| Abstract | This study examined the factors affecting relational capital and how relational capital relates to performance of the international joint ventures in Vietnam. Vietnam was chosen to be the study site because of its characteristic as an economy in transition, which has not much been studied so far, especially in the context of relational exchange of international business. The study first provides a brief overview of the Vietnamese economy, followed by discussions of the current situations of foreign direct investment and international joint ventures in Vietnam. The main characteristics of the international joint ventures were reviewed for the development of the research's hypotheses. In this study, it was proposed that relational capital, which is defined as mutual trust, respect, understanding, and close friendship between partners, has important impact on performance of the international joint ventures. A number of relational factors, such as flexibility, cultural sensitivity, goal clarity, information exchange, and conflict management were hypothesized to have positive influence on relational capital between partners in the international joint ventures in Vietnam. Two regression models were built to test these proposed relationships. The study collected data from the local partners through a mail survey of the top local representatives of the international joint ventures. Five hundred and fifty one international joint ventures, which were currently in operation and had an investment capital of at least US$5 million, were selected as targeted population for the study. One hundred and thirteen out of 551 international joint ventures responded, making a reasonable response rate of 20.5 percent. Non-response bias was negligible. The findings revealed that conflict management has the greatest impact on relational capital, followed by flexibility and goal clarity. The age of the international joint ventures as a control variable was also found to have significant impact on relational capital. The remaining factors were found to have no significant impact on relational capital. The results also showed that relational capital and the age of the international joint ventures were significant predictors of the joint venture' s performance. Finally, the implications of the proven factors from the research and a model for interactive relational governance of IJVs were provided to help business parties of both sides to alleviate conflicts and focus their cooperation more on the critical factors to build the relational capital for a more successful joint venture. |