The International Journal of Human Resource Management,

Vol. 22, No. 5, March 2011, 10171035

Social capital and human resource management in international

joint ventures in Vietnam: a perspective from a transitional economy
C. Christopher Baughna*, Kent E. Neuperta, Phan Thi Thuc Anhb and Ngo Thi Minh Hangb
a

Department of Management, College of Business and Economics, Boise State University, Boise, ID,
USA; bNEU Business School, National Economics University, Hanoi, Vietnam
This study highlights the importance of social capital in international joint ventures
(IJVs), and examines human resource practices as a factor shaping such social capital.
Comprehensive measures of social capital are developed and tested, which extend prior
work on bonding and bridging social capital. We also link social capital with its
anticipated antecedents and consequences. The studys findings are based on data
collected from 164 IJVs located in Vietnam. IJV performance was predicted by training
and by the level of trust and cooperation between foreign and local personnel. Training
(including acquisition of management skills, technology, and cross-cultural understanding) also was predictive of the measures of social capital. A key practical
implication arising from this study is that the return on investment from training of joint
venture personnel can stem not only from the transfer of technical and management
skills needed for developing competitive advantage, but also from the positive impact
on social capital, which further contributes to venture success. The establishment of
written objectives and plans for the venture, as well as the IJVs level of control
regarding its own HR functions also was found to be related to some components of
social capital. The findings of this study reinforce the call to build on the contributions
of local personnel in joint ventures, and in Vietnam in particular.
Keywords: alliance management; human resource management; international joint
ventures; social capital; Vietnam

While international joint ventures (IJVs) are an increasingly important way for
organizations to expand internationally, many difficulties arise in achieving effective
collaboration (Kogut 1988; Fryxell, Dooley and Vryza 2002; Chan, Luk and Wang 2005;
Madhok 2006; Zhan, Chen, Erramilli and Nguyen 2009). In achieving a good fit,
differences in strategies, culture, and capabilities need to be addressed. Decision making
and control mechanisms conducive to good communication and effective monitoring of
the collaboration need to be developed (Cui, Ball and Coyne 2002). Developing effective
human resource policies and practices plays an important role in this process, and is
critical for IJVs success (Pucik 1988; Zeira and Parker 1995; Schuler 2001; Kabst 2004).
Human resource management (HRM) functions must address control, trust, and conflict
issues, establishing mechanisms to enhance trust and performance (Iles and Yolles 2002;
Inkpen and Currall 2004; Lu and Hebert 2005). IJV research has repeatedly emphasized
the importance of developing social capital, especially trust (Buckley and Casson 1988;
Yan and Gray 1994; Currall and Inkpen 2002; Madhok 2006; Zaheer and Zaheer 2006).

*Corresponding author. Email: cbaughn@boisetstate.edu

ISSN 0958-5192 print/ISSN 1466-4399 online
q 2011 Taylor & Francis
DOI: 10.1080/09585192.2011.556776
http://www.informaworld.com

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C.C. Baughn et al.

This work examines the role of HRM functions in the development of social capital in
IJVs. We examine this issue from the perspective of IJVs in a transitional economy,
Vietnam.
As noted by Jarillo (1988), IJVs potentially enable parent companies to blend their
competencies into a stronger organization than if either parent acted independently.
Success in this collaborative process entails developing a process wherein the critical
objectives of the partners are met. This may require the development of compatible
objectives (strategic fit), shared business logic and mutual understanding (cultural fit), a
willingness to share competencies and other critical resources (capabilities fit), and
decision making and control mechanisms which facilitate communication and effective
monitoring (organizational fit) (Cui et al. 2002).
Observers of IJVs have noted the importance of control mechanisms in developing
predictability and the confidence that the other partner will behave in a way that is
consistent with mutual benefits (Beamish 1988; Geringer and Hebert 1989; Sohn 1994;
Das and Teng 1998). Many observers have noted the distinction between formal controls
(often related to majority ownership) and social control mechanisms. Formal control
relies on hierarchy, planning, and reporting mechanisms with prespecified behaviors or
performance outcomes. On the other hand, social control entails the development
of social relations and shared norms and values (Beamish and Banks 1987; Madhok
1995; Fryxell et al. 2002). Social controls, once established, were argued to be better
suited to building partner cooperation in IJVs, reducing monitoring and contracting
costs, and enhancing the flexibility and adaptability critical to long-term performance
(Dryer 1997).
In the context of the inherently unstable IJV relationship, management processes
creating trust and the ongoing capacity to collaborate are necessary (Johnson, Cullen,
Sakano and Takenouchi 1996; Neupert and Beamish 2001). Social cohesion,
communication, and the development of a win win culture need to be established
(Child and Faulkner 1998; Schuler 2001). The relationships that make organizations work
effectively constitute social capital. Social capital consists of the trust, close relationships,
respect, and mutual understanding developed in the structure and content of social
relations, leading to goodwill and solidarity (Fukuyama 1995; Kale, Singh and Perlmutter
2000; Adler and Kwon 2002). This is associated with a common sense of purpose and
strong norms of cooperation (Prusak and Cohen 2001).
Trust has been an especially important issue in IJV research (Buckley and Casson
1988; Yan and Gray 1994; Gill and Butler 1996; Currall and Inkpen 2002). Currall and
Inkpen (2002) defined trust as reliance on another partner under a condition of risk. Trust
may strengthen interorganizational ties, speed contract negation, and reduce transaction
costs (Neupert and Beamish 2001; Schuler 2001).
Determinants of social capital in IJVs
Although social capital can be seen as important in the functioning of any organization, it
is easy to see why it has been emphasized in the IJV literature. The creation of a firm from
two or more geographically separated parents itself gives rise to loyalty issues, potential
for disagreement and battles for control. Based on the literature, this study posits a number
of factors that are likely to shape the development of social capital in IJVs. These factors
include initial work-related commonalties between the partners, cultural differences, the
development of formal written objectives plans, training, and the joint ventures control of
its own human resources functions.

The International Journal of Human Resource Management

1019

Operational relatedness
To the extent that the partners share similar backgrounds and experience on dimensions
relevant to the success of the business, there may be a greater affinity and higher levels of
trust between the firms. Geringer (1988) cautioned managers regarding partnerships with
dissimilar companies. Differences in size, organizational culture, policies, and management styles can undermine the partnership (Bucklin and Sengupta 1993). Johnson et al.
(1996), on the other hand, found that neither similarity nor complementarity had major
effects on trust in cooperative alliances. This study will reexamine this issue in a different
country context. Our position is that initial differences in such work-related areas as
products, customers, and skill base could be a source of conflict, and that operational
relatedness could serve as a common foundation for building social capital.
H1:

Social capital is positively related to the prior operational relatedness of the firms
participating in the joint venture.

Cultural differences
One would expect that a dissimilarity of cultural values would complicate the formation of
social capital. Cultural differences may effect evaluation of strategic choices (GomesCasseres 1989), and would be expected to lead to differences in expectations regarding
company operations, structure, and policies. Fryxell et al. (2002) found that cultural
distance was negatively correlated with measures of trust in IJVs based in the US. IJV
conflict regarding staffing issues was noted in China, where overstaffing is common
among state enterprises. Values of productivity vs. the provision of employment, as well as
conflict regarding dismissal policies, pay, and promotion, were noted (Tsang 1994).
Therefore, we propose the following hypothesis:
H2:

Social capital is negatively related to the cultural differences between firms

participating in the joint venture.

Formal objectives and plans

To the extent that shared ownership in the IJV constitutes a dual hierarchy, there is a high
potential for conflict (Harrigan 1986; Madhok 1995). Such conflicts are often cited as a
cause for IJV failure (Tsang 1995; Fedor and Werther 1996; Lu 2006).
As noted by Nahapiet and Ghoshal (1998), social capital includes a cognitive
component shared interpretations and representations as well as structural and
relational attributes. The development and articulation of clear goals and plans for the
venture can facilitate a clear, common understanding about such purpose and the means by
which it is to be attained (Neupert and Beamish 2001; Thuy and Quang 2005). The need to
bridge potentially differing company objectives, operational differences, and differences
in cultural understanding may amplify the need for formal goals and plans in developing
social capital (Inkpen and Currall 2004).
H3:

Social capital is positively related to the utilization of formal objectives and plans
for the venture.

Training
Training may have an impact on social capital. While Youndt and Snell (2004) found that
developmental HR practices were not significantly predictive of social capital in a sample

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C.C. Baughn et al.

of US firms, there is reason to believe that the impact of training in IJVs (especially in
developing economies) will be more pervasive. Training relating to operational issues
such as technology and managerial skills may facilitate a greater potential for shared
involvement between foreign and local employees in venture activities, and provide a
better foundation for enhanced mutual understanding. Mutual understanding may also be
enhanced through cross-cultural training. Geringer and Frayne (1990) suggested that
language and cultural training can improve the extent and quality of communication
within the IJV as well as between the venture and its parents.
H4:

The higher the level of training provided to IJV employees, the higher the social
capital.

Control of the human resources function

Many conflicts in IJVs are related to human resource issues. Employees in different
countries may have very different expectations about what companies should do in terms
of recruitment, selection, compensation, appraisal, promotion policies, vacations, flexible
work hours, or general working conditions (Shenkar and Zeira 1987; Gamble 2000; Iles
and Yolles 2002). In an IJV, two or more sets of HR practices interact. As noted by Pucik
(1988), this can lead to tension between the desire to comply with local HR practices
(regarding staffing and labor relations, for instance) and the desire of the partners to retain
parent-country practices for reason of familiarity and/or control.
Indeed, HR practices constitute a significant source of control in the IJV (Geringer and
Frayne 1990). Several researchers have noted that ownership distribution in the IJV may
matter less than the right to appoint key personnel to the venture. For a parent with
minority ownership, control can be achieved by appointing managers loyal to the parent
company (Killing 1983; Schaan 1983; Pucik 1988). Of course, evaluation and
compensation practices can also be seen as control mechanisms (Harrigan 1986; Geringer
and Frayne 1990).
This leads to the issue of how much control of HR functions should be retained by the
IJV parents, and how much should be apportioned to the IJV itself. As noted by Gifford
(1998, p. 11), this can be seen as one manifestation of the larger issue of control and IJV
autonomy:
As their joint ventures continue to spring up in increasingly remote parts of the world,
multinational companies are having to revisit a well-known management dilemma: Which
tasks should be performed at headquarters and which should be delegated to on-site
managers?

Many researchers on IJVs have argued for a high level of IJV autonomy in regards to
human resource functions. Harrigan (1987) noted that parent firm managers tended
to overmanage their subsidiaries, especially if they were unfamiliar with techniques for
managing cooperation. Parent company managers may not understand local differences in
HR practices and expectations, and instead attempt to inappropriately apply uniform,
worldwide corporate policies. Because of the importance of developing human resource
policies and practices consistent with the host culture, delegating authority to local
managers might be more beneficial (Zeira and Parker 1995; Schuler 2001). Such local
control may be particularly important in developing countries, where there are substantial
differences between host country conditions and the parent company environment
(Gifford 1998).
The initial level of control accorded to the joint venture itself may lead to the
development of policies and practices more likely to effectively align the venture with its

The International Journal of Human Resource Management

1021

host environment, leading to higher levels of social capital. Of course, the level of HR
control held by the joint venture may change over time, and may lead to further
development (or reduction) of social capital.
Lorange (1986) has argued that the IJVs should have their own, strong, fully fledged
HR department. HR input to the partnership is critical in staffing and motivating people, as
well as in establishing mechanisms to enhance trust and the relationship between alliance
partners (Pucik 1988; Iles and Yolles 2002). Therefore,
H5:

Social capital is positively related to IJV control (rather than parent control) of its
HR functions.

IJV performance
As noted above, establishing a shared vision, enhanced communication, and resolution of
conflict are key challenges for joint venture success. Building social capital involves the
development of a teamwork culture. To the extent that the psychic distance between
employees from different companies and countries is reduced and identification with the
IJV itself is established, key impediments to IJV success are removed. Furthermore, we
have noted that the development of social capital can provide an alternative to
hierarchical, rule-based control mechanisms. Firms characterized by higher levels of
social capital may, therefore, be afforded more flexibility and adaptability. Therefore,
H6:

Social capital is predicative of IJV performance.

Investments in training can be anticipated to lead to higher levels of IJV performance.

Training may be particularly critical for the success of joint ventures in developing
countries. Firms in developing countries may have greater needs for technical support and
adaptation (Contractor 1980), and the success of the IJV itself may depend on the ability
of host-country employees to absorb the technology, production techniques, and
managerial skills needed to convey competitive advantage. Training has been argued to
be a particularly crucial issue for the management of foreign firms in Vietnam. Though
the Vietnamese labor force is young and generally well educated, it is also characterized
by lack of skill and experience, as well as a dearth of managers trained in free market
principles of management (Mai, Bilbard and Som 2009). This leads to the final
hypothesis.
H7:

The level of training provided to IJV personnel is predicative of performance.

An overview of our proposed model is presented in Figure 1.

Research site
Vietnam provides a very desirable site for examining the development of social capital in
IJVs. Since Vietnams large-scale economic reform (known as Doi Moi) began in 1986,
thousands of foreign-invested enterprises from approximately 70 nations were formed in
the country. These investments, including over 1000 IJVs, constitute a significant portion
of the nations GDP Ministry of Planning and Investment (MPI 2005; Vu 2005).
Although such ventures contribute substantially to Vietnams economy, they also
represent opportunities for foreign-based MNCs. The country, only recently seen as an
important player in the international market, is characterized by a solid record of economic
growth, a stable social political environment, rich national resources, and an ambitious,
young, hard-working labor force (JICA 2003; MPI 2005). These factors make Vietnam a

1022

C.C. Baughn et al.

Operational
Relatedness

+
Cultural
Differences

Formal
Objectives

Social
Capital

IJV
Performance

+
JV Control of
HR

Training:
- Operations
- Cultural

Figure 1. Operational model: hypothesized predictors of social capital and IJV performance.

very attractive destination for foreign firms to conduct business and make an investment
(Mai et al. 2009).
These opportunities are countered, however, by the difficulties faced by foreign
managers in working effectively in transitional economies such as Vietnam. Such
difficulties may include issues in the IJVs environment (legal, bureaucratic, and
regulatory uncertainties) and within the venture itself, including lack of management
skills, cultural differences, and differing objectives (Neupert, Baughn and Dao 2005).
Developing social capital in this setting may be particularly critical, because (1) in
Vietnam and other economies characterized by poorly defined property rights and legal
systems, firms many need to rely on trust-based transactions, which substitute for
effective market transactions (Nguyen 2005; Nguyen and Rose 2009), and (2) Vietnam is
a high context culture with a strong relationship-based orientation (Thuy and Quang
2005).
A further complexity facing those responsible for IJVs in Vietnam involves working
in the context of dual ideologies (Nguyen 2005). Following the Doi Moi reforms,
Vietnam has endeavored to create a market economy under social guidance. For the
Vietnamese partner, socialist ideology stands with market ideology, whereas most of
the IJVs are with firms from market economies. This places additional demands on the
development of shared understanding. Social capital entails overlapping or shared
understanding, and effective HRM practices can help in providing a shared frame of
reference (Taylor 2007). This study examines the use of HRM practices in a complex
environment like Vietnam, and the relationship of such practices to social capital and IJV
performance.

The International Journal of Human Resource Management

1023

Method
Sample
The sample for this study was drawn from a population of IJVs provided in a listing by the
MPI, the government authority managing all Foreign Direct Investment (FDI) activities in
Vietnam. The study focused on Ho Chi Minh City and Hanoi, the two biggest economic
centers of the country, where most IJVs are located. The sample was drawn from a list of
all IJVs in both locations. The companies selected had been in operation for 3 years
or more to establish a foundation for the development of social capital and a track record of
IJVs performance.
Data collection was conducted using a questionnaire survey developed for the purposes
of this study. The majority of respondents were directors or vice directors of the IJVs, who
are responsible for the companys overall performance and for the success of the venture.
Others were mainly department heads who responded to the survey according to the
assignments of their superiors. If the contacted person agreed to participate in the survey,
the field researcher delivered the questionnaire directly to him/her.
Personal delivery of the questionnaires was used to help ensure a high response rate.
Given Vietnams high-relationship culture, we were concerned that the use of post mail or
e-mail would yield an unacceptably low response rate. Sharing information with outsiders
through responding to surveys is still not common among Vietnamese companies (see
Zhan et al. 2009).
For most appointments, the respondents completed the questionnaire while the
researcher waited. In other cases, the researchers left the questionnaires at the survey
subjects offices and came back to collect them at another time.
In total, 260 appointments were made, 218 of which resulted in completed
questionnaires (158 in Ho Chi Minh City and 60 in Hanoi). Of the 218 responses, 181 firms
were represented by a Vietnamese respondent. In 37 firms, foreign respondents presented
their perceptions of the joint venture. For this study, only the Vietnamese responses were
used. Seventeen surveys were eliminated due to missing data, yielding a final sample size
of 164.
In terms of foreign partners country of origin, 26 of the foreign partners were
headquartered in Japan. Twenty-three were from Singapore, 20 from South Korea, 18
from Taiwan, 12 from Hong Kong, and 13 from other Asian countries. Twelve of the
alliance partners were headquartered in France and 14 in other European countries. Eight
were from Australia and seven from the US. The remaining 11 alliances involved
partners from other countries or with multiple partners from more than one foreign
region. The high proportion of Asian joint ventures reflects the pattern of FDI in
Vietnam. Of course, this must be taken into consideration when interpreting the results.
The interviewed IJVs had been in operation from 3 to 14 years, with an average of 7.6
years. In most IJVs, foreign partners held a substantially larger share of equity than the
Vietnamese counterparts (the average level of equity held by the Vietnamese partner
was 36%).
Variables and measures
The first version of the questionnaire was developed in English. The questionnaire was
then translated into Vietnamese by two of the authors and back-translated to English by a
separate translator. Some differences in wording between the original version and the
back-translated version led to minor revisions, followed by pretesting and preliminary
item analysis before final revisions and administration in the joint ventures.

1024

C.C. Baughn et al.

Most variables were measured by multiple items using a Likert-type (1 strongly

disagree to 5 strongly agree) format. All of the items in the scales, as well as the source
of the items and scale reliabilities, are found in Appendix A.
Measures included a scale assessing the operational relatedness of the venture with the
foreign parents technology, products, industry, customers, and skill base (see Lyles and
Salk 1996). An item on this scale, e.g. is Our products were highly related to that of the
partner(s). The measure of cultural differences used a four-item scale adapted from
Simonins (1999) study of international strategic alliances. An item from this scale is Our
national culture is very different from the partners. The use of written objectives and
business plans was taken from Lyles and Salk (1996). One of the items reads, The venture
has very detailed written business objectives. Items assessing investment in training for
example, every year the venture commits significant resources to educating and training
Vietnamese personnel to master the technology brought by the foreign partners were
taken from Cao (2000). This measure of training contains two items dealing with
operational issues (training regarding technology and management skills), and an item
dealing with cross-cultural training. Because it is instructive to assess the impact of the
type of training provided, subscales (operational and cultural training) were included with
the overall training measure in the analyses.
Control of the human resources function was assessed by asking respondents to report
the proportion of control allocated to the foreign parent, the Vietnamese parent, and the
joint venture itself for each of the five following HR functions: staffing of operational
personnel, staffing of executive personnel, training and development, employee
evaluation, and employee compensation. These allocations were gathered with regard to
both the levels of control at the initial founding of the IJV as well as for the current level of
control allocated to the parents and the joint venture. This studys hypotheses deal with
the level of control allocated to the IJV itself, both with the level of control allocated to the
venture at the foundation of the IJV, and with the extent to which HR control changed over
the course of the venture. To calculate the change variable, each ventures initial level of
HR control was subtracted from its current level. As typical with change scores, the
measure of change is significantly correlated with the initial level of control. Therefore,
the interpretation of the change measure should be through the significance of its
coefficient when controlling for the level of initial control, as in the regression analyses to
be presented.
Items measuring social capital were developed for this study. The items were subjected
to factor (principal components) analysis, using varimax rotation, and applying the
standard cut-off point for eigenvalues greater than 1.0. The analysis of the social capital
items yielded three factors, accounting for 65.3% of the total variance. Each item
demonstrated factor loadings greater than 0.50, demonstrating that each original item is
highly correlated with its factor. Three scales were, therefore, derived from this analysis,
calculated by the mean for the original loaded items. One resulting scale measures
connections the level of interpersonal interaction between Vietnamese and foreign
partner personnel. An item on this scale is, Vietnamese personnel in the venture
frequently interact with the foreign partners personnel in Vietnam through work related
activities. The second scale, participation, examined the collaborative sharing of
activities and decision making between the partners. For example, overall, Vietnamese
personnel have been deeply involved in shared activities between partners. The third scale
incorporated items assessing levels of trust and cooperation between the partners. Items
from this scale include, the partner is trusted, and the partner is very cooperative with us
in solving problems.

The International Journal of Human Resource Management

1025

Joint venture performance was assessed using a four-item scale developed by Lyles
and Salk (1996). One item, e.g. is the venture achieved its target sales volume.
Respondents were asked to rate venture performance both for the prior year and for the
prior three years. Control variables included (1) JV age, calculated as the number of years
in operation up to the time the respondents were interviewed and (2) the proportion of
equity in the venture held by the Vietnamese parent.
As seen in Appendix A, reliability analyses for the scales measured by multiple items
appeared satisfactory. Furthermore, all items were entered in an overall factor analysis
(principal components and varimax rotation). This resulted in 13 factors with eigenvalues
greater than 1, accounting for 74.3% of the total variance. The identification of several
distinct factors, coupled with the finding that the first factor only accounted for 12.2% of
the total variance, attenuates concerns about common method variance (Podsakoff and
Organ 1986).
Results
Correlation analyses
Table 1 presents the means, standard deviations, and correlations among the variables in
this study. Examining of the mean of the variable measuring change in human resources
control (a positive value of 17.12), one can see that IJV control of its HR functions
increased over the duration of the ventures.
Ancillary analyses revealed that IJV control increased for each of the five HR
functions (staffing of operational personnel, staffing of managerial personnel, training and
development, employee evaluation practices, and employee compensation practices)
measured here. The increase in IJV control was greatest in regards to management staffing.
The three measures of social capital were found to be significantly related to each
other, with intercorrelations ranging from r 0.35 ( p , 0.01) for the relationship
between connections and participation, to 0.60 ( p , 0.01) for the trust cooperation and
participation relationship.
There was a slight tendency for the ventures to provide more cross-cultural training in
the face of cultural differences (r 0.16, p , 0.05). Cross-cultural training was more
likely to occur in ventures that had established clear written objectives and plans
(r 0.36, p , 0.01). Both operational and cross-cultural training were more likely to be
provided in those ventures that were operationally related (similar in products, technology,
for example) to the foreign parent. Joint venture performance was found to be significantly
correlated with training as well as with each of the overall measures of social capital.
Regression analyses
The ability of the independent variables in this study to contribute unique prediction of the
measures of social capital was assessed through multiple regression analyses.
Prediction of social capital
The analyses presented in Table 2 address the extent to which the hypothesized context
conditions (operational relatedness and cultural differences) and organizational practices
(establishment of written objectives, training, and control provided to the venture over its
HR functions) are related to the three measures of social capital. For each of the social
capital measures, two regression analyses were performed first with the measure of

3.50
3.22
4.20
3.45
3.43
3.48
67.36
17.12
3.81
3.33
3.72
3.59
3.68
7.62
36.83

0.78
0.73 0.07
0.67 0.23** 0.13
0.81 0.34** 0.16* 0.26**
0.94 0.33** 0.13
0.17*
0.95**
0.88 0.25** 0.16* 0.36** 0.73** 0.47**
30.09 0.16* 2 0.01 20.01
0.12
0.11
0.11
25.10 2 0.21** 2 0.06 20.07
0.02
0.02
0.02 20.56**
0.60 0.21** 0.11
0.32** 0.41** 0.35** 0.40** 0.20*
0.58 0.16*
0.05
0.19*
0.41** 0.34** 0.42** 0.09
0.62 0.25** 0.04
0.30** 0.44** 0.40** 0.36** 0.15*
0.89 0.15
0.08
0.06
0.33** 0.36** 0.14*
0.00
0.81 0.13
0.03
0.11
0.33** 0.35** 0.16*
0.01
2.73 2 0.13
0.04 20.04 2 0.08 2 0.11
0.01 20.10
11.80 0.00 2 0.02 20.07 2 0.07 2 0.07 2 0.05
0.05

s.d.

Notes: aVariable transformed to correct for skewness. Means and standard deviations for original variable.
n 164; *p , 0.05 and **p , 0.01.

1. Operational relatedness
2. Cultural differences
3. Objectives
4. Training
5. Training: operations
6. Training: cultural
7. Initial HR control: JVa
8. Change in HR Control: JVa
9. Participation
10. Connections
11. Trust/cooperation
12. JV performance (1 year)
13. JV performance (3 years)
14. JV age
15. Equity split (local)a

Mean

Table 1. Relationships among variables.

9

10

11

12

13

14

20.06
20.01
0.35**
20.04
0.60** 0.43**
0.09
0.28** 0.18*
0.39**
0.04
0.25** 0.20*
0.31** 0.75**
0.22** 2 0.05 2 0.05 2 0.03 0.07 2 0.04
20.07
0.07 2 0.20** 2 0.05 0.01 2 0.02 0.04

1026
C.C. Baughn et al.

The International Journal of Human Resource Management

1027

Table 2. Multiple regression analyses predicting social capital.

Participation
Independent
Variablesa
Operational related
Cultural differences
Objectives
Training
Train: operations
Train: cultural
Initial HR
control JV
Change in HR
control
JV age
Equity split
F
R2
Adj. R 2

0.02
0.03
0.24**
0.32***

0.03
0.03
0.22**

Connections

0.01
20.03
0.08
0.37***

0.01
20.03
0.04

0.19*

0.19*
0.20*
0.18*

0.06

0.16
0.32***
0.04

0.08

0.07

0.01

2 0.02
0.11
6.72***
0.26
0.22

2 0.02
0.11
6.11***
0.26
0.22

0.00
20.17*
5.05***
0.21
0.17

Trust &
cooperation

0.08
20.04
0.20**
0.35***

0.08
20.04
0.20**

0.13

0.27**
0.13
0.13

0.00

0.05

0.05

20.02
20.17*
5.20***
0.23
0.19

0.03
20.02
6.54***
0.25
0.21

0.03
20.02
5.77***
0.25
0.21

Notes: aStandardized regression coefficients are given for each independent variable.
n 164; p , 0.10; *p , 0.05; **p , 0.01 and ***p , 0.001.

overall level of training as a predictor, and next with the training measure broken out into
the two subscales of operational training and cross-cultural training.
For each of the independent variables in the regression models presented on Table 2,
the variance inflation factor (VIF) was calculated. The VIF values ranged from 1.01 to
1.62. This is well within the acceptable level for this measure (Fox 1991; Gujarati 1995;
Hair, Anderson, Tatham and Black 1998). Thus, our data indicate no substantial problems
with multicollinearity.
Examination of the pattern of significant relationships across the measures of social
capital leads to several important findings. The overall measure of training was a
significant contributor to each of the measures of social capital. This provides support for
H4. Cross-cultural training appears to be a somewhat stronger predictor of connections.
Operational training, however, seems to be particularly critical in the prediction of overall
trust and cooperation. Both types of training significantly predict the participation
variable.
Neither the operational relatedness nor cultural differences measures contributed
unique variance to any of the regression models. Although operationally related ventures
may be more likely to establish training programs (r 0.34, p , 0.01 on Table 1), the
relatedness itself did not appear to be a direct contributor to social capital. Neither H1 nor
H2 is supported. The use of formal objectives was found to be related to both the
participation and trust cooperation measures. This provides support for H3. The level of
HR control initially provided to the venture is significantly related to the participation
component of social capital. This provides some support for H5.
Social capital and performance
Table 3 presents the results of the prediction of IJV performance. The three measures
of social capital, as well as all of the predictor measures in the earlier analyses are used to
predict performance both for the previous year and the previous three years. In the first

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C.C. Baughn et al.

Table 3. Multiple regression analyses predicting performance.

Performance
1 Year
Independent
Variablesa
Operational related
Cultural differences
Objectives
Training
Train: operations
Train: cultural
Current HR control JV
Participation
Connections
Trust & cooperation
JV age
Equity split
F
R2
Adj. R 2

3 years

1 year

0.03
0.04
2 0.11
0.21*

0.08
0.01
0.34***
0.09
0.02
6.14***
0.16
0.14

0.09
0.07
0.23*
20.03
20.01
3.82**
0.11
0.08

0.01
0.05
2 0.04
0.31**
0.10
0.02
3.99***
0.21
0.15

0.03
0.05
20.06
0.29**
20.13
0.00
0.07
0.00
0.29**
0.12
0.03
4.25***
0.23
0.18

3 years

0.00
2 0.01
2 0.03
0.24*
2 0.06
0.07
0.01
0.18
2 0.01
0.00
2.65**
0.15
0.09

20.01
20.01
0.00
0.29**
20.07
20.08
0.08
0.04
0.17
0.01
0.00
2.74**
0.17
0.11

Notes: aStandardized regression coefficients are given for each independent variable.
n 164; p , 0.10; *p , 0.05; **p , 0.01 and ***p , 0.001.

analyses depicted in Table 3, the three measures of social capital as well as the control
variables are entered in the prediction equations. The second set of analyses includes all of
the venture practice and context variables as well. For the second set of analyses, two
models are provided for the dependent variables one with overall level of training, and
one distinguishing between operational and cultural training. VIF values for the
independent variables in the analyses presented in Table 3 ranged from 1.01 to 1.82, again
indicating no substantial problems with multicollinearity.
Regarding prediction of the prior years performance, both training and trust
cooperation were found to be statistically significant. Of the two training measures,
operational training appeared to be the more critical. Training was also a significant
predictor of performance over the prior 3 years, whereas the impact of trust cooperation
was somewhat attenuated.
Discussion
This study highlights the importance of social capital in IJVs, and points to human
resource issues as one source of social capital. The role of social capital may be
particularly salient in transition economies such as Vietnam. Where market institutions
and protection of private interest have not been adequately developed, firms may rely on
interfirm networks as a substitute for formal markets. In such cases, trust is an important
factor to facilitate transactions between firms and to serve as an interim solution on the
way from a socialist economy to a market economy (Nguyen 2005). For the firms in this
study, and others in similar situations, social capital and its components of trust and
cooperation can be key to making IJVs a success. Understanding the nuances of the factors
and how they facilitate the development of working relationships, on a personal and
organizational level, can serve to further our understanding of IJV performance.

The International Journal of Human Resource Management

1029

The strongest findings in this study are those assessing the relationships between
training, social capital, and IJV performance (Hypotheses 4 and 7). Operational training
(related to learning technology and management skills) certainly appears important in
serving as a catalyst, facilitating the effective merging of parent company competencies to
provide competitive advantage. Interestingly, this type of training is also related to the
development of trust and cooperation between Vietnamese and foreign partner personnel
in the venture. The importance of cross-cultural training, on the other hand, is most evident
in its relationship to the level of interpersonal connections developed between local and
foreign personnel. These connections are, in turn, strongly related to trust cooperation.
This studys results are consistent with the idea that training has both a direct impact on
organizational performance as well as an indirect effect through the development of social
capital. One key practical implication arising from this study is that the return on
investment from training for joint venture personnel includes not only such benefits as
transferring and updating the technology, production techniques, and management skills
needed for developing competitive advantage, but also the positive impact on social
capital, which further contributes to venture success.
The establishment of written objectives and plans for the venture appeared to be most
strongly related to participation and to trust cooperation. As noted earlier, it was also
found that ventures that set written objectives were more likely to engage in training.
A significant relationship was found between the IJVs initial control of its own HR
functions and social capital, specifically between initial level of HR control and
participation. Where the venture has greater control over staffing, training, compensation,
and evaluation decisions, the local venture personnel may be accorded an enhanced role in
terms of shared decision making and positions of importance in the venture. The initial
level of HR control accorded to the IJV may serve as a set point for subsequent actions.
Although the joint ventures tended to gain autonomy over the duration of the venture, the
correlation between the initial and subsequent change in venture HR control was
substantial (r 2 0.56, p , 0.01). Change in venture HR control was not significantly
related to social capital. It should be noted that most of the IJVs in this study possessed a
substantial level of current control over their HR functions. Furthermore, it may take some
time for a ventures control over its HR functions to translate into practices that
subsequently result in social capital.
Somewhat surprisingly, neither HR control nor the social capital measures were
related to the cultural distance measure used in this study. As noted earlier, the great
majority of foreign firms in this study were also Asian, and this may perhaps explain the
results here. It is also conceivable that joint ventures in which cultural difficulties
presented substantial impairment in venture functioning did not survive long enough to be
included in this study. As noted earlier, the IJVs in this sample were all at least 3 years old.
This may help to explain the lack of significant relationships between IJV age and many
other variables in this study.
Our measure of trust cooperation was one of the two unique predictors of IJV
performance. This supports the view that firm performance is a function of both human
and social capital (Youndt and Snell 2004). Interestingly, the relationship between trust
cooperation and performance is stronger for more recent performance. It is possible that
performance itself may have an impact on trust and cooperation. Trust and cooperation
may be easier to sustain under conditions of high performance.
The statistical finding that trust cooperation was the sole social capital measure
uniquely linked to performance does not necessarily undermine the importance of the
other two aspects of social capital (interpersonal connections and participation). These

1030

C.C. Baughn et al.

three components can be seen as interdependent interpersonal connections and active

participation in joint activities may reinforce, and be reinforced by, trust and cooperation.
Conceptually, our component of social capital measuring trust cooperation is
closely linked to the bonding type of social capital described by Coleman (1990) and
relational social capital, as described by Nahapiet and Ghoshal (1998). Our measure
labeled connections can be seen as more closely aligned with the constructs of
structural and bridging social capital (Nahapiet and Ghoshal 1998; Portes 1998).
Bridging social capital is a function of bridging the gap between parties: in this case,
bridging the gap between the local and foreign personnel in the venture. Our component
of social capital measuring participation is bound up with both of the other components,
and emphasizes the sharing of activities between local and foreign personnel, and the
level of equal participation accorded to local personnel in decision making. A strong
relationship was found between participation and trust cooperation. This finding
reinforces the call to build on the contributions of local personnel in joint ventures (Mai
et al. 2009). In this study, higher levels of participation are seen where the joint venture
had more autonomy regarding HRM practices. As noted earlier, participation was also
supported by the development of detailed written goals and objectives for the IJV, as
well as training.
Limitations and recommendations for future research
This study was able to explain only a modest amount of the total variation in IJV
performance. Clearly, there is much left unexplained. A key construct not included in this
study is the level of organizational learning obtained by the IJV. Several researchers point
to a link between social capital and the development and transfer of knowledge in
organizations (Nahapiet and Ghoshal 1998; Kale et al. 2000; Adler and Kwon 2002;
Inkpen and Currall 2004; Suseno and Ratten 2007; Van Wijk, Jansen and Lyles 2008).
Although the development of trust and social capital is a dynamic process that
develops over time (Nguyen 2005), this study relied on measurement at a single point in
time. Though our study does incorporate IJV age as a control variable in our analyses, we
would anticipate that measurements across time would provide understandings not
captured here.
Another limitation of this study is our reliance on a single respondent for each IJV. We
attempted to address the implications of this regarding the possibility of common method
variance using multiple item constructs (Harrison, McLaughlin and Coalter 1996),
eliminating items that constituted clear overlap (Podsakoff and Organ 1986), and testing
for evidence of problems of common method variance. Our analysis relieves some of this
concern, as discussed in the Methods section. Nevertheless, this study focused on the
perspectives of the local (Vietnamese) joint venture manager. While this focus helps to
provide a useful counterpoint in a literature where the perspectives of the developedcountry MNC manager are stressed, it would certainly be desirable to tap both
perspectives in assessing the degree of social capital (and perceived contributors to social
capital) in IJVs.
In addition to including assessment of IJV learning, future studies could address more
specific steps taken by venture partners to develop the connections, participation, and trust
which seem to be important for firm success. This may include the use of training for
the foreign personnel in the venture, specific socialization and retention practices, and the
reward systems employed in the venture. A comparison of the impact of such practices in
different country environments would also be of benefit to IJV managers.

The International Journal of Human Resource Management

1031

Acknowledgements
This research was conducted as part of a joint project between the Boise State University and the
National Economics University. It was funded in part by a Cooperative Agreement with the US
Agency for International Development. The US Agency for International Development administers
the US foreign assistance program providing economic and humanitarian assistance in more than 80
countries worldwide.

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Appendix A
Scales

Operational relatedness from Lyles and Salk (1996) Alpha 0.81

Our technology was highly related to that of the partner(s).
Our products were highly related to that of the partner(s).
Our industry was highly related to that of the partner(s).
Our customers were highly related to that of the partner(s).
Our skill base was very similar to that of the partner(s).
Cultural differences from Simonin (1999)
Alpha 0.69
Our national culture is very different from the partners.
Language differences are a major obstacle in communicating with, and understanding the partner.
Our problem solving methods are very different from that of the partner(s).
Our management style is very different from that of the partner(s).

Alpha 0.77

Objectives adapted from Lyles and Salk (1996)

The venture has very detailed written business objectives.
The venture has very detailed written business plans.

Training from Cao (2000)

Alpha 0.80
Every year the venture commits significant resources to educating and training Vietnamese
personnel to master the technology brought by the foreign partners.
Every year the venture commits significant resources to educating and training Vietnamese
personnel to master the managerial skills brought by the foreign partners.
Vietnamese personnel in the venture have been provided with training in cross-cultural skills.
Alpha for the first two items (operational training 0.89).

Control of human resources (developed for this study)

Initial control: when the joint venture began, who controlled the decisions regarding the
following activities?
For each of the activities listed below, divide 100 points between the foreign parent, local parent,
and joint venture to indicate the extent of each partys control. The sum of the numbers should add up
to 100.
Local parent

Foreign parent

Joint venture

Staffing of operational personnel

Staffing of managerial personnel
Training and development
Employee evaluation practices
Employee compensation practices
Current control:
The above areas were later repeated with the question:
Who currently controls the decisions regarding the following activities?
Alphas were 0.83 and 0.88 and for initial JV control and current JV control, respectively.

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Social Capital
Participation (developed for this study)
Alpha 0.82
Vietnamese personnel have been fully informed about activities in the areas in which they work.
Vietnamese personnel have been expected to contribute their ideas when they work with the
foreign counterparts.
Vietnamese personnel have been assigned to activities of equal importance when they work with
the foreign counterparts.
Vietnamese personnel have had equal opportunities to make decisions when they work with the
foreign counterparts.
Overall, Vietnamese personnel have been deeply involved in shared activities between partners.

Connections (developed for this study)

Alpha 0.74
Vietnamese personnel in the venture frequently interact with the foreign partners personnel in
Vietnam through work related activities.
Vietnamese personnel in the venture frequently interact with foreign partners personnel in
Vietnam through non-work related activities.
Vietnamese personnel in the venture closely work with the foreign partners personnel in Vietnam.
Vietnamese personnel in the venture have friendly relationship with the foreign partners
personnel.

Trust and Cooperation (developed for this study)

The partner is trusted.
The partner is very helpful.
The partner is fair.
Both partners have developed trust in each other.
The partner is very willing to share knowledge with us.
The partner is very cooperative with us in solving problems.
The partner is very committed toward achieving common goals.
Overall, the partner is very cooperative.

Alpha 0.93

IJV performance (previous year) from Lyles and Salk (1996)

The venture achieved its target sales volume.
The venture achieved its target market share.
The venture achieved its target profits.
Overall, the venture achieved its planned goals.

Alpha 0.95

The same questions were asked regarding performance over the past 3 years, Alpha 0.92.

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