An Analysis on Factors of Success for Chinese/European JVs in Culture Aspect

Abstract

China is the largest recipient of foreign direct investment (FDI) among all developing countries (Tsang,1998). Nowadays, more and more worlds leading multi-national companies have set out on a joint venture with Chinese State owned enterprises. The main motive for many European companies in establishing the enterprise in China is to gain entry to its potentially large market (Strange,1998). A successful joint venture will offer the access to large market and the access to greater resources, including specialized staff and technology. It allows the firm to share the costs and risks with the partner. However, the potential problems of cooperating with a partner from a different national culture led to some unique risks. The cultural difference may also create ambiguities in the relationship, which may result in conflict and even dissolution of the enterprise (Barkerma, 1997). The principal reason why joint ventures fail is not because the contracts are poorly written but because the managers involved failed to make them work (Harrigan, 1986). This paper is a comparative study based on the Chinese culture environment and the international business environment literature. This paper focuses on the Chinese cultural environment and also compare with the European culture in order to find out the critical element for the success of the European/Chinese joint venture enterprise.