Application of conflict solving strategies to enhancing the performance of TC STC, a holland vietnam joint venture vompany

22 2.3 The impact of conflict resolution strategies on performance of joint ventures between foreign partners .... Appendix 3: Conflict management test Appendix 4: 14 collaboration tool

MINISTRY OF EDUCATION AND TRAINING UNIVERSITY OF ECONOMICS HO CHI MINH CITY

TRUONG TAN LOC

APPLICATION OF CONFLICT SOLVING STRATEGIES TO ENHANCING

THE PERFORMANCE OF TC-STC,

A HOLLAND-VIETNAM JOINT-VENTURE COMPANY

EXECUTIVE MASTER OF BUSINESS ADMINISTRATION THESIS

Ho Chi Minh City, 6/2020

MINISTRY OF EDUCATION AND TRAINING UNIVERSITY OF ECONOMICS HO CHI MINH CITY

TRUONG TAN LOC

APPLICATION OF CONFLICT SOLVING STRATEGIES TO ENHANCING

THE PERFORMANCE OF TC-STC,

A HOLLAND-VIETNAM JOINT-VENTURE COMPANY

Major: Executive Master of Business Administration Type of education: Applied Economics

Major code: 8340101

EXECUTIVE MASTER OF BUSINESS ADMINISTRATION THESIS

SCIENCE SUPERVISOR Assoc Prof – PhD Bui Thanh Trang

Ho Chi Minh City, 6/2020

STATUTORY DECLARATION

I herewith formally declare that I myself have independently written the submitted Master‟s Thesis “APPLICATION OF CONFLICT SOLVING STRATEGIES TO ENHANCING THE PERFORMANCE OF TC-STC, A HOLLAND-VIETNAM JOINT-VENTURE COMPANY” under the supervision and guidance of Assoc Prof – PhD Bui Thanh Trang

All references in this Thesis are clearly quoted with authors‟ names, research works I did not use any outside support except for the quoted literature and other sources mentioned at the end of this paper

TABLE OF CONTENTS COVER PAGE

STATUTORY DECLARATION

TABLE OF CONTENTS

LIST OF TABLES

LIST OF FIGURES

OVERVIEW

CHAPTER 1: INTRODUCTION 1

1.1 Problem statement 1

1.1.1 Research background 1

1.1.2 Corporate background 2

1.1.3 Problem analysis and problem statement 4

1.2 Research objective 7

1.3 Scope of research 9

1.4 Research methods 10

1.5 Research structure 11

CHAPTER 2: LITERATURE REVIEW 13

2.1 International joint ventures 13

2.1.1 Introduction 13

2.1.2 Measures of the performance of international joint ventures 14

2.2 An investigation of conflict and conflict resolution strategies 18

2.2.1 Conflict 18

2.2.2 Sources of conflicts 20

2.2.3 Conflict management styles 21

2.2.4 Conflict resolution strategies 22

2.3 The impact of conflict resolution strategies on performance of joint ventures between foreign partners 26 2.4 The impact of cultural dimension difference on conflicts in joint ventures

2.4.1 The dimensions of national cultures 30

2.4.2 The culture of Vietnam and the Netherlands 33

2.5 Factors influencing how to manage the conflicts 39

CHAPTER 3: METHODOLOGY 42

3.1 Research framework 42

3.2 Research methods 43

3.2.1 Desk research 44

3.2.2 Qualitative research 45

3.3 Data analysis 53

3.4 Validity and reliability 57

CHAPTER 4 FINDINGS AND ANALYSIS 58

4.1 Situational factors 58

4.1.1 Existing situation 58

4.1.2 Conflict situation 64

4.2 In what way do the dissimilarities in national cultures have impact on the conflict management styles? 66

4.3 How do conflict resolution strategies influence the IJV performance? 73

4.4 Discussion 78

CHAPTER 5: CONCLUSION AND RECOMMENDATIONS 81

5.1 Conclusion 81

5.2 Recommendation 83

5.2.1 Recommendation 83

5.2.2 Proposed action plan 85

BIBLIOGRAPHY 98

Appendix 3: Conflict management test

Appendix 4: 14 collaboration tools for small business

Appendix 5: Local intercultural training and consulting firms

LIST OF TABLES

Table 1: Business results of TC-STC from 2013 to 2019

Table 2: Potential determinants of International Joint-Venture performance

Table 3: Overview of conflict resolution strategies

Table 4: Individualistic and collectivistic conflict lenses

Table 5: Thesis interviewee details

Table 6: Group discussion and meeting details

Table 7: Overview of research design

Table 8: Coding schedule for analysis

Table 9: The company‟s objective and expectation changes over time of the 2 partners Table 10: Results of conflict management styles test

Table 11: Costs and benefits of the action plan

Table 12: Stages of the proposed action plan

LIST OF FIGURES

Figure 1: The model of 5 conflict management styles

Figure 2: The role of conflict resolution strategy

Figure 3: Research framework of the thesis

Figure 4: A culture comparisons of Vietnam and the Netherlands Figure 5: Research paper conceptual model

Figure 6: Vietnamese managers‟ conflict management styles Figure 7: Dutch managers‟ conflict management styles

Figure 8: The result of conflict resolution strategies

OVERVIEW

TC-STC, a Vietnamese-Dutch JV, was established in 2012 in Vietnam, is currently specializing in consulting and developing human resources in the industries of ports and logistics The company had not been able to obtain positive results until 3 years ago, experiencing consecutive losses during the first 3 years of operations The top management has been struggling to find ways to make the circumstances better Nonetheless, over time, differences or even conflicts among members of management board have occurred, which hindered the JV‟s from coming to important decisions Therefore, this paper tries to give TC-STC suggestions about how to manage the conflicts so as to enhance the operations of the JV

Two primary goals of the thesis include (1) to examine and analyze the existing circumstances of TC-STC (2) to recommend a suitable conflict solving strategy for the J.V The research creates a conceptual model to examine the connection of 3 variables: international J.V‟s operational performance, national culture, and conflict resolution strategy For the research methodology, a mix method approach was used to study the issues Secondary data were collected via desk research, website, and other internal sources Primary data were gathered through conflict management tests and qualitative interviews with the managers of the J.V as well as the managers of other international J Vs (Vietnamese partners with foreign partners) The data collecting was handled via qualitative content analysis as well as non-probability analysis to produce the outcomes

The findings indicate that (1) the primary objectives and expectation of the J.V 2 partners are not perfectly aligned Thus, the J.V Company has been operating under pressure from the two parties, resulting in lower-than-expected operational and business performance; (2) The Dutch managers tend to the confrontational conflict management styles whereas the Vietnamese counterparts prefer to use the non-

confrontational one The dissimilarities in national culture also make it hard to create

or reach a mutual commitment in TC-STC owing to the fact that perceptions of commitment of both parties are not the same (3) the Vietnamese and Dutch members

of board of management of the J.V Company are still struggling to address the conflicts because of certain limitation on communication as well as the exchange of information, lack of trust and commitment, lack of consideration for partners‟ needs and concerns (4) a mixture of Problem-solving strategy and Compromising strategy can be used in order to address the conflicts in the Company amid the existing situation

The recommendations to TC-STC is that the Company should adopt a combined conflict resolution strategy of Problem-solving strategy and Compromising strategy (although Legalistic strategy received a little bit higher score than Compromising strategy but all of the interviewees emphasized that it would be the last resort) in order

to rectify the existing conflicts and to get ready for potential conflicts in the coming days First of all, so as to ensure a full achievement of this strategy, it is necessary for both partners to align the objectives and expectations to identify the gap between them, from which a plan for improvement can be made Both parties should be able to reach agreement on objectives in order to adopt a new way as to how the joint venture will work The two partners should commit themselves to the agreement Second of all, it is advisory for the management to set up short-term and long-term goals for the Company A strategic communication plan which also consists of the conflict resolution strategy will follow up so as to regularly update the work progress and exchange information Last of all, conducting inter-cultural training in order to avoid unworthy conflicts, misunderstanding and to identify trust or commitment signalling accurately should be executed by the J.V because it can result in greater trust and strong commitment between parties

The proposed action plan which consists of are 4 vital stages is expected to take place for a period of one year (from 01/01/2021 to 31/12/2021) Above all, this research partly contributes to the management of the J.V Company and the empirical researches on international joint ventures

Key words: international joint ventures, international joint venture performance,

cultural dimensions, national cultures, partner satisfaction, conflict management, conflict resolution/solving strategy

CHAPTER 1: INTRODUCTION

The background of this research and that of the joint venture is introduced in this chapter Furthermore, problem analysis statement, research objective and questions, scope of research, research methods as well as research structure are also mentioned in this part of this paper

1.1 Problem statement

1.1.1 Research background

In the well-connected world like today, among various main strategies of big companies to widen their scopes and areas of business internationally is through partnership with foreign partners Joint venture is an effective method to penetrate new foreign markets However, lots of joint ventures have been encountering challenges and uncertainties in terms of returns and future development (Stewart, 2011) Research showed that 30-40% of international J.V failures were due to choosing inappropriate strategies, incompatible partners, poor management, impractical or unfair deals (Killing, 1983)

The past many years have witnessed more and more concern in examining the effectiveness of operations of international joint ventures In order to assess the effectiveness of international joint ventures, there are 2 measures that are used: objective (financial indicators, survival, duration, stability) and subjective (partner satisfaction) (Geringer & Herbert, 1991) Previous researches indicate objective and subjective measures are very much closely connected for international joint ventures This research concentrates more on the subjective measure because it is able to show the long-term performance of international joint ventures (Killing, 1983; Geringer & Herbert, 1991; Glaister & Bluckley, 1998)

Conflict solving strategies greatly impact the operations of joint ventures between foreign partners The methods conflicts are impacted by both personal experience and cultures Many prior researches emphasize the cultural dissimilarities to examine to see how the conflict management styles are similar and different between foreign and local companies (Wang & Lin, 2005; Boonsathorn, 2007) Nonetheless, there are still

a limited number of researches concentrating on solving conflicts between foreign partners in a practical method Therefore, the topic “Application of conflict solving strategies to enhancing the performance of TC-STC, a Holland-Vietnam joint-venture company” is chosen to conduct the thesis

1.1.2 Corporate background

TC-STC is a unique Vietnamese – Netherlands Joint Venture Training Centre for the Port, Shipping, Transport and Logistics Sectors in Vietnam TC-STC focuses on short courses, awarded with a Certificate of Proficiency, for the thousands of people employed in the fast-growing Vietnamese transportation sector Ports and their hinterland connections (rail, road, air, rivers), international, coastal and inland shipping play a vital role in the Vietnamese economy Courses and trainings offered include: Ship‟s Agent, Terminal Operation and Management, Transport and Forwarding, Customs Administration and Documentation, Dangerous Goods and Hazardous Cargo, Safety and Security and Port Operator, etc

The company was established to:

- Provide specific advice and training for port and transport personnel in the maritime port and logistics sector including but not limited to terminal management, cargo handling, sea transport, supply chain and process management and other related fields in accordance with international standards

- Select competent students and graduated of (maritime) schools, colleges and universities for extra education and training in line with (inter)national request and needs

- Conduct training and refreshment courses to improve, update knowledge and skills for technical staff/managers and personnel working in the maritime and logistics industry and other fields related to the maritime transport chain

- Provide other tailor-made maritime training courses at the request of shipping, shipbrokers, cargo supervisors, terminal management companies, freight forwarding companies, international organizations

TC-STC, located in Ho Chi Minh City in Vietnam since 2012, is an international joint-ventures between STC-Group and Saigon Newport Corporation (SNP) At this location there is a transport chain simulator, developed by the STC Group

STC Group is a worldwide operating educational and research institution for the

shipping, logistics, transport and process industries STC Group offers business

courses and training for professionals

Saigon Newport Corporation (SNP) is the country‟s top port operator as well as logistics service provider in Vietnam with a wide range of port-centric services and transport and logistics services Employing a big amount of staff (nearly 20.000 laborers), SNP has the huge training demand for its personnel

Being hoped to bring benefits to both parties from a joint-venture, TC-STC was established in 2012 Both parties own 50% of the shares have same authority and management control The Dutch managers are responsible for the training aspects while marketing activities, finance and accounting are in hands of Vietnamese managers There is a member council inclusive of 4 members of whom 2 are from each party and they are also engaged in the important strategic decisions of the

company As an affiliate of SNP, TC-STC can be considered as a „born-to-serve its mother (SNP)” The main activity of TC-STC is training and developing the competencies of employees with short courses, specialized in sea transport and logistics for its mother company (SNP) SNP is both mother and biggest client Beside TC-STC offers tailor-made courses for other companies and universities in Vietnam (TC-STC company profile, 2019)

1.1.3 Problem analysis and problem statement

Since establishment, TC-STC has still faced an accumulative loss although the last 5 years saw much more positive results

Table 1: Business results of TC-STC from 2013 to 2019

(VND)

Pre-tax profit

Corporate income tax

After-tax profit (net)

Shared profit Vietnam Holland

The board of directors has seen that the simulation system is not suitable for the main corporate customers, including SNP So, training fees are low and the system is not attractive to working people (only to students)

participants

Courses Turnover (VND)

University

(Source: Report on TCS-based courses in 2019)

The location is not convenient The training staff and teaching materials also need updating TC-STC shall change to enhance its operations

Below are some internal and external forces that leads to must-make changes:

Internal forces:

 Financial issue due to asset depreciation and expenses

 Simulation system has not been best used

 Inadequate and not qualified human resources for marketing and training

 Not updated training materials and usually done by local trainers

External forces:

 Trainee demand (practical, not theoretical)

 Potential but competitive markets

 State requirement (The Navy may halt TC-STC‟s operations due to long time loss)

Solutions have been discussed but the Vietnamese and Dutch managers had some misunderstanding and challenges (in stronger words: conflicts) while they are making plans to change Some efforts have been made to rectify the situation However, decisions cannot be made due to the miscommunication, misunderstanding and different perspectives from the two parties, which leads to the fact that the situation has not been improved as much as expected The simulators are still not fully and effectively exploited There is growth in business but not stable Turnover and profit share from mother company (SNP) is shrinking There is a tendency for the work of members of the management board to be disconnected and detached This negatively impacts the performance and the partnership of this joint venture

Not only financial issues, operational issues (known as the hard side of strategic alliance) but also development, managerial relationship (the soft side) decide the success of international joint ventures (Cullen & Johnson, 2000) International joint-venture partnership should be addressed if the company want to improve its operations Partner satisfaction does impact the operations of international joint ventures either in positive or negative manner (Spekman & Lynn, 1996) Nevertheless, the fact that people from different nations working together may create conflicts more usually makes it hard to obtain the satisfaction in cross-cultural companies (Lin & Germain, 1998) Therefore, selecting a proper conflict management approach will help rectify issues of an international joint venture which then will make the partners satisfied and lead to a more successful and developed performance (Lieshout, 2011)

Problem statement: If TC-STC fails to address conflicts, the managers from the 2

parties cannot reach a mutual consent, which will result in the discontenting and worse performance of the joint-venture and possibly an ending of the Company

1.2 Research objective

Research Objective:

This international J.V Company had not been able to obtain positive results thus far The Member Council as well the top management of the Compnay have been trying to enhance the situation However, there have been differences or even conflicts between partners, which stopped the JV‟s from reaching vital decisions Therefore, this paper tries to give TC-STC recommendations about how to manage the conflicts in order to improve the business and operations of the J.V

In other words, the objectives of this research paper are to to analyze the existing conflicts of TC-STC and to recommend the J.V Company how to manage conflicts so

as to enhance the company‟s performance by proposing a suitable conflict solving strategy via the application of theories on international joint venture performance, conflict solving strategy and national cultures

Main question as well as theoretical and empirical points to be clarified are created so

as to obtain the research objective of this research paper are as follows:

Research question:

How can TC-STC adopt conflict solving strategies in order to enhance the company performance?

Theoretical points to be clarified:

 Definitions of international joint venture, conflict, conflict management, national culture?

 Determinants of international joint venture performance?

 Situational factors that impact conflicts in international joint ventures?

 In what way do national culture differences impact conflicts in international joint ventures?

 In what way do the conflict solving strategies impact partner satisfaction and international joint venture performance?

Empirical points to be clarified:

 The weaknesses of the existing circumstance and conflict circumstance of the Company?

 The differences in conflict management styles of the Vietnamese and Dutch managers of the Company?

 To what extend and how do national culture differences affect the performance

of the Company?

 Which conflict solving strategies should be used to solve the conflicts as well

as to enhance the performance of the Company?

Previous researches show that conflict solving strategy has its toll on enhancing the performance of international joint ventures, especially on partner satisfaction (Campbell, 1988; Lin & Germain, 1998; Zheng & Larimo, 2014)

In addition, conflict management in international joint ventures are impacted by 2 variables which are situational factors and national culture Therefore, the theoretical and empirical research points consider these key concepts so as to obtain the main research question and objective A conceptual model shall be created based on some

theoretical extracts The thesis is expected to examine the existing circumstance of TC-STC and the way members of board of management of TC-STC approach the cultural dissimilarities, conflict management manners and how they reduce the differences between the foreign managers Besides, the findings from data collection will be joined and play parts in making the recommendations

1.3 Scope of research

The study was conducted in 3 locations of STC-Group: STC Group in Rotterdam, the Netherlands, TC-STC and UT-TC in Ho Chi Minh City and STC Group Representative Office in Ha noi (Vietnam) because MC members and Managers and ex-Managers were stationed in various places The researcher also had opportunities

to meet and interview 09 managers who were either directly or indirectly engaged in the J.V Company‟s management Although STC Group had a worldwide network of locations but those 3 locations were selected because they were closely related to the operations and cooperation with TC-STC and especially the researcher had opportunities to conduct group discussion and attend the MC meeting where all of the interviewees met and discussed various topics related to the operations of the J.V

All the one-on-one interviews, group discussion and meeting were done as of 3rdquarter of 2019 until end of 2019, which can help create a clear picture of the effectivesss and the problems that the Company had been facing All the topics/issues were looked at and analysized within the timeframe since establishment (2012) to the end of last year (2019) and even being updated until the time of the thesis completion Since the topic is mainly related to conflicts arising among Vietnamese and Dutch managers, students/participants were not selected as the research subject Instead, 09 interviewees were all managers of the J.V and of the parent partners of the J.V and one affiliate of STC-Group which is also a J.V between Vietnamese partner and Dutch partner

1.4 Research methods

The strategy of this study was the selection of a single and particular case study This can help obtain a general situation by focusing on the existing circumstance as well as making attempts to improve such situation Besides, a mix-method approach was applied for colleting and analyzing data This approach was used to help achieve a better understanding about the theories and exploring the problems of the J.V Company from different perspectives

Owing to the descriptive nature of this research, data collection and analysis were done via desk research and qualitative research (field research) with deductive approach The result of desk research focused on theoretical points whereas the qualitative research addressed the empirical points The findings from these data collection methods were integrated to be contributions to suggesting the final proposals

The theories related to international joint ventures, conflict resolution strategies and cultural dimensions were selected for examination and analysis The theoretical data were collected from various sources and seriously examined in order to get a full acquisition of the previous knowledge as well as the recent trends

This research paper used the mix methods to carry out the qualitative research (field research) Qualitative data were collected via the semi-structured interview Because

of the size of the joint venture as well as the geographical distance between the researcher and the Dutch partner, 09 managers were selected for the interviews

The conflict management test was applied to discover the differences between the Vietnamese and the Dutch managers and find out an appropriate conflict resolution strategy for the J.V

A group discussion and a meeting were also carried out with participation of MC members, STC Group and STC International representatives These group discussion and meeting helped provide more understanding and insights into the situation of the Company

While conducting the research, observation method was used to record information when it occurs Also, some documents of the company such as company profile, presentations, and minutes of meetings, etc to support the data collection could be requested for

The data collected from the interviews were transcribed and coded using a closed coding technique because the interviews were semi-structured The important information from the interviews was related to the appropriate codes to make up the findings, and the feedbacks were categorized by each section related to the conceptual model

semi-1.5 Research structure

Below is the outline of this research:

Chapter One introduces the background of this study as well as that of the J.V

Company Importantly, problem statement, research objectives, scope of research, research methods and research structure are mentioned in this 1st chapter

Chapter Two helps formulate a conceptual model for this research paper, literatures

related to theories on international joint-ventures, conflict resolution strategy and dimensions of cultures are carefully studied in this part

Chapter Three provides a description of technical design of this study paper

including research framework, research strategy, data collection and analysis, validity and reliability An explanation about how the study was carried out is also mentioned, especially sources of data and the analysis method in order to draw a conclusion

Chapter Four: in this Chapter, the research findings will be given according to the

conceptual model from the Chapter Two and the qualitative research (field research) and the analysis The result is also discussed and the connection between the findings with the theories introduced in previous chapters

Chapter Five answers the central research question according to the findings and

result of this study with taking some limitation into consideration Additionally, some recommendations as well as a proposed action plan are provided for solving the conflicts and improve J.V‟s operations and business activities

CHAPTER 2: LITERATURE REVIEW

To serve the purpose of creating a conceptual model for this research paper, literatures which are related to theories on international joint-ventures, conflict resolution strategy and dimensions of cultures will be carefully examined and considered in the Chapter

2.1 International joint ventures

2.1.1 Introduction

International joint-venture is defined as “a business arrangement which includes two

or more businesses from different countries to form a partnership” (Encyclopedia, 2000) An organization wishing to explore overseas businesses does not want to assume complete liabilities of international dealings may take into account the joint venture partnership with a partner from a different country A formal contract of a joint venture include business goals, contractual agreements, the ownership percentage and joint property interests (Datta, 1988) The global economy has lately seen a sudden large increase of international joint-ventures during the last 20 years because

of technology advancement, competitive market and globalization (Beamish & Delios, 1997) Setting up international joint ventures can bring lots of advantages to foreign companies as well as local ones namely approaching new markets, picking up concerning businesses, exploiting current technologies, transferring knowledge, sharing cost as well as resources, etc Nonetheless, lots of international joint ventures encounter lots of challenges and uncertainties in terms of returns and future development It is estimated that at least 40% to 70% of international joint ventures failed because of competing partners, culture wars, unrealistic profit expectations and lack of exit strategy (Farrell, 2014) International joint-ventures are said to be like patients after the medical tests; some continue to live whereas the others do not

(Lowen & Pope, 2008) For instance, Danone, a world leading food company from France, made the decision to end their international joint venture in China after 13 years of operations owing to the issues of cultural differences plus marketing and investment problems (Kwok, 2009) From positive view of the history of international joint-ventures, several corporations have achieved remarkable successes, for example Plizer, Microsoft, Cadbury Schweppes, Sony-Ericsson, Nokia and Siemens AG, etc (Zuibair, 2013)

2.1.2 Measures of the performance of international joint ventures

Previous researches show the significant differences in the operationalization of the performance of international joint ventures To measure international joint ventures, there are 2 two categories that are applicable: objective measures (financial indicators, duration, stability, survival) and subjective measures (partner satisfaction, organizational reputation, market position, ownership stability, etc.) (Lowen & Pope, 2008) It is awared that objective measures include contain some restrictions because

of the unavailable data (Geringer & Herbert, 1991) In addition, objective measures fail to indicate the degree an international joint venture has obtained its short and long-term goals (Lu & Lee, 2005) Schaan (1983), Killing (1983) and Beamish (1984) create the subjective measure so as to examine satisfaction of partners based on international joint-venture performance The advantage of using this measure is to access information as to whether the IJV has achieved overall objectives Nonetheless, several biases may happen whereas using the subjective measures to access the performance of international joint ventures (Osland & Cavusgil, 1996) The prior researches indicate these 2 types of measures are highly consistent and interactive (Geringer & Herbert, 1991; Glaister & Bluckey, 1998) Likewise, Cullen and Johnson (2000) emphasized that the success of international joint ventures result from hard side as well as soft side of the management of strategic alliance The hard side is composed of financial investment as well as operational planning, the soft side covers

the development and management of relationship capital Therefore, if concentrating

on only market development or financial matters but not on the relationship between partners, international joint ventures are not able to reinforce their performance

Some other elements are regarded as indicators or drivers for the success of international joint ventures A recent research by Zheng and Larimo (2014) divided international joint-venture performance into three stages: local environments, formation stage, operation stage (see table 1) By dividing the operations of IJV into different stages, the researchers obtain an insight into each stage and find out the determinants in detail This study concentrates on investigating which indicators or drivers have the most influence in the 2nd and 3rd stage of international joint ventures The outcome indicates that “experience” is the key factor at formation stage, “partner commitment” is particularly important at operation stage (Zheng & Larimo, 2014)

Table 2: Potential determinants of International Joint-Venture performance

1 International joint-venture

Local Environments

2 International venture

joint-Formation Stage

3 International venture

commitment, level

of both foreign and commitment local partners‟

Economy Local country GDP, Firm size

Foreign partner firm Bargaining Resource-based

growth rate of GDP, size, local partner power power, context-

Government Stability of government Partner How to find a local Control Strategic control,

policy policies, cooperation selection partner? operational control,

and efficiency of local

How to evaluate

partner? process control,

Technology Technology available,

International joint-venture experience

Prior FDI and International joint- venture Trust Interpartner trust,

technology and experiences in both interpersonal trust,

knowledge transfer local country and

trust between partner

transportation system, non-capital procedure justice, telecommunication resources interactional justice

ventures affect International joint- venture

performance, early entry vs late entry

Market

potential Market size, market Ownership Percentage of share Conflict Joint problem

type, local competition structure

of ownership, equity resolution solving, forcing,

government regulations target country or between partners,

and legal protection countries

cooperation between

Quality of life

Cost of living, safety

and social security

system

Long term focus

Intended duration

of

Age of the International Joint-Venture

Age of the International Joint- Venture unit, age

of partner relationship International Joint-

Venture, short-term

vs long-term focus

Adapted from (Zheng & Larimo, 2014)

On the contrary, a number of researches were done to find out the reasons of the failures of international joint ventures The common mistakes within international joint-venture environment are the lack of conflict management strategy, contingency planning and exit strategy (Stewart, 2011) A thorough preparation and tactical business plan may remain inadequate when partners are over-optimistic or too hurried with available chances in new markets Failure of international joint venture can also

be attributed to inconsistent strategies This occurs when the main objectives of both partners are not aligned or when one party alters their strategies without advising the others (Christensen, 2014) In other words, the management of control is extremely

essential for the performance of international joint ventures owing to the special features of the business Without taking financial and non-financial factors into consideration, success is not able to be achieved for international joint ventures

In this research paper, conflict and conflict resolution/management are selected as the factors that decide or influence the performance of international joint ventures These determinants greatly affect international joint ventures in the operation stage which is regarded as the existing circumstance of the Company The connection between conflict management and international joint-venture performance is demonstrated by some researchers from various perspectives (Lin & Germain, 1998; Fey & Beamish, 1999; Ding, 2997; Lieshout, 2013) The effect of conflict management on the performance of international joint ventures will be carefully studied later in the thesis

2.2 An investigation of conflict and conflict resolution strategies

Lately, other researchers have defined conflict in board terms Dreu defined that conflict is “the tension an individual and group experiences because of perceived differences between him or herself and another individual or group” (Dreu, 1999) Jehn and Bendersky (2003) said that conflict involves “perceived incompatibilities or

discrepant views among the parties involved” Nonetheless, Tjosvold (2006) argued that conflict is not always based on different goals and interests This definition creates negative effects on decision-making because people will be fast demotivated and forget to assess the situation critically It is proposed that conflicts should be regarded from different perspectives to eliminate destructive outcomes (Tjosvold, 2006)

The research of Dreu showed that competitive conflicts reflect win-lose situation and

it is probably to include opposing activities and goals because people tend to attack each other to obtain their intentions (Dreu, 1999) On the contrary, parties may get lots

of benefits from cooperative conflicts as people do not assume that they have incompatible goals and interests; instead, they tend to raise constructive ideas to rectify problems (Tjosvold, 2006) For example, accountants and managers in a Hong Kong company discussed in a cooperative manner and they figured out a solution for budget problems, reinforcing their relationship and enhancing financial performance (Poon, Pike, & Tjosvold, 2001)

Facts show that the presence of conflict is a common problem and unavoidable in any companies Conflict is referred to as a negative effect on the operations of companies, resulting in the misunderstanding among people, stimulating extreme arguments, destroying relationships or even ending organizations (Robbin, 2005) On the other hand, conflict is also positively taken as an indication of problem existence, creating plenty of opportunities, requiring creativity to figure out a better solution (Wilmot & Hocker, 1998; Daroczi; 2003) So as to manage unexpected circumstances, it is important to enhance conflict awareness and to strengthen conflict transcending skills not only in daily life but also in workplace More importantly, sources and types of conflicts should be initially addressed to select a proper approach and effective solutions

2.2.2 Sources of conflicts

Fisher (1990) showed that conflicts arise when business partners have different perspectives on needs, interests, views, values and goals There are 3 main sources of conflict in organizations: communication (caused by misunderstandings), structural problems (related to organizational roles) and personal reasons (occurring due to individual differences) (Robbin, 2005)

Besides, Moore in his study proposed 5 types of conflicts during joint projects: data conflicts occur when information is inadequate or considered differently; interest conflicts take place once there are limited resources (human, skills, finance, facilities, etc.); value conflicts appear owning to various perceptions and priorities of individuals; relationship conflicts are the result of ineffective communication, strong emotions or wrong assumptions; structural conflicts erupt because of instability in

control, ownership, authority or geographic distance (Moore, 1996)

Pham especially emphasized that difference in characteristics of parent companies, in regulations of host and home governments, cross-cultural problems are the causes of conflicts in Vietnamese-European international joint-ventures (Pham, 2013) Similarly, Lieshout figured out that conflicts between Dutch and Chinese international joint-venture partners took place owing to different views of doing a viable business, different perceptions in agreements and different cultural values (Lieshout, 2011)

“Different perceptions of reality and differences functional area knowledge and skills”

is found to be the causes of conflicts of international joint ventures in organizational level (Park & Ungson, 1997) Conflicts often appear in international joint-venture context and parties struggle to figure out solutions and strategies to transcend conflicts Even though the majority of the daily conflicts have been taken as negative circumstances, the result of each situation mainly relies on the way people manage and handle conflicts

2.2.3 Conflict management styles

Effective conflict management is referred to a success in “minimizing disruption stemming from the existence of a conflict and providing a solution that is satisfactory and acceptable” (Bercovitch, 1990) Eliminating destructive elements of every conflict situation and to assist the parties in controlling their incompatible goals is the motive

of conflict management An organization is run and joined by several people with different personalities, coming from different backgrounds Although they work in the same organization and environment, each individual still has different styles and approaches in rectifying the common issues Hence, to understand different kinds of conflict management styles is of importance

Thomas and Kilmann defined conflict management with two dimensions, that is to say, assertiveness and cooperativeness (Thomas & Kilmann, 1977) Assertiveness can

be explained as an attempt to satisfy one‟s own concern, while cooperativeness is an attempt to satisfy the concern of the others (Thomas & Kilmann, Developing a Forced-Choice Measure of Conflict-Handling Behavior: The "Mode" Instrument, 1977) Based on the above-mentioned 2 dimensions, Thomas came up with 5 conflict management styles as follows:

 Accommodating: allowing the other party to satisfy their concerns while neglecting your own concerns

 Avoiding: not paying attention to the conflicts and not taking any action to rectify them

 Competing: using formal authority or other power that satisfy your concerns without caring the others‟

 Compromising: trying to resolve a conflict by coming up with a solution that is partially satisfactory to both parties, yet totally unsatisfactory to either

 Collaborating: cooperating with the others to understand their viewpoints and showing your concerns to seek a win-win solution that is satisfactory to both parties

Figure 1: The model of 5 conflict management styles

2.2.4 Conflict resolution strategies

In accordance with the study of Rahim and Bonoma (1976), conflict handling strategies consist of dominating, obliging, avoiding, compromising, and integrating Lin and Germain (1998) developed 4 conflict management strategies that could be used in international joint-venture context, that is to say: problem-solving strategy, compromising strategy, forcing strategy, legalistic strategy

Problem-solving strategy is aimed at satisfying the need of all parties engaged in the business relationships by searching for a new effective solution Problem-solving

comprises open discussions, sharing ideas, opinions, and concerns This approach is suitable to rectify complex issues, but it requires both parties to spend a lot of time and make lots of efforts

Compromising strategy is an approach in which partners make efforts to search for middle ground solutions that fulfil both parties‟ needs With this strategy, partners

must give and take to obtain a common consensus Compromising can be utilized once partners have same bargaining power, balanced ownership and they are in need

of immediate solutions

Competing (forcing) strategy allows partners to try to achieve their interests in order

to dominate the decision-making process This approach may be used when partners are expertise and they assure that their methods are best to fight the problem

Legalistic strategy is making use of binding agreement or written contracts to obtain expected outcomes This approach seeks for fairness by examining legal documents

It is likely to engage legal authorizations and cost a remarkable fee

Table 3: Overview of conflict resolution strategies

Strategy Problem-solving Compromising

Forcing strategy Legalistic

Features

Concerning for

and other‟s benefits

reducing one

Benefits benefits

with legal action

Advantages Maintaining both

Promoting

trust and rapport

Disadvantages

Time and resources Willingness to Partner Expensive

consuming scarify some

relationship

of the benefits be damaged Partner

from the other

relationship may

Partners

also be damaged

Adapted from (Nguyen, 2011)

Many studies have lately adopted the model of Thomas to determine the conflict management styles with regard to different countries, regions or cultures (Wang & Lin, 2005; Boonsathorn, 2007; Gire & Cartment, 1993; Chiu & Kosinki, 1994) The goal of examining conflict management styles is to find out how people coming from different backgrounds manage and deal with conflicts, thus proposing recommendations to cross-cultural organizations cultural awareness, conflict awareness as well as a range of survival strategies Some studies were carried out in order to make comparison between the conflict management styles of Western and that of Eastern countries, the others concentrated on 2 or more chosen nations

Moreover, some researches also analyzed the preferred conflict management styles

of Asian or European nations to point out the dissimilarities among nationalities

Wang and Lin discovered that Western managers have tendency of choosing forcing and problem-solving styles whereas Asian managers tend to prefer compromising styles so as to deal with conflicts (Wang & Lin, 2005) The respondents in this study are managers from international joint ventures having different nationalities from China, Hong Kong, Taiwan, Singapore, Thailand, Malaysia, Macau, America, England, Germany, France, The Netherlands, Canada, Belgium, Switzerland, Austria, Denmark and Sweden Based on larger scale survey, the outcome of this research proposed that Westerners should learn how to adapt harmony approach, utilizing confrontation styles less, and Asians are advised to manage conflicts in a legalistic way like Western peers do (Wang & Lin, 2005)

Some findings from comparison studies have shown that people from various nations have different preferences on conflict management styles For example, the Thai people preferred integrating and compromising style more than the Americans (Boonsathorn, 2007) The Canadian preferred non-confrontational styles such as avoiding or compromising more than the Nigerian did (Gire & Cartment, 1993) The Americans utilized integrating styles less than the Mexico counterparts (Gabrilidis, 1997) Chiu and Kosinski discovered that the Chinese preferred avoiding conflict style than the American did (Chiu & Kosinki, 1994) It can be explained that the American have the tendency of expressing more aggressively and more directly than the Chinese

do

Nevertheless, Onishi & Bliss (2006) argued that comparing Asians and Westerners conflict management styles are homogenous and stereotype Thus, some researches examined the dissimilarities among Asia nations concerning conflict management approaches McKenna and Richardson pointed out that the Chinese and Indians

preferred compromising style, while the Malays have the tendency of utilizing collaborating styles (McKenna & Richardson, 1995) Ting-Toomey discovered that the Chinese and Taiwanese like avoiding style better than the Korean and Japanese (Ting-Toomey, 1991) Likewise, another research demonstrated that the Chinese had the tendency of becoming more cooperative in managing conflicts than Japanese Onishi and Bliss via their study has lately indicated that the Japanese and Vietnamese have a stronger preference in the competing style than the Thai and Hong Kong people (Onishi & Bliss, 2006)

The conflict management studies have been mainly implemented in international business settings because this is favorable environments which involve various personalities, nations as well as cultures Apart from multinational corporations and alliances, the researchers have paid lots of attention to international joint-ventures when it comes to conflict management analysis, as one international joint-venture is often combined by two parent firms from different nations Therefore, it would be easier to observe and highlight the differences of preferences through studying conflict management in international joint ventures rather than in multinational companies or the other partner relationships

2.3 The impact of conflict resolution strategies on performance of joint ventures between foreign partners

Conflicts can be either destructive or constructive, and it all depends on the method people handle issues General speaking, a comprehensive conflict management strategy will change the partnership from competitive relationship to cooperative orientation Hence, it is remarkably crucial for international joint ventures to understand conflict management This part of this Chapter will give a description of the impact of conflict resolution strategies on performance of international joint-

venture companies as well as to make a review on the conflict management methods used in international joint-venture companies

The study of Lin and Germain was conducted to investigate the connection between conflict management and international joint-ventures‟ performance Four conflict management strategies (problem-solving, compromising, forcing, and legalistic) were used to test the performance of Chinese – American joint venture companies The outcome indicated that the problem-solving and legalistic strategies had the strong impacts on partner satisfaction Nevertheless, this element also relies on cultural similarity and age of international joint-venture companies The research proposed that managers of international joint ventures should protect and develop partner relationship by sharing their ideas positively as well as respectfully listening to partners In addition, conflict management skills will be honed over years and projects The more experiences they have in international joint-venture partnership, the more problems can be rectified, and the more success can be obtained with satisfaction (Lin & Germain, 1998)

Figure 2: The role of conflict resolution strategy

Source (Lin & Germain, 1998)

Open problem-solving and compromising solutions not only help partners get an agreement but also impact the success of international joint-venture companies in the long run Partners will be satisfied with the overall performance when the problem-

strategy is achieved, and it will create more positive outcomes for organizations (Campbell, 1988) Apart from that, the compromising strategy is proved to be effective and practical in some circumstances Partners are advised to balance their concerns and the other party‟s concerns by using “give and take” formula, in order to obtain common objectives and enhance organizational performance (Ganesan, 1993)

On the contrary, forcing and legalistic strategy are taken to be win-lose orientation in conflict management process When one party controls or mainly influences the relationship of international joint ventures, they have the tendency of forcing the other party and make use of power to fight a conflict This will reduce the possibility to find out root causes of conflicts and remain frustrations in the long term (Schaan, 1988)

As a matter of fact, forcing reveals weak management and ineffective partnership The forcing is only last resort in some situations when one partner continuously avoids conflict, and this takes its toll on the whole management process When the legalistic strategy is utilized in conflict management, partners may seek for fairness and solutions by resorting written contracts or advanced agreement This approach is useful when the problem is extremely complex and requires legal binding However, using legalistic strategy is costly and worsens problems, which influences trust and the managerial relationship of international joint ventures (Chan, P S., Pollard, D., & Quek)

A conflict management approach developed by that Blake and Mouton stresses consultation-based interventions, open communication, greater involvement in problem-solving and decision-making The researchers proposed that the consultation-based method should be done by organizational consultants, who have no personal interests in the conflicts, but possess adequate information and experience to offer an appropriate model of conflict management The method may include coaching activities, educational courses, observations, surveys or questionnaires The advantages of using consulting activities are preventing bias toward conflict situation, upgrading individual knowledge and skills, providing a supportive and learning environment In other words, the interventions of consultation-based approach are

highly recommended in situations where international joint-ventures try to obtain effective conflict management (Blake & Mouton, 1965)

The majority of researches concentrates on how international joint venture can avoid conflicts between partners However, Fey and Beamish argued that conflicts should be confronted and resolved, not to be avoided because it is vital issues to managerial relationship as well as international joint-ventures‟ overall performance The practical study of Fey and Beamish created nine strategies for managing conflicts and minimizing negative impacts on conflicts in international joint ventures It is said that communication is a decisive factor in managing conflict Conflict resolution strategy should be formed as standard procedures to make sure that people can follow and use them as guidance So as to improve effective communication, the study suggested that partners of international joint ventures should show understanding of the other party‟s perspectives and give an explanation on why they see issues in a different manner Additionally, the dissimilarities in national cultures and organizational climates always exist in the environment of international joint ventures It is, therefore, important to have tolerance and understanding about the other party‟s traditions and

cultures A general manager engaged in this research stated that: “Over the years we have developed a good system for learning from past conflicts After a conflict is resolved, we have a standard procedure that must be followed A memo should be written describing why the conflict occurred, what the conflict was, and how the conflict was solved We feel that having a file of such memos to refer to helps us avoid some conflicts and know how to solve conflicts that emerge more effectively I have personally used the file several times and found it very helpful There is no reason to make the same mistake twice.” In other words, international joint ventures should take previous issues as lessons and openly discuss solutions to confront future conflicts

(Fey & Beamish, 1999)

2.4 The impact of cultural dimension difference on conflicts in joint ventures between foreign partners

2.4.1 The dimensions of national cultures

Culture was defined by Geert Hofstede as “the collective programming of the mind which distinguishes the members of one group or category of people from another” (Hofstede, 1991) Culture consists of 6 levels which are national-societal culture,

organizational culture, identity group culture, functional culture, team culture and individual culture (TMCORP, 1991) On national level, culture is taken as behaviors and perceptions of people from a nation, comprising knowledge, experiences, beliefs, values, attitudes, languages, religions, cuisine, social habits, etc Each nation has a different culture which has been formed throughout many centuries of human history Thus, people from different countries have the tendency of thinking and acting differently even while working on the same task in the same environment

Several pieces of research have been conducted to examine cultural differences The work of Hofstede has been regarded as one the most comprehensive studies which analyzed the influence of national cultures on values in the workplace According to Hofstede, there are 6 dimensions of national culture: power distance index (PDI), individualism versus collectivism (IDV), masculinity versus femininity (MAS), uncertainty avoidance index (UAI), long-term orientation versus short-term orientation (LTO), indulgence versus restraint (IND) (Hofstede, 1991) The study of Edward Hall (1979) developed two dimensions (low context culture and high context culture) to describe the cross-cultural communication In the working setting, people

in low context cultures (North America and Western Europe) have the tendency of selecting the direct manner in communication which relies mainly on words In contrast, the communication style of high context cultures (Asia, Middle East and Africa) is indirect and formal; words are not as important as tone of voice, facial expression, gestures and attitude in negotiation (Hall, 1979)