Challenges in Sino-Western Joint Ventures: an approach to understanding and dealing with problems

Despite high investments and low success rates for Joint Ventures of Westerncompanies in China, there has been no systematic investigation into the problemswhich cause these alliances to not achieve their goals. For this reason, this workaims to provide academically researched insights while also addressing a businessneed.The objective of this research was to develop a classification of Sino-Western JVproblem attributes according to their similarities in a hierarchical cluster structure.The classification enabled the generation of a better understanding of typicalproblem areas based on problem attributes. Further analysis and interpretation ofthe identified problem areas and problem patterns allowed for the identification ofresolution measures and the examination of their potential effectiveness.This work classified a large number of multi-layered JV problems, varying widely innature. For this purpose, problems derived from empirical case studiesdocumented in the literature were arranged according to their subject-relatedsimilarities and a hierarchical structure consisting of problem attribute clusters wasdeveloped. The result is the establishment of a polythetic classification ofapproximately 700 Sino-Western Joint Venture problem attributes.Through the process of problem statement selection, problem attribute extractionand their clustering, the attributes were grouped and condensed. This reduced the initial complexity of the wide range of problems and enabled specific problemdomains with related problem attribute clusters to be identified. The structuring ofthe problem elements showed how problem clusters are interrelated and helped todifferentiate between complex and more easily resolved problems.The overall classification of attributes illustrates the domains in which problemsoccur. Eight problem domains are revealed and refer to: differences in the Westernand Chinese cultures, business practices, business operations, JV expectations,Chinese history, Chinese government involvement, disparities between Westernexpatriated managers and local Chinese managers, and opposing fundamentalconcepts. Further, communication and culture challenges were identified asrecurring themes among the problem attribute clusters.Based on an improved understanding of key problem areas, it is suggested tofocus on strengthening communication capabilities and cultural awareness with theaim of increasing the success rate of Sino-Western Joint Ventures. It isrecommended that Western companies concentrate on problem attribute clusterswhich are considered to be potentially solvable or reducible rather than thoserelated to intrinsic differences in order to have the greatest effectiveness.This work exemplifies the important role which classifications play in socialsciences research and demonstrates the problem solving capability ofclassifications. Consequently, a classification approach which is suitable to makenew kinds of investigations in social phenomena has been suggested. An improvedunderstanding has been achieved which enabled these phenomena to be reviewedand addressed from new angles. Further, the work both confirmed existingresearch results related to Sino-Western JV problems and gathered new insightsby analysing these problems in a consolidated, structured form through thedevelopment of a classification.