The Effect of Culture on the Management Style and Performance of International Joint Ventures in China: The Perspective of Foreign Parent Firms

By Lu, Lung-Tan; Lee, Yuan-Ho | International Journal of Management, September 2005 | Go to article overview

The Effect of Culture on the Management Style and Performance of International Joint Ventures in China: The Perspective of Foreign Parent Firms


Lu, Lung-Tan, Lee, Yuan-Ho, International Journal of Management


This paper examines the relationships between cultural impact, management style and performance. Empirical results from 82 senior managers in Japan and Taiwan, whose firms have joint ventures with local partners in China indicate that cultural dimensions (i.e. power distance and individualism) have little impact on management style and performance. However, it is found that power distance and individualism show a pattern of negative correlations in the Japanese group but not in the Taiwanese group. Building on our findings, several suggestions are made for further research.

Introduction

The issue of culture is one of the most important topics in the field of international business. The impact of culture on IJVs have been examined by previous studies, however, the results are mixed (e.g. Kogut and Singh, 1988; Glaister and Buckley, 1999). This study aims to examine the relationships between cultural impact, management style and performance. This study is organized in the following way. The first section reviews cultural dimensions, management styles, and performance. Secondly, appropriate research methods are discussed. Results and discussion of the findings are then presented. Finally, implications, limitations and further research are discussed in the conclusion.

Literature Review

Cultural dimensions

Culture has been defined in more than 160 ways, primarily in the field of anthropology (Kroeber and Kluckhohn, 1963). One of the most cited definitions of culture in two decades is "the collective programming of the mind which distinguishes the members of one human group from another", is that by Hofstede (1980). His IBM survey, which collected data by questionnaires from over 116,000 employees in IBM's subsidiaries in over 50 countries, has been one of the most influential contributions in the field of cross-culture studies. Four dimensions (i.e. Power Distance, Uncertainty Avoidance, Individualism, and Masculinity) were found through a combination of factor analysis and theoretical reasoning. The Chinese Value Survey (CVS) found that the Confucian work dynamism was not related to any of Hofstede's four dimensions (Hofstede and Bond, 1988). This dimension, which is renamed as Long-term Orientation, was adopted as the fifth dimension in Hofstede's study (Hofstede, 1991).

This study only uses Power Distance (PD) and Individualism (IDV) as independent variables for three reasons. Firstly, Yeh and Lawrence (1995) argue that Hofstede's fifth dimension, Long-term Orientation, is strongly related to individualism dimension. secondly, Barkema and Vermeulen (1997) suggest that the view that collectivism and long-term orientation represent the same aspect of culture is too much of a simplification. They examined 228 IJVs formed by 25 Dutch firms and found that IJV incidence correlates negatively with differences in long-term orientation. Thirdly, it is suggested that PD and IDV are the two dimensions particularly different between nations (Chow et al., 1999).

Performance and culture dimensions

Numerous studies address this issue with different criteria, such as partners' satisfaction, financial indicators, survival, duration, instability, and stock-market reaction (e.g. Barkema and Vermeulen, 1997; Glaister and Buckley, 1998; Lu 2003). The use of objective measures has limitations that may fail to reflect a joint venture reaching its long-term goals (Geringer and Hebert, 1991). In contrast, using subjective measures reflects difficulties that are not easy to acquire with compatible objective data (Osland and Cavusgil, 1996). Geringer and Hebert (1991) found that subjective and objective measures are highly correlated. Using a sample of UK IJVs, Glaister and Buckley (1998) confirmed Geringer and Herbert's finding. Hence, a subjective measure of satisfaction of GM's of IJV's in general is used in this study. In a recent study carried out by Hofstede and his colleagues, they found that businessperson's goals are significantly related to Power Distance Index (Hofstede et al. …

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