National and Transnational Effects in International Business: Indications from Sino-Foreign Joint Ventures(1)

Abstract * Nationality and transnationality effects on strategy and management practice are examined for a sample of joint ventures in China. The impact of foreign parent transnationality was wide-ranging, whereas there were few across-the-board national effects. * The implication is that China's stated goal of importing foreign management practice is more likely to be attained through joint ventures with transnational corporations than other types of foreign firms. Key Results * Transnational companies adopt distinctive strategies and practices for their joint ventures in China. Among several nationalities, only Hong Kong firms were distinctive. Introduction Over the past twenty years, it has been argued forcefully that there are distinct and contrasting national systems of business and managerial practice which are strongly embedded in the specific cultural and institutional heritage of the home countries of business corporations (Biggart/Guillen 1998, Hampden-Turner/Tromenaars 1993, Hofstede 1991, Whitley 1992a, 1992b). More recently a contrary view has been advanced, namely that the pressures of operating in a worldwide competitive environment, and the globalization of production among large transnational corporations (TNCs), are leading to a convergence in the strategies and structures of those corporations towards the same globally-integrated model (Dicken 1998). The two arguments suggest the presence of respectively "national" and "transnational" effects on corporate strategies and practices. The aim of this paper is to examine evidence for both effects among companies that have established joint venture (JV) operations in China. A sample of companies operating within the same environment, but with contrasting national origins and transnational statuses, should be able to shed useful light on the issue. It is assumed that foreign direct investment into China is guided by a set of strategic objectives and, when implemented, gives rise to a transfer of foreign practice. Such transfer is, in principle, consistent with China's official policy of acquiring foreign management expertise. The question addressed here concerns the nature of these foreign investor effects, and whether they are associated with national origin and/or scope of global operation. The paper first summarizes previous discussion of the two effects, before presenting the method and results of the empirical study. National Effects The argument from national effects is that even global companies are the bearers of distinctive strategic orientations and management practices which are embedded in them by the cultural and institutional contexts of their national homes. Despite exposure to common contingencies in the world economy, and more specifically in a common host country environment like China, "the point is that the home-base characteristics invariably remain dominant" (Dicken 1998, pp. 196-197). Recent comparative research suggests that national differences persist in the strategies, governance structures and R&D systems of TNCs (Pauly/ Reich 1997). The study to be reported was conducted among a sample of JVs located in China, which had foreign-investing partners from four broad cultural categories: Anglo-Saxon (primarily US), Continental European (primarily France and Germany), Japanese, and Overseas Chinese (primarily Hong Kong and Taiwan). Anglo-Saxon, Overseas Chinese and Japanese groups have often been contrasted despite the presence of some heterogeneity within the first two (Hofstede 1991, Hampden-Turner/Trompenaars 1993, Hickson/Pugh 1995). The continental European group is much less homogeneous, though it is considered by some to share similar "communitarian" values (Calori/De Woot 1994, Choi/Golder/Lee 1996). Bearing these qualifications in mind, we can summarize the key strategic orientations and management practices that have been identified as typifying each of these national groupings. …