Building Successful U.S. – China Business Alliances: Why and How to Do it?

The importance of China as the top U.S. strategic partner cannot be left unseen. Participating in the Chinese market is both a necessity and requirement to maintaining global competitive advantage. Corporate alliances or inter-organizational voluntary cooperative arrangements are some popular ways to achieve business objectives, minimize business costs, and reduce risks when entering China.

While the issues of the U.S-China corporate alliances have been investigated extensively, the true causes and internal issues of supplier management in China are often not transparent for the U.S. partners. A team of researchers from the College of Staten Island, CUNY, and Shanghai University, China, a long-term partner institution of CSI, agreed to investigate U.S.-China corporate alliances to achieve a better understanding of international cross-border supplier management.

China Group

Shuai Ping, bottom row, 2nd from the left; Alex Matveev, top row, 4th from the left, with other researchers at Shanghai University

Corporate Alliance Spectrum

The corporate alliance spectrum demonstrates a changing alliance structure, ranging from the repetitive market transactions (contract alliances) to new joint ventures (property rights alliances). The property rights issues diminish to the left of the alliance spectrum (general market transaction) and intensify to the right of the alliance spectrum (business entity).

Benefits of U.S.-China Alliances

Several benefits of building and maintaining a Chinese alliance include: (1) financial benefits of presence in the world’s largest consumer and commercial goods market, (2) strategic learning of new skills, capabilities, and innovation, and (3) strategic position of global competitiveness in the Chinese and other markets, instant access to business contacts, reduced investment, and strategic learning.

Pitfalls of U.S.-China Alliances

Fundamental differences in American and Chinese national and business cultures, as well as in strategic objectives of U.S. and Chinese firms, can create potential problems and cause failures in cross-border alliances. In addition, Chinese firms rely heavily on the GuanXi management style, relying heavily on a system of connections with mutual reciprocity and obligations. GuanXi and Chinese business systems hinder cross-border alliances, as it takes a long time to establish contact and trust with business people in China through an established referral system.

 

 

 

 

 

 

While recent economic and cultural development in China elevated interest about GuanXi and alliance management, studies of Chinese supply chain management still remain limited. Professors from CSI and Shanghai University will tackle some demanding research questions of long-term supplier management, including the direction of origin of international alliances; the economic, cultural, and institutional differences; and cross-cultural learning and knowledge transfer in U.S.-China corporate alliances.

Corporate Alliance Spectrum

Since trust and control are two basic elements that influence the confidence level in business alliances, the research team will investigate the issues of:

A. Trust. Higher private trust and less developed institutional and business environments in China stimulate shadow relationships and personal GuanXi.

B. Communication. Since supply chain information is transmitted from consumers to the downstream firms and then to the suppliers, the higher number of information terminals demands faster speed and rigorous requirements for communication between corporations and suppliers.

C. Knowledge. While significant differences in content knowledge exist in U.S-China corporate alliances, content knowledge is significantly lower in Chinese corporations.

D. Inter-corporate interdependence. The interdependence between corporations is the key factor in deciding the corporate governance structure.

E. Level of cooperation. Compared to the U.S. companies, the cooperation level between enterprises and suppliers in China is concentrated on the lower stages of the alliance or the market transaction stage on the alliance spectrum.

Research Outcomes

This global research initiative between the faculty from CSI and Shanghai University will provide insights on U.S.-China corporate alliances to maximize the success rate and value of the enterprise.

Research Team

Shuai Ping, Associate Professor of Management, Shanghai University, China.

Alex Matveev, Assistant Professor of Management, College of Staten Island, CUNY, USA.

Article By Alex Matveev, Business Department

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