The Relationship Between Cross-Cultural Conflicts In Sino-foreign Joint Ventures And Their Performance

With economic globalization, International joint ventures (IJVs) continue to proliferate across the globe. Unfortunately, IJVs are still threatened by high failure rates. So are those in China. According to statistics, about 15% of Sino-foreign joint ventures (SJVs) including multinational corporations are destined to break up prematurely and 70% of joint ventures cannot cooperate harmonically for various reasons. Given this intriguing mix of promise and peril, academics have been keenly interested in understanding the factors that influence IJV performance, which are studied from the perspectives of environmental factors, partner selection and IJV-specific characteristics. In spite of different research angles, methods and conclusions, they reach a consensus:Cross-cultural conflict remains one of the important factors that influence IJV performance. However, most of the existing literature focuses on hard managerial factors in IJVs but ignores the hard ones. Even less literature addresses the effects relational capital has on the relationship between cross-cultural conflicts and IJV performance, which is no other than one of the roots of failure in cross-cultural conflict management in IJVs. In fact, the real challenge IJVs are confronted is how to handle the relationship between cross-cultural conflicts and IJV performance so as to improve IJV performance and success rates. How do national and corporate cultural conflicts influence IJV performance? What role does relational capital play in the relationship between cross-cultural conflicts and IJV performance? These questions receive less attention from academics and practitioners alike, although they are strategic issues determining the fates of IJVs and also burning problems in SJVs in China.To fill the gap mentioned above, this dissertation takes an early step towards to making a theoretical and empirical study of the relationship between national cultural conflicts, corporate cultural conflicts and performance in SJVs in China, and the role that relational capital plays in the relationship between the double cultural conflicts and IJVs. After reviewing the related literature, this dissertation systematically expounds the connotation of cross-cultural conflict, its forming mechanism and its impacts on SJV performance. Then an empirical study is made, in which national and corporate cultural conflicts are treated as dependent variables, joint venture performance as an independent variable and relation capital as a mediating variable. After that, some hypothesis on the relationship between cross-cultural conflicts and SJV performance are put forward. Through the structural equation and quadratic regression analysis of survey data collected from 278 executives across forty-three SJVs in China, this study reveals some key findings. First, as a whole, the frequency and intensity along each dimension of national and corporate cultural conflicts negatively correlate with SJV performance. Second, there is an inverted "U" shape relationship between the conflicts along the dimensions of power distance, individualism/collectivism and masculinity/femininity, behavioral and institutional cultural conflicts and SJV performance, which,however, doesn't occur to the relationship between conflicts along the dimensions of uncertainty avoidance and long-term/short-term orientation, material and spiritual cultural conflicts and SJV performance. Third, Social capital positively correlates with SJV performance and can effectively reduce the negative effects of cross-cultural conflicts in SJVs. Later on, an extensive and profound discussion over these findings follows the empirical tests. Accordingly, some suggestions are offered on policy making in cross-cultural conflict management in IJVs. Finally, the limitations of this study and future research directions are discussed herein.The breakthroughs and implications of this study are summarized as follows:First, this study develops the traditional definition of cross-cultural conflict, which is further classified into several dimensions from the perspective of national culture and corporate culture, based on which, a rating scale is tentatively developed to measure the frequency, intensity and overall level of cross-cultural conflicts in SJVs. The relationship between cross-cultural conflicts and SJV performance is tested empirically. According to the empirical results, this study proposes that whether cross-cultural conflicts have positive effects on IJV performance depends on some conditions. The implication of this study is that it breaks through the limitations of the traditional research which examined the relationship between cultural factors and IJV performance from a single angle and lays a foundation for quantitative study on cultural conflicts in the future.Second, the denotation of relational capital is extended by incorporating cultural perception into its dimension. The dynamic relationship between cross-cultural conflicts and SJV performance is further explored by treating relational capital as a regulatory variable. Empirical results show that relational capital can effectively buffer the negative effects of cross-cultural conflicts on SJV performance. It is suggested that IJVs should strengthen the management of soft factors such as partnership and display the mediating effects of relational capital to avoid the negative effects of cross-cultural conflicts after IJV formation. This research enriches the connotation of relational capital, overcomes the deficiency of ignoring the moderating variables in previous studies on the relationship between cultural factors and performance, and therefore takes a tentative step towards opening the "Black Box" of the dynamical relationship between cross-cultural conflicts and IJV performance.Third, As an indigenous probe into the intricate relationship between cross-cultural conflicts and SJV performance in Chinese context, this study not only tests the universality of some related theories, but also draws some unique conclusions with Chinese characteristics, which suggests that the success in cross-cultural management in SJVs is determined by effective cultural integration, innovation and the full use of multi-cultural advantages. This study enriches and develops the application of theories on international joint venture and cross-cultural management in developing countries.