How IJVs build differentiation capability in China? To be technology-oriented or customer-oriented?

Abstract

Should international joint ventures (IJVs) be technology-oriented or customer-oriented when attempting to achieve differentiation advantage in emerging economies such as China? To answer this question, we examine the roles of technology and customer orientations in building differentiation capability in emerging market-based IJVs and compare their relative effects. Findings from a survey of 156 IJVs in China indicate that technology orientation has a stronger positive effect on IJV differentiation capability than customer orientation and both effects depend on cultural distance and three key components of foreign parent control. Technology orientation leads to stronger differentiation capability when foreign ownership is higher and the level of foreign parent's operational control is higher, whereas customer orientation is more beneficial when the level of foreign parent's operational control is lower and communication with headquarter is more frequently and effective.