Control mechanisms in Sino-German joint ventures

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Joint venture parent companies utilize various control mechanisms to achieve their objectives within the venture. Key elements include the joint venture boards of directors, top management compensation, and career development, which serve to safeguard and provide resources for the realization of parent goals. Interviews with 25 top managers from Sino-German joint ventures reveal several findings: (1) The parent company with a majority stake appoints the chairman of the board. (2) Shared equity ownership results in a larger board compared to majority ownership. (3) Joint venture top managers typically receive fixed salaries and bonuses, but rarely deferred compensation like stocks or options. Ventures that offer bonuses to their top managers tend to perform better than those that do not. (4) Compensation for joint venture top managers is often covered by the venture itself rather than the parent company, with better performance noted when the venture pays fixed salaries. (5) German parent companies are more proactive in appointing joint venture top managers compared to their Chinese counterparts, and these managers often continue to work with the parent firms post-tenure. (6) Interestingly, a top manager's prior experience with the parent firm does not significantly impact joint venture performance.