Interpretive structural modelling of absorptive capacity building within international joint ventures of logistics firms

Purpose of this paper: The purpose of this paper is to investigate how international joint ventures (IJVs) of logistics firms effectively build up the absorptive capacity. Despite logistics firms’ growing formation of the IJV, there is fragmentation of understanding specific factors that influence their inter-firm interactions by building absorptive capacity in the logistics context. This research reviewed extant studies on IJVs of logistics firms and derived specific contributing factors to their inter-firm interactions by building absorptive capacity. There have been numerous contributing factors to absorptive capacity of logistics IJVs postulated by the extant research, but the interactions among the factors have not been fully explored. Thus, this research provide a holistic perspective of absorptive capacity building within IJVs of logistics firms. Design/methodology/approach: Interpretive structural modelling (ISM) is a method to explain interactions of elements within a complex system (Warfield, 1974). This method analyses the orders and interactions among variables within a complex system in a systematic manner using directed graphs (Govindan et al., 2010). ISM helps to structure collective knowledge and generate a model of a complex system consisting of interactions of related elements (Alawamleh & Popplewell, 2011). This research identified twelve elements of absorptive capacity within logistics IJV. An application of ISM highlights the interactions and hierarchies of contributing factors to absorptive capacity by a graphical ISM-based model. It illuminates how absorptive capacity can be built up in the IJV settings of logistics firms and what elements should be specifically underlined for the capacity building within logistics IJVs. Findings: The ISM-based model shed light on the four groups of twelve elements that can foster absorptive capacity of IJVs of logistics firms. The findings show that capabilities elements within Group 1 (Capability for knowledge acquisition, assimilation, transformation, exploitation) are all interrelated, thus self-enhancing themselves. Group 2 (trust and commitment, accessibility of knowledge from logistics partners) highlights capacity building of IJVs is determined by inter-organisational collaboration. Group 3 (compatibility of knowledge source, cultural similarity, business relatedness) denotes the similarities of the business pertaining to the knowledge base between IJV partners of logistics firms. Group 4 (logistics partner’s prior knowledge, organisational structure) possesses high driving power in this model by affecting other groups of factors, but their characteristics are slightly different. Value: Within the logistics domain, this research provides further theoretical insights and an ISM-based framework into logistics IJVs by building on the absorptive capacity and knowledge management disciplines. Research limitations/implications: This research provides implications for the mangers of logistics IJVs. The findings suggest a holistic perspective on absorptive capacity building considering the interactions between the contributing factors within IJVs of logistics firms which offers a solid platform on which to base further studies. Top and middle managers of logistics IJVs can obtain useful lessons from this study. However, this research is not without limitations. Given the findings of this study are based on logistics IJVs, it limits the generalizability of the results toward other industries.