Challenges due to the exogamic nature of Sino-Foreign joint ventures
Dominique R Jolly
CERAM Sophia-Antipolis , Sophia-Antipolis, France
PP: 200
Abstract
For more than twenty years, Sino-foreign joint ventures have been the key mode of entry into China for foreign companies. Research has been done on the governance of these structures, partner selection, knowledge transfers, guanxi, etc. This research sees Sino-foreign joint-ventures as exogamic partnerships: partners have different profiles, contribute differentiated resources and pursue different objectives. As such, these ventures raise specific challenges. It was first hypothesized that the main day-to-day problems that managers of Sino-foreign joint ventures have to deal with are: (1) Transcending differences between partners, (2) dealing with conflicting objectives, (3) protecting the differentiated resources brought into the joint venture, and (4) managing local resources. The second hypothesis stated that exogamic partnerships such as Sino-foreign joint ventures induce risks such as misunderstanding between partners, having an untrustworthy partner, competing for knowledge or technological leaking.
Data was collected in 67 equity joint ventures mostly in the Shanghai area. Foreign partners originate mainly from the USA and Europe. Semi-structured face-to-face interviews were conducted with a majority of Chinese managers. Bias was eliminated from the issues raised in this paper by the use of open questions.
This research showed that, on a day-to-day basis, partners have to deal with two challenges. The first challenge to managers of Sino-foreign joint ventures is dealing with conflicts between partners. This comes from the exogamic nature of these alliances. Unrelated profiles, differentiated resources contributed by partners and divergent interests are sources of inconsistencies that increase the probability of clash. The second challenge is related to marketing issues - such as branding, sales networks and market research. This research has shown that risks incurred in the management of Sino-foreign joint ventures can be grouped into three broad categories: risks related to the Chinese environment; risks related to working in cooperation; and risks linked to the business itself. 'Competition on the market', 'political and macro-economic environments', 'conflict in making strategic decisions', 'unbalanced relationship', 'failure in financial control' and 'failure to understand the Chinese market' appeared to be the most important risks as identified by the respondents.
Keywords
inter-firm alliances, management of international Joint Ventures, exogamic partnerships, cultural inconsistencies, conflict management, risk management, learning through alliances, Chinese business
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