BUS 1B) ASIAN DRAGON Fo INTERNAT OF FIRMS IN NALIZATION VIETNAM = Ss HENRIK SCHAUMBURG-MULLER & PHAM HONG CHUONG EDITORS COPENHAGEN BUSINESS SCHOOL PRESSCHAPTER 5 Culture and Performance of International Joint Ventures in Vietnam Phan Thi Thue Anh & Ngo Thi Minh Hang Introduction Firms enter into international joint ventures (IVs) for a variety of reasons, in- cluding turbulence in world markets, technological and economic uncertainty, cost minimization, foreign market entry, organizational learning, and cultural access (Zander and Lerpold 2003). For Vietnamese firms, establishing joint ven- tures with foreign companies is one of the most effective ways to gain access to new knowledge and capabilities in order to enhance theit international competi- tiveness (Thue Anh et al. 2006). Despite a great hope from international cooperation, research has shown a high rate of IV dissolution (Hennart and Zeng 2002) and # high rate of unsat- isfactory alliance performance (Zander and Lerpold, 2003). Many researchers attribute the difficulty in succeeding with alliances to the differences in objec- tives, capabilities, behavior, and especially in culture (Shenkar and Zeira 1992; Barkema and Vermeulen 1997; Yan and Zeng 1999; Zander and Lerpold 2003). Despite vast research in this area, the relationship between culture and IJV per- formance remains unclear (Li et al. 2001), Past studies diverge rather than agree both conceptually and practically on the relationship between culture and ISV performance. With few exceptions, such as those of Meschi (1997) and Pothuku- chi et al. (2002), most cross-cultural research focuses on differences in national culture, while the relationship between organizational cultural distance and JV performances is largely ignored. Most research on cross-cultural management in LIVs examines only one aspect of IJV performance (concentrated mainly on JV Iongevity or instability), while itis a complex concept that includes many aspects (Arino 2003). WSThe New Asian Dragon ‘This research describes cultural differences between the two partners of JVs in Vietnam, and explores the impact of national culture and organizational cul- tural distance on IJV performance. By studying cultural distance at bath levels, we can be more confident that the finding at one level is not obscured by potential effects of the other (Pothukuchi et al. 2002). More importantly, this research ex- Theoretically, this research will contri growing body of literature on IIVs by proposing a model of cultural distance that incorporates the cultural attractiveness dimension, as well as providing new and interesting empirical evidence from Vietnam, an economy in transition, Practically, this research will offer insights into how cross-cultural issues should be managed in LJVs in tran- sitional economies, In particular, its implications will help expatriates, as well as Vietnamese managers, successfully manage their ventures. ‘The chapter is structured in the following sections: a description of the re~ search questions and hypotheses; a discussion of the methodology employed: 4 presentation on the research results and interpretation; and a discussion and conclusion. Research questions and hypotheses This research is designed to answer the following questions: © What are the differences between the local and foreign cultures in Viet- namese JVs? + How do differences in national and organizational culture, and the interac- tion between them, affect IJV performance? = What role does cultural attractiveness play in determining 1JV perfor- mance’? We hypothesize that ITV performance is affected by national cultural distance and organizational cultural distance, as well as by the interaction between them. LIV performance is also affected by the attractiveness of cultures to one another. ‘These relationships are present when controlling for the effects of a number of variables as shown in Figure 5.1. Cultural distance and IJV performance In the broadest sense, tis generally agreed that ee ra 116Culture and Performance of International Joint Ventures in Vietnam: (Pothukuchi et al. 2002). iraNGS the difference in values and beliefs, as well as practice and behaviors, be- tween one group and another. In this research, cultural distance at both national and organizational levels is examined. UV size UV age Equity spit No.of Vietnamese personne! interacting with foreigners Percentage of worktime interacting. No.of foreign personel interacting with Vietnamese Technology intensity YN parts ownership Respondent's years Flaspondent’s years of working for the WV Figure 5.1. The conceptual model On the surface, it can be seen that national cultural distance can create prob- Jems in language and communication. Ineffective communication will not al- Iow IJVs to reach a needed level of understanding and adaptation (Hennart and Zeng 2002). At a deeper level, differences in values and beliefs can lead to dif ferent ways of seeing and dealing with things. Partners from different nations or from different organizations suffer great difficulty in their interactions and this ean lower their performance (Pothukuchi et al. 2002). Many researchers of UYs argue that cultural asymmetries lead to their low performance and failure (see Lyles and Salk 1996; Barkema and Vermeulen 1997; Zeira et al. 1997; and Zander and Lerpold 2003). Several researchers take a different view, such as Shenkar and Zeira (1992) and Beamish and Kachra (2004), by positing that partners can benefit from di- ‘verse cultural backgrounds. They see the cultural differences as positive things that could translate into business synergies and increased innovation. 7The New Asian Dragon Similar to differences in theoretical arguments, empirical findings are also reported in different directions, with some research finding a positive relation- ship, some a negative one, and other no significant relationship between the two variables (Hennart and Zeng 2002). In the Vietnamese context, we suspect that these differences would hinder rather than support the LJV's performance. There- fore, we hypothesize as follows: HI: National cultural distance is negatively associated with IJV. performance. H2: Organizational cultural distance is negatively associated with LIV performance. Although national culture and organizational culture are separate constructs, itis widely accepted that organizational culture is nested in national culture (Pothu- kuchi et al. 2002). Indeed, these two cultures are blended into a single way of working that distinguishes one entity from another, The existence of the differ- ence in culture at one level can exemplify the impact of the difference in culture at another level of IV performance. In other words: H3: Interaction between national cultural distance and organi- zational cultural distance is positively associated with IJV per- formance. Recently, some authors have suggested that the relationship between cultural dis- tance and IJV performance is more complex, with different dimensions having different levels of impacts (Barkema and Vermeulen 1997) or with impacts that could be in different directions (Pothukuchi et al. 2002). We acknowledge this insight and investigate it when the data is collected. At this point, we leave it as an exploratory issue and form no formal hypotheses. Cultural attractiveness and IJV performance Shenkar (2001) argues that different conceptualizations and methodologies in cultural studies have led to inconsistent findings in the relationship between cul- tural distance and performance. He identifies several elements that are crucial yet still missing in the literature to date. One of those important elements is cultural attractiveness. This is where parties in an IJV can be brought together. Some cultures can be attractive to other cultures (Gould 1996; Shenkar 2001) while others are not. In this case, more cooperation can be expected, which will enhance IJV performance. 118Culture and Performance of International Joint Ventures in Viemmam a Se a -todetermine LIV performance. Consequently, we hypothesize that: Héa: Organizational cultural attractiveness is positively assoct- ated with LIV performance. Hab: National cultural attractiveness is positively associated with WV performance. Control variables Control variables are listed in figure 5.1. and have been selected for different rea- cons. Previous research has found significant correlations between an LJV's age and its effectiveness (Newburry and Zeira 2003), between equity split (Boateng fand Glaister, 2002) and IJV size (Dhanaraj et al. 2004) and its performance. Frequency of contacts between partners’ personnel and the number of personnel invelved could be a factor that influences the impacts of culture on performance (Pothukuchi et al. 2002), We suspected that performance could be different be- tween high-tech and low-tech IVs. As the only legitimate form of business in ‘Vietnam for a long time, state-owned enterprises (SOEs) are different from other types of business, such as privately-owned, in their behavior, including the way they interact with their foreign partners. Thus, the type of parent ownership of a Victnamese IJV may have an influence on its performance. Finally, differences in answers could also be influenced by the respondents themselves. Therefore, we alco control for the differences in respondents’ years of experience in working with foreigners, for the parent firms as well as for the JVS. Research methodology Data collection and sample We used a survey to answer the research questions. The survey population was defined as all manufacturing IJVs operating in Vietnam. According to the list provided by the Ministry of Planning and Investment (MPD, there were 630 manufacturing IJVs in the whole country. Data were collected through a self-administered questionnaire. In each tar- geted LIV, we gathered information from one executive. typically one of the [IV's general directors or deputy general directors, who are responsible for their TY’s overall performance and have frequent contact with both parents (Simonin 1999). Data were collected through the Foreign Investment Agency (FIA) belonging to MPI by means of an official letter sealed by the Agency. Of 630 manufactur ing LIVs, 480 received the questionnaire due to some non-updated addresses 119The New Asian Dragon provided by the MPI list. In total, 154 usable responses were retrieved, which yielded a response rate of thirty-two percent (154/480). Of 154 responding IJVs, the number with parents from Japan, Taiwan, South Korea, Singapore, Hong Kong, Europe, and the United States were 27, 24, 23, 15, 7, 25, and 8, respectively. Twenty-five Vs were from other countries. This sample reflects the pattern of foreign investment in Vietnam in terms of country of origin. ‘The responding [JVs had been in operation from one to seventeen years, with an average of 9.2 years. Of 154 LJVs, 141 firms were represented by Vietnamese respondents and 13 were represented by foreign counterparts. Out of 154 respon- dents, 115 were IJV general directors or deputy general directors. The rest (39) were branch directors or department heads who were assigned to respond to the survey by their superiors. On average, the respondents worked for their parent firms for 12.8 years and for the JVs for 6.2 years. Variables and measures Observed variables included in the model were measured by facts. Latent vari- ables were measured by an indirect mean through verbal expressions. All latent variables were measured by multiple items using a Likert-type scale ranging from one to five. Multiple items measures were used because they could increase the measures’ reliability (Neuman 2000). Dependent variables In this research, IJV performance was measured in three ways: 1) strategic goals fulfillment, which consists of seven items measuring the extent to which the identified strategic goals are important to the respondents’ IJVs, and how far their IVs have achieved those strategic goals; 2) respondents’ satisfaction with the IJVs, which consists of nine items measuring the extent to which the re- spondents were satisfied with their partners and with management of the joint venture, and 3) the extent to which the IJVs have achieved their business goals. The first two ways of measurement were adapted from Pothukuchi’s (Pothu- kuchi et al. 2002) research, which was based on Geringer and Hebert (1991) and Parkhe (1989). The last form of measurement was taken from Thuc Anh’s research (Thuc Anh et al. 2005). Independent variables Measures of cultural distance For measures of cultural distance, Hofstede et al. (1990) found that whereas organizations from different nations differ in fundamental values, organizations from the same nation differ only in organizational practices. This has a very important implication for the operationalization of the concepts. While national 120Culture and Performance of International Joint Ventures in Vietnam culture should be measured in terms of values, organizational culture should Be measured in terms of core practices. Following this line, Pothukuchi et al. (2002) adopted national culture scores reported in Hofstede's (1997) survey and modi= fied his organizational culture measures to include eighteen questions, which were argued to have “relevance for JVs” for primary data collection in their re- search. The authors used Kogut and Singh’s (1988) cultural distance formula to calculate the composite index for both national and organizational cultures. This type of culture measurement is also widely used by many other researchers such as. Barkema and Vermeulen (1997), Minbaeva et al. (2003), and Beamish and Kachra (2004). The formula is as follows: 4 NCD = ¥ {(lj—livay (Vib / 4 i=l where I, stands for the index for the #* cultural dimension and j* country. Vis the variance of the index of the i dimension. V,, indicates Vietnam, and NCD, is the national cultural distance of the j,, country from Vietnam. In this research, we adopted the same measurement for organizational cultur- al distance as in Pothukuchi’s research (Pothukuchi et al. 2002). Organizational culture was presented by eighteen questionnaire items supposed to measure six dimensions: 1) process vs. result, 2) employee vs. job, 3) parochial vs. profes- sional, 4) open ws. closed, 5) loose vs. tight, and 6) normative vs. pragmatic. Each organizational cultural dimension was measured by three items. Respon- dents were asked to rate the Vietnamese parent organization's culture along eigh- teen questions (OC,,), and then their foreign parent organization's culture (OC,) on the same set of questions. The distance between cultures of two partners was calculated as the difference between two partners (OC,, - OC,) along each item. A composite index for organizational cultural distance was then calculated for cach JV by applying a formula similar to that of national cultural distance. For national culture, we used the data from Hofstede’s survey (2002) and applied the Kogut and Singh’s formula to calculate the distance between Viet- namese partners and their counterparts. We developed cultural attractiveness measures ourselves, since they were not available in the literature, The measure for organizational cultural attrac tiveness includes four statements asking the respondents to rate the extent to which they believe that the venture benefits from adopting: 1) problem solving methods, 2) management style, 3) organizational practices, and 4) the corporate culture of their partner’s parent firm. Measure for national cultural attractiveness included eight statements asking the respondents to rate the extent to which they have favorable attitudes toward their partner's country of origin’s: 1) people, 2) lifestyles, 3) values, 4) products, 5) companies, 6) business culture, 7) government policies, and 8) national cul- ture. 121The New Asian Dragon Control variables IV size was measured by the ITV's number of employees. IV age was calcu- lated as the number of years in operation up to the time the respondents filed in the questionnaire. Equity split (local) was the proportion of equity in the venture held by the Vietnamese parent. Technology intensity was measured as dummy with one equaling high-technology intensity and zero equaling low-technolo- ay intensity. The respondents were asked to write down their firms’ industries, Based on these answers, we arranged the LJVs" industries into four types: 1) high-technology, 2) medium-high-technology, 3) medium-low technology, and 44 low technology. This arrangement was based on the OECD's (2005) classifi- cation of manufacturing industries based on technology. We then coded all Vs in the first and the second groups as high-technology IVs, and all 1JVs in the third and the last group as low-technology IJVs. Vietnamese parent's ownership was also measured as a dummy variable with one equaling state-owned and zero equaling non-state-owned. Other control variables were measured as stated in their names. Data processing First, reliability analyses and factor analyses were used to evaluate the measures’ reliability and validity (Aaker et al. 1998). Second, bi-variate correlations were performed to explore bi-variate relationships among variables, Multiple regres- Fons were then used to estimate the relationships between ‘independent’ and ‘dependent’ variables. Data analysis was performed using the Statistical Package for the Social Sci- ences (SPSS) computer software package. Results and interpretations Analysis of measurement Organizational cultural distance measures Factor analyses with the varimax rotation method and reliability analyses were used to test the appropriateness of the six-dimensional model. However, an un- satisfactory result was found. Among the six assumed dimensions, only the loose \s.tight dimension has both reliability and validity. In the end, we decided to ac- cept organizational culture as itis, with eighteen questionnaire items measuring eighteen dimensions. The composite index for organizational cultural distance ‘was calculated for each LIV based on these eighteen dimensions. The formula is: 18 OCD, = ¥ {(VNPxy— FP) / Va) /18 xe 122Culture and Performance of International Joint Ventures in Viemam where VNP,, is the Vietnamese parent's organizational culture for the x* cultural dimension and y* JV. FP,, is the foreign parent's organizational culture for the same cultural dimension and the same IJV, V, is the variance of the x® cultural dimension, and OCD, is the composite index for organizational cultural distance of the y® IJV. Cultural attractiveness measures Factor analysis showed that twelve cultural attractiveness items were loaded onto three factors, including one organizational cultural attractiveness and two na- tional cultural attractiveness factors. Reliability statistics were then calculated for the three loaded factors. The results showed a good level of measurement reliability (Cronbach’s alphas were 0.73 and above). Thus, the three-factor model is appropriate. Consequently, three variables were created: 1) organizational cultural attractiveness, 2) national eul- ture-people’s attractiveness, and 3) national culture-products, companies, gov- ernment policies attractiveness. These were created by calculating the means of loaded items. IJV performance measures First, for strategic goals fulfillment, new items were created by multiplying a respondent’s assessment of the importance of each strategic goal to his/her IV by his/her respective assessment of the degree to which the IJV had achieved that goal. Thus, seven new Importance x Fulfillments were created. We then ran factor analysis on twenty-three items measuring IV perfor- mance together. All items were loaded onto five factors with three factors almost congruent with the results of Pothukuchi’s research (Pothukuchi et al. 2002). Two additional factors were Learning and Business performance. The five fac- tors were: 1) Performance — Business (eight items); 2) Performance — Satisfac- tion (eight items); 3) Performance — Efficiency (four items); 4) Performance - Learning (one item); and 5) Performance - Competitiveness (two items). Factor loadings were 0.45 and above, indicating that the original items are significantly correlated with their respective factors (Hair et al. 1998). Together, they explain 71.33% of the total variance. Reliability analyses were then conducted for multiple-item measures of ITV performance. The results showed that Cronbach’s alphas for all factors with mul- tiple items were 0.65 and above. Together with factor analyses, this indicates that measures for IJV performance are both valid and reliable. For subsequent analy- ses, an index was created for each of the multiple-item performance factors. 123The New Asian Dragon Descriptive analyses Differences in organizational cultures Table 5.1 presents differences between Vieinamese parent organizational culture and the culture on the foreign parent side. ‘For, Differ- Sig. ‘parent | ence (in | (2-tailed) (mean) means) 1 4.03 030 0.00, 2 4i1 052 i 0,00 3 3.62, -0.32 0.00 4 | Decisions are centralized at the top: 4.36 4.09 0.27 0.00 "S| There is little concern for personal prob- 2.86 333 OAT 0.00 Jems of employees @ | Organization is interested only inthe Se ae | ae work of employees 7 | People’s privatc lives are treated as their | 2.99 342 04d 0.00 own business B | Job competence is the only criterion in 3.32 388 056 0.00 hiring people % [Think (plan) tice yeassbeadormors | 327 | 383 | 057 | 000 70 [Only specific kinds of people fitinthe | 306 | 309 | 003 | O71 ‘organization 11 | Organization is closed and secretive 2.78 3.01 0.23 0.00, 12 | New employees need more than a yearto| 2.71 2.90 0.19 0.02 feel at home 13. | Everybody is cost-conscious 68 41h 0.43 0.00 Ta | Meeting times are kept punctually 3.70 413 0.43 0.00 75 | Employees always speak seriously about | 3.62 401 039 0.00 organization and job 16 | Employees tend to be pragmatic in mat- | 3.27 020 | 0.00 ters of ethics = rea 17 | Major emphasis is on meeting customer 436 449 0.13 0.14 needs 18 | Results are more important than proce- | 3.68 425 057 0.00 dures Table 5.1. Organizational cultural differences 124Culture and Performance of International Joint Ventures in Vietnam The first column presents the Vietnamese parent's organizational culture. cal- culated as the mean of all responses along each questionnaire item. The second column is the mean of foreign parent's responses along the questionnaire items. Note that the bigger the number the larger the extent to which the respondents agreed with the statements. The third column shows the differences between the first and the second column, representing differences in organizational cultures between Vietnamese parents and foreign parents. To test if these differences are statistically significant different from zero, we conducted one-sample t-test. The significance statistics are shown in the last column, As can be seen, except items ten and seventeen, where p > 0.1, other items have p <0.05, indicating that the differences between the Vietnamese par- ent’s and foreign parent's organizational cultures are significantly different from zero. Correlations analysis ‘The bi-variate correlation analysis shows that all performance measures are highly correlated with each other at p < 0.001, with the exception of the relation- ship between Performance ~ Satisfaction and Performance — Competitiveness Organizational Cultural Distance and national Cultural Distance have insignifi- cant relationships with most of LIV performance measures except with the Per- formance — Business. Meanwhile, Organizational Cultural Attractiveness has a strong positive significant association with all IJV performance measures (p < 0.001) except the measure for Performance ~ Competitiveness. National Culture ~ People Attractiveness is positively significantly associated with Performance ~ Satisfaction at 8 = 0.16 and p <0.05. National Culture ~ Products, Compa- nies, Government Policies Attractiveness is positively significantly associated with Performance — Efficiency and Performance - Learning at 8 = 0.26 and p <0.001. ‘Among control variables, the IV size is significantly associated with UV Performance — Satisfaction and IV Performance ~ Efficiency at 8 = 0.25 (p <0.001) and B= 0.17 (p <0.05), respectively. Average percentage of work time an executive spent in interacting with their partner's personnel exhibits a positive re- lationship with IV Performance ~ Satisfaction at 6 = 0.18, p <0.05. Vietnamese parent ownership has a significant relationship with IV Performance ~ Learning (B= 0.17, p <0.05). The respondent’s years of experience working with foreign- ers is positively significantly associated with JV Performance ~ Efficiency, - Learning, and -Business at 8 = 0.22 (p <0.01), 8 = 0.19 (p <0.05) and B = 0.23 (p <0.01), respectively. Finally, the respondent's years of working for the IV is significantly associated with JV Performance ~ Efficiency and Performance ~ Learning at B =0.23 (p <0.01) and B =0.18 (p <0.05), respectively. Some of these control variables are also associated with each other to a certain extent. 125The New Asian Dragon Hypotheses testing To test the proposed hypotheses, we conducted a series of multiple regression analyses, controlling for selected variables. ‘The analyses were done on each IV performance measure in tum. For each performance measure, five regression equation models were conducted. The first equation included only the controls as independent variables. The second equa- tion included control variables together with Organizational Cultural Distance Index and National Cultural Distance Index. In the third equation, an interaction term between two Cultural Distance Indices was also entered. The fourth mul- tiple regression equation tested the power of cultural attractiveness in predicting [JV performance using the same list of control variables. The last equation is the full model with all control and main variables. Results for Performance — Satisfaction To summarize the multiple regression results for JV Performance ~ Satisfac- tion measure, all five models were found significant, explaining 14.4%, 13.3%, 17.2%, 19.3%, and 23.1% of the variance in IJV Performance — Satisfaction, respectively. Thus, together, the control and independent variables explain quite ‘well the variance in the respondents’ satisfaction with their respective Ws. National Cultural Distance and Organizational Cultural Distance do not have a significant relationship with Performance ~ Satisfaction in model two but when the interaction term was entered in the regression equation (model 3), the relation ships between these two variables and Satisfaction became significant National Cultural Distance is negatively associated with Performance ~ Satisfaction at = 0.31 (p< 0.05) and Organizational Cultural Distance is negatively associated with Performance = Satisfaction at B = 0.46 (p < 0.05). This indicates that the higher the distance in cultures between two partners, the lower the performance of the IV as measured by the respondents’ satisfaction. When interacting with each other, the effect of cultural distance on IJV Performance ~ Satisfaction is even larger, as f= 0.54 (p <0.05) for the interaction term. The impacts of the two cultural distance measures and their interaction on satisfaction still maintain in the full model (model 5) the same or higher level of significance. In this model, organizational cultural attractiveness also has a weak positive association with Performance — Satisfaction. ‘Among control variables, JV size and equity split are positively associated with Performance — Satisfaction across all five models. This means that the big ger the ITV andor the higher the portion of the IJV equity owned by Wietnamese side, the more satisfied the respondent. Results for Performance — Efficiency The model including only the control variables is significant at p < 0.1, explain- 126Culture and Performance of International Joint Ventures in Vietnam ing 7.7% of the variance in Performance ~ Efficiency. The models including cultural distance measures as independent variables in addition to the list of con- trol variables are insignificant, while the model including cultural attractiveness measures as independent variables together with the control list is strongly sig- nificant at p < 0.01. This model explains 18.87% of the variance in Performance ~ Efficiency. The full model is also significant at p < 0.01, explaining 17.9% of the variance in Performance ~ Efficiency. ‘Across all models, Organizational Cultural Attractiveness appears as a very strong predictor of IJV efficiency. It is positively significantly associated with Efficiency at B = 0.38 (p < 0.001) in the model using cultural attractiveness as predictor and B = 0.40 (p < 0.001) in the full model. The more attractive a partner is perceived to be by the other partner's culture, the more efficient the JV becomes. No other main variables, including cultural distance measures and national cultural attractiveness measures, have a significant relationship with ITV efficiency. Similar to the results for Performance — Satisfaction, JV size and equity split are two control variables that exhibit significant relationships with LV Perfor- mance ~ Efficiency across all models. The relationships are a little bit weaker, however (they are significant at p < 0,05 as compared to p < 0.01 of the earlier results). Results for Performance — Learning Regression results for IJV Performance — Learning show that all five models are significant, explaining 9.5%, 9.7%, 10.2%, 22.8%, and 26.9% of the variance in the Learning measure of IJV performance. Similar to the results for Performance ~ Efficiency, Organizational Cultural ‘Attractiveness is a strong predictor of Leaming while no other main variables have significant relationships with this dependent variable. The regression coef- ficients for Organizational Cultural Attractiveness are 0.38 and 0.43 at p < 0.001, indicating that the more attractive the partner’s organizational culture, the higher the level of learning. Among control variables, equity split exhibits significant relationships with Learning across all models while ITV size does not have significant relationship with this dependent variable in any of the models. Instead, IJV age, technology intensity, and respondents” years of working for their LJVs are significantly as- sociated with Learning in some of the models. The relationship between IJV age and Learning is quite interesting as the B coefficients is negative, indicating that the older the IJV, the lower the level of Learning. Results for Performance — Competitiveness None of the five models are significant, which means that together, the control 127The New Asian Dragon and main variables do not explain well the variance in Performance ~ Competi- tiveness. Looking in detail at each model, we can see that only cultural distance measures have significant relationships with JV Competitiveness. National Cul- tural Distance and Organizational Cultural Distance are negatively associated with IJV Performance — Competitiveness at = 0.47 (p < 0.05) and 0.37 (p < 0.05), respectively. The interaction between them is positively associated with Competitiveness at B = 0.64 (p < 0.05). Results for Performance — Business The multiple regression results for LIV Performance, as measured by the IJV’s achievement of its business target, show three models: one including only the controls as independent variables, one including cultural attractiveness, and the full model are all significant at p<0.1, p< 0.1, and p <0.05, respectively. These models explain 6.4%, 7.4%, and 13.6% of the variance in INV Performance — Business, respectively. The two other models are not significant, indicating that the independent variables in these two models do not statistically explain well the variance in Performance — Business. ‘Among main independent variables, Organizational Cultural Distance and the interaction between two cultural distance measures do not have a significant relationship with IJV Performance ~ Business in any of the models. National Cultural Distance has a weak positive association with Performance — Business in one model with B = 0.20 (p < 0.1). Organizational Cultural Attractiveness is positively significantly associated with Performance ~ Business. ‘Among control variables, IJV age exhibits a significant positive relationship with Performance — Business in three models, indicating that the older the IJV, the better its business performance. Technology intensity has positive B coeffi- cients across all models, indicating that JVs in high-technology industries have been more successful in terms of achieving their business targets. Vietnamese parents’ ownership types and the respondents’ years of experience in working with foreigners have trends towards significant relationships with IJV Perfor- mance — Business in some of the models. A summary of hypotheses testing results Figure 5.2 presents a summary of hypotheses testing, H1 posits that National cul- tural distance is negatively associated with IV performance. The results show that this hypothesis is supported for the Satisfaction and Competitiveness mea- sures of the IJV performance, but not for the Efficiency, Learning, and Business measures. The same results also hold for H2, which states that Organizational cultural distance is negatively associated with LJV performance, and H3, which puts forward a positive significant relationship between National cultural dis- tance and Organizational cultural distance Interaction and LJV performance. H4a 128Culture and Performance of International Joint Ventures in Viemam posits a positive association between Organizational cultural attractiveness and UV performance. This hypothesis is confirmed in all measures of IJV perfor- mance except LJV competitiveness. H4b states that National cultural attractive- ness and IJV performance is positively associated. There is no evidence to sup- port this hypothesis. National Cultural Distance Saiistaction (NCD) 0 (highest Adj. R= 0.231) Organizational Cultural Distance (OCD) Interaction between NCD and OCD Organizational Cultural Efficiency (Highest Adj. R= 0.188) Leaming (Highest Adj. R? = 0.269) Attractiveness Competitiveness NC - People's (Highest Adj. R= 0.027) Attractiveness Business NG -Pro., Gomp., Gov. (Highest Ag). R?= 0.136) Policies Attractiveness Figure 5.2. Summary of hypotheses testing Discussion and conclusion This research examines the impact of cultural distance on performance of JVs in Vietnam. The results show more sophisticated relationships than previously assumed as cultural distance was examined at two levels, the national and organi- zational one, and performance was measured on five dimensions. By unbundling the complexity of cultural distance and IJV performance constructs, and adding the cultural attractiveness dimension, this research helps create a more detailed and exhaustive understanding of the perhaps over-researched yet little-known relationship between cultural distance and IJV performance. Generally, our research results are in line with previous empirical research on the impact of cultural differences on IJV performance such as those by Li and Guisinger (1991) and Barkema et al. (1997). The results are consistent with Pothukuchi’s research (Potthukuchi et al. 2002) in that both national cultural 19The New Asian Dragon distance and organizational cultural distance affect IJV performance but their effects depend on different types of performance measures. However, the results of our research are different from that of Pothukuchi’s research in some aspects. Pothukuchi et al. (2002) found that national cultural distance was positively as- sociated with Competitiveness and Efficiency, and organizational cultural dis- tance was negatively associated with Satisfaction while in our research, both cultural distance measures were found negatively associated with Satisfaction and Competitiveness, but none of them was significantly associated with Ef ficiency. They found that the jnteraction between two cultural distance measures had no significant relationship with ITV performance, while our research shows that this interaction was also significant for Satisfaction and Competitiveness. ‘The impact of national cultural distance on IV performance is larger’ in the pres- ence of organizational cultural distance and vice versa. One of the reasons for the different findings can be attributed to a very important missing element in Pothukuchi’s research (Pothukuchi et al. 2002), namely cultural attractiveness. Our results pointed out that cultural attractiveness was ‘one of the most important elements that determine IJV performance. Considering the impact of cultural distance on performance without examining the admiration of one side on the culture for the other would be a mistake. Until 1986, the economy of Vietnam had been purely a central planned one. Businesses and managers had been imbued with the central planning ideology and working method, which are not appropriate for a modern market economy. Therefore, Vietnamese managers and employees have a desperate need to learn from moder organizations. As found by this research, the higher the level of at- tractiveness of one side for the other’s organizational culture (working practices), the better the IJV performance. Despite the negative influence that cultural dit tance may have, organizational cultural attractiveness always positively affects performance. Thus, as long as one partner finds the other partner's organizational culture attractive, a high level of IJV performance can be expected. Potential partners should focus not only on the cultural differences, but perhaps more im- portantly, the attractiveness of one side’s culture to the other. During the course of JV operation, maintaining a high level of cultural attractiveness is necessary. ‘Our research has several limitations. First, it does not include responses from all parties involved in an UV. Although we tried very hard to obtain data from both sides (local and foreign) in each IJV, we did not succeed. It would be much more compelling if both sides’ answers were available for comparison. Further- more, although previous research has pointed out that parents” assessments of their IJVs was strongly correlated to the executives’ assessments (Geringer and Hebert 1991), we do believe that IW cultural research would be more robust if answers could be obtained from parents’ representatives in addition to UV ‘executives. Second, our sample includes relatively established LJVs. These IVs 130Culture and Performance of International Joint Ventures in Viemam may have been able to overcome many difficulties resulting from cultural differ- ences at the beginning, and have come to a stage where both sides have found a. common way of working. Researchers that focus on newly formed IVs may: have provided different insights. The issue of acculturation is certainly @ promis- ing avenue for future research. Finally, though taken from previous well-known literature, the six-dimensional organizational cultural distance measure in this re- search does not have a good reliability or validity. We encourage further inquiry into this variable in a different context and at a different time. Despite these limitations, this research helps enhance our understanding of the role of cultural distance in IJVs. 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Management International Review 37(3): 259-79. 133Pt aa For the last decades, Vietnam has been experiencing accelerated ec enterprises are on the way to become a past of the global economy. But there are many difficul- 1g from limited management capacity to differences in the way of doing in depth many aspects idance from Danish professors ema me rece a ee) ee ec eee ae ee A, ama eee ee ee ee also a sign of global integration of Vietnam. ee Nam, Perea Ce CC co em eon ori eee MN eee provides a firm-based perspective on Vietnam's rapid economic growth. It highlights both the Pt rae ee ca Te eres rr rae mend it strongly to the research, policy and business communities. It has widespread relevance, ncorporation in TNC eRe ee Re ec cc ee Professor Raphael Kaplinsky, Development Policy and Practice, The Open University, United Kingdom A ; Pero) | | | eer le | AWM Lars) ald 002283"