Explanation of conflicts in international joint ventures.

1. INTRODUCTION

Reduction and elimination of conflicts in IJVs is important research area in contemporary management. The objective of this paper is to answer the following questions: What traits influence co-management contradictions and conflicts in international joint ventures (IJVs)? What can be done to reduce these conflicts? These questions are also driven by Knight et al.'s (1999) suggestion that a promising area for future research might be investigation of different kinds of conflicts along different dimensions. I examine conflicts between Western and transition economy partners in IJVs operating in the context of transition economies, as there are numerous research works suggesting the severe character of conflicts in such a setting. The paper starts with identification of a conflict and causes for conflicts. Major differences leading to greater management complexity and conflicts in IJVs may be explained by different perceptions of reality and differences in functional area knowledge and skills. The present paper proposes new dimensions of conflicts in IJVs in the context of transition economies. As implications for theory and practice, I suggest concrete ways of reducing the conflicts.

2. BACKGROUND

2. 1. Conflict in an IJV: Importance to Prevent It

Some definitions of conflict emphasize its consequences or concomitant behavior. Conflict behavior was defined by Habib (1987) as overt activity expressing disagreement between two or more parties consisting of passive resistance or overt aggression. For Rubin, Pruitt, & Kim, "conflict" meant perceived divergence of interests, or belief that the parties' current aspirations could not be achieved simultaneously (1994: 5). However, these definitions of conflict behavior focusing only on expressed disagreement between parties are not sufficient to understand the nature of conflict. George, Jones, & Gonzalez note that "conflict is, by definition, stressful" (1998: 759), and increases pessimism, tension, and anxiety between parties. Stulberg also remarked that upon hearing the word "conflict", typically the first things that came to mind included "anger, fear, tension, anxiety, frustration, distrust, hostility, damage, destruction, disruption" (1987: 11). Thus, conflict goes along with negative feelings, and some authors argue that conflict stems from negative feelings. For example, a study of Nugent (2002) named anger, frustration or hurt, arising from contrasts between facts and normative expectations about the other person's behavior, as reasons for conflict. Anyway, importance to prevent conflicts expressed by many authors can be understood from the point of view that negative feelings in conflict behavior are unwanted. A situation that gives rise to anxiety, frustration, stress or anger can be resolved by eliminating the source of these negative feelings (Stulberg, 1987: 12). At the same time Fey and Beamish note that "a small amount of conflict may be healthy for the joint venture since it may force management to evaluate their decisions more carefully" (2000: 142). Rubin et al. (1994) argue that conflict nourishes social change, facilitates the reconciliation of people's legitimate interests, fosters group unity. However, Parkhe stressed that while in some cultures conflict was viewed as a healthy and inevitable part of relationships, other cultures focused on destructive character of conflict:

"But in other cultures, vigorous conflict and open confrontation are deemed distasteful. Embarrassment and loss of face to either party is sought to be avoided at all costs by talking indirectly and ambiguously about areas of difference until common ground can be found, by the use of mediators, and other techniques" (1991: 585).

And from the point of view of IJV performance the nature of conflict is not healthy. For example, Jehn (1995) argued that conflicts led to lower levels of satisfaction with the group and to expressing less desire to remain with the group. Fey, & Beamish also note that as a result "frustration, unpleasantness and dissatisfaction is likely to contribute to managers losing interest in, or in extreme cases even terminating, their IJVs" (2000: 142). Interviews conducted by the authors might raise a thought that even small amount of conflict as destructive for human being and IJV performance had to be prevented. There are some quotations from these interviews: "In general, IJVGMS viewed the absence of conflict as a necessary, but not sufficient, condition for good performance" (2000: 148); "When conflict exists between parent firms in a joint venture, the joint venture has little possibility of reaching its top possible performance" (2000: 148); "In fact, I have found that conflicts that directly involve the joint venture are the most detrimental" (2000: 148); "conflict is something like a cancer" (2000: 148). Some IJV managers "felt conflict was important to monitor because they viewed it as a performance indicator, not because it was a dependent variable which affected something else" (2000: 149). Indeed, Fey & Beamish (2000) found a strictly linear relationship between performance and conflict at all levels of conflict. Hyder (1999) also argues that conflict link to performance of IJVs, and empirical study of Demirbag & Mirza (2000) indicates that general performance improves with decreasing level of conflicts.