Factors affecting the effectiveness of FDI venture operations in China: a comparison between Early-Entrants and Late-Entrants.

ABSTRACT

This paper aims to examine the factors affecting the effectiveness of international pharmaceutical firms' foreign direct investment (FDI) venture operations in the Chinese pharmaceutical industry during the period of 1980-1998. It will also compare the perceptions of senior managers from Early-Entrants who entered into China before 1992 and Late-Entrants who started investment in China since 1992 on the impact of Chinese culture, relationship networks (Guanxi), and organizational resource variables on the effectiveness of China venture operations. It was found that way of doing business in China, relationship with Chinese partner and relationship with Chinese partner government authority, and competent sales and marketing professionals were regarded as the most important variables. Early-Entrants and Late-Entrants had significantly different opinions on three variables: employees' loyalty to company, employees' expectation from the company, and relationship with the local logistic network. The importance of employees' loyalty to the company has decreased significantly since 1992, whereas employees' expectation from the company has become more important. The influence of the relationship with logistic network has decreased significantly since 1992. Overall the influence of the majority of work and business relationship variables did not show significant changes. However, the influence of personal relationship variables tended to decrease since 1992.

1. INTRODUCTION

Doing business in China is a difficult task (Shaw and Merier, 1993; Davies, Leung, Luk, and Wong, 1995; ENL, 1997). Foreign companies are discovering that doing business in China is more difficult than they thought (ENL, 1997). Problems and issues include: the different language, the perplexing culture, unpredictable government (Koenderman, 1990); the legal differences, intellectual property, local governments, labor unions--the extensions of the government (Rich, 1996); the local rules, customs, taxes, a shortage of skilled local managers, underutilized capacity and tough competition from consolidating Chinese national companies (ENL, 1997).

China is, and will long remain, a difficult operating environment for foreign investors, but the long-term economic opportunities China offers are so remarkable that senior managers will find it prudent to pay attention to what the most active companies have been doing and learning (Shaw and Meier, 1993). In the processes of implementing business strategies, foreign ventures have to face Chinese business practices often sharply dissimilar to those prevalent in their home countries. As a result, sensitivity to local Chinese business conditions must be developed (Luo, 1995). This paper explores the factors that contributed to the effectiveness of foreign direct investment ventures in China during the period from 1980 to 1998, and to compare the perceptions of senior managers from Early-Entrants who started investment in China before 1992 and Late-Entrants who have entered into China since 1992. Since China opened its door to foreign investors in 1978, the year of 1992 was another turning point in China's political and economic reforms. FDI inflows into China have increased sharply since China's former leader Ding Xiaoping's much publicized tour to the southern provinces in early 1992 and his call for accelerating economic reform and opening up of the economy to the outside world. The commitment of the Chinese government to Deng's calling has remained solid (Jiang, Christodoulou, and Wei, 2001). The dramatic changes in Chinese policies and economic development activities may result significant impacts on the business operating environment, in turn impacting on the effectiveness of FDI operations in China. The findings of the study are both timely, useful, and contribute to a better understanding of foreign direct investment theories and practices in general.

The following sections of this paper will discuss the relevant literature, the conceptual framework and research method for this research, the data analysis and results, as well as the limitations of this research and future research directions.

2. LITERATURE REVIEW

Literature on the effectiveness of venture operations in China, especially in the pharmaceutical industry, is very minimal in published reports and academic research. Some authors have, however, emphasized that cultural factors heavily influence the management styles and practices of foreign companies doing business in China (Koenderman, 1990; Ward, 1994; Xing, 1995; Swanz, 1995; Davies, Leung, Luk and Wong, 1995; Yeung and Tung, 1996). The most significant of these include: preserving "face" in public; cultivation and maintenance of guanxi (relationship networks); experience of time as synchronous and subordinate to relationships; and limited legitimacy accorded to the rule of law in contrast to demonstrations of power.

Confucianism societies are characterized by tight, close-knit networks among people and businesses known in China as 'guanxi'. In these groups, connections with the right people, not the price or quality of the product or service, are usually the main determinant of business decision-making (Yeung and Tung, 1996). Chen (1995) described guanxi as relationships that imply a continual exchange of favors which need not be founded on friendship. When applied to organizations, guanxi obligation tends to run counter to the universalistic, performance-based values and systems, found in many Western organizations.

Chinese nationals tend to rely heavily on personal relationships in business dealings (Chen, 1994). Sales force marketing, and activity heavily dependent on Guanxi, has become increasingly popular and effective marketing means. Guanxi binds literally millions of Chinese firms into a social and business web that can be particularly useful for enterprises built on foreign investment in China (Luo, 1995). Expatriate managers may nevertheless find a tension between cultivating personal relationships within the enterprise and managing according to universalistic, performance-based values. Much has been written about the use of guanxi to acquire status, power, and resources in Communist China (Gold, 1985; Walder, 1996; Bian, 1994). It is argued by some scholars that guanxi is the most important social-business resource of an individual Chinese (Ju, 1995). Ju stated that there is a popular saying that "China is a land of guanxi, and nothing can be done without guanxi". Luo (1995) suggested that cultivating and extending firm's guanxi should be a preoccupation for business success. A survey of Hong Kong Chinese executives found that the businessmen believed that once good guanxi had been established, a number of benefits would follow. These benefits include the smooth running of routine business operations, information about government policies, and receipt of administrative approvals (Davies, Leung, Luk, and Wong, 1995). Yeung and Tung (1996) presented a list of eleven factors to the executives of nineteen Chinese operations and asked participants to rank them in order of importance to long-term business success in China. Guanxi was the only item which was consistently chosen as a key success factor.

While recognizing the importance of guanxi in financial affairs, most of the executives agreed that guanxi alone is not enough to guarantee long-term success in China. It is more appropriate to treat a good guanxi network as a necessary, but not sufficient, for business success in China (Tsang, 1998). The significance of guanxi in ensuring continued success decreased over the life of the venture. Once the operation is established, other conditions must be met to sustain success, and of these conditions, technical competence is most important. The business must supply high-quality products, adopt suitable business strategies, and possess in-depth knowledge of the market (Yeung and Tung, 1996). Furthermore, the value of guanxi depends very much on the status of the partner with whom the guanxi is maintained. Guanxi may become worthless or even turn into a liability once the partner loses power (Tsang, 1998).

Although knowledge of cultural differences on the part of foreign managers will not always guarantee success, its absence (ignorance of Chinese culture, including the role of guanxi) usually leads to failure. Landry (1997) pointed out that the challenges of conducting business in China range from gaining access to suppliers to securing distribution rights, but perhaps the biggest challenge is assembling an effective team of managers. To deal with those challenges effectively, Landry highlighted three important elements that should be considered by foreign investors, these include the training and preparation for expatriate managers; the development of local managerial talent and effective ways of attracting it; and the consideration of human resource policies.

3. CONCEPTUAL FRAMEWORK

Previous studies have found that building up a good relationship network - guanxi, having a good understanding of Chinese culture and business practices are the most important factors in doing business in China (Chen, 1994; Luo, 1995; Ju, 1995; Yeung and Tung, 1996). On the top of that, organizational resources including high quality products, technical competence, suitable business strategies, and in-depth knowledge of the market (Yeung and Tung, 1996), management capacity and training programs for expatriate and local managers, and human resource policies (Landry, 1997) also played important roles in operating business ventures in China. The theoretical framework for this study was developed using the most significant findings from the recent research studies on management issues in China. From this a conceptual framework for testing the effectiveness of venture operations in China was developed (refer to FIGURE 1). It consists of three groups of independent variables namely: Chinese culture, relationship networks (Guanxi), and venture's organizational resources. However, the existing literature provides an incomplete set of variables that could be used for measuring the effectiveness of venture operations in China, especially in the pharmaceutical industry. Therefore, the majority of independent variables for this study were identified using the researcher's extensive pharmaceutical industry knowledge and experiences in China.

[FIGURE 1 OMITTED]

Chinese cultural variables were measured by three sub-dimensions; i.e., employee variables, social cultural variables, and the business cultural variable. Employee variables include employees' loyalty to company, hardworking characteristics of employees, and employees' expectation from the company. Social cultural variables consist of language, social structure of society, and Chinese people's way of life. Business cultural variable deals with way of doing business in China.

Relationship networks (Guanxi) variables were measured by two-sub-dimensions; i.e. work and business relationship variables and personal relationship variables. Work and business relationship variables include relationship with the government authority, relationship with Chinese partner (if applicable), relationship with suppliers, relationship with customers, and relationship with the local logistics network. Personal relationship variables consists of personal relationships between managerial staff, personal relationships between managerial and non-managerial employees, personal relationships between Chinese and expatriate managers, personal relationships with external individuals, and personal relationships with external organizations.

Organizational resource variables were measured by two sub-dimensions; i.e. human resource variables and financial and technological variables. The human resource variables include source of trained expatriate managers from foreign parent firm, source of qualified local Chinese managers, competent sales and marketing professionals, source of skilled labor, training and education programs for expatriate managers, and training and education programs for local Chinese managers. The financial and technological variables consist of source of financial support and source of advanced technology.

4. RESEARCH METHOD

4.1. Population Definition

It was particularly difficult to obtain a complete directory of foreign invested pharmaceutical companies in China although the author contacted several Chinese authorities in China early in 1998. The China Centre for Pharmaceutical International Exchange (CCPIE), an agency of State Pharmaceutical Administration of China, provided a Catalogue of Chinese Pharmaceutical Enterprises with Foreign Investment. The Catalogue was officially published by CCPIE in 1995, and was the only one available at that time. It contains necessary information on over 1,310 foreign invested pharmaceutical companies (FIPCs) in China. Other complementary sources were also used including Market Reports of National Trade Data Bank of the United States of America (1996), MIMS Asia (1998) and the report of Shanghai Pharmaceutical (Group) Corporation (1999), etc. Most of FIPCs' information and data overlapped across the four major sources. It was identified that a total of 117 companies had significant investment by international pharmaceutical firms. The rest had capital investment by non-pharmaceutical firms such as business trading companies, investment development firms, etc. Medical devices or machinery manufacturers that were historically classified as part of the pharmaceutical industry in China were not defined as part of the population for this research.

A total of 117 international pharmaceutical firm invested pharmaceutical companies (IPFIPCs) were defined as the population for the research. The IPFIPCs were unevenly distributed in twenty-six provinces, municipalities and autonomous regions in Mainland China. Over 84% of IPFIPCs were located in east China's thirteen provinces and/or municipalities including Hainan, Guangdong, Fujian, Zhejiang, Shanghai, Jiangsu, Anhui, Shangdong, Hebei, Tianjin, Beijing, Liaoning and Hellongjiang. Less than 16% of IPFIPCs were distributed in China's cental and western areas (CCPIE, 1995; NTDB, 1996; SPGC, 1999; MIMS Asia, 1998).

4.2. Sample Size

A total of 98 IPFIPCs were distributed in the three major regions in east China and account for 83.76% of the population was defined as the sample for this research. The IPFIPCs in the sample included 29 in South East Region (SER), 38 in Middle East Region (MER) and 31 in North East Region (NER). The SER comprises of Guangdong and Fujian provinces. The MER covers Shanghai municipality, Jiangsu, Anhui and Zhejiang provinces. The NER consists of Beijing and Tianjin municipalities, Liaoning, Shandong and Hebei provinces. The companies in the sample in SER, MER and NER were centered on Guangdong, Shanghai and Beijing, respectively. Guangdong, Shanghai and Beijing are the three major locations of the headquarters of most IPFIPCs in China.

4.3. Data Collection

A questionnaire was designed in both English and Chinese versions and was pretested with six respondents by means of four personal interviews, one mail questionnaire survey and one telephone survey. Of the six pretesting respondents, four respondents had received MBA degrees from Australian universities and had worked for foreign invested companies in China for a number of years in senior management positions, and two of them had worked for IPFIPCs in China. The rest were senior managers of a large Chinese-US joint venture pharmaceutical company in China at the time the pretesting was conducted.

The fieldwork began in early April 1999, and was conducted over a three-month period. The data was collected mainly from personal interviews, and complemented by mail questionnaire surveys. Personal interviews were conducted with senior executives of foreign business partners in IPFIPCs in China, and the postal questionnaires were addressed to foreign general managers/representatives in IPFIPCs in China. In total 44 companies consisting of 17 Early-Entrants and 27 Late-Entrants participated in this research, and 82% of answered questionnaires were obtained through personal interviews. Of the 17 Early-Entrants, 10 IPFIPCs had investment by eastern pharmaceutical firms including 2 Japanese and 8 Non-Japanese Asian pharmaceutical firms. The rest had western firms' investment including 5 from USA and 2 from European countries or regions. The 27 Late-Entrants consist of 11 IPFIPCs that had investment by eastern pharmaceutical firms including 2 Japanese and 9 Non-Japanese Asian pharmaceutical firms. The rest had western firms' investment including 9 from USA and 7 from European countries or regions. A total of 39 firms selected joint venture entry mode, and the rest chose sole venture with 100% share of ownership. 3 companies including 2 in Guangdong and 1 in Jiangsu were found to have ceased operations during the fieldwork. Also 1 company in Guangdong had the foreign partner's share sold to its Chinese partner before this survey was conducted. Therefore the real sample size was reduced from an estimated 98 to 94 IPFIPCs, which means that a 46.81% response rate was achieved.

5. DATA ANALYSIS AND RESULTS

Respondents were requested to indicate their perceptions on the importance of three groups of variables; i.e. Chinese cultural related variables, relationship (guanxi) variables, and organizational resource variables. Responses were gathered using questions with a six-point Likert scale, ranging from "1" not important to "6" very important, for each of the variables. The reliability of the scales was tested, and Cronbach's alpha was used as the indicator. The reliability coefficients (Alpha) for the three groups of exploratory variables were 0.61 for 'Chinese culture' related variables (7 items), 0.71 for 'Relationship network (guanxi)' (10 items) variables, and 0.75 for 'Organizational resource' variables (8 items). According to Peter (1979), a modest reliability in the range of 0.5 to 0.6 will suffice in the early stage of research. The internal consistency of the scale values for each one of the three groups of variables thus was considered as at an acceptable level.

The descriptive analysis was firstly carried out to summarize the mean scores (standard deviations) for each variable by international pharmaceutical firms, and then to compare the responses of senior managers from Early-Entrants and Late-Entrants. Bivariate analyses were undertaken using the independent sample t-test (parametric test) to compare the mean scores for the two independent groups. In addition to the independent sample t-test, since the sample size was relatively small, and the data distribution normality may not be exactly met, the Wilcoxon (Mann Whitney) test (non-parametric test) was also used for adjusting the level of significance revealed from the t-test. Therefore if the results from both t-test and Wilcoxon test are fairly similar, then the t-test is considered reliable and the preferred technique as it is more powerful than the Wilcoxon test (Kervin, 1992).

5.1. Descriptive Analysis

The descriptive analysis attempted to investigate the variables that were significant to the effectiveness of China venture operations. Three groups of variables were tested: Chinese cultural variables, relationship networks (guanxi) variables, and organizational resource variables.

Chinese Cultural Variables

The sample mean scores and standard deviations for the Chinese cultural variables are depicted in FIGURE 2. Three distribution patterns emerged: 1) The business cultural variable; 2) employee variables; and, 3) Social culture variables. The business cultural variable of way of doing business in China (mean=5.45), was ranked as the most important variable that impacted on the effectiveness of international pharmaceutical firms' China venture operations. All three employee variables including employees' loyalty to company (mean=4.66), hardworking characteristics of employees (mean=4.61) and employees' expectation from the company (mean=4.61) also played important roles. Social cultural variables including language (mean=3.98), social structure of society (mean=4.02) and Chinese people's way of life (mean=4.02) appeared to have somewhat moderate impacts on the effectiveness of venture operations in China.

Relationships Network (Guanxi) Variables

The variable of relationship with Chinese partner was defined by the researcher as an optional variable for respondents to answer, as it was not applicable for sole venture firms, therefore there was no data inputs for the variable by respondents from sole venture. The sample mean scores and standard deviations for the relationships variables are depicted in FIGURE 3. It shows that the majority of work and business relationship variables (with the exception being relationship with suppliers) appeared to be more important than the majority of personal relationship variables (with the exception being personal relationship between Chinese and expatriate managers) to the effectiveness of international pharmaceutical firms' China venture operations. The relationship with the (Chinese) government authority (mean=5.30) and the relationship with Chinese partner (mean=5.38) were the most important variables among the work and business relationship variables, and relationship with customers (mean=4.91) and relationship with local logistics network (mean=4.61) also received significant attention from the responses in the sample. Personal relationships between Chinese and expatriate managers (mean=4.95) was ranked as the most important of the personal relationship variables, and respondents also paid considerable attention to the personal relationships between managerial staff (mean=4.18).

Organizational Resource Variables

The sample mean scores and standard deviations for the organizational resource variables are depicted in FIGURE 4. It shows that competent sales and marketing professionals (mean=5.32) registered as the most important variable for the effectiveness of international pharmaceutical firms' venture operations in China. Sources of trained expatriate managers (mean=4.84) from foreign parent firms and qualified local Chinese managers (mean=5.00) were more important than the training and education programs for expatriate (mean=4.25) and training & education programs for local Chinese managers (mean=4.45) respectively. Sources of financial support (mean=4.48) was perceived as slightly more important than the source of advanced technology (mean=4.41). Source of skilled labor (mean=4.07) was perceived as a moderately important variable for the effectiveness of China venture operations.

5.2. Bivariate Analysis

The bivariate analysis aims to examine the differences between Early-Entrants and Late-Entrants. The sample consists of 44 companies for the vast majority of variables (17 Early-Entrants and 27 Late-Entrants) with the exception of the relationship variables, relationship with Chinese partner, which was analyzed based on the data input from 39 joint venture firms (14 Early-Entrants and 25 Late-Entrants). There were no data input from 5 sole venture firms for this variable. The results of Parametric and Nonparametric tests are displayed in TABLE 1.

Chinese Cultural Variables

Both Early-Entrants and Late-Entrants perceived the variable of way of doing business in China as the most important variable for their venture operations in China. Respondents from Early-Entrants believed that employees' loyalty to company also played an important role, whereas respondents from Late-Entrants perceived employees' expectation from the company as an important variable to their China ventures' operations. There was a significant difference between Early-Entrants and Late-Entrants on the variable of employees' loyalty to company (p=.0010), and Early-Entrants scored higher than Late-Entrants. A significant difference was observed for the variable of employees' expectation from the company (p=.0302), and Late-Entrants scored higher than Early-Entrants. The results obtained from both the t-test and Wilcoxon test were consistent

Relationship Networks (Guanxi) Variables

Both Early-Entrants and Late-Entrants perceived that relationship with Chinese partner (mean=5.29 for Early-Entrants; mean=5.44 for Late-Entrants) played the most important role in effectively operating their China ventures. The relationship with the government authority was ranked as the second most important variable among relationship variables (mean=5.24 for Early-Entrants; mean=5.33 for Late-Entrants). Personal relationships between Chinese and expatriate managers and relationship with customers were also considered important to the effectiveness of venture operations in China. Early-Entrants scored higher than Late-Entrants. Marginally significant differences were found between the two groups of firms for the variables of personal relationships between managerial staff (p=.0646) and personal relationships between Chinese and expatriate managers (p=.0965), and Early-Entrants scored higher than Late-Entrants for these two variables in the sample. The results obtained from the t-test and Wilcoxon test were fairly similar.

Organizational Resource Variable

International pharmaceutical firms regarded organizational resource variables as important or very important variables, and both Early-Entrants and Late-Entrants tended to have a similar view on organizational resource variables and believed that competent sales and marketing professionals (mean=5.47 for Early-Entrants; mean=5.22 for Late-Entrants) played the most important role with respect to the effectiveness of their China venture operations. Source of qualified local Chinese managers seemed to be more important to Early-Entrants than to Late-Entrants, whereas source of trained expatriate managers from parent firm was more important to Late-Entrants than to Early-Entrants. There was a marginally significant difference between Early-Entrants and Late-Entrants for the variable of source of qualified local Chinese managers (p=.0833), and Early-Entrants scored higher than Late-Entrants. The results obtained from the t-test and Wilcoxon test were consistent.

6. CONCLUSION

This paper examined variables that affected the effectiveness of international pharmaceutical firms' China venture operations, and the perception differences between managers of early and late entrants. The analyses have shown that the mean scores of Chinese cultural related variables, relationship (Guanxi) variables, and organizational resource variables were all greater than the 3.5-middle-point scale on a six-point likert scale from "1" not important to "6" most important, and the majority of variables were perceived as important or very important to the effectiveness of foreign firms China venture operations. Way of doing business in China, relationship with Chinese partner and government authority, competent sales and marketing professionals were regarded as the most important variables. The variables of employees' loyalty to company, hardworking characteristics of employees and employees' expectation from the company, relationship with customers and logistics network, personal relationship between Chinese and expatriate managers, personal relationships between managerial staff, source of trained expatriate managers from foreign parent firms and qualified local Chinese managers also played important roles in effectively managing venture operations in China. The analyses have also indicated that the business cultural variable (e.g. way of doing business in China) was more important than the employee variables (e.g. employees' loyalty to company, hardworking characteristics of employees and employees' expectation from the company), and the employee variables were more important than social cultural variables including language, social structure of society and Chinese people's way of life.

The majority of work and business relationship variables (with the exception being relationship with suppliers) were more important than the majority of personal relationship variables (with the exception being personal relationship between Chinese and expatriate managers) to the effectiveness of international pharmaceutical firms' China venture operations. The most important work and business relationship variable was relationship with Chinese partner, and personal relationship between Chinese and expatriate managers was the most significant variable among personal relationships variables. Sources of trained expatriate managers from foreign parent firm and qualified local Chinese managers were more important than the training and education programs for expatriate and local Chinese managers, and also were more important than the sources of financial support and advanced technology.

Bivariate analyses have shown that Early-Entrants and Late-Entrants had significantly different opinions on three variables: employees' loyalty to company, employees' expectation from the company, and relationship with the local logistic network. The importance of employees' loyalty has decreased significantly since 1992, whereas employees' expectation from the company has become more important. The influence of the relationship with logistic networks has decreased significantly since 1992, which may be due to the gradual liberalization of the Chinese market. Overall the influence of the majority of work and business relationship variables did not show significant changes before and after 1992. The influence of personal relationship variables tended to decrease after 1992. This may indicate that the business practice in China has been gradually moving towards more global management systems. The importance of organizational resource variables did not show significant changes.

7. LIMITATIONS AND FUTURE RESEARCH DIRECTIONS

The population that the sample was drawn from was restricted to the international pharmaceutical firms' FDI in China. The findings of this research are only applicable for explaining FDI behaviors in this particular area. Most of the pharmaceutical companies with international investment in China are firms who have investment by international non-pharmaceutical firms. Therefore, further research on FDI of international non-pharmaceutical firms' and a comparison of determinants between pharmaceutical and non-pharmaceutical firms' FDI in the pharmaceutical industry would be expedient and meaningful. Future research studies should also extend to other industries, as international investors have been actively engaging in FDI in other industries in China.

TABLE 1: PARAMETRIC AND NON-PARAMETRIC TESTS RESULTS
(EARLY-ENTRANTS VS. LATE-ENTRANTS)

                                                    Mean

Variables                                     Early-     Late-
                                             Entrants   Entrants
                                              (n=17)     (n=27)

Chinese Cultural:
Employees' loyalty to company                  5.12       4.37
Hardworking characteristics of                 4.71       4.56
  employees
Employees' expectation from the company        4.29       4.81
Language                                       4.00       3.96
Social structure of society                    3.88       4.11
Chinese people's way of life                   4.24       3.89
Way of doing business in China                 5.53       5.41

Relationships Network (Guanxi):
Relationship with the government               5.24       5.33
  authority
Relationship with Chinese partner (a)          5.29       5.44
Relationship with suppliers                    3.88       3.81
Relationship with customers                    5.00       4.85
Relationship with the local logistics          4.88       4.44
  network
Personal relationships between managerial      4.41       4.04
  staff
Personal relationships between managerial      3.82       3.78
  and non-managerial employees
Personal relationships between Chinese         5.24       4.78
  and expatriate managers
Personal relationships with external           3.88       3.74
  individuals
Personal relationships with external           3.94       3.81
  organizations

Organizational Resource:
Source of trained expatriate managers          4.65       4.96
  from foreign parent firm
Training and education programs for            4.18       4.30
  expatriate managers
Source of qualified local Chinese managers     5.24       4.85
Training and education programs for local      4.35       4.52
  Chinese managers
Competent sales & marketing professionals      5.47       5.22
Source of skilled Labour                       3.94       4.15
Source of financial support                    4.29       4.59
Source of advanced technology                  4.35       4.44

                                                   T-test

Variables
                                             t-value      Sig.
                                                       (2-tailed)

Chinese Cultural:
Employees' loyalty to company                 3.5461    .0010 **
Hardworking characteristics of                0.6679    .5079
  employees
Employees' expectation from the company      -2.2434    .0302 *
Language                                      0.1242    .9018
Social structure of society                  -0.8680    .3903
Chinese people's way of life                  1.2131    .2319
Way of doing business in China                0.5897    .5585

Relationships Network (Guanxi):
Relationship with the government             -0.5288    .5997
  authority
Relationship with Chinese partner (a)        -0.7792    .4408
Relationship with suppliers                   0.2002    .8423
Relationship with customers                   0.6410    .5250
Relationship with the local logistics         2.1351    .0386 *
  network
Personal relationships between managerial     1.8979    .0646
  staff                                                   ([dagger])
Personal relationships between managerial     0.1458    .8848
  and non-managerial employees
Personal relationships between Chinese        1.7002    .0965
  and expatriate managers                                 ([dagger])
Personal relationships with external          0.4750    .6373
  individuals
Personal relationships with external          0.5288    .5597
  organizations

Organizational Resource:
Source of trained expatriate managers        -1.1612    .2567
  from foreign parent firm
Training and education programs for          -0.4909    .6260
  expatriate managers
Source of qualified local Chinese managers    1.7741    .0833
                                                          ([dagger])
Training and education programs for local    -0.5727    .5699
  Chinese managers
Competent sales & marketing professionals     1.1371    .2619
Source of skilled Labour                     -0.9604    .3424
Source of financial support                  -1.2241    .2277
Source of advanced technology                -0.3585    .7218

                                                Wilcoxon test

Variables
                                               W         Sig.
                                                      (2-tailed)

Chinese Cultural:
Employees' loyalty to company                493.00    .0025 **
Hardworking characteristics of               581.50    .4932
  employees
Employees' expectation from the company      305.50    .0449 *
Language                                     607.00    .9899
Social structure of society                  358.50    .5372
Chinese people's way of life                 551.50    .1558
Way of doing business in China               587.50    .5874

Relationships Network (Guanxi):
Relationship with the government             360.50    .5453
  authority
Relationship with Chinese partner (a)        256.50    .4368
Relationship with suppliers                  600.50    .8569
Relationship with customers                  575.00    .3908
Relationship with the local logistics        532.00    .0431 *
  network
Personal relationships between managerial    542.50    .0805
  staff                                                  ([dagger])
Personal relationships between managerial    596.60    .7815
  and non-managerial employees
Personal relationships between Chinese       555.50    .1497
  and expatriate managers
Personal relationships with external         593.00    .7131
  individuals
Personal relationships with external         588.00    .6117
  organizations

Organizational Resource:
Source of trained expatriate managers        339.00    .2590
  from foreign parent firm
Training and education programs for          359.50    .5489
  expatriate managers
Source of qualified local Chinese managers   545.00    .0920
                                                         ([dagger])
Training and education programs for local    360.00    .5658
  Chinese managers
Competent sales & marketing professionals    560.50    .2152
Source of skilled Labour                     338.00    .2244
Source of financial support                  343.50    .3013
Source of advanced technology                379.50    .9377

(a:) Data input for this variable was from 39 joint venture
firms only including 14 Early-Entrants and 25 Late-Entrants.

([dagger]) p<.10 *: p<0.05; **: p<0.01; ***: p<0.001.

FIGURE 2: SAMPLE MEANS (STANDARD DEVIATION) FOR
CHINESE CULTURAL RELATED VARIABLES

Employees' loyalty to company              M:  4.66
                                           Sd: 0.81
Hardworking characteristics of employees   M:  4.61
                                           Sd: 0.72
Employees' expectation from the company    M:  4.61
                                           Sd: 0.78
Language                                   M:  3.98
                                           Sd: 0.95
Social structure of society                M:  4.02
                                           Sd: 0.85
Chinese people's way of life               M:  4.02
                                           Sd: 0.93
Way of doing business in China             M:  5.45
                                           Sd: 0.66

Note: M: Mean
Sd: Standard Deviation

Note: Table made from bar graph.

FIGURE 3: SAMPLE MEANS (STANDARD DEVIATION) FOR
RELATIONSHIP (GUANXI) VARIABLES

Relationship with the government authority         M: 5.30
                                                  Sd: 0.59
Relationship with Chinese partner *                M: 5.38
                                                  Sd: 0.59
Relationship with suppliers                        M: 3.84
                                                  Sd: 1.08
Relationship with customer                         M: 4.91
                                                  Sd: 0.74
Relationship with the local logistics network      M: 4.61
                                                  Sd: 0.69
Personal relationships between managerial staff    M: 4.18
                                                  Sd: 0.66
Personal relationship between managerial and       M: 3.80
  non-manegerial employees                        Sd: 1.00
Personal relationships between Chinese and         M: 4.95
  expatriate managers                             Sd: 0.89
Personal relationships with external               M: 3.80
  individuals                                     Sd: 0.95
Personal relationships with external               M: 3.86
  organizations                                   Sd: 0.77

Note: M: Mean
Sd: Standard Deviation
*: This variable is not applicable
for SV-Firms (n=39)

Note: Table made from bar graph.

FIGURE 4: SAMPLE MEANS (STANDARD DEVIATION) FOR
ORGANIZATIONAL RESOURCE VARIABLES

Source of trained expatriate managers from     M: 4.84
  foreign parent firm                         Sd: 0.81
Training programs for expatriate managers      M: 4.25
                                              Sd: 0.78
Source of qualified local Chinese mangers      M: 5.00
                                              Sd: 0.72
Training and education programs for local      M: 4.45
  Chinese managers                            Sd: 0.93
Competent sales and marketing professionals    M: 5.32
                                              Sd: 0.71
Source of skilled labour                       M: 4.07
                                              Sd: 0.70
Source of financial support                    M: 4.48
                                              Sd: 0.79
Source of advanced technology                  M: 4.41
                                              Sd: 0.82

Note: M: Mean
Sd: Standard Deviation

Note: Table made from bar graph.

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Dr. JIANG Fuming earned his Ph.D in The Australian Graduate School of Entrepreneurship at Swinburne University of Technology, Australia in 2002. Currently he is a lecturer in International Business/Marketing and Strategic Management at Charles Sturt University, Australia.