Austrian Partners in Joint Ventures With Companies from CMEA Countries: Problems Today

Razvigorova, E., Plasonig, G., & Horak, C. (1990). Austrian Partners in Joint Ventures With Companies from CMEA Countries: Problems Today. IIASA Working Paper. IIASA, Laxenburg, Austria: WP-90-021

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Abstract

International research institutes involved in comparative global studies are not normally involved in the education of students or their respective studies. However, this study on joint ventures between Austrian enterprises and companies from CMEA countries was undertaken by students of the Vienna University of Economics and Business Administration with the assistance of IIASA scientists. This exceptional example proves that such cooperation can be most successful and mutually beneficial.

Cooperation can be summarized in that IIASA would provide methodological guidance, data, literature and organize a series of lectures on East-West cooperation with special emphasis on joint ventures. These lectures were given by experts from CMEA countries and Austria; each lecture being followed by a discussion not only on joint ventures but also on economic reform in CMEA countries and national business practice. Simultaneously, hypotheses, questionnaires and plans for interviews were developed jointly.

The main objective of the study was to look at the problems that Western partners meet in the process of negotiating and operating joint ventures with Eastern companies. The study consisted of two parts: first, theoretical -- elaboration of methodology, basic concepts and hypothesis; and second, empirical -- revealing specific problems of joint venture creation and operation from the Austrian partner's viewpoint.

This sample of managers from 20 companies represents half of the Austrian partners involved in joint ventures at the end of 1988. Normally joint ventures begin their activities within one year from the date of registration and stabilize after two to three years. Austria ranked second among the countries establishing joint ventures; ranked by the number of joint ventures created and by the share of joint venture contracts with CMEA among all contracts of industrial cooperation of the country -- 33.3%.

The findings in this Working Paper do not always meet the assumptions; but this is a sign that joint ventures have used opportunities in some areas and found ways to overcome difficulties. Other important and promising issues which resulted from the study are: (1) Recognition and mutual understanding of two different systems and business environments was observed and considered vital by both East and West; (2) Willingness to cooperate and achieve synergy effects by Austrian partners and their readiness to share their experience and enter into another joint venture; (3) The lack of some goods and raw materials in CMEA countries combined with longer delivery times and the monopolistic position of suppliers on the domestic market, etc., turned out to be the main problems. (4) It can be generally stated that joint ventures are a good means of managerial know-how transfer. However, difficulties in managing East-West joint ventures can be found in two main areas: new methods and techniques (EDP and telecommunication) and in the functional area of personnel management. Although the management of joint venturers is not a particular problem. (5) The importance of a new type of "cooperation" management emerged from the study.

It can be stated that based on the subjective views of the businessmen interviewed, the results are not far removed from other national research studies. Obviously the specific features of the countries play an important role but do not drastically change the shape of the problems.

Criticism of the study can also be made. Some of the hypothesis and elaborated assumptions are not based on real data and facts from CMEA countries. The short period of study did not permit an extensive research of literature on and from CMEA countries. In addition, the number of managers who did not answer some questions was high thereby offering different subjective interpretations. However, the approach and the structure of this research could, in the future, serve as a constantly repeating check-up on East-Austrian economic ventures and their development.

This study was the first of its kind carried out at IIASA and in the field. Even considering that only 20 out of 40 companies were studied, the results can be regarded as a barometer of Austrian partnership in ventures with CMEA countries.

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