Exploitation and Exploration in International Joint Ventures: Moderating Effects of Partner Control Imbalance and Product Similarity

Abstract

International joint ventures (IJVs) need to exploit their existing resources as well as explore new capabilities to capture the potential in emerging markets. This study develops a contingent view, arguing that the efficacy of exploitation and exploration depends on the levels of control imbalance and product similarity between an IJV's foreign and local partners. A sample of 198 IJVs in China reveals that partner control imbalance has a U-shaped moderating effect on the relationship between exploitation and IJV new product performance but has an inverted U-shaped moderating effect on the effectiveness of exploration. Exploitation relates more strongly to IJV new product performance when partner product similarity is high, whereas exploration has a stronger impact on IJV new product performance at low levels of partner product similarity. These findings provide novel insights for IJVs to better manage exploitation and exploration in their new product development.