Self-selection, socialization and budget control in the PRC: a study of a U.S.–Sino joint venture and Chinese state-owned enterprise

Abstract

This study examines a range of self-selection (alternatives and achievement motivation) and socialization (Western training and indoctrination) factors that are likely to be related to the use of formal budget controls in a U.S.–Sino joint venture (JV) and its state-owned Chinese partner in China. The formal budget mechanisms comprised participation in budget setting, budget emphasis in performance evaluation, and merit-based reward structure. Hypothesised relationships were set up between these variables and tested using a LISREL path model. The analysis was confined to a survey of 63 Chinese sub-unit managers in a single U.S.–Sino JV and its state-owned enterprise (SOE) partner in the advertising industry. The relationships between manager self-selection, socialization practices, and the use of merit-based rewards were found to be significant, regardless of the type of entity. The results indicate that self-selection (achievement motivation) and socialization processes are important co-determinants of the use of formal budget controls in the China context. This study is one of the firsts to test the role of self-selection and socialization in the management control of organizations in China.