Fatal Attraction, Social Pressures, and Joint-Ventures Termination.

A popular belief in both academic and business quarters is that joint ventures (JVs) are inherently unstable. This study questions this premise by arguing that the high failure rate of JVs observed in prior studies is, in part, an outcome of a selection process in which, paradoxically, out of all possible JVs, the ones that are especially likely to be formed are also the ones that are most likely to fail. That happens, we argue, because the same factors that make a JV partner attractive high social status and expertise in established technologies constrain its ability to adapt to environmental change, which is vital to new ventures in rapidly changing, technology-intensive industries. Thus, social status and established expertise increase firms propensity to joint venture but decrease their ability to do so successfully. Analysis of JV formation in 26 technology-intensive industries in the United States between 1986 and 2001 support our premise, indicating that JVs, rather than being inherently unstable, are hindered by an adverse selection process in which executives are seduced by a partners status and existing skills rather than considering whether that partner can create a venture flexible enough to survive in a dynamic setting.