Determinants and performance consequences of accounting performance-related compensation in international joint ventures

International joint ventures (IJVs) have become important strategic arrangements for firms expanding across national borders. However, very few studies have examined management accounting issues in IJVs. In order to fill this gap in the existing literature, this study examines one of the most important roles of accounting in management control in IJVs: the use of accounting performance measures in employee compensation. In particular, this study examines the determinants and performance consequences of accounting performance-related compensation (APRC).;The empirical analysis of this study consists of two parts. The first part is a large-sample quantitative study using four-year data (1998 to 2001) from 3,490 IJVs in China. The second part is a qualitative analysis using semi-structured interview data from thirteen IJVs in China. The quantitative and qualitative analyses in this study complement each other to offer insights into how IJVs use APRC and how that affects IJV long-term and short-term performance.;Several important empirical findings emerged from this research. The results show that use of APRC depends on partners' common goals and national cultures. In the case of asymmetrical influence between partners, the more influential partner can impose the use of APRC in favor of its own interests. The results also suggest that IJVs with higher growth rate and greater R&D intensity use APRC less than do IJVs without such characteristics. The empirical results suggest that the long-term and short-term use of APRC has a different effect on IJV performance. IJVs that consistently use APRC for a few years enjoy improvement in employees' long-term productivity and the firms' long-term profitability. However, for IJVs that use APRC for only a year, the positive impact of APRC is limited to employees' productivity. Neither long-term nor short-term use of APRC was found to have a significant impact on IJV innovation and growth.;This study represents the first systematic investigation of the use of APRC in IJVs. It not only advances our knowledge on the role of accounting information in managing IJVs but also provides guidance for managers regarding the appropriate design of employee compensation in IJVs.;Drawing from the perspectives of agency theory and international business literature, the study examines whether four unique IJV characteristics---partners' mutual commitments to IJVs, partners' divergent goals for participating in the IJV, sharing of control between partners, and cultural difference between partners---affect the use of APRC. The study also examines the impact of business strategy, growth rate, R&D intensity, and noise of accounting performance measures on the use of APRC in IJVs. The study then investigates how the use of APRC affects IJV productivity, innovation, profitability, and growth.;Keywords: Accounting performance measures, employee compensation, agency theory, international joint venture performance, China.