Differential Effects of State and Private Partnerships on Sino-foreign Joint Ventures in China

Karine Victoria Fränkl & Kim Katrin Scheel

Student thesis: Master thesis

Abstract

This thesis investigates the performance of Sino-Foreign Joint Ventures (SFJVs) in China, with specific focus on differential effects of state and private ownership of the Chinese partner. Specifically, the aim is to investigate what effect the ownership type of the Chinese partner has on the performance of the joint venture (JV). Performance is measured along four different categories of variables: Product and Customer Dynamics, Company Turnover, Financial Performance Measures, and Liquidity Risk. The issue is addressed through a quantitative investigation using panel data gathered from ORBIS. A cross section of 163 SFJVs with state owners and 5942 with private owners is observed in the time period from 2007 to 2010. This time period includes effects of the global financial crisis and the consecutive stimulus package implemented by the Chinese state, which are observed and included throughout the analysis.
The analysis is structured in three main stages. 1) Academic literature is analyzed in order to provide insights on the Chinese context, including foreign investment liberalizations and privatization reforms, as well as international business theory to comprehend the motivations of the international investor, and firm performance. 2) An analytical descriptive analysis is conducted including tests of equality to identify initial statistical differences between state and private ownership. 3) A regression analysis is performed to identify causal relationships between ownership and other chosen independent variables on the selected performance measurements. Findings show that market share and productivity are positively impacted by state ownership, whereas state ownership has a negative impact on productivity growth and asset turnover. The remaining performance measures included in this analysis do not achieve any differential results between the two types of ownership. Lastly, it is concluded that the theoretical
justification of differential performance between private owned enterprises (POEs) and state owned enterprises (SOEs) is only moderately applicable to the case of China, due to the state capitalistic
role of the Chinese government.

EducationsMSc in International Business, (Graduate Programme) Final Thesis
LanguageEnglish
Publication date2017
Number of pages195
SupervisorsAri Kokko