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Technological Forecasting & Social Change

The rise and fall of technology companies: The evolutional phase model of ST-Ericsson's dissolution

Joseph Amankwah-Amoah a,⁎, Christopher Durugbo b,1

a Bristol University, School of Economics, Finance and Management, 8 Woodland Road, Clifton, Bristol BS8 1TN, England, UKb University of Liverpool Management School, University of Liverpool, Chatham Street, Liverpool L69 7ZH, United Kingdom

a r t i c l e i n f o

⁎ Corresponding author. Tel.: +44 117 3317936.E-mail addresses: Joseph.amankwah-amoah@bristo

Amoah), [email protected] (C. Duru1 Tel.: +44 151 795 3621.2 JVs refers to “organizational and legal entit(ies) crea

separate groups jointly participate as co-owners of a pr(Stuckey, 1983).

http://dx.doi.org/10.1016/j.techfore.2015.04.0050040-1625/© 2015 Elsevier Inc. All rights reserved.

Please cite this article as: Amankwah-Amomodel of ST-Ericsson's dissolution, Techno

a b s t r a c t

Article history:Received 25 February 2015Received in revised form 29 March 2015Accepted 10 April 2015Available online xxxx

Although joint venture dissolution among technology firms has been recognised as a commonfeature of both the twentieth and twenty-first centuries, our understanding of the complexprocesses involved remains limited. This study advances entrepreneurship research on jointventures by examining the dissolution process and factors that accelerate or hinder the processover time. Our study develops a unified sequential model that elucidates the complexities,processes and factors that lead to dissolution. We illustrate our theoretical analysis using thecontemporary case of ST-Ericsson's (2009–2013) dissolution. Our study uncovered three distinctstages in the disbandment process. These stages provide insights on declaration of intent, formingof the dissolution team, distribution of assets and liabilities, and the aftermath. Our studyhighlights how an entrepreneurial venture so well-conceived can eventually dissolve after fewyears in operations. We outline the practical implications of the findings and contributions toentrepreneurship and technology foresight.

© 2015 Elsevier Inc. All rights reserved.

Keywords:Technology companiesEvolutional phaseJoint venturesDissolution

1. Introduction

Over the past three decades, literature has consistentlyshown that joint ventures (JVs) (Stuckey, 1983)2 offer technol-ogy firms an opportunity to accumulate expertise, develop newproducts at a faster pace, exploit market opportunities andcompete beyond their current scopes of operations (Deeds andHill, 1996; Kyriazis andMetaxas, 2011). In the last two decadesthere has been a surge in scholarly works, suggesting that firmsin the high-technology industrywith specialism in areas such assoftware development, research and development, semicon-ductors, internet and telecommunications, have often opted toform JVs as ameans of sharing risk, reducing costs and achieving

l.ac.uk (J. Amankwah-gbo).

ted when two or moreoducing organization”

ah, J., Durugbo, C., The rl. Forecast. Soc. Change (

sustainable competitive advantage (Hobday, 1995; Gulati andWestphal, 1999).

This is important given that the competitive advantage ofhigh-technology firms often depends on being the first toacquire patents and intellectual protection – an awarenesstouted by some as the “winner takes all” principle (Deeds andHill, 1996; Hoang and Rothaermel, 2005). Yet, scholars such asKilling (Killing, 2013) have argued that JVs pose a catch-22 forfirms, citing examples of the Volvo–Peugeot–Renault JV forengine and transmission parts in the 1970s and the Rolls-RoyceJV with Japanese firms in the 1980s to design and manufacturejet engines.

On the one hand, managers dislike JVs due to potentialdisagreements and creation of future competitors (Gomes-Casseres, 1987) and, on the other hand, there is strong evidenceof the need for firms to leverage complementary resourcesthrough alliance formation to maintain competitiveness (Shi,1998). Although several business historians have examinedjoint ventures among technology firms (Kyriazis and Metaxas,2011; Pilkington, 1996), the issue of how firms dissolve tiesover time has been largely overlooked. Indeed, the underlying

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mechanisms through which firms dissolve ties remains theleast understood subject in general management and technol-ogy foresight.

Against this backdrop, the rich body of scholarly writingshas focused mainly on factors that motivate firms to engage inJVs (Hennart and Zeng, 2002) with a few notable exceptionssuch as Peng and Shenkar (Peng and Shenkar, 2002) who haveanalysed JV dissolution by drawing insights from humandivorce literature. As such, relatively few studies have exam-ined the causes of dissolution and processes leading todissolution (Polidoro et al., 2011).

Although some scholars have suggested that JV dissolu-tion is more likely to occur when the parent organisationsare rivals,3 the issue of how such dissolution unfolds andwhat factors accelerate or hinder this process has been givenlimited attention. Indeed, our understanding of the JVdissolution process, whether planned or unplanned remainsseverely limited (Polidoro et al., 2011). This omission issurprising given that throughout history JV dissolutionremains relatively common.

Our purpose in this study is to fill this void in our under-standing by developing a unified sequential model to explicatethe JV dissolution process and the factors that accelerate/hinderthis process.

Our study makes two main contributions to the foresightand entrepreneurship literature. First, we integrate multipletheoretical lenses to develop a unified stage perspective ondissolution that elucidates the underlying complexities andprocesses involved. In so doing, we shed light on how changesin the business environment can prompt and precipitatedisbandment of a joint entity (Lokshin et al., 2011). Second,the study moves beyond the existing streams of research thathave focused on themain entrepreneurial factors thatmotivateJV formation to examine the processes and factors in dissolvingties in such inter-firm networks (Dhanaraj and Beamish, 2004).

We illustrate our theoretical analysis using the contempo-rary case of the disbandment of ST-Ericsson. We focus on ST-Ericsson's dissolution for two main reasons. First, it was one ofthe largest JVs in European corporate history with two majorparent firms whose operations span across multiple countries.Second, although the JVwas sowell conceived, sudden changesin the business environment ultimately altered the foundingconditions, culminating in the disbandment.

The rest of the article is organised as follows. The nextsection of the paper sets out prior studies on the rationale,causes and process of JV disbandment towards developing aunified framework. We then describe the approaches adoptedto collect the data. The penultimate section sets out the keyfindings of the illustrative case of ST-Ericsson's dissolution. Thefinal section outlines the implications of the study for practiceand theory.

2. Joint venture: rationale and dissolution

Driven by our research focus, we began our theoreticaldevelopment by scrutinising the rationale for JVs and identify-ing a pertinentmodel that reflects theprocess for JVdissolution.We particularly analysed the causes and processes of JVdissolution and used this insight to serve as the foundation for

3 For an overview see (Pilkington, 1996).

Please cite this article as: Amankwah-Amoah, J., Durugbo, C., Themodel of ST-Ericsson's dissolution, Technol. Forecast. Soc. Change (

the development of a research model that offers a normativedescription for the stages that encapsulate the JV dissolutionprocess.

2.1. The rationale for joint ventures

Broadly speaking, JVs are formed for two main entrepre-neurial motives: offensive and defensive (Lorange and Roos,1993). Offensive alliances are seen as a strategy to assembleresources and expertise that equip the joint entity to invade orpressure rivals in their current areas of operations. There is anaccumulated body of literature that shows that such alliancesoffer technology firms an opportunity to exert competitivepressure on rival firms and thereby forcing them to maintaintheir current positions to avert exit (Lei, 1993; Mahmood andZheng, 2009). Indeed, such alliances also offer technology firmsan opportunity to confront competitors in their home marketsto thwart any potential growth of competition (Cavusgil et al.,2012).

Interestingly, leading technology companies in industriessuch as biotechnology and telecommunications view strategicalliances as ameans of acquiring new expertise and positioningthemselves to outcompete rivals as well as better positioningthemselves to respond to changes in the competitive landscape(Deeds and Hill, 1996; Hoffmann, 2007). Recent contributionsto this line of research have suggested that bypooling resourcesand capabilities, organisations are able to leverage economiesof scale and exploit opportunities in new technology sectorswhere both individual organisations have limited expertise(Polidoro et al., 2011). Thus, these organisations are able toutilise the alliance as a means of gaining market power andaccessing key resources (Bae and Gargiulo, 2004).

On theother hand, the defensive strategy is onewhere firmsemploy JVs as vehicles to protect their market positions andimprove competitiveness with a view to fending off attacksfrom rival firms (Lei, 1993). The strategy lays emphasis onusing competitive weapons such as defining and settingindustry standards, attaining control over key resources andcountermoves to anticipate changes in competitive landscapeand government policy.

Buoyed by technology foresight, the central argument isthat technological alliances can allow the parent firms to gainfirst-mover advantage in emerging sectors by developing newproducts at a faster pace relative to rivals (Deeds and Hill,1996). Although some studies have suggested that factorsleading to JV dissolution can be deduced from those precipi-tating the formation, there is a growing view that dissolution isan outcome of much more complex processes which warrantfurther scholarly attention (Shi, 1998).

2.2. Joint venture dissolution: causes and processes

It is worth noting that there is no clear consensus on whatfactors lead to JV dissolution. That being said, a common themehas been to conceptualise the causes of JV dissolution into firm-level (internal) and market-based (external) factors. At the firmlevel, some scholars have suggested that poor duediligence priorto JV formation leads to unrealistic expectations of both parentcompanies about themarket potentials andopportunities for thejoint entity (Kogut, 2003a). The unrealistic expectations oftencreate conditions for conflict to emerge as the single entity fails

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to meet expectations and thereby prompting a parent to seekto exit the relationship. It has also been suggested that lackof effective integration between the two firms and culturalmismatch between the partners are sources of friction whichprecipitate or create conditions for the venture to be dissolvedprematurely (Shi, 1998; Park and Ungson, 1997).

By seeking tomaintain their respective parental identities ina JVwhilstworking together, a source of frictionmay emerge toundermine the alliance (Luo, 2007). There is growing evidence,however, suggesting that dissimilarities in the structures andprocesses of both parties can inhibit progress in the JV, leadingto its dissolution (Polidoro et al., 2011; Park andUngson, 1997).Literature has also indicated that prior relationships betweenpartners can create an atmosphere that fosters trust andlongevity of the joint entity (Polidoro et al., 2011; Park andUngson, 1997).

Another stream of research has suggested that the dissolu-tion process may be imposed by external forces such as newgovernment regulations and legal requirements, over whichmanagers have little or no control (Hennart and Zeng, 2002).This makes it difficult for the parties to sustain their stakes andthereby precipitate premature exit. A focus on external factorsis at the heart of research that points to national culturaldifferences between the parent companies and competitiverivalry as precipitators for JV dissolution (Hennart et al., 1998;Park and Russo, 1996). Another line of research on externalfactors has also suggested that changes in the business envi-ronment such as newcompetitors could force theparties to exitthe venture and shorten the life of the venture (Polidoro et al.,2011).

With regard to dissolution processes, research suggests thatthere are broadly two types: planned/late and unplanned/early(Park andUngson, 1997; Park andRusso, 1996). Late or plannedJV dissolutions occur when the venture ends as anticipatedor noted by the parties (Park and Russo, 1996). An early orunplanned dissolution may also occur when early signals offriction or conflict cause the alliance to be ended prematurely(Shenkar et al., 2008). Unplanned JV dissolutions occur when asudden change in the business environment during the courseof the alliance prompts the parent companies to terminate theventure (Polidoro et al., 2011). This is a situation where bothparent companies agree to disband the joint entity largely dueto inability to achieve the goal articulated at the founding stagerather than a mere change in ownership.

In a wider sense, the disbandment may simply be an earlyrealisation that the alliance has failed to meet the expectationsof the parent organisations and inability to respond to un-expected changes in the business environment (Shenkar andZeira, 1987).

Traditionally, scholars have often invoked the resourcedependence theory (RDT) and transaction cost explanations toshed light on how and why firms engage in JVs and other col-laborative arrangements. The RDT is concerned with how suchalliance formation enables firms to acquire unique resources tominimise uncertainty and interdependence (Hillman et al.,2009). Some scholars have integrated multiple theoreticallenses such as transaction cost economics with social networktheory (Goerzen, 2007; Goerzen and Beamish, 2005) and socialnetwork theory and the RBV of the firm (Ahuja, 2000a) toexamine various aspects of such collaborative ventures includ-ing motives and partner opportunism. However, these studies

Please cite this article as: Amankwah-Amoah, J., Durugbo, C., The rmodel of ST-Ericsson's dissolution, Technol. Forecast. Soc. Change (

have provided limited insights into the stages associated withthe JV dissolution process.

In Appendix 1, we summarise the theories used by paststudies to shed light on alliances/ventures and their underlyinglogic and limitations. Each of the theoretical perspectivesprovides uswith a stage or step towards a better understandingof the overarching dissolution processes, as summarised inTable 1 (see col. 4). The table articulates how each of thesetheories helps us to understand the dissolution process and thefactors that precipitate these processes. It also outlines some ofthe limitations of the theoretical paradigms.

Although all the theories individually and jointly haveprovided insights into factors that lead to JV formation, theyhave tended to overlook the processes and stages inherent insuchdissolution and as suchour understanding is limited. Closeinspection of the theories also indicates that they have focusedmainly on either behavioural or economic motivations andthereby overlooked other factors.

Another theme is the inward nature of the theories, asoutlined in Table 1 (e.g. the RBV, knowledge-based view andorganisational learning) and, as such, there seems to be anomission of external factors and their impacts on the dissolu-tion process. There is therefore a need for a perspective thatlooks beyond the behavioural or economic motivations fordissolution. This is the focus of the next section where we alsohighlight the inherent value of theoretical integration.

2.3. A unified perspective of joint venture dissolution

Drawing on the key theories from the previous section,which are viewed as complementary in illuminating ourunderstanding, we advance a unified stage perspective of theJV dissolution process, as captured in Table 1 and reflected inFig. 1. Our theory contends that the dissolution process is aprogressive de-escalation of parent firms' commitment, con-trol, resources or capability to the venture, which then triggersa process leading to the sale of or exit from the joint entity. Thisprocess is influenced by a number of firm-specific and envi-ronmental factors such as opportunistic behaviour and lack ofeffective coordination.

Our key premise is that the processes of dissolution arecomplex and influenced bymultiple factors that are often tracedtowhat initiallymotivated the firms to engage in the JV (formingstage), changes in the business environment as anticipated bythe parties, and behaviours of a party or conditions after theformation stage (post-formation stage). Our unified perspectivebrings together insights from pre- and post-formation factors(firm-level and environmental)which influenced themotive fordissolutions and the stages involved. The dissolving tie entailsthe declaration of intent, establishing a team to help end theventure, sharing of assets and liabilities, and disintegrationstage/effects.

2.3.1. Stage 1: The announcement/“coming out”Although the desire to accrue synergistic benefits motivate

firms to engage in JVs, it often transpires that the self-interestof the parent companies leaves little room to achieve the“common good” and create conditions for conflict and frictionto emerge (Peng and Shenkar, 2002). The dissolution processoften commenceswhen a partner begins to pursue self-interestat the expense of the other and thereby fostering mistrust and

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Table 1Theoretical perspectives used in joint venture/alliance research.

TheoreticalLens

Perspective on dissolution process Insights from theories with respect tothe unified stage perspective

The unified sequential perspective

Transactioncost theory(TCT)

• Opportunistic behaviour by a partner to pursueself-interest triggers the dissolution processes.

• Partner opportunism has been identified as thestart of the process towards dissolution whichundermines confidence in the alliance andhampers inter-firm collaboration (Luo, 2007).

Stage 1: Partner opportunism/source oftension/friction (insights from agencyand transaction cost theories)

Joint venture dissolution commerce with aseries of events which reflect a decreasing levelor commitment, control and communication bya parent company.This process also follows declaration of intent,decision to close the venture, dissolution andaftermath. Stage 3 focuses on the post-dissolution effects.

Agency theory • Agency theory contends that parties to a jointventure may decide not to act in the best inter-ests of all the parties.

• It argues that firms employ a range of corporategovernance mechanisms such as equity, boardmonitoring, incentive systems and enforcementmechanisms as a means of mitigating the effi-ciency loss or opportunistic behaviour by a party.

Stage 1 and 2

Socialnetworktheory

• Weak ties and lack of effective coordinationcontribution leads to underperformance andthe decision to close the venture. Inability toincorporate social context into firm strategy ismore likely to lead to dissolution.

Stage 1

Resource-based viewsof the firm

• Unmatched and/or unequal contributions andcommitments of partners and diminishinglevels of commitment are key determinants ofdissolution.

• The process commences with diminished fi-nancial and expertise commitment of a partnerto the alliance.

Stage 1 and 2

Knowledge-based view

• Inability to learn from the venture or decay ofknowledge that led to the formation precipitatesthe shift towards the dissolution of the alliance.

Stage 1

Contingencytheory

• Misalignment between the firm strategy andchanges occurring in the post-formation envi-ronment triggers the dissolution process.

Stage 1 and 2

Organisationallearning

• Barriers to learning from others such asorganisational culture and incompatibility pre-cipitate the dissolution of the alliance.

Stage 2: Maladaptation to changes inthe business environment anddecaying resources or expertise(insights from RDT and RBV).

Dynamiccapabilities

• Inability to adapt with post-formation environ-ment represents a major step towardsdissolution.

Stage 2

Resource-dependencytheory

• ‘Joint dependence can be a means of reducinguncertainty and enhancing firms' performance.’1

Stage 2

Life-cyclestages

• Dissolution is sequential and series of discretechanges including changes in parent firms'commitment and resource deployment.

Stage 1 and 2

Human-divorcetheory

• Incompatibility between partners leads todissolution.

Stage 1 and 2

1 Hillman, Withers and Collins, ‘Resource dependence theory’, p. 1407.

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undermining the basis of the relationship (Lokshin et al., 2011).The transaction cost theory of JVs contends that the dissolutionprocess begins when a partner engages in opportunisticbehaviour to the detriment of the other partner (Willamson,1985; Ahuja, 2000b).

Interestingly, however, this view further argues that “nomatter howwell contracts are designed, theymay fail to provideeffective guarantees” (Kogut, 2003b: p. 208). The flexibilitiesinherent in contacts often provide opportunities for a party topursue entrepreneurial activities that advance its interests at theexpense of the ally and thereby gives rise to conflict thateventually leads to dissolution. Thus, the complexities involvedinmonitoring behaviour give rise to opportunistic behaviour bya parent company. The RBV of JV dissolution adopts the viewthat dissolution stems from weak or unequal contributions of

Please cite this article as: Amankwah-Amoah, J., Durugbo, C., Themodel of ST-Ericsson's dissolution, Technol. Forecast. Soc. Change (

resources and capabilities by partners which eventually giverise to weak sources of competitive advantage that precipitatetimely or untimely dissolution (Osborn and Baughn, 1990;Bucklin and Sengupta, 1993). During this stage, a series ofevents at the firm and environmental levels after the formationstage triggers the process of dissolution.

This is also the stage where warning signs begin to emergethat the venture has failed or is failing tomeet the expectationsof the parent organisations. This often triggers a quest forsolutions to help the subsidiary generate a turnaround andinability to do so leads to a decision to exit or sell stakes. It isimportant to note that some ventures generate turnaroundwhich alters the fate of the firm and averts dissolution.

From the dynamic capabilities and RBV perspectives(Lorenzoni and Lipparini, 1999), key expertise and key resources

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Fig. 1. A unified stage perspective of joint venture dissolution process.

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are required to equip organisations to be able to respond tochanges in the business environment. Interestingly, however,there are some ventures that are unable to adapt or respond tothe warning signals. This may be attributed to conflict betweenthe parent firms, unwillingness to contribute further to theventure, loss-making of operations and/or a loss of interest in thealliance. Dissolutionmay stem from the pre-founding conditionswhich had remained dormant but have been activated by theactions of a party. By the end of this phase, the parent companieshave declared their intention to close the alliance.

2.3.2. Stage 2: Forming teams and distribution of resources/“phasing out”

This is where the parent organisations form liquidationcommittees or project management teams to accomplish thespecific task of closing the venture. This may entail bringing inexpertise from outside and/or from both companies to helpbring about an amicable closure. The stage ends with thedistribution of assets and liabilities accumulated by the subsid-iary during its course of operations. Ultimately, the venture endsthrough the sale of stakes to the other partner(s) or throughliquidation (Hennart et al., 1998). Getting the rightmix for theseteams can be very difficult in view of the multiple parents – asituation in which “even an issue as straightforward as a plantdecision can become complex and drawn out” (Killing, 2013).

2.3.3. Stage 3: The aftermath/“going out”A central theme of this final stage is that there are both

positive and negative post-dissolution effects on the keystakeholders. For the parent firms, termination may providethe opportunity to withdraw resources from a loss-makingoperation and redeploy them in a more efficient manner. Itmay also pave the way for them to pursue more promisingopportunities elsewhere. For the former employees, the effectsmight include loss of jobs and reintegration into the parentorganisation. The phase entails elements of job relocationand job loss with varying effects on the organisations. Oneexplanation for the job loss may be inadequate slack resourcesand capacity within the parent firm to absorb the number ofemployees released by the joint entity.

The loss of jobs following the dissolution is one of thetraumatic life experiences with the possibility or hint of

Please cite this article as: Amankwah-Amoah, J., Durugbo, C., The rmodel of ST-Ericsson's dissolution, Technol. Forecast. Soc. Change (

unemployment for the employees (Spera et al., 1994). Theclosure also ushers in a period of transition for the displacedworkers to findnew jobs and their former colleagues to learn toadjust to the new situation. It must also be noted that externalfactors such as government regulations and requirements alsoshape the dissolution process. Despite a rich body of research,scholars have paid limited attention to delineating theseunderlying processes. Consequently, the termination of collab-orative arrangements such as JVs has attracted little researchand as such our understanding of the subject remains limited(Park and Russo, 1996; Peng and Shenkar, 2002).

3. Research design and data sources

We will now use the case of ST-Ericsson's formation anddissolution to explicate the underlying processes inherent inJV dissolution. We adopted a revelatory case study design tohelp provide the depth of understanding of the JV dissolu-tion process needed (Leonard-Barton, 1990). The case studyapproach was favoured because it offers a more viableoption to study information-rich cases (associated with thedissolution of JVs), in comparison to surveys.

Given the sensitivity of the issue of dissolution and thegeneral tendency of top executives not to discuss cases offailure and the dissolution process, we rely mainly on archivalrecords to shed light on the processes (Peng and Shenkar,2002). Indeed, it has been established that gaining access to topexecutives to discuss such sensitive matters remains “one ofthe most challenging barriers researchers face” (Daily et al.,2003, p. 3718). Despite these problems, the ST-Ericsson caseoffers an opportunity to shed light on the dissolution process.

By archival records we are referring to “documents made orreceived and accumulated” by the firm (Ellis, 1993, p. 2). Thisdecision is reinforced by the fact that archival records havebeen found to be “particularly suited to generating develop-mental explanations, in other words, explaining processes ofchange and evolution” (Welch, 2000, p. 198). This approachentailed delving deeper into the archival records of the twoparent companies: Ericsson and STMicroelectronics, and therecords of the offspring, ST-Ericsson.

We consulted the annual reports and press releases of thethree companies from 2009–2013 to gain an understanding of

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the operations of ST-Ericsson and to establish the chronology ofevents that precipitated the dissolution and the underlyingprocesses. Archival materials such as industry periodicals andbusiness magazines were also consulted. The approachesadopted helped to provide a better understanding of how theorganisation emerged, what it was expected to achieve, factorsthat contributed to the dissolution, and processes and firm-level decisions that led to the disbandment.

4. Findings

4.1. Overview of the evolution of ST-Ericsson

In 2008, Franco-Italia STMicroelectronics acquired an 80%ownership stake in NXP's wireless business to form the JV ST−NXP Wireless and then acquired the remaining 20% from NXPin 2009. This paved the way for the firm to combine ST − NXPWireless with Sweden's Ericsson Mobile Platforms (EMP)leading to the formation of ST − Ericsson (STMicroelectronics,2008). In August 2008, both companies agreed to form ST-Ericsson which became operational in February 2009 with a50/50 stake. Prior to founding, Ericsson also contributed certainlines of business and $1.1 billion net to the alliance, out ofwhich$0.7 billionwas paid to STMicroelectronics (STMicroelectronics,2009, p. 65).

EMP was dedicated to licensing “open-standard 2.5G and3G technology platforms to other mobile phonemanufacturersand other mobile communication devices” and offeringengineering support services to clients (Solberg et al., 2012,p. 1339). In addition to this, the EMP platforms includedintegrated circuits and software required to develop differentmobile systems such as WCDMA, EDGE and GPRS phone(Solberg et al., 2012). One of the key assets of the joint entitywas the EMP which connects different chips that are requiredto run a smartphone (Palmer, 2012c).

Although rival firms such as Samsung have been “successfulin designing chip packages for smartphones”, they lacked thestrong interoperability platform offered by EMP (Palmer,2012c, p. nd. By forming this JV, the firms had expected toexploit potentialmarket opportunities and accrue greater value

Fig. 2. A unified stage perspective of STM

Please cite this article as: Amankwah-Amoah, J., Durugbo, C., Themodel of ST-Ericsson's dissolution, Technol. Forecast. Soc. Change (

by combining their expertise in wireless and mobile technol-ogy. Fig. 2 demonstrates the evolution model of the JV.

The beginning of the JV was marked by a clear number ofoverlaps and complementarities in the firms' operations. At thetime, ST had considerable expertise in multimedia andconnectivity products, whereas Ericsson brought to the tableits extensive 3G and 3GPP Long-Term Evolution platformtechnology, thereby outlining clear areas for synergies andlaying the foundation for future success to emerge. At the timeof the formation, Ericsson was regarded as one of the world'sleaders in third-generation wireless technologies with anextensive global network of operations.

On the other hand, STMicroelectronics was regarded as oneof the biggest high-technology and most innovative firms inEurope and a trend setter in the sensor and microcontrollersector (Jolly, 2013). The beginning of the alliancewasmarked bythe considerable array of expertise brought by the parents to thenew venture, as shown in Table 2. The table outlines the keyfeatures of both parent companies prior to the JV and clear areasfor synergy. As such, both parties expected the firm to becomeprofitable and opportunities to learn from each other's expertise.

The evolution of ST-Ericsson was also inextricably linkedwith the new wave of firms taking advantage of opportunitiesunleashed by liberalisation in the global telecommunicationindustry.

During the last half of the 1990s, the effects of deregulationacross countries in the European Union became increasinglyevident in terms of the number of opportunities whichaccompanied the opening up of the industry. ST-Ericsson wasamong a new breed of firms that have taken advantage ofliberalisation by providing technology and technical solutionsfor mobile manufacturers with limited expertise in areas suchas radio access, that accelerate the development and bringingto market of new phone models (Solberg et al., 2012, p. 1339).

ST-Ericsson's key competences were rooted in efficientutilisation of contemporary technologies to manufacturemicrochips used in mobile phones. Indeed, immediately afterST-Ericsson's formation, The Economist (The Economist, 2009,p. 58) dubbed it “Europe's new champion for wireless chips”.The joint entity encompassed between 3000–8000 staff fromEricsson and around 5,000 from STMicroelectronics.

icroelectronics dissolution process.

rise and fall of technology companies: The evolutional phase2015), http://dx.doi.org/10.1016/j.techfore.2015.04.005

Table 2Complementarities of both firms.

Features Sweden's Ericsson Mobile Platforms (EMP) business unit Franco-Italia STMicroelectronics' ST − NXP Wireless

Key competencies and areasof operations

• Established reputation as a formidable Swedish telecomsequipment business.

• Licensed open-standard 2.5G and 3G technology platforms.• Stable platform deliveries such as platform software,reference design and development.

• Well-developed EMP platforms which encompassedintegrated circuits and software required to build a GPRS,EDGE andWCDMA phone.

• The Franco–Italian maker of semiconductors.• The firm had considerable expertise in wireless technology.• Regarded as a global semiconductor leader with extensive globalnetwork of operations and serving clients across the spectrum ofelectronics applications.

Expected gains of the jointventures and strategies toaccrue them

• The synergistic benefits expected from their expertisein phones and resource combinations.

• To achieve efficiencies by eliminating overlapping activities.• To gain potential market power over competitors innegotiating with major manufacturers.

• By pooling their resources and expertise, the parentfirms are expected to complement each other's operationsby combining EMP business with ST-NXPWireless.

• To gain global leadership in wireless platforms and semiconductors.

Data sources: synthesised by the authors from: (STMicroelectronics, 2008, 2009, 2010, 2013a, 2013b; Palmer, 2009, 2012a, 2012b, 2012c; Jolly, 2013; Stothard andThomas, 2012; Milne, 2012; Arthur, 2013; Daneshkhu, 2012; Ericsson, 2013; The Economist, 2009).

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For the firm to become a successful venture, it needed todevelop a low cost base as well as delivery of high-qualityproducts. Because of the structure, the parents anticipated thatthe integration would be a complex process due to “mergingthree different companies, andmay trigger a significant amountof costs” (STMicroelectronics, 2010, p. 9). The sheer complexityinvolved in harmonising the operations, policies and proce-dures within the three companies created a major impedimentwhich affected its ability to achieve long-term success.

4.2. ST-Ericsson: where did it all go wrong?

In 2009, ST-Ericsson was regarded as the world's secondlargest maker of mobile phone chips and decided to trim theoverhead costs by announcing a plan to reduce the workforceby 15%, i.e. around 1,200 employees. This was surprising giventhat the venture becameoperational the same year and therebygave an indication of potential looming problems. The scale ofthe change was unexpected whilst at the same time creatinganxiety among workers. At this point in its relatively shorthistory, the firm had spent $40 m of the $400 m cash it had atinception and the expenses had been projected to increase,putting the firm in a precarious position (Palmer, 2009). As thechief executive of ST Ericsson, Alain Dutheil, said at the time:

“The job cuts are a reflection of the lower sales volumes weare seeing and the pressure on pricing…There is an urgentneed to react with speed and focus to new marketconditions.” (Palmer, 2009, p. nd)

Although both parent companies have been historicallysuccessful in their operations, the JVwas besieged by a numberof internal and external factors which contributed to thedissolution. Below we explicate these factors and how theycontributed to the disbandment.

4.2.1. Internal factorsA contributory factor to the decline was the over-reliance

on a single customer. In 2011, the firm's sales shrunk by 28% to

Please cite this article as: Amankwah-Amoah, J., Durugbo, C., The rmodel of ST-Ericsson's dissolution, Technol. Forecast. Soc. Change (

$1.65bn and operating losses increased to $841 m (Palmer,2012b). At this point in ST-Eriksson's history, as a key supplierof chips for older Nokiamobile phones, the firmwas affected bythe declining fortunes of older Nokia mobile phones as moreand more consumers switch to “Apple's iPhone and handsetsusing Google's Android operating system” (Palmer, 2012b, p.nd). Indeed, Nokia accounted for around 30% of the company'ssales and was its main customer (Palmer, 2012a). The over-reliance on this single customer meant that the venture hadlimited diversification in its customer portfolio and any impacton the operations of Nokia could have knock-on effects on itsoperation and even sealing its fate. Carlo Bozotti, the then chiefexecutive of ST Microelectronics, noted:

“The revenues of Nokia have collapsed and this is whythe revenues of ST-Ericsson are not what we expected.”(Palmer, 2012c, p. nd)

In an attempt to boost cash flow to the business, ST-Ericsson announced a plan to focus on “creating productswhich combine the wireless connectivity chips which are itsstrength, together with applications processor chips as itseeks to gain a better position in the smartphone market”(Palmer, 2012c, p. nd). Perhaps most strikingly, by 2012the company's losses had reached $2bn. This was furtherexemplified by ST-Ericsson's failure to win sufficient con-tracts to sustain the loss-making operations. In April 2012,following a period of sustained losses and a sharp fall in salesto handset maker Nokia (its key customer), ST-Ericssonannounced its decision to cut 1,700 jobs – around 25 per centof the employees – as a means of remaining competitive(Stothard and Thomas, 2012).

4.2.2. External factorsIn 2012 one of the parent companies, Ericsson, suffered a

sharp decline in revenue partly due to intense competitionfor contracts to modernise mobile networks especially fromChinese firms such as Huawei. Accordingly, Ericsson wasforced to write down its investments. A number of factors

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Table 3Key events in the firm's exit.

Year Key events in the disbandment process

2009 • Founded on 3 February 2009 with 50–50 stake with four directorsfrom each firm to the board.

• In November 2009, industry expert Gilles Delfassy wasappointed the president and CEO of the new company.

• ST-Ericsson announced a plan to reduce workforce by 15% toaround 1,200 employees as part of efficiency savings.

• The firm made an operating loss of $98 m in its first two monthsof its operation.

• Intense competition from Asian chipmakers creating a hostileenvironment for the firm.

• In 2009, Ericsson attributed the 30% fall in first quarter profit inpart to the joint venture. The global economic crisis and itsaftermath in 2009 affected consumer demand for handsets.

2010 • The weak economic conditions in Europe following the globaleconomic crisis affected the sale of its products.

• Intense competition from Asian chipmakers created a hostileenvironment for the firm.

2011 • The fierce competitive pressures from the Asian rival caused thecompany to lose market share.

• Sales shrunk by 28% in 2011 to $1.65bn and operating lossesincreased to $841 m.

2012 • Total number of employees – 5,000 (as of end 2012).• December 2012, the company was brought to the brink afterSTMicroelectronics indicated its intention to exit from the venture.

• STMicroelectronics regarded one of the largest Europeanchipmakers.

• In December 2012, the parent companies announced a strategicreview of the overall operations of ST-Ericsson.

• In December 2012, Ericsson decided to write down the full valueof its 50% stake in the then loss-making ST-Ericsson.

• STMicroelectronics declared its intention to quit the venture andfocus more on digital chips for cars, consumer electronic devicesand computers.

• In October 2012, the parent companies sought the expertise ofexternal consultants to explore a new strategic direction for theloss-making operations. This entailed finding a new partner forthe venture or potential buyer for the business in an attempt toend the loss-making operations of the firm.

• In 2012, the company's losses reached $2bn.• Nokia was noted to account for about 30% of the firm's sales.

2013 • Ericsson promised to back about 1,800 of the employees ofST-Ericsson and the loss-making operations of 4G chips used insmartphones. On the other hand, a decision was made to allowSTMicro to retain a number of ST-Ericsson products as well as itsassembly and test facilities (Arthur, 2013). In addition to this,STMicro inherited around 950 employees in France and Italy.

• The parent companies announced the end of the joint venturebringing to an end a sad chapter in another joint venture story.

• In March 2013 the parent companies announced a deal to splitthe assets and liabilities of ST-Ericsson.

• In April 2013 Carlo Ferro was appointed the President and ChiefExecutive Officer of ST-Ericsson, succeeding Didier Lamouche,with the responsibility for winding down the joint venture andallocating the resources and liability to the parent company.

• ST incurred cash costs which entailed the covering of ST-Ericsson'soperations during the transition period of up to $450 million.Dissolved in 2 August 2013.

Data sources: synthesised by the authors from: (STMicroelectronics, 2008,2009, 2010, 2013a, 2013b; Palmer, 2009, 2012a, 2012b, 2012c; Jolly, 2013;Stothard and Thomas, 2012; Milne, 2012; Arthur, 2013; Daneshkhu, 2012;Ericsson, 2013; The Economist, 2009).

8 J. Amankwah-Amoah, C. Durugbo / Technological Forecasting & Social Change xxx (2015) xxx–xxx

contributed to this decision. First, Ericsson was affected bythe news that the JV had accumulated significant losses ofmore than $2bn after its formation (Milne, 2012). This wasdevastating given the resource and expertise commitmentsmade by the firm and its partner to gain a stronger footholdin the sector. Second, the firm was also affected by thedemise of Nokia's smartphone business, its biggest customerat the time (Milne, 2012).

In January 2013, the topmanagement teamwarned of thesudden decline in the venture's fortunes. This was exempli-fied by total sales in 2012 and this represented a decline of19% to $1.35bn (£1.16bn) with an estimated loss of $749 mfrom $841m in 2011 (Arthur, 2013). In this regard, the fiercecompetitive pressures from the Asian rival caused thecompany to lose market share. In the 2010 annual report,STMicroelectronics noted some of the problems affecting theoperations of the venture and emphasised that successfulintegration was essential to its success.

“ST− Ericsson is a newwireless joint venture, representinga significant investment and risk for our business. The jointventure is currently engaged in restructuring initiatives andfurther declines in the wireless market, as well as theinability of ST − Ericsson to complete its ongoingrestructuring plans or to successfully compete could resultin additional significant impairment and restructuringcharges.” (STMicroelectronics, 2010, p. 3)

The intense competition in the industry, coupled with ashrinking customer base of its main customers, altered thefortunes of the firm and thereby acted as a catalyst for the JVdissolution. Taken together, the expected growth in demandfor ST − Ericsson's services failed to materialise which forcedthe parent companies to end the loss-making operations. Anumber of obstacles to change became evident which affectedits ability to find a buyer for the loss-making unit. First,potential buyerswere concerned about the liabilities associatedwith the entity given it was overstaffed and the need to carryout expensive structural reforms and staff reductions incountries such as France (Palmer, 2012a, 2012b). In addition,the geographical location of the firm made it unattractive tobuyers based in emerging economies such as China and India.Table 3 summarises the major events in the evolution ofST-Ericsson.

4.3. Phases in ST-Ericsson's disbandment

Our analysis uncovered three distinct phases in the disband-ment processes. Fig. 3 demonstrates the inherent processes andopportunities for learning during the various life stages of the JV.As can be seen from the figure, a number of factors influencedthe dissolution process.

4.3.1. Stage 1: The announcementIn the first phase of the dissolution process, the firm

announced the decision to terminate the venture due to thefactors noted above. Prominent among them was the loss-making operations of the venture coupled with minimalprospects on the horizon. In 2012, STMicroelectronics declaredits intention to leave the venture and deploy its resources to newareas. At this point, the firm noted that its decision to quit the

Please cite this article as: Amankwah-Amoah, J., Durugbo, C., Themodel of ST-Ericsson's dissolution, Technol. Forecast. Soc. Change (

loss-making wireless chip joint-venture was driven by its desireto focus on the promising avenues in its existing business ofanalogue and digital chips for cars, consumer electronic devicesand computers (Milne, 2012; Daneshkhu, 2012). Following theperiod of poor performance, the parent firms made the decision

rise and fall of technology companies: The evolutional phase2015), http://dx.doi.org/10.1016/j.techfore.2015.04.005

Fig. 3. A process model of joint venture disbandment process.

9J. Amankwah-Amoah, C. Durugbo / Technological Forecasting & Social Change xxx (2015) xxx–xxx

to terminate operations of the JV after receiving regulatoryapproval. In January 2013, STMicroelectronics announced a:

“$544 million write-down of good will and other intangibleassets on its share of ST-Ericsson, a charge that reduced theaccounting value of the 50–50 joint venture to ‘a negligibleamount’ on its books” (Jolly, 2013, p. nd).

During this period, the firm announced the decision and allthe stakeholders within the parent companies were informedof the decision and the potential effects on their jobs andlivelihoods. The dissolution approval paved the way for theparties to take steps towards dissolving the venture.

4.3.2. Stage 2: Forming the dissolution team/committee anddistributing the assets and liabilities

Next, the board of both companies sought expertise withinboth parent companies in an attempt to help bring an end tothe venture. This led to the formation of a committee whosetask was to help bring about an amicable end to the venture.One possible reason for this was the desire between bothparties to close the venture on cordial terms.

In April 2013, Carlo Ferro was appointed the President andChief Executive Officer of ST-Ericsson, succeeding DidierLamouche, with the sole responsibility for helping to winddown the JV by allocating the resources and liability to theparent company. Carlo Ferro also worked in collaboration withthe directors from each firm to help bring about closure. Theexecutives were appointed with the aim of helping to end theventure in an amicable fashion.

During this period, the board of ST-Ericssonwas empoweredto identify their key assets and liabilities, and outline processestowards the dissolution. By the end of 2013, the committee hadcreated conditions for dissolution of the joint venture to occur.Given ST's activities in R&D, it had a number of intellectualproperties and technological know-how which posed majorchallenges to the dissolution team.

Please cite this article as: Amankwah-Amoah, J., Durugbo, C., The rmodel of ST-Ericsson's dissolution, Technol. Forecast. Soc. Change (

During this phase, the firm released employees who werenot wanted by either party and sold some assets to third partycompanies who offered a higher price than in the openmarket.This period entailed the sale of some assets to third parties,distribution of employees to both companies, releasing ofemployees, and general distribution of assets and liabilities.One of the main decisions following the appointment of theteam to help facilitate the closure was how to distribute assetsand liabilities in such a way as to ensure that one party is notworse off. After examination of these issues and consultationbetween both parties, it was decided that both firms wouldshare ST-Ericsson's assets and liabilities. The parent companiesagreed to split ST-Ericsson along the following lines.

First, it was decided that Ericssonwould inherit “the design,development and sales of the LTE multimode thin modemproducts including2G, 3G and 4Gmultimode”, whereas ST tookon the existing ST-Ericsson products, “other than LTE multi-mode thin modems, and related business as well as certainassembly and test facilities” (STMicroelectronics, 2013a, p. nd).

In August 2013 Ericsson took over research and develop-ment, sales of the LTE multimode thin modem solutionsincluding 2G, 3G and 4G interoperability, as well as inheritingaround 1,800 employees and contractors (Ericsson, 2013).These agreements paved the way for the dissolution process tobe brought to an end.

Another problem encountered during the process ofdissolution was how to apportion the expertise of the firmdue to the complex operations and numerous lines of workadvanced by the firm. As part of the disbandment process, thefirm offloaded some of its assets to other parties.

InMay 2013, ST-Ericsson announced the sale of the assets ofits mobile connectivity Global Navigation Satellite System(GNSS) business as part of its overall strategy to wind downthe operations of the firm. The sale of the mobile connectivityGNSS business to a third party (Intel) paved the way for thefirm to minimise the restructuring costs. By August 2013 whenthe parties completed the transaction to split up ST-Ericsson, it

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was made clear that they were “assuming equal funding of thewind-down activities” (STMicroelectronics, 2013b, p. nd).

4.3.3. Stage 3: The aftermathThis period was characterised by the departure of the

employees from the subsidiary to the parent organisations anda process of re-integration. Following consultations and workby the dissolution team, the distribution of assets was followedby the parent firms' inheriting employees from ST-Ericsson andintegrating them into their operations. It was decided thatEricsson would take on around 1,800 employees and contrac-tors mainly in Germany, Sweden, India and China. In welcom-ing the new employees, Douglas Gilstrap, Senior Vice Presidentand Chief Strategist at Ericsson at the time, put it this way:

“Wewelcome the team of about 1,800modem experts whojoin Ericsson. Ericsson continues to see great value in theLTE multimode thin modems as they are an important partof our vision of 50 billion connected devices in a NetworkedSociety. Themarket potential is there and Ericsson will nowfocus on bringing the best modems to market, and workclosely with customers to integrate them into theirproducts.” (STMicroelectronics, 2013b, p. nd)4

On the other hand, STMicroelectronics took on the existingST-Ericsson products except for LTE multimode thin modems,and 1,000 employees joined the firm (Ericsson, 2013). STinherited the employees in France and Italy to support theresearch and development activities within the firm(STMicroelectronics, 2013b). Georges Penalver, Executive VicePresident, Chief Strategy Officer for ST at the time, noted thisabout the agreement:

“We welcome our new employees as we are adding strongcompetencies in the areas of embedded processing, RF,analog and power technologies, as well as in software andcomplex system integration, to fuel growth in many of ourproduct areas where we have significant businessopportunities.”5 (STMicroelectronics, 2013b)

ST further noted these benefits for its business:

“ST-Ericsson's portfolio includes devices that are com-plementary to ST's focus on the fastest growing segmentsof the wireless semiconductor market, such as system-optimized analog mixed signal and power managementdevices, high-quality, low-power audio and video en-hancements and innovative energy harvesting solu-tions.” (STMicroelectronics, 2013a, p. nd)

The parent firms committed time and resources to helpminimise this potential effects by absorbing the workers intotheir core operations. A number of assets (new products,expertise and innovation) and liabilities (initial financialcommitment and investment, and inherited unwanted opera-tions) were shared between the two parent organisations.There were also some resources and assets such as employees,patents, and technological expertise and products (e.g. low-

4 Quoted in STMicroelectronics, ‘Ericsson and STMicroelectronics Complete’,p. nd.

5 Cited in STMicroelectronics' document (STMicroelectronics, 2013b).

Please cite this article as: Amankwah-Amoah, J., Durugbo, C., Themodel of ST-Ericsson's dissolution, Technol. Forecast. Soc. Change (

power audio, system-optimised analogue mixed signal andpower management devices and video enhancements), thesubsequent utilisation of which within the parent firm wasunclear. During this period, the employees began to detachthemselves from the ST-Ericsson brand knowing that the entitywas going to disband as well as forging new relationships inone of the parent organisations.

From the employees' standpoint, this was like a period ofcoming to terms with the fundamental change in theirreporting structures. Our discussion thus far suggests that thedissolution process entails a range of activities and eventswhich are often difficult to unravel and time-consuming.

4.4. Research implications and contributions

How do JVs dissolve?What factors accelerate or hinder thisprocess? And how do these factors evolve during thedissolution process for a JV? These are questions we explorein this research by analysing the three stages in the disband-ment process of a major JV. As competition across multipleindustries intensifies and pressure to produce new productsgrows, technology firms have increasingly established JVs as ameans to combine their expertise and accelerate the pace atwhich new products are developed.

Although different theoretical perspectives have been usedto examine the rationale for alliance formation (see Table 1),they have been limited in their ability to shed light on thedissolution process for technology firms. For our study,we haveconceptualised and analysed (using the case of ST-Ericsson) thedissolution process, which entails forming teams, distributingassets and the aftermath. In the next subsections, we discussthe contributions and implications of our study to theory andpractice.

4.4.1. Theoretical implicationsTo begin with, our study makes some contributions to the

foresight, international business and entrepreneurship litera-ture. First, over a decade ago, Peng and Shenkar (Peng andShenkar, 2002, p. 94) observed that JV “failures and dissolutionsare either ignored or, at best, mentioned in passing, treated as asingle occurrence rather than a dynamic series of events”.Despite a decade passing since this observation, there stillremains a limited understanding of howandwhy the processesof JV disbandment occurs (Polidoro et al., 2011). Taking aunified perspective on dissolution that builds on existingtheories, as shown in Table 1, the analysis and findings shedlight on the nature of dissolution processes in technology firms.

As earlier mentioned, our analysis of the literature is thatdissolutions can be through sale or exit/liquidation (Hennartet al., 1998) and that the dissolution process of can either beunplanned (and sudden) or planned (and in incrementalphases). As shown through our study of ST-Ericsson, this canalso be attributed to internal and external factors, and thesefactors interact to influence the dissolution process. Thus,crossing the two causes of JV dissolution (i.e. internal andexternal) with two types of dissolution (i.e. planned andunplanned) we can produce a typology of JV dissolution, asshown in Fig. 1.

Through these conceptualisations of the JV dissolutionprocess and causes, we have sought to respond to recent callsfor such an approach for a better understanding of the subject

rise and fall of technology companies: The evolutional phase2015), http://dx.doi.org/10.1016/j.techfore.2015.04.005

11J. Amankwah-Amoah, C. Durugbo / Technological Forecasting & Social Change xxx (2015) xxx–xxx

(Polidoro et al., 2011). Furthermore, most studies have focusedon the factors relating to JV formation and relatively few havelooked at dissolution stemming from the parent firms' actionseither through liquidation or sale of equity stake (Reuer, 2000).Our study elucidates our understanding of the roles played byparent organisations in the disbandment processes.

Our study also examined the existing streams of research onJVs and dissolution towards conceptualising a “new” perspec-tive which captures the connectedness and consultations oftenoverlooked by the research. In so doing,we lend support to paststudies that have viewed JV dissolution as a continuum ofevents which ultimately lead to separation and distribution ofassets and liabilities of the joint entity (Peng and Shenkar,2002).

In addition, we have advanced the novel “unified” sequen-tial model which views dissolution in stages influenced byinteraction of market-based and firm-level factors. It alsocontributes to the current discourse by viewing dissolution asconsisting of a chain of events and interactions of firm-level andenvironmental factors. This contrasts with but complementsthe human divorce perspective adopted by past studies (Pengand Shenkar, 2002).

Our case of ST-Ericsson broadly supports the three-stage JVdissolution conceptualisation based on the two steps weadopted to analyse the case. Firstly, the evolution of the ST-Ericsson JVwasanalysed to capture complementary resources–sources –which scholars have characterised as one of the mostimportant considerationsduring alliance formation (Shi, 1998).

A more focused analysis of the disbandment process for ST-Ericsson was also conducted using our unified perspective ondissolution and factoring the internal and external factors.Although, defensive strategies are crafted to help protect thefirm and its line of business against threats from rival firms ortechnology, our findings are in line with prior researchsuggesting that collaboration between rival firms may endprematurely as self-interest eclipses the synergistic benefits(Park and Ungson, 1997).

4.4.2. Practical implicationsAside from the contributions to theory noted above, there

are also potential implications for entrepreneurship practice

Fig. 4. Typology of types and causes

Please cite this article as: Amankwah-Amoah, J., Durugbo, C., The rmodel of ST-Ericsson's dissolution, Technol. Forecast. Soc. Change (

stemming from the analysis. First, we note the need for “criticalfactors” of JV sustenance to be established during formationphases. In our case study,we found evidence of a dominant andcritical external factor – a single customer – which evidencefrom the data suggests was more pronounced in its influencedue to intense competition for contracts to modernise mobilenetworks. This interplay of factors, irrespective of their nature,from our analysis suggests at least two potential traits thatcharacterise the evolution of dissolution factors (see Fig. 4):emergent traits that make factors more apparent as JVs evolveandmetamorphic traits that change the nature of the factor overtime. (see Fig. 5)

Even though there are suggestions that dissolution isinevitably the outcome of most JVs (Gomes-Casseres, 1987;Killing, 2013), this does not necessarily need to be theprevailing mind-set of firms or even the case. Our studyindicates that underperforming JVs should not necessarily haveto lead to immediate termination as there are often opportu-nities for the parent companies to deploy additional resourcesin a more efficient manner in an attempt to generate aturnaround. In addition, our findings indicate a need for amore painstaking, due-diligence process that uncovers hiddenrisks and opportunities such that the compatibility of thepartners is established prior to formation (Kogut, 1988). Suchanalysis would help to enhance the longevity of JVs evenamong those with different cultural backgrounds.

There is also a need for corporate leaders to examine thecultural fit alongside strategic fit in seeking to identify andcollaboratewith other firms to help ensure effective integrationof activities after the formation period. This would help toimprove the survivability of the alliance. It is important torecognise that the dissolution process is a complex one whichentails more factors than have been adequately articulated inliterature. For instance, our analysis of ST-Ericsson unearthedthe importance of strategising internal and external client/customer bases.

5. Conclusions

This article sought to explicate the joint venture (JV)dissolution process and factors that accelerate or hinder this

of joint venture dissolution.

ise and fall of technology companies: The evolutional phase2015), http://dx.doi.org/10.1016/j.techfore.2015.04.005

Fig. 5. Traits that characterise the evolution of joint venture dissolution factors.

12 J. Amankwah-Amoah, C. Durugbo / Technological Forecasting & Social Change xxx (2015) xxx–xxx

process. Our analysis of the existing streams of research led tothe conceptualisation of a unified model which views dissolu-tion as constituted of stages which encompass an incrementalde-escalation of parent firms' commitment, resources andcontrol over the venture, leading to exit or sale of stake. Wehave also argued that a fundamental shift from coupling phasesof JV formation to early-warning signals triggers the dissolutionprocess.

We illustrated the theoretical analysis using the case of ST-Ericsson's dissolution and, based on the case, we found supportfor our three distinct stages of the dissolution process: theannouncement (“coming out”); forming of the dissolutioncommittee and distribution of assets and liabilities (“phasingout”), and the aftermath (“going out”). Each phase sheds lighton the interaction of firm-level and external environmentalfactors contributing to dissolution.

Our analysis indicates that a number of factors such as loss-making operations and over-reliance on few customers madethe alliance vulnerable to any sudden change in the businessenvironment. The stages also explicate the various stepsadopted by the parent firms to help bring about an amicableend of a JV. Our second set of findings indicates that thedisbandment process is often constrained by factors such as thestructure of the venture and influences of the parent compa-nies. Although both parties were cautious not to jump intounknown territory, the integration of the “three” entities madeit much more difficult for ST-Ericsson to achieve success andensure its long-term survival. Taken together, these factorsultimately weaken the market position of the firm andcontributed to the disbandment.

Using insights from literature, we have also conceptualiseda typology of types and causes of joint venture dissolution thatfocuses on internal/external and planned/unplanned continua.Additionally, with the insights from the dissolution of ST-Ericsson,we analysed how the potential interplay of factors canbe characterised with regard to emergent and metamorphictraits. In view of these different traits, there is a need for adetailed contingency plan for internal and external dissolutionfactors.

Future research could therefore extend the findings here byexamining the effects of the dissolution on former partners'

Please cite this article as: Amankwah-Amoah, J., Durugbo, C., Themodel of ST-Ericsson's dissolution, Technol. Forecast. Soc. Change (

propensity to engage in new JV formation. Such analysis wouldhelp to enrich our understanding of post-dissolution effects.Also, we suggest that a potentially fruitful opportunity forfuture research would be to examine the mechanisms throughwhich firms attempt to mitigate the negative effect of tiedisbandment on stakeholders such as employees and partners.Itwould also be interesting to explorewhether the emergent ormetamorphic traits of dissolution causes are differential, i.e.vary in their influence under identical conditions.

Supplementary data to this article can be found online athttp://dx.doi.org/10.1016/j.techfore.2015.04.005.

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Dr Joseph Amankwah-Amoah is an Associate Professor (Senior Lecturer) ofManagement at Bristol University. His research interests include strategicrenewal, global business strategy and lateral hiring in emerging economies. Hehas published articles in journals such as International Journal of HRM, BusinessHistory, Group & Organization Management, Journal of Business Research,Thunderbird International Business Review, Strategic Change and Journal ofGeneral Management.

Dr. Christopher Durugbo is an Associate Professor (Senior Lecturer) ofManagement at University of Liverpool Management School. His researchmainly centres on networks and systems analysis for organisational andcommunity design.

ise and fall of technology companies: The evolutional phase2015), http://dx.doi.org/10.1016/j.techfore.2015.04.005