Companies pursuing business in China and other developing countries should customize their fit with local partners, according to an article in this month's edition of a journal published by the Institute for Operations Research and the Management Sciences (INFORMS).
To increase the chance of success, the study suggests, multinational corporations should pick and choose from potential partners' strategic and organizational abilities. Investors who want to begin operating in a foreign market should search for local partners with rich market experience, superior market position, the capacity to absorb advanced technological or organizational skills of a multinational company, and a diverse line of products in the multinational's specialty. Those seeking profitability and stability should select local firms that have superior international experience, a long record of international collaboration, and greater market power.
Using methods employed in operations research and management science, the study examined data from 116 International Joint Ventures (IJVs) operating in Chinese manufacturing industries from 1988 through 1991. The data was collected in Jiangsu Province, which now ranks second in gross domestic product among all the provinces of the People's Republic of China.
Among the study's findings are -
The study, "Partner Selection and Venturing Success: The Case of Joint Ventures with Firms in the People's Republic of China," was written by Dr. Yadong Luo, a management scientist with the College of Business Administration at the University of Hawaii at Manoa. It appears in the current issue of Organization Science, a publication of INFORMS.
The Institute for Operations Research and the Management Sciences (INFORMS) is an international scientific society with 12,000 members, including Nobel Prize laureates, dedicated to applying scientific methods to help improve decision-making, management, and operations. Members of INFORMS work primarily in business, government, and academia. They are represented in fields as diverse as airlines, health care, law enforcement, the military, the stock market, and telecommunications.
Organization Science