Globalization with Chinese characteristics

Citation

Alon, I., Chang, J., Fetscherin, M., Lattemann, C. and McIntyre, J.R. (2009), "Globalization with Chinese characteristics", Chinese Management Studies, Vol. 3 No. 1. https://doi.org/10.1108/cms.2009.32303aaa.002

Globalization with Chinese characteristics

Article Type: Guest editorial From: Chinese Management Studies, Volume 3, Issue 1

Only in the last few years has the international business literature begun to examine the impetus, consequences and impact of the increasing globalization of China and Chinese firms (Alon and McIntyre, 2008). Despite the fact that in 2008, 29 Chinese companies were among the Fortune 500 listed companies and more are expected in the coming years, the phenomenon itself is relatively recent and the available data are just beginning to be able to provide some answers to the fundamental research questions of motivations, strategies and impact of the march of Chinese enterprises out into the world.

Despite the current economic crisis around the world and in China, the questions that animated an October 2008 Harvard conference on the globalization of Chinese firms remain important. And, indeed, in order to better understand and thus prepare for future growth, those questions are of even more salience. What are the motivations, strategies, and impact as Chinese enterprises respond to their government’s encouragement, and admonition, to “go global”

Although the impact of the 2008 financial crisis in China is not yet fully revealed, it is safe to assume that the trend in the last decades for the Chinese private sector to increase its share of GDP growth will (at some point) continue and Chinese firms will continue to expand internationally. The state in China will continue to be involved in the evolution of market capitalism with Chinese characteristics (Huang, 2008) but innovation and entrepreneurship will increasingly be driven by private enterprises (Huang, 2008; Khanna, 2008).

For many of these private enterprises, increased internationalization is inevitable. The choice of strategies, the implementation and execution of those strategies, the political environments they are entering and the impact on local competition are the subject of the research on the China goes global international project. This project sponsored a conference at Harvard’s John F. Kennedy School of Government in October 2008 to examine the questions introduced above.

This special issue of Chinese Management Studies presents four of the over 60 papers presented at the October conference. Those papers provided a comprehensive overview of China’s globalization activities. From the macro to the micro, these papers looked at topics as diverse as different styles of entrepreneurship across regions in China, the role of international standards on China’s environmental protection, firm-level decisions in overseas acquisitions, and the political implications of increased Chinese management capacity just to name a few of the notable themes. The papers presented here were chosen for the quality of their analysis, their contributions to advancing the state of the knowledge in this research area, their focus, and for their ability to represent the various themes of the conference.

In the article, “Do China’s ‘national team’ business groups undertake strategic-asset-seeking OFDI?” [1] Dylan Sutherland looks at the experience of so-called “national teams” or the large companies anointed by the Chinese Government to succeed internationally. He finds that “much of China’s OFDI is probably involved in resource seeking and market-seeking activities (particularly trade related) as opposed to strategic-asset-seeking,” with the concomitant observations that trans-national activity is driven by national development goals as much as strategic-asset-seeking, and serve to facilitate China’s growth as a trading nation.

In their article, questioning the value of official statistics in research on Chinese overseas investments, Yun Schüler-Zhou and Margot Schüller provide a useful analysis of how official data do not provide the whole picture. “The internationalization of Chinese companies: what do official statistics tell us about Chinese outward foreign direct investment?” finds that most of China’s cross-border mergers and acquisitions (M&A) activity takes place in the mining and manufacturing sectors of developed countries. Drawing on the Dealogic database, the chapter provides an informative look at the development patterns of Chinese cross-border M&A transactions in terms of geographical and sectoral distribution and with regard to the equity participation of Chinese companies investing abroad.

The article by Monica Yang, “Isomorphic or not? Examining cross-border (M&A) by Chinese firms, 1985-2006”, looks at the issue of isomorphism in overseas activities by Chinese firms. Is there a tendency towards imitative behavior, or a “flying goose” pattern in foreign M&A choices? In particular, the paper reflects on the tension between conformity (legitimacy) and differentiation (competitive advantages) in corporate strategy during the process of deciding to invest overseas. While the study shows a tendency towards differentiation in decisions to go global some aspects of conformity do exist.

Doug Fuller, in “China’s national system of innovation and uneven technological trajectory: the case of China’s integrated circuit design industry”, looks at the integrated circuit industry to examine the successes and failures of China’s national system of innovation. In determining what kinds of firms in China contribute to technological development (or upgrading), Fuller first defines a typology of firms in the high-tech sector: neglected domestic, favored domestic, hybrid and regular foreign-invested enterprises (FIE). The “politics of finance” and “the operational strategies of firms” also affect the patterns of technological development. He finds that what he calls the “hybrid FIE”, firms that have a China-based operational strategy combined with foreign capital and hard budget constraints have contributed the greatest to China’s technological upgrading, which is “defined as using local Chinese human resources to create products that are closer to the international technological frontier than those products commonly created in China.” This article also examines the cases of two “returnees” to illustrate the role that access to foreign financing plays in this market.

Taken as a whole, these articles show that those Chinese firms that are involved in international activities can benefit from the access to foreign capital, education and technology that the reform era has allowed. Increasingly, successes of Chinese firms are positively affected by the role of ethnic networks, technological upgrading and overseas education and networks. Nevertheless, it should be mentioned that the discussion at the conference also showed that there are many challenges to overcome nationally and internationally and many Chinese firms are also failing or at risk of bankruptcy especially in the current economic downturn.

This special issue also includes a book review by Syed Anwar about the recent book Billions of Entrepreneurs: How China and India Are Reshaping Their Futures and Yours written by Tarun Khanna. Both the author and reviewer were also present at the China goes global conference.

What this special issue has tried to show is the range of diversity and options available to Chinese firms as they contemplate going global. The choices they make, the methods of implementation and their responses to changing environments reflect a uniquely Chinese approach to the business literature. What, then, is globalization with Chinese characteristics? Three factors stand out. First and foremost, the Chinese state maintains a significant level of involvement in firm activity. Secondly, neither Chinese firms nor Chinese markets were protected like their counterparts in the Asian “dragons” from foreign competition early in the reform years. And finally, a strong pool of foreign reserves provides a healthy foundation for portfolio investment. As the activities of Chinese enterprises beyond China’s borders continue to expand, so do opportunities for further research. Above all, solid data on enterprise activities and decision-making processes are needed. Governance issues will become more and more important. These include corporate governance activities but also a better understanding of the relationship between the state (Chinese and foreign) and enterprises. The guest editors hope that this special issue will spur thinking about further avenues of research on the activities of Chinese firms and the implications of those activities for China and the world.

Ilan Alon, Julian Chang, Marc Fetscherin, Christoph Lattemann, John R. McIntyreGuest Editors

Note

1. Outward foreign direct investment.