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INTERNATIONAL JOURNAL OF

PROJECT
MANAGEMENT
International Journal of Project Management 25 (2007) 799–806
www.elsevier.com/locate/ijproman

Effect of host country and project conditions

in international construction joint ventures
Beliz Ozorhon a, David Arditi a,*
, Irem Dikmen b, M. Talat Birgonul b

a
Department of Civil and Architectural Engineering, Illinois Institute of Technology, Chicago, IL 60616, USA
b
Department of Civil Engineering, Middle East Technical University, 06531, Ankara, Turkey

Received 26 December 2006; received in revised form 22 March 2007; accepted 1 May 2007

Abstract

Joint ventures (JVs) have become popular because of their importance as a strategic alternative in global competition. International
joint ventures (IJVs) are difficult to manage due to their complex structures involving more than two entities having different and com-
peting objectives and strategies. Since each construction project is unique, project-specific factors are significant for the success of an IJV
as well as the risks associated with the host country in which the IJV operates. In this study, the impact of host country conditions and
project characteristics on IJV performance is investigated through a questionnaire survey. IJV performance is defined as a three-dimen-
sional construct considering the performance of the project, the IJV partners, and the IJV organization itself. The results of the study
suggest that project-related factors have a great impact on IJV performance. But they failed to provide evidence that IJV performance is
affected by host country related risks.
Ó 2007 Elsevier Ltd and IPMA. All rights reserved.

Keywords: Joint ventures; International factors; Construction industry; Project management

1. Introduction increasingly common since the 1970s [4–6]. The complexity

Inter-firm collaboration has become a crucial compo-
nent of the pursuit of international competitive advantage
as market complexity is growing. With increased globaliza-
tion, alliances between multinational firms are becoming
popular [1]. Joint ventures, a special type of strategic alli-
ance, offer a unique opportunity to combine the distinctive
competencies and the complementary resources of partici-
pating firms. An international joint venture (IJV) is defined
as a joint venture that involves at least two organizations
that contribute equity and resources to a semi-autonomous
legally separate entity [2] with at least one partner head-
quartered outside the JV’s country of operation [3].
Although IJVs are not a new occurrence in international
business, the trend towards forming IJVs has become
*
Corresponding author.
E-mail addresses: ozorhon@iit.edu (B. Ozorhon), arditi@iit.edu
(D. Arditi), idikmen@metu.edu.tr (I. Dikmen), birgonul@metu.edu.tr
(M.T. Birgonul).
of the venture is caused by the presence of two or more
partner organizations usually of different cultures, which
may be competitors as well as collaborators [7,8].
The majority of the current literature on IJVs concentrate
on manufacturing industries. IJV theories have not been
extensively investigated empirically in the construction
industry, except for few studies associated with the risks of
IJVs in construction [9–12], the factors affecting the perfor-
mance of IJVs [13–15], and management issues in IJVs [16–
18]. There are numerous advantages to undertaking IJVs
including greater access to local markets and engineering
consultants; improved capabilities in terms of size and scope
of work carried out; broadened expertise; an ability to select
and obtain suitable staff relatively easily as opposed to
recruiting from the external market; access to new areas of
the world without having to carry all the risk; and an ability
to take on and maintain an international workload [19].
Despite the benefits associated with IJVs, the failure rate
of IJVs is high [20]; higher than are those for domestic joint

0263-7863/$30.00 Ó 2007 Elsevier Ltd and IPMA. All rights reserved.

doi:10.1016/j.ijproman.2007.05.003
800 B. Ozorhon et al. / International Journal of Project Management 25 (2007) 799–806
ventures because IJVs generally face greater challenges. For
example, many IJV partners must monitor operations in set-
tings with which they have little familiarity (e.g. markets, dis-
tribution systems, political and legal systems); they must
often cope with significant geographical separation; and they
must bridge cultural boundaries [21]. The core objective of
the study presented in this paper was to explore the impact
of host country conditions and project-specific issues on
IJV performance. IJV performance was defined in this study
to reflect three dimensions: ‘‘project performance’’, an objec-
tive indicator that measures the extent to which project
objectives are realized in terms of schedule, cost, quality
and client satisfaction; ‘‘partner performance’’, a subjective
indicator that measures the extent an IJV partner’s objec-
tives are met; and ‘‘performance of the IJV management’’,
a subjective measure that indicates the effectiveness of man-
agement control of the IJV as perceived by an IJV partner. A
questionnaire survey was administered to construction com-
panies that have established IJVs with foreign partners. In
this study, it was hypothesized that hospitable host country
conditions and a strong ability to handle project-related fac-
tors have a positive effect on IJV performance.
2. Impact of host country on IJV performance
International construction projects involve multinational
participants from different political, legal, economic, and
cultural backgrounds [22]. When firms enter an international
market, they are likely to face a high level of uncertainty.
Those uncertainties are caused by political, economic, struc-
tural, policy, environmental, market, production, and social
risks [10,23] as well as completion, operational, and regula-
tory risks [24]. The environment under which IJVs operate
was found to influence their performance [25].
Considering the overlaps among these factors, ‘‘host
country conditions’’ in this study was defined by political
stability, macroeconomic conditions, strength of the legal
system and relations with the host government. These fac-
tors cover all the factors mentioned in the literature.
 Political risk is defined as the occurrence of politically
motivated events that affect the IJV’s ability to operate
effectively in the host country [26]. It includes inconsis-
tency in policies, changes in laws and regulations, restric-
tions on fund repatriations, and import restrictions.
 Macroeconomic conditions such as fluctuations in eco-
nomic conditions, inflation, and foreign exchange rates
affect the overall performance of the construction indus-
try, and are also critical to the performance of IJVs.
 The strength of the legal system in the host country is
important in the formation and operation of an IJV as
it is the legal system that regulates the management of
claims, disagreements, conflicts, disputes and any and
all contract related problems.
 The quality of the relations between IJV partners and the
host government may be critical for the success of an IJV,
especially for government projects, since one of the prin-
cipal market characteristics frequently cited as influenc-
ing IJV performance is how policies are implemented by
host country governments [27].
Based on the above discussions, it was hypothesized that
political stability, strong macroeconomic conditions, and a
strong legal system in the host country, and strong rela-
tions between IJV partners and the host government
enhance IJV performance. In addition, host country condi-
tions are expected to influence the project-specific factors
that are discussed in Section 3. Survey respondents were
asked to rate the extent of these issues in their projects
on a 1–5 point Likert scale.
3. Impact of project related factors on IJV performance
Although some companies may cooperate with the same
partner in several projects, IJVs in the construction indus-
try are considered to be project-based rather than continu-
ous collaborations. Unlike many other industries,
construction is a complex blend of disparate needs, skills
and techniques that are difficult to coordinate. It is widely
accepted that a construction project is subject to more risks
than other business activities because of its complexity [11].
The risks associated with construction businesses may be
split into those that are related to the management of inter-
nal resources and those that are prevalent in the external
environment. Internal factors are relatively more controlla-
ble and vary from project to project. External risks are rel-
atively uncontrollable, but they need to be continually
scanned and forecasted in order to develop company strat-
egies for managing their impact [28]. While host country
conditions (Section 2) constitute external risks, project-
related factors (this section) represent internal risks.
In this study, project-related factors cover project risks
that are frequently reported in the literature as significant
[10,29,30]. These include completeness of payments by
the client; tolerance/flexibility of the client; relations with
other project parties; competence of other project parties;
completeness of project definition; availability of resources;
technical complexity of the project; impact of factors such
as weather and soil conditions; completeness of the design;
completeness of the contract documents; handling the pro-
ject requirements in terms of quality, environment, health
and safety; penalty sanctions concerning duration; and
effectiveness of the project management functions such as
planning, coordination, monitoring, and controlling. The
above listed project-related factors were hypothesized to
affect IJV performance. Survey respondents evaluated these
factors on a 1–5 point Likert scale.
4. Performance indicators
The measurement of the performance of strategic alli-
ances has been an important research topic in the field of
international management [31,32]. According to Chowdh-
ury [33], no consensus has yet emerged on an appropriate
 B. Ozorhon et al. / International Journal of Project Management 25 (2007) 799–806 801

definition and measurement of IJV performance. There are of directors level, operational control at general man-
two main difficulties in evaluating the success of IJVs. The agement level, and organizational control imposed by
first one is to decide whose performance should be the partners in forming the venture’s organizational
assessed, i.e., a partner, the IJV itself, or the operation/pro- structure, processes and operating routines.
ject. The second difficulty is to decide whether IJV perfor-
mance should be measured using subjective or objective
indicators or a combination. To overcome these difficulties, 5. Research methodology
a three-dimensional construct was proposed in this study
that involved ‘‘project performance’’, ‘‘partner perfor- This research tests the extent to which IJV performance
mance’’, and ‘‘performance of the IJV management.’’ is affected by the conditions of the host country where the
project is undertaken and the ability of the IJV partners to
 Project performance is defined as the extent to which the handle the project-specific characteristics.
predefined project objectives are realized. IJVs in con-
struction are essentially formed to execute project-based Table 1
activities. Part of the operational success of an IJV in the Latent and constituent variables
construction industry can be defined in terms of project Variables Factor
success. Most commonly cited project goals are related loading
to time, budget, and functionality/quality considerations Conditions of the host country
[34] in addition to satisfaction of clients [35]. In this Level of political stability in the host country 0.908
research, it is an objective measure of project targets Strength of macroeconomic conditions in the host country 0.768
such as completion of the project on schedule, within Strength of the legal system in the host country 0.548
Strength of the relations between IJV partners and the host 0.234
budget, in good quality, and with maximum client country
satisfaction.
 Partner performance measures the extent to which preset Project-related factors
Completeness of payments by the client 0.504
company objectives are realized as a result of a project Tolerance/flexibility of the client 0.656
undertaken through an IJV. The assessment of IJV per- Relations with other project parties 0.348
formance is to some extent related to the degree to Competence of other project parties 0.576
which the objectives of the IJV partners are achieved Completeness of project definition 0.883
[6]. Besides fulfilling financial or operational objectives, Availability of resources 0.714
Technical complexity of the project 0.118
a company may get involved in an IJV for a number Impact of external factors such as weather and soil 0.389
of additional motives such as to enhance organizational conditions
learning [36], to improve the strategic positioning of the Completeness of design 0.760
company, or to gain presence in new markets [37,38], to Completeness of the contract 0.904
participate in overseas projects, to maintain an overseas Handling the project requirements such as quality, 0.373
environment, health and safety
presence particularly when the market is low in the Penal sanctions for duration 0.489
home country, to spread the financial risk, to bring in Effectiveness of the project management functions 0.759
outside expertise, to make use of an existing geographi- (planning, coordinating, monitoring, controlling, etc.)
cal or regional base, and to access greater manpower Project performance
from their partners [19]. In this study, the major objec- Completing the project within budget 0.728
tives of a construction company when forming an IJV Completing the project within schedule 0.779
are listed as sharing risks, sharing resources, reducing Achieving required quality 0.682
Satisfying the client 0.915
costs, enhancing competitiveness, entering international
markets, and learning managerial and technical skills Partner performance
from partners. Sharing risks 0.612
Sharing resources (financial, etc.) 0.591
 Performance of the IJV management is defined by the Decreasing costs 0.710
effectiveness of control over the IJV operation. Control Learning management skills from your partner 0.658
is defined as the influence exercised by the partners over Transferring technology/learning technical skills from your 0.554
the management of the venture [3,8,39,40]. Since control partner
is a multidimensional construct [3], a wide array of def- Facilitating internationalization (market entry) 0.528
Increasing competitiveness (get the job) 0.296
initions and measures are available to researchers, such Creating long-term relationships 0.532
as those proposed by Schaan [39], Geringer and Hebert Making more profit 0.734
[3], and Merchant [41]. Yan and Gray [42] defined the
Performance of the IJV management
scope of management control in terms of strategic, oper- Effectiveness of the strategic (upper management) control 0.714
ational and structural dimensions. Adopting a similar of the IJV
approach, ‘‘performance of IJV management’’ was mea- Effectiveness of the operational (daily activities) control of 0.695
sured in this study by the level of effectiveness of man- the IJV
Effectiveness of the organizational control of the IJV 0.954
agement control in terms of strategic control at board
802 B. Ozorhon et al. / International Journal of Project Management 25 (2007) 799–806
A questionnaire was designed to assess host country
conditions and project-related factors that are unique for
each construction project. The objective of the survey
was to explore the relationship between these external
issues and the performance of the IJV. This survey was
administered through face-to-face interviews and via e-mail
to the Turkish partners of 68 IJVs. The projects were
undertaken in Turkey or in a foreign country. Considering
the fact that medium-to-large companies are likely to
undertake IJVs with more frequency compared to smaller
firms, the target population was set as the members of
the Turkish Contractors Association (TCA). The number
of IJV projects completed by Turkish construction compa-
nies with foreign partners in the last ten years is around 110
[43]. A total of 68 completed questionnaires were returned
for data analysis, 48 of which were administered through
face-to-face interviews and 20 via e-mail. Around 60% of
the target population was covered in this study. Respon-
dents were required to rate (using a 1–5 point Likert scale)
the host country conditions, project-related factors, and
‘‘project performance’’, ‘‘partner performance’’, and ‘‘per-
formance of the IJV management’’ by taking into account
the characteristics of the construction project completed
via the IJV in which they were involved. The latent vari-
ables and their constituent variables are shown in Table
1. Respondents stated the extent of the favorability of the
host country conditions and project related-factors in their
IJV projects; they also rated the extent to which the com-
pany and project objectives were realized in addition to
specifying the level of effectiveness of the IJV organization.
6. Data analysis
The data collected from a total of 68 questionnaires
were analyzed using a software package called EQS 6.1, a
structural equation modeling (SEM) tool. SEM is a multi-
variate statistical technique used to examine direct and
indirect relationships between one or more independent
variables and one or more dependent variables, which
may be continuous or discrete. SEM is also referred to as
causal modeling, causal analysis, simultaneous equation
modeling, analysis of covariance structures, path analysis,
dependence analysis, or confirmatory factor analysis
(CFA) [44].
The general form of SEM consists of a measurement
model that specifies how the hypothetical constructs are
measured in terms of the observed variables, and that
establishes the validity and reliability of the observed vari-
ables; and a structural model that explores the causal rela-
tionships between the validated constructs, and that tests
the hypothesized causal effects [45].
The first step in constructing a structural equation
model involves specifying the relationships among the
latent variables and determining how the latent variables
will be measured. Also, the validity of the hypothesized
constructs is tested in this step. Validity is the degree to
which an instrument measures the construct under investi-
gation. Construct validity is achieved when a construct
passes both qualitative and empirical validity tests. Con-
tent validity is a qualitative test and refers to the degree
to which the construct is represented by indicators that
cover the domain of meaning of the construct [46]. Since
there is no formal statistical test for content validity,
researcher judgment and insight must be applied [47].
The indicators of both ‘‘host country conditions’’ and
‘‘project-specific factors’’ were initially derived from the lit-
erature; they were then revised by professional and aca-
demic experts who participated in pilot studies to
establish content validity for these constructs.
Empirical validity of the constructs is achieved by
observing factor loadings, internal reliability values, and
fit indices. Fig. 1 shows the factor loadings corresponding
to the six constructs (host country conditions, project-spe-
cific factors, project performance, partner performance,
performance of the IJV management, and overall IJV per-
formance) used in the initial model. Factor loadings are
important in CFA because indicators that do not have sta-
tistically significant loadings are to be deleted from the
model.
The initial model is composed of all the variables defined
in Fig. 1 and tests the hypothesized relationships between
the two input constructs (host country conditions, and pro-
ject-specific factors) and IJV performance. Model analysis
starts with assessing the reliability of the six constructs used
in the model. Reliability is traditionally defined as the con-
sistency of measurement. From a structural perspective, the
reliability of a measure is the magnitude of the direct rela-
tions that all variables (except the error terms) have on that
measure [45]. Internal consistency, which estimates how
consistently individuals respond to the items within a scale,
is measured by Cronbach’s alpha coefficient that is an
index of reliability associated with how well a set of vari-
ables measures a single unidimensional latent construct.
In the initial model, Cronbach’s alpha values were calcu-
lated as 0.716, 0.869, 0.858, 0.819, 0.837, and 0.904 for
‘‘host country conditions’’, ‘‘project-specific factors’’, ‘‘pro-
ject performance’’, ‘‘partner performance’’, ‘‘performance
of the IJV management’’, and ‘‘overall IJV performance’’,
respectively. These reliability values are satisfactory since
the Cronbach’s alpha coefficients are all above 0.70, the
minimum value recommended by Nunally [48]. The factor
loadings of the respective variables are presented in Table
1. Higher Cronbach’s alpha coefficients were obtained for
the ‘‘host country conditions’’ construct and ‘‘project-spe-
cific factors’’ by deleting from the model two indicators
with low factor loadings that were not statistically signifi-
cant at 5%, namely ‘‘relations with the host country gov-
ernment’’, and ‘‘technical complexity of the project’’ (see
Fig. 1). The new Cronbach’s alpha coefficients for these
constructs were found to be 0.775, and 0.880, respectively,
a little better than before (0.716 and 0.869). The results sug-
gest that the internal consistencies of the constructs are
enhanced when ‘‘host country conditions’’ is represented
 B. Ozorhon et al. / International Journal of Project Management 25 (2007) 799–806 803

Budget
.728
Schedule
Project .779
Political stability performance Quality
.915 .682
.768 Host country .915
Macroeconomic conditions conditions Client satisfaction

.537
Strength of legal system
Strategic control
.714
Performance of .695 Operational control
the IJV
management
.954 Organizational control
.952

Completeness of
payments by the client .861

.507
Tolerance/flexibility of .312 Sharing risks
Overall IJV
the client .659 performance
Sharing resources
.612
Relations with other
project participants .348 .822 .591 Decreasing costs

Competence of other .710

project participants .577 Learning management
skills from IJV partner
Partner .658
Completeness of project performance
definition .881 .712 Transferring technology
.554 from IJV partner
Availability of .715 .528 Facilitating
resources
Project-related internationalization
.386 factors
Impact of external .296
/environmental factors Increasing
.757 competitiveness
Completeness of design .532
.904 Creating long-term
.734
relationships
Completeness of the
contract
.368 Making more profit

Strictness of the project

requirements .487

Penal sanctions
regarding time
.759

Performance of the
project management

Fig. 1. The modified structural equation model with factor loadings and path coefficients.

by three rather than four indicators and ‘‘project-specific
factors’’ by 12 rather than 13 indicators while the remain-
ing constructs remain intact.
The modified model is shown in Fig. 1. The numbers on
the light arrows in Fig. 1 represent the new factor loadings
while the heavy arrows originating from the input con-
structs and ending in ‘‘overall IJV performance’’ indicate
the direction of the influences between the parameters of
the model. The numbers on these heavy arrows represent
the path coefficients. Path coefficients are equivalent to
regression weights, except that in structural equation mod-
eling there is no intercept term. All path coefficients are sta-
tistically significant at 5%, except for the influence of ‘‘host
country conditions’’ on ‘‘overall IJV performance’’; that is
why it has been eliminated from the initial model (shown
by a dashed line in Fig. 1).
When the path coefficients are examined, it is observed
that ‘‘project-specific factors’’ affect ‘‘overall IJV per-
formance’’ largely and positively with a coefficient of
0.712. On the other hand, the influence of ‘‘host country
804 B. Ozorhon et al. / International Journal of Project Management 25 (2007) 799–806
Table 2
Fit indices for the model
Recommended Initial Final model
value model
Non-normed fit index 0 (no fit)–1 0.685 0.730
(NNFI) (perfect fit)
Comparative fit index 0 (no fit)–1 0.691 0.750
(CFI) (perfect fit)
Goodness of fit index 0 (no fit)–1 0.676 0.723
(GFI) (perfect fit)
v2/degree of freedom Between 1 and 2 901/ 768/
489 = 1.843 428 = 1.794
conditions’’ was found to be insignificant. However, ‘‘host
country conditions’’ have an indirect effect on ‘‘overall IJV
performance’’ since they moderately influence ‘‘project-spe-
cific factors’’ with a coefficient of 0.312 that is significant at
5%. The Cronbach’s alpha coefficient of the final model in
Fig. 1 was found to be 0.928, well beyond Nunally’s [48]
recommendation of 0.7, and slightly better than the one
obtained with the initial model that took into consideration
all variables (0.926). The reliability coefficient rho, which is
the square of the multiple correlation coefficient was found
to be 0.945 for the final model whereas it was slightly lower
(0.937) for the initial model. The overall fit of the initial
and modified model can be assessed by examining good-
ness-of-fit indices. The results are presented in Table 2.
These values provide evidence that the fit between the final
model and the data is quite satisfactory.
7. Discussion of findings
A structural equation model has been proposed to eval-
uate the impact of external factors such as the conditions of
the host country of operation and project-specific issues on
IJV performance. ‘‘Project performance’’, ‘‘partner perfor-
mance’’ and ‘‘performance of the IJV management’’ have
been set as indicators of performance that are complemen-
tary. The internal reliability of two of the six constructs
(‘‘host country conditions’’ and ‘‘project-specific factors’’)
and of the initially proposed model was improved by elim-
inating variables with low factor loadings that were not sta-
tistically significant at 5%. The reliability of the ‘‘overall IJV
performance’’ construct was observed to be 0.904, which
justifies the use of a three-dimensional performance mea-
sure. The reliability coefficients of the revised constructs
and of the revised model are highly satisfactory. The good-
ness-of-fit indices of the model (Table 1) are also quite sat-
isfactory considering the exploratory nature of the study.
One reason why the goodness-of-fit indices are not closer
to 1 (perfect fit) is because only a portion of the IJV perfor-
mance may be explained by external factors. There are
indeed other parameters that influence the performance of
an IJV directly such as the strategic and organizational
issues concerning the IJV organization, inter-partner fit,
and inter-partner relations, that were beyond the scope of
this study. In addition, since goodness-of-fit indices are
affected by sample size [49], a larger sample than the 68
cases used in the study could yield higher fit indices.
CFA indicates that ‘‘project performance’’, ‘‘partner
performance’’, and ‘‘performance of IJV management’’
are appropriate measures of IJV performance since all
three constructs have high factor loadings that are signifi-
cant at 5% and contribute positively to the definition of
‘‘overall IJV performance’’. Again, based on factor load-
ings, it can be stated that client satisfaction is the predom-
inant indicator of ‘‘project performance’’; effectiveness of
control over IJV’s organizational management is dominant
in measuring ‘‘performance of IJV management’’; and
increasing profit/reducing cost are the top two variables
of ‘‘partner performance’’. All three of these findings are
well represented in the literature and are not contradicted
in any study [12,16,30,50,51].
The results of the SEM model suggest that ‘‘overall IJV
performance’’ is highly associated with project-specific fac-
tors. CFA results also point out that almost all project-
related variables have high factor loadings and therefore
contribute to IJV performance extensively. The large effect
of project-specific factors is also supported by Mohamed
[13,52] who found that project-related risks have strong
and negative effects on venture performance. He asserts
that the more project-related risks the venture has to deal
with, the less certain the operating environment becomes,
and the worse it will perform. The strong impact of pro-
ject-related risks on IJV performance reinforces the impor-
tance that must be assigned by organizations to the
development and adoption of risk management strategies,
via which risk sources and factors are identified, evaluated,
and addressed in a proactive manner [52]. Among the 13
project-related variables considered in this study, complete-
ness of the contract, completeness of project definition, and
completeness of design are the most significant indicators
based on their factor loadings. This finding demonstrates
the importance of the quality of contract documents
including project definitions, legal terms, specifications,
design instructions, and implementation processes. This
implies that the clarity and completeness of the contract
documentation before a project starts are critical for pro-
ject success. Therefore, partner companies should make
sure that the rights and responsibilities of the partners
are fully defined in the contract, project requirements and
specifications are complete, and there are no uncertainties
associated with the design. Issues concerning the project
management team, the other project participants, and the
necessary resources to complete the project are of second-
ary importance, yet ability to coordinate the relations
among project parties and effectiveness of management
functions help companies achieve success.
It is surprising that data analysis did not provide any
evidence of a significant relationship between ‘‘host coun-
try conditions’’ and ‘‘overall IJV performance’’. A similar
result was obtained by Mohamed [13] who found that con-
trary to what was hypothesized, risks associated with host
government appear to have no significant direct relation-
 B. Ozorhon et al. / International Journal of Project Management 25 (2007) 799–806
ship with joint venture performance. It is argued that host
country conditions may have an indirect influence on IJV
performance through other variables. For example, politi-
cal instability in a country may or may not affect a partic-
ular construction project, but might influence the
construction market or an associated market, which in turn
might affect the project under consideration. Therefore, by
extension, projects are likely to be impacted by the host
country environment and the specific market environment
[53]. In this study, host country conditions have a moderate
influence on project-specific factors and therefore they indi-
rectly affect IJV performance. This finding is supported by
Mohamed’s [13] and Hastak and Shaked’s [53] studies.
Based on factor loadings, ‘‘political stability’’ and ‘‘macro-
economic conditions in the host country’’ appear to exten-
sively affect project-related factors, which in turn impact
‘‘overall IJV performance’’.
8. Conclusions
Construction companies are able to exploit business
opportunities and enter new markets abroad through the
formation of IJVs. Considering the high failure rates of
IJVs [20], research has focused on the assessment of IJV
performance in the last few decades. But only strategic
and organizational issues regarding the partners and the
IJV organization have received attention from researchers.
Yet, one of the reasons why such international collabora-
tive arrangements are difficult to manage is because the
IJV is operating in a different environment, i.e., a different
host country and different project conditions. Indeed, in
construction, IJVs are project-based and each construction
project as well as the location of the project is unique. In
this study, the effects on IJV performance of (1) the condi-
tions of the host country where the IJV is operating and (2)
project-specific factors are investigated.
A questionnaire survey was administered to the Turkish
partners of 68 IJVs and the collected data were analyzed
using structural equation modeling to compare the effects
of host country and project-specific characteristics on IJV
performance. A conceptual model was proposed where
the ‘‘overall IJV performance’’ construct has three dimen-
sions, namely ‘‘project performance’’, ‘‘partner perfor-
mance’’, and ‘‘performance of the IJV management’’. The
reliability coefficients of the constructs used in the final
model exceed the minimum recommended value, and the
fit indices of the final model are satisfactory.
The results suggest that project-specific factors are
highly associated with IJV performance, which supports
the view that each construction project is unique and
appropriate strategies should be developed to handle the
particular risks and problems associated with the project.
Given the variables that control the ‘‘project-related fac-
tors’’ construct, this can be achieved by making sure that
the owner has a clear idea of the expected product and
issues clear instructions to designers, who in turn produce
a complete set of design documents. The IJV will benefit
805
if the contract between the owner and the joint venturers
is unambiguous and the duties, responsibilities and liabili-
ties of the parties are clearly stated at the start of the pro-
ject. Strong project management performance and
availability of resources also help.
The presumed positive effect of host country conditions
on IJV performance was not verified; findings suggest that
there is no significant relationship between the conditions
of the host country and IJV performance. The reason for
this result may lie in the long standing myth that conditions
in a foreign country could disrupt the activities of an IJV,
whereas given the globalization of business practices that
took place in the last decade, foreign country conditions
may not have much impact on performance after all. How-
ever, it is also observed that host country conditions have a
moderate effect on project-related factors which in turn
influence IJV performance. Specifically, political stability
and macroeconomic conditions in the host country should
be taken into account when evaluating the impact of host
country conditions on project-related factors.
IJV performance is affected by a multitude of factors.
This study investigated the impact of host country condi-
tions and project-specific factors only. It does not cover
any other factors such as cultural differences between part-
ners, organizational and strategic fit of the partners, and
the quality of inter-partner relations. The findings and
resulting recommendations of this study are based only
on host country conditions and project-specific factors.
Given the limited context of the study, it can be stated that
for successful IJV performance, IJV partners should make
sure that contract documents (plans and specifications) are
clear and complete at the outset, a project management
team is in place that will effectively manage the project
and all resources necessary to perform the IJV are avail-
able. IJV partners should also keep an eye on the political
and economic conditions in the host country, as these fac-
tors are likely to affect project-specific issues, and indirectly
IJV performance. Further studies may propose more com-
plete models involving both internal (e.g., partner fit, part-
ner relations, and structural characteristics of the IJV) and
external factors (e.g., host country conditions, and project
risks) to evaluate the direct and indirect effects of these fac-
tors simultaneously.
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