The influence of Guanxi on local partner selection : a study of small and medium-sized Sino-Hong Kong manufacturing joint ventures in southern China

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The influence of Guanxi on local partner selection : a study of small and medium-sized Sino-Hong Kong manufacturing joint ventures in southern China

 

Author: Wong, Leung-kwong Peter
Title: The influence of Guanxi on local partner selection : a study of small and medium-sized Sino-Hong Kong manufacturing joint ventures in southern China
Degree: D.B.A.
Year: 2000
Subject: Manufacturing industries -- China
Manufacturing industries -- China -- Hong Kong
Small business -- China
Small business -- China -- Hong Kong
Joint ventures -- China
Joint ventures -- China -- Hong Kong
Hong Kong Polytechnic University -- Dissertations
Department: Dept. of Management
Pages: 281 p. : ill., 1 map ; 30 cm
Language: English
InnoPac Record: http://library.polyu.edu.hk/record=b1553088
URI: http://theses.lib.polyu.edu.hk/handle/200/4590
Abstract: Partner selection is critical to the success of an international joint venture (IJV). The selection process involves both the identification and evaluation of potential partners. As existing research mainly focuses on the evaluation side of the process, little is known about the actual decision mechanics involved in partner identification. The implicit assumption in the extant literature is that potential partners are identified on the basis of formal market research. But under conditions of bounded rationality, partner identification may not be undertaken in such systematic way. While partner identification is a critical precursor to the evaluation process, studies of both are necessary to improve on understanding of how foreign investors actually select local partners when forming IJV. This study will examine the local partner selection in China. It is likely that interpersonal relationships between the key actors on both sides of the potential venture can influence the selection process. This may be the case for IJVs in China where guanxi, or the reliance on connection is a way of life. Therefore, this research will investigate the influence of guanxi on both partner identification and evaluation. The analysis is based on information regarding the initial partner selection processes of eighteen small and medium-sized Sino-Hong Kong manufacturing IJVs. These IJVs are drawn from eleven industries and are located in four large cities in southern China. In total, thirty-five informants were interviewed over a few months period. The in-depth interviews averaging one hour in length were mainly conducted in China. The findings indicate that HK investors usually identify potential mainland partners from their personal networks. In no case a partner was identified on the basis of a systematic search in the market for all possible alternatives. Investors sometimes rely on intermediaries, also identified from their personal connection networks, to introduce potential candidates. No matter how the candidates are identified, decision-makers of investing firms seem to use a good selection process in partner evaluation. The influence of social factors on partner evaluation can be fostered if the existing ties amongst the key actors of both the Hong Kong and mainland parties are very strong; the ganging between them is very good; and some local parties have strong inclination to the formation of the IJVs. However, this influence is undermined if the investment commitments in IJVs are significant in the perception of the investors. This study helps to balance the predominantly microeconomic focus of extant work, address a knowledge gap in the literature, and contribute towards an improved understanding of a social phenomenon which may be of use to government agencies and other bodies in stimulating and promoting cross-border investment flows.

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