Cultural Similarity, Regional Institutional Quality And Ownership Change Among Joint Ventures In China

Along with the deepening of China's opening up policy and the continuous improving of market economic system, the sole ownership tendency of foreign investment became more obvious. Due to the geographical closeness, cultural similarities, ethnic and other homology advantages, Hong Kong, Macao and Taiwan(HMT) should have a more closely partnership with Chinese mainland than other foreign investors do. Nevertheless, by individually viewed from the perspective of different ownership, equity ratio, industry and region, We find not only HMT performed a strong sole ownership tendency since entry, but also has a easily spilt relationship with China, Moreover, the lifetime of HMT's joint venture is shorter than other foreign investors.Based on this fact, our paper use China's industrial enterprises database during 1998-2007, Standing on the perspective of cultural similarities, dividing foreign investment sources into two parts(HMT& non-HMT) to explore the deep reason of cultural similarity influence sole ownership tendency from the perspective of conflict and cooperation system defects. The results show that similar culture did not make up for the role of regional system of quality defects, instead of high intensity of industries and the contract system of poor quality, HMT are more likely to take path in the sole ownership tendency. At the same time, the robustness test found in this paper that in different system measure, subsample, negotiation skills and investment motivation, the conclusion is still significant. Finally, based on the guidance of the foreign investment industrial guidance catalogue attitudes change as a natural experiment, our paper found that where HMT's joint venture in the face of conflict with the mainland during a loose policy control will be more likely to make sole ownership decisions.From the perspective of cultural differences, this paper provide a valuable empirical evidence of the high demanding for quality management system in China. Therefore, we should optimize the domestic market environment, enhance the strength of domestic enterprises to maintain a positive and healthy development of foreign direct investment.