Managerial Capabilities Development of Local Chinese Firms Through Forming IJVs with Foreign MNC Partners

Abstract

The objective of this study is to advance an empirical framework pertaining to interorganizational learning mechanisms through international joint ventures (IJVs) in emerging markets, particularly in China. This study sheds light upon “under which circumstances local Chinese firms can upgrade their managerial capabilities through forming IJVs with foreign multinational corporations (MNCs)”. Traditionally, the alliance literature has primarily focused on technological knowledge acquisition and exchange, this study however contributes to the literature by examining the less developed area in managerial capabilities under the context of emerging market. By examining data from 348 Chinese firms involving 297 international joint ventures (IJVs) in China, we found that age and number of subsidiaries of foreign MNC partners, cultural distance, and educational distance between partners are positively associated with the development of Chinese firms’ managerial capabilities. On the contrary, technological distance and number of partners in IJVs have a negative relationship to Chinese firms’ managerial capabilities development. Additionally, we found that the local Chinese firms should allow time to grasp and assimilate the acquired managerial knowledge. These findings lend support to the interfirm learning through alliance perspective and provide theoretical and managerial implications for local firms aiming at learning through IJVs in emerging economies. The results underscore the importance of partner selection and IJVs configuration. Foreign partners’ characteristics, experiences, and complementarity can influence knowledge acquisition and learning of local partner firms. As well as, the efficiency of IJVs’ configuration can enhance learning and capabilities development of local partners.