Asset specificity, IJV performance and the moderating effect of trust: Evidence from China

In the People's Republic of China, IJVs are still a prevalent mode of operation for foreign firms. However, the performance of these ventures often falls short of expectations. In particular, high levels of asset specificity in IJVs can generate relational risks and governance costs. We investigate how the existence of trust affects the relationship between asset specificity and IJV performance. Our empirical analysis confirms the positive role of trust in this relationship. More specifically, we find that the effect of trust on the asset specificity-IJV performance relationship is stronger for high asset-specificity than for low asset-specificity.