And then there are all the regulatory requirements to contend with in China. Google came to China and ended up doing quite well in search -- simply because the quality of its search was quite good compared to Baidu. Yet, Google left China because its co-founders couldn't accept dealing with the onerous regulatory requirements.
The most successful American in China in the last 10 years -- arguably, of course -- is Yahoo! But that wasn't a JV. Yahoo! was lucky enough to back the right horse in Jack Ma of Alibaba. They got a heck of deal in taking 40% of his company for $1 billion (with Jack's consent of course). But even in this success, Yahoo! has found out that success in China can come at a cost. Jack Ma removed the profitable Alipay unit from the ownership of Yahoo! earlier this year. After Ma had received some assessments that Alipay could be worth $30 billion if it was a public entity, he opted to compensate Yahoo! and Softbank (owners of 70% of Alibaba Group) $50 million for Alipay with a potential earn-out for the Group owners with a cap of $6 billion. Ma and his Alibaba Group management team decided to take on the rest of the upside to Alipay. American Internet firms should JV at their own risk in China.