Sino-Foreign Joint Venture Case Study

3.1. IJV local environment
This section discusses in detail the effect of national culture and organization culture on the performance of Sino-foreign joint ventures, based on previous studies.
3.1.1. National culture
Culture is regarded as a “system of shared values and beliefs” (Saloner, Shepard and Podolny 2001) that aims to solve problems that arise due to external adaption and internal adaptation of the organizations (Schein 1985). External adaptation is defining the strategy and main objectives of the organization, and understanding the opportunities and threats involved. Internal adaptation is more about understanding the differences in the working styles and behaviors and creating an effective work environment within the organization.
People in China act in the interest of the group. In China, it may also appear that employee commitment towards the organization is low, and people easily switch jobs. But they show utmost solidarity and commitment towards their people. Relationships towards their colleagues are co-operative for in-groups and can be hostile for out-groups. Conversely, as observed in Graph 3, the United States has the highest individualism dimension of 91 percent, of any country analyzed in Hofstede’s research. Individuals in the U.S. are driven by power and ambition. The managers are accountable, and the responsibility of making the ultimate decision solely rests with the manager. When things go wrong, the manager himself is accountable for the action taken and support seems to vanish. However, the upside is that when these decisions are right, the manager obtains all the credit. The Americans believe that outstanding success brings outstanding rewards. To understand the British, it is quite important to be able to ‘read between the lines’, else what is said can be misinterpreted. People in the UK are extremely work oriented and have a clear performance ambition. Managers in the UK are expected to have great interpersonal skills that are necessary to hold a team together. These skills and the agility of the manager are highly regarded. Modern managers often want to be able to
Some studies indicate that the effect is positive while other studies maintain that the effect is negative. Although the economic and organizational transactions that occur with cross-border ventures are variable, the nationalities of the partners involved are given. Thus, it is assumed that the participant involved in the cross-border venture represent the values and beliefs, that are largely driven by their nationality (Ronen and Shenkar 1985; Shan and Hamilton 1991). Studies by Parkhe (1991) have revealed that national culture influences managerial behavior, leading to an effect on the performance of joint ventures. IJVs are also limited by some unique risks, that hinder cooperation between non-homogenous partners (Harrigan 1988). Power distance and individualism directly inhibit internal adaptation and influence the organization’s choice of rewards systems, control forms, etc. (Hofstede1980). Ignoring cultural differences lead to ambiguous understanding and weak relationships, ultimately leading to the dissolution of the venture (Barkema, Bell and Pennings 1996). Differences in culture may also lead to misinterpretation of what is being said and is what is meant. Coordination problems between firms are compounded, as communication between the culturally distant countries is challenging (Lane and Beamish 1990). Also, these differences can lead to a lack of