A Study On The Relationships Among Joint Ventures’ Control And Performance

As an independent economic entity with a corporate capacity, a joint venture enterprise not only isintervened and controlled by its parent company, but also has differences of both ethnic and cultureswith its parent company, which makes the complex management of the joint venture even harder.Drucker, the famous American managerialist, believes that "international joint venture is the mostdifficult to operate, the most complicated in management requirements and the least understood modelamong various business patterns."The foreign researches on relationships between parent companies’ control and performance aremainly developed from the view of transaction cost theory, strategic behavior theory, organizationallearning theory, bargain theory, resource-based theory and game theory etc. In the research ofrelationships between parent companies’ control and performance at present, because of the differentsample-selecting sources, different focus on controlling the three dimensions(control mechanism,control degree and control range), different choices of objective criteria(such as financial target, stabilityand life expectancy) and subjective criteria(such as the degree of satisfaction on international jointventures, the realization of target) on performance measurement, as well as the different views ofobserving(foreign enterprise, host-country enterprise or international joint venture), the conclusions aredifferent from each other and could even be contradictory. Foreign scholars have done lots of researcheson the relationship between transnational corporations’ share arrangements and performance. Generally,three kinds of entirely different standpoints exist: majority share dominant theory, peer equity dominanttheory, causeless relationship theory. Most theory studies in China agree on majority share dominanttheory and causeless relationship theory. Until now there is no insightful study of peer equity dominanttheory.In consideration of the shortages in previous researches, this article has some further study onrelationships between parent companies’ control and performance. First of all, because the controlproblems of joint ventures only gets fragmentary and nonsystematic attention, and the researches basedon the local situation are so rare, this article has done the systematic pioneering research, includingshare control, management control, governance structure and control structure. Secondly, this researchstudies on control, innovation and organizational performance from the view of value creation. Thepathway is: controlling shareâ†'governance structureâ†'management controlâ†'innovation abilityâ†'innovation performanceâ†'organizational performance. This research has constructed the framework ofcontrolâ†'innovationâ†'performance, which explains that the departure of organizational performancefrom share percentage and control structure. This framework enables the researches on joint ventures toshift its emphasis from shares control and control structure to governance structure, management controland innovation, i.e. from focusing on transaction cost and game to value creation. In order to prove that the logical relationship and the research framework of this article arereasonable, the article not only examines by field study, case study and interview study, but also adoptsthe quantitative study to do empirical research. First, the author launched a preliminary test of thequestionnaire through interviews with entrepreneurs and experts, and complete the formal questionnaireby cutting and adjusting questions.308questionnaires are retrieved and statistically analyzed by variousmethods facilitated by AMOS20.0, SPSS20.0and other software. The empirical results is showed asfollows:â‘ The percentage of shares and the performance of joint ventures have an inverted U-shapedrelationship.â‘¡Control structure and JV performance are inverted sine relation. Under the circumstance of samepercentage of shares, the relationship between control structure and joint-ventured performance is:splitting the control> joint control> mainly foreign control> mainly local control> alternate control. Thevariance analysis shows that this influence has reached an extremely remarkable extent.The six conclusions above has clearly and comprehensively sketched the contours of the theory todemonstration that: the splitting control or joint control under the Peer equity is the best way based onthe both-side view; the mainly one-side control under majority stakes or minority stakes has thesecond-best joint venture performance; the alternate control ranks lowest in joint performance among allthe control structures.Based on the conclusion of the research, the author suggests that:Firstly, the enormous Chinese market is changing rapidly in a complex environment. Therefore,Chinese consumers’ special needs and propensity to consume have dominant influences, latent rules andreticent knowledge. The structure of market demand, which has important influence on the technicalevolution, is apparently different by locations. And such difference has obvious path-dependentcharacteristics. Having an insight of domestic economic development trend, releasing domesticdemands, doing innovation on product frameworks based on domestic demands and revising positioningstrategy, are the effective way to make break-through for joint ventures to gain competitive advantagesand change the competition patterns. The key points of framework innovation and strategic positioningis the match of technology supply and demand, but not the match of all the supply elements ininnovation. To set up match between the supply and demand of technology, the key is to set roots deeplyinto China, step up with the Chinese environment, market and consumers and grasp trends in China.Secondly, the mass customization economy patterns will reverse the tendency that joint venturesturns to sole ownership and that major party takes control. The world has transited from rare economyto surplus economy and the consumption has transited from the era of mass consumption to the era ofniches and personalized consumption. The trend has become more and more obvious that the demandsof consumers are becoming different, diversified and discretizated. The rapid change of market demandhas led to crises of massive producing patterns. Mass customization is oriented to customer demand,based on modularization design, marked by fast response, supported by advanced informationtechnology as well as manufacture techniques, and realized by supply chain management. Masscustomization is a complicated systematic course. Enterprises achieve efficient cooperation of strategicclusters with the help of supply chain management, where they have the whole process of product development, design, manufacture, assembling, sales, and logistics and after-sales services. In respectsof strategic positioning, customer demand insights, technology evolution, and collaborativemanagement, Chinese domestic enterprises possess the advantages that their foreign peers do not have.Chinese enterprises are playing an increasingly more important role in the development of jointventures’ competitive advantages.The possible innovations presented in this article include:â‘ Prospective topic. Mass customization and modular production are emerging productionpatterns in the new era of economy. Such developments have been given new significance in themodular environment. The questions become essential on how joint ventures regenerate creativenessand vitality, and how industry structure make adjustment and upgrade in this new era. Many scholarshave regarded these changes as one of the direction of the future development of industry, which hasrevolutionary impacts. And increasingly more scholars have looked into this field. This article makesresearches on the relationships among control, innovation and performance of joint ventures in thebackground of the new era of economy with mass customization and modular production, which is veryprospective.â‘¡Pioneering and ground-breaking research contents. This research has come up with theconclusions that weak shareholders control have a negative correlation with control structure, as well asshareholders control have negative effects on management control and the control structure influencesinnovation ability effectively. The3assumptions are confirmed by308sample’s examination. The studyhas showed that: interest control and JV performance are in an inverted U-shape relationship, controlstructure and JV performance are in an inverted sine-curve relationship. This two conclusions appear inthe domestic literature for the first time, and thus are original.â‘¢The author takes Chinese and foreign joint ventures as samples, and performs a localizedresearch into the relationship of parent company’s control and performance in international jointventures. Such study may not only enrich international joint venture theories from the perspective of thejoint ventures in China, but also verify some relevant theories’ validity in China.