Institutional factors underlying the issues in Sino-foreign joint ventures in China: An extension of transaction cost economics to underdeveloped hybrid markets.
Song, Zhenzhen
1990
Abstract
Tensions in manufacturing joint ventures (JVs) between Western multinational corporation (MNCs) and Chinese state-owned enterprises (SOEs) have received increasing attention from both the academic and the business community. Though the number of Sino-foreign JVs in China has grown rapidly, frustration has kept pace with the progress in JV activities. Among various perspectives, this dissertation focuses on investigating those institutional factors underlying the issues in MNC-SOE JVs in China. I propose that differences in economic settings between the partners are the basic source of difficulties in the operation of the JVs. Particularly, it is argued that the economic system in the People's Republic of China is neither a rational-legal planned bureaucracy nor the market, but rather a system of "industrial feudalism" (Boisot 1986); it is this nature of the transition in the system which causes confusion and frustration to JV managers. This dissertation first develops an analytical framework which allows comparative economic institutional analysis at both the macro- and micro-level. This framework starts with the transaction cost approach, but in fact extends such an approach to underdeveloped quasi-market economies. To explain the dynamic characteristics of systems undergoing the transformation from planned toward market economies, the framework is used to conduct analyses of the ideological values and transaction-governance capacities of systems, and explores the inter-relationship between these two factors. Furthermore, the framework incorporates and elaborates such themes as "rent-seeking" theory and property rights in investigating the effects of economic institutional settings on enterprise behavior. Finally, relationships between the Chinese economic system and the MNC-SOE JV behavior are investigated in three major production-factor markets--markets for product, capital and labor. The data of 42 Sino-foreign manufacturing JVs collected from field interviews in China are generally supportive of the hypotheses set fort within the framework of this dissertation. In the formulation of this supporting evidence, the necessity of this expanded analytical framework becomes clear. The examination of Chinese economic reforms in general, and of the 42 JVs in particular, indicate that consistency between change in ideology and change in transaction-governance capacity is a necessary condition for China's successful transition to a market economy. In conclusion, the dissertation provides both strategic recommendations for MNCs and policy implications for Chinese government.Other Identifiers
(UMI)AAI9034520
Subjects
Business Administration, Management Economics, Commerce-Business Sociology, Social Structure and Development
Types
Thesis
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