Sino-foreign Joint Ventures Instability Causes And Countermeasures

Since reform and opening, China has gradually immerged into the world's economic integration. Owing to the rapid rise of China economic, improvement of infrastructure, stability of social politics and reform of investment environment, more and more foreign direct investment occur in China. Recently, the trend of sole foreign-owned in the field of joint venture has attracted wide attention from the society. Sole foreign-owned is only one of the manifestation of instability. This essay defines instability as significant changes of joint venture which are not planned in advance, and at least one of the partners has not anticipated. Based on this definition, this essay handles theory of organization conflicts, contracts imperfection and absorptive capability and knowledge of knowledge transfer, along with joint venture cases about Danone which established joint venture with Chinese drink industry--Wahaha, Robust, Guangming, etc., to explain factors which influence joint venture instability in the background of Chinese society.The author realizes China side is very urgent to solve the problem of instability, so that this essay handles model of knowledge transfer to analyse the mechanism of instability: how the foreign side gets local knowledge by the joint venture, and once the process is finished, the foreign side will have the motivation to create instability; on the opposite, how the China side acquires foreign knowledge by the joint venture. Only the China side promotes its absorptive capability and makes uses of the knowledge, can it remove the threat of instability. The author refers to solutions for the China side. Also multi-direction is mentioned.