The Role of International Joint Ventures in the Spread of Foreign Companies in India and China

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1.0 Introduction:

The opening up of the economies of China and India in the recent decade marked a landmark

development so far the spread of globalization and international trade is concerned. The

liberalization of the two economies, which counts among the fastest growing and vastest ones in

the world, has effects of its own and this aspect has intrigued the researchers, scholars,

academicians and policy makers of the two nations and of the world community alike (Hooda,

2011). The process of the globalization and the establishment of the business on the part of the

multinational corporations of the world have been done most effectively, so far, in the form of

joint ventures with domestic companies. This trend is manifest in the gradual establishing of a

range of joint ventures in multiple sectors of India and China, following their relaxation to allow

more percentage of FDI in those sectors, and have served to be role models for other companies,

emanating benefits for all concerned or at least, that is what it is supposed to be. China and India

has been selected for the proposed study, China and India are two of the world’s largest

recipients of Foreign Direct Investment (FDI) which often comes through the international joint

ventures (Fang and Zou, 2009). Having observed the existence of joint ventures (see table below)

in both countries, it has been found that local Indian and Chinese firms and most foreign firms

establish IJVs to gain access to each other’s complementary resources and knowledge base. It is

expected in this regard that it can be possible to know why international firms are extending the

business in China and India rather than many other countries with less population. It is also

important to conduct this study because it is expected by the researcher to know what factors in

China and India in fact influencing the Foreign Direct Investment through international joint

ventures.

1.1 Background of the Study and Gap in the existing Literatures

It has been an established fact that last two decades due to the surge of globalization and

international joint ventures (IJVs), it has been possible for the firms and markets to be

interconnected globally (Glaister, Husan, & Buckley,2003 cited in Yao et al, 2013). In this

regard, shorter product life cycles, rapid technological advances and the increasing costs of

simultaneously innovative in diverse sectors make the companies to be relied on the international

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companies beyond the internally developed innovations (Narula & Hagedoorn, 1999 cited in Yao

et al, 2013). Numerous studies such as (Narula & Hagedoorn, 1999; Sinha & Cusumano, 1991;

lnkpen & Dinur, 1998; Si & Bruton, 1999) empirically evidenced that in regards to access to new

market knowledge so as to improve new product development performance; international

companies form international joint ventures. In this regard, studies such as (Lambe, Spekman, &

Hunt, 2002; Kwon, 2008: Narula & Hagedoorn, 1999) further added that lack of relative

competitive advantage in the local market influences the firms to engage in IJVs which enables

the companies to gain access to complementary knowledge and resources in different sectors.

The existing literatures suggest that with the access to the complementary knowledge resources,

it can be possible fir the foreign firms and local firms to explore new ideas about concepts,

design, development of new products (Fang & Zou, 2OO9; Das & Teng, 2000). The argument of

the existing literatures assumes a direct linkage between new product development performance

and complementary knowledge resources while they ignored the fact of the country specific

factors such as political, technological, legal and demographic factors that drive the international

firms to extend the business in the emerging economies. For example, the huge population

(consumers) in China and India encourages the European firms to expand the business in China

and India because economies of scale ensure the lower production costs and subsequent higher

income.

1.2 Significance of the Study

My research is aimed to examine and analyze the factors that have shaped the

environment for the spread of foreign companies in India and China with particular emphasis on

the concept of the international joint venture model in penetration into foreign markets and

subsequent establishment of business in those areas.. This study seeks to include in its scope, the

particularities of India and China as destinations for foreign investment through the joint venture

model, the problems, issues and the aspects that encourage the same would form the core of the

study and analysis of the research.

To examine and analyze these factors and events a range of theories and literature sources would

be examined and implemented and findings employed in this particular research to understand

the dynamics of the international joint venture model via-a-vis the conditions and particularities

of India and China. The research would also extensively deal with the different strategic

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decisions taken by some of the noted companies being belligerents of the joint venture towards

the successful functioning of the venture and also takes into account a number of journal sources

which reflect the account of eminent scholars and researchers who have conducted studies and

researches on the subject matter of this research topic. The international joint venture model has

emerged to have become a potent means for the international companies to penetrate new

marketing destinations through active collaboration with a domestic company and this research

paper specifically deals with the extent to which and the manner in which the international joint

venture model has led to the spr34ead of foreign companies in India and China.

1.3 Aim and Objectives of the Study

The main aim of the proposed research study is to examine the trends and dynamics of

the spread of international companies in India and China based on the international joint venture

model. For the purpose the examples of some of the leading foreign companies working in joint

ventures with domestic companies of India and China would be taken into account in the

analysis part of the research. In regards to fulfill the aim of the proposed study, the following

objectives will be set:

- To identify the factors that influences the spread of foreign companies in India and

China through foreign direct investment

- To evaluate the impediments and barriers that the foreign direct investment model

faces in the Indian and Chinese context

- To suggest alternative tools and techniques that can be implied so as to overcome the

impediments and barriers relating to foreign direct investment through international

joint venture

1.4 Research questions

- What are the main factors that have contributed to the spread of foreign companies in

India and China through International Joint Ventures?

- What are the impediments and barriers that the foreign direct investment model faces

in the Indian and Chinese context and what are the common and distinct factors in

both the cases?

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- What can be the alternative options that may be implied to overcome the relating to

foreign direct investment through international joint venture

2.0 Theories, concepts and critical evaluationVarious theories and concepts related to the organizational cultural difference (OCD) and

Integration acculturation strategy (IAS) define the dynamics of foreign direct investment through

international joint venture (IJVs) and merger and acquisition implementation, respectively. The

organizational practices, attitudes and behaviors that are incompatible with the belligerent and

organizational cultural differences seriously compromise the effectiveness of interaction

activities and processes engaged in international joint ventures. Integration acculturation refers to

the changes that either or both of the cultural groups experience when they come into active

contact and work together in an organizational setting and positiveness in this aspect positively

influences the effectiveness of interaction and coordination of international joint venture model

(Claes and Knutsen, 2011).

Specifically in the case of China the theory and practical application of the bandwagon effect

deserves special mention and it deals with the rise and fall of the Equity Joint Venture model of

penetration of the foreign companies into the Chinese market.

It deals with the adoption of a new set of practices or new approach by the organizations with the

passage of time and changes in the dynamics of the environment in accordance to their strategic

focus or goals for that period of time. This part explains the bandwagon diffusion of the EJV

system of market entry by the mergers and acquisition entry technique in the context of China

with the geographical proximity and reference organizations playing a prominent role in this

context.

Generally speaking, Hymer’s theory of “Uneven development” is also important in this context.

By the virtue of this theory, the author has sought to explain the ways the MNEs seek to

dominate the host nations, especially the under-developed ones and compromise with the

interests of the host nation and distributing the private welfare benefits unequally and negatively

affecting the societal and political and socio-economic fabric of such nations (Devonshire-Ellis,

2012).

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Aligned with the eclectic paradigm is another important contribution to the better analysis and

understanding of foreign direct investment in the Indian and Chinese context emanating from the

theories that explain the role soothe public organizations and personnel of the host nations and

the foreign producers in positively influencing the interactions in international joint ventures or

other forms of cross-border collaborative working. Related to this is the factor of the disputes

that take place in with the increase in business transactions and increased competition in the

domestic players among domestic and foreign players and often in combination and together

with the regulatory and monitoring measures employed by the local government, forms an

interesting matter of study and analysis on this given topic (Ghosh and Wang, 2011).

Equally important, and most illuminated in the India context, is the factor related to “Resource

complementarity, race to learn and returns to global integration” of the value chain and the

implications and ramifications of the same on the emerging or existing joint ventures holds a

place of special significance in so far the prospects of the international joint venture model,

mergers and acquisitions and regulatory aspects of the local governments are concerned (Hart

and Spero, 2013).

All these theoretical and conceptual aspects apply in the case of the study of the role of the

international joint ventures in the spread of the foreign companies in India and China, the typical

problems and challenges in each of the destinations, the scopes for prospect ad success as well as

the considerations that define and explain the future state of affairs in the two nations and the

changes in dynamics of the working of the foreign companies in the domestic markets of India

and China (Zhao, 2011).

The particularities in the Indian and Chinese context and the ways they help define and explain

the dynamics and fundamentals of the trends seen in India and China vis-à-vis the spread of

foreign companies through FDI and ways in which, and the extent to which certain theories and

conceptual frameworks help define and explain the same (Huang and Tang, 2011).

The theories and concepts mentioned above seem to provide the theoretical base for the study

and analysis of the dynamics and trends identified in the Indiana and Chinese scenarios. The

ways the Chinese and Indian economies, being the fastest growing and vastest in the modern

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times, have been able to liberalize their economies and markets and attract FDI in their different

sectors forms an interesting matter of study and analysis and there has been a renaissance of

studies and researches conducted on this subject matter to analyze and examine the trends and

dynamics seen in the two scenarios. The theoretical and conceptual aspects mentioned above

bear testimony to the developments in the academic field that have taken place hand-in-hand

with the developments in the practical scenario (Villajuana, 2013). Through the interpretation of

the theories and concepts it has been successful in shedding light on roles played by a range of

complex and diverse factors in the spread of foreign companies including the roles of the

government, the MNEs, the domestic dynamics, the international market and also the

international trade related organizations (Tolentino, 2010).

The theories and concepts have been able to apply the theoretical concepts of eclectic paradigm,

organizational cultural difference (OCD) and Integration acculturation strategy (IAS), the band

wagon effect the concept of uneven development, resource complementarity, race to learn and

returns to global integration have been the major areas of interest of researchers conducting

studies on this field and the same have been effective in the given case as well (Prime, et al.,

2012).

The examples of the successful entry of the foreign companies and their subsequent successful

integration within the domestic dynamics in India and China, on one hand, and the examples of

the failures or underperformance of MNEs in Indi and China owed to various reasons, on the

other hand, have all been explained and discussed by virtue of the theories and concepts

mentioned above (Panigrahi and Panda, 2012).

Though the theories and models and the conceptual framework mentioned above help identify

the dynamics and the trends that have been displayed by the different international firms in the

context of Indian and china, there exists no such theoretical or conceptual framework that serves

as an one size fits all framework to take under its ambit and define the various diverse and

complex aspects of international production, foreign direct investment and spread of foreign

companies in the domestic scenario.

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3.0 Literature Review The companies chosen for the purpose and the literature sources accessed are in perfect sync

with the realities and the ground situations in the two nations and reflect the scenarios as they

are. The theories and concepts contained in the literature in the form of the journals accessed for

this purpose also deal with case specific and common aspects related to the international joint

venture model in India and China. For the purpose of this assignment a range of literature

sources and data would be accessed by the researcher to gather the required information and

have a proper understanding of the subject matter of the research, the theories and conceptual

framework and also to understand the way the prior researchers have approached this topic

(Sweeney, 2012). The journals and the examples of the companies investing in India and China

provide bright examples of the typical problems faced by the government and the multinational

companies in the Indian and Chinese scenario and the track record of the companies taken as

examples, reflected in their annual reports serve to be readily available practical instances of the

trends and aspects that mark the discourse on international joint venture model working in India

and China (Kamath, 2013).

The factors in the internal environments of the two nations including their policy framework

and the factors that encourage or not encourage the development of successful and mutually

beneficial joint ventures with foreign companies would be studied in the light of the examples

that have been mentioned in the table attached below (Dulien, 2011).

The logic for the inclusion of the examples of the international joint venture model of working in

India and China would enable devolve trends, facts and figures related to the practical working

environment in the content of the two given nations and would also help understand the logic

behind the policies of the two national government to encourage international joint ventures, the

regulatory measures, the competitiveness of the economy, the pressure from the domestic

manufacturers, the domestic policies, foreign policies and a range of other associated factors that

govern the decision of the government related to the liberalization and regulations pertaining to

the advent and spread of the foreign companies in the domestic turfs of the two nations (Devajit,

2012).

The review of the literature on the subject matter of the international joint ventures and the

spread of the foreign companies in Indi and china have been made shed light on by the literature

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sources accessed and explained in the course of this research paper (Malhotra, 2014). With the

help of the real life examples of the foreign companies penetrating the markets of the two

economies in the form of the international joint ventures has paved the way for successful

interpretation and examination of the factors that promote or hinder the spread of the foreign

companies in the context of India and China with special emphasis on the international joint

venture model of market penetration as adopted by majority of leading multinational

corporations seeking to invest in the Indian and Chinese economies (Gale and Luo, 2004). As

such, this aspect has evolved to be an important subject matter of study and research and has

attracted the attention of the research scholars, academicians and students as well and the factors

that are common in the case of both of the nations and more importantly, the factors and aspects

unique to each of the cases have become important matters of study for the policy makers,

managers and academicians as they define and explain the recent trends in the growth and

prospects of the international joint venture model in the globalized world with references to two

economies that are supposed to become the future economic leaders of the world in the

upcoming days (Davies, 2011).

The empirical literature on the case of the international joint ventures and the spread of the

foreign companies in India and China has been well explained and discussed in the recent work

named “Critical analysis of joint ventures”. And the journal, in line with the aspects discussed in

the journal named the “International joint ventures in developing nations”, by Sinha (2011)

Milelr (2011), respectively, deals extensively with the argument that though international joint

ventures provide attractive and marvelous opportunities for the spread and prospect of the

foreign companies on one hand, and for the rejuvenation of the host economy on the other, but

facts and records show a different picture almost as often as not with the international joint

venture model, especially in the developing nations, not functioning in the desired way and

worse even , often running into difficulties and proving to be counter-productive (Sahoo, et al.,

2011). These journals define and explain the supposed mutual benefit of international joint

ventures owed to the maximization of advantages attributed to the comparative advantage of the

foreign and domestic partners and leading to a mutually beneficial and prosperous communion

and serving as an example of successful entry and business by multinational corporations (Wei,

2013).

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The bottlenecks, impediments, barriers to the investment by the foreign companies and the ways

the domestic dynamics respond to the same have been core aspects of the journals mentioned

above

The review of the established literature on this given subject matter has also helped shed light on

the problems associated with the institutional and structural setup of India and China and the

range of other factors that act as impediments to the successful operation and smooth suctioning

of the international joint venture model in the two nations and in spite of the economies being

liberalized and made to attract foreign investment are not able yield the desired benefits nor are

the multinational corporations able to have a very successful business performance in the

economies through the international joint venture model (Bhattacharya, 2012).

The track record and the results of the investments done by the foreign companies in the form of

joint ventures with the domestic companies of China and India, as shown in the table, would

serve to be of great help for this particular section as much for the entire course of the research in

understanding the performance and the companies in lines with the coveted model of joint

venturing in the context of India and China (Malhotra, 2014).

.The events and performances of the joint ventures in the context of the two nations would be

done separately so as to devolve comparative analysis and also together to have an understanding

of the core of the concept as they apply in the two cases. With the help of the empirical literature

aided with the empirical evidences would serve to be the base of the reflection on the findings

that would be arrived at after the successful completion of the review of the empirical literature

and empirical evidences and would help the researcher as well as the readers understand the

various issues, both typical of the two nations as well as common, that influence the spread of

the foreign companies and their prospects in such economies in the form of the International

joint venture model (Ramanuj, 2012).

3.1 Gap in the empirical literature

The account of the empirical ;literature as identified and discussed in the preceding

chapter of this paper, deals with a number of factors and determinants that influence the roles

and activities of the various international business firms in the context of India and China but

there remain gaps in the discourse as provided and this gap paves the way for further future

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research and analysis for the enrichment of the literature on this given topic and for the better

examination and interpretation of the factors that have been overlooked by the researchers, as

seen in the above stated account.

The gap in the literature on this given subject matter can be related to , among others, the aspect

of the developmental phases of the nations and the effects of the same on the investment policies

and tendencies of the domestic companies towards off-shore business destinations and also the

tendencies and the likelihood of the foreign companies towards investment into the particular

nation and the trajectory of the interplay among the domestic and foreign companies dictating the

stature of the economic maturity, FDI-based or import-export based growth and development of

the particular nation (Bhattacharya, 2012).

This aspect, though crucial in the given context, had never found prominent mention or analysis

in the discourse of research based studies on this subject matter, until recently. The studies

conducted in line with the aspects of the Investment development Path and the relationship of the

same with the given context has proved to be a noted contribution of the defenders of the eclectic

paradigm propagated by John Dunning in his eclectic paradigm model theories (Dunning, 1993).

Thus, this gap, as identified paves the way for further researches and academic scrutiny based on

the aspects related to the developmental phases of e nations and the aspects related to inward

investment. The concept of the Investment Development plan or the IDP, the building up or

making available of the commercial, infrastructural and legal systems for the efficient

functioning of business on the part of the foreign companies on the domestic land and also the

communication systems and human resources made available for the purpose are important

factors that influence the aspect of the location-based attractiveness and as the investment by

domestic and foreign firms would grow, the internalization aspects are also deemed to increase

so as to yield the competitive advantages (Dunning, 1993).

Moreover, the gaps identified in the empirical literature can also be related to the aspects related

to the strategic relationships between the business firms and the ways the same can influence the

aspect of international production and investment by foreign firms in the domestic markets. This

also defines the aspects of cross-border strategic partnerships and relationships between business

firms and cross-border economic activities are these serves as the reflectors of the likeliness of

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the domestic as well as the foreign firms to tap the technological and economic opportunities

provided by market and business destinations or business firms, and hence encouraging foreign

investment and economic activity (Malhotra, 2014).

Another illuminated gap that can be identified in the empirical literature as mentioned in the

preceding section can be related to the aspects upheld by the modern “Journal of International

Business Studies” which deals with the “reappraising the Eclectic Paradigm in an Age of

Alliance Capitalism”. This journal helps identify the gap in the empirical literature has it deals in

detail with the evolving dynamics of competition and cooperation vis-à-vis resource creation and

tapping of income-generating assets. This takes the discussion to bring under i5ts ambit the

aspects of creation and tapping of innovative and income-generating assets not merely by virtue

of the internal mechanism but also by the virtue of the harnessing and tapping the income-

generating assets and competencies of other firms through a cooperative and harmonious

relationship (Dunning, 1993).

All these aspects bear testimony to the fact the dynamics of the researches and studies on

foreign direct investment, international trade and the spread of foreign companies have evolved

with time and have experienced significant chang3es with each phases of the discourse seeking

to address the gaps identified in the preceding studies, just like the subject itself and the gaps

identified and discussed in the preceding section are the ones that construct the hitherto discourse

of studies and research on this given subject.

As such, a major portion of this research paper would deal with the proper identification of the

gaps, their examination and analysis and the filling of the gap as identified in the account of the

empirical literature and devolving the aspects that have been overlooked by the researchers and

scholars who have set forth such aspects.

As such, the identification of the gaps and the rationale for the research takes the researcher to

the aspects that found mention in the Eclectic Paradigm and the OLI model as advocated by John

H. Dunning. The concept advocated by him in his famous work the Eclectic Paradigm related to

the identification of the variables of the Location advantages, Ownership advantages, and

Internalization advantages apart from the fact that the basic tenet of the internalization theory

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which states that the transactions within the organization take place when the costs associated

with the transaction in the outside free market are higher than the internal ones (Davies, 2011).

Hence, in the course of this research paper, the concept and theories advocated by John H.

Dunning in the Eclectic paradigm would form a major portion of the theoretical construct and

would serve to be the base for the analysis and interpretation of other concepts, theories and

frameworks as well.

The relationship with such gaps in research and the dynamics of this subject matter in the

hitherto times places John H. Dunning’s theory of Eclectic Paradigm and the OLI model in a

strategic position to identify and address uch gaps present in the empirical account presented.

3.2 OLI model of John Dunning and justification of its application for the given topic

The theory advocated by John H. Dunning is an important theory that has found wide

scale application in the analysis of the concepts related to foreign direct investment by

enterprises and the factors that influence the decision making and profitability on their part to

invest in an off-shore destination and the profitability of such a venture analyzed through the

variables that Dunning added to the erstwhile internalization theory in his famous work of the

Eclectic paradigm, also known as the OLI model. The basic tenet of the internalization theory

deal with the fact that the transactions within the organization take place when the costs

associated with the transaction in the outside free market are higher than the internal ones and

Dunning, in his mentioned work sought to add the dimensions of the Ownership advantages,

Location advantages and Internalization advantages in the examination and analysis of the

factors that influence the decision making on the part of the organizations pertaining to their

engagement in foreign direct investment (Agrawal and Khan, 2011). In line with the first

dimension or the Ownership advantage, the author has stated that is essentially refers to the

competitive advantages associated with the ventures on the part of the organization engaging in

foreign direct investment taking into account the aspects of “trademark, production technique,

entrepreneurial skills and returns to scale” (Bagchi and D'Costa, 2011).This entails that the

firms with greater competitive advantages are likely to engage in foreign direct investment.

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The eclectic paradigm has laid special stress on the aspect of the location-based advantages of

the nations that act as a potent determinant of the extent to which the organizations are able to

profitable produce in foreign land. The aspects related to the geographical clustering of foreign

direct investment and the diversification theory with stress on the aim of the MNEs to have “all

eggs in one basket” so far the geographical dimension of foreign direct investment is concerned.

Hence, this factor deals with the alternative choices for locations in the form of nations or other

geographical divisions vis-a-vis the prospects of the foreign direct investment in order to add the

added value to the activities and results of the organizations engaging in foreign investment.

The variables that the theory takes into account are “Existence of raw materials, lower wage

rates, taxation and tariffs” (Bose, 2012).

The factor of the internalization advantages takes into account the aspects related to the benefits

that emanate from the within the organization production instead of licensing other partners to do

so and more the benefits of internalization of the product markets the more is the likelihood for

the organization to engage in the endeavor of foreign production (Dunning, 1993).

3.3 Critical evaluation of John H. Dunning’s Eclectic paradigm and the OLI model The critical evaluation of John H. Dunning’s Eclectic paradigm would be based on the

propositions and on the fact that the international production by the virtue of the foreign direct

investment can be gauged by the configurations of dynamics of the forces mentioned below:

The first forces refers to the advantages or the competitive edge over the national firms of the

domestic destination in supplying or catering to the markets of that particular destination by

virtue of either the possession of or access to superior income-generating assets that attribute the

competitive advantage to the former. This competitive advantage can also be owed to the

efficiency in the ability to coordinate and arrange the resources or the assets in cross-boundary

management that help the firms enjoy upper hand over the competitors or the potent rivals (Bose,

2012).

The second force necessarily deals with the extent to which the business organizations hold the

perception that the internalization of their markets would lead to the generation of added value

by virtue of more effective and efficient use of the assets or the income-generating resources and

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capabilities and competencies. The third force deals with the extent to which the business

organizations decided positively to indulge in such activities and processes that may attribute

added value in a foreign business destination. In the same breath, it has to be mentioned

specifically that it emanates from John H. Dunning’s Eclectic paradigm that the significance of

the competitive advantages that each of the three forces or the interplay among them attributes is

not anything that can be deemed to be universally applicable and one that holds equal value

across different circumstances. Instead, John H. Dunning’s Eclectic paradigm specifically

mentions that the advantages stemming from these factors or the configuration of the three can

be varied depending of the sector of the industry, the national particularities and dynamics, as

well as the business organizations involved in the activities in an off-shore destination (Bagchi

and D'Costa, 2011).

So to say, the differences in the competitive advantages, as mentioned in the preceding section,

provide logical justification to the statement that the best application of the John H. Dunning’s

Eclectic paradigm or the OLI theories can be related to it being a framework for the analysis of

the factors that determine the dynamics of international production and as such, cannot be

regarded as a fool-proof theory for the prediction of the actions, activities and the success for the

multinational enterprises. It is a fact that has been provide through in de-th research and analysis

that there cannot practically be a single, all-encompassing and fool-proof theory that claims to

address all the value added aspects on international production on off-shore destinations. As

such, the applications of John H. Dunning’s Eclectic paradigm or the OLI model can be deemed

to be effective and applicable so far the context of international production is specified and well-

defined (Agrawal and Khan, 2011).

3.4 Criticism of the OLI model and John H. Dunning’s Eclectic paradigmThe criticism of John H. Dunning’s Eclectic paradigm can be related to the point that the

variables taken into account for the purpose of it serving as a framework for international

production in foreign destinations are so numerous and lengthy that the value that emanates from

prediction makes it almost zero. Other criticisms can be related to the aspects of the

independence of the variables taken into account in this concept and on the basis of which the

concept applies. As such, the variables, as suggested by the critics, are dependent on a range of

factors and interdependent to a great extent and the dynamics of one or two can have significant

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effects on the other variables and thus, considering such variables is both faulty and misleading.

On the other hand, several critiques have emphasized on the aspects related to the insufficiency

on the part of John H. Dunning’s Eclectic paradigm or the OLI model to suggest strategic

response for the firms in the context of the variables identified in the concept that are the very

determinants of international production. Critics have also suggested that the approach and

concept of John H. Dunning’s Eclectic paradigm or the OLI model provide for a static approach

and insufficiently approaches and addresses the dynamics of the internationalization of the firms

that indulge in foreign business and the range of factors that also affect the course of business

and the various business processes (Agrawal and Khan, 2011).

The Kojima criticism forms another important construct of the critical discourse on John H.

Dunning’s Eclectic paradigm and the OLI model. Kijima opines that the approach adopted in the

John H. Dunning’s Eclectic paradigm or the OLI model, alike the internationalization scholars,

are confined within the micro- economic boundaries and do not take into account the macro-

economic aspects that are as important as the micro-economic factors when gauging the

dynamics of international production on the part of the MNEs.

Notwithstanding the criticisms and the logic they hold, the modern aspects that have been

extracted, in a sense, from John H. Dunning’s Eclectic paradigm and the OLI model can be

related to the recent efforts by the defenders of John H. Dunning’s Eclectic paradigm in the

course of the extension and redefinition of the eclectic paradigm. The concept of the Investment

development path or the IDP is one of the most astounding developments related to this

extension and reconfiguration of the eclectic paradigm. The application of the John H. Dunning’s

Eclectic paradigm in the context of the evolving and changing statuses and positions of the

various nations in terms of the aspects related to the different phases of development and the

corresponding policies and actions towards important and export. The application of John H.

Dunning’s Eclectic paradigm or the OLI model in this context suggest that the course of the

development of a nation has considerable effects on the investment opportunities and likelihood

by firms of other nations into it and on the other hand, of the domestic firms into other nations

and this trajectory has a lot to do with the economic development of the nation, in the broad

sense of the term with relation to the investment policies and actions of the demotic firms

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investing in off-shore destinations as well as the international forms seeking to invest in that

particular nation (Wei, 2013).

3.5 Linking with the eclectic paradigmNotwithstanding the contribution made by the critics to the discourse on this subject

matter, it would still be pretty justifiable to link the theories and concepts with the Eclectic

Paradigm and the OLI model. The criticism that relates to the comparison with the

internalization theory in terms of the merits and demerits is grossly inappropriate and so are the

criticisms related to the fact that it is inappropriate to term the internalization of firms as a

comparative advantage. However, it has to be accepted that the conventional foundations of the

eclectic paradigm are not very compatible in explaining and interpreting the diverse and complex

dynamics of internal production but it is a fact that the aspects that are explained and examined

using the OLI framework or the eclectic paradigm can be related to the mentioning of the fact

that the investment profile of a particular nation can display different attributes at a given point

of time the endogenous and exogenous aspects as mentioned in the account of the eclectic

paradigm also help in the application of the configuration of the OLI framework as opined by

John H. Dunning.

The criticism put forth by Kojima regarding the confinement of the eclectic paradigm within the

boundaries of micro-economics is also not entirely true as the difference between Kojima and

eclectic paradigm is not based on difference on reasoning and more on emphasis on macro-

economic factors in the case of the former and micro-economic factors in the case of the latter.

However, even the staunchest of the of the account of John H. Dunning’s eclectic paradigm

would not speak otherwise so far the criticism related to the need for the reconfiguration of the

OLI model to accommodate the aspects of the asset-acquiring or non-equity alliances between

firms. So to say, “an add-on dynamic component” to the eclectic paradigm of John H. Dunning

and “an extension of its constituent parts to embrace asset-augmenting FDI and cross-border

non-equity ventures” coupled with a more in-depth and more comprehensive “explicit knowledge

and acknowledgement of increasing role of the access of ownership of resources and

capabilities”, can help a great deal in attributing the appropriateness and compatibility to the OLI

model and the eclectic paradigm as a potent framework for efficient analysis of the given subject

matter (Agrawal and Khan, 2011).

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Summary of the chapter:The aspects covered within the ambit of this chapter have provided the researcher with the base

of materials to be accessed and interpreted to arrive at meaningful and logical observations and

findings. The materials have been so selected to ensure that they reveal the various facets or

dimension of the subject matter and present the latest developments in the field of research on

the given topic. The specification of the research approach and research philosophy further

contributed to the comprehensiveness and meaningfulness of this particular chapter.

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MethodologyThe primary idea behind this section of the research paper is to conduct a thorough

examination and in-depth analysis of the literary materials that are relevant and meaningful

considering the topic in hand so as to enable the researcher to identify the aspects that demand

more attention and intensive research and investigation. Higgins and Green (2005) opined “A

systematic review is a scientific tool that has been developed for appraising, summarising and

communicating the outcome and implication of or else uncontrollable quantities of research”.

The advantages of using the systematic review is evident from the words of Boland, et al.,

(2000) who stated that it was “the most reliable and comprehensive statement that involves

identification, synthesis and assessment of all available evidence, quantitative and qualitative, in

order to generate a robust, empirically derived answer to a focused research question” (Higgins

and Green, 2005, p. 191-222).

As such, the systematic review serves to be a highly effective and efficient tool in the collection

and analysis of empirically derived data in evidence based research studies. The literary

materials accessed for the purpose of the research have been filtered to take into account only

those which provide relevant and valid information about the spread of foreign companies in

India and China through the International joint venture model. The materials selected are

research articles reflecting the accounts of researches being done by prior researchers and hence,

the problem of reliability, authenticity and validity of data has been addressed. To ensure the

desired quality and reliability of data and information only the research articles of reliable

sources were accessed and information gathered from and the accounts provided by students

were avoided.

The research approach for the given research endeavor is positivism as the researcher would

arrive at specific observations and findings through the analysis and interpretation of the

materials available.

3.6 Search method for identification of studies

To have access to the relevant materials extensive search on Google and other databases like

Google Scholar, Ref Repository, JSTOR, SEEK a long with corporate affiliation databases etc.

19 | P a g e

were also taken help of. To streamline the process of searching and to filter the search the

keywords like ‘international joint venture in India and China’ were used. The reports and the

facts and figures regarding the companies that have come into a joint venture with domestic

companies of India and China would throw light on their plans, performance and output in the

practical scenario and would provide the researcher with real time data and information about the

prospects and results of the companies working in the joint venture mode in India and China

(Shenkar and Zeira, 1992)

The analysis of the topic would be, hence, based on the literature review conducted and also on

the facts and figures gathered in the process of the research from the reports, journals and articles

and the secondary data collected from the literature review would form the core of the research.

3.7 Inclusion and exclusion criteriaThe concept of inclusion and exclusion criteria is meant to streamline the research

process and avoid unnecessary and often counter-productive wastage of time and costs. For the

purpose of the present research, certain aspects were kept in mind and carefully taken care of

throughout the research. As the topic represents hitherto research discourse, the research articles

published between the years 2011-2015 were only considered to have access to the latest

findings and observations researchers have come up with. Moreover, research articles written in

other languages were avoided to prevent loss of precious time and heckle in translating and then

interpreting the same. Also the research accounts of students pursuing their courses were also

avoided. Research articles representing studies conducted on other nations were also avoided to

focus the research on India and China only.

3.8 Approach towards the researchThe research on the given topic would be analyzed by virtue of the literature review

based on theories and concepts that underscore joint venturing and foreign direct investment with

emphasis on the context of India and China. The subject matter of the research would be

approached from the information gathered from the literature review conducted from the range

of articles and reports as mentioned in the table attached above.

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3.9 Research ethicsResearch ethics is an imperative for researchers who wish to uphold the integrity of the

research paper. The concept of research ethics applies in this case so far the protection of data

and information collected from the mentioned sources is concerned in line with the Data

Protection Act of 1998 gains manipulation, distortion or plagiarism.

3.10 Reflection on the findingsBeing the researcher it was my responsibility to gather relevant and important

information from various important literature sources to have a proper understanding of the topic

and to provide detailed inputs regarding the investment of the foreign companies in the two

economies of India and China. For the purpose, apart from the close examination and detailed

analysis of the literature sources, I had also accessed the reports of the various companies

investing into China and India in the joint-venture model and this endeavor has enabled me to

identify and understand the particularities of each of the economies, the opportunities and

barriers, the threats and channels for further growth and mutual benefit (Campbell & Netzer,

2009).

The research has provided me with some important findings related to both the cases and they

can be related to the barriers and problems associated with the foreign companies investing in

India and China and also the ways the national policies and policies and strategies of the foreign

investing companies come into an agreement of adjustment to render the collaboration beneficial

for the investing company as well as the host nation (Gutterman, 2009).

The findings related to the Chinese context hint at the ways the dissolution of the traditional

barriers have led to prosperous growth of the different sectors of the Chinese economy marked

with active participation of the foreign companies and the manner in which and the extent to

which this has led to the increased competitiveness of the domestic economy of China. However,

on the other hand, the findings also hint at the structural changes that need to be brought into the

system to make investments easier, smoother and effectively beneficial for the domestic

economy as well as for the companies (Woodside & Pitts, 2006).

In the Indian context, the findings hint at the economic liberalization and the encouragement of

mutually beneficial foreign participation since the 1990s and the ways the same has helped the

21 | P a g e

Indian economy to come out of the traditional clutches and have rendered it as one of the most

prosperous in the world (Herzfeld, 1989). However, the findings also lay emphasis on the

barriers and the impediments related to policies, culture, society and the other related factors at

home that do not allow the participation of the foreign companies realize its full potential and

attribute the advantages to the best extent possible. The findings, on the other hand, also hint at

the bad effects uncontrolled and unmonitored foreign investment can have on the health of the

Indian economy and its people (Singh & Marjit, 2003).

On a whole, the findings have provided me with relevant and vital information about the role

played by the international joint-ventures in the spread of the foreign companies in India and

China.

22 | P a g e

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Investing

Country

Investors Country –

China

Sector Target nation justification

Germany BYD Auto

and Daimler

AG

China Automobile Opening up of the economy under the new economic policies of china leading to better policy incentives attracting foreign investment into the nation. Moreover, the nation has also progressed considerably in the field of science and development and boasts of a capable, efficient and young work force who can serve as prized assets for any organization. The political stability and impressive growth rates of the Chinese economy through the years and the enormous demand of products in the domestic market make China the favorable destination for foreign investment in the mentioned sectors.

Japan Changhe

Auto and

Suzuki

Corporation

China Automobile

France Hangzhou

Wahaha

Group and

Danone

China Food and

nutrition

Great Britain Tesco plc

and China

Resources

Enterprise

China Retail

India Reliance

Industries

Limited and

Shandong

Ruyi

China Garment

and clothing

USA Continental

structural

Plastics and

Quingdao

Victall

Railway

Group Co,.

Ltd.

China Construction

materials

Investing

Country-

Investors Country

– India

Sector Target nation justification

Germany Force Motors

and Man AG

India Automobile The economic liberalization policies of the post 1990s have had a bourgeoning effect on foreign investment into India and have since then led to various investments being made by some of the most renowned companies of the world into India in the form of the international joint venture model, the most illuminated ones being attached in the table. The competitiveness of the domestic economy, the price elasticity, the steady and consistent economic growth and policy incentives, the relaxation of tariffs and the new economic policies of the government have made India the appropriate destination for investment for the foreign companies in the sector mentioned in this table.

Great

Britain

Hinduja

Group and

Leyland

Motors

India Automobile

Sweden Volvo group

and Eicher

Motors

Limited

India Automobile

France Morgan

Stanley

Infrastructur

e and Isolux

Corsan

Concessione

s

India Engineering

and

construction

USA Wabtech

Corporation

and Texmaco

Rail and

Engineering

Limited

India Construction

Great

Britain

Mahindra

and

Mahindra

and `BAE

Systems

India Military

logistics and

transport

24 | P a g e

If real-life examples are to be considered, the recent developments in science and technology are to be taken into account coupled with the development of tech savvy and computer educated youth and entrepreneurs in India and china have led to the investments by the automobile companies like BMW or Hyundai. Similarly, the relaxation of the bidding rules and the relaxation of the FDI regulations have led to better and healthier competition among the global manufacturers and suppliers of defense equipments, transport and logistics evident from the investment by the BAE systems in India. As such, being recognized as the future seats of economic powers of the world and being counted among nations having the best potential human resources, coupled with the policy incentives, less strict regulations and monitoring and low entry barriers have contributed to the investment by a number of foreign companies in India and China in the form of the international joint venture.

25 | P a g e

26 | P a g e

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