International Joint Venture Termination: An Empirical Investigation

Termination rates of international joint ventures (IJVs) are high, and two distinct outcomes are established 1) termination is intended or 2) termination is unintended. However, most studies do not specify the direct causes of IJV termination. The failure of extant research to recognize the difference between intended termination and unintended termination has left a significant gap in the literature. The purpose of this article is to contribute to a better understanding of IJV exit literature by differentiating empirically between intended and unintended IJV termination. The empirical data for the article stems from data from the project portfolio of a Danish Investment Fund for Developing Countries with a total of 773 investments. A number of hypotheses are established from the literature review and tested related to the empirical data. The result indicates that the most important factor in successful IJV termination is the length of the investment and to some extent the size of the investment. The psychic distance plays a negative role for investments in the African region while a general recession will lead to a lower success rate.