Emerging Multiplicity

With two-thirds of the world population living in Asia, and with the corresponding increase of Asian purchasing power, has come the stimulation and emergence of various approaches to business development. Historians and geographers, as well as scholars from other disciplines from the West and from Asia, have long since contributed with research and pushed the frontiers of our knowledge in many areas. However, research on ‘business development’ — within the disciplines of Management Science and International Business — is of recent origin. The economics of nations, the business models of corporations as well as the daily lives of many consumers have evolved such that we need the work of researchers to help us understand these trends. To combine parts into a whole is often a valuable contribution in research, a contribution which this book aims to make. In addition to integration, the other important key factor in this book is responsiveness; that is, our striving to see ‘root causes’ and ‘responses to influences’. This book is an anthology comprised of contributions presented at the annual conference of the Euro-Asia Management Studies — EAMSA — in October 2003 in Stockholm. Twelve of the papers presented were chosen, of which ten were later rewritten for the purpose of this publication. The book is in three parts, each comprised of four chapters focusing on one of three major themes that run through this book. Part I is based on the theme that corporations and governments make major adjustments in order to realign their positions to new realities.

One of the significant lessons for an executive going into Asia for the first time, and expecting to do business there, is that the region is highly varied, in some ways much more so than most other regions such as Latin America, the Middle East or Europe. It is possible to argue, for example, that Sweden and Italy provide strong contrasts when first observed, but at least they are both products of a shared Christian civilizational heritage, both members of the same political grouping, both operating at a high level of GDP per capita, and both capable of constructing industries and complex firms with a global impact. Much of Europe’s variety is near the surface, and underneath there is much common ground. This is not true of Asia. There the contrasts — on the surface perhaps less obvious than those of Europe — are well below the surface and much more likely to lead to the separating out of different societal formulae. As the famous historian of Chinese science, Joseph Needham, once observed in considering the contrast between China and Japan, the latter is so much closer to Europe and so different from its neighbour that you might just as well tow it away and anchor it off the Isle of Wight.

The Swedish experience of the recovery from the financial system crisis with quick structural reform has often drawn attention as one of the best practices from policy-makers in various countries. For instance, the International Monetary Fund in its 1997 report counted Sweden as one of the five ‘substantial progress countries’ (Dziobek and Pazarbaşioğlu, 1997). In the discussion on the financial system crisis in Japan, the Swedish case had appeared rather sporadically until the mid-1990s (Yoshino, 1994; Masumura, 1997), but it attracted much attention in the 1998 Diet session where the recovery measures from financial crisis were discussed most intensively. Japanese policy-makers have shown their interest in the Swedish case more often since then, but most previous observations, however, have merely focused on the technical aspect. Hence, the ordinary pattern is to point out some advantages and disadvantages of such policy measures as the nationalization of problem banks and divestiture of bad assets, and to discuss the applicability of those measures to Japan.

In this chapter a summary comment is offered on the global integration versus local responsiveness issue from both theoretical and commercial perspectives. The issue is introduced through reference to its theoretical development in the marketing and business strategy literatures, followed by an equally brief reality check by noting a few contemporary business decisions, apparently made with the need for enhanced local responsiveness in mind. There then follows a closer look at some specific, heavily foreign-invested industries in which both global versus local tensions might reasonably be expected to be present and informative. These are the Thai auto industry and the Chinese computer and optical frame industries. Using only publicly available information, it will be seen that at the present stage of world development the globalization of supply chains and of manufacturing is probably moving faster than the much earlier-heralded globalization of markets; and that the latter will experience intensified competition leading to enhanced local responsiveness.

The aim of this chapter is to examine the strategies employed by Japanese automobile manufacturers in East Asia in the context of the post-crisis transformation of the region’s political economy. Flying-geese (FG)-type models of foreign direct investment (FDI) have made valuable contributions to our conceptual understanding of Japanese MNC FDI, the international division of labour and economic development in East Asia. However, the increasingly diverse and complicated reality of the contemporary political economy may render these models overly simplistic and consequently of limited analytical value.

International stakeholder management of MNCs in emerging markets focuses on the social context of the MNC, with a major premise being that this strategic context differs from the Western market context. Institutional theory, models from international business, resource-based theory, stakeholder management, corporate social responsibility (CSR) and legitimacy are integrated into a coherent theoretical framework. This development is based on case study methodology, where stakeholder management in Malaysia is used to illustrate the theory developed. The matching strategy, that is, the correspondence between the strategies employed and successful outcomes, makes it possible for the MNC to legitimize its operations by adapting to the values, norms and thought styles of the stakeholders. One major way of achieving legitimacy is the demonstration of social responsibility. Through this kind of matching strategy, social values and environmental concern are created among the various stakeholders, which may lead to societal advantages and, in the end, sustainable competitive advantages. The main factor behind the matching strategy is the MNCs managerial and organizational processes, which are shaped by the values, norms and thought styles of the internal institutional environment, and are constrained by institutional elements external to the institutional environment.

One of the most marked characteristics of globalization has been the dynamic restructuring of industrial value chains.¹ This restructuring has been both a major driver of globalization while itself being driven by globalization. The outsourcing of corporate functions has lead to greater specialization and fragmentation in value chains and the off-shoring of activities are the main features of this transformation. It creates risks and opportunities for corporate and political actors, and its evolution is highly uncertain for all parties. A state of equilibrium in a new international division of labour is not yet apparent.

Whereas research has been carried out on multinational enterprises’ (MNEs) attempts to balance global integration and local responsiveness, there has been hardly any research into the degree to which foreign firms respond to differences that exist between themselves and their local joint venture (JV) partners in host countries. This chapter discusses MNEs’ responsiveness to inter-firm differences in IJVs as a special case of MNEs’ responsiveness to differences that exist between home and host country. We also highlight the role of perceptions for (empirical) research into firms’ decisions about the degree of responsiveness. Based on empirical data gathered by means of a questionnaire survey among 76 managers representing German partner firms of German-Chinese IJVs in the Peoples’ Republic of China (PRC), we provide some empirical evidence for the importance of individuals’ perceptions of responsiveness. A first finding of this study is that MNEs’ responsiveness in the specific context of international joint ventures warrants further scholarly attention and is of high practical relevance for firms interested in improving the management of their IJV. A second result of this chapter is that perceptions need to be taken into account when empirically studying the degree of local responsiveness of MNEs.

In this chapter, data on the establishment of wholly-owned foreign subsidiaries in China are used to study to what extent the prior existence of wholly-owned subsidiaries in a host country has the effect of legitimizing this form of subsidiary. The legitimization process is explored applying institutional and ecological perspectives at the population level, rather than as a firm-level phenomenon. The results will show that the establishment of wholly-owned subsidiaries was related to the prior existence of both wholly-owned subsidiaries and joint ventures in China, and that this legitimizing effect spilled over from foreign investors in other industries and from other home countries.

After the foundation of the People’s Republic of China (PRC) in 1949, China’s existing market economy was gradually transformed into a socialist economy. To achieve rapid industrialization the first Five-Year Plan (1953–57) stressed the development of heavy industry on the Soviet model. In addition, the government began to collectivize agriculture and nationalized banking, industry and trade. Private enterprises were virtually abolished by 1958, and after ongoing brutal suppression during the Cultural Revolution from 1966–76, private business was close to extinction at the time when economic reform began. The 3rd Plenary Session of the 11th Central Committee of the Communist Party of China (CPC) in December 1978 made the strategic decision to shift the focus of the Party’s work to socialist modernization and formulated the basic national policies of reform and opening-up. Although the plenum itself made no specific announcements concerning private business, it signified the official adoption of economic modernization and growth as a paramount concern. It emphasized economic development and individual incentives, which gave impetus to the revival of private business (Liu and Wu, 1988). Small private businesses were expected by the Chinese government to provide the goods and services that had been neglected by the state, state-owned enterprises and collectives in the years before. Serious unemployment was one of the immediate issues that had to be tackled by the reformers. Opening the private sector to absorb the unemployed seemed to be a viable policy option at this time.