Globalization of Chinese Enterprises

Citation

Lamond, D. (2008), "Globalization of Chinese Enterprises", Chinese Management Studies, Vol. 2 No. 3, pp. 229-231. https://doi.org/10.1108/17506140810895915

In his Foreword, John Childs (2008, p. xi) notes a reality with which companies and governments around the world are currently grappling – China is the largest source of foreign direct investment (FDI) outflows among developing and transitional economies. The results of two McKinsey Quarterly executive surveys on competition from emerging markets and Chinese markets confirm the increasingly large steps that Chinese companies are taking on the world stage −40 percent of executives around the world see China as their single greatest source of competition, while most executives at companies based in China say their long term aspiration is to become globally competitive (McKinsey and Company, 2008). Nearly 60 percent of their Chinese respondents say they are active outside the mainland. The reported drivers of their international expansion included increased competition at home, encouragement by the state and the international moves of their domestic competitors.

It is timely then to examine the globalisation of Chinese enterprises, which is the subject and title of this book by Ilan Alon and John McIntyre.

To mark this important shift in the direction of investment, the question posed by Li's (2008, p. xiii) preface is not “Who's coming to China?”, which has been the overwhelming focus of the literature that has considered “investment” and “China” to date. Rather, he asks “Where is China going?” and provides a useful series of street signs, linked to the role of firms in institution building. The broader answer to Li's question is proffered in various combinations by this collection of conference papers, presented at the same‐titled conference, “The Globalization of Chinese Enterprises”, held at Rollins College, Florida, in November 2006, and collected and ordered by Alon and McIntyre into the book's four parts – I resources and outward FDI by Chinese companies; II institutional considerations – new pathways; III regional implications: following or leading?; and IV case studies.

In Part I, Chapter 2, the first substantive chapter, presents case studies of Haier, Lenovo and TCL as examples of asset‐seeking FDI, with the companies seeking to overcome competitive disadvantage vis à vis their global competitors, at least in capability terms. The McKinsey (2008) survey of Chinese executives confirms that, among the top three challenges for Chinese companies undertaking activities outside mainland China, are lack of managerial talent and inadequate understanding of legal and reputational risks in other countries (the third, interestingly, is lack of sufficient capital).

It is one thing to buy “new knowledge”, but it is another to absorb this knowledge and reflect it throughout the total organisation's operations. Chapter 3 explores how this learning takes place, while Chapter 4 seeks to identify the gaps in the learning.

According to its title, Part II's focus is on the importance of the institutional context within which Chinese firms are globalising their operations, and it begins with Chapter 5 examining the role of the Chinese state and its policies. Chapter 6 goes on to consider, given the Chinese institutional context, the extent to which focus or diversification strategies have been more or less successful as approaches to internationalisation, finding that firms with a focus strategy perform more successfully. Chapter 7 details the business activities of a Chinese state‐owned enterprise (SOE) in Malaysia, as a basis of a case study of how one company develops and implements its internationalisation strategy in response to the institutional pressures it experiences.

Part III, titled “Regional implications: following or leading”, is said to consider the “regional impacts of China's globalization” (p. 7), on Vietnam (Chapter 8), on South Korea (Chapter 9), Taiwan (Chapter 10) and Northeast China (Chapter 11). Chapter 8 proceeds by way of the “flying geese” metaphor, examining the extent to which Vietnam might advance in the path of China, as China moves labour intensive activities to Vietnam to obtain cost advantages. Chapter 9 offers a comparison of the development of South Korea's business conglomerates (chaebol) and China's SOEs, while Chapter 10 identifies “the determinants of domestic interfirm network utilization in the internationalization process of Taiwanese SMEs”. Chapter 11 examines global strategies of multinational companies (MNCs) operating in the electronics industry in northeast China, as basis for identifying corporate strategies and policy measures for nurturing Chinese MNCs in that region.

Part IV presents a collection of case studies from selected industry sectors, with Chapter 12 proposing a framework for identifying the likelihood of specific Chinese automobile manufacturers exporting their products, while Chapter 13 looks at Huawei (China's largest telecommunications equipment provider) and Chapter 14 presents the Wuliangye Distillery as an example of a Chinese global consumer company. The book's conclusion is a thoughtful and insightful series of “final reflections”.

Individually and collectively, the book and its constituent parts offer a series of useful learning points, and it is worth the investment of time to explore those parts. On the other hand, while the authors have toiled to bring a coherence to the selected papers through the ordering and styling of the papers, they ultimately fail to effectively integrate what are at times disparate theoretical (or, with the latter case studies, atheoretical) approaches, straining at subject unity. This is not a gestalt of the globalisation of Chinese enterprises. A few other aspects of the book “niggle” for this reader.

The resource based view of the firm and institutional theory are presented as the lingua franca of the book and its constituent parts, and most of the earlier chapters pay due heed to these as organising frameworks. The further one delves into the book, however, the more disentangled are the analyses from these explanatory approaches. Indeed, by the time of the case studies, there is no mention of these at all. In this regard, there appears to be an inconsistent use of “resources”, with McIntyre (p. 222) discussing “resource‐seeking behaviour” in terms of commodities (energy sources and metals), while earlier Deng (p. 17 ff) devotes a chapter to the firm's “strategic resources”, being its knowledge and capabilities. One can see how the two uses are within a broad appreciation of the term, but tighter editorial attention would have addressed that kind of variation for the reader.

The use of the cases is more troublesome for the purposes of structure and content. It is not clear, for example, why Chapter 7 (a Chinese SOE operating in Malaysia) is not presented with the other cases. The auto industry case proffers an explanatory model, but the Huawei and Wuliangye cases are less studies than descriptions. Finally, closer attention to the grammar and spelling would have paid dividends, avoiding awkward sentences and the use, for example, of “adsorptive” rather than “absorptive”.

Notwithstanding some of the observations above, this book is an important reminder of the changing shape and direction of FDI as far as China and its enterprises are concerned. It provides valuable information about the globalisation of Chinese enterprises and is a worthy addition to your reading list.