Host-country policies and MNE management control in IJVs: Evidence from China

Abstract

In international joint ventures (IJVs), partner firms exert three types of management control: output, process, and social. Since management control critically influences IJV success, it is essential to understand what factors drive the development of the control system. Prior studies have focused mainly on IJVs’ internal conditions, and have largely neglected external institutional influences on IJV control. In this study we explore how host-country policies affect MNE partners’ control over their IJVs. Using a sample of IJVs in China, we find that MNE partners tend to exercise less output and process control when minority equity restriction is present, greater process control when they receive government incentives, and less social control when they are required to partner with state-owned enterprises. In contrast, the results of a post hoc analysis show that local partners’ control activities are not significantly influenced by these policies. Our findings provide new insights into IJV management by demonstrating the impacts of regulatory institutions on partners’ control activities.

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Notes

  1. 1.

    We also examined the policy factors individually and found that the relationships remained unchanged. In consideration of possible nesting of the two categorical variables (equity restriction and SOE partner requirement), we performed two-level linear modeling and obtained similar results.

  2. 2.

    The use of mean-centered variables also contributes to the strong intercepts of the models.

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Acknowledgements

The authors thank Editor-in-Chief Lorraine Eden, special issue editor Mike Peng, and anonymous reviewers for their insightful comments and constructive suggestions. This research was supported in part by the China Europe International Business School (CEIBS) in Shanghai.

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Correspondence to Dong Chen.

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Accepted by Mike Peng, Guest Editor, and Lorraine Eden, Editor-in-Chief, 6 November 2009. This paper has been with the authors for five revisions.

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Chen, D., Paik, Y. & Park, S. Host-country policies and MNE management control in IJVs: Evidence from China. J Int Bus Stud 41, 526–537 (2010). https://doi.org/10.1057/jibs.2009.97

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Keywords

  • alliances and joint ventures
  • organizational control and design
  • institutional context
  • China
  • survey method