Cross Cultural Studies in Sino-Foreign Joint Ventures

Abstract

The People"s Republic of China (PRC) is one of the most lucrative markets in the world. Because of the size and potential of the market, many corporations around the world have made a dash to capture a competitive advantage. In the current era of globalization, the joint venture has emerged as an increasingly useful and popular way for firms to carry out their foreign investment strategy. Joint ventures between foreign firms and local partners have been a particularly important component of the FDI (foreign direct investment) in Asia. This is because the governments of these countries have frequently provided a more favorable investment climate (e.g., in terms of regulations, approvals, licensing requirements, taxes, etc.) to foreign firms entering joint ventures with a local partner than to foreign firms attempting to establish a wholly owned foreign enterprise. The governments want part of the organization s equity, ownership and control to remain local. The foreign firm, unfamiliar with the business environment and culture of the local market, also finds the joint venture the most advantageous way to enter into a strategic alliance with a local firm who is already nestled in that market. This paper will highlight important factors and questions concerning joint venture operations and their ultimate outcomes. It will also strive to raise new questions for the future through three case studies: Beijing-Kentucky Fried Chicken (Beijing-KFC), Pacific Dunlop China, and Shanghai Volkswagen.