Understanding Conflict in Global Alliances and Joint Ventures
Our second focal domain of global organizing, international collaborations, has burgeoned in the past 20 years. International organizational alliances have become an essential part of corporate growth and strategy.
Cross-national alliances expand geographical market participation, facilitate resource sharing, create economies of scale, enable responsivity, reduce a wide variety of risks, and create opportunities for companies and staff to access and learn new skills and technologies. Despite this, joint ventures can entail serious competitive risks and managerial obstacles as companies attempt to incorporate cooperative rather than conflictual relationships (Park & Ungson, 2001). Statistics regarding the numbers of cross-national alliances that ultimately attain smooth integration and collaboration are varied, but researchers suggest that between 50% to 80% of mergers fail in some way, often due to cultural conflicts at the interpersonal, group, organizational, and interorganizational levels (Bleeke & Ernst, 1995; Inkpen & Ross, 2001). A McKinsey study of 150 large-scale companies in the United States, Europe, and Japan found that the median life span for international joint ventures (IJV) is generally 7 years, and it is only 5 years in developing nations (Meschi & Riccio, 2008). In more than 80% of the cases, one partner ends up selling its share to the other (Bleeke & Ernst, 1995). In the case of collaborations between MNCs and NGOs, the statistics are just as daunting. Brugmann and Prahalad (2007) identify several points of potential conflict in these partnerships ranging from differing attitudes toward deregulation, divergent definitions of social responsibility, and alternative views of accountability metrics.Overall, joint ventures often become enmeshed in both structural and relational conflict. Empirical studies identify operational complexities associated with organizational and national cultural differences and differential perceptions based on the level of economic development to be two of the most powerful drivers of conflict (Babiak & Thibault, 2008; Provan, Veazie, Staten, & Teufel-Shone, 2004).
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