Management Research Review

Corporate entrepreneurship of IJVs in China

Theresa Lau K.F. Chan Susan H.C. Tai David K.C. Ng

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To cite this document:
Theresa Lau K.F. Chan Susan H.C. Tai David K.C. Ng, (2009),"Corporate entrepreneurship of IJVs in
China", Management Research Review, Vol. 33 Iss 1 pp. 6 - 22
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MRR
33,1

Corporate entrepreneurship
of IJVs in China
Theresa Lau, K.F. Chan, Susan H.C. Tai and David K.C. Ng

The Hong Kong Polytechnic University, Hung Hom, Hong Kong

Abstract

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Purpose The purpose of this paper is to examine if corporate entrepreneurship in terms of

innovation and proactivity that has been developed in the international joint ventures (IJVs) in the
Chinese cultures.
Design/methodology/approach A structured questionnaire with a systematic sampling
approach was adopted and sent to 800 firms (400 from the manufacturing industry and 400 from
the servicing industry) in Beijing. Descriptive statistics, correlation analyses and stepwise multiple
regression were used.
Findings Corporate entrepreneurship exists in the IJVs, yet the Western-Chinese JVs are more
innovative and proactive. It is found that organisational variables such as flexibility, operational
delegation, control system and the implementation of differentiation or growth strategy are
significantly related to both innovation and proactivity. However, organisational variables on
strategic delegation and risk-taking culture are significantly related to proactivity only. On the other
hand, the implementation of cost leadership is found to be unrelated to either innovation or
proactivity.
Research limitations/implications Since the sample was drawn from IJVs in Beijing,
comparative studies could be done on IJVs across different cities in China.
Practical implications The significant results provide insights for studying the cultural context
of Chinas IJVs.
Social implications Asian-Chinese JVs have to improve corporate entrepreneurship posture in
their management. This will attract professionals with international experience from different parts
of the world to work in Chinas IJVs.
Originality/value The entrepreneurial posture of an IJV can be measured in terms of its ability on
innovation and proactivity. It provides benefits to both foreign and local partners in terms of local
knowledge, access to market, and cost consideration as well as technological and skills transfers.
Keywords China, National cultures, Joint ventures, Entrepreneurialism, Corporate strategy
Paper type Research paper

Management Research Review

Vol. 33 No. 1, 2010
pp. 6-22
# Emerald Group Publishing Limited
2040-8269
DOI 10.1108/01409171011011535

Introduction
The economy of China has experienced remarkable growth in recent years. A catalyst
for this economic expansion was the opening up of Chinese companies to foreign
investors. The majority of this investment is in international joint ventures (IJVs),
which are intended to provide benefits to both foreign and local partners concerning
local knowledge, access to market and cost consideration in addition to the transfer of
technology and skills. According to Zhang and Li (2001), IJVs represent a voluntary
cooperative relationship in which participating firms are exposed to the risk of
opportunism, whereby partners from both sides need to take risks in forming the new
venture. As an IJV involves risk-taking and proactive responses to market changes
(Yan and Warner, 2001), the staff of IJVs need to behave entrepreneurially to compete in
the highly competitive Chinese business environment.
Corporate entrepreneurship is generally viewed as a strategic option to refine an
organisations business model to meet changing customer needs and to enhance its
competitive position in the market. The entrepreneurial posture of any IJV can be
assessed by estimating its capacity to innovate and its level of proactive behaviour.
Corporate entrepreneurship, as conceived of in the West, is also well recognised in

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China. Since the cultural and behavioural differences between Chinese managers and
Western managers are notable (see Hitt et al., 2002; Li et al., 1999; Ralston et al., 1993;
Su, 1999), it is likely that the IJVs formed by foreign partners with local Chinese
partners may exhibit quite different organisational and strategic characteristics and
assume different entrepreneurial postures. Since Beijing is the capital city of China and
one of the largest cities receiving foreign investment, this study examines whether
corporate entrepreneurship related to innovation and proactivity has been pursued by
IJVs in Beijing.

Background of IJVs in China

Since the economic reform of China in the late 1970s, foreign investors have been
permitted to establish equity joint ventures with Chinese companies or state
enterprises (Jackson and Bak, 1998; Clegg et al., 2007). In particular, IJVs have become
an important means for foreign investors to invest in China (Clegg et al., 2007). The
usual form of IJVs in China is a cooperation of multinational firms (MNCs) from
developed countries with local firms or government-owned enterprises. Although
foreign companies have started to set up their wholly owned subsidiaries, JVs with
local firms remain a dominant mode of operating for foreign firms in China.
Chinese and Western partners often have different interests and objectives. The
local partners, for example, view the venture as a means to obtain capital, managerial
skills, technology and access to export markets (Antoniou and Whitman, 1998; Kim,
1996). In contrast, Western partners generally wish to remain competitive, deliver
profits for the home firm and reduce the risks associated with entering the Chinese
market (Antoniou and Whitman, 1998; Berrell, 2007).
However, forming joint ventures in China is no easy undertaking. Foreign
companies are compelled to comply with a painful management process, encounter a
myriad of problems and difficulties that range from external environmental problems
to internal organisational conflicts of interest (Hoon-Halbauer, 1999). The partners in
IJVs may also wish to impose their own practices and use contractual and noncontractual resource power, internationalisation expertise and operational consistency
requirements to gain relative decision advantage (Wilson et al., 2006). One potential
source of conflict stems from the differences in national cultures and values between
the local and foreign partners.
As suggested by Su (1999), three main tendencies observed in Chinese central value
system are the avoidance of uncertainty, collectivism and acceptance of hierarchy and
authority. As a result, hierarchical decision-making, bureaucratic organisational
structure, reactionary leadership, static management style and Confucian-Leninism all
characterise Chinese culture. On the other hand, Western culture is characterised by
open communication, decentralised decision-making, a flatter organisational structure,
flexible management styles and individualism.
The influence of diversified cultures on business behaviour in the case of IJVs adds
to the risk that misunderstanding will occur and failure in cooperation will be the result
(Child and Yan, 1999). As indicated by Hu and Chen (1996), the smaller the cultural gap
between the partners, the easier it is to create the desired cohesion necessary for the
effective performance of an IJV. Therefore, the pursuit of corporate entrepreneurship in
Chinas IJVs will be clearly influenced by the national cultures present both within the
IJV and among its management.

Corporate
entrepreneurship
of IJVs in China
7

MRR
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Literature review
Corporate entrepreneurship
There are various definitions of corporate entrepreneurship. Burgelman (1983) referred
to it as a process whereby firms engage in diversification through internal development.
Such diversification requires new combinations of resources to extend the firms
activities in areas either unrelated or marginally related. Miller (1983) defined an
entrepreneurial firm as one that engages in product-market innovation, undertakes
somewhat risky ventures and is first to come up with proactive innovations to beat its
competitors. Jennings and Lumpkin (1989) shared a similar view that an organisation is
entrepreneurial if it develops a higher than average number of new products or new
markets.
Watson (1995) defined entrepreneurship as the innovatory process involved in the
creation of an economic enterprise based on a new product or service, which differs
significantly from other suppliers in its production or marketing. Kao (1992) viewed
entrepreneurship as an attempt to create value through the recognition of business
opportunities and the management of risk-taking appropriate to those opportunities.
Zahra (1993) referred to corporate entrepreneurship as a process of organisational
renewal that has two distinct but related variables. These are innovation, venturing
and strategic renewal. Zahra and Pearce (1994) defined corporate entrepreneurship as a
strategic option that refines an organisations business concept to meet changing
customer needs and to enhance its competitive position. Covin and Slevin (1991)
defined corporate entrepreneurship as the basic strategic posture of a firm to engage in
entrepreneurial behaviour.
The entrepreneurial posture is measured in innovation, proactivity and risk-taking
behaviour. Lumpkin and Dess (1996) used the term entrepreneurial orientation to
refer to innovativeness, risk taking, proactiveness and competitive aggressiveness.
Russell and Russell (1992) highlighted the fact that an entrepreneurial strategy
entails the proactive search for new opportunities as well as the on-going management
of the process of innovation. Rieple and Vyakarnam (1994) found that literature
on entrepreneurial practices generally encouraged the pursuit of corporate
entrepreneurship as a positive business strategy.
Although various dimensions have been included by authors to articulate the
concept of entrepreneurship, innovation and proactivity remain the central ideas in
these articulations. Therefore, the definition used in this study limits the focus to the
common posture adopted by all entrepreneurial firms related to innovation and
proactivity.

Innovation
Innovation reflects a firms tendency to engage in and support new ideas,
experimentation and creative processes that may result in new products, services or
technological processes. The level of expenditure and resources dedicated to research
and development (R&D) represent a firms involvement in innovative activities. If an
organisation is willing to commit a significant amount of its resources in developing
new products then product innovations are more likely to be successful (Maidique and
Zirger, 1984). A high level of innovation is also associated with greater reliance on
technically trained specialists according to Miller and Friesen (1982). The more
professionals and specialists within a firm can indicate a higher level of innovation
(Hage, 1982).

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Proactivity
Lieberman and Montgomery (1988) emphasised the importance of first-mover
advantage as the best strategy for capitalising on a market opportunity. The first to
move into a market place usually captures higher profits and gains brand recognition.
Therefore, taking the initiative in pursuing new opportunities is associated with
entrepreneurship and is often referred to as proactivity. The proactivity of a firms
decision-making process is determined by how it shapes the environment by
introducing new products, technologies and administrative techniques (Miller and
Friesen, 1978).
However, a firm can be forward-thinking and quick on its feet without always being
first. A study of 84 small business units by Miller and Camp (1985) found that the
second firm to enter a new market was just as pioneering as the first entrant and just as
likely to achieve success through proactivity. Consistent with Miller and Friesens
(1978) earlier definition, Venkatraman (1989) suggested that proactivity refers to
processes aimed at anticipating and acting on future needs by seeking new
opportunities, which may or may not be related to the present line of operations.
Therefore, a proactive firm is a leader rather than a follower because it has the will and
foresight to seize new opportunities, even if it is not always the first to do so.
Cultural factors and corporate entrepreneurship
Cultural factors engender a strong entrepreneurial orientation that will be moderated
by environmental factors that include factors related to economics, politics, the law and
social norms (Lee and Peterson, 2000). Ralston et al. (1993), in a study comparing crosscultural managerial values, found that Chinese managers dogmatically tend to hold
that precedent is more important than innovation. Kim et al. (1998) confirmed that
people from high-context cultures, such as China and Korea, are less excited about
learning new ways of thinking and are more complacent with existing situations than
their counterparts in North America.
As suggested by Weldon and Vanhonacker (1999), the typical Western approach
emphasises proactivity through anticipating and quickly responding to problems. In
contrast, the Chinese approach is based on precedence and reference to authority.
Weldon and Vanhonacker (1999) further emphasise that the Chinese have a more
social-oriented achievement motivation whereas independent self-construal is common
in individualistic cultures like those in North America. The individuals from lower
context cultures usually show a stronger preference for proactivity and innovative
thinking.
Formulation of hypotheses
Relationship of organisational flexibility and innovation/proactivity
Organic structures are found to facilitate innovation while mechanistic structures
impede the process (Burns and Stalker, 1961). Organic firms are defined as those firms
having a flexible, adaptable and open communicative style, which enables these
enterprises to respond quickly. Mechanistic firms are more highly structured and
rigidly controlled, more uniform, restrictive and slower to adapt. Decision-makers
under organic structures are aware of the need for change and allocate expertise and
resources to engage in entrepreneurial behaviours (Miller, 1983). In a competitive
industry, strategic flexibility is necessary for a venture to be successful (HoonHalbauer, 1999).

Corporate
entrepreneurship
of IJVs in China
9

MRR
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10

Entrepreneurial firms often adopt particular structural attributes that permit

flexibility and rapid decision-making. Greater flexibility of organisational structure
can enhance communication even where cultural differences are high. If a firm is more
proactive and responsive to changes in the external environment, it is able to perceive
new opportunities. Therefore, it is hypothesised that organisational flexibility is
significantly related to an organisations corporate innovation and proactivity:
H1.

Organisational flexibility is significantly related to corporate innovation/

proactivity.

Relationship of strategic delegation and innovation/proactivity

An organisation with decentralisation of decision-making authority, minimal
hierarchical levels and free-flowing communications channels is positively related to
firm performance (Khandwalla, 1977). The advantages of decentralisation of decisionmaking or delegation are further supported by Thompson (1967), who indicates that
dispersed power makes resources more readily available to support innovative
projects. In the context of IJVs in China, strategic delegation serves to identify the
extent of strategic issues such as the selection of new investments, developing new
products and changes to financial and personnel policies require the approval of the
parent company.
The more the delegation within the IJV, the more the entrepreneurial it should be. On
the other hand, the more centralised the decision-making authority, the more difficult it
is for the IJV to become an entrepreneurial enterprise. Chinese organisations often lack
the capacity to delegate due to a hierarchical structure and the conservative nature of
interpersonal relationships (Su, 1999). Therefore, it is hypothesised that strategic
delegation has a significant relationship with an organisations corporate innovation
and proactivity:
H2.

Strategic delegation is significantly related to corporate innovation/

proactivity.

Relationship of operational delegation and innovation/proactivity

Employees at the operational level of an organisation tend to act proactively in
response to market needs and drive corporate entrepreneurial activities (Burgelman,
1983). Operational delegation in the context of IJVs in China serves to identify the
extent to which these operational issues are delegated to the operational staff.
Vanhonacker and Pan (1997) highlight the significant differences between Asian and
Western firms in their assessment of the desirability of having the daily management
of IJVs under their control. For a firm to become entrepreneurial, it is important that
employees are given the authority to participate in operational decisions (HoonHalbauer, 1999). Therefore, it is hypothesised that operational delegation has a
significant relationship on an organisations corporate innovation and proactivity:
H3.

Operational delegation is significantly related to corporate innovation/

proactivity.

Relationship of risk-taking culture and innovation/proactivity

Organisation culture is the key determinant for fostering entrepreneurial activity
within an organisation (Cornwall and Perlman, 1990). A firms innovative capacity
is affected by cultural norms (Kanter, 1985), which can encourage or discourage

business-related risk taking (Burgelman and Sayles, 1986). The extent to which managers
are inclined to take business-related risks is one of the significant measurements of
corporate entrepreneurship and the more an organisation demonstrates a risk-taking
posture, the more entrepreneurial the firm is (Slevin and Covin, 1995). Therefore, it is
hypothesised that risk-taking culture has a significant relationship with an organisations
corporate innovation and proactivity:

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H4.

Risk-taking culture is significantly related to corporate innovation/

proactivity.

Relationship of control system and innovation/proactivity

Controls facilitate or inhibit innovation. Control facilitates entrepreneurship related to
performing regular market research on demands and tastes of customers, enabling a
shift in competitors actions and adjusting the financial performance of a firm
according to its operating budget. Controls that monitor task performance and
financial results are used to identify areas of weakness and drive remedial actions
(Downs, 1966). According to Glaister and Yu (1994), control is a critical concept for
successful management and performance in IJVs (see Berrell, 2007).
The more control the foreign firms have over critical functions, the more satisfied
they are with their JVs in China (Wang et al., 1999). American and European firms tend
to become more involved in the hands-on managing of their IJVs (Vanhonacker and
Pan, 1997). American managers, for example, tend to have dominant control in
decision-making, especially in large IJVs (Osland and Cavusgil, 1996). However,
Chinese managers tend to rely more heavily upon informal means of influence than
formal authority channels. In addition, these managers place more emphasis on
personal relationships and less on legal contracts (Ralston et al., 1993). In light of
cultural differences, it is important to use contracts to establish control mechanisms in
IJVs (Luo, 2002). Therefore, it is hypothesised that a control system is significantly
related to an organisations corporate innovation and proactivity:
H5.

Control systems are significantly related to corporate innovation/proactivity.

Implementation of cost leadership and innovation/proactivity

A cost leadership strategy is often associated with competing in low price segments.
A firm concentrates on product efficiencies and cost control in order to be the lowest
cost producer relative to competitors (Porter, 1985). Foreign firms enter and operate in
foreign markets usually based on an economic rationale that is, they can minimise the
costs associated with the entire value-added chain (Tse et al., 1997). Higher
performance is noticed in firms where managers adopt an entrepreneurial approach to
decision-making (Dess et al., 1997) as cost leadership can be achieved with this step
(Hamel et al., 1989). An effective cost leadership is often associated with new product
development (Zahra and Covin, 1993). Foreign investments are attracted to China
mainly due to the advantage of the low-cost production and economies-of-scale. As
long as an organisation emphasises the importance of mass production, standardised
and low-cost products, it will be difficult to become truly innovative and proactive.
Therefore, it is hypothesised that implementation of cost leadership strategy is
significantly related to an organisations innovation and proactivity:
H6.

Cost leadership strategy is significantly related to corporate innovation/

proactivity.

Corporate
entrepreneurship
of IJVs in China
11

MRR
33,1

12

Implementation of differentiation strategy and innovation/proactivity

Differentiation strategies, which relate strongly to the proactive nature of corporate
entrepreneurship, endeavour to offer customers unique products or services.
Differentiation tactics, such as high prices and high product quality, are most
pronounced among entrepreneurial firms (Covin and Slevin, 1991). It was also found that
IJVs with bilateral-related diversification perform better than ventures with unilateral
related linkages (Luo, 2002). Therefore it is hypothesised that differentiation strategy is
significantly related to an organisations innovation and proactivity:

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H7.

Differentiation strategy is significantly related to corporate innovation/

proactivity.

Implementation of growth strategy and innovation/proactivity

The risk-taking, highly venturous and innovative top management styles often relate
to invest/grow situations (Geller, 1980). It was found that the general managers (or
CEOs) of build organisations exhibit a greater willingness to take risks than the
general managers of harvest organisations (Gupta and Govindarajan, 1982) and
the entrepreneurial posture is the highest among firms with growth strategies (Covin
and Slevin, 1991). Therefore, it is hypothesised that growth strategy is significantly
related to an organisations innovation and proactivity:
H8.

Growth strategy is significantly related to corporate innovation/proactivity.

Methodology
A structured questionnaire consisting of three sections was used for this study. The
first section concerned the corporate entrepreneurship of the company concerning
innovation and proactivity as well as the strategy adopted by the company (that is, cost
leadership, differentiation or growth). Section 2 included 24 organisational statements
previously adopted by Khandwalla (1977) for measuring corporate entrepreneurship
(see Miller and Friesen, 1982; Slevin and Covin, 1995). The last section consisted
questions about the background of the responding companies. A Chinese version of the
questionnaire was adopted and used for the pilot test. Six senior managers from IJVs in
Beijing were invited to complete the first draft of the questionnaire in order to make
sure of its clarity. Amendments were then made to the questions based on their advice.
A systematic sampling approach was adopted where 800 firms (400 firms from the
manufacturing industry and 400 firms from the servicing industry) were selected as
the sample for this study. The samples were chosen systematically from the first 400
firms of each industry listed in the Directory of Standing Representative Organisations
of Foreign and Territorial Companies in China published in March 2000.
The questionnaire was sent by mail to senior executives or general managers who
had overall responsibility of the operation of IJVs in Beijing in 2004. Follow-up
telephone calls were made to remind the respondents to return the questionnaire.
A total of 78 completed and useful questionnaires were received representing a 10
per cent response rate, which is regarded as acceptable in view of the difficulty of
conducting mail surveys in China.
Descriptive statistics, correlation analyses and stepwise multiple regression were
used to examine the relationships of innovation and proactivity with organisational
and strategic dimensions in the IJVs. Since the moderate to high correlations among the
organisational variables may cause a problem of multicollinearity, factor analysis was
conducted and only the items with low cross-loadings were used for the multiple

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regression analysis. The regression analyses demonstrated significant regression

equations with a moderate level of R2 from 0.183 to 0.368.
Research findings
Among the 78 responding companies, 43 were from Asian-Chinese JVs and 25 were
Western-Chinese JVs (Table I). The majority of responding companies were established
between 1991 and 2004 (59 per cent for the Asian-Chinese and 64 per cent for the
Western-Chinese JVs) with employment size less than 500 workers (84 per cent for
the Asian-Chinese JVs and 70 per cent for the Western-Chinese JVs). The sample of
Asian-Chinese JVs was skewed toward manufacturing companies (68 per cent) while
the sample of Western-Chinese JVs was skewed toward services companies (51
per cent). Western-Chinese samples also had a higher annual sales turnover compared
to the Asian-Chinese samples.

Corporate
entrepreneurship
of IJVs in China
13

Identification of organisational factors

A principal component factor analysis was performed on the 24 organisational variables.
Variables that had low correlations with other variables and low loadings on the factors
were removed. As a result, 20 organisational variables were retained. Scree test and
eigenvalue greater than one were selected as the criteria to determine the number of factors
to be extracted. A varimax rotation procedure was also performed to facilitate the
interpretation of each factor. Five organisational factors flexibility, strategic delegation,
operational delegation, risk-taking culture and control system were identified with
reported Cronbachs alpha ranging from 0.702 to 0.925 (see Table II).
All samples
(n 78) (%)

Asian-Chinese JVs
(n 43) (%)

West-Chinese JVs
(n 25) (%)

Company year of establishment

Before 1978
1978-1990
1991-2004

10.4
29.9
59.7

4.5
36.4
59.1

10.3
25.6
64.1
2 1.164

Nature of business
Manufacturing
Service
Others

47.3
44.6
8.1

68.0
28.0
4.0

37.2
51.2
11.6
2 6.120*

Company size of employment

Below 50 employees
Between 51 and 500 employees
Between 501 and 3,000 employees
Above 3,001 employees

35.1
37.9
18.9
8.1

40.0
44.0
12.0
4.0

32.6
37.3
25.6
4.5
2 5.797

Company annual sales turnover (RMB $)

Below 100,000
100,001-500,000
500,001-1,000,000
1,000,001-5,000,000
Above 5,000,001

15.7
12.9
18.6
11.4
41.4

32.0
20.0
24.0

24.0

7.5
10.0
17.5
17.5
47.5
2 13.477**

Company information

Notes: *p  0.05; **p  0.01

Table I.
Background information
of the sampled IJVs
in China

MRR
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14

Flexibility ( 0.925)
My company has a strong tendency to let requirements of the situation and the
individuals personality define proper on-job-behaviour
My company has strong emphasis on getting things done even if this means
disregarding formal procedures
My company allows free managers operating styles, ranging from very normal
to informal
My company has loose and informal control, with heavy dependence on informal
relationship and norm of cooperation for getting work done
My company has strong tendency to let the expert in a given situation has
the most say in decision-making, even if this means temporary bypassing of
formal lien of authority
My company has a strong emphasis on adapting freely to changing circumstances
without too much concern for past practice
My company has open channels of communication, with free flow of important
information (e.g. financial and operating information) throughout the organisation
Strategic delegation ( 0.798)
My companys CEO places complete delegation of authority to the parties concerned
in developing new product/services
My companys CEO places complete delegation of authority to the parties
concerned in periodically reviewing and changing the financial policy
My companys CEO places complete delegation of authority to the parties concerned
in selecting new investment opportunities
My companys CEO places complete delegation of authority to the parties
concerned in periodically reviewing and changing the personality policy
Operational delegation ( 0.770)
My companys CEO places complete delegation of authority to the parties
concerned in periodically reviewing and changing the operating policy
My companys CEO places complete delegating of authority to the parties
concerned in periodically reviewing and changing the marketing policies
My company decentralises most operating decisions to lower management levels
My companys CEO places complete delegation of authority to the parties
concerned in pricing the existing and new product/services
Risk-taking culture ( 0.790)
My company is usually the pioneer of new product/services as well as the
leader in technological advancement
My company has strong tendency for high-risk project to earn higher returns
My company has a high tolerance for risk-taking

Table II.
Results of factor
analysis organisational
variables

Control system ( 0.702)

My company is used to establishing cost centers for cost control of companys
operations, varying a great extent from the lowest to highest operating levels
My company emphasises that systemically studies customer preferences, price
and demand forecast of product/services before almost all changes are to be made

Loadings

0.733
0.873
0.796
0.831
0.706
0.811
0.712

0.690
0.752
0.831
0.622

0.608
0.674
0.708
0.484

0.477
0.843
0.846

0.889
0.708

Organisations overall innovation and proactivity

About half of the firms considered themselves innovative, whereas only one-fifth
considered themselves as non-innovative (Table III). A similar pattern was found when
firms were asked to rate how proactive they were. Nearly half considered themselves
proactive and 30 per cent non-proactive. However, no significant relationship was
found between corporate entrepreneurship and company background such as the
number of years in operation or the size of organisation.

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Western-Chinese JVs were found to exert significantly higher corporate

entrepreneurship related to innovation and proactivity. In addition, they had
significantly higher flexibility and operational delegation and were more likely to
implement differentiation and growth strategy than Asian-Chinese JVs as Table IV
suggests. Despite statistical insignificance, Asian-Chinese JVs were more likely to
adopt a low-cost strategy compared to their Western-Chinese counterparts.
Asian countries are classified as collectivistic cultures and people are traditionally
less likely to engage in entrepreneurship because of cultural values such as harmony,
status quo and consensus in decision-making (Lee and Peterson, 2000). Kim et al. (1998)
found that high-context cultures such as those of China and Korea are better at dealing
within an existing system but find it more difficult dealing with new situations. Lowcontext cultures such as those in North America react better to change. Therefore, the
above findings are consistent with the view of Weldon and Vanhonacker (1999) that a
Western approach is to emphasise proactivity through anticipating and responding
quickly to problems in contrast to the Asian approach, which is based on precedence
and reference to authority. As a result, Western-Chinese JVs were also more likely to be
innovative compared to the Asian-Chinese JVs.

Corporate
entrepreneurship
of IJVs in China
15

%
Innovation (Mean 4.61, SD 1.35)

Agree
Neutral
Disagree

48.7
31.0
20.3

Proactivity (Mean 4.51, SD 1.55)

Agree
Neutral
Disagree

48.6
21.6
29.7

All samples
(n 78)
Corporate entrepreneurial dimensions
Innovation
4.61a
Proactivity
4.51
Organisational dimensions
Flexibility
3.94
Strategic delegation
4.07
Operational delegation
4.15
Risk taking culture
4.11
Control system
4.66
Strategic dimensions
Cost leadership
4.46
Differentiation strategy
5.09
Growth strategy
4.47

Asian-Chinese
JVs (n 43)

Western-Chinese
JVs (n 25)

3.88
3.64

5.14
5.14

4.535*
4.369*

3.38
3.92
3.64
3.82
4.29

4.34
4.22
4.58
4.28
4.78

3.225*
1.141
3.862*
1.516
1.641

4.96
3.92
4.10

4.26
5.65
4.69

1.706
5.055*
3.421*

Table III.
Organisations overall
Innovation and
proactivity

t-value

Notes: aMean rating was measured on a 7-point Likert scale, from strongly agree 7 to
strongly disagree 1; *p  0.01

Table IV.
Comparison of corporate
entrepreneurship
between Asian-Chinese
and Western-Chinese JVs

1.35
1.55
1.389
1.294
1.210
1.373
1.367
1.830
1.510
0.590

SD
1.000
0.674**
0.406**
0.183
0.446**
0.372**
0.222
0.19
0.327**
0.450**

1.000
0.464**
0.370**
0.470**
0.500**
0.411**
0.048
0.396**
0.431**

1.000
0.454**
0.592**
0.485**
0.163
0.220
0.287*
0.384*

1.000
0.604**
0.420**
0.268*
0.391**
0.103
0.390*

1.000
0.469**
0.262*
0.144
0.334**
0.575**

1.000
0.390**
0.414**
0.036
0.462**

1.000
0.243**
0.204
0.282

Notes: *Correlation is significant at the 0.05 level (two-tailed); **Correlation is significant at the 0.01 level (two-tailed)

4.61
4.51
3.937
4.075
4.151
4.109
4.664
4.473
5.095
4.458

Innovation
Proactivity
Flexibility
Strategic delegation
Operational delegation
Control system
Risk-taking culture
Cost leadership
Differentiation
Growth

Table V.
Results of correlation of
organisational and
strategic variables with
corporate
entrepreneurship

Mean

1.000
0.304**
0.295

16

Variable

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1.000
0.289

1.000

10

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Impact of organisation and strategic dimensions on corporate innovation

The results of the correlation analysis (see Table V) show that the overall innovation of
an organisation had a statistically positive correlation with operational delegation
followed by flexibility and the control system. As for strategic variables, an
organisations overall innovation has statistically positive relationships with the
implementation of the growth strategy and the differentiation strategy. In other words,
innovative organisations are more flexible in their organisational structure, often
delegate to employees on operational issues and available control systems. No
significant relationship was found between risk-taking culture and strategic delegation
with an organisations overall innovation.
The findings suggest that the pursuit of innovation of IJVs in China depends on the
delegation of operational decisions but not the strategic ones. Good controls that
monitor task performance and financial performance are important for identifying
areas of weakness and to drive remedial actions. A risk-taking culture does not have an
impact on a corporations innovation due to a good control system that attempts to
balance risk and creativity. If an IJV adopts a growth or differentiation strategy and
delegates operational issues to employees at various levels, it is natural that more new
products or services will be developed to cater for the growth of the organisation.
The results of multiple regression analysis set out in Table VI indicate that the
pursuit of a growth strategy and operational delegation are significant predictors of
the level of innovation of an organisation. This further validates the view that
operation delegation and implementation of a growth strategy have significant
impacts on an organisations corporate innovation.

Corporate
entrepreneurship
of IJVs in China
17

Impact of organisation and strategic dimensions on corporate proactivity

It was found that all five organisational variables had statistically positive correlations
with the firms overall proactivity as indicated in Table V. The control system was
significantly positively correlated with overall proactivity, followed by operation
delegation, flexibility, risk-taking culture and strategic delegation. Growth and
Innovation
Beta weight
Organisational variables
Flexibility
Strategic delegation
Operational delegation
Risk-taking culture
Control system
Strategic variables
Cost leadership strategy
Growth strategy
Differentiation strategy
R
R2
F-ratio
Note: *Significant at 0.01 level

Innovation
Beta weight

0.239
0.132
0.48*
0.101
0.212

0.427
0.183
15.194*

Proactivity
Beta weight

Proactivity
Beta weight

0.201
0.003
0.281*
0.226*
0.286*
0.066
0.45*
0.108
0.450
0.203
9.407*

0.606
0.3676
12.762*

0.056
0.324*
0.371*
0.559
0.312
8.173*

Table VI.
Results of multiple
regression of the
impacts of
organisational and
strategic variables
on corporate
entrepreneurship

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18

differentiation strategies also showed significant positive relationships with the

proactivity of an organisation.
Findings such as these suggest that the proactivity of a firm largely depends on its
organisational issues and the implementation of growth and differentiation strategies.
If an organisation dedicates itself to pursuing business development through growth
or quality products/services as well as maintaining a healthy organisation, the staff of
an IJV will take more initiatives in making decisions. The view is validated further by
the results of the multiple regression analysis in Table VI, where the predictors of
the proactivity of an organisation are operational delegation, control system, risktaking culture and the implementation of differentiation and growth strategies.
Conclusions and implications
A summary of the results of the hypothesis testing is reported in Table VII. Five out of
eight hypotheses were supported, including organisational flexibility, operational
delegation, control systems, differentiation and growth strategies, which were
significantly related to both innovation and proactivity. Two hypotheses were partially
supported. Strategic delegation and risk-taking culture were found to be significant with
an organisations proactivity only. However, no significant relationship was found
between the implementation of cost leadership strategy with an organisations innovation
or proactivity.
The above findings demonstrate that corporate entrepreneurship concerning
innovation and proactivity exists within IJVs in China. The impact of both
organisational and strategic dimensions on corporate innovation and proactivity
yielded significant results, which provide insights into the study of the cultural context
of IJVs in China.
If an organisation adopts growth or differentiation strategy to expand, both
innovation and proactivity can be enhanced. Innovative and proactive organisations
often demonstrate an atmosphere of empowering their employees and engendering an
enterprising spirit of business development. Though control systems are available for
senior management, decision-making authority on operational issues is usually
delegated to employees. This holds true especially in organisations that facilitate

Table VII.
Summary of the results
of hypotheses

Hypothesis

Result

1. Organisational flexibility is significantly related to corporate

innovation/proactivity
2. Strategic delegation is significantly related to corporate
innovation/proactivity
3. Operational delegation is significantly related to corporate
innovation/proactivity
4. Risk-taking culture is significantly related to corporate
innovation/proactivity
5. Control systems are significantly related to corporate
innovation/proactivity
6. Cost leadership strategy is significantly related to corporate
innovation/proactivity
7. Differentiation strategy is significantly related to corporate
innovation/proactivity
8. Growth strategy is significantly related to corporate
innovation/proactivity

Supported
Partially supported
Supported
Partially supported
Supported
Rejected
Supported
Supported

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employees participation in problem-solving and decision-making by adopting

techniques like total quality management, continuous improvement and quality circles.
The implementation of a cost leadership strategy does not relate to an organisations
innovation and proactivity. Homogeneous products usually compete on price and a
low-cost strategy is adopted commonly by firms in less competitive industries. As the
China market is very competitive, the IJVs must remain innovative in both developing
new products and marketing strategies. Chinese consumers can afford higher-priced
products and consequently, quality is a factor in which products or services they
purchase this recent development may well bolster the growth of corporate
entrepreneurship in China.
Western-Chinese JVs exhibit higher corporate entrepreneurship than do their AsianChinese JVs. Western-Chinese JVs generally implement differentiation and growth
strategy and are more innovative and proactive because they exert higher degrees of
flexibility and operational delegation. Flexibility has a more significant impact on an
organisations innovation while a risk-taking culture and control systems have a more
significant impact on corporate proactivity. The risk-taking culture and behaviours are
common when the overseas partners have dominant control of the day-to-day
management of an enterprise. The risk-taking culture can be enhanced if the firm
recruits and empowers an elite group of talents, provides incentives and delegates
authority with responsibility. Concerning decision-making processes, operational
decisions can be delegated to local management provided that the managers are
competent and well-trained while strategic decisions should be submitted to overseas
headquarters for approval.
Since organisational flexibility will become less apparent as employees become
familiar working within the scope of assigned activities, IJVs will have to monitor
different organisational and strategic dimensions closely to maintain their corporate
entrepreneurship posture. As Asian-Chinese JVs are comparatively less innovative and
proactive, management within these ventures must rethink, revaluate and improve
their corporate entrepreneurship posture. In the eight years since the accession to the
WTO in 2001, China has been keen to receive foreign investment and technological
expertise. This environment will attract even more professionals with international
experience to work in Chinas IJVs. It is expected that the new managerial styles,
practices and organisational cultures will further speed up corporate entrepreneurship
in China.
Like all empirical studies, this study has limitations. Due to the low response rate of
the survey, the issue of non-response bias should be tackled. Personal interview could
be used for future studies. Since the sample was drawn from IJVs in Beijing, which is a
relatively more developed region, future research might include other cities under more
regulatory environments. Comparative studies could be done on the entrepreneurial
postures of JVs in first and second tier cities in China such studies will add to the
knowledge of an emerging area of study in China.
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Corresponding author
Susan H.C. Tai can be contacted at: mstai@inet.polyu.edu.hk

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