Factors that Influence the Success of Aviation Joint Ventures in China: A Case Study

Joint ventures in China have a high failure rate. Failure rates in all industrial categories established by the Chinese government vary from 50% or more. Business philosophy, language barriers, and a weak legal system are reasons given for this high rate of failure. Aviation joint ventures in China are the exception. Controlled by the national government, the foreign partner can own no more than 49% of an aviation joint venture; yet, all are successful operations, dating back to 1979, before the "Open Door" policy. This qualitative case study explored how managers of foreign companies in an aviation joint venture in China address culture-related differences in management style, business relationships, and communications. While archival records were used to educate the researcher, critical information related to this study came from open-ended interviews and direct observations from two senior managers associated with a facility in China. The information collected was analyzed against typical failure modes of other industrial joint ventures for commonality. This case study demonstrates that the advanced technology offered by the American partner gave them a major advantage and consequently leverage which most joint ventures do not possess. Since this company possessed the technology required to maintain the existing and future fleet of commercial aircraft, the Chinese government, against its own laws on joint ventures, granted the American partner the position of senior manager, allowed the business to operate under western-style business practices, and the facility to be profit-driven as opposed to Chinese philosophy of expansion. Business philosophies were integrated to a limited extent, and the typical language barrier failure mode was overcome by the requirement of English speaking floor supervisors. The Chinese senior manager was given responsibility for communication with the local and national government officials and social gatherings which are part of Chinese business culture. The conclusion is that the Chinese government will make concessions against written law providing the technology is determined necessary for Chinese technological advancement. Since this was one facility investigated, the recommendation is that another more extensive study of several facilities be undertaken to confirm the results.