IJV’s political ties and R&D strategy: Asymmetric contingencies of market versus governmental policy turbulence

Abstract

The purpose of this article is to empirically explore (1) the impact of political ties on international joint ventures’ (IJVs) R&D strategy and (2) the moderating effects of market turbulence and governmental policy turbulence on the relationship between IJV political ties and R&D investment in China. Our sample consists of 1,344 observations taken from 224 IJVs over a period of 6 years (2012–2017), and we applied hierarchical moderated regression analysis (HMRA) with panel data to analyze our three hypotheses. Our findings show that IJVs with political ties tend to invest more in R&D than their counterparts without political ties. Interestingly, this positive relationship grows stronger with high market turbulence, but wanes under high governmental policy turbulence. While the issues regarding the importance of political ties to IJVs competing in China have been discussed, the issues related to why political ties influence IJV’s decisions on R&D investment have been largely overlooked. Hence, this study applies the environmental contingency view to fill this gap and shows how asymmetric contingencies for market turbulence and governmental policy turbulence occur in this context. JEL CLASSIFICATION: M1