J. Service Science & Management, 2010, 3: 84-90
doi:10.4236/jssm.2010.31010 Published Online March 2010 (http://www.SciRP.org/journal/jssm)
Does Learning Process Mediate the Relationship
between Social Control and Production Innovation
of International Joint Ventures in China?
Cheng Wang, Hailin Lan, Hongming Xie
School of Business Administration, South China University of Technology, Guangzhou, China.
Received October 23rd, 2009; revised December 2nd, 2009; accepted January 16th, 2010.
ABSTRACT
A comprehensive model that delineates the interrelationships among social control, learning process and production
innovation in international joint ventures is absent. This study aims to fill this void. Unlike previous research, this study
investigates the role of social control, in facilitating learning process and production innovation in China. In our
framework, we argued that learning process mediated the impact of social control on production innovation. In order to
test the feasibility of this framework, we conducted an empirical study. This study employed a survey instrument, which
contained data collected from 300 organizations international joint ventures in South China. A total of 96 usable re-
sponses were analyzed. The results indicate that social control has a positive impact on learning processes and produc-
tion innovation. Learning process partial mediate the influence of social control on production innovation. The impli-
cations of the study are provided, and future research is suggested.
Keywords: Learning Process, Production Innovation, Social Control, International Joint Ventures
1. Introduction
International joint ventures (IJV) are now a common
organizational form. Increased international joint venture
activity has been seen as one of the major changes in
international business environment in the past decade.
The exercise of managerial control has been one of the
most important subjects in the IJV literature. Control has
long been recognized as an important aspect of an or-
ganization’s management of exchange relationships. Al-
though control considerations are important for any or-
ganization, they are especially so when managing organ-
izational exchanges across diverse national environments.
The major function of control involves bringing about
conformance to organizational requirements and achieve-
ment of ultimate purpose of the organization.
While the literature reflects a fair amount of effort di-
rected toward an understanding of control exercised as
well as its antecedents and consequences [1–3]. It pro-
vides very little, if any, guidance about the effectiveness
of various control mechanisms across different innova-
tion modes used in structuring international principal
agent exchange relationships.
Although firms form IJVs for a variety of reasons, in-
terorganizational learning has become an important ra-
tionale for their creation [4,5]. While an IJV’s parents
often seek to learn from one another, IJV learning from
its foreign parents is considered to be essential for its
survival, hence, the realization of the parents’ strategic
goals [6,7].
Consider first technology-related capabilities. A highly
technologically turbulent environment is characterized by
a short cycle of technological innovation and obsoles-
cence. In high turbulence, technology-related capabilities
(such as innovation) should enable an IJV to shape or
react to these environmental conditions [8]. For example,
the timely introduction of new products to replace obso-
lete products may become crucial to firm success [9].
The purposes of this study are: a) to examine the role
of social control in facilitating learning process; b) to
realize the impact of learning process on the effect of
adopting social control to facilitate production innovation.
This article proceeds as follows. First, the theory of
social control is examined, focusing on the role of dis-
tinctive capabilities in innovation-based competitive
strategy. Second, the conceptual framework describing
the focal constructs and theoretical relationships intended
to be tested is discussed. Third, the method used to test
the hypotheses is discussed. Next, the results, based on
analysis of data collected from 96 firms of international

Does Learning Process Mediate the Relationship between Social Control and Production Innovation of International Joint Ventures in China? 85
joint ventures in China, are presented. The paper con-
cludes by discussing implications for innovation theory
and practice, identifying limitations of the study and pro-
viding directions for future research.
2. Theoretical Backgrounds and Hypothesis
2.1 Social Control
For many decades the topic of control has been a source
of considerable discussion and thus it is not surprising to
find a variety of approaches to conceptualizing and op-
erational sing control.
Social control represents an informal control mecha-
nism based on prevailing social perspectives and patterns
of interpersonal interactions within a firm. In socially
controlled exchange relationships, behavior is specified
by the organizational culture, and performance is viewed
as a social obligation maintained via mechanisms of so-
cial pressure [10]. Social control relies on implicit or-
ganization wide culture to monitor agents’ behavior and
to orient them toward organizational rather than paro-
chial goals.
Similarly, socially controlled relationships are charac-
terized by shared values and a common sense of well-
being among members. Reliance on social control in ex-
ternal relationships assures that each partner is being
treated fairly which in turn facilitates community inter-
ests fostering greater relationship flexibility. However, in
internal exchanges, social controls are expected to be
especially instrumental in making agents feel an integral
part of the team, fostering shared values and aligning
interest thereby leading to much greater relationship
flexibility and adaptability. As a result, principals and
agents can adopt a longer term perspective by balancing
immediate results with long term nurturing relationships
with each other. This is necessary because existence and
continuity of social control requires stability of the ex-
change partners which in turn necessitate compromise
and adaptability.
Through the process of socialization and indoctrina-
tion, the agents can be accounted wide latitude enabling
them to respond to conditions quickly and in a manner
consistent with long-term organizational goals and objec-
tives. The socialization process can be used to create
shared values and common interest among independent
parties to encourage flexible and negotiated adjustment
as well as to improve economic performance in terms of
both sales growth and market share increases. Further-
more, by using social controls that sanction rather than
punish risk taking, agents can be encouraged to try inno-
vative approaches to achieve organizational performance
objectives [11].
2.2 Learning Process
Acquiring knowledge related to those capabilities from
foreign parents critical to the transitional economy IJVs’
survival. As noted earlier, the survival of the IJV is a
prerequisite for the domestic and foreign parents to
achieve their goals. It is also a prerequisite for the do-
mestic government to achieve its goals [12,13]. The
common interest of all stakeholders in the survival of a
transitional economy IJV creates strong incentives for the
IJV and its parents to focus on its learning from the for-
eign parent. Hence, the analysis of organizational learn-
ing has become an increasingly important study area in
international joint ventures. Organization learning in-
volves the basic elements and processes of organizational
development and growth. From a learning perspective,
organizations grow when there is an increase in shared
understanding involving the organization, its environ-
ment and the relationship between the two. A parent
adopting a learning-oriented cooperative strategy usually
possesses clear learning intent, which, in this study, re-
fers to the level of desire and will of the parent with re-
spect to learning from the international joint venturing
experience.
Discussions of individual learning generally refer to
the product of the learning process as changes in beliefs
(or cognition) and changes in behavior. The term skill is
often used to describe behaviors for which an individual
has developed a level of expertise or proficiency. In a
reliable learning process, an organization develops
common understandings of its experience and makes its
interpretations public, stable and shared. In a valid learn-
ing process, an organization understands, predicts and
controls its environment. As organizations engage in
learning efforts, neither reliability nor validity is assured
because different people and groups in an organization
approach historical experience with different expecta-
tions and beliefs. As we found, shared understanding
about the value of IJV learning experiences was often
obstructed by the variety and differences in managerial
beliefs.
2.3 Production Innovation
Resource-based theory views a firm as a unique bundle
of tangible and intangible resources and emphasizes the
protection of firm core competencies comprising these
resources. Staying on top of innovation and creativity in
business is necessary for a business to stay ahead of the
competition. New product introduction indicates the po-
tential significance of a firm’s innovation activities. New
products are a central mechanism by which organizations
diversify, adapt, and reinvent themselves in changing
market and technical conditions [14].
In the past 20 years, many potentially useful typolo-
gies have been proposed, each providing insight to our
understanding of the innovation process. Three of the
most popular typologies are based on the distinctions
between administrative and technical innovations, prod-

Does Learning Process Mediate the Relationship between Social Control and Production Innovation of International Joint Ventures in China? 86
uct and process innovations, and radical and incremental
innovations [15,16]. Technical innovations include prod-
ucts, processes and technologies used to produce prod-
ucts or render services related to the basic work activity
of an organization. Product and process innovations are
distinguished based on the different areas and activities
that each of them affect within the firm [17]. Product
innovations are outputs or services that are introduced for
the benefit of customers or clients.
Accordingly, the following hypothesis is advanced:
H1: The higher the level of social control, the higher
the level of learning process
H2: social control is a function of its production inno-
vation
H3: learning process will significantly impact on pro-
duction innovation
In order to explore the impact of social control and
learning process on production innovation, we developed
the research framework in Figure 1. There are two re-
search questions. a) Does social control play a role in
facilitating learning process? b) Does learning process
mediate the effect of social control on facilitating pro-
duction innovation?
3. Methods
3.1 Sample
Data were collected from international joint ventures of
China through a survey instrument. An initial version of
the survey instrument was developed based on the the-
ory-grounded operationalization of the various constructs.
This version was subsequently revised through pretesting
with academic and experts. The multiple phases of in-
strument testing and development resulted in a signifi-
cant degree of refinement and restructuring of the survey
instrument as well as establishing the initial content va-
lidity [17]. We had three sampling criteria: the firms had
to be 1) at least 1years; 2) at least 50 employees; 3)
manufacturing and service firms in South China. We
received responses from 118 of 300 IJV firms, a response
rate of 39.3 percent. Of the 118 returned questionnaires,
16 were excluded because they did not meet all sampling
criteria and 6 were excluded because of incomplete ans-
Figure 1. Research framework
wers, leaving 96 usable responses. Hence, our usable
response rate was approximately 32 percent.
Location and age data on no respondents indicate no
significant differences between respondents and no re-
spondents. Because those responding late are argued to
be similar in composition to no respondents, we also
tested for response bias by comparing early against late
respondents. We found no significant differences in
terms of sales, employees, or international sales. The
results of statistical tests for response bias suggest that
our sample is representative of the firm satisfying our
criteria.
3.2 Reliability and Validity
Factor analysis using principal components factor
analysis with factor extraction and VARIMAX rotation
was conducted to examine the convergent and dis-
criminant validity [18]. The four commonly employed
decision rules were applied to identify the factors [19]:
1) minimum Eigen value of 1; 2) minimum factor load-
ing of 0.4 for each indicator item; 3) simplicity of factor
structure; and 4) exclusion of single item factors. Reli-
ability was evaluated by assessing the internal consis-
tency of the indicator items of each construct by using
Cronbach’s α [20].
The results of factor analysis relating to convergent
validity are shown in Appendix.
3.3 Measures
Social control represents an informal control mechanism
where monitoring occurs through interpersonal interac-
tions. As Jaeger and Baliga (1985) [21] notes, in socially
controlled exchanges, one would expect the interactions
between the principal and foreign agents to be weighted
in favor of personal contacts such as visits, social meet-
ings, and use of expatriates. Based on this conceptualiza-
tion, a five-item scale was developed to capture the in-
formal interactions and socialization opportunities in
principal-agent relationships. Alpha coefficient for this
five item scale is 0.80.
Following Chou (2003) [22], learning process consist
of decision to contribute and decision to adopt. For an
individual to contribute knowledge one has to formulate
the tacit and explicit knowledge about what has been
learned, what the problems were, what kind of know-
how I used to solve the problems, and what the context
for a solution was. The other activity for ‘contribute’ is to
delivery such knowledge to the person who needs it. In
order to do so, knowledge has to be represented in a way
that is meaningful and easy to understand to others. In
order to adopt knowledge, an individual has to search for
the possible solutions and match the problems to the ap-
propriate solutions. Alpha coefficient for this seven-item
scale is 0.85.

Does Learning Process Mediate the Relationship between Social Control and Production Innovation of International Joint Ventures in China? 87
Product innovation was adapted from the scale devel-
oped by XIE Hongming and Wang Cheng et al. (2007)
[23]. Product innovation is measured by a five-item scale.
Production innovation Alpha coefficient for this five-
item scale is 0.85.
4. Analysis and Results
The means, standard deviations and correlations of all the
variables are reported in Table 1. The bivariate correla-
tions show that similarity is significantly related to social
control, learning process and production innovation. Al-
though the bivariate relationships support our hypothesis,
we use structural equation modeling approach to actually
test the hypothesis, thereby taking into account any rela-
tionships between the latent variables and observable
indicators.
A structural equation modeling approach was applied
to the data using the AMOS version 7.0 software packing.
Figure 2 and Table 2 shows the results of the competing
model analysis. Although the χ2 statistic for each model
is significant, other relevant fit indices indicate good
overall fit. The results show that learning process partial
mediates the relationship between social control and
production innovation. First, positive relationships exist
between social control and learning process (H1: β=0.27,
t=2.099) and learning process and production innovation
(H3: β=0.36, t=2.913). Second, the significant relation
ship between social control and production innovation
Table 1. Means, standard deviations, correlations
Multi-item scales Means S.D. 1 2 3
(1) Social control 3.316 0.663 1.000
(2)Learning process 3.826 0.498 0.276*** 1.000
(3) Production innovation 3.330 0.695 0.447*** 0.412***1.000
indicated in the direct effects model (β=0.53, t=3.681), it
is also significant in the partial mediation model (H2:
β=0.44, t=3.286). Together these three points provide
compelling evidence that there exists a partial mediating
effect of learning process on the relationship between
social control and production innovation.
5. Conclusions and Discussions
This study investigated the role of social control in fa-
cilitating learning process and production innovation.
Based on 96 respondents from organizations in manu-
facturing, the service industry of international joint ven
tures in China, we found that the functions of social control
have a positive impact on the organizational learning
processes. We also examined the impact of learning
process on the adopting of social control to facilitate
production innovation. Two interesting results were
found. First, learning process is related to the effect of
adopting social control to facilitate production innovation.
Second, learning process partial mediates the influ-
Social control
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Q3.8.3
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Q3.8.4
.6 7
Q3.8.5
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.07
Learning
proces s
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q4.2.4
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e42
e44
.41
Production
innovation
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.57
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.45
q4.2.5
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e48
e49
.55
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.57
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.27
.36
.44
.63
.68
.7 6
.50 .82
.71
.74
.7 5
.78
.71
.59
.67
.62
.67
.76
.7 6
.71
Figure 2. The overall theory model and parameter

Does Learning Process Mediate the Relationship between Social Control and Production Innovation of International Joint Ventures in China? 88
Table 2. Test results that learning process partial mediate the influence of social control on production innovation
Parameter Direct effects model Partial mediation model
Hypothesized paths
Social control →Learning process — 0.27(2.099)
Social control →Product innovation 0.53(3.681) 0.44.(3.286)
Learning process →Product innovation — 0.36(2.913)
Goodness-of-fit statistics
χ2 =53.624 =204.397
d.f. =34 =116
GFI =0.903 =0.809
Comparative fit index(CFI) =0.947 =0.871
Tucker-Lewis index(TLI) =0.930 =0.849
RMR =0.044 =0.051
RMSEA =0.078 =0.090
ence of social control on production innovation. Unlike
previous research, this paper examines the impact of so-
cial control on production innovation in a more compre-
hensive way. First, we integrate social control, learning
process and production innovation in a theoretical model.
Second, we conducted an empirical study to specify the
learning process that mediates the influences of the adop-
tion of social control on facilitating production innova-
tion. By emphasizing the features of social control, we
may facilitate the effect of learning process. On the other
hand, we cannot overlook learning process, since it may
increase or decrease the effect of production innovation.
The implications of this study are three fold.
First, this research explores the social control features
that may facilitate learning process. Some of the features
are new in supporting learning process. Understanding
the features of learning process that facilitate organiza-
tional learning is very helpful for management. Manag-
ers should emphasize the learning process.
Second, understanding the characteristics of the or-
ganizational learning process in an in international joint
ventures environment may help us to design the facili-
tating mechanisms accordingly. The difference of the
organizational learning process between in international
joint ventures and regular environment is therefore wor-
thy of future research.
Finally, our empirical study identified social control
and learning process synergistic affect production inno-
vation. In order to obtain the most effective way of pro-
duction innovation, it is crucial that managers develop
social control adopting strategy. This study further sup-
ports the belief that production innovation should be
congruent with the learning process international joint
ventures. To promote production innovation, firms shou-
ld actively manage their learning processes. Whenever a
new IJV is set up, its learning potential has to be care-
fully evaluated. Management should examine wheth- er
the IJV provides novel and useful management experi-
ence and whether knowledge can be acquired from other
partners of the IJV. The evaluation step has to be fol-
lowed by allocating appropriate resources for the purpose
of learning. To exploit the learning potential identified
above, clear objectives with respect to learning have to
be set for managers who are sent to work in the IJV.
Like all research, this study has left some unanswered
questions that suggest avenues for future research. First,
our sample of South China may not be representative of
China. Thus, a direction for future research would be to
test the various hypotheses in this study using a broader
sample of China. Further, the sample size, 96 IJV, was
relatively small, which might account for some of the
marginal effects that we observed; future research should
aim to replicate this study with a larger sample. Second,
the use of data and analysis do not allow the possibility
of bidirectional (feedback) effects to be explored. Future
studies can collect longitudinal data to assess such bidi-
rectional (feedback) effects. Longitudinal data may also
be sought in future studies in order to explore the causal
link between social control, learning process and produc-
tion innovation. The model proposed and tested in this
study is based on the notion that learning process partial
mediates the influence of social control on production
innovation. However, as a relationship develops, the
model may also affect the evolution of a mix of control

Does Learning Process Mediate the Relationship between Social Control and Production Innovation of International Joint Ventures in China? 89
mechanisms used to achieve desired production innova-
tion. Hence, an interesting approach for future research
would be a longitudinal analysis of how control mecha-
nisms used in production innovation. Third, we discuss
only social control; we believe researchers should in-
clude control mechanism other than just social control
when studying the production innovation of international
joint ventures in China.
6. Acknowledgement
This research was supported by National Natural Science
Found of China (Key Program) under Grant 70832003,
National Natural Science Fund of China (NSFC) under
Grant 70572095 and 70972108, Program for New Cen-
tury Excellent Talents in University under Grant NCET-
07-0308.
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Does Learning Process Mediate the Relationship between Social Control and Production Innovation of International Joint Ventures in China? 90
Appendix
Table 3. Social control (five indicator variables; Cronbach’s
α = 0.803
Factor loadings
1. We often have social meetings where our firm manag-
ers and foreign agents interact with each other 0.745
2. We frequently send our managers to this foreign
country to update our agents about product changes 0.763
3. Our firm managers make frequent trips to this for-
eign country to meet with our agents 0.810
4. Our foreign agents make frequent trips and visit our
business headquarters 0.605
5. We provide training to our foreign agents in our
business headquarters 0.834
Table 4. Learning process (five indicator variables; Cron-
bach’s α = 0.852
Factor loadings
1. Employees are wiling to contribute their expertise 0.668
2. I can contribute my working experience easily 0.744
3. A learning community may eliminate temporal and
spatial constraints 0.675
4. My problems will be solved by adopting col-
leagues’ opinions 0.725
5. I can obtain the solution for a specific problem from
a learning community 0.796
6. To solve the problems that may have in work prac-
tice, I need more innovative ideas 0.783
7. Learning community will facilitate the creation of
innovative ideas 0.752
Table 5. Product innovation (five indicator variables; Cron-
bach’s α = 0.854
Factor loadings
1. This organization’s new products acquire many
innovation prizes 0.768
2. This organization develops abundance products 0.804
3. This organization has more patent than others 0.805
4. This organization mostly profit result from new
products and service 0.831
5. This organization seeks out and acquires new tech-
nologies of improving process 0.781