The Role of Business Similarity in Joint Venture Performance

Abstract

Business similarity between partners was found to be positively related to joint venture performance. This finding complements two past studies that also found a positive relationship between business similarity and performance. The strength of these findings is amplified by the fact that each of the three studies used a different method of measuring business similarity and employed a different performance measure. The positive relationship between business similarity and performance was strong enough and consistent enough that all three measurement schemes captured the phenomena. This research illustrates that (1) self-assessment by partner firms allows the degree of business similarity to be captured and (2) that self-assessment is more reflective of reality than are traditional, coarse, categorical classification schemes. Business similarity varies in degree, a phenomenon not captured in traditional research which emphasizes a dichotomous choice of similarity (i.e., related or unrelated). This study found key dimensions of business similarity in the joint venture environment to be geographic areas served, supplier base, distribution channels, and forms of advertising and promotion. These dimensions contrast with the traditional business domain items that have been tried in past research, of product technology, manufacturing process, and product purpose.