forcing firms
to invest heavily in developing new know-how (Jaworski
and Kohli 1993). Because coopetition stimulates knowledge
development and creation (Ritala 2012; Zhang et al. 2010),
it helps address the demand of technological turbulence
for technological innovation. Because coopetition also
fosters knowledge utilization, it helps the IJV use its
new knowledge to develop new products that better
serve the market.
Second, the coopetitive benefit of strategic flexibility be-
comes more prominent when industrial technologies change
rapidly. Because technological turbulence challenges the
status quo, IJVs must redefine, reconfigure, and redeploy
their resources and skills to cope with such challenges
(Sanchez 1995). When partners compete and cooperate
simultaneously, they achieve a high level of strategic flex-
ibility (Lado, Boyd, and Hanlon 1997), which is instrumental
for coping with the challenges triggered by technological
turbulence (Nadkarni and Narayanan 2007). In contrast,
when technological turbulence is low, the strategic flexibility
derived from coopetition is unnecessary because there is little
demand for change and adaptation.
Third, technological turbulence may curb the potential
downsides of coopetition. In such an environment, not
only are firms strongly motivated to update and develop
new technologies through cooperation (Kotabe and Swan
1995; Mjoen and Tallman 1997) but they are also likely to
suppress their intention to compete heavily, which, in turn,
decreases the potential difficulties in balancing cooperation
and competition (Zeng and Chen 2003). Technological
challenges also force partners to focus more on collective
interests rather than individual interests to ensure IJV
survival (Li, Poppo, and Zhou 2010). Such an orientation
reduces the potential inequality in individual gains from
the coopetitive relationship. In contrast, without the
external challenges of technological changes, partners
may become overly competitive and care too much about
their individual gains, thus lowering the performance of
the IJV. Thus, we predict the following:
H3: The relationship between coopetition and IJV
performance is more likely to be positive when
technological turbulence is high rather than low.
Moderating Role of Market Growth. Market growth
represents the growth rate of market demand and sales in an
industry (Aaker and Day 1986; Jin, Zhou, and Wang 2016).
High market growth offers firms ample opportunities to
expand rapidly and gain higher profit margins (Robinson and
Min 2002). However, it can challenge firms with resource
constraints, distribution constraints, and aggressive com-
petitive entries (Kuester, Homburg, and Robertson 1999).
We posit that high market growth may enhance the value of
coopetition. First, when the industrial market grows rap-
idly, the knowledge benefits of coopetition become more
important. Market growth provides firms with opportu-
nities for expansion, but many firms fail in their rapid-
growth phase because they lack knowledge and skills to
“handle the expanded business” (Aaker and Day 1986,
p. 417). To successfully grasp the growing opportunities,
IJVs must upgrade their production facilities, enhance their
management skills, and sharpen their marketing capabilities
(Sun and Lee 2013). The coopetitive benefit of knowledge
development and exploitation can help IJVs meet these
requirements.
Second, market growth makes the coopetitive benefit of
strategic flexibility more pertinent. High market growth not
only offers ample opportunities for sales expansion but also
requires fast and increasing business investments (Aaker
and Day 1986). To capture the growth opportunities and
stand out in an environment of market rivalry, firms must
be flexible enough to explore emerging possibilities, dif-
ferentiate themselves from competitors, and commit nec-
essary investments (Sanchez 1995). For example, strategic
flexibility helps IJVs redeploy and reconfigure available
resources to address emerging and unanticipated market
demand (Zhou and Wu 2010). Strategic flexibility also
enables IJVs to recalibrate their competitive strategies and
reposition themselves for better differentiation (Nadkarni
and Hermann 2010).
Third, market growth can curtail the downsides of coopetition.
Because future sales potential is high and the top priority is
to take advantage of growth opportunities (Robinson and
Min 2002), both foreign and local partners are likely to
emphasize long-term common benefits and refrain from
being overly competitive for short-term individual gains.
As a result, foreign and local partners will find it easier to
balance cooperation and competition and achieve fair gains
from coopetition.
Partner Coopetition in IJVs 47
However, low rates of market growth may augment the
downsides of coopetition in IJVs. First, a major reason for
multinational corporations to form IJVs with local partners
in emerging markets is to take advantage of the rapidly
growing demand (Beamish 1993; Ding 1997). But if the
local market grows slowly, the multinational corporations
may seek alliancing opportunities in other faster-growing
economies. As a result, individual rationality may overrun
the collective one, and the unequal gains from the coopetitive
relationship may emerge. Second, when the market stag-
nates, the revenue margin will fall and IJV partners may
become unsatisfied with their counterparts (Osland 1994).
When partners are unsatisfied, they are likely to take a more
short-term orientation and prioritize individual rationality
(Zeng and Chen 2003), leading to overly competitive behaviors
and reduced IJV performance. Thus, we propose the following:
H4: The relationship between coopetition and IJV
performance is more likely to be positive when
market growth is high rather than low.
METHODOLOGY
Sampling and Data Collection
To test our hypotheses, we conducted a survey of man-
ufacturing IJVs in China. During the past several decades,
China has attracted a substantial amount of foreign direct
investment, much of which is in the form of IJVs (Chen,
Chen, and Zhou 2014; Sun and Lee 2013). The industrial
environment varies by region and location within a socially
and economically diversified economy, which provides
significant variations to market and technological factors,
making it a rich context in which to examine the contingent
role of coopetition.
We prepared an English version of our questionnaire based
on a thorough literature review. Two researchers inde-
pendently translated the measurement items from English
into Chinese and then back-translated them into English to
ensure conceptual equivalence. To reduce respondent fa-
tigue, we designed the questionnaire to include two separate
sections and asked each respondent to answer only one
section. To ensure content validity, we pretested the survey
with 13 senior managers; on the basis of the results, we
modified a few items and finalized the questionnaire.
We obtained a list of IJVs from the National Bureau of
Statistics of China. We restricted the sample to IJVs with
two partners only (i.e., one foreign and one Chinese). We
randomly drew 800 IJVs from the list and then contacted
two senior managers in each IJV, explained the academic
48 Journal of International Marketing
purpose of our research project, and promised a summary
report upon completion. We administered the questionnaire
on-site to assess the suitability of the respondents and ensure
data quality (Zhou, Yim, and Tse 2005). The trained in-
terviewers visited the IJVs and conducted the survey with
two senior managers at each IJV. The first respondent
answered questions related to the IJV’s characteristics,
and the second addressed questions related to partner co-
operation, partner competition, environmental factors, and
IJV performance. In total, our data collection efforts yielded
388 valid responses from 194 IJVs, representing a response
rate of 24.25%. We examined whether participating and
nonparticipating firms were different. The results of t-tests
showed no significant differences in IJV age, number of
employees, or annual sales. Thus, the nonresponse bias was
not a major concern.
On average, the responding IJVs had approximately 347
employees, had existed for 13.5 years, and had annual sales
of US$23.3 million. Most of the foreign partners were from
developed countries/regions, including Canada, Europe,
Hong Kong, Japan, Taiwan, the United States, and others.
The IJVs were in various manufacturing sectors, including
high-tech industries (e.g., computer equipment, electronics,
pharmaceuticals, telecommunications) and low-tech indus-
tries (e.g., textiles and clothing, construction, food processing).
The managers had an average of 9.28 years working ex-
perience with their firm and industry tenure of 13.63 years;
on a seven-point scale, the mean level of the respondents’
self-reported knowledge about their firm was 6.4, indicating
that the respondents were knowledgeable about the issues
under investigation.
Measures
We adapted measurement scales from prior studies; we
report the items in Table 1. In line with the conceptuali-
zation of coopetition (Lado, Boyd, and Hanlon 1997) and
prior studies (Luo, Slotegraaf, and Pan 2006), we measured
coopetition as the multiplicative interaction of partner co-
operation and competition, reflecting the notion that the
two elements are interdependent and nonsubstitutable. We
adapted the scales from Luo, Slotegraaf, and Pan (2006) to
measure cooperation as the degree to which IJV partners
exchange resources, improve communication, and seek
collective benefits, and measure competition as the extent to
which IJV partners compete for strategic resources, knowl-
edge, and power.
Following prior studies (Gong et al. 2007; Zhou, Yim, and
Tse 2005), we used a perceptual measure to assess IJV
performance relative to major competitors, which has also
Table 1. Construct Measurement and Validity Assessment

Construct Item SFL CR AVE HSV

IJV performancea Overall profitability. .86 .87 .77 .11

Return on investment. .90
Cooperation Both parties share information frequently in our business. .74 .88 .64 .07
Both parties cooperate closely to make sure the venture will last .83
a long time.
Both parties contribute sufficient technological and manage- .81
ment know-how to the venture.
Problems that arise in this JV are treated by partners as joint, .81
rather than individual responsibilities.
Competition Both parties try to gain more strategic importance and power .64 .87 .63 .05
inside the JV.
Protecting one party’s turf is considered to be a way of life in the .63
JV.
Both parties try to guard their proprietary customers or tech- .94
nology information.
Both parties try to protect their own business networks to be .90
exposed to each other.

Partner cultural compatibility The organizational cultures of the two partners are compatible .81 .86 .67 .05
with each other.
The managerial styles of the two partners are compatible with .90
each other.
The operating styles of the two partners are compatible with .74
each other.
Technological turbulence The technology in our industry is changing rapidly. .82 .70 .44 .19
It is very difficult to forecast the technology development .54
direction in our industry.
Most technological developments in our industry are radical .60
changes over existing technologies.
Market growth Our industry market has grown rapidly in last year. .95 .91 .78 .19
Our industry has offered many opportunities for fast .89
development.
The market demand in our industry grows rapidly. .80
aThe IJV’s overall performance relative to major competitors.
Notes: SFL = standardized factor loading; CR = composite reliability; AVE = average variance extracted; HSV = highest shared variance. Overall model fit: c2(137) = 225.48,
p < .01; CFI = .95; IFI = .96; RMSEA = .06.

been adopted by a recent study (Jin, Zhou, and Wang
2016). As Choi and Beamish (2004) note, perceptual per-
formance measures, when possessing strong validity and
reliability, are highly correlated with objective indicators
(see also Ju, Zhao, and Wang 2014; Pangarkar and Klein
2004). A perceptual performance measure also helps avoid
problems related to objective measures (e.g., inconsistent
and problematic enforcement of relevant financial reporting
regulations) in emerging markets (Hoskisson et al. 2000).
Although perceptual performance measures might involve
the risk of common method bias, our focus is on coopetition
(i.e., the interaction between cooperation and competi-
tion), which could create cognitive difficulty that would pre-
vent the respondents from inferring the exact goal of our

Partner Coopetition in IJVs 49

research and would thus reduce the risk of common method
variance affecting our results (Aiken and West 1991).
Consistent with previous studies on emerging economies
(Gong et al. 2007; Ju, Zhao, and Wang 2014) and the
recommendation from Katsikeas et al. (2016), managers
were asked to evaluate their financial performance relative
to major competitors on (1) overall profitability and (2)
return on investment, because profitability is a dominant
element when assessing IJV performance.
We measured foreign equity share as the percentage of the
IJV’s equity owned by foreign partners (ranging from 0 to 1)
(Li, Zhou, and Zajac 2009). We measured partner cultural
compatibility with a three-item scale from Hoetker and
Mellewigt (2009), reflecting the compatibility of organi-
zational culture and managerial/operating styles between
the partners. We measured technological turbulence using a
three-item scale adapted from Jaworski and Kohli (1993) to
capture changes in industrial technology. We measured
market growth with a three-item scale from Im and Workman
(2004) and Jin, Zhou, and Wang (2016) to assess industry
evolution and market attractiveness.
Controls
We controlled for several factors that might affect IJV
performance. We controlled for IJV age (natural log of the
number of years since the IJV was founded) and IJV size
(natural log of the number of employees). We used two
dummy variables to control for the heterogeneity from two
primary industries in the sample: electronics and bio-
pharmaceuticals. Other industries represent the baseline
group. The IJV location matters because coastal and inland
areas in China differ considerably in market demands,
technology development, and legal regimes. Therefore, we
controlled for location and measured it with a dummy var-
iable: 1 if located in coastal regions and 0 if located in inland
regions. We controlled for cultural distance, which refers to
the cultural difference between the foreign partner’s home
country and the host country, China. We used a composite
index based on Hofstede’s (2001) four cultural dimensions:
individualism, masculinity, uncertainty avoidance, and power
distance. We constructed the following equation:
4
2 
Iij - Iic
CDj = i=1 4
Vi
, hierarchically nested structure models recommended by
where CDj stands for the cultural distance of country j from
China; Iij and Iic denote the index scores on cultural dimension
i for country j and China, respectively; and Vi is the variance
of the index for cultural dimension i. Table 2 displays de-
scriptive statistics and correlations between all the variables.
50 Journal of International Marketing
Construct Reliability and Validity
We followed Anderson and Gerbing’s (1988) approach to
assess the convergent validity and reliability of our mea-
sures. First, we conducted a confirmatory factor analysis to
evaluate psychometric properties and convergent validity of
the multi-item measures. In the measurement model, we
restricted all the items to load onto their theoretically
assigned constructs. The model fit indices indicate that the
estimated model fits the data reasonably well: root mean
square error of approximation (RMSEA) = .07, compar-
ative fit index (CFI) = .95, and incremental fit index
(IFI) = .95. Furthermore, the t-values for all the items are
highly significant, at the .001 level, providing support for
convergent validity. Second, all composite reliability values
are well above the recommended .70 threshold, and all
average variance extracted (AVE) values, except for tech-
nological turbulence, meet the .50 benchmark (see Table 1).
Thus, the measures demonstrate adequate convergent re-
liability and validity.
We assessed discriminant validity using Fornell and Larcker’s
(1981) recommended procedure. All the 99.9% confi-
dence intervals of the cross-construct correlations are less
than 1, thus providing evidence for discriminant validity.
Furthermore, our results indicate that the AVE for each
construct is much higher than the highest shared variance
with any other construct in the model, lending further sup-
port to discriminant validity (see Table 1). Overall, the results
demonstrate that our measures have adequate reliability and
validity.
Common Method Variance
To address common method bias (CMB), we adopted both
an ex ante and an ex post procedure. To reduce evaluation
apprehension, we ensured participants that their responses
would remain confidential and emphasized that there were
no wrong or right answers to the questionnaire. In addition,
we collected information from two respondents to measure
the focal constructs and assigned items for the independent
and dependent variables to different sections of the ques-
tionnaire to create a proximal separation of measurements.
Moreover, we pursued a rigorous approach to using the
Cote and Buckley (1987) to check the likely threat of CMB.
We estimated three confirmatory factor models: a method-
only model (M1), a trait-only model (M2), and a trait-and-
method model (M3). In M1, all items were loaded on one
common method factor (c2(153) = 1,480.59, p < .01; CFI =
.31; IFI = .32; RMSEA = .21). In M2, each item was loaded
Table 2. Descriptive Statistics and Correlations of the Constructs

Variables 1 2 3 4 5 6 7 8 9 10 11

1. IJV performance .20** .19** −.10 .10 .25** .32** −.11 .20** .00 .09
2. Cooperation .21** −.13† .03 .21** .05 .26** −.10 −.02 .13† .12
3. Competition .20** −.12 −.06 .06 .22** .02 −.04 .04 .01 .00
4. Foreign equity share −.09 .04 −.05 −.11 −.04 −.04 .03 −.10 .25** .09
5. Partner cultural .11 .22** .07 −.10 .04 .18* −.02 .07 −.08 −.01
compatibility
6. Technological .26** .06 .23** −.03 .05 .43** −.20** −.07 −.03 .18**
turbulence
7. Market growth .33** .27** .03 −.03 .19** .44** −.16* −.03 −.17* .10
8. IJV age −.10 −.09 −.03 .04 −.01 −.19** −.15* .24** .05 .11
9. IJV size .21** −.06 .05 −.09 .08 −.06 −.02 .25** −.19** −.02
10. Location .01 −.01 .02 .26** −.07 −.02 −.16* .06 −.18* .11
11. Cultural distance .10 .14* .01 .10 .00 .02 .11 .12 −.01 .12
†
Marker variable .19** .13 .01 −.13 .08 .19** .25** .02 .20** −.22 −.05
M 4.76 5.20 3.89 .43 5.19 4.67 5.12 13.52 347.00 .29 2.02
SD .94 1.00 1.18 .20 1.08 1.08 1.24 6.93 469.00 .46 2.34
Min 2.00 1.00 1.00 .05 1.00 1.67 1.00 5.00 50.00 0.00 .41
Max 7.00 7.00 7.00 .95 7.00 7.00 7.00 49.00 4,000.00 1.00 12.65
†p < .10.
*p < .05.
**p < .01.
Notes: Two-tailed tests of significance. N = 194. Zero-order correlations appear below the diagonal; adjusted correlations for potential common method variance are above
the diagonal.

on its theoretically assigned latent construct (c2(137) =
225.48, p < .01; CFI = .95; IFI = .96; RMSEA = .06). In M3,
one common method factor linking to all the measurement
items was added into M2 (c2(118) = 199.36, p < .01; CFI =
.96; IFI = .96; RMSEA = .06).
We compared these three models to look for any change in
model fit due to the CMB and found that M3 and M2
demonstrate a better fit to the data than M1. However, the
results of the chi-square difference test indicate that M3 does
not show a significant difference from M2 (Dc2 = 26.12,
Dd.f. = 19, p > .10). Further, we calculated the mean per-
centage of variance explained by both the construct items
and the method factors. The results show that 63.7% of the
variance in the data were due to the trait factors, while 4.1%
of the variance was accounted for by the common method
factor, which is much less than the median of method
variance (about 25%) (Cote and Buckley 1987). A small
portion of the covariance originates from the common
method factor, indicating that CMB is relatively minor
(Jean, Sinkovics, and Kim 2010).
We also employed Lindell and Whitney’s (2001) partial
correlation adjustment test. We used corporate social re-
sponsibility (three items adapted from Maignan and Ferrell
[2004]; Cronbach’s a = .80) as a marker variable, which is
theoretically unrelated to at least one of our focal constructs.
We used the lowest positive correlation between the marker
variable and the others (r = .01) to partial out this corre-
lation from other zero-order correlations and to create a
partial correlation–adjusted matrix. The results of the
partial correlation adjustment show no significant change
among the correlations of the principal constructs (see
Table 2). Therefore, CMB is unlikely to constitute a sig-
nificant problem in our study.
ANALYSES AND RESULTS
In our model, partner cooperation and competition are
likely influenced by IJV characteristics and environmental
factors (Dagnino and Rocco 2009; Gnyawali and Park
2011). To correct for the potential endogeneity, we adopted a

Partner Coopetition in IJVs 51

three-stage hierarchical regression approach that has Stage II
been widely used in prior studies (e.g., Handley and Angst

6
2015; Luo, Rindfleisch, and Tse 2007; Slotegraaf, IJV performance = b20 + b20i Controli
i=1
Moorman, and Inman 2003). First, we regressed partner + b21 Foreign equity share
cooperation and competition on IJV characteristics and
+ b22 Partner cultural compatibility
environmental factors, respectively, and derived residuals
of cooperation and competition. Second, because such + b23 Technological turbulence
residuals tease out the effects of these moderators, we + b24 Market growth
used these residuals rather than the original scales in + b25 Cooperationresidual
further analysis. Third, we mean-centered the moderating + b26 Competitionresidual
variables to create the interaction terms with these re-
+ b27 Coopetition + e20,
siduals (Aiken and West 1991).
where Controli represents different control variables.
In the first stage, as specified in the equation, we regressed
cooperation and competition against all the moderators In the third stage, we added the interaction terms to assess
(foreign equity share, partner cultural compatibility, the moderation effects. To test the effect of each moderator,
technological turbulence, and market growth) to obtain we added interactions stepwise (Models 4–7 in Table 3).
predicted values. We used Cooperation residual and
Competitionresidual as the indicators of cooperation and
Stage III


6
competition in the subsequent models. We computed
IJV performance = b30k + i=1 b30ik Controli
Coopetition as the product of Cooperationresidual and
Competitionresidual. We present the details of the equa- + b31k Foreign equity share
tions next. + b32k Partner cultural compatibility
+ b33k Technological turbulence
Stage I + b34k Market growth
+ b35k Cooperationresidual
Cooperation = b110 + b111 Foreign equity share + b36k Competitionresidual
+ b112 Partner cultural compatibility + b37k Coopetition
+ b113 Technological turbulence + b38k Cooperationresidual
+ b114 Market growth + e110. · Moderator k
From this, we can obtain + b39k Competitionresidual
· Moderator k + b310k Coopetition
Cooperationresidual = Cooperation - Cooperationpredicted .
· Moderator k + e30k,
We also used
where Moderatork (k = 1, 2, 3, 4) represents different
Competition = b120 + b121 Foreign equity share moderators.
+ b122 Partner cultural compatibility The results of the first-stage regression indicate that part-
+ b123 Technological turbulence ner cooperation was positively related to market growth
+ b124 Market growth + e120 (b = .27, p < .01) and partner cultural compatibility (b = .18,
p < .05); and partner competition was positively related to
to obtain technological turbulence (b = .27, p < .01). These results
Competitionresidual = Competition - Competitionpredicted . show the necessity of using the three-stage model to correct
for potential endogeneity.
Then,
Coopetition = Cooperationresidual · Competitionresidual . We used the results in Table 3 to test the research hy-
potheses. Because the effect of coopetition (the two-way
In the second stage, we regressed IJV performance against interaction between cooperation and competition) is con-
the moderators, cooperation, competition, coopetition, ditioned on the level of the three-way moderators, we need
and a set of control variables to examine the main effect of to include two-way interaction terms when examining the
coopetition. effects of three-way interactions (Aiken and West 1991). If

52 Journal of International Marketing

 Table 3. Standardized Estimates of Regression Analyses

IJV Performance

Model 1 Model 2 Model 3 Model 4 Model 5 Model 6 Model 7

Variables b t b t b t b t b t b t b t

IJV age −.11 −1.60 −.10 −1.45 −.10 −1.44 −.09 −1.38 −.09 −1.31 −.10 −1.53 −.11 −1.61
IJV size .26** 3.67 .26** 3.65 .26** 3.66 .24** 3.49 .26** 3.75 .25** 3.63 .24** 3.55
Industry type 1 −.04 −.62 −.04 −.61 −.04 −.63 −.04 −.65 −.05 −.71 −.04 −.52 −.04 −.61
Industry type 2 −.06 −.89 −.08 −1.22 −.09 −1.26 −.10 −1.43 −.07 −1.04 −.11 −1.55 −.09 −1.37
Location .14† 1.92 .14† 1.91 .14† 1.91 .15* 2.06 .13† 1.79 .15* 2.18 .13† 1.95
Cultural distance .08 1.11 .05 .80 .05 .81 .05 .69 .06 .87 .04 .65 .04 .63
Foreign equity share (FES) −.08 −1.15 −.08 −1.15 −.08 −1.14 −.06 −.78 −.06 −.92 −.07 −1.03 −.06 −.90
Partner cultural compatibility (PCC) .03 .45 .03 .42 .03 .40 .01 .16 .03 .37 .00 .04 −.01 −.21
†
Technological turbulence (TT) .15* 2.02 .15* 2.12 .15* 2.08 .15* 2.05 .16* 2.13 .14 1.93 .15* 2.08
Market growth (MG) .27** 3.48 .27** 3.60 .27** 3.58 .30** 4.00 .30** 3.81 .30** 4.05 .30** 4.03
Cooperation (COOPE) .15* 2.34 .15* 2.11 .13† 1.93 .15* 2.18 .18** 2.64 .14* 2.11
Competition (COMPE) .16* 2.56 .17* 2.57 .15* 2.27 .17* 2.58 .15* 2.35 .16* 2.52
Coopetition .03 .43 .03 .48 .05 .71 .06 .81 .01 .07
COOPE × FES −.01 −.13
COMPE × FES −.07 −1.09
Coopetition × FES .18* 2.41
COOPE × PCC −.09 −1.28
COMPE × PCC .00 .00
Coopetition × PCC −.12† −1.66
COOPE × TT .04 .58
COMPE × TT −.07 −.99
Coopetition × TT .20** 3.05
COOPE × MG .02 .28
COMPE × MG .02 .29
Coopetition × MG .26** 3.21
R2 .21 .26 .26 .29 .28 .31 .32
Change in R2 .05** .00 .03* .03† .05* .06**
F 4.96** 5.21** 4.81** 4.52** 4.38** 4.79** 5.31**

†p < .10.
*p < .05.
**p < .01.
Notes: Two-tailed tests of significance. N = 194. Maximum variance inflation factor = 1.53. Standardized coefficients are reported for b.

Partner Coopetition in IJVs 53

we included all the interactions, the full model would contain
13 interaction terms (see Table 3). The correlations among the
interaction terms including the same construct or two-way
interactions could be high, which would produce multi-
collinearity and further render the regression estimates in-
efficient (Dow and Larimo 2009). To deal with the potential
problem of multicollinearity and reduce spurious effects, we
followed previous studies to evaluate the moderation effects
block by block (Handley and Angst 2015, p. 1428; McGrath
2001, p. 125). We included the three-way and two-way
interactions of each moderator in Models 4–7 separately.
According to this procedure, across these models, the largest
variance inflation factor was 1.53, far below the 10.00 bench-
mark, suggesting that multicollinearity is not a major concern.
As Model 2 in Table 3 indicates, cooperation is positively
related to IJV performance (b = .15, p < .05). Competition is
also positively related to IJV performance (b = .17, p < .01).
However, coopetition (i.e., cooperation × competition) is
not significantly related to IJV performance (Model 3: b =
.03, p > .10), suggesting the necessity of considering the
contingencies of coopetition.
Hypothesis Testing
To help interpret the three-way interactions, Table 4 reports
how the effect of coopetition on IJV performance varies
across different levels of the moderators. To further illus-
trate the three-way interaction effects, we plot the partial
derivative of IJV performance with respect to coopetition
over the range of the moderators, following Schoonhoven’s
(1981) technique, in Figure 1. The value of the moderator is
on the x-axis, and the regression coefficient of coopetition
on IJV performance is on the y-axis.
Table 4. Effect of Partner Coopetition Across Different Levels of the Moderators
Foreign Equity Partner Cultural
Moderator Level Share (H1) Compatibility (H2)
−2 SD −.18 (.095)† .20 (.106)†
−1 SD −.08 (.061) .12 (.066)†
M .02 (.045) .03 (.045)
+1 SD .12 (.061)* −.06 (.066)
+2 SD .22 (.095)* N.A.a
†p < .10.
*p < .05.
**p < .01.
aThe mean + 2 SD for paternal cultural compatibility and market growth is outside of the scale. When partner cultural compatibility is at the highest level (partner cultural
compatibility = 7), coopetition relates negatively to IJV performance (b = −.12, p < .10). Further, when market growth is at the maximum value (market growth = 7),
coopetition has a positive effect on IJV performance (b = .15, p < .05).
Notes: Two-tailed tests of significance. Unstandardized coefficients are reported; standard errors appear in parentheses. N.A. = not applicable.
54 Journal of International Marketing
H1 deals with the moderation effect of foreign equity share.
The three-way interaction of foreign equity share, co-
operation, and competition in Model 4 in Table 3 is positive
and significant (b = .18, p < .05). Panel A of Figure 1 shows
that the impact of partner coopetition on IJV performance
shifts from negative to positive when foreign equity share
moves from low to high. Table 4 further shows that when
foreign equity share is low, coopetition relates negatively to
performance (b = −.18, p < .10), yet it relates positively to
performance at high levels of foreign equity share (b = .22,
p < .05). These results provide support for H1.
H2 pertains to the moderating effect of partner cultural
compatibility. Model 5 in Table 3 shows that the interaction
of cooperation, competition, and partner cultural com-
patibility is negative and marginally significant (b = −.12,
p < .10). As Panel B of Figure 1 shows, the effect of
coopetition on IJV performance shifts from positive to
negative over the range of partner cultural compatibility.
As Table 4 indicates, at low levels of partner cultural
compatibility, coopetition relates positively to IJV perfor-
mance (b = .20, p < .10), but the effect becomes negative (but
nonsignificant) when partner cultural compatibility is high
(b = −.06, n.s.). These results provide partial support for H2.
H3 examines the role of technological turbulence. Model
6 in Table 3 shows that the interaction of cooperation,
competition, and technological turbulence is positive and
significant (b = .20, p < .01). Panel C of Figure 1 shows
that the effect of coopetition on IJV performance shifts
from negative to positive over the range of technological
turbulence. Table 4 also shows that at low levels of
technological turbulence, coopetition is negatively related
to IJV performance (b = −.27, p < .05), but at high levels
Technological
Turbulence (H3) Market Growth (H4)
−.27 (.106)* −.21 (.087)*
−.12 (.066)† −.10 (.053)†
.03 (.045) .01 (.032)
.18 (.060)** .12 (.048)*
.33 (.099)** N.A.a
Figure 1. Contingent Effects of Partner Coopetition

A: Foreign Equity Share (H1) B: Partner Cultural Compatibility (H2)

0.4 0.4
(d IJV Performance/d Cooperation)
= .02 + .51
0.3 d Competition 0.3

0.2 0.2

0.1 0.1

0 0
\.05 .23 .41 .59 .77 .95 1 2 3 4 5 6 7
–.1 –.1

–.2 –.2
(d IJV Performance/d Cooperation)
= .03 – .08
–.3 –.3 d Competition

–.4 –.4

C: Technological Turbulence (H3) D: Market Growth (H4)

.4 .4
(d IJV Performance/d Cooperation) (d IJV Performance/d Cooperation)
.3 = .03 + .14 = .01 + .09
d Competition .3 d Competition

.2
.2
.1
.1
0
1 2 3 4 5 6 7 0
–.1 1 2 3 4 5 6 7
–.1
–.2
–.2
–.3

–.4 –.3

–.5 –.4

the effect is positive (b = .33, p < .01). Thus, H3 is
supported.
H4 assesses the moderating effect of market growth. The
interaction of cooperation, competition, and market growth
is positive and significant (b = .26, p < .01; Model 7 of
Table 3). Panel D of Figure 1 shows that the effect of
coopetition on IJV performance shifts from negative to
positive as market growth increases. Table 4 shows that
coopetition relates to IJV performance negatively at low
levels of market growth (b = −.21, p < .05) but positively at
high levels of market growth (b = .12, p < .05), in full
support of H4.
DISCUSSION AND IMPLICATIONS
Theoretical Implications
Our study develops a contingent view of how coopetition
influences IJV performance by considering important IJV
characteristics and environmental factors as boundaries.
Our findings show that coopetition is positively related to
IJV performance when foreign partners possess high equity
share, partner cultural compatibility is low, technological
turbulence is high, or market growth is high. In contrast,
under conditions of low foreign equity share, high partner
cultural compatibility, low technological turbulence, or low
market growth, coopetition is negatively related to IJV
performance. These findings contribute to the coopetition
and IJV literature in several ways.
First, our study develops a contingent view of coopetition in
IJVs. Prior literature provides inconsistent theoretical
arguments and conflicting evidence for how coopetition af-
fects alliance performance. Whereas the syncretic rent-seeking
perspective emphasizes the positive role of coopetition
(Lado, Boyd, and Hanlon 1997), the tension perspective
focuses on its potential downsides (Das and Teng 2000;
Zeng and Chen 2003). We propose that coopetition can

Partner Coopetition in IJVs 55

benefit or hurt performance, depending on IJV characteristics
and environmental factors. According to different levels of
controllability, our study identifies IJV characteristics and
external environmental factors as internal and external
moderators. IJV characteristics are controllable and can be
designed purposefully to enhance the benefits and curtail the
downsides of coopetition. In contrast, uncontrollable envi-
ronmental factors create opportunities and challenges for IJVs
and shape the efficacy of coopetition. Thus, our contingent
view of coopetition helps reconcile two competing perspec-
tives: the syncretic rent-seeking and tension perspectives.
Second, our study extends the coopetition literature by
showing that its value is contingent on particular IJV
characteristics. Lado, Boyd, and Hanlon (1997) propose
that new organizational forms and organizational life cycles
may determine whether coopetition is beneficial. Luo,
Shenkar, and Gurnani (2008) suggest that goal congruity,
resource complementarity, and bargaining asymmetry be-
tween partners are potential boundary conditions for the
role of coopetition in IJVs. Our study focuses on two im-
portant IJV characteristics: foreign equity share and partner
cultural compatibility. We reason that in IJVs, because
foreign partners often possess advanced technological and
managerial know-how, high foreign equity share helps re-
duce the tension of coopetition and enhances its value. As
such, when foreign equity share is high, coopetition is
positively related to performance; in contrast, coopetition
has a significant negative relationship with performance
if foreign equity share is low. We also suggest that when
foreign and local partners share little in terms of organi-
zational culture and managerial and operating styles, low
partner cultural compatibility helps them take advantage of
the benefits of coopetition. Indeed, when partner cultural
compatibility is low, coopetition is positively related to IJV
performance. With these findings, our study extends the
prior literature by identifying two firm characteristics that
condition the value of coopetition.
Third, our study enriches the coopetition literature by
showing the contingent role of important environmental
factors. Lado, Boyd, and Hanlon (1997) propose that
coopetition becomes more salient in a turbulent environ-
ment or a rapidly changing market. Empirical studies fur-
ther show that coopetition is beneficial under conditions of
high market uncertainty (Ritala 2012) or high technological
uncertainty (Bengtsson and Kraus 2013). Our results con-
firm that coopetition is beneficial to IJV performance when
technological turbulence or market growth is high. Extending
prior studies, our findings show that coopetition is harmful to
IJV performance at low levels of technological turbulence or
market growth. Taken together, our findings suggest that
56 Journal of International Marketing
partner coopetition in IJVs can function as a double-edged
sword; it can both benefit and harm IJV performance,
depending on different internal and external factors.
Finally, our study extends previous research by examining
coopetition in an important but underresearched context:
IJVs. Whereas the importance of coopetition in the IJV
context is well recognized (Dagnino and Rocco 2009;
Kumar 2010), extant research only discusses it conceptually
(Luo, Shenkar, and Gurnani 2008). Foreign and local
partners in IJVs have a strong motivation to cooperate
through sharing complementary resources and operational
risks; however, they also have a strong impetus to compete
for value division. In this aspect, our study complements
prior studies that have primarily examined coopetition at
the intraorganizational level (Luo, Slotegraaf, and Pan
2006; Tsai 2002) or the strategic alliance level (Gnyawali
and Park 2011; Luo, Rindfleisch, and Tse 2007).
Managerial Implications
Our findings provide novel insights for managing coopetition.
Managers must understand that coopetition itself is a
double-edged sword and may not always generate com-
petitive advantages for IJVs. The history of the Guangzhou
Peugeot Automobile Company (GPAC), an IJV between the
Chinese Guangzhou Auto Factory (GAF) and the French
automobile manufacturer PSA Peugeot Citroën (PSA), il-
luminates this point. The IJV of GPAC achieved initial
success. However, the competition for IJV control and
individual gains as well as organizational cultural differ-
ences between GAF and PSA ultimately resulted in a pre-
mature termination of the IJV in 1997, only12 years after
its inauguration. GAF wanted to learn advanced car-
manufacturing technologies, but PSA focused more on
profiting from selling imported auto parts. Facing the
coopetition of foreign and local partners, GPAC was in-
adequately managed, and the accumulated losses amounted
to CN¥2.9 billion (Fernandez and Liu 2007).
Regarding external environmental contingencies, managers
should pursue a coopetition strategy only when industrial
technologies are changing quickly or when the industrial
market is growing rapidly; otherwise, coopetition can be
detrimental to IJV performance. The Chinese information
and communication technology industry has experienced
rapid technological upgrades and fast market growth in the
past decades. Siemens and Huawei Technology established a
coopetitive IJV, TD Tech, to develop a 3G commercial
network and broadband trunking enhanced network
solution. High turbulence in industrial technology and
rapid market growth made the benefits of coopetition
prominent, and TD Tech was ranked as one of the leading
high-tech ventures in China (Deloitte 2010).
LIMITATIONS AND FUTURE DIRECTIONS
Our research findings cannot be interpreted without noting
their limitations. First, our research may suffer from its
cross-sectional design, which limits us to examining the causal
links between the focal constructs. Relatedly, our measures
are based on managers’ perceptions, which may contain
perceptual bias. Although we employ ex ante and ex post
procedures to address the potential threat of CMB, these
procedures cannot completely eliminate it. Further, we
adopt a three-stage hierarchical regression procedure to tease
out the effects of the moderators on coopetition. However,
this approach cannot address threats of other potential en-
dogenous problems. Thus, further research should employ
multiple informants, a longitudinal design, or secondary data
to overcome these limitations.
Second, we rely on the senior managers’ perceptions about
IJVs’ financial performance, yet they might reflect narrow
facets of firm performance (for a recent and insightful
discussion, see Katsikeas et al. 2016). Further research could
consider other aspects of performance, such as satisfaction
about IJV performance or objective financial performance.
In addition, although the AVE of technological turbulence is
much higher than the shared variance with other constructs,
its value is relatively low. We encourage future research to
employ refined measures or objective indicators to validate
our findings.
Third, we examine only four important moderators; future
research is needed to investigate other possible contingency
factors, such as organizational forms, different stages of
organizational life cycle (Lado, Boyd, and Hanlon 1997),
firm structural and motivational mechanisms (Zeng and
Chen 2003), and organizational mindset, capabilities, and
experience (Gnyawali and Park 2011).
Fourth, although China has many commonalities with
other emerging economies, emerging markets differ in their
requirements for ownership structure of IJVs and are at
differing stages of industrial development. Further studies
could corroborate our findings in other emerging and de-
veloped markets or compare the value of coopetition across
emerging economies. Furthermore, we limit our sample to
IJVs with only two partners. Additional research could
employ a sample of IJVs with more than two partners to
investigate more complex coopetitive relationships and the
impact of coopetition on IJV performance.
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