Control and performance in International Joint ventures in Turkey

The main topic of this paper is to analyze how power and control are shared among the
parent companies of a joint venture. The authors focus mainly on joint ventures with seat
in late-industrializes country, particularly in Turkey. The also distinguish between strategic
and operational control, in order to better explain how decisional power is correlated to the
accomplishment of the parent companies goals.

International joint-ventures are one of the most used ways by companies who want to
penetrate a foreign market, but despite its clear advantages this form organization has
some intrinsic problems.
Is there a parent that has a higher degree of control compared to the other(s). If yes, which
one? An efficient system of controlling is really important for all the parent companies, but
what if a partner operate in an opportunistic way, in order to obtain advantages for
himself? The domestic parent has a higher degree of control? How do the goals of the
home parent (the firm with seat in the domestic and developing countries) differs from the
goals of the foreign parent (often a firm with seat in an industrialized country, doing a FDI)?
The authors of the paper try to answer all this questions.
Very important to understand is that parent firms want to control the IJV (international joint
venture). We can distinguish two main types of control:

Strategic control: the ability to influence the IJV decisions in the long run
Operational control: the ability to influence the IJV decision in the short run.

In order to gain and keep power the parent firms establish control mechanisms.
Some of this mechanisms are useful to gain strategic power (being represented in the
board is useful to shape the companys future goals but give little power in the all-day
tasks) other are incredible tools to gain both strategic and operational power (equity
ownership, appointment of key personal).
When a parent firm exercise control over an IJV the performance from the local power
prospective usually improves. This happens for two main reasons
1. Parent firms are both partners and competitor. This means that the fact the they can
act opportunistically must not be excluded. Partners has also usually different

personal goals, and a higher degree of power and control facilitate the
accomplishments of this goals.
2. The parent firm with an higher degree of power could be able to use the IJV
resources to pursue his own goals
Excluding opportunistic behaviors, it appears clear, that an IJV will created and prosecuted
only if it can be useful to achieve both partners objectives. This also include the
distribution of dividend (the company policy on the dividend distribution can be influenced
by both parent firms, thus the equation, more control means more possibilities to achieve
the parents goals is still true)
As already said, main topic of this paper are the companies operating in Turkey. In 1980
the Turkish government decided to open the countrys economy to foreign investor and this
resulted in Turkey attracting a lot of FDI.
INJ became of popular form of investing in Turkey: foreign firms needed local firms due to
their knowledge of the internal market, but on the other side Turkish firms need foreign
firms in order to increase their know-how and to have the chance to enter new markets.
The authors of the paper tried to analyze the performance degree and the satisfaction
degree of the Turkish companies who operate in an IJV.
They emailed a questionnaire to the major Turkish companies involve in an IJV and
analyzed the answers collected.
They discovered for example that the degree of the local parent control was higher if the
managers were appointed by local partners, that in average the local company own about
45% of the IJVs equity and that most joint ventures are active in sectors like vehicles, food
or textile.
Most Turkish firms operate in an IJV in order to access to famous brand names, to earn
profit and to have access to expertise.
There is also a negative relation between the distribution of the dividends and the extent of
the local firms power: Turkish firms want to reinvest the dividends, also if they represent
34.1% of all the income received by Turkish firms from the IJV.
The average achievement of the goals was also high.