Factors Affecting the Effectiveness of FDI Venture Operations in China: A Comparison Between Early Entrants and Late Entrants

This paper aims to examine the factors affecting the effectiveness of international pharmaceutical firms' foreign direct investment (FDI) venture operations in the Chinese pharmaceutical industry during the period of 1980-1998. It will also compare the perceptions of senior managers from Early-Entrants who entered into China before 1992 and Late-Entrants who started investment in China since 1992 on the impact of Chinese culture, relationship networks (Guanxi), and organizational resource variables on the effectiveness of China venture operations. It was found that way of doing business in China, relationship with Chinese partner and relationship with Chinese partner government authority, and competent sales and marketing professionals were regarded as the most important variables. Early-Entrants and Late-Entrants had significantly different opinions on three variables: employees' loyalty to company, employees' expectation from the company, and relationship with the local logistic network. The importance of employees' loyalty to the company has decreased significantly since 1992, whereas employees' expectation from the company has become more important. The influence of the relationship with logistic network has decreased significantly since 1992. Overall the influence of the majority of work and business relationship variables did not show significant changes. However, the influence of personal relationship variables tended to decrease since 1992.