Management Control in International Joint Ventures in the Infrastructure Sector

Abstract

Management control in international joint ventures (IJVs) is an important instrument for parent firms (parents) to achieve their goals. Although determinants of parents’ management control have been widely explored, the effect of goal incongruence between IJV partners remains controversial. In addition, how parents implement control to manage task interdependence with their IJVs has attracted little attention. This paper investigates how parents’ management control is related to both goal incongruence and task interdependence in overseas infrastructure investment. Hierarchical regression analysis was performed on 161 Chinese firms that had set up IJVs for overseas infrastructure investment. Results show that task interdependence is positively related to parents’ behavior control and clan control. By contrast, goal incongruence has inverted U-shaped relationships with behavior, outcome, and clan control; moreover, evidence suggests earlier investment turning points in outcome control and clan control than in behavior control. This study contributes to the alliance governance literature by resolving the paradox in parents’ management control and extends the organizational control literature by revealing the coordinating roles of different control mechanisms. In addition, it offers managerial implications in promoting efficiency in managing IJV cooperation and coordination problems.