Control of international joint ventures in China : a case study investigation.
Changes in the world economy and industrial structures have transformed the patterns of
international competition (Porter, 1986). The trend indicates that most firms prefer to take
the short route when approaching overseas markets and present themselves directly
through foreign direct investment (POI) (Julius, 1991; Turner, 1991; United Nations 1991).
Following the FDI development, a second wave of change in the 1980s and 1990s was the
surge of strategic alliances and joint ventures (IVs), the so-called new forms of
organisations (Hennart, 1989; 'Franko, 1987; Buckley & Casson, 1985). The rapid growth
of the new forms is at one level a response to the threats and opportunities presented by the
shift in patterns of competition, and a driving force which accelerates further changes at
the other level. These developments have inevitably raised new contracting and
management control issues.
The rise of China is another feature highlighting the world economy in the later part of the
20th century (The World Bank, 1997, 1997a). Since China opened up in 1978, the country
has undergone a major transformation and changed from "being an econ_omic backwater to
a hot spot of investor interest" (Tretiak & Holzmann, 1993:vii). The nation has captured
one third of all FDI flows to developing countries between 1970 and 2000 (Independent,
1111112001), the majority of which arrived in IV form and from the sources of overseas
ethnic Chinese. All these changes and features have added further questions and
requirements to contracting and management control of international IVs (UVsl
Both the topic (IJV control) and the location (China) are of paramount importance to
practitioners and academics 8.Iike. This study has made two major contributions to
knowledge of DV control in China. The first contribution is the use of a middle-range
thinking research approach (Laughlin, 1995) and the case study method. Control is seen as
a wider package, which consists of four contingency factors (environment, UV mission,
ownership and bargaining power structure, and control in terms of focus, extent and
mechanisms), that is used to articulate strategies and achieve the desired results. Control
as a holistic concept is empirically examined in this study.
The empirics revealed a web of complex interactions and delicate relationships between
the hard/economics and softlbehavioural elements underlying a holistic control package.
The analysis also discovered that the contingency variables comprising a holistic control
package are influenced by, and at the same time influence, other variables through
changing the enacted settings that other factors created. This process is circular and
creates multiple layers of interactions between the environments and different contingency
The in-depth understanding and the establishment of an integrative theory of UV control
highlighting the unique environments in China at the current stage of development is the
second major contribution that this research has made. Moreover, this case-based study is
set out to fulfil a middle-range role in changing some aspects of the status quo by
informing managers and fellow researchers of the significant subject of DV control in
China. In summary, these are the main contributions of this research.
1 A IV is considered to be international if at least one of the partners is headquartered outside the JV's country of operation. or if the JV
has a significant level of operation in more than one country (Geringer &: Herbert. 1989:235).