Hypothesis 4 is therefore supported. Among foreign-invested enterprises in China, those with a high intensity of guanxi-based sales force marketing will have a higher performance in terms of domestic sales growth, asset turnover, and profitability than those with a low intensity of guanxi-based sales force marketing, other things being equal.
However, the Chinese market can present daunting challenges to the unwary investor. Three forms of sales force marketing can be distinguished: As a consequence, it is suggested that: In the following paragraphs we seek to establish the relationship between these guanxi-based business proxies and FIE performance.
The learning effect and accumulative nature of guanxi, are thereby verified. The information about the length of operation, country of investment origin, and the mode of entry was obtained from the Directory of Foreign-Invested Enterprises in Jiangsu Province, compiled by the same Commission.
As a result, it is predicted that: Indeed, when a foreign firm enters a host country in which the cultural, political and economic systems differ greatly from its own, it is more likely to cooperate with an local partner which has developed unique country- or firm-specific skills and advantages that are very costly, if not impossible, to duplicate by a foreign firm Beamish and BanksDavidson and McFetridge People will turn to members of their inner circle of friends and relatives to secure favors needed to facilitate their personal or business dealings.
The measurement of these proxy variables is detailed in the Research Design section.
Jiangsu now ranks second in China in terms of GDP and level of foreign investment absorption, as reflected in the number of foreign-invested ventures and the total volume of foreign capital. II As shown in Tables 2 and 3, the study provides evidence that the intensity of guanxi-based accounts payable Payable is positively associated with profitability and asset turnover while the intensity of guanxi-based accounts receivable Receivable is positively linked with ROI and domestic sales growth in either a significant or a moderately significant fashion.
In order to achieve a truly robust result on the relationship between business proxies of guanxi and venture performance, it is necessary to control these variables in the regression analysis. It should be acknowledged that this study has several limitations that have to be taken up in future research.
Region-specific cultural factors may play certain role in modifying the interrelationship between guanxi and venture performance, in order to truly appreciate the generalizability of the empirical results reported here, future work on guanxi needs to investigate the applicability of the model to other regions in the country or other territories in greater China.
Rather than depending on an abstract notion of impartial justice, Chinese people traditionally preferred to rely on their contacts with those in power to get things done.
The policies, rules and measures adopted in the province vis-a-vis FDI have been widely applied elsewhere in the country. Guanxi end Foreign-invested Enterprises:Hypothesis 1: Among foreign-invested enterprises in China, those with a high intensity of guanxi-based sales force marketing will have a higher performance in terms of domestic sales growth, asset turnover, and profitability than those with a low intensity of guanxi.
Undoubtedly, the most dramatic and consequential changes have taken place in China, with the active participation of foreign-invested enterprises (FIEs). In fact, China has now become the second biggest FDI recipient in the world (surpassed only by the United States).
Keywords: Performance of foreign-invested enterprises, capital and investment, entrepreneurship, domestic reform and economic integration, business and trade policy.
OPERATIONAL PERFORMANCE OF DOMESTIC AND FOREIGN-INVESTED ENTERPRISES IN CHINA ABSTRACT Despite increasing attention paid to China’s enterprise reform since the late s, relatively little is known about the performance of the reformed SOEs and newly formed private firms vis-a-vis foreign firms in China.
Foreign-invested enterprises from the U.S. and European countries have higher technology, more advanced management experience, more research and development activities than those from Hong Kong and Taiwan, so the quality of services FDI in Shaanxi is lower.
The goal of this study is to examine and compare the performance of Chinese and foreign-invested enterprises in different ownership categories. We are particularly interested in knowing whether, after years of ownership reform, the former SOEs and new firms in the non-state sector have gained competitiveness vis-à-vis FIEs, and will formulate basic hypotheses addressing this research question.Download