In search of complementary assets: Co-operative strategies and knowledge seeking by prospective chinese partners

This chapter focuses on the hitherto neglected perspective of the local partner during the preliminary phase of the decision to form a Chinese-foreign venture. By exploring the intentions of Chinese firms which seek foreign investment, it becomes possible to identify and assess the managerial, marketing and technological skills those firms seek from prospective foreign partners. It is also possible to discern to what extent the desired skills are related to the local partners’ own skills, to the intended venture characteristics, namely equity or contractual, and to the size of the investment. The study shows that local partner skills largely determine the skills sought from foreign partners, providing support for the underlying principle of skill complementarity. Briefly stated, this principle suggests that a threshold of knowledge is a prerequisite for further requisition of skills in that domain. In other words, firms which do not possess a particular skill are less likely to seek it than firms which seek to supplement an already existing skills base. The study also shows that Chinese state-owned firms were more likely to seek the transfer of managerial (but not marketing or technological) skills than non-state enterprises, possibly because of their dominance in the local market. In general, prospective Chinese partners were more likely to seek the transfer of management and marketing skills via an equity joint venture rather than a contractual one. For larger projects, local firms were more likely to seek transfer of management skills (rather than marketing and technological ones), perhaps due to the substantial capital requirement in such projects.