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How Do International Joint Ventures Build Legitimacy Effectively in Emerging Economies? CSR, Political Ties, or Both?

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Abstract

Legitimacy has been identified as an important factor influencing the survival of international joint ventures (IJVs). Yet empirical studies exploring IJV strategies for gaining post-formation legitimacy are scarce. This study examines how IJVs accumulate legitimacy after their formation in China. We identify two non-market strategies, namely corporate social responsibility (CSR) and political ties, and compare their effects on gaining two types of legitimacy: political legitimacy and market legitimacy. Data obtained from senior and middle IJV managers in China lends empirical support for the direct effects of CSR and political ties on IJV legitimacy-building. Surprisingly, we find that CSR has a stronger effect on gaining both political and market legitimacy than political ties. Furthermore, both political and market legitimacy contribute to IJVs’ performance.

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Acknowledgements

The work described in this paper was fully supported by a Grant from the National Natural Science Foundation of China (NSFC) (Project No. 71872159).

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Authors and Affiliations

  1. Department of Marketing, School of Business Administration, Southwestern University of Finance and Economics, Chengdu, Sichuan, China

    Xuan Bai

  2. Department of Marketing, Faculty of Business and Law, Deakin University, Burwood, VIC, Australia

    Jeanine Chang

  3. Department of Marketing, College of Business, City University of Hong Kong, Kowloon, Hong Kong

    Julie Juan Li

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Appendix

Appendix

Measurement items

CSR (CR = 0.810; AVE = 0.519)

SFL

 Our company seeks to comply with all laws regulating hiring and employees benefits

0.718

 We are recognized as a trustworthy company

0.842

 We give active support to programs with good social causes

0.669

 We use customer satisfaction as an indicator of our business performance

0.633

Political ties (CR = 0.861; AVE = 0.674)

 

 IJV’s top managers have built up personal ties, networks, and connections with:

 Political leaders in various levels of the government

0.748

 Officials in industrial bureaus

0.852

 Officials in regulatory and supporting organizations such as tax bureaus, state banks, commercial administration bureaus, and the like.

0.858

Political legitimacy (CR = 0.885; AVE = 0.661)

 The joint venture owns excellent political status

0.659

 The joint venture can get necessary support from the government

0.891

 The joint venture could obtain beneficial policies when necessary

0.873

 The joint venture has some advantage when dealing with the governments

0.809

Market legitimacy (CR = 0.903; AVE = 0.756)

 The joint venture owns qualifications to operate in this industry

0.827

 The joint venture has received endorsement and receptiveness by business partners in the market

0.939

 The joint venture gains customer receptiveness in the market

0.838

Performance (CR = 0.912; AVE = 0.721)

 Sales growth

0.869

 Market share growth

0.879

 Profit growth

0.816

 Return on investment

0.831

Foreign firm reputation (CR = 0.895; AVE = 0.683)

 The foreign parent is a highly-regarded firm

0.884

 The foreign parent is very successful

0.914

 The foreign parent has well-established corporate name

0.712

 The foreign parent is a well-known company

0.781

  1. SFL standardized factor loading

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Bai, X., Chang, J. & Li, J.J. How Do International Joint Ventures Build Legitimacy Effectively in Emerging Economies? CSR, Political Ties, or Both?. Manag Int Rev 59, 387–412 (2019). https://doi.org/10.1007/s11575-019-00382-x

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