Anticipated duration of international joint ventures: A transaction cost perspective Marshall S. Jiang a, ⁎, Rongwei Chu b,1 , Yigang Pan c,2 a International Business, MIBS, Faculty of Business, Brock University, 500 Glenridge Ave., St. Catharines, Ontario, Canada L2S 3A1 b School of Management, Fudan University, 220 Handan Road, Shanghai 200433, China c Schulich School of Business, York University, 4700 Keele St., Toronto, Ontario, Canada M3J 1P3 article info abstract Article history: Received 15 July 2009 Accepted 7 January 2011 Available online 5 February 2011 Many international joint ventures have a pre-determined duration in the formation contract. However, what influences the ex ante anticipated duration has not been well researched. In this study, we applied the autonomy versus cooperation adaptability of transaction costs economics to examine the pre-determined duration of joint ventures. We developed hypotheses based on the argument of asset specificity, small numbers problem, and environmental uncertainties. Based on a sample of 7049 international joint ventures in China (1979–1996), we find that the longer anticipated duration is associated with bigger asset investment, higher local government affiliation, and lower host country risk. This study provides new insights on the research regarding the longevity of joint ventures. © 2011 Elsevier Inc. All rights reserved. Keywords: International joint ventures Anticipated duration China 1. Introduction A joint venture is a contractual arrangement that forms a separate legal entity in which parent firms hold ownership interests (Murray and Siehl, 1989). Firms that form joint ventures in foreign markets have diverse strategic objectives (Porter, 1985), including the need to seek collaboration when they lack the resources needed to enter a market or to strengthen their current positions in a market (Kogut, 1991), to adhere to host market requirements, and as real option to expand because joint ventures may be designed as mechanisms to exploit, as well as to buffer, uncertainty in a foreign market (Folta and Miller, 2002; Kogut, 1991; Richards and Yang, 2007). Accordingly, joint ventures are considered as transitional form of governance. To consider joint ventures as a transitional form of governance implies that joint ventures involve the adaptability or flexibility considerations regarding the duration of the joint venture. In the literature, the longevity and the stability of joint ventures have been extensively examined (Yan and Zeng, 1999). Some scholars maintain that joint venturing is essentially a temporary contract (Park and Ungson, 1997). In other words, a joint venture is not expected to last indefinitely (Glaister and Buckley, 1996). However, other scholars claim that joint venturing is an on-going mode, as long as both partners see the benefits for its existence (Delios and Beamish, 2004; Dhanaraj and Beamish, 2004). Those literatures look at the longevity issue according to the ex post formation situations of joint ventures. Given high risks in foreign markets and instability of joint ventures (Park and Ungson, 2001), it is essential that firms, before getting into the partnership, consider and be prepared for how long the joint venture will last. In fact, some joint ventures have a pre-determined duration at the formation in the United States (Park and Ungson, 1997), 3 and many joint ventures in China have a pre-specified duration in the contract (Beamish, 1993; Zhang and Rajagopalan, 2002). Furthermore, the fact that many joint Journal of International Management 17 (2011) 175–183 ⁎ Corresponding author. Tel.: +1 905 688 5550x5384; fax: +1 905 378 6716. E-mail addresses: mjiang@brocku.ca (M.S. Jiang), 041025005@fudan.edu.cn (R. Chu), pan@yorku.ca (Y. Pan). 1 Tel.: +86 65642222. 2 Tel.: +1 416 736 2100x77936. 3 For example, Thompson Financial SDC Database shows 2453 IJVs between 1980 and 2008 that specified a pre-determined duration. 1075-4253/$ – see front matter © 2011 Elsevier Inc. All rights reserved. doi:10.1016/j.intman.2011.01.001 Contents lists available at ScienceDirect Journal of International Management