FACTORS INFLUENCING UTILIZATION OF INTERNATIONAL JOINT VENTURE

PARTNERSHIPS IN EXECUTING HOUSING DEVELOPMENT PROJECTS IN

KENYA: A CASE OF NAIROBI COUNTY, KENYA.

BY
KOSGEI KIPKURUI SILAH

A RESEARCH PROJECT PROPOSAL SUBMITTED IN PARTIAL FULFILMENT OF

THE REQUIREMENTS FOR THE AWARD OF THE DEGREE OF MASTER OF
ARTS IN PROJECT PLANNING AND MANAGEMENT OF THE UNIVERSITY
OF NAIROBI
2016

Declaration
I declare that this is my original work and has not been presented by any other person to a
university or college for the award of degree, diploma or certificate.
Signature.

Date

KosgeiKipkuruiSilah,
L50/79815/2015

This research project has been submitted for examination with my approval as the university
supervisor.
Signature.
Prof. Christopher Gakuu.
Department of Extramural studies,
University of Nairobi

Date

Dedication
I dedicate this project to my dear parents, family and friends. Your support, love, patience,
encouragement, sacrifice and prayers have transformed my dreams to the success of this degree.

Acknowledgements
First, my sincere gratitude goes to the Almighty who by His grace I was able to do and complete
this study. This far the Lord has brought me, it has been a challenging project and I thank Him
for his mercies. In addition, I would also like to thank the individuals who have contributed to
the successful completion of this project.

Second, for the development and production of this work I feel a deep sense of gratitude to my
supervisor Prof. Christopher Gakuu for his patience, support, understanding, knowledge and
encouragement throughout the demanding journey.
Kosgei Silah

CHAPTER ONE
INTRODUCTION
1.1 Background
The state of business environment currently faced by organizations is complex and rapidly
changing. For any venture to be successful and to survive the difficulties faced, organizations
have to device means and ways of positioning itself to the external environment (Mittral 2001).
Organizations therefore need to invest more on formulating competitive strategies. Competitive
strategy is the ability of a firm to meet and beat its competitors (Porter, 1985).
In the construction industry, one of the competitive strategies which is gaining popularity is
formation of joint venture partnerships in order to bring together strengths that will enable firms
survive the harsh terrain of the market. According to (Porter, 1998) joint venture partnership is a
form of strategic partnership which seeks to unite investors with common goals and needs to
pool resources to execute a project.
1.1.1 The Concept of Joint venture partnership
A joint venture partnership is a form of a strategic partnership which organizations use to execute
specific projects by pooling resources together. For clear understanding of the concept of joint
venture partnerships, it is imperative to first discuss strategic partnerships.
A strategic partnership is a formal alliance between two or more commercial enterprises, usually
formalized by one or more business contracts. Normally two or more companies form a strategic
partnership when each own assets that the other partner doesnt have and does not wish to
develop internally in their organizations. Strategic alliances are critical elements to many
business strategies. Porter (1998) states that developing competitive strategy is developing a
broad formula on how a business is going to compete, what its goals should be and what policies
are needed to carry out these goals. There is no organization or institution which can execute all
the projects on its own, therefore formation of alliances is a powerful means of achieving
desired results and solutions for the clients, advancing entry to new markets and customers, and
expanding the organizational knowledge base and capabilities. Organizations can increase their

core competencies by venturing into same projects with organizations that have capabilities that
complement theirs.
According to (Buono, 1997; Coulson, 2005) Alliances combine competencies and capabilities to
create synergy and enable the partners to achieve what they could either not do at all, or could do
only at reduced efficiency or greater cost. The fundamental aspect to success of alliances is the
management competency and the way parties perceives the partnership. Yoshino and Rangan
(1995), proposed various forms of strategic alliances which include but not limited to Public
Private Partnerships, Franchising, Licensing and Joint ventures. The commonly used forms in
real estate projects are Joint ventures andPublic Private Partnerships
1.1.2 Housing sector in Kenya
There has been a considerable evolution of the housing sector in Kenya since independence in
1963. It all picked in 1968/76 when the National Housing Policy was passed which issued a role
to the government in providing affordable housing for the citizens of the country through its
parastatal or quasigovernment institution, the National Housing Corporation (NHC), through
municipal councils, and through civil service housing. NHC became the market leader in the
housing industry for two decades, having the responsibility of developing government run and
managed public housing. The Nairobi City Council and local authorities throughout the country
emulated the public housing of NHC by developing and managing a considerable stock of
housing units, largely in urban centers. Concurrently, the government provided housing to civil
servants working at national, provincial, and municipal levels of administration at a time when
one in two wage earners were public sector employees. However, in the late 1970s and onwards,
the urban housing situation in the country worsened. Demand for housing radically outstripped
supply as people migrated to cities, the national economy itself suffering from poor performance,
could no longer finance public housing, and poor governance led to the near collapse of
Parastatal institutions, including NHC. The advent of structural adjustment programs (SAP's) in
the 1980s and 1990s compounded the problem as government down-sized the civil service and
the housing benefits associated with it (National Housing Corporation, 2012).
The Kenya Vision 2030 recognizes the importance of development infrastructure as critical for
socio-economic transformation. The housing Sector aspires for a country with modern
metropolitan cities, municipalities and towns with housing facilities that meet international

standards to make Kenya a globally competitive and prosperous country. The strategies and
measures to be pursued in the medium term include; supporting the development of housing
initiatives around flagship projects, strengthening the institutional framework for housing
development, raising the efficiency and quality of housing as well as increasing the pace of
housing projects so that they are completed as envisaged, protecting the environment as a
national asset and conserving it for the benefit of the future generations and the wider
international community. Other measures include encouraging Private Sector participation in the
provision of housing services through the Public-Private-Partnerships framework (Ruitha, 2010).
1.2 Statement of the problem
We are living in a world where the majority of people live in cities and 1 billion live in slums, a
figure that will double by 2030 (UN Habitat report, 2007). Urban populations are growing at a
rate much faster than can be absorbed and managed, causing demands on services and
infrastructure that massively outstrip supply. In many emerging market cities, this leaves the
majority of residents with few options but to live in slums.
Increasing access to good quality affordable housing has a profound impact, both for the
individual and society at large.Housing is a challenging and capital-intensive sector characterized
by delays and regulatory difficulties, and as a result, it rarely gains the limelight for impact
investors and social entrepreneurs.
Kenya is no exception. Twenty-two percent of Kenyans live in cities, and the urban population is
growing at a rate of 4.2 percent every year (CIA World Factbook, 2010). With this level of
growth, Nairobi requires at least 120,000 new housing units annually to meet demand, yet only
35,000 homes are built, leaving the housing deficit growing by 85,000 units per year. As a result
of this mismatched supply and demand, housing prices have increased 100 percent since 2004.
This pushes lower income residents out of the formal housing market and into the slums.
Housing developments are extremely capital intensive and highly leveraged. It is difficult to
secure debt, especially at reasonable rates, which are a key component of bringing down the cost
for the end-user. Yet, even if the banks did lend at reasonable rates, approvals and timely
disbursals would still be a challenge. Developers tell cautionary tales about banks committing
project finance but neglecting to disburse, making claims such as that they will only disburse

after construction is complete. This clearly defeats the purpose of project finance, which is meant
to fund the construction itself.
The Government has a duty to provide decent and affordable housing to the Kenyan Citizens.
Part of this responsibility has been delegated to the Counties through the devolved government
structure. The key challenge in meeting this duty has been getting sufficient funds to implement
such capital intensive programmes. It is for this reason, that Joint Venture (JV) and Public Private
Partnerships solutions have been developed under the PPP act.
Under the joint venture (JV) business agreements, the government/project sponsor and the
investors will agree to develop for a finite time, the proposed houses by contributing equity. They
will jointly exercise control over the development and consequently share revenues, expenses
and assets. Due to this international investors have been flocking the Kenyan Market searching
for opportunities to invest their resources in the different sectors of the economy. This
opportunity however has not been fully exploited in the Kenyan real estate industry. The
National and the county governments have not utilised well the provisions it has been given in
the PPP Act of the Kenyan Laws in providing services to the citizens. Private developers also
have not embraced well the use of joint venture structures to tap the private equity locally and
internationally
Hence the purpose of this study is to explore the factors affecting the real estate developers and
the governments in tapping the internationally available equity for financing the housing projects
in Nairobi, Kenya with a quest of solving the shortage of good quality housing currently
experienced in the city.
1.3 Purpose of the study
The findings of this research would inform the Governments and other Public and private sector
bodies on the significance of international joint venture partnerships and how synergy is created
in a project between the two parties. International joint venture partnerships helps the
government meet its service delivery to the people by accessing the technical and financial
capital in areas that the government would not successfully undertake without affecting service
delivery in other basic areas.

The state corporations, developers, contractors and other stakeholders in the construction
industry would benefit from this study because it would highlight some of the factors which are
influencing the performance of international joint venture partnerships in the housing sector and
hence they would institute measures to mitigate these constraining factors. The information
gathered and presented in this study will serve as a guideline in the decision making for the
parties concerned.
For researchers and academicians, this study would add to the existing body of literature thereby
acting as a source of reference. In addition, this study would provide areas for further research
where future scholars could explore to widen the knowledge base on project partnerships. The
findings of this study would be important to scholars in the field of Joint venture structuring.
1.4 Research objectives
i)
To assess how legal factors influence utilization of international joint venture
ii)

partnerships in executing real estate projects in Nairobi, Kenya

To establish how technological factors influence utilization of international joint

iii)

venture partnerships in executing real estate projects in Nairobi,Kenya

To review how political factors influence utilization of joint venture partnerships in

iv)

executing real estate projects in Nairobi,Kenya

To assess how economic factors influence utilization ofjoint venture partnerships in

v)

executing real estate projects in Nairobi,Kenya

To review how social factors influence utilization of joint venture partnerships in
executing real estate projects in Nairobi,Kenya

Reserch questions

CHAPTER TWO

LITERATURE REVIEW
INTRODUCTION
According to (Frdric and Pierre 2006) an international joint venture is a legal organizational
entity in which at least two partners that are economically, geographically and legally
independent of each other participate in executing one project with and intention of sharing the
returns accrued. Joint venture has in the recent past become a common strategy for multinational
to entering in to developing countries (young, 1994: Mickiewicz, 1986). On the other hand
developing countries attract foreign direct investments and knowledge through request for
International joint ventures. International joint ventures help in knowledge transfer in terms of
technology, it also creates employment opportunities in the local country and grow the flow of
foreign currencies (Udo ,Sugata and Arijit,2003).
IJV offer an opportunity for each partner to benefit significantly from the comparative
advantages of the other. Local partners bring knowledge of the domestic market; familiarity with
government bureaucracies and regulations; understanding of local labor markets; and, possibly,
existing manufacturing facilities. Foreign partners can offer advanced process and product
technologies, management know-how, and access to export markets. For either side, the
possibility of joining with another company in the new venture lowers capital requirements
relative to going it alone (Killing, 1982).
IJV entails a decision between foreign companies and local companies to create a legal entity to
share the ownership, profit or loss and other benefits of the specific business at hand. Previous
studies however depict big percentage failures in the previous IJVs despite a strong
understanding between the companies and with huge amount of resources. The reasons for the
failure may be attributed to various aspects which include cultural differences; too many partners
political sabotage etc.
Scholars (e.g., Child & Faulkner, 1998) and practitioners (e.g., Harbison & Pekar, 1998) have
argued that by pooling expertise and resources, IJVs can solve intractable problems in ways that
confrontation or competition cannot. During the past decades, empirical evidence indicates that
joint ventures have grown extensively in response to industry deregulation, globalization,

technology changes and an increasing emphasis on product innovation (Harrigan, 1985). Since
dependence on joint ventures has grown significantly in recent years, partnership formation with
external parties for variety of reasons has become a central strategic activity for many firms
across multiple industries (Gulati, 1998). Bamford et al (2004) observed that more than five
thousand joint ventures, and many more contractual alliances, had been launched worldwide
since 1999. They further note that the largest 100 joint ventures currently represent more than
$350 billion in combinedannualrevenues.
Central to the IJV formation process is the quest for a suitable partner (Blodgett, 1991; Parkhe,
1993). Partner selection is an important strategic choice for firms entering foreign markets. JV
partner selection criteria determines JV's mix of skills, knowledge, and resources, its operating
policies and procedures, its vulnerability to indigenous conditions, structures, and institutional
changes, and its overall competitive viability (Beamish, 1987).
Organizations should engage potential partners with good IJV experience and should have
adequate knowledge to provide complementary resource (Sim and Yunus. 1998). For example,
Kenyan firms should expect foreign companies such with appropriate technology, joint venture
experience , overseas marketing knowledge, managerial expertise's and networks. So as the
foreign company will look in the Kenyan firm is local market knowledge, cost effectiveness in
inputs and past joint venture experience.
According to (Paul, 2007) the basic elements of an International Joint Venture include:
Contractual Agreement - IJVs are established by express contracts that consist of one or more
agreements involving two or more individuals or organizations and that are entered into for a
specific business purpose.
Specific Limited Purpose and Duration - IJVs are formed for a specific business objective
and can have a limited life span or be long-term. IJVs are frequently established for a limited
duration because the complementary activities involve a limited amount of assets; the
complementary assets have only a limited service life; and/or the complementary production
activities will be of only limited efficacy.

Joint Property Interest - Each IJV participant contributes property, cash, or other assets and
organizational capital for the pursuit of a common and specific business purpose. Thus, an IJV
is not merely a contractual relationship, but rather the contributions are made to a newly formed
business enterprise, usually a corporation, limited liability company, or partnership. As such, the
participants acquire a joint property interest in the assets and subject matter of the IJV.
Common Financial and Intangible Goals and Objectives - The IJV participants share a
common expectation regarding the nature and amount of the expected financial and intangible
goals and objectives of the IJV. The goals and objectives of an IJV tend to be narrowly focused,
recognizing that the assets deployed by each participant represent only a portion of the overall
resource base.
Shared Profits, Losses, Management, and Control - The IJV participants share in the specific
and identifiable financial and intangible profits and losses, as well as in certain elements of the
management and control of the IJV.
According (Child & Faulkner, 1998) the motivations that lead to the formation of a IJV include:
Risk Sharing Risk sharing is a common reason to form an IJV, particularly, in highly capital
intensive industries and in industries where the high costs of product development equal a high
likelihood of failure of any particular product.
Economies of Scale If an industry has high fixed costs, a JV with a larger company can
provide the economies of scale necessary to compete globally and can be an effective way by
which two companies can pool resources and achieve critical mass.
Market Access For companies that lack a basic understanding of customers and the
relationship/infrastructure to distribute their products to customers, forming a JV with the right
partner can provide instant access to established, efficient and effective distribution channels
and receptive customer bases. This is important to a company because creating new distribution
channels and identifying new customer bases can be extremely difficult, time consuming and
expensive activities.

Geographical Constraints When there is an attractive business opportunity in a foreign

market, partnering with a local company is attractive to a foreign company because penetrating
a foreign market can be difficult both because of a lack of experience in such market and local
barriers to foreign-owned or foreign-controlled companies.
Funding Constraints When a company is confronted with high up-front development costs,
finding the right JVP can provide necessary financing and credibility with third parties.
Acquisition Barriers-When a company wants to acquire another but cannot due to cost, size, or
geographical restrictions or legal barriers, teaming up with a JVP is an attractive option. The JV
is substantially less costly and thus less risky than complete acquisitions, and is sometimes used
as a first step to a complete acquisition with the JVP. Such an arrangement allows the purchaser
the flexibility to cut its losses if the investment proves less fruitful than anticipated or to acquire
the remainder of the company under certain circumstances
Factors influencing International Joint Ventures
Political Factors
The political environment of IJV includes any national or international political factor that can
affect the organizations operations or its decision making.Politics has come to be recognized as
the major factor in many international investment decisions, especially in terms of whether to
invest and how to approach the markets (Grosse, 2005).
The freedom to operate in a given country depends largely on the governments attitude to
investment. Volatile political regimes expose foreign investors to a multitude of risks that they
would basically not face in their home country. This therefore incinerates that the political arena
is the most volatile area of international investments (Buckley, 2003).
Government actions in dealing with regulation changes can have an immense impact on how
international investors perceive the markets within the country. The changes in regulation can
provide both opportunities and threats. For example the invasions of Afghanistan and Iraq caused
market development opportunities for some but market wreckage for others and higher political
risk in neighboring markets for all.

The persistent threat of global terrorism and the instability in the Middle East have heightened
organizations understanding on the essence of monitoring political risk factors in the
international markets in which they venture in. Developing countries and up-and-coming markets
front particularly high political risks, irrespective of their quest to solve political problems they
have. Recently in Indonesia, Venezuela, Brazil and Argentina, quest to have reforms itself lead to
civil disorder and rising opposition to governments. Political risk is defined as a risk due to a
sudden or gradual change in a local political environment that is disadvantageous or
counterproductive to foreign firms and markets (Lowe, 2008).
The types of action that governments may take which constitute potential political risks to firms
fall into three main areas: Operational restrictions. These could be exchange controls,
employment policies, insistence on locally shared ownership and particular product
Requirements; Discriminatory restrictions. These tend to beimposed on purely foreign firms and,
sometimes, only firms from a particular country.
The USA has imposed import quotas on Japan in protest at non-tariff barriers which they view as
being imposed unfairly on US exporters. They have also imposed bans on imports from Libya
and Iran in the past. Such barriers tend to be such things as special taxes and tariffs, compulsory
subcontracting, or loss of financial freedom;
Physical actions. These actions are direct government interventions such as confiscation without
any payment of indemnity, a forced takeover by the government, expropriation, nationalization
or even damage to property or personnel through riots and war.
In 2001 the Nigerian government claimed ownership of Shells equipment and machinery
without any prior warning. Investment restrictions are a common way governments interfere
politically in IJV by restricting levels of investment, location of facilities, choice of local partners
and ownership percentage.
The World Trade Organization has led negotiations on a series of worldwide agreements to
expand quotas, reduce tariffs and introduce a number of innovative measures to encourage trade
amongst countries. Together with the formation of regional trading agreements in the European
Union, North and South America and Asia, these reforms constitute a move to a more politically
stable international investment environment (Lowe, 2008).

Economic Factors
Economic environment includes factors and trends related to income levels and the production of
goods and services. Economic conditions affect how easy or how difficult it is to be successful
and profitable at any time because they affect both capital availability and cost, and demand
(Thompson, 2002). Economic trends affect the purchasing power of these markets. Thus, it is not
enough for a population to be large or fast growing, as in many developing countries, to offer
good market opportunities; the economy must provide sufficient purchasing power for
consumers to satisfy their wants and needs (Linnemann, 1966). Economic trends in differentparts
of the world can affect trading activities in other parts of the world. For example,changes in
interest rates in Germany affect the value of the dollar on world currencymarkets, which affects
the price, and subsequently sales, of American exports andimports (Clay et al., 2005).
Market opportunities are a function of both economic sizeand growth. The gross domestic
product (GDP) represents the total size of a countryseconomy measured in the amount of goods
and services produced. Changes in GDPindicate trends in economic activity. The US has the
largest economy in the world,followed by Japan, Germany, France, Italy, and Britain. Yet, the US
ranks relativelylow on in Hong Kong, China, and some countries in Western Europe (Vitullo,
1997).
Another important economic factor is the level of economic activity per person. Percapita data
integrate population and economic data to provide an assessment of the purchasing power of
individual consumers in a country. The US ranks at the top of thepack in per capita GDP,
followed by Switzerland, Canada, Luxembourg, Germany,and Japan. Some smaller countries,
such as the United Arab Emirates and Kuwait,have large GDPs relative to their small
populations, although their overall level ofeconomic activity is small in comparison to the larger
countries. Consumers in thesecountries may have a lot of purchasing power, but there are not that
many of them.

These countries typically offer attractive market opportunities for luxury products.Conversely,
many developing countries have large populations relative to theireconomic strength; that is,
individual consumers do not have much purchasing power(Clay et al., 2005). However,

subgroups within these countries may have substantial purchasing power, or economic growth
may offer substantial opportunities in thefuture. India, for example, has a large and growing
population but a low per capitaincome. Within this relatively poor country, however, are 250
million middle-classconsumers. This is larger than the total US market. Coca-Cola, Walt Disney,
KentuckyFried Chicken, Frito-Lay, and many other companies have recently started
Indianoperations to take advantage of this opportunity (Russow, 2006).
China is an example of a country whose economic growth has been increasing at a rapid pace
over the past few years, offering substantial opportunities. As incomes risein China, so does the
demand for consumer products and the heavy machinery,agricultural and medical equipment,
power plants, and communication equipmentneeded by business and government organizations.
For example, Benetton plans tohave 500 stores in China by 1999. These stores are designed to
take advantage of growing demand for consumer products, but will also increase demand for the
many organizational products needed to build, maintain, and manage the stores (Martin,1997)
Socio-Cultural Factors
The socio-cultural environment encapsulates demand and tastes, which vary with fashion,
disposable income, and general changes, can again provide bothopportunities and threats for
particular companies (Lowe, 2008). Over-time mostproducts change from being a novelty to a
situation of market saturation, and as thishappens pricing and promotion strategies have to
change. Similarly, some productsand services will sell around the world with little variation, but
these are relativelyunusual. Organizations should be aware of demographics changes as the
structure ofthe population by ages, affluence, regions, and numbers working and so on can
havean important bearing on demand as a whole and on demand for particular productsand
services. Threats to existing products might be increasing: opportunities fordifferentiation and
market segmentation might be emerging (Robinson, 2005)
The social environment includes all factors and trends related to groups of people, including their
number, characteristics, behavior, and growth projections. Sinceconsumer markets have specific
needs and problems, changes in the socialenvironment can affect markets differently. Trends in
the social environment mightincrease the size of some markets, decrease the size of others, or
even help to createnew markets. The two important components of the social environment:
thedemographic environment and the cultural environment. The demographicenvironment refers

to the size, distribution, and growth rate of groups of people with different characteristics. The
demographic characteristics of interest to marketersrelate in some way to purchasing behavior,
because people from different countries,cultures, age groups, or household arrangement often
exhibit different purchasing behaviors (Buckley, 2011).
A global perspective requires that traders be familiar with important demographic trends around
the world. Population size and growth rates provide one indication ofpotential market
opportunities. There is a tremendous disparity in population size andgrowth rates across
countries. China currently has the largest population, followed byIndia, with the US a distant
third. The rapid growth of the Indian population is expected to make it the worlds most populous
nation by the year 2100. Othercountries with large and growing populations are the developing
nations of Indonesia,Brazil, Pakistan, Bangladesh, and Nigeria. (Lowe, 2008)
The cultural environment refers to factors and trends related to how people live and behave.
Cultural factors, including the values, ideas, attitudes, beliefs, and activitiesof specific population
subgroups, greatly affect consumers purchasing behavior.Thus, marketers must understand
important cultural characteristics and trends in different markets. Cultural differences are
important in both international anddomestic markets. A cultural groups characteristics affect the
types of products itdesires and how it purchases and uses those products. Different cultural
groups ininternational markets often require marketers to develop strategies specifically forthem
(Rugimbana, 2003).
Technological Factors
Technology has transformed society at many different levels. But it has had the most remarkable
and pervasive effect upon global trade and commerce. From the desktopcomputer to advanced
robotics, from television to satellite communications,technology has connected the world in a
way no other innovation has done before.
And with the technology, have come problems (Feldman et al., 2008). As companies become
more dependent upon computer networks to manage their databases, finances,inventories, etc.,
they become targets of hackers, saboteurs, and international crimerings. Organizations that
engage in E-commerce, reaching out to a global market viathe Internet, have become vulnerable
to Cyber Crime. Many have found itincreasingly found it difficult to protect their products,

services, trade secrets,customer base, and personnel from those determined to gain access to
privilegedinformation. It is no wonder that information security is one of the fastest growing
service areas in todays economy (Egol, 2004).
The emergence of a more open world economy has resulted in an upsurge in international trade,
since many countries belong to major trading blocs. Companies ofall sizes need to develop skills,
ability and knowledge to compete effectively ininternational markets. Moreover, with the
advancement of technology,communications and international transportation become faster and
more convenient,and increase opportunities for companies to look beyond their domestic markets
andfacilitate their engagement in international market operations (Feldman et al., 2008).
Technological advancement is an important environmental factor impacting trade. It has
accelerated in transportation, communication, manufacturing and computersystems, which may
be considered major part of international trading. Advanced technology in transportation can
facilitate the distribution of products. It helpscompanies to better communicate and control their
distribution channels. Informationtechnology together with technological skills can create new
opportunities forcompanies to communicate with their target customers (Chirapanda, 2012).
Issues of compatibility, interoperability and connectedness affect communications between an
organization and its suppliers. The problem is compounded by the factthat differences in
technology from one company or region to another may make itdifficult to ensure good
communications between suppliers and organizations, andkeep consumers happy with the
products or services they are purchasing. Likewise,differences in standards and quality control
may occur due to the age, obsolescence,or condition of technology used by suppliers in less
developed parts of the world(Feldman et al., 2008). Communications may be complicated by
language differences.
Technological practices and standards may differ as a result of cultural, political or religious
factors. Local workforces may be unskilled in the use of technologies andthis may affect the
quality of the final product. The ability to maintain goodcommunications with suppliers and to
monitor compliance with organizationalstandards and practices is critical to company branding,
consumer confidence, andmarket share (Ball, 2005).
Legal Factors

The global legal environment refers to the legal environment in international business. The legal
environment regulates the operations of firms in international markets.Legal systems vary both
in content and interpretation. A company is not just bound bythe laws of its home country but
also by those of its host country and by the growingbody of international law. It is sufficient for a
firm operating at the domestic level tostick to regulations of the land, but organizations operating
in different countries needto know and comply with the laws of the domestic country as well as
all the hostcountries they operate in.
Governments impose laws to protect the home industry from cut- throat global competition
(Grosse, 2005). They impose different kinds of tariffs, enter intoagreements and sign treaties to
protect indigenous industry and promote local trade.
To protect domestic industry, they can also impose non-tariff barriers and frame regulations on
foreigninvestments. In international business, disputes and litigation are common. To
resolvedifferences between countries, all member nations of the WTO have established aDispute
Settlement Body. It is the final authority and passes rulings and framesregulations on disputes
between/among member countries. WTO members haveentered in to agreements and established
committees to regulate and governinternational trade in information technology products. Laws
have also been framed to regulate and bring uniformity to the interpretation of transportation
rules among countries (Jayaraj, 2011).
It is important, therefore, for the firm to know the legal environment in each of its markets.
These laws constitute the rules of the game for business activity. The legalenvironment in
international trade is more complicated than in domestic markets sinceit has three dimensions:
local domestic law; international law; domestic laws in the firms home base Law and Policy in
(International Business Association, &Georgetown University, 1969). Local domestic laws; the
only way to find a route through the legal maze in overseas markets is to use experts on the
separate legalsystems and laws pertaining in each market targeted. International law; there are
anumber of international laws that can affect the organizations activity. Some areinternational
laws covering piracy and hijacking; others are more internationalconventions and agreements
and cover items such as the International Monetary Fund(IMF) and World Trade Organization
(WTO) treaties, patents and trademarks legislation and harmonization of legal systems within
regional economic groupings, e.g. the European Union.

Domestic laws in the home country: The organizations domestic (home market) legal system is
important for two reasons. First, there are often export controls which limitthe free export of
certain goods and services to particular marketplaces, and second,there is the duty of the
organization to act and abide by its national laws in all itsactivities, whether domestic or
international (Doole, 2005).
For many firms, the legal challenges they face in international markets are almost a doubleedged sword. Often firms operating internationally face ethical challenges indeciding how to
deal with differing cultural perceptions of legal practices (Buckley,2011).In many mature
markets they face quite specific and, sometimes, burdensome regulations. In Germany, for
instance, environmental laws mean a firm is responsiblefor the retrieval and disposal of the
packaging waste it creates and must producepackaging which is recyclable, whereas in many
emerging markets there may belimited patent and trademark protection, still evolving judicial
systems, non-tariffs barriers and instability through an ever-evolving reform programme. China
earnednotoriety in the past for allowing infringements of copyright and blatant piracy.
However, this is now changing. Some governments are reluctant to develop and enforce laws
protecting intellectual property partly because they believe such actionsfavor large, rich,
multinationals (Lowe, 2008).

Legal or regulatory requirements.

Scholars (e.g., Kumar, 1995) have argued that perceptions of the executives responsible for
establishing a JV are critical determinants of the partner selection criteria utilized when forming
a JV. Researchers (e.g., Hitt, Ahlstrom, Dacin, Levitas, & Svobodina, 2004) have also suggested
that the host country's institutional environment and specifically the legal aspect of the
institutional environment should not be ignored when studying JV partner selection.
Often, organizations are forced to enter into joint ventures because of legal requirements.
International joint ventures might serve as an example. Many international joint ventures have
resulted from host country restrictions to foreign ownership. For instance, many developing

countries insist that access to the local market can only occur in co-operation with a local partner
(Beamish, 1988).
Of the various institutions that exist within the host-country institutional environment, rule of
law and control of corruption appear to be particularly important elements in influencing the
decisions and behaviors of MNEs. Rule of law is the extent to which agents have confidence in
and abide by the rules of society, and in particular the quality of contract enforcement, the
police, and the courts, as well as the likelihood of crime and violence (Kaufmann, Kraay,
&Mastruzzi, 2006: 4). Rule of law in the host country defines and protects corporate activity,
constructs and constitutes the grounds of organizational action, and ensures stability and order
in the society that hosts the IJV. A lack of adequate legal protection increases uncertainty with
respect to property rights and legitimate returns (Delios&Henisz, 2000), and restricts the means
of legal recourse for victims of opportunistic conduct.
Control of corruption, on the other hand, is defined as the extent to which public power is
exercised for private gain, including both petty and grand forms of corruption, as well as
capture of the state by elites and private interests (Kaufmann et al., 2006: 4). Control of
corruption in the host country lessens the average firm's likelihood of encountering corruption
in its normal interactions with state officials in the society that hosts the JV. Like Kaufmann et
al. (2006) and others, we recognize and treat rule of law and control of corruption as distinct
concepts of host-country legal environments. While not wholly unrelated, the former pertains to
predictability and protection of the firm's interests, while the latter relates to the cost of doing
business. (The high degree of discriminant validity exhibited in this study between the two also
supports their conceptual distinctiveness as constructs.)
Globerman and Shapiro (2003) found that American MNEs were less likely to enter countries
characterized by weak rule of law and control of corruption than those with strong rule of law
and control of corruption. Li and Filer (2007) illustrated that when investing in countries where
laws are opaque and ineffective, investors have a greater tendency to choose direct investment
rather than portfolio investment. Yiu and Makino (2002) found that MNEs entering a host
country that had protection deficiencies or legal risk mitigated such threats by entering into an
IJV with local partners. Tse, Pan, and Au (1997) found that American firms entering China

preferred to enter special economic zones and coastal cities where laws and policies were
explicitly specified. Furthermore, several studies have shown that weak control of corruption
has extensive negative effects on foreign direct investment (Habib & Zurawicki, 2002; Zhao,
Kim, & Du, 2003), which distorts international trade and investment flow (Glynn, Kobrin, &
Nairn, 1997). Recently, Hitt et al. (2004) argued that the differences they discovered in the
partner selection criteria preferences between Chinese and Russian firms were, at least in part,
reflective of the different legal environments in China and Russia.
Clearly, research to date has demonstrated that the institutional context of the host country
remains central to understanding the decisions and behaviors of MNEs. In particular, it is
strikingly apparent that MNEs are influenced by the rule of law and control of corruption that
exist in the host country's institutional environment, and must adapt their strategies accordingly.
This body of research provides the impetus for suspecting that host-country rule of law and
control of corruption also influence IJV partner selection criteria.

Conceptual framework
Legal factors

Technological factors
Political factors
Economic factors
Socio-cultural factors

Environment
al factors

Utilization of
international joint
venture partnerships in
executing

CHAPTER THREE
RESEARCH METHODS
Introduction
This chapter presents various stages and phases that will be followed in completing the study. In
this stage, most decisions about how research will be executed and how respondents will be
approached, as well as when, where and how the research will be completed. This chapter
contains the research design, target population, sample design, data collection instruments and
procedures and data analysis.
Research Design

The research will adopt a descriptive survey. The study aims at collecting information from
respondents on their attitudes and opinions in relation to the success of Joint ventures in the
Housing sector in Kenya.
Descriptive survey is a method of collecting information by interviewing or administering a
questionnaire to a sample of individuals (Mugenda and Mugenda, 2003).
It can be used when collecting information about peoples attitudes, opinions, habits or any of the
variety of education or social issues. In this study, the researcher seeks to collect information
about peoples attitude on the performance of joint ventures in the housing sector in Nairobi.
This provides a better platform for the researcher to collect relevant information from the target
respondents without having to physically observe the situation.
Population of study
The population of this study will comprisefirms within Nairobi of real estate developers, real
estate consultants and real estate contractors. It will also encompass government entities which
include Ministry of housing, Housing Finance Public-Private-Partnership Unit at Treasury,
Ministry of Lands and department of housing in Nairobi City County. The above respondents
will be selected because of their key role in the execution of Joint venture agreements in the
housing sector in Kenya. The identified respondents will either have interest in the Joint Ventures
or are likely to enter in such arrangements.

Sample Design
The sampling plan describes the sampling unit, sampling frame, sampling procedures and the
sample size for the study. The sampling frame describes the list of all population units from
which the sample will be selected (Cooper & Schindler, 2003). The study will use
disproportionate stratified sampling technique. In disproportionate stratified sampling the sizes
of different groups may vary and not represent the percentage of any particular group within the
larger population.

Sample points will be awarded to each stratum and must be assigned correctly to assure accuracy
in the study. This type of sampling is most appropriate where one or more of the subgroups is
very small in comparison to other groups, or where the target of the study is a specific and
oversampling of a group may provide more accurate results. For the category with less than 30
members, the study included all of them. However, for the population exceeding 30 members, a
representative sample of 30% was selected.

Data Collection
The main instrument in data collection will be questionnaires. The questionnaires will contain
both closed and open ended questions. This is because closed ended questions ensure that the
respondents are restricted to certain categories in their responses. The open ended questions will
be use where the researcher wishes to explore other possible responses that differ from
respondent to respondent.
Primary data will be collected for this study. The questionnaire will be personally administered
with the help of research assistants who will be taken through the tool to be used. The research
assistants will be trained on the issues on the questionnaire to ensure that they clearly understand
its contents and collect relevant information. The use of personally administered questionnaires
will ensure a high response rate.
3.6 Data Analysis
Data collected will be analyzed by means of Statistical Package for the Social Sciences (SPSS)
and presented through percentages, means, standard deviations and frequencies. The information
will be displayed by use of bar charts, pie charts and frequency tables.
The study will use both descriptive techniques like frequencies and measures of central tendency
like mean and standard deviation. Open ended questions will be analyzed using content analysis.
To help establish the relationship between the variables, a correlation analysis will be
undertaken.

CHAPTER TWO
LITERATURE REVIEW
Introduction
Objectives

Corruption
Economic concerns
three economic concerns: (1) providing the partners with appropriate risk-adjusted returns if the
deal is successful; (2) providing a mechanism for restructuring and salvaging the deal if things
do not go as well as expected; and (3) ensuring that technical tax and accounting matters do not
have an unintended and unanticipated effect on the parties negotiated business deal. This article
examines the role that each of these three fundamental economic concerns plays in structuring
real estate joint ventures.
Bureaucracy
Black market
Legal factors influencingjoint ventures
Taxes
Legislation on Foreign Investors

Technological factors influencing joint ventures

Political factors influencing joint ventures
Economic factors influence Joint ventures
Social factors influence Joint Ventures
Theme on first objective
Theme on second objective
Theoretical framework
Conceptual Framework
Explanation of relationships of variables on the conceptual framework
Gaps in literature review
Summary of Literature review