Competitive consequences of interfirm collaboration: How joint ventures shape industry profitability

Recent international business research on international joint ventures focuses on how firms can use such ventures for knowledge access and learning to enhance their competitiveness, thereby increasing competition in the industry. By contrast, research in industrial organization economics has observed that firms can also use joint ventures in various ways to attenuate competition. In this paper, we join these two streams of research to investigate the conditions under which joint ventures reduce or enhance competition by empirically testing the effects of different types of joint ventures on industry profitability. Our results suggest that joint ventures can be pro-competitive or anti-competitive, depending on whether or not they are formed between competing firms, represent foreign market entry, and operate in relatively concentrated industries. Our paper shows the importance of adopting a contingent approach to evaluating the competitive implications of joint ventures, and it also points to the value of reinvigorating international business research on the competitive context and consequences of interfirm collaboration.

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