Identifying key factors for successful joint venture in China
| Date | 01 March 2002 |
| Published date | 01 March 2002 |
| DOI | https://doi.org/10.1108/02635570210419645 |
| Pages | 98-109 |
| Author | Jiaqin Yang,Huei Lee |
| Subject Matter | Economics,Information & knowledge management,Management science & operations |
Identifying key factors for successful joint venture in
China
Jiaqin Yang
Department of Management, Georgia College and State University, Milledgeville,
Georgia, USA
Huei Lee
Department of Finance and Computer Information Systems, Eastern Michigan
University, Ypsilanti, Michigan, USA
Introduction
With the fastest growth rate in last two
decades, China has become one of the largest
markets for international business.
Hundreds of international companies have
been competing for business opportunities in
China in the form of joint venture or direct
investment ± since the Chinese Government
opened its market in the 1980s. As its
economic reform continues, China's
perennial economy expansion scale and huge
market potential have been continuously
attracting the attention of international
business giants (Ma, 1997). By the end of June
1997, it was reported that over 200,000
business joint ventures had been registered
in China, with a total foreign investment of
$204 billion ($15.7 billion from US companies)
(China National Statistics Bureau, 1997). The
International Monetary Fund (1997) predict
that if China can sustain its current growth
rate, its GDP will reach the total GDP of the
European Union and the USA in ten years.
The World Bank (1997) indicate that among
the world's five largest developing countries
± China, Russia, India, Brazil, and Indonesia,
China has the most potential for growth and
becoming one of largest markets for
international business.
The adjustment of government policy also
played a role in the recent increase of foreign
investment in China. For example, in order
to provide foreign investors more freedom in
currency exchange, two government
guidelines were published in 1996 regarding
open foreign investment ± Introductory
Industrial List for Foreign Investment and
Current Regulations Against Foreign
Investment in China. As a result, after July
1997, foreign investors were allowed to make
their bank transactions based on an
international currency or free exchange from
China's $RMB to international currencies.
More importantly, a new government policy
was established to provide foreign
corporations with more flexibility in
selecting investment alternatives among
related industries, such as: the joint stock
holding companies (e.g. investment in the
manufacturing industry), the investment
company (e.g. banking and bond industry),
the mutual fund institutions (e.g. financial
management industry), and foreign trade
businesses. Consequently, many foreign
investment joint ventures in international
trade, global air transportation, banking and
financing, business insurance, as well as
professional accounting and legal consulting
service companies had opened their first
offices in Shanghai, Beijing, and Shenzheng
(three most important cities in China)
recently (Yuan, 1997). The Chinese National
Statistics Bureau (1997) annual report
strongly supports recent policy changes by
showing that the 1997 national tax revenue
was increased by 17.2 percent, while in
comparison, 1997 tax revenue from joint
ventures and foreign investment companies
was increased over 55 percent ± three times
more than the national average.
International corporations have explored
their business opportunities in China during
the last two decades. Both successful joint
ventures and failed investments were
reported with mixed feelings and evaluations
(Miller et al., 1997). Research addressing the
issues of the conflicts between different
cultures, traditions, as well as value systems
has appeared in the recent literature, but few
focuses on identifying the key factors for
foreign investors to successfully enter
China's market under its current political
and economic systems ± because there are so
many factors involved (economic, political,
social, cultural, etc.) and many factors are
interactive with complex relationships. In
fact, such a problem should be viewed as a
typical multi-criteria multi-attribute
decision-making problem. In the current
The current issue and full text archive of this journal is available
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[98]
Industrial Management &
Data Systems
102/2 [2002] 98±109
#MCB UP Limited
[ISSN 0263-5577]
[DOI 10.1108/02635570210419645]
Keywords
International trade, Joint ventures,
China, Analytic hierarchy process
Abstract
China has become one of the top
three nations for attracting foreign
investment in the international
market since 1990. Hundreds of
international corporations are
currently competing for business
opportunities in China in the form
of joint venture or direct
investment. Both successful joint
ventures and failed investments
have been reported. Research,
addressing issues of the conflicts
between different cultures,
traditions, as well as value
systems, has appeared recently,
but few focuses on identifying the
key factors and their managerial
implications for foreign investors
to successfully enter China's
market. This paper presents an
application of analytic hierarchy
process (AHP) in such an effort,
through a case study of China
Motorola. This study shows that
for foreign investors, by identifying
key success factors and then
incorporating those factors into
firm's long-term business
strategies and policies can
enhance their business
opportunities in China for a long
time to come, even under China's
current complex economic and
marketing conditions.
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