The transitional construction industry and sino-foreign construction joint ventures in the P.R. Of China

This study investigates the transitional construction industry and the characteristics of Sino-foreign construction joint ventures (JVs) in China. Particular attention is paid to examining the relationships between ownership, management control and joint venture performance, and the key success factors at the formation stage of joint venture companies in the construction sector.China’s construction industry has been in transition since 1980. Construction industry reforms have obtained notable achievements. The implementation of the "management contracting responsibility system" had been effective in ensuring that firms enjoy greater autonomy. The “bidding and contracting system” stimulated firms to enhance management efficiency and promoted market competition. The emergence of non-state construction enterprises showed a new pattern of property rights. The national budget is no longer the sole investment channel.Nevertheless, many problems remain. In the 1990s China’s construction industry is likely to face many challenges in transition towards a market-oriented economy. For instance, the boundary between the property rights and enterprise management still remained seriously vague. The most important step is how effectively to realise transformation of large state construction enterprises. Empirical evidence indicates that the “gradual strategy of transformation” seems to be becoming less efficient. This thesis argues that the so-called “one step into position” strategy may be the better choice.Construction JYs are developing very rapidly in China. Sino-foreign construction JVs have unique characteristics different from those in developed and developing countries. Both Chinese and foreign partners appear to share the most important strategic objectives. Dominant management control over JVs by Chinese partners is the major form of management. Usually foreign partners do not participate in the daily operation and management of JVs. Sino-foreign construction JVs perform well. A major factor appears to be the opportunities offered by the large construction market in China.Regarding the relationships between ownership, management control and JV performance, positive and significant correlation exist between these three variables. The higher the share of equity partners own, the stronger the level of management control exercised by parent companies of the partners tend to be. Through the input of capital investment or ownership, JV partners can obtain strategic and operational control to realise management control over the JVs. Consequently, a higher overall level of control over the JV can help partners to achieve their strategic objectives. Although JV partners may have a minority equity share, they are still able to achieve control over a TV’s structural mechanism and organisational form to change their passive role in management of JVs. It is also found that host government’s satisfaction is a valid measure in assessing TV’s performance in developing countries.At the formation stage in the JV life cycle, both Chinese and foreign partners have similar perceptions on the importance of the key factors leading to success of JVs. It is suggested that common business principles could exist in different cultures at the formation stage, regardless of political, social and cultural backgrounds. Different situations on perceptionsof Chinese and foreign partners in relation to criteria of JV success may be associated with the different stages of the JV life cycle.