Here - Beedie School of Business - Simon Fraser University

As for governments in emerging economies, we would suggest that policies
encouraging the use of IJVs may be effective in improving indigenous capabilities, but only
to a certain degree. Governments in emerging economies often require foreign firms that
wish to enter their countries to establish IJVs with indigenous firms, in the hope that
indigenous firms will benefit significantly from knowledge transfer from foreign firms
(Beamish, 1993; Moran, 1998). However, our study suggests that knowledge acquisition of
indigenous firms varies across industries, contingent on the technology gap between
indigenous and foreign firms. Hence, government policies towards IJVs should also depend
on the technology level of different industries. In industries with high technology gap, we
find that learning from IJVs is likely marginal. The implication for government policy is
that relying solely on foreign technology transfer in IJVs is not effective; instead,
governments should employ complementary policies to help latecomer industries acquire
technology assistance from a variety of sources, so as to improve the absorptive capacity of
latecomer industries.
Our study also shows that in industries with low technology gap, international joint
ventures tend to play a positive role in building up indigenous capabilities, but the benefits
decrease substantially once the presence of IJVs reaches a certain high level. This suggests
that a high level of IJV presence in the local economies may result in indigenous firms’
reliance on IJVs, and such reliance is definitely destructive to the capability improvement of
indigenous firms. Therefore, it is important for the host-country government to adopt a
dynamic perspective in enacting and adjusting their policies toward the use of IJVs, so as to
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