International Joint Ventures (IJVs), Asymmetric Partnerships and Innovation: An Empirical Study of Chinese Manufacturing Industry

This study examines the impact of partner relations on international joint ventures (IJVs) performance in the Chinese manufacturing industry for the period 2009-2022. Using panel data analysis, the study investigates the influence of three types of asymmetry - technological capability, sales capability, and financial resource - on IJV innovation performance based on social exchange theory. The results indicate that asymmetric partner relations significantly affect IJV performance in different situations. Moreover, the study analysis the ownership of the partners involved in the partnerships. It reveals the large number of IJV that are formed between partners which are in fact owned by the same shareholders. Round-tripping is a phenomenon whereby companies establish fictitious foreign partners in offshore tax havens to invest in their home countries. This practice can distort the true nature of foreign investment and may have negative implications for the development of the industry and economy. The study contributes to the literature by highlighting the critical role of partner relations in the success of IJVs and underscores the need to manage asymmetry in such relationships. It argues that for IJV with partners from emerging markets, the innovative performance and long-term survival the level of asymmetry in the financial performance and in the individual level of innovation through patenting are not significant in the innovative performance of the venture. When there is round -tripping the innovative performance of the IJV is very reduced, and indicative of lack of knowledge transfer and synergies between the partners, which in this case are in fact owned by the same shareholders. This study suggests that regulations should be put in place to promote more equitable outcomes in emerging markets and impede organizational innovation by business through roundtripping as they are detrimental to innovation and long-term economic development in emerging markets.