Alliance of foreign firms in equity joint ventures in China

Abstract

The existing literature on international joint ventures focuses mainly on joint ventures between one foreign firm and one local firm. This study explores the phenomenon of alliances of multiple foreign firms in equity joint ventures (EJV) in China. Drawing upon the existing literature, this study proposes a set of conditions under which it is desirable for a foreign firm to seek partnership with another foreign firm. Five hypotheses are tested regarding the impact of alliance of foreign firms on the structure of EJVs. The data set consists of 5058 EJV formations in China between 1979 and 1993. The findings show that the presence of multiple foreign partners was associated with a higher level of foreign equity ownership, the risk conditions in China, presence of multiple Chinese partners, EJV industry sectors and locations.