Partner Selection in China's High-End Equipment Manufacturing Industry.

Selecting the ‘right partner’ to form international joint ventures (IJVs) is a critical strategic choice for companies entering foreign markets. The poor choice of local partners may lead to IJV failures and even more often at the stage of negotiation. Many prior studies within the IJV literature have developed a set of selection criteria for evaluating potential IJV partners in developed economy contexts. However, little knowledge has been provided relating to how to choose IJV partners in the context of the high-end equipment manufacturing (HEM) sector in China. Geringer (1991) contended that the partner selection criteria differed extensively not only across heterogeneous contexts but also across different industrial sectors. The main objective of this exploratory study is to address this critical knowledge gap by investigating what criteria should be used by foreign HEM investors when selecting their IJV partners in China. To achieve the research objectives, an inductive, qualitative and comparative case study methodology is employed within an interpretive research paradigm. Two recent IJV projects (one failed project and one successful project) of setting up aircraft final assembly line (FAL) facilities in China are selected as the empirical basis of this research. The case study evidence, collected from documentary data, semi-structured interviews and participant observation, identifies that HEM investors should seek local Chinese partners with six important criteria, including the confirmed sales orders, the governmental approval, the product-related industrial experience, the past business cooperation experience, the ability of providing suitable land and buildings and the ability of offering favorable tax policies. The presented findings provide managerial implications for practitioners involved in the IJV formation process in China, especially for the directors and managers in HEM sector. By learning from those who have previously succeeded and failed in China, practitioners will be able to understand the new investment environment of the Chinese HEM sector, recognize the appropriate characteristics which any local partner company must possess, and find the right the partners in less time and with lower cost involved in order to achieve the strategic goals of IJVs and improve the chances of IJV success. On the other hand, the Chinese government and local potential partners should also try to make these criteria available to attract more stable and profitable foreign investment in China’s HEM sector