The China Venture

factor which makes the foreign firm attractive to its potential Chinese partners. Access to
foreign markets is yet another attractive factor.
Having something attractive to offer one’s potential partner provides one with a basis for
negotiation. Successfully conducting the negotiation and working successfully with the
business partners to make the cross-cultural venture a success, requires cultural understanding
and knowledge.
Matthias Kästner, a doctoral student at HSG and a director of a high-tech company wrote:
3.3 Making a High - Tech Market Entry (by Matthias Kästner)
Economic reforms under Deng Xiaoping led to a massive increase in foreign trade and to
substantial foreign direct investment in China. Having realised that modern technology is
essential for sustainable economic growth, China favours ventures with a high technology
content. Multinational companies and overseas Chinese investors were the early movers in
this new market. To date many MNCs have established considerable operations in China
whereas Western small and medium sized enterprises (SMEs) are still largely
underrepresented. Only recently, foreign governments have started to promote China -related
trade and foreign direct investment by SMEs through special funds, export guarantees, sino-
foreign trade fairs and other means of support.
The purpose of this paper is twofold:
• First, to identify factors which influence the choice of market entry strategies for high-tech
SMEs for the Chinese market. Previous research concentrated mainly on determinants
which are relevant for the decision making process within large multinational companies,
while it was largely ignored that the market entry choice by SMEs may depend on different
factors. Therefore, it is interesting to have a closer look at SME relevant determinants.
Special focus is given to the role of technology, which is expected to have a significant
impact on the market entry mode decision of SMEs.
• Second, to help SMEs understand their strategic assets, strengths and weaknesses in
bargaining situations with Chinese authorities, customers and partners.
Interviews with Swiss, German and Austrian SME managers revealed that prior to China
activities most preparation is spent on the investigation of the Chinese market potential and
understanding the legal issues. Both are certainly prerequisites for success, however, they are
not sufficient. Usually, little time is spent on evaluating and understanding the company’s
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