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International Business Research


April 2008

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Literature Review on the Management Control

System of Joint Ventures
Linjuan Mu Associate Professor of Beijing
Technology and Business University, China Postgraduate Candidate of Central
University of Finance and Economic, China Tel: 86-136-4108-4469

Guliang Tang
Professor of University of International Business and Economics, China
Tel: 86-138-0125-1642


The author will review literatures analyzing the characteristics on management control mechanism and pattern in joint
venture. According to the actual situation and the subject we going on studying, materials mainly are collected from
Accounting and the Tax English database and Uygur Pu Chinese periodical database. We will make contribution to the
literature study which research on its factors about the controlling and management problems in joint venture, and has
an important guiding significance to the future study, especially in China.
Key words: Literature Review, Joint Venture, Management Control System
1. Introduction
Along with global economic integration, the management control system of joint venture is pay attention by the
domestic and foreign scholars. This paper reviews the recent year researches. On the basis of literature review, we could
find the characteristics of management control system of joint venture. How profound influence the different country
special economy system factors have, and so on. Moreover we try to find the insufficiency of the study at present, in
order to find the goals at future research.
Our materials mainly are collected from Accounting and the Tax English database and Uygur Pu Chinese periodical
database. Accounting & Tax based on Accountants' Index and Accountant database. It included 2174 kinds of important
international publication and index of accounting, audit and corporate financial issues. The Uygur Pu Chinese periodical
database included 9000 kinds of Chinese publication of economics, management, science, education, and so on. That
can help the researchers found the articles most conform to the need.
2. Research Achievement
2.1 About Joint Venture
Joint venture, emerged in the 1950s, gradually evolved to be one of the operating fundamental mode of the
Multinational corporate. Compares with the sole ownership subsidiary company, Joint venture status in developing
country is important day by day (Beamish, 1988). Since US to Europes reconstruction aid established US and Europe
Joint venture after the World War II, so the early research mainly discussed the motive difference, unique management
issues and organizational structure issues on the American enterprise and the Europe domestic enterprise establishing
joint ventures. Since the 1970s, the scholars started from the angle of Multinational corporate to study motive which the
Joint venture establishes. (Reus & Tchiem, 2004) thought that the pressure from the government, the risk dispersion and
the gain specific resources and so on are the dominant motive of Multinational corporation establishing joint ventures.
After the 1980s, the research on the joint venture started to develop, transforms from the initial descriptive research to
the comprehensive construction research theory and the frame. Hennart (1988) using the transaction cost theory analysis
why the enterprises are favorite to the stockholders rights investments. Kogut (1988) advanced the organization theory
of learning in joint venture. But, as a result to the theory and experience research technique multiplicity, as well as
conducts the research from the different angle and the different analysis level, cause the research to lack the unity
(Robsonetal, 2002). Reus (2004) thought because joint ventures operating would be influenced by the cooperation of
the partner, contribution of the group and the mobility of area environment factors. Therefore, the research subject on

International Business Research

April, 2008

the joint venture could be divided into three different analysis levels which are the joint venture partner, the holding
company and the environment factors. Also the research subject on the joint venture could be divided into three aspect
issues which are the creation of the joint venture, the management and control system in the joint venture, the
performance appraisal of operating of the joint venture.
2.2 About Management Control System in Joint Venture
Theoretically, the control issues of joint venture involves in topics at two levels. One is joint venture how to implement
controls to protect the integrity of its resources. The other is how to design the joint venture management control system
to promote enterprise accountability of enterprise managers and upgrade enterprise performance (Child and Faulkner,
1998). No matter on which level, features of joint ventures control system can be reflected by three areas: the extent of
the control, the focus of the control and the choice of control mechanism (Geringer and Hebert, 1989; Grout and
Mechant, 2000). The current literature is focused on studies of the first level about control characteristics and impact
factors. Traditional studies, abroad China, mainly concern joint venture enterprises in developed countries. Using
transaction cost theory and negotiating capacity theory, they find out impact factors of joint ventures control mode are
equity shareholding, bargaining power and commit key resources (such as Beamish, 1988; King, 1983; Glaister, 1995).
Some research confirmed the more influence factors nearly. As a result, managers of early-stage firms introduce formal
management control systems (hereafter, MCS), which are formal (written and standardized) information-based
procedures and statements, used by managers to monitor and influence the behavior and activities in a firm (Simons,
1994). Groot and Merchant (2000) studied three Europe and America joint ventures control system, found these factors
including confidence level on the cooperation both sides, goal orientation, specialized quality and so on would influence
the extent, the focus and the mechanism of the control. Davila and Foster (2005) find that age, size, the presence of
outside investors, a change in CEO, CEO experience, and a planning culture, are positively associated with the rate of
adoption and the sequence of introduction of different categories of MCS. Kamminga & Meer Kooistra (2007), by
analyzing transaction and relation characteristics of a joint venture, further divided three control modes, including
content-based control pattern, consultation-based control pattern and context-based control pattern.
With the economic development of all over the world, especially in China, the economy in the developing countries
plays more important role in world economy. Scholars also gradually shift the focus from the developed countries to
developing countries. For example, Yan & Gray (1994, 1996) did some case studies and questionnaires on the
relationship between negotiating capacity and control model. From four Sino-US joint ventures, they confirmed that the
negotiating capacity of Chinese and foreign sides determined the model characteristics of their control, and this situation
affected the performance of enterprises. Luo (2001) surveyed the management situation of the construction industry, the
structure of ownership, management control system and company performance which be found existing the notable
relevance. By studying Chinese-foreign joint ventures, Child &Yan (2003) found the main factors that decides Sinoforeign joint venture enterprise performance, including foreign transnational operation and the joint venture experience,
the quality of foreign investment (such as capital, equipment and management, etc.). When foreign invest the high
quality resources, share with the Chinese side, they can also bring high performance levels. Calantone & zhao (2001) had
a comparative study on the objectives, the relationship between control and the performance in Sino-US, Sino-Japanese
and Sino-South Korea joint venture. The relationship was very different among the different types of culture in joint
ventures. They suggested people should concern the impact of different management thinking and culture. Chalos &
Connor (2004) discovered, through on-the-spot investigation in Sino-US joint venture, the knowledge and the
appropriation property investment of the partner deciding the different control mechanism utilization, such as sending
administrative persons, releasing decision-making power, reporting system to the Group, etc.
Chinese scholars Mao Yunshi, & Li Xinjia, etc. (2005) had a system study on the foreign enterprises polices, in China,
about investment, operation and finance. They found that investment projects has a vertical integration tendency,
increasing their investment and accelerating the pace of sole proprietorship, making full use of overseas resources to
plan global supply chain system for chips. Xie Wei (2006) confirmed the five key differences between the local
enterprises and joint ventures on learning and innovation strategy. Pei Changhong (2007) pointed out interstate merger
and acquisition at important industry could make monopoly, maybe endangers the state economy security.
3. The Insufficiency of the Present Research
The literatures show the formation and the influencing factors of control systems in joint venture. But the researcher
still had the insufficiency. Firstly, most studies focus on the control problem between the two sides of joint ventures,
such as the restrictions on the controlled percent of share in joint venture. But the study on the management control
system is not enough. The latter is very essential on the implementation of joint ventures control and enhancing
business performance. Secondly, every study has only focused on certain aspects (such as supply chain, technology
introduction, culture), so it exist the issues lack of systematic and in-depth analysis. Thirdly, about the research
methodology, most study used questionnaires lack of systematic and in-depth analysis to the joint venture control mode.
Finally, the empirical study result of the control model and influence factor are varies, some even mutually

Vol. 1, No. 2

International Business Research

contradictory. It needs analysis further thoroughly.

We hoped this article which has done the literature summary is helpful to the researcher to open field of vision,
understanding most recent development and direction of the research on the management control system, and could
makes the theory and the empirical study contribution.
Calantone & Zhao, 2001, Joint Ventures in China: a comparative study of Japanese, Korea and U.S partners, Journal of
international Marketing, 9.1.
Chalos &Connor, 2004, Determines of the use of various control mechanism in US-Chinese Joint Ventures, Accounting,
Organization and Society, 29.
Chen Futian, 2006, The research on Relationship between Subsidiary Company and Group, Chinese Industry &
Economy, 2006.1, 64-71.
Chen hall R H. 2003, Management control systems design within organizational context, findings from contingencebased research and direction for the future. [J] Accounting, Organizations and Society. (28): 127- 168.
Child & Yan, 2003, Predict the performance of international joint ventures: An Investigation in China, Journal of
Management Studies, 40.2.
Chow C.W, Kato Y, Merchant K, 1996. The use of organizational controls and their effects on data manipulation and
management myopia: a Japan vs. U.S. comparison [J]. Organizations and Society, 21, 175-192.
Dent G. Strategy organization and control: Some possibility for accounting research [J]. Accounting Organization and
Society, 1990(15): 3-25.
Fisher J., Frederickson J., Peter S., 2002. The effect of information asymmetry on negotiated budgets: an empirical
investigation [J]. Organizations and Society, 27, 27-43.
Foster, G &Young, S.M, 1997, Frontiers of management accounting research, Journal of Management Accounting
Research, 63-78.
Geringer & Hebert, 1989, Control and performance of international joint venture, Journal of International Business
Study. Summer, 235-254.
Groot & Merchant, Control of international joint ventures, Accounting, organizations and Society, 25.
Jun Luo, 2001, Assessing management and performance of Sino-foreign construction joint ventures, Construction
management and economic, 19.
Kamminga & Meer- Kooistra, 2007, Management control patterns in joint venture relationships: a model and
exploratory study, Accounting, organization and Society. 32.
Langeld Smith K., 1997. Management control systems and strategy, a critical review [J]. Accounting, Organizations
and Society, 22(02), 207-232.
Li Xinjia, 2006. Financing Strategy of Multinational Corporation in China, Chinese Finance & Economical Press.
Liu Aidong, 2006, Performance Management in Joint Venture in China, Fudan University Press.
Robert Simons. 1995. Control in an Age of empowerment, Harvard business review March-April.
Sunder S., 2002. Management control, expectations, Conlmon knowledge, and culture [J]. Journal of Management
Accounting Research, Vo1. 14.
Wang Xiaoxiang 2006, Method of Inter-costing Control in ChangAn Ford Limited Co., Finance and Accounting,
2006.7, 30-31.
Xie Wei, 2006. The Chinese Auto Industry in Global Production Network, Management World, 2006, 67-87.
Yang Guang 2006. The Charming of Manufacture at Toyota Moto Co., Sino-foreign Management, 2006. 9, 56-64.