International Joint Ventures in China

International Joint Ventures in China

Introduction

International joint ventures have become a prevalent form of business cooperation across the borders. Organizations of two or more countries form International joint ventures. They present distinctive advantages of interconnecting complementary skills of each organization cross-culturally, provide transnational market access, jump across the technological differences or deficiencies of host nations, and act strategically to the increasingly powerful competition, both nationally and globally. (Killing, 1982; Beamish et al., 1994) International joint ventures have flourished because it has been identified by individual organizations that expansion or infiltration into new markets can be uncertain and needs a lot of resources. Acquisition and merger- traditional models or strategies are not much appealing, particularly if the venture is reliant only on product, market or time. Governments generally go all-out to protect local firms therefore in launching new markets in foreign countries; organizations may cope with significant confrontation. (Datta, 1988)

Discussion

International Joint Ventures in China

China has become one of the leading markets for international business with the progressing growth rate in last three decades. Since 1978, with the implementation of its 'Open-Door' policy, hundreds of international firms have been contending for seeking business opportunities in China in the form of direct investment or joint venture.

However, special consideration should be given to certain while managing the joint enterprises. According to Faulkner, long term achievement, at the same time as apparently dependent upon the economic profits, is also predominantly reliant upon the approaches of the venturers towards each other, how the joint endeavors are handled by them, and on the level to which the venturers take up an optimistic learning philosophy, thus facilitating the coalition to develop, all of which are inclined by the involved partners' cultural characteristics. Many of the setbacks and misapprehensions in joint ventures have their basis in the cultural disparities present at both national and organizational levels. (Faulkner, 1995)

Special considerations existing for Entering into an IJV in China

Cultural Considerations

China has a Confucian culture in terms of collectivism and individualism and from Western cultures, it is considerably poles apart. (Hofstede, 1980) A set of values in which devotion, faithfulness, chain of command, and respect to superordinates are vital, and the individual is underling to the group represent 'Confucian ethic'. (Morrison, 2006) This Chinese philosophy is still an essential cultural element in the progress of Chinese society and is yet efficacious in business culture of China nowadays. Societal relationships and ...