Conflict and Innovation: Joint Ventures in China (International Comparative Social Studies)

Conflict and Innovation: Joint Ventures in China

International Comparative Social Studies Series Editor

Wil Arts Editorial Board Duane Alwin, University of Michigan, Ann Arbor, USA Wil Arts, Tilburg University, The Netherlands Mattei Dogan, Centre National de la Recherche Scientifique Paris, France S.N. Eisenstadt, Hebrew University Jerusalem, Israel Johan Galtung, Professor of Peace Studies, France Linda Hantrais, Loughborough University UK Jim Kluegel, University of Illinois, Urbana-Champaign, USA Chan Kwok-bun, Hong Kong Baptist University, Hong Kong, China Frank Lechner, Emory University Atlanta USA Ron Lesthaeghe, Free University Brussels, Belgium Ola Listhaug, Norwegian University of Science and Technology Trondheim, Norway Rubin Patterson, University of Toledo USA Eugene Roosens, University Leuven/Louvain, Belgium Masamichi Sasaki, University of Tokyo, Japan Saskia Sassen, Columbia University, New York, USA John Rundell, University of Melbourne, Australia Livy Visano, York University Toronto Canada Bernd Wegener, Humboldt Universität zu Berlin, Germany Jock Young, Middlesex University, London UK

VOLUME XI

Conflict and Innovation: Joint Ventures in China Edited by

Leo Douw and Chan Kwok-bun

BRILL LEIDEN • BOSTON 2006

This book is printed on acid-free paper.

Library of Congress Cataloging-in-Publication Data Conflict and innovation : joint ventures in China / edited by Leo Douw & Chan Kwok-bun. p. cm. — (International comparative social studies, ISSN 1568-4474 ; v. 11) Includes bibliographical references and index. ISBN-13: 978-90-04-15188-8 ISBN-10: 90-04-15188-5 (hardback : alk. paper) 1. Joint ventures—China—Management. 2. International business enterprises—China—Management. I. Douw, Leo. II. Chan, Kwok-b. III. Series. HD62.47.C66 2006 338.8'7—dc22 2006043930

ISSN 1568-4474 ISBN-13: 978 90 04 15188 8 ISBN-10: 90 04 15188 5 © Copyright 2006 by Koninklijke Brill NV, Leiden, The Netherlands. Koninklijke Brill NV incorporates the imprints Brill Academic Publishers, Martinus Nijhoff Publishers and VSP. All rights reserved. No part of this publication may be reproduced, translated, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without prior written permission from the publisher. Authorization to photocopy items for internal or personal use is granted by Brill provided that the appropriate fees are paid directly to The Copyright Clearance Center, 222 Rosewood Drive, Suite 910, Danvers, MA 01923, USA. Fees are subject to change. printed in the netherlands

CONTENTS Acknowledgements .................................................................... 1. Introduction: Differences, Conflicts and Innovations: The Emergence of a Transnational Management Culture in China .................................................................. Chan Kwok-bun and Leo Douw 2. The Role of Middlemen in the Localization of SinoForeign Enterprises: A Historical Approach ...................... Leo Douw 3. Conflict and its Management in Sino-Foreign Joint Ventures: A Review .............................................................. Xun (George) Wang, Chan Kwok-bun and Vivienne Ho Luk 4. Negotiating Spaces ................................................................ Peter Peverelli

vii

1

23

47

72

5. Sino-Singaporean Joint Ventures: The Suzhou Industrial Park Project .......................................................................... Alexius Pereira

95

6. Sino-German Joint Ventures: Shared Values and Cultural Divides .................................................................... Irmtraud Munder and Renate Krieg

116

7. Indigenous and Expatriate Managers in Sino-German Joint Ventures: Natural Antagonists? .................................. Kerstin Nagels

139

8. Human Resource Management in Sino-German Joint Ventures in China: Building for the Future ...................... Monika Schaedler

157

9. Gender in Cross-Cultural Management: Women’s Careers in Sino-German Joint Ventures ............................ Renate Krieg

184

vi

contents

10. Conflict Management Strategies and Innovation in Sino-Japanese, Sino-Korean, and Sino-Taiwanese Joint Ventures in China .............................................................. Chan Kwok-bun and Vivienne Ho Luk 11. Conflict and Innovation in International Joint Ventures: Toward a New Corporate Culture in China .................. Chan Kwok-bun, Vivienne Ho Luk and Xun (George) Wang List of Contributors .................................................................. Index ..........................................................................................

208

241

275 279

ACKNOWLEDGEMENTS Three meetings contributed to the production of this book. The first was a panel on ‘Transnational management: China and Singapore’ at the International Convention of Asian Scholars in Berlin on 9 August 2001. This was followed by a seminar in November 2001, organized by the School of Business at the Department for Applied Business Languages and International Management/China at the Bremen University of Applied Sciences in Germany. There was also a workshop on ‘Politics of Culture in Transnational Management: China during the Twentieth Century’, on 23–24 May 2002, as part of the International Conference on ‘China in the World in the Twenty-First Century: Hot Development Issues in Contemporary China’, organized by the David C. Lam Institute for East-West Studies (LEWI) and the Wing Lung Bank International Institute for Business Development (IIBD) at Hong Kong Baptist University on 22–25 May 2002. We acknowledge the contribution of these three institutes to the production of our book by facilitating the meetings. We also acknowledge the contribution of the Amsterdam School for Social Science Research at the University of Amsterdam and the International Institute for Asian Studies in Leiden and Amsterdam, which funded the travel costs of several of the participants. LEWI and IIBD paid for the copyediting costs during the book’s final editing stage. We would like to thank Vivienne Luk, Director of IIBD, for her personal support. Vivienne has always been a gracious colleague. Anna Lo and Christie Tang, the two secretaries at the Department of Sociology, Hong Kong Baptist University, have given us full secretarial support during the workshop in Hong Kong, and throughout the entire book’s editing process. Mike Poole, Chief Editor of Armstrong-Hilton Ltd., plays his role competently. We thank those participants, particularly David Ip, in the three meetings who did not write for this volume but contributed by providing comments on the earlier versions of many of the chapters. LD CKB

Chapter 1

Introduction Differences, Conflict and Innovations: The Emergence of a Transnational Management Culture in China Chan Kwok-bun and Leo Douw Business enterprises are somewhat marginal to the academic study of human society. Many of the social sciences take an interest in them, but rarely view them as sites in which the fullness of social life expresses itself. Mainstream economists consider enterprises as functional units that must be optimally equipped with technology, finances and information to survive and compete in the market. There is a fast growing body of histories of individual enterprises, but they are the preserve of specialist business historians and are marginal to the interests of mainstream historians. Similarly, some sociologists and anthropologists are engaging in the study of business firms, but most of them tend to leave the economy, let alone the business, to economists. The political scientists are focally interested in the state system, and usually take little interest in what happens at the micro-level, where companies are found. It is a major challenge for academic research to study companies as part of society that are deeply rooted in it, interact with it and act as social laboratories. The study of companies and interactions between them may connect all of the social science disciplines, and, if pursued in a proper manner, enrich them. This is what began to happen during the 1990s, when concepts such as ‘communication’, ‘identity’ and ‘culture’ represented a new interest in human or social relations, and also encompassed the sites or spaces in society where significant work was being done: government ministries and departments, schools, social work units, banks, the army, and, of course, companies. Communication sciences and cultural studies thus began to flourish, having adopted business management as an important field of interest; the economic sciences also started to take enterprises more seriously as units in which the character of social relations plays its part in the achievement of the best results.

2

chan kwok-bun and leo douw

Economic relations are first and foremost social relations. This insight of economic sociology applies in particular to the management of transnational enterprises, in which alienation occurred when managers and entrepreneurs with different national backgrounds set out to collaborate with one another as the new era of globalization dawned in the 1990s. This book intends to follow that trend of collaboration between nations and cultures. It takes Sino-foreign joint ventures as a case, which should help us to understand transformations in an age of flexible production, post-Fordism and the network society. The main theme of this book pertains to the emergence of a transnational management culture in China, one of the most dynamic workshops in the world. Articulating the theme in this manner immediately questions its basic premise: is the emergence of an integrated, if not homogeneous or unified, transnational management culture possible, or even desirable? One could imagine that a transnational or cosmopolitan culture would result, which is predictable to a large extent, and provides an optimal environment for the conduct of business. However, as much as such an environment may seem plausible, one also wonders how to construct it: if managers from different cultures cooperate, whose norms, values, mentalities, sensitivities and thoughts should prevail? For instance, is it possible to impose the Shell corporate culture on its Chinese branches? Or is it preferable that a balanced but dynamic amalgamation of various cultures be created? To whom befalls the task to engineer such an amalgamation? Most poignantly, should we limit our investigations to ‘cultures’ alone, while trying to transform them or adapt them to local circumstances? The Dynamics of Transnational Enterprises In the search for answers to these questions, much of this book comments on two premises that prevail in the literature on the role of culture in transnational management. One premise is that business companies are atomized units, which can be studied in isolation from their social environment. This hails from neo-classical economic theory, which is embedded in the political ideology of neo-liberalism and takes the free market as its starting point. It postulates that enterprises should compete with one another as equal participants in the market, without forming cartels or monopolies, and also with

introduction

3

the least possible support of the state. This premise has been criticized from the angle of institutional economics as well as political economy, but those disciplines are mainly interested in how corporations are linked to the state, and tend to take them as more or less closed units, the social functioning of which is often taken for granted. This book argues that a more radical approach is long overdue: business enterprises are organizations composed of people who cooperate and compete with one another in ever shifting combinations, have conflict among themselves, are connected to the outside world in many ways, and group and regroup from time to time to form new companies. Hence, a full understanding of companies cannot do without insights from the social sciences, which are typically interested in the interactions between actors and cultures from parts of different social worlds. This argument of ours coincides with a new interest of a growing, though still marginal, gathering of economists who have begun to go beyond the mathematical and numerical tradition of their field by moving their research methods and bringing their imagination closer to the social sciences in an attempt to embed economics in the study of wider non-economic and sociocultural factors. This new interest in ‘contextualizing economics’ can be partly explained by the increasing collaboration across the social sciences and the humanities. However, the main impetus comes from the business world itself. The merger mania of the late 1990s produced numerous multinational giants, many of which failed due to socio-cultural reasons. Many international joint ventures and multinational corporations have discovered that the cultural identities of their employees and many socio-political and cultural factors are crucial for corporate success or failure. As it happens, a host of socalled ‘soft factors’ have moved closer to the center of attention in international management circles. The other premise is that cultural conflict is a major problem for the management of transnational enterprises. Hofstede (1980) is the most influential purveyor of this view. He combines the investigation of cultures within multinational corporations with the idea that cultures are ‘mental programming’ that determine the behavior of people in a decisive manner. Hofstede’s method is attractive because it provides yardsticks with which to measure cultural differences: the so-called dimensions of culture, namely, power distance, individualism (versus collectivism), masculinity (versus femininity) and risk avoidance. Over the past two decades an academic industry has emerged

4

chan kwok-bun and leo douw

which has used questionnaires to conduct quantitative surveys based on Hofstede’s dimensions, and it has charted cultural differences within corporations all over the world. In this manner, much has been learned about the functioning of transnational companies, but it will be argued in this book that the fixing of cultural characteristics on survey populations has its limits. This book encourages the reader to radically position companies in the midst of society, and also look at transnational companies as sites in which different societies are represented and link up with one another in competition as well as in cooperation. This means that in a fully developed transnational business culture, both sides are aware of how the other side estimates the importance of any joint venture from the point of view of its own society. The chapters by Peverelli and Pereira, respectively, illustrate this most clearly. Peverelli uses the case study of a Sino-Dutch joint venture to illustrate the concept of ‘configurations’, defined as frequent interactions involving perceptions, ideas and worldviews amongst a number of actors who cooperate on a specific topic. He argues that Chinese managers usually take part in various hierarchies within the Chinese administrative and market structures, which are equally relevant to their job and career perspectives, but may have conflicting purposes. The continual shifting from one role to another that is performed effortlessly by the Chinese is often lost on the Dutch managers, which can result in many instances of conflict. Another, rather well known, example of how Chinese society can be dramatically misunderstood is the case of Suzhou Industrial Park in the mid-1990s. Pereira argues that the failure of this project must be partly attributed to the mistaken claims by the Chinese and the Singaporean governments that their shared Chinese identity would facilitate cooperation. The project was meant to transfer Singaporean management techniques to Chinese companies, but this was undermined by the municipal administrators, who had been left out of the project but took it over within a few years. Pereira stresses the importance of seriously considering local knowledge and local interests while international joint ventures are making adaptations to their contextual circumstances. An important part of China’s interest in foreign companies is its goal of economic development, hence the emphasis on the theme of unequal economic development between China and the Western world in our book. The role of compradors, or native business brokers, in Douw’s chapter illustrates this theme. Foreign firms employed

introduction

5

compradors during the nineteenth and early twentieth centuries to help them in their dealings with the Chinese state and with their counterparts in the Chinese market. Nationalist and Marxist political elites in China identified compradors increasingly with foreign economic interests in China, which were commonly perceived as an impediment to China’s own development. The slow development of China’s economy compared to the economies in the West and Japan required a stronger state than had long existed to manage the transfer of modern technology, capital and knowledge. Even though the activities of the compradors had learning or modelling effects as far as the training of indigenous workers was concerned, these were insufficient for the goals as defined by the new elites, and, after 1949, many of the comprador functions were taken over by the Communist state to speed up the modernization process. This unequal development and its effects on how the participants in Sino-foreign business ventures perceive each other linger on until today, and is part of China’s transnational business culture. This theme of unequal development continues in several other chapters. Munder and Krieg report that German managers in SinoGerman joint ventures attribute ‘traditional’ work values to their Chinese colleagues, whereas Chinese managers consider their German counterparts as ‘modern’: an element of learning is implied here in the sense that both groups feel that the Chinese should learn from the Germans to modernize their work habits. The background to these perceptions is complex, but it seems justifiable that mutually exclusive and widely diverging perceptions at least partly reflect unequal positions of members of the management staff, and should certainly not be taken to reflect existing work values, let alone work behaviour. The theme of learning is even more strongly present in Schaedler’s chapter, in which she argues that Anglo-Saxon style human resource management is to be introduced into Chinese management practice so that Chinese firms can survive in the global market, especially since China entered the WTO. The findings of Munder and Krieg and of Schaedler are confirmed by Wang, Chan and Luk’s analysis of the literature on conflict in Sino-American joint ventures: perceived cultural differences are often invoked as sources of conflict in joint ventures, though the exercise of power by foreign managers is clearly a source of tension in the human resource management hierarchy.

6

chan kwok-bun and leo douw Intra-Enterprise Differences: Complexities and Challenges

One of the most often cited factors associated with conflict in joint ventures thus pertains to the many alleged or perceived cultural differences between Chinese and non-Chinese workers. As pointed out in Chapter 2 by Wang, Chan and Luk, much of the literature on conflict in joint ventures explains disputes in terms of differences in cultures, values or preferred ways of handling conflict. Such a culturalist explanation focuses on things that supposedly set the Chinese managers apart form the non-Chinese, which often take the form of sharp and unbridgeable dichotomies: for example, Chinese particularism versus Western universalism. We have been told in the literature that Chinese managers stress the maintenance of the collective, ‘the group before the self ’, interpersonal harmony, conformity to the existing social structure and power hierarchy, face saving, reciprocity and guanxi (Kirbride, Tang and Westwood 1991). We have also been told that the Chinese prefer the indirect, informal, non-assertive, non-aggressive, accommodating, compromising way, and avoid the direct, formal, assertive, confrontational, aggressive and legalistic way. Questions arise about how much of these assertions is about real differences, and, more importantly, how much it is a consequence of social construction, a kind of self-fulfilling prophecy in the sense that one behaves to ensure what one has formerly predicted will indeed come true. Is it culture or is it an attribution to culture on the part of both sides, thus committing what social psychologists call attribution error? Is it culture or is it the politics of culture? Is culture merely a front, a political ploy, a smoke screen, a pretext? What is behind the closed doors of culture? What is it beyond culture, after culture? While some cultural differences are real, others are perceived, constructed in the eyes of the beholder, imagined, created artificially and exaggerated—as a result of encounters between two groups, consequently magnifying and hardening whatever initial differences they might have. The social psychologists call these prejudices, stereotypes or pictures in the head, the analysis of which has a long history in psychology, sociology and social psychology. Frederick Barth (1969; 1995) was among the first sociologists to point out that migrant communities tend to articulate values that they share with members of their host society more explicitly than their fellow countrymen back home. These claims of a shared culture or identity serve as the basis

introduction

7

for the migrants’ social organization and set them off against social groups in the host society. In this way, claims about culture gain added weight because of their social and political relevance. Similarly, in the 1980s and 1990s, claims of cultural affinity by politicians and businessmen in China, Taiwan, Hong Kong and Singapore served to bind business communities and the local officialdom together in their joint efforts to cooperate for mutual benefit (Douw 1999a; 1999b). Likewise in this book, we are interested to know what makes managers of different national backgrounds in Sino-foreign joint ventures claim that they either differ in culture from one another or share a culture—and how these claims work to affect the processes of cooperation and conflict. Many of these differences are in fact structural: for example, the wage differential between foreigners and Chinese, which seems to be the single most serious source of conflict in joint ventures, or differences in staff appraisal and evaluation both in terms of expectations and procedure. But these structural differences are often disguised as cultural differences due to seemingly unalterable values or ethos. Structural differences often find themselves being talked out (thus forming a discourse) in cultural, sometimes even racial, ethnic or national terms— culture is thus being racialized, ethnicized, politicized, nationalized, thus giving rise to intense emotions. We suspect that this propensity to politicize (and racialize and nationalize) structure is a rather prominent discourse in the everyday life of employees of joint ventures. In such a discourse, many things are traceable to culture or personality, a kind of ‘cultural or psychological reductionism’ which welltrained sociologists have long learned to avoid. A couple of interesting findings reported in the chapter by Wang, Chan and Luk have got us thinking out of the culture trap. First, Chinese and American managers have mutual stereotypical prejudices towards each other (Walsh, Wang and Xin 1999; in this book, see the chapter by Munder and Krieg). Second, Americans working in Sino-American joint ventures experience more hostility in conflict with other Americans than in conflict with Chinese counterparts (Doucet and Jehn 1997). There may well be other forces at work besides culture. Sharp dichotomies of cultural differences are often artefacts of the human mind, self-feeding and self-fulfilling when two groups or two persons insist they are different by manufacturing or imagining differences, thus making the two groups seem more different than

8

chan kwok-bun and leo douw

they otherwise would be. Internal cohesiveness and solidarity of the groups emerges as a result of inter-group contact. Cultural encounters may thus produce, harden and ossify differences. But the contrary is also possible: A and B encounter each other, and A changes in the direction of B, and B changes in the direction of A, sort of A and B altering each other, thus becoming more like each other than before. Coming out of such a process of cultural encounter, both A and B have been transformed, changed, hybridised (Chan 2003; 2005a; 2005b; 2005c; in this book, see Chapter 10 by Chan and Luk, and Chapter 11 by Chan, Luk and Wang). But such a kind of encounter, a very special kind indeed, presupposes a commitment: to first an appreciation of differences, but neither trying to eradicate them by insisting on assimilation, that is, making you to become like me, nor thinking that differences cannot be reduced at all; second, engagement in conflict, not fearing, not avoiding it, knowing that something good may come of it because conflict is a precondition of change, creativity, and innovation; and third, not allowing conflict to degenerate into a downward spiral of animosity and aggression, a lose-lose situation. All of these require a radical mental shift from a commonsensical fear of conflict, of conflict to be avoided and suppressed at all costs. Conflict and its Functions in Enterprise Management When it comes to conflict, we, laymen and specialists alike, have our blind spots. As a word, and as an aspect of social reality, conflict carries negative connotations. When it happens in relationships between people, or between organizations as in joint ventures, it is something to be anticipated and thus prevented, avoided, handled and managed, or even eliminated altogether. Again, the literature review by Wang, Chan and Luk has revealed a few rather interesting research findings that call this conventional wisdom into question, which perhaps might put us onto new paths of thinking about conflict and its management in joint ventures. First, a moderate (but not high, not low) level of (substantive) conflict is most positively associated with international joint venture performance (Hambrick et al. 2001). Second, conflict in joint ventures intent on developing new product processes has simultaneous positive and negative effects on performance (Xie, Song and Stringfellow 1998). Conflict is not to be

introduction

9

avoided because it could contribute to the venture’s success, particularly while searching for creative, innovative products or new ways of doing things. Conflict itself is not the problem; rather, it is how it is looked upon, approached, and handled—the stress should be on adaptation and improvisation. Third, the role conflict and role ambiguity of CEOs increases satisfaction with performance in joint ventures (Gong et al. 2001). Fourth, when conflict resolution processes are properly managed, international joint ventures are often energized! The satisfactory resolution of conflict indeed has positive emotional consequences; it puts new energy into the system, possibly elevating the system to a higher order of well-being. The use of constructive conflict resolution techniques is positively associated with more successful partnership (Mohr and Spekman 1994). All of these findings noted in the literature review are rather counter-intuitive, if not paradoxical, which may bring us all the way to the sociological classics, especially Simmel’s (1995) Conflict and the Web of Group-Affiliations and Coser’s (1956) The Functions of Social Conflict. Indeed, one of the objectives of our book is to argue that conflict in joint ventures cannot be explained by cultural analysis alone: we must take account of power struggles and the construction of alliances across otherwise shifting cultural borders. Also, the linkages between joint ventures and the larger society and its politics must be studied to comprehend the inner workings of these business enterprises. The chapter by Wang, Chan and Luk reports that Chinese managers not only can use the ‘traditional Chinese way of handling conflict’, but they can also learn and apply the Western way. Chinese values do not necessarily impede ‘cooperative conflict’. Chinese managers are open to cooperative conflict, are interested in knowing about it, participate in it, use it and appreciate it. Sharp cultural dichotomies are mental, not empirical. They should be considered in relation to more widely ramified social contradictions, which change over time. There are structural contradictions between entrepreneurs and workers, officials and non-officials, and representatives of different age groups. We suspect that the Westerners are eager to implement in China the corporate culture of their parent companies in terms of liberalism, procedural transparency, encouraging self-motivation and commitment to the company rather than the self, emphasis on creativity, role flexibility and interchangeability, problem solving, continuous self-development, meritocracy, anti-discrimination, and so on. Yet

10

chan kwok-bun and leo douw

the implementation of this foreign corporate culture has met with resistance in China, the degree of which varies depending on whether the Chinese managers and workers have been trained in ways sympathetic to Western ways of management, or whether they are more comfortable with the traditional Chinese state enterprise style informed by communism, control and authoritarianism. This Chinese resistance is in fact more nuanced and sophisticated than it appears on the surface. We suspect several processes and dynamics are at work here. First, Chinese managers are ambivalent about Western ways, attracted to parts of them (for example, transparency, reward based on merit and performance) but also not liking other parts (for example, the preoccupation with techniques, science, rationality or rationalism). There could also be good reasons why Chinese managers are ambivalent about their own Chinese ways of doing things. Ambivalence is indeed a very powerful emotion, putting the actor in a bind. Second, Chinese managers feel that their local knowledge and expertise are not being fully respected and used, thinking that they have something valuable and useful to teach their non-Chinese colleagues: for example, the importance of patience, face saving, human relationships and local connections ( guanxi ), and proper ways of dealing with Chinese officials. Sociologically, we are best reminded of the importance of the context, of contextualizing and localizing things. Conceptually, we are dealing with the classic problem of technology transfer to a foreign land and with how a foreign ideology or way of doing things manages or fails to manage its implementation in a foreign land. Third, foreign managers are eager to operationalize and institutionalize their corporate culture, and to put in place a system which stresses universalism (which fights age and gender discrimination, cronyism and nepotism) rather than particularism (for example, hiring based on personal connections rather than competence). This eagerness to institutionalize a foreign practice in China is met with resistance because the local managers insist on the importance of adaptation to the local context, to the local ways of doing things, which, theoretically, sets the stage for a dialectic of the foreign against the local. Fourth, some foreign managers, especially those who have worked in China for years and have wisely learned to adapt to the local context, may think and behave differently from their bosses back home in the parent company who hold the final power—which sets up another dialectic between expatriate managers and the senior management of their parent compa-

introduction

11

nies. In this case, the expatriate is eager to change but folks back home are less enthusiastic about it. Fifth, Chinese mangers trained in Western management are hybrids, marginal or translated men and women (Rushdie 1991; Chan 2005a; 2005b; 2005c) who live on the margins of two cultures, two social worlds, the Chinese and the non-Chinese, that don’t mix, or perhaps only mix in the longer term. While they may well be agents of cultural change in the joint ventures, they also have their share of anxiety and nervousness because they may well be distrusted by both sides because they belong to neither. They have then become strangers in their own country. It has often been argued that people with mixed cultural backgrounds would be eminently suitable for the negotiation of differences amongst business partners in joint ventures. As Douw points out in his chapter, the history of the compradors, however, makes it clear that companies have a tendency to avoid the use of such intermediaries, because it is cheaper to negotiate through one’s own managerial staff, which makes operations more controllable. There is another problem with intermediaries: a double cultural identity may entail competing claims of loyalty to both sides that use their services. Nagels’s (Chapter 7) interviews with Chinese students who were trained in Germany and consequently worked in Sino-German joint ventures reveal precisely this kind of personal dilemma. Ip’s (2002) study of the experiences of Australian Chinese entrepreneurs in China suggests that these hybrids, as brokers of an emerging transnational management culture in China, have been surprised by the politics of identity. Ip finds that overseas Chinese operating in China, despite their assumed cultural affinity, have to renegotiate and reconstruct both their displayed and personal identities, making strategic assertions across innumerable transactions in their daily life and in business operations. Seen in this context, they have become too preoccupied with the fluidity and malleability of their identities to effectively broker cultural differences. The Negotiation of Culture and Power Two chapters of this book, by Schaedler and Krieg, respectively, concern themselves with two groups of ‘invisible actors’ who are at the forefront of contributing to change in transnational management culture: women and human resource managers. Schaedler laments

12

chan kwok-bun and leo douw

about Sino-German enterprises overemphasizing the technical and engineering skills of managers while overlooking the interpersonal and cross-cultural skills of the human resource personnel who nevertheless are often implicated in conflict and disputes in international joint ventures, and who are therefore at the forefront of change in corporate culture. Like human resource managers, German women managers working in Sino-German enterprises in China conduct themselves as important, though largely invisible, agents of change as far as the transformation of transnational corporate culture in a foreign land is concerned. The problem of power and its relationship with cultural bordercrossing comes out most clearly in the case of women, who work in transnational enterprises: women mangers find themselves in a marginal or even marginalized position in their places of departure where local cultural and systemic barriers prevent the full entry of women into positions of power. But migration is emancipatory in consequences, for both men and women, in that there is a relationship between migration and the creation of opportunities and wealth (Chan and Chiang 1994). When one steps out of an otherwise constraining structure, first in mind, then in body and in action, one experiences ecstasy. Migration frees the person because it transforms the condition in which one operates; now, in the place of arrival, the rules of the game, or even the game itself, have changed for the better. In her chapter, Krieg has recorded many personal comparisons of Germany and Hong Kong made by women respondents and the result is sharp and clear: women in Hong Kong have more (perceived and real) opportunities, move faster, face less gender prejudice and discrimination, gain more social acceptance as career women and can, literally, leap-frog a few steps here as opposed to climbing, one step at a time, there. The feminist literature suggests, among other things, that there is a distinct difference between men’s and women’s lives in that women, unlike men, live horizontally; women strive to cultivate and build relations ‘on the ground’, so to speak, emphasizing consensus building. As Krieg suggests, women managers have deep ambivalence about power and authority, preferring to use power in terms of how it might help others to more fully realize their potential, and how it might make a contribution to the company. In other words, it is power with a social (as opposed to personal or self ) orientation, the meaning of which is seldom judged in its absolute sense. Some call

introduction

13

this the ‘feminization of the managerial culture’. Whatever you call it, this signals the beginnings of a new management culture or ethos, at least in the social world of transnational enterprises. In this world, one treasures a ‘feminine’ demeanour leaning towards ‘restrained conduct’, harmony and consensus, personal tentativeness, a hesitancy that ‘perhaps the other party is right’, a disposition to waiting for one’s turn to make one’s point—all of which are a far cry from the kind of coercive, assertive and aggressive power that has long been taken for granted to be superior in the corporate world. If we care to pause for a moment to predict a brave new world, we might well be talking about a future economy where service and reproduction will be as important as industry and production—an economy that requires an altogether different kind of orientation to the world, which values cooperation and ‘doing things together’ rather than competing in a zero-sum game. If that is the case, Krieg would be right in saying that the ‘weakness’ of women managers, their socalled ‘soft abilities’, may well be their ‘strength’, their ‘soft power’. Now that women managers are increasingly represented in the transnational economy (there are good sociological reasons to believe so), how can they go about acting as agents of change and doing things here that they cannot do there? What are the sociological limits of their free action and what will they do with these limits as collectives, putting their skills, their new strengths, to good use? It is clear that women have an advantage, an edge, in cross-cultural competence because of their proficiency in foreign languages, communication and, sometimes, translation skills, their relative concentration in trade, finance, service, and personnel, all of which, at the risk of exaggeration, pre-determine them to act effectively in crosscultural environments. Toward a Transnational Corporate Culture Munder and Krieg, in their insightful chapter on Sino-German ventures, attempt to articulate an approach that critiques the traditional preoccupation with cultural values that delineate group boundaries, divide people and groups, and manufacture and exaggerate group differences. In an attempt to seek an alternative approach in crosscultural or transnational management that looks beyond cultural divides, they have tried to identify work values that German and

14

chan kwok-bun and leo douw

Chinese managers in Sino-German joint ventures ascribe to one another. It appears that both groups have very sharply delineated images of one another’s work values: while German managers generally ascribe ‘traditional’ work values to their Chinese counterparts, Chinese managers ascribe ‘modern’ work values to the Germans. Munder and Krieg have also found that actually existing or real work values are very different from those which managers of different national backgrounds ascribe to one another. Such real work values are indeed shared by the highly skilled professional members of both groups, which begs the question of the role and function of mutually ascribed stereotypes in the interaction between the two groups of managers. Obviously, these stereotypes divide the two groups sharply. But, ironically, they also serve to set the standards for behavior on the workfloor: both groups appreciate ‘modern’ values more highly than ‘traditional’ values. These findings suggest that apparent cultural divides should not be understood in isolation from social relations, and that attempts to improve work relations should emphasize objectively shared values, rather than perceived values. Barth (1995) offers the same advice to transnational enterprises. The overall goal here is to create a transnational corporate culture that strives to create opportunities of cooperation, build contexts of coalitions and nurture consensus and solidarity. The discourse to be put forward here is not one of identifying cultural differences and then managing the conflict that subsequently arises, but rather of finding shared values and working with them. This is particularly significant in theoretical terms because the prevailing literature on joint ventures has much more to say about differences than similarities, conflict than consensus. Wondering aloud in her chapter if indigenous and expatriate managers in Sino-German joint ventures are ‘natural’ antagonists, Nagels concedes to the inevitability of conflict, or ‘storming’ as she would put it, in the course of team-building. There would be no ‘norming’, ‘forming’ and ‘performing’ without ‘storming’: conflict as a process is not only inevitable in group formation, it is in fact desirable, if seen in the long term. Nagels also underscores the fact that young local employees in Sino-German joint ventures have linked up with expatriate managers in articulating and promoting ‘modern’ work attitudes. In doing so, these young Chinese employees have strived to create better conditions for their own upward mobility; they would not shun ‘traditional’ values if those values serve their

introduction

15

purposes. As a result, shared interests lead both sides to enter into contexts of coalitions and cross-cultural alliances, thus effectively transcending national cultures and their boundaries. Behind all of these occasions of cooperation and doing things together, there seems to be a commonly shared awareness of the salience of local knowledge as it guides and informs management practices, and of the importance of the gradual localization of transnational corporate culture as a long-term management goal. Convergence and Hybridity in the Workplace In Chapter 10, Chan and Luk present a conceptualization of conflict management strategies for human resource issues in Sino-Japanese, Sino-Taiwanese and Sino-Korean joint ventures in China. Their chapter describes three major conflict management strategies that are cross-culturally based and variously adopted, namely, disruptive, conciliatory, and cooperative strategies, and also describes their conflict outcomes. Chan and Luk have found that cooperative and disruptive events often coexist in Sino-foreign joint ventures, although cooperative events are comparatively more numerous. In such situations, a co-adaptive conflict management of these cooperative and disruptive events occurs whereby a conciliatory strategy is ultimately accepted by each partner as a ‘sub-optimal’ solution. As conflict is inevitable in Sino-foreign joint ventures, a conciliatory approach is the best way to enable a sustainable joint venture. When these various dispute management strategies are invoked to regulate or resolve conflict between business partners, they set off a concomitant cross-fertilization of the traditional culture of Chinese enterprises and that of foreign corporations. As a result, a new derivative of a sinified corporate culture is evolving, rather than the complete displacement of one business culture by another. This study highlights the post-modern globalized reality of intermeshing and of the interdependent attributes of human needs, corporate needs and time-honoured cultural values in the international corporate world to reveal a sweeping globalizing trend towards a revamped transnational corporate culture that is constantly being challenged and reconstituted. Moreover, the organizational processes characterizing economic restructuring that are engendered by this globalization are both the transgression of state borders by organizations seeking economic opportunities and

16

chan kwok-bun and leo douw

partnerships beyond their national sites and the transformation and re-making of boundaries both within and without those organizations. In the last chapter of our book, Chan, Luk and Wang attempt to investigate how conflict in human resources management arises, evolves and is resolved in Sino-foreign joint ventures in China. Specifically, they argue that most forms of conflict can be resolved satisfactorily by a bilateral or multilateral process of reciprocal purposeful learning that is based on mutual adaptation, adjustment, trust and common objectives. The theme of learning thus returns in this chapter. In most cases, a reconfiguration of social and economic relations also takes place within the enterprises. The study posits that conflict can be functional or dysfunctional, or both, as far as building constructive management-labor relations is concerned, and that it is in the best interest of both partners to resolve conflicts satisfactorily, neither fearing nor avoiding them. Chan, Luk and Wang explore the role of culture from a perspective that is prevalent nowadays in China’s ideology of modernization. The guiding conceptual framework of their study is convergence theory. The convergence thesis of modernization theory suggests that the more a society strives to modernize, the more it will be obliged to share in a modern way of life. China is no exception to this ‘rule’. It is claimed that China has fashioned a socialist mixed economy and a more open civil society than before. Hence, the socio-economic and cultural convergence of China and the West has become a reality—a common hybrid. This hybridising convergence between two fundamentally different socio-economic and cultural systems is a dynamic process in which each system selects and borrows from the other important traits, institutions, regulations and cultural values— and localizes and synthesizes them. In this process, old economic and cultural values are being redefined, and new innovations created. The Chinese economic innovation of a ‘socialist mixed economy’ and cultural adaptation or localization of what distinguishes the foreign from the native create an ‘alternative globalisation’ as adumbrated by Berger (2002) in his hypothesis of ‘many globalizations’. There may well be more than one path to modernity; alternative globalizations anticipate alternative modernities. When positive elements are selected and borrowed by both sides of the foreign-native equation, the hybrid is upgraded, ushering in an evolutionary convergence. To Berger (2002: 10–11), hybridization is “the deliberate effort to synthesize foreign and native cultural traits”, and he cites

introduction

17

as examples the newly fashionable notion of the ‘Confucian merchant’ (Chan and Chiang 1994), and “the case of software engineers in Bangalore who garland their computers in Hindu ceremonies”. Rushdie (1991: 394) sees hybridization as a “transformation that comes of new and unexpected combinations of human beings, cultures, ideas, politics, movies, songs.” Hotchpotch, a bit of this and a bit of that, change-by-fusion, change-by-conjoining is how newness enters the world. In an increasing pluralization of the life-world (a favourite term of Habermus), in a world that is ‘hopelessly’ and ‘irreversibly’ plural (Bauman 1988), the proper role for intellectuals and for people in the streets is one of interpreting different cultural traditions (including one’s own) and the linkages between them. Such self-questioning or reflexivity is inherent in modernity (Giddens 1990), though not without a deep sense of ambivalence. Berger (2002: 11) concludes that “the idea of a mindless global homogenization greatly underestimates the capacity of human beings to be creative and innovative in the face of cultural challenges”. At the microeconomic level, a hybrid corporate culture emerges out of the cultural dynamics of the interplay of reciprocal learning and adaptation between the foreign and the native over a sufficiently long period. In the process, Chan, Luk and Wang observe, we are beginning to see the emergence of a new transnational management culture in international joint ventures in China. The analytical gaze here should be upon the unspectacular, practical, everyday life fusion and hybridisation that happen when two groups share a workplace, collectively solving the practical problems of working together that requires a transcendence of group loyalties. One culture ‘slips into’ another culture, half forgetting and remembering itself, and half changing the other. One is allowing oneself to be inhabited by the other, while still recognizing oneself and the other as different (Chan 2003; 2005b; 2005c). Anyone can be a cosmopolitan; but one must cure oneself of ‘mental blindness’, through learning and self-cultivation. Dialectically, one is then no less than one, but more than a sum total of two because something new is produced. The Dialectic of Innovation A sociological conception of culture tends to see it as a process, thus the terms ‘the cultural process’ or ‘the process of culture’ which

18

chan kwok-bun and leo douw

emphasize the dialectical dynamism and changeability of cultures that are in contact with each other. Following what Becker (1986: 13) calls a sparse definition, culture describes and “explains how people act in concert when they do share understandings”. The process of culture thus comprises people doing things together in line with their understanding of what one might best do under the given circumstances. As a result, what people do will fit together. But where does culture come from? Sociologists have two very different ways of answering this question. One explanation takes the culture as given, already out there, pre-existing particular encounters between individuals and groups—and shaping and constraining their behaviour. Another explanation takes a different pathway: given new conditions, people invent culture. Becker (1986: 18) refers to William Graham Sumner (1907) who, in his Folkways, articulates a variant conceptualization of culture. Members of a group or groups encounter new conditions, engage in a collective discussion of the problems that arise, achieve a common definition of the situation and its possibilities, and arrive at a consensus of the most efficient ways of behaving. New situations provoke new behaviour. Since people solve their problems collectively, each assumes that the other shares them, which thus ushers in a new shared understanding, a new culture. Becker (1986: 19) describes this process of culture as a paradox: On the one hand, culture persists and antedates the participation of particular people in it: indeed, culture can be said to shape the outlooks of people who participate in it. But cultural understandings, on the other hand, have to be reviewed and remade continually, and in the remaking they change.

How culture shapes collective action and how it comes into being are in fact the same process: in both cases, people mesh, combine or synthesize what they know and do with others. Successful collective action, whether as a consequence of cooperation or of conflict, thus takes place amidst a dialectical process of making and remaking culture. Of course, as articulated earlier in this chapter, there is a third way of approaching culture, which asks whether it is theoretically useful to think of culture politically. Indeed, culture is a space in which continual competition over the determination of meaning takes place (Berger 2002: 11); it is also an area of contestation in which weak groups attempt to resist the imposition of meanings that bear the

introduction

19

interests of stronger groups. It is this that makes culture ideological and political. On both theoretical and practical levels, we are perhaps searching in this book for new ways of seeing differences and conflict in transnational enterprises that could work for both sides, indigenous and expatriate, local and global. Such styles or modes of conflict resolution on the one hand, and of consensus building on the other, must then be seen as emergent dialectical products—creativity and innovation as emergence, as processual. Such a search perhaps is the real motive of studies of conflict and cooperation in international joint ventures—indeed the very motive of this book. This book is not merely about business, management, profit or productivity. At a much deeper level, it is about the politics of cultural encounters, encounters with ‘the other’, a longstanding anthropological, indeed human, concern. But if we wish to offer insights into the working of business enterprises, we cannot study them in isolation from the wider society and its politics. We thus return to the premises that are discussed at the beginning of this chapter and on which the mainstream literature about business management is based. The neoclassical school in the economic sciences, which considers enterprises as atomized, competitive economic units, stands in the way of a search that we have begun in this book. The same criticism can be leveled against the culturalist approach of the Hofstede school who tend to reduce group formation in transnational enterprises to the interactions between people, who differ in their behavior allegedly because of their different national backgrounds, and are motivated by inflexible or unchanging norms and values. The fact of the matter is that people, groups and society continually produce innovations, although within sociological constraints. As it happens, studies of joint ventures have a larger, deeper, human agenda—that of making sense of humanity, its possibilities and, of course, its limits. Social scientists must remain calm and sober in their analyses, but should also dare to dream in their imagination and innovate in their action. The same applies to workers in international business enterprises. Allow us to conclude this introduction by re-visiting claims about cultural differences in terms of an East-West dichotomy. The EastWest divide that has by now become a common expression in the everyday language of scholars and laymen alike can be interpreted in three different ways. First, the words East and West, or Chinese and non-Chinese, native and foreign, local and global, are linguistic

20

chan kwok-bun and leo douw

symbols that indicate the intentions of users of such words to denote differences, if not conflict, that are out there, preexisting, given. In spite of the recent popularity of anti-essentialist arguments which find faults with attempts to mystify and reify cultures, a realistic sociological position is that real or empirically verifiable cultural differences between East and West, Chinese and non-Chinese, etc., do exist and they do matter; as social facts they cannot be simply wished away. When we pretend these differences do not exist, when we gloss over them, or even worse, when we try to eradicate them, sometimes with force, by insisting on one-way assimilation of the minority by the majority, of the powerless by the powerful, we are robbing the individual and his culture of their sense of authenticity, their ‘real me’. This is violence. We ignore (or try to eradicate) differences at our peril. A slave can catch his master off guard. Even a giant has his moments of weakness. All policemen, soldiers and dictators, must sleep, eventually. In any given country, there are always more citizens than soldiers, more civilians than policemen, more inmates than prison guards, more slaves than masters. Numbers do matter. The opposite to violence is deference to differences or sympathy to the fact that the other person is different from me and he or she has the right to be so. Second, East and West are words that people use to refer to differences that are manufactured, made up, constructed artificially when groups encounter each other in order to maintain their own threatened sense of authenticity. I have become more different from you than before I encountered you, especially when I am part of a group that interacts with the group of which you are a part. Social psychologists call these constructions group prejudices, which are part truth and part fiction. East and West indeed are matters of positionality. If I claim to be part of the East, I designate you to be part of the West (and vice versa), intentionally creating a chasm, an exclusivity that is integral to the formation of personal and group identity. If I am East, you must be West, and vice versa. Actors make cultural claims while in fact the real differences at work are social or political in nature; the dramatic quality of claims about culture lies precisely at the moment of disguising or masking politics and pretending that politics is culture. A third, theoretically more exciting, position is to replace the hyphen (the divide, the pause, the void) between the two words, indeed the two worlds, East and West with a double-headed arrow, or arrows at both ends, which symbolically suggest reciprocal, two-way influence

introduction

21

between East and West, a conflict-ridden entanglement between self and other, a dialectical synthesis that may result in newness, innovation and change—a kind of East in the West and West in the East (Chan 2003; 2005a; 2005b; 2005c). REFERENCES Barth, Frederick, ed. (1969), Ethnic Groups and Boundaries. Boston: Little, Brown and Company. ———, ed. (1998), Ethnic Groups and Boundaries. Middleton: Waveland Press. Barth, Frederick: Ethnicity and the Concept of Culture. Paper represented to the Conference “Rethinking Culture”, Harvard 1995. http://www.tau.ac.il/tarbut. Bauman, Z. (1988), Legislators and Interpreters, Cambridge: Polity Press. Becker, Howard (1986), ‘Culture: A Sociological View’, in Becker, Howard, Doing Things Together, Evanston: Northwestern University Press, pp. 12–24. Berger, P.L. (2002), ‘Introduction: The Cultural Dynamics of Globalization’, in P.L. Berger and S.P. Huntington (eds.), Many Globalizations: Cultural Diversity in the Contemporary World. Oxford: Oxford University Press, pp. 1–16. Chan, Kwok-bun (2003), ‘Imagining/Desiring Cosmopolitanism’, Global Change, Peace and Security, 15, 2: 139–155. ——— (2005) ‘The Stranger’s Plight and Delight’, Social Transformations in Chinese Societies, Vol. 1. Chan, Kwok-bun and Chiang, C. (1994), Stepping Out: The Making of Chinese Entrepreneurs, Singapore: Prentice Hall. Coser, L. (1956), The Functions of Social Conflict, New York: The Free Press. Doucet, L. and Jehn, K.A. (1997), ‘Analyzing Harsh Words in a Sensitive Setting: American Expatriates in Communist China’, Journal of Organizational Behavior, 18: 559–582. Douw, Leo (1999a), ‘Introduction’, in Douw, Leo, Cen Huang and Michael Godley, (eds.), Qiaoxiang Ties: Interdisciplinary Approaches to “Cultural Capitalism” in South China, London: Kegan Paul, pp. 1–21. ——— (1999b), ‘The Chinese Sojourner Discourse’, in Douw, Leo, Cen Huang and Michael Godley, (eds.), Qiaoxiang Ties: Interdisciplinary Approaches to “Cultural Capitalism” in South China, London: Kegan Paul, pp. 22–45. Giddens, A. (1990), The Consequences of Modernity, Cambridge: Polity Press. Gong, Y.P., Shenkar O., Luo, Y.D. and Nyaw, M.K. (2001), ‘Role Conflict and Ambiguity of CEOs in International Joint Ventures: A Transaction Cost Perspective’, Journal of Applied Psychology, 86: 4: 764–773. Hambrick, D., Li, J., Xin, K. and Tsui, A. (2001), ‘Compositional Gaps and Downward Spirals in International Joint Venture Management Groups’, Strategic Management Journal, 22, 11: 1033–1053. Hofstede, G. (1980), Culture’s Consequences: International Differences in Work-related Values, Beverly Hills, Calif.: Sage Publications. Ip, D. (2002), ‘Hybridity and Transnationalism: Identity Issues in Transnational Chinese Enterprises’, paper presented at the International Conference on China in the World in the Twenty-First Century: Hot Development Issues in Contemporary China, Hong Kong Baptist University, 22–25 May, 2002. Kirkbride, P., Tang, S. and Westwood, R. (1991), ‘Chinese Conflict Preferences and Negotiation Behavior: Cultural and Psychological Influences’, Organizational Studies, 3: 365–386. Mohr, J.K. and Spekman, R. (1994), ‘Characteristics of Partnership Success: Partnership Attributes, Communication Behavior, and Conflict Resolution Techniques’, Strategic Management Journal, 2: 135–152.

22

chan kwok-bun and leo douw

Rushdie, S. (1991), Imaginary Homelands, London: Granta Books. Simmel, G. (1995), Conflict and the Web of Group-Affiliations, translated by Wolff, K.H. and Bendix, R., New York: The Free Press. Sumner, William Graham (1907), Folkways, Boston: Ginn and Co. Walsh, J., Wang, E. and Xin, K. (1999), ‘Same Bed, Different Dreams: Working Relationships in Sino-American Joint Ventures’, Journal of World Business, 1: 69–93. Xie, J., Song, M. and Stringfellow, A. (1998), ‘Interfunctional Conflict, Conflict Resolution Styles, and New Product Success: A Four-Culture Comparison’, Management Science, 44, 12: 192–206.

Chapter 2

The Role of Middlemen in the Localization of Sino-Foreign Enterprises: A Historical Approach Leo Douw Middlemen have always played an important role in the brokerage of foreign business in China. The difficulty in penetrating the Chinese market is notorious and centuries old. Only Japan and Korea have been more closed than China, whereas the countries in Southeast Asia were easier to penetrate; Chinese descendants have traditionally served there as business brokers (Rhoads Murphy 1974: 19–20). It seems that China is in a sort of middling position in this respect: its officialdom and parties in the market are tough negotiators, but if one tries hard, a profit can be made. The brokerage of foreign business interests in China is a complicated but fascinating challenge. At present, business brokerage in China is in a period of transition: China’s entrance to the World Trade Organization (WTO) in 2001 allows for more direct access to Chinese markets, and will in the longer term most probably diminish the need for middlemen. Administrative procedures will be more routinely followed, and experience with Chinese business partners will increase. Nevertheless, it is not to be expected that the role of middlemen will decrease in the short term. The question to be addressed is, why this should be so. Businessmen, if asked, will say that middlemen should be dismissed as soon as possible (Interview HK, financial director of a Dutch transnational corporation during the 1980s and early 1990s, 2001). Here a cost is involved: whatever one could achieve with one’s own staff seems less wasteful than working through middlemen, if only because one’s own staff can be better controlled (Cochran 2000). It will become apparent, however, that the benefit of training and employing such staff is not easily weighed against the benefit of employing independent middlemen, especially not in the situation in which China found itself in the late 19th century. Most of the reasons

24

leo douw

for this are non-economic. They follow from the inequality that had evolved between the native Chinese and the foreign sectors of China’s economy during the course of the 19th century. During that period, China’s economic development began to lag behind the West and Japan, and concomitantly China declined in political power relative to the other world powers. As a consequence, the Chinese state lost most of its control over the foreign sector of its economy, which it had guarded with great success until deep into the 19th century. It has been China’s ambition to overcome these inequalities ever since, and for the same reason the foreign sector became an object of ambition among politicians, officials, businesspeople and business brokers, and those among China’s common people who went to work in foreign firms. Therefore, the brokerage of foreign business interests has always been politically contested: for the foreign business community in China, their enterprises in China have always been devices used to profit from China’s favorable economic circumstances; but from the Chinese side, especially its governments, they were as much instruments for the modernization of China’s economy. One might also express this in somewhat different terms, by saying that China’s political ambitions are part of the process of ‘localization’, or ‘embedding’, of foreign enterprises in China (Granovetter 1985; Biggart 1997; Heffner 1998: 9–12; Hamilton 1999), and that middlemen were needed to facilitate this process and consequently found themselves in a vulnerable political position. Existing studies that use concepts such as localization, embedding, or ‘indigenization’, ‘sinification’, or ‘sinicization’ (Bickers 1999: 170) usually start from the premise that foreign enterprises have to go through a learning process before they can operate smoothly across China’s borders; they have to learn about China’s very different culture, economy, society, and politics, and adapt their business management and strategies accordingly. It should be better acknowledged, however, that at the same time and as a part of the same process, Chinese society and political actors learn just as much, or even more, from foreign businesses and profit from the latter’s activities in China. Localization thus encompasses more than the inroads of foreign economic activity into China; it also represents the inroads of Chinese economic and political actors into the foreign or international economy. This chapter explores how private brokers, the Chinese state, and foreign companies in China have negotiated the localization process over time, and pays particular attention to the dynamics of the Chinese

the role of middlemen in sino-foreign enterprises

25

side. In doing so, the chapter intends to underscore an important theme of this book: the negotiation of cultural difference as a part of broader processes of social and political change, in which both Chinese and foreigners take an active, dynamic, and creative part. We can discern four stages in the history of business brokerage in China. First is the comprador stage, which covers most of the 19th and early 20th centuries. Second is the stage that marked the arrival of big international corporations that tried to dispense with compradors and other middlemen and deal with their counterparts in China directly through their own staffs, from around 1900 until the 1940s. Third is the stage of Communist radicalism, during which foreign firms were commonly denied access to China, and foreign business brokerage was practically absent, during the 1950s–1970s. Fourth is the stage of joint ventures, which is coincidental with the globalization era from the 1980s onwards. One may discern still another, fifth stage, which has been initiated by China’s entrance to the WTO in 2001, and which continues to the present day. The Comprador Age The comprador system was at its peak from the 1860s until the beginning of World War One in 1914. Compradors were salaried employees, who served in foreign companies in China but also often ran their own firms and thus were usually business entrepreneurs at the same time. The functions of a comprador were manifold. They introduced their employers to labor contractors and sales agents, for whom they acted as guarantors, and also to officials; they acted as interpreters and experts on local conditions; and they trained junior personnel. They acted as the brokers between Western business life and the Chinese market and officialdom in more than one respect. As a group and as individuals, they profited greatly from this position. The high rewards of the profession were obviously caused by the rarity of the services that its practitioners offered and monopolized. The compradors profited from the fact that Western businesses were in a situation of continuous flux and expansion, but were nevertheless constrained in their activity by Chinese law-giving and the difficulty in accessing the Chinese market. Foreign enterprises depended heavily on their compradors for their economic needs. Both sales and

26

leo douw

purchases were entrusted to the compradors, because direct access to Chinese tradesmen was too cumbersome to acquire at the time. Compradors had to be strong economic actors themselves: they had to avail of capital of their own, because large sums of money were usually involved in the transactions with native merchants. They also needed guarantors, who were often district fellowmen; in their turn, they had to guarantee their own staff and their debtors in the market. By depositing the required sum to gain access to the foreign firms they provided the firms with capital, which was particularly useful in the case of newly initiated businesses (Hao 1970: 157–61). Aside from brokering business interests in the market, compradors were needed to circumvent existing law giving. British American Tobacco (BAT), for example, bought its comprador Wu Tingsheng an official title to gain him easier access to officialdom; this provided BAT with the possibility, otherwise prohibited, of renting land outside the treaty ports in Wu’s name (Cochran 2000: 48–9). Other long existing impediments lingered. Language was an obvious problem, and the classical comprador coped by mastering the so-called pidgin English. Also, the handling of silver money was so complicated that the staff of compradors usually included silver experts. More generally, a bewildering variety of weights and measures existed in China, differing tremendously from one locality to the other, and there was an urgent need to understand local customs and habits. For all of these reasons, the comprador profession was a specialization per se, which was unsurprisingly based in particular places in Southeast China, first in Xiangshan (present-day Zhongshan) in Guangdong province, where foreign trade had been confined during most of the 17th and 18th centuries, and later also in localities in Zhejiang and Jiangsu provinces (Cochran 2000: 20–21, 184; Hao 1970: 49–55, 173–74). The position of the comprador institution was enhanced and diversified from the 1860s onwards, when a major transformation of the world economy took place under the pressure of Western industrialism, and financial services and the construction of infrastructure became much more important in China than they had been previously; the relatively few but big agency houses, which had predominated in Sinoforeign trade during the mid 19th century, were replaced by more numerous smaller ones, which at the same time diversified into financial services and industrial investment (Bickers 1999; Feuerwerker 1986). Business brokerage became more businesslike than it had been

the role of middlemen in sino-foreign enterprises

27

during the preceding decades (Hao 1970: 167), when foreign trade had become increasingly liberalized and privatized, breaking away from the state monopolies of the preceding centuries, and the localizations of foreign enterprises gradually took the shape that it still has today: serving as much as a bridge for the Chinese economy to access the world market as adapting foreign enterprises to local Chinese conditions. The institutional changes in the conduct of trade in the 1860s went together with a rapid widening of the gap between levels of development in China and its Western trading partners. For a proper understanding of the political side of business brokerage it is important to keep in mind the role of the Chinese state in the control of foreign economic activity on its frontiers, and the consequences of the loss of that control, which occurred in the course of the 19th century. Until around 1800, many Asian and Western European states had been more or less on a par in their economic and technological development. The “great divergence” between the West and the rest of the world occurred only in the course of the 19th century (Frank 1998; Pomeranz 1998; Vries 1999; Wong 1999). As for China, at least the famous adage had applied, that China needed nothing from merchants abroad and that trade with the empire was benevolently allowed to foreigners by imperial virtue. This principle had been institutionalized in the so-called Cohong system, in which the imperial government licensed foreign trade to monopolists in Canton (Guangzhou), where the foreign trade was confined. Compradors had originally been controlled within this system, and only began to develop their positions as independent brokers around the middle of the 19th century. After the middle of the 19th century, however, economic differences with the West became increasingly conspicuous. At the same time, when Western business began to expand in China and Western dominance began to transform the mutual perceptions among Chinese and foreign nationals, disparities in economic organization and technological development became added to the long-existing regional disparity (Rhoads Murphy 1974: 53–54). The Chinese state lost much of its control of foreign trade and businesses with the establishment of the treaty port system: in an increasing number of Chinese sea ports and inland harbors, foreign nationals could reside, own property, and engage in business under the extraterritorial jurisdiction of their own consuls. Also, the system of import levies on foreign goods

28

leo douw

was simplified and tariffs came to fall outside the control of the Chinese authorities (Feuerwerker 1986: 129). Diminished state control did not imply, however, that foreign businesspeople enhanced their control over Chinese markets to a very large extent. The Chinese native merchant class remained a force to be reckoned with. As mentioned, Western business was never able to penetrate deeply into Chinese markets, let alone its social and political life, from which it remained insulated. The defining feature of the Western penetration of Chinese markets was that trading enclaves were established near existing Chinese trading centers, with an eye to catching part of the local markets (Rhoads Murphy 1974: 17–20). Those markets remained basically closed to foreigners, because native merchants kept most of their ability to handle the foreign trade between the treaty ports and the Chinese hinterland, a situation from which the compradors derived their position. The disparity in economic development was shown most clearly by the fact that Western firms could organize their own trading networks only in new and technologically advanced products, such as mechanically spun yarn, kerosene, matches and cigarettes. But whenever the opportunity arose, Chinese competitors jumped in and often quickly managed to push the Westerners out of the market (Rhoads Murphy 1974: 27–31, 55; Chang 1998: 31–32). Moreover, the force of active localization of foreign business activity was felt from the beginning, despite its marginal position in the Chinese economy as a whole: native Chinese penetrated the modern sector of the economy from its emergence in China, and the compradors greatly facilitated that process. The comprador was not simply an individual native business broker, but would be better conceived as an institution: the comprador’s rooms and offices were often physically separated from the firm which they served, and their staff formed a separate body of employees, who were in a position to learn modern business practices at close hand. The comprador institution thereby created a sphere of influence from which an increasing number of Chinese could profit. It is remarkable, for one thing, how large their staffs were in comparison to the Western expatriate management (Hao 1970: 24, 164–66), a situation that resembles present-day Sino-foreign joint ventures in a striking manner. Neither was localization limited to foreign business enterprises. Similar processes were going on in the state sector, the most conspicuous example being the Chinese Customs Service, directed by Sir Robert Hart,

the role of middlemen in sino-foreign enterprises

29

which was built up from the 1860s onwards with a rapidly expanding Chinese staff. It provided another learning space for ambitious Chinese, who availed of the means to profit from the opportunities offered (Fairbank 1965: 317–8; 343). Also, many of the compradors adopted modern business techniques that were adapted from Western models, and they were active in setting up modern banks. Their influence on China’s modernization was even more conspicuous in the cases where they were lured into modern big, state-sponsored undertakings, such as occurred with Tong King-sing, the comprador of the British firm Jardine and Matheson. Tong transferred to the China Steam Navigation Company and built it into a very competitive undertaking, and never returned to work for Western business firms (Hao 1970: 83–88). Additionally, they often expanded their activity abroad, making use of their connections with overseas Chinese trading houses and networks in Japan and Southeast Asia, and making their impact felt as far away as India (Hao 1970: 54–58). The foremost expert in this field, Hao Yen-p’ing, emphasizes that the changes engineered by the compradors were brought about in a pragmatic manner on a day-to-day basis, but were nevertheless incremental and substantial, and contributed in important ways to China’s modernization (1970: 207–23). It is important to keep this assertion in mind: this type of change seems typical of situations where the localization of foreign economic activity is overwhelmingly left to the market, and the state does not interfere too much in economic life. The reason for non-interference may either have been weakness of the state, as was the case in the period under discussion, or the result of deliberate policy, as occurs nowadays. One might say that this type of evolutionary borrowing from the West was largely ‘cultural’ in character: Western economic institutions and business practices were selectively adopted and if necessary adapted to Chinese conditions. Political pressures, however, were just as pertinent to the situation in which the compradors found themselves, and in the longer term had a deep impact on the mode of negotiation among Chinese and foreign businesspeople, and their connections with the Chinese state. Most importantly, there were tensions built into the system, which resulted from the double-dealing position in which the compradors found themselves. The compradors were clever at fully exploiting their positions with foreign companies to promote their own businesses, an activity explicitly allowed them.

30

leo douw

They could, for example, deposit their employers’ money in banks and earn interest for themselves, or, more confusingly, use the names of their employers’ firms to add to their prestige among the Chinese merchants with whom they dealt in their private businesses, and who envied their privileged position (Hao 1970; Chang 1998: 39–44). The latter practice in particular often gave rise to misunderstandings and lawsuits, which sometimes embarrassed the foreign employers, but failed to make them change the system. There are also many known instances of compradors who cheated on their foreign employers, and profited more from the business involved than did the employers themselves, with the latter even going bankrupt at times as a consequence. Due to the apparent identification of the compradors with their employers and their function in the specific Sino-foreign relationships made at the time, they became a social group that could only function well in the treaty ports, and became utterly dependent on the treaty ports as a system. Hao Yen-p’ing argues that their position turned them into a class, which carried the attraction of being flexible, potentially rich, creative and innovative, but at the same time was hybrid, and marginal to native Chinese society (1970: 207–23). Around 1900, the position of the compradors began to gradually decline. This was due to the vast social transformations taking place all over East and Southeast Asia, which heavily influenced the position of Chinese descendants as middlemen. For China, however, the following factors contributed most: native Chinese trades people became more competent at dealing with foreign businessmen, and the latter became more experienced with things Chinese; more foreigners learned the Chinese language, and so were better able to avoid the squeeze of the compradors and could approach Chinese inland traders directly; and also, the compradors’ role as guarantors of persons and transactions was less needed because of the quick rise of a modern, native Chinese banking system to which they themselves contributed and on which Chinese merchants could rely. During World War One, foreign investment declined, giving a boost to native entrepreneurship in China, and after the 1920s the monetary system was reformed and simplified several times so that financial knowledge became easier to obtain (Hao 1970: 59–63). For these reasons, the functions of compradors began to be split up over a number of new institutions, leaving the newly emergent middlemen, usually called hua jingli (Chinese managers), without the usual

the role of middlemen in sino-foreign enterprises

31

roles of the compradors as guarantors and up-county purchasers, but acting rather as commission agents, salesmen, and commercial advisors (Hao 1970: 63). The comprador system survived until the 1940s, when the treaty port system was abolished and took the compradors with it. Long before this happened, however, the newly emergent international big corporations had made concerted efforts to replace the compradors with another type of staff member, as mentioned above, and by a different type of contractor, who just like the compradors depended on their own networks in the Chinese market but were no longer on foreign company payrolls. The Attack on the Independent Middlemen: The Emergence of the Large Corporations Those changes occurred from the 1890s onwards, and apparently worked to the advantage of the foreign powers and the newly emergent big corporations. But despite the apparent increase in visibility and activity of foreign companies in China, it must be doubted whether the cost of negotiating social difference was reduced to any significant extent. It will become clear below that the frenetic efforts by several of those corporations to localize their ventures by putting in better-trained expatriate staff members were only rarely successful, and the dependence on Chinese middlemen remained high (Bickers 1999: 185; Cochran 2000). Moreover, after the late 1920s the rise to power of the Guomindang (Nationalist Party) made the Chinese government stronger and added impetus to efforts to make foreign economic activity more subservient to Chinese interests. Transnational entrepreneurship and globalization may have emerged as focal concepts in academic discourse during the 1990s, but the actual processes represented by those terms date back to the early 20th century at the latest. After the 1860s, when the so-called second industrial revolution caused a breakthrough in global communication technology, the United States, Japan, Germany, and other nations had begun to emerge alongside Britain as competing colonial powers. The rise of the big corporations in these countries and the beginning of their investment all over the globe dates from that time. Their penetration into China was late compared to other parts of the colonial world, and became inevitable only after the SinoJapanese War of 1894–5; Japan’s victory forced a political breakthrough

32

leo douw

in the relationship between China and the colonial powers. Nowadays, globalization and transnational entrepreneurship are commonly understood as being the US-led explosive upsurge over the past decade in global movements of capital, labor, and commodities. It is clear, however, that they are the continuation of processes that date back more than a century. The Treaty of Shimonoseki (1895), aside from establishing Japan as another imperialist power, facilitated the entrance into Chinese markets of the newly emerged imperialist powers, particularly the USA, Germany, and Japan itself. Foreign industrial investment expanded rapidly, as did financial interest in China in the form of railway investment and government lending. The British kept their lead in financial services in China, and British financial interests in China remained far stronger than their industrial and trading interests, whereas industrial exports and investment were more central to the other powers’ economic interests in China (Osterhammel 1984, 1989; Cain & Hopkins 1993). This divergence may have retarded British moves to tie in with the ongoing changes, which were forcefully invigorated by World War One. Japan at that time was able to tighten its economic grip on Pacific Asia, where the Western powers temporarily receded. Germany had to leave its newly established colonies in China. As it was forced out of the treaty port system, Germany had urgent reason to explore the new management techniques needed to do business in China; direct contact between foreign suppliers and producers and their Chinese contractors and customers required a different system of business negotiation. The Japanese and Americans had already explored the new methods that were now required to successfully conquer Chinese markets and deal with Chinese counterparts (Bickers 1999: 175–6). As mentioned, the comprador system did largely survive until the 1940s, even though the new developments began to gradually undermine its predominance. The big foreign corporations in particular energetically set out to replace compradors with different types of middlemen, and with staff from their own corporate hierarchies. In view of the argument presented here, the question at stake is whether the new and big Western corporations replaced existing networks of Chinese traders with their own managerial hierarchies, or whether they were forced to use Chinese native networks and remain dependent on them. Sherman Cochran poignantly raised this question in a recent monograph (2000). In his answer the cost argument plays

the role of middlemen in sino-foreign enterprises

33

an important role: it was very expensive to train expatriates to replace Chinese middlemen, but it was not so easy to weigh those costs against the advantages of using Chinese networks for distribution and personnel recruitment. Several firms used both systems together, deciding on one or the other only after many years of experimenting. The Standard Oil Company and the Japanese Mitsui zaibatsu both tried hard to train their own staff for work in China. Standard Oil had few positive experiences with compradors and comprador-like middlemen during its first decades in China. It dismissed its sales agent Ye Chengzhong, a big merchant from Ningbo, after ten years of service (1883–1893) because Ye had misused his credit privileges and committed fraud; but it kept working through compradors who resembled Ye in how they used their privileged positions until 1904 (Cochran 2000: 20–1). Only then was it forced by competition from the Shell Company in the Chinese kerosene market to change its sales management: Shell, which set up the Asiatic Petroleum Company (APC) together with other business partners in 1902, was intent on achieving larger and better regulated sales by assigning salaried employees to replace trading companies as managers of kerosene transactions (Cochran 2000: 28). As far as Shell was concerned, that replacement was confined to the Straits Settlements; in China it combined the building of an elaborate network of sales offices with the subcontracting of sales to Chinese networks similar to those used by Standard Oil, but on more favorable conditions. APC’s success, however, pushed Standard Oil to invest the enormous amount of US$20 million in setting up a new marketing system in China, much of which was used to recruit a large staff of Western and Chinese salaried employees, who were to control better the social networks of native Chinese salesmen (Cochran 2000: 28–30). In Cochran’s words, it extended “its corporate hierarchy deeply into China’s market for the first time” (2000: 31). Western employees received very high salaries, emoluments, and other privileges, and were impelled to acquire local knowledge and competence in the Chinese language. During the decades to follow, Standard Oil was very successful in China, and it seems safe to conclude that the new system, expensive though it was, bore fruit. It should also be noted, however, that the Western expatriates resorted to a large staff of Chinese salaried employees, who in their turn controlled the newly expanded networks of Chinese sales agents and subagents. That native staff had acquired Western business training and English

34

leo douw

in sufficient measure to be able to communicate with the expatriate staff, and seem to have reported rather efficiently. As it paid very well, and it was also prohibited to work in places where individual staff had personal connections, the vices of the old system were avoided (Cochran 2000: 31–37). Nevertheless, it is difficult to make out whether the system worked better than continued employment of independent native middlemen. The high expenditure of the new system made other companies ponder whether to use similar systems or keep working directly through Chinese distribution networks (Cochran 2000: 41–43). Looking at the firms researched by Cochran as a whole, and over the period concerned, both principles are equally viable (2000: 177–86). British American Tobacco used both strategies simultaneously during 1902–1919, weighing the advantages of one against the other, and chose to rely mainly on networks until 1937. Mitsui began early, in 1877, and then relied on social networks, and changed toward building its own corporate hierarchy to strength from 1898 onwards, and kept to it until 1937. Another Japanese corporation, the Naigai Cotton Company, relied from its first investments in the 1900s on Chinese native subcontractors for the recruitment and management of its personnel, and consecutively set out to manage and recruit its workers through its own corporate hierarchy only to be forced back to the use of subcontractors during the political upheaval of the mid-1920s. Labor recruitment was a very sensitive part of enterprise management, because native middlemen could earn a lot of money and enhance their own social position, as is still the case nowadays; the firms, in contrast, had a strong interest in controlling their own labor force and excluding native middlemen in this particular field. After the mid-1920s, the Guomindang rose to power and took Shanghai’s most powerful secret society, the so-called Green Gang with it. With that political connection, the Green Gang was able to force its mediation of labor on many enterprises, Naigai among them (Cochran 2000: 43; 177–86). It remains difficult to determine exactly why Standard Oil and Mitsui were so successful in their implementation of new systems to deal with their counterparts in China, in particular because the question of whether or not to use middlemen is only part of the overall management strategy, and many other factors are also involved: the character of these enterprises’ products, sales techniques, and enterprise policy in a general sense. Other questions about Standard

the role of middlemen in sino-foreign enterprises

35

Oil and Mitsui’s success also arise. How were the differences between their Chinese and their expatriate staffs bridged? How responsive to central control were Chinese staff members, who had a large responsibility in finding and dealing with sales agents in China’s hinterland? Even though the sales agents could not work through their pre-existing personal connections, they must have derived leverage on the expatriate management from their superior local knowledge and their monopoly of contacts with native dealers. Those problems were new, and may be said to represent a higher stage of integration of foreign enterprises into China than existed under the comprador system; they are especially relevant because similar problems persist to the present day. This brings us back to the role of business brokerage in the embedding of foreign firms in China. From the side of the foreign business sector, obviously the new big corporations had the potential to penetrate Chinese markets more deeply, by way of their own staffs, than foreign firms had done previously. On the basis of the examples mentioned above, however, it seems probable that this had more to do with their large size and their ability to abundantly invest in appointing staff, in combination with the implementation of additional competitive market strategies, than with a truly significant increase in the expatriates’ ability to deal with Chinese partners in the market and the state. It is important to note that the resilience of the problem of how to deal directly with those partners was not determined to a great extent by cultural differences. This becomes evident in the first place by the fact that Chinese middlemen were also used by native Chinese enterprises, which grew into corporate firms during the same period. Shenxin Cotton Mills operated according to a management style that combined corporate and particularistic elements from its inception in 1915, and at first used native subcontractors for the recruitment of its workers but turned to corporate management and recruitment in the 1930s. In 1930, Shenxin turned toward recruiting workers by itself. It may have been the case that this outcome was the result of a deal with Chiang Kaishek as much as of sound management principles: upon the rise to power of the Guomindang in 1928, Chiang put great pressure on Shenxin’s owner, Liu Hongsheng, to comply with the requests of his new government, as he did with most of Shanghai business life. Another Chinese big corporation, the China Match Company, operated on corporate principles from its establishment in 1930, but then

36

leo douw

took on particularistic traits in 1936 (Cochran 2000: 147–77). Looking on from a completely different angle, the establishment of foreign business corporations in China was a process that delivered very similar problems to those in the home countries, such as the USA, Japan, and England. One might even say that methods developed to replace local brokers in China were often transplanted from the country of origin. The Japanese method, for example, of developing domestic markets by building hierarchies of sales agents down to the lowest market units and by thoroughly exploring local tastes and habits was precisely what the big zaibatsu tried to do in China (Cochran 2000). For these reasons, the difficulty that the big corporations faced in increasing their power in the Chinese market cannot be attributed to cultural differences alone, but is better explained by the interest that native contractors and brokers had always had in exploiting the foreign economy by localizing it. Moreover, that localization was increasingly supported and stimulated by native political forces. The rise to power of the Guomindang in 1926–28 thoroughly changed the treaty port system and improved the Chinese government’s control over the foreign expatriate communities, especially in their most important site, Shanghai. We have already mentioned how the Guomindang could insist in individual cases on the use of native middlemen for the recruitment of labor, but the recruitment of native Chinese staff for the colonial administration was also hard pushed (Douw 2002: 48–9). In this manner, the role of the compradors, and the role of bodies such as the British-dominated Customs Service in modernizing Chinese enterprises and localizing foreign enterprises, was endorsed and taken over by the government, and increasingly so. But also, by their big size these corporations came to employ large native staffs, which learned to deal with their foreign managers and received training in modern business skills. Therefore, the emphasis by authors like Cochran on the penetration of Chinese markets by foreign firms must be supplemented by a thorough sensitivity to the process, by which native staff penetrated the modern sector of China’s economy: localization was still a two-sided process, just as it had been at the peak of the comprador age. Dealing directly with Chinese customers, business partners and state officials became imperative; it was exactly in these fields that the British lagged behind and were overtaken by Japanese, German, and American business corporations (Bickers 1999: 173–82) that were increasingly set on

the role of middlemen in sino-foreign enterprises

37

training their expatriate staff and evading the use of middlemen. But at the same time, reliance on native staff members increased in importance, a process that was stimulated by China’s new political leadership. To the same extent, the rise of the Guomindang added clout to the dynamism of the native Chinese business class. It has been solidly argued that investing in the traditional economy was much more profitable for Chinese merchants than in the modern one, and that, as mentioned above, whenever the opportunity arose the Chinese were quick to put their money in it, as in the case of the China Merchant Steam Navigation Company (Rhoads Murphy 1974: 55; Chang 1998; Bickers 1999: 175–6). Rhoads Murphy even maintains that the Chinese economy was so strong that even during the much more difficult decades following World War One it was no more than marginally influenced by foreign entrepreneurship. There is little reason to doubt that the engagement in modern industrial enterprises by Chinese businessmen, which received a boost during World War One and continued throughout the 1920s and 1930s, and the concomitant assertion of their business interests, put as much pressure as Western business did on the comprador system as the major interface between foreign and Western enterprise. Direct contact between foreign and Chinese businesses was the trend for the future. Even the British engaged in the establishment of Sino-British corporations, a completely new form of collaboration and negotiation during the 1930s, which foreshadowed the joint ventures of our times in the age of globalization (Bickers 1999: 188–91). The Developmental Interlude: Maoist Radicalism and the Central Plan The Communist interlude, during its radical or ‘Maoist’ stage from the 1950s to the 1970s, was first and foremost a period during which the Chinese government took the treaty port economy over from its foreign owners and managers. The principles of the centrally planned economy represented a radical localization of economic management, leading up to a specific Chinese institutional fabric and a concomitant labor and enterprise culture. This culture should be considered as a new stage in the ongoing process of cultural change that went with China’s modernization. It was part of the wholesale restructuring of China’s economy, which was directed by China’s

38

leo douw

government and was also meant to transform Chinese society in all of its aspects. The attitudes and values pertaining to that culture, most poignantly described in Jim Mann’s classic Beijing Jeep (1989; also Walder 1986), had come into being without direct interference from Western and other foreign managers. Aside from the Soviet interlude in the 1950s and the marginal activity by surviving nonChinese companies, it can be said to represent a completely native Chinese enterprise culture, as in any case the Chinese had been in full command of their own enterprises. The prevalent Marxist historiography of that period served to justify the expulsion of foreign enterprises, and vilified the compradors of the late 19th century, and also those who had served otherwise as brokers between foreign and Chinese markets and officials. Over most of the 20th century, the role of foreign enterprises and compradors alike had been considered inimical to China’s best interests, because they had allegedly destroyed local manufacturing enterprises and put artisans out of work. During the late 1920s, as we saw, a central Chinese state asserted itself once more, expanding gradually during the following decade in the territorial sense and also in the sense of state interference in the economy, society, and culture. This process implied, as indicated above, that the state developed more intense links with the Chinese intermediaries in the dealings between the foreign enterprises on the one hand, and the state and the market on the other. The historiography that emerged from nationalist and communist efforts at reform at the time naturally wished to justify the ongoing assertion of Chinese state power, and in so doing emphasized the dominance and allegedly negative impact of foreign activity in China, in business as much as in its diplomatic-military activity and in running its semi-colonial bureaucracy. Both nationalists and Marxists envisaged the enactment of a Chinese revolution that would make the foreign economy subservient to the perceived national interest. In doing so, however, the historiography lost sight of the ability of the Chinese side to manipulate its suppressors and share at the least some of the profits derived from the emergent modern economic order. The revision of this historiography, which took place from the 1980s on, restores the balance (Liu 1981; Osterhammel 1986), but had its predecessors in authors such as Rhoads Murphy and Hao Yen-p’ing, who are quoted above. The revisionist historiography urges us to look at the micro-level, how piecemeal social and

the role of middlemen in sino-foreign enterprises

39

cultural change was brought about in enterprises and government offices. To be sure, this type of change is no less connected to the ongoing changes in the wider society and politics than under the period of the Maoist grand designs, but in a much less articulate manner. Also, notions of imperialist domination linger on, and will most probably keep doing so until China has achieved a status commensurate with its overall place in the world. Around 1980 a purposeful rehabilitation occurred in China of the roles of Sino-foreign middlemen, in accordance with Deng Xiaoping’s open-door policies. More of an emphasis was placed on the dynamic side of Chinese entrepreneurship and the advantages of foreign business activity in China. Chinese business networks were increasingly recognized as equal at the least in their initiative and business acumen to Western entrepreneurship, and quite capable of countering its aggression. Sherman Cochran’s work quoted above (2000) testifies to that trend. The Joint Venture Age: Globalization during the 1980s and 1990s In the early 1980s, after Deng Xiaoping’s rise to power, new models for enterprise management were sought so that China could adapt to the requirements of the global market. Initially, Eastern European models of self-governing enterprises were widely studied. Foreign enterprises confronted a state that had become intimately tied up with the country’s social and economic fabric, more than ever had been the case under Guomindang rule. The focal problem for the Chinese state now became how to profit from the renewed foreign activity in China and define the space that was needed to negotiate deals with foreign firms, while cautiously engineering the establishment of a market economy. Piecemeal, evolutionary change and the adaptation of the Chinese enterprise culture to the requirements of the world market gradually replaced the ideal of wholesale cultural change, which had dominated during the Maoist period. As one observer remarked, “the present is not a time of chronicling cultures, but of creating them” (Dirlik 2001: 24). Nevertheless, the developmental aspect is still crucial for an understanding of China’s position. Foreign firms were looked upon as transmitters of knowledge and providers of initial capital, which would enable China to join the global market on an equal footing with the

40

leo douw

West and Japan. The establishment of joint ventures, with a majority share for the Chinese counterpart, and a limited term to the alliance to be concluded with the foreign partner, were initially looked upon as the means to achieve that end. Foreign firms in their turn had to reckon with tightly organized relations on the work floor, a deeply rooted social security system, and the partaking of local employees and managers in social organization, discipline, and control. All of these factors influenced the native business culture, and prevented a quick fulfillment of the requirements of globalization policies. The 1980s brought forward the pessimistic view expressed in Jim Mann’s Beijing Jeep of the emerging business culture in China and its possibilities of being integrated with foreign styles of management (1989); the decade may in hindsight be considered as a period of cautious experimentation. The joint venture must be considered as the sequel to the prewar comprador institution. Joint ventures are used as a protective shield against administrative abuse and as instruments of negotiation with officialdom, and also as a vehicle through which to manage Chinese staff and personnel; but at the same time, the joint venture is generally considered to be a difficult mode of organization to work in, and thus costly. For this reason, many firms prefer to work as wholly foreign-owned enterprises and do their brokerage themselves. But in line with the historical argument outlined above it should be asked how far this solves the problems that are attached to business brokerage in China. Wholly foreign-owned enterprises also employ large native staffs, and cannot easily solve the problem of cultural difference. Special training for all kinds of functionaries, Chinese as well as foreign, who can be considered as middlemen will keep adding to the cost of transnational entrepreneurship, which must be weighed against the cost of conducting a joint venture. To borrow from Cochran once more, foreign enterprises do try and build their own managerial hierarchies just like in the past, and do try to impose their own corporate culture on their branches in China, but at the same time they also rely on Chinese social networks of all sorts to survive. This means that we have to continue looking at the localization process from two sides: the expatriate management, which has to adapt to local circumstances, and the Chinese staffs, which are connected to local society and politics and are active in using the foreign sector to make inroads into the world market. This keeps the process of localization very dynamic and politically contested,

the role of middlemen in sino-foreign enterprises

41

and also demonstrates that cultural change is more than simply the adaptation of one’s behavior to a different environment, or the selection of what seems best in permanently changing circumstances. The process of localization thus involves political change, and matters of national importance are reflected in the micro-environment of the work floor. Chinese and foreign managers generally succeed quite well in making their cooperation work, as the other chapters in this volume amply attest. But at the same time tensions may be caused by the ambition of Chinese managers to replace the Western expatriate management; the pursuit of this ambition must be considered an aggressive form of localization. One example illustrates this point: a (Dutch) expatriate manager in a big American consultancy firm working from Shanghai and Beijing commented that she was waiting for the day when the Chinese would take over. Her firm could only hold them back, because their level of knowledge was still inadequate for the highest functions, and because its exclusively Western clients had as yet insufficient trust in being advised by native Chinese consultants. But she had no doubt that this would change in the very near future (Interview MR, 2000).1 The localization of foreign enterprises may assume different shapes. Native staff members who have a talent for brokering the differences between the Chinese personnel and the expatriate management may enhance their own position by creating a Chinese sphere of influence within the enterprise, which is difficult to handle for the expatriate management. Their power as brokers is, of course, usually informal. When interviewed, Dutch managers often mention the prevalence of Chinese social networks that take shape informally within their firms, and which may be needed to connect the expatriate staff with native Chinese employees. In one medium-sized Dutch firm, for example, most personnel were acquired by being recommended by the General Manager, a trusted and competent employee, who was a central

1 Much of the materials used here come from a field work trip to Beijing in April 2000, when the author supervised a group of students who were researching human resource management in Dutch enterprises in China as their main topic (see van IJzerloo, 2000). The information gained there has been supplemented by interviews with several Dutch expatriate managers in Dutch transnational corporations working or having worked in China, and by previous information drawn from fieldwork by a student of the author’s in Beijing. All those interviewed are indicated by their initials.

42

leo douw

figure in the organization and who linked the overwhelmingly Chinese staff to the three Dutch shareholders. This situation is all the more remarkable because one of the shareholders had graduated in China Studies and had a long and multi-faceted experience as a business consultant in China (Interview HSN, 2001). Bringing in personnel in this manner in China creates bonds of obligation and dependency, and in this rather small-sized firm invigorated the General Manager’s position. But similar processes have been noticed in bigger firms, where other staff may also be involved in recommending people for positions, by which principle complicated threads of personal loyalty may be spun among the personnel as a whole. This was explicitly mentioned as an important factor by an experienced expatriate manager in a large Dutch transnational corporation when asked about his experiences in Taiwan (Interview HK, 2001). It is also true that family and regional loyalties among personnel are usually looked upon as an impediment to the transparency of the organization, and are sometimes explicitly prohibited (Munder 2001), but the more subtle hierarchies based on other particularistic principles, such as seniority and personal loyalty, apparently cannot easily be prevented from emerging in these firms. The working of those principles may be further illustrated by the case of the German Machine Tool Service, a service point for the sale and maintenance of machinery, which was established by a consortium of German small and medium enterprises (SMEs) in the Tianjin Economic and Technological Development Area (TEDA) during the 1990s (Munder 2001). Four technicians had been selected from among the trainees in the German training institute in TEDA, all from the same class, and sent to Germany for internships to get acquainted with the firms that were involved in the consortium and prepare them for supporting their clients. A graduate from the German Department at Nankai University in Tianjin was appointed as a General Manager, and appeared to be particularly adroit at brokering issues concerning personnel management. Each of the four technicians had fulfilled their internships with one of the four firms in the consortium. Back in China, it appeared that all four considered the orders for the firm in which they had been trained as their exclusive domain, and they refused to work for the others even if they had sufficient time. The problem was counteracted in various ways, but the most interesting for our argument is the installment of an extra layer among this very small group of technicians, and

the role of middlemen in sino-foreign enterprises

43

the adding to the salary and privileges of the General Manager. The extra layer in this case consisted of one of the four technicians, who had been their classmate, but because he was older he occupied a position of natural seniority. His position and the General Manager’s were added to in terms of responsibility, prestige, and material rewards. The hierarchization within this minuscule work unit is arguably connected to the need for the employees to have clear career perspectives and to be strictly judged on the basis of their own task performance. Another research project on Sino-German joint ventures confirms this perspective. Young male employees in Sino-German firms highly appreciated the inclination of Western managers to take the opinions of their Chinese subordinates seriously. Nevertheless those employees did not doubt the need for a business firm to have a clearly defined command structure (Krieg and Nagels 2001). The same research project revealed that managers and employees alike in Sino-German joint ventures are quick to complain about ‘chaotic’ work conditions when managers try to create an atmosphere of cooperation on the work floor. In Hofstede’s terms, they prefer a large ‘power distance’ (1991) between themselves and their superiors in the organization, a preference that Hofstede considers to be a Chinese cultural feature; research reveals, however, how this supposedly cultural trait is connected to the power structure in the enterprises concerned, and reflects the ambitions of the Chinese personnel (Krieg and Nagels 2001). All this is not to say that the embedding of foreign firms in China is a one-way process of sinification. Western managers in consultation with their Chinese colleagues have instituted smart systems of bonuses, for example, to ensure that their staff members share responsibilities among themselves and cooperate more closely (Munder 2001; Interview HSN, 2001). Also, there has been a quick expansion of Chinese managers with Western and Japanese MBAs and management experience, who avail of a cosmopolitan worldview and modern business skills. Nonetheless, it seems important to acknowledge that the localization of enterprises in China is still a many-facetted, costly, and in many ways painful process, and cannot be solved by playing to simple concepts of cultural difference. Careful, creative, and unspectacular social engineering will be needed for a long time to come, as has been the case ever since the days of the compradors.

44

leo douw Conclusion

The persistent need for Sino-foreign middlemen in the process of localization or the embedding of transnational enterprises in Chinese society and politics is due to the divergence of interests of the counterparts involved, which comes on top of their cultural differences broadly defined. Since the time when the level of economic development of China and the West began to diverge over the course of the 19th century, at the same time as economic exchanges and diplomatic traffic increased, both sides had to invest deeply in a means to bridge the gap separating foreign and native business communities and managerial staffs. The comprador institution of the 19th and early 20th centuries, the efforts at better control and direct negotiation by the big foreign corporations after the 1890s, the expulsion of foreign enterprises from the 1950s to the 1970s and, since the 1980s, the joint managerial hierarchies of the Sino-foreign joint ventures and the problems of wholly foreign owned enterprises, are all proof of the persistent difficulties that had to be overcome in the longer term, and still wait for solutions. Sino-foreign middlemen work in a complicated field of tensions that are only partly cultural in character and place those who are adroit at negotiating differences in a powerful position, exactly because more is involved than ingrained habits and values, and because those habits and values are part of a dynamic, aggressive, and ambitious Chinese society and politics. China’s entrance to the WTO in 2001 and the rapidly increasing activity of foreign enterprises in China may be expected to enhance the capacity of foreigners to deal directly with Chinese partners in the market and among officials. Furthermore, if the growth of China’s economy continues in the longer term and its potential for being integrated into the global market on equal terms with the US, the EU and Japan is realized, then the position of middlemen may decline and be reduced to being consultants in a technical rather than a political sense. However, China’s society has such momentum of its own, and still organizes itself in manners so different from what is usual elsewhere that the brokerage of the differences may continue to require the services of specialized and powerful middlemen. Just as in the past, the costs and benefits of that brokerage may remain difficult to weigh against one another for quite some time to come.

the role of middlemen in sino-foreign enterprises

45

Acknowledgements Earlier versions of this chapter appeared as Douw (2002; 2004). As this work has been presented at various workshops and seminars, I am indebted to many colleagues for comments. I owe special thanks, however, to Alexius Pereira and Peter Peverelli. REFERENCES Bickers, R. (1999), Britain in China; Community, Culture and Colonialism 1900 –1949. Manchester, New York: Manchester University Press. Biggart, N.W. (1997), ‘Explaining Asian Economic Organization’, in: Orrú, Marco, Nicole Woolsey Biggart, Gary G. Hamilton, The Economic Organization of East Asian Capitalism, Sage Publications, pp. 3–32. Cain, P.J., and Hopkins, A.G. (1993), British Imperialism; part I, Innovation and Expansion 1688–1914; part II, Crisis and Deconstruction 1914–1990. New York: Longman Publishing. Chang, J.N. (1998), ‘New British Companies in China: The case of International Export Company in Hankou, 1907–18’, Studies in Chinese History 8: 29–63. Cochran, Sherman (2000), Encountering Chinese Networks; Western, Japanese, and Chinese Corporations in China, 1880–1937. Berkeley, Los Angeles, London: University of California Press. Dirlik, Arif (2001), ‘Markets, Culture, Power: the Making of a “Second Cultural Revolution in China”’, Asian Studies Review, 25, 1: 1–33. Douw, Leo, Cen Huang and David Ip, eds. (2001), Rethinking Chinese Transnational Enterprises: Cultural Affinity and Business Strategies. London: Curzon Press. ——— (2002), ‘The Indigenization of Transnational Management: Towards a Research Strategy for the Chinese Cultural Sphere’. In: Chang, Tsun-wu, ShiYeoung Tang, eds., Essays on Ethnic Chinese Abroad (Haiwai Huazu Yanjiu Lun Ji), 3 volumes, Overseas Chinese Association: Taipei, vol. I (Migration, Entrepreneurs and Commerce), pp. 43–63. ——— (2004), Embedding and Dis-embedding Transnational Enterprises in China during the Twentieth Century, Working Paper Series of the David Lam Institute for East-West Studies, Hong Kong Baptist University. Fairbank, J.K. (1965), East Asia: the Modern Transformation, London: George Allen and Unwin. Frank, Andre Gunder (1998), ReORIENT: Global Economy in the Asian Age. Los Angeles, London, Berkeley: University of California Press. Granovetter, Mark (1985), ‘Economic Action and Social Structure: The Problem of Embeddedness’, American Journal of Sociology 91: 481–510. Hamilton, Gary (1999), ‘Asian business networks in transition: or, what Alan Greenspan does not know about the Asian business crisis’, in: T.J. Pempel, ed., The politics of the Asian economic crisis, Cornell University Press, pp. 45–61. Hao, Yen-p’ing, (1970), The Compradore in Nineteenth-Century China: Bridge between East and West. Cambridge, Massachussets. Hefner, Robert W. ed. (1998), ‘Introduction; Society and Morality in the New Asian Capitalisms’, in: Hefner, Robert W., ed., Market Cultures; Society and Morality in the New Asian Capitalisms, Boulder (Col): Westview Press, pp. 1–38. Hofstede, G. (1991), Cultures and Organizations, Software of the Mind. London: McGrawHill. Krieg, Renate and Kerstin Nagels, 2001, ‘Receptiveness to changing

46

leo douw

practices in human resource management: a comparison of Mainland Chinese and Taiwanese employees in German-Chinese business’, in: Douw, Leo, Cen Huang and David Ip, eds. (2001), Rethinking Chinese Transnational Enterprises: Cultural Affinity and Business Strategies. London: Curzon Press, pp. 38–64. IJzerloo, Jeroen van, ed. (2000), A Changing China. Amsterdam: Chain 2000. Liu, Kwang-ching (1981), ‘World View and Peasant Rebellion: Reflections on PostMao Historiography’, Journal of Asian Studies, 40, 2: 295–326. Mann, Jim (1989) Beijing Jeep. How Western Business stalled in China. New York: Simon and Schuster. Munder, Irmtraud (2001), ‘The German Machine Tool Service—A work floor case study of a German-based transnational small enterprise in China’, in: Douw, Leo, Cen Huang and David Ip, eds., Rethinking Chinese Transnational Enterprises: Cultural Affinity and Business Strategies. London: Curzon Press, pp. 64–83. Murphey, Rhoads (1974), ‘The Treaty Ports and China’s Modernization’, in: Mark Elvin and G. William Skinner, eds., The Chinese City between Two Worlds, Stanford: Stanford University Press, pp. 17–73. Osterhammel, Jürgen (1984), ‘Imperialism in Transition: British Business and the Chinese Authorities, 1931–1937’, The China Quarterly 98: 260–86. ——— (1986), ‘Semi-colonialism and informal empire in twentieth-century China: towards a framework of analysis’, in: W.J. Mommsen, J. Osterhammel, eds., Imperialism and after, continuities and discontinuities, London: Allen & Unwin, pp. 290–315. ——— (1989), ‘British business in China, 1860s-1950s’, in: Davenport-Hines, Richard. P.T. and Geoffrey Jones, eds., British Business in Asia since 1860, Cambridge, etc.: Cambridge University Press. Pomeranz, Kenneth (1999), The Great Divergence; China, Europe, and the Making of the Modern World Economy. Princeton: Princeton University Press. Vries, Peer (1998), Should we really ReORIENT?, Itinerario 22, 3: 19–39. Walder, A.G. (1986), Communist Neo-traditionalism, work and authority in Chinese industry. Berkeley, London, Los Angeles: University of California Press.

Chapter 3

Conflict and its Management in Sino-Foreign Joint Ventures: A Review Xun (George) Wang, Chan Kwok-bun and Vivienne Ho Luk International joint ventures are quickly becoming popular business alliances (Gill and Butler 2003; Hu and Chen 1996; Lane and Beamish 1990; Munn et al. 2000; Hambrick et al. 2000; Miller 1997; Cui 1998; Child et al. 1994). They play a “pivotal role in the economic development of the host country and the globalization of the world economy” (Cui 1998: 87), particularly in China (Si and Bruton 2003; Selmer 2005; Beamish 1993; Wang and Ralston 2000; Lee 2001). From 1980 to 1988, the number of foreign-joint ventures approved in China increased from 48 to 5,955 (Wang and Ralston 2000: 678). These figures have continued to soar since the 1990s. From 1992 to 2001, capital from foreign partners in registered foreign-funded enterprises rose from US$68.6 billion to US$359.6 billion, and the total investment from these joint ventures increased from US$178.4 billion to US$875 billion (China Statistical Yearbook 1997 and 2002). In 2004, the total number of foreign direct investment contracts reached 43,664, or about 6.3 times the number in 2003 (US-China Business Council 2005). In theory, Sino-foreign joint ventures benefit both partners because they offer comparative advantages to both sides. Most researchers have agreed that both Chinese and foreign partners contribute to joint ventures (Buckley, Clegg and Tan 2004; Beamish 1993; Wang and Ralston 2000; Hambrick et al. 2001). Foreign partners bring advanced products and technologies, management know-how, and access to export markets, while Chinese partners bring ‘local knowledge’ of government regulations and bureaucracies, cheap labor, existing manufacturing facilities, and access to the domestic market (Miller 1997). Some researchers have claimed that China and multinational corporations can be a winning combination (Liu and Song 1997). Unfortunately, cross-national interaction is plagued with problems because the foreigners and the Chinese are unable to resolve differences

48

xun (george) wang, chan kwok-bun, vivienne ho luk

of various sorts (Gill and Butler 2003; Yau 2004; Doucet and Jehn 1997; Strutton and Pelton 1997; Hoon-Halbauer 1999). The number of labor disputes in foreign-funded and Hong Kong, Macau and Taiwanese Chinese-funded enterprises in China was 20,174, and the number of cases settled was 18,088 (China Statistical Yearbook 2001: 794–5). Most of these conflicts were settled by mediation, arbitration or lawsuit. In some cases, the conflicts threatened the operations and even the survival of the firms. For instance, several large multinational corporations such as Otis, Occidental, AT&T, Bethlehem Steel Group, and Caterpillar closed down their offices and left China because of problems with their partners (Strutton and Pelton 1997). What causes problems between partners in Sino-foreign joint ventures? Theoretically, the question is important for studies of globalization and intercultural management and interaction. Practically, it is a vital question for the business enterprises themselves, and for the business community as a whole. Although the success of Sino-foreign joint ventures depends on many factors, both internal and external, technological and managerial, researchers have found that conflict between Chinese and foreign partners plays an important role (Yau 2004; Wang et al. 2005; Strutton and Pelton 1997; Hyder and Ghauri 2000; Johnson et al. 2001). Johnson and her associates (2001: 39) concluded that conflict is potentially detrimental to international joint ventures because it results in a distraction of resources, energy, and attention away from their missions and objectives. Considerable attention has been devoted to the study of conflict and its management in international joint ventures, but there has been limited research into Sino-foreign joint ventures (Wang et al. 2005; Gill and Butler 2003; Hu and Chen 1996; Hambrick et al. 2001; Doucet and Jehn 1997; Hoon-Halbauer 1999; Ding 1997; Lin and Germain 1998; Yan and Gary 2001; Gong et al. 2001). Efforts are lacking to comprehensively review the literature to identify explicit or implicit links among fragmented studies. It is the intent of this chapter to review selected empirical research on international joint ventures in China and offer an assessment of their findings and limitations. What has been studied about conflict in Sino-foreign joint ventures? What are the contributions and shortcomings of such studies? How can we put these studies into perspective? Our review of the literature revealed that there are a few dozen studies on conflict in Sino-foreign joint ventures. We approached these

conflict and its management in sino-foreign enterprises

49

studies in respect to four areas: (1) types of conflict; (2) antecedents and correlates of conflict; (3) relationship between conflict and performance/ satisfaction of joint ventures; and (4) conflict resolution strategies. Table 1. Selected Major Studies of Conflict in Sino-Foreign Joint Ventures Issues

Selected Major Studies

Types of Conflict Intercultural vs. intracultural

Doucet and Jehn, 1997.

Substantive vs. relationship Conflict at different levels

Hambrick et al., 2001; Worm and Frankenstein, 2000.

Areas of conflict

Hoon-Halbauer, 1999; Hambrick et al., 2001; Gong et al., 2001; Johnson et al., 2001; Zhu et al., 1998; Lane and Beamish, 1990; Lee, 2001; Ding, 1997.

Antecedents of Conflict Cultural factors

Antonoiu and Whitman, 1998; Worm and Frankenstein, 2000; Gong et al., 2001; Doucet and Jehn, 1997; Hoon-Halbauer, 1999; Walsh et al., 1999; Lee, 2001; Hu and Chen, 1996; Ding, 1997; Mohr and Spekman, 1994.

Structural factors

Hambrick et al., 2001; Walsh et al., 1999; Zhu et al., 1998; Hoon-Halbauer, 1999.

Multiple factors

Lane and Beamish, 1990; Strutton and Pelton, 1997; Hoon-Halbauer, 1999.

Managers

Lee, 2001; Gong et al., 2001; Johnson et al., 2001.

Conflict and Performance Some relationship

Lee, 2001; Frankenstein, 1997; Ding, 1997; Hu and Chen, 1996; Xie et al., 1998; Lin and Germain, 1998.

Different relationships

Hoon-Halbauer, 1999; Hambrick et al., 2001; Mohr and Spekman, 1994.

No significant relationship

Yang and Gary, 2001; Gong et al., 2001.

Conflict Resolution Types of main strategies

Kirkbride et al., 1991; Ding, 1998; Lin and Germain, 1998; Xie et al., 1998; Tjosvold et al., 2001.

Selection of strategies

Kirkbride et al., 1991; Ding, 1998; Lin and Germain, 1998; Tjosvold et al., 2001; Xie et al., 1998; Tinsley and Brett, 2001.

Future strategies

Xie et al., 1998; Strutton and Pelton, 1997; Worm and Frankenstein, 2000.

50

xun (george) wang, chan kwok-bun, vivienne ho luk Types of Conflict

Substantive and Relationship Conflicts Many researchers have categorized conflict into two groups: substantive conflicts and relationship conflicts (Pelled and Alder 1994; Amason and Schweiger 1994; Hambrick et al. 2001). Substantive conflict occur due to opposing opinions and positions regarding running company business, such as setting up the main agendas and priorities of the company. Relationship conflict is conflict at the interpersonal level, including personal incompatibility, mistrust, animosity, and so on. Hambrick and his colleagues (2001) have argued that these two types of conflicts have different causes and may have different functions. Intracultural and Intercultural Conflicts Doucet and Jehn (1997) identified two types of conflicts in Sino-foreign joint ventures: intracultural and intercultural. Intracultural conflicts are those between members of the same culture, such as conflict between two Chinese managers. Intercultural conflicts are those between people from different cultures, such as between a foreign manager and a Chinese manager. Doucet and Jehn examined the interview records of 76 American managers who were currently or had recently been working in Sino-American joint ventures. Contrary to conventional wisdom, they found that “Americans working in Sino-American joint ventures experience more hostility in their conflicts with other Americans than in their conflicts with Chinese counterparts” (Doucet and Jehn 1997: 576). Conflict at Different Levels Ding (1997) focused on the relationship between parent companies in Sino-American joint ventures. Specifically, the relationship between parent companies can be a dominant relationship in which one partner exercises more control, or an egalitarian relationship in which both partners exercise more or less equal control. Ding found that control by parent companies was inversely related to conflict, and positively related to performance. The implication is clear: there is less conflict in a dominant relationship that will yield better performance.

conflict and its management in sino-foreign enterprises

51

Johnson and her colleagues (2001) studied conflict at two levels. At one level, conflict is between the parent company and the newly created joint venture. At the other level, conflict is between partners within the joint venture. Using data from an in-depth longitudinal study of two major Sino-foreign joint ventures, Hoon-Halbauer (1999) also found that conflict can occur at multiple levels. First, it can occur between two or more parent companies due to their different and conflicting objectives. Second, the parent companies and the newly developed venture can experience conflict: while parents want to control the venture, newly created ventures want autonomy. Third, conflict may exist between two groups of staff who pledge allegiance to their own parent companies or other entities. Conflict not only occurs between parent companies, between parent companies and joint ventures, and between staff members, but also within a particular role, such as that of the CEO of an international joint venture. CEOs experience role conflict because they are required to perform different role activities and are expected to fulfill competing role expectations (Gong et al. 2001: 764). Instead of studying conflict at different organizational levels of joint ventures, Hambrick and his colleagues (2001) studied it in the international joint venture management group. They argued that it is important to study senior management because that is where potential and actual conflict visibly manifests. In addition, the senior management group “may have extraordinary effects on the successes and failures of international joint ventures” (Hambrick et al. 2001: 1035). Areas of Conflict Some researchers have pointed out that conflict is inevitable because the two partners in the joint venture have very different objectives (Walsh et al., 1999; Lane and Beamish 1990; Hoon-Halbauer 1999). For instance, Walsh and his colleagues (1999) argued that the most serious and frequent conflict is between partner objectives. Typically, while the Chinese are interested in attracting foreign capital and the transfer of both technological and managerial expertise, foreign partners are attracted to the enormous emerging Chinese market and the availability of cheap labor in China. The two partners sleep in the same bed but have different dreams. Lane and Beamish (1990) identified four areas of potential conflict in establishing joint ventures: in deciding whether to set up a joint

52

xun (george) wang, chan kwok-bun, vivienne ho luk

venture, how to select partners, how to select an organizational structure, and how to manage relationships. Instead of studying conflict at the initial stages, some studies have focused on operational conflict. For instance, having examined four major Sino-European auto joint ventures, Zhu and his colleagues (1998: 18) concluded that most of the conflicts between Chinese managers and European managers revolved around four key issues: (1) control over the company and different functional departments in the company; (2) managing staff and workers with low education and skills; (3) technology transfer from the parent company to the newly created venture; and (4) localization by using parts and components made in China. Hoon-Halbauer (1999) pointed out that at different levels, major issues that can lead to conflicts vary tremendously. At the highest level, the main concerns are the partners’ conflicting objectives. At the middle level, the key issue is the control of the venture. At the lowest level, it is the problem of mistrust. Based on interviews with 261 U.S. general managers and Chinese managers, Ding (1997) found that most typical and severe conflicts occur in functional areas such as quality control, export and import, wages and labor policy, and administration and supervision. Antecedents and Correlates of Conflict Cultural Differences. Research has agreed that cultural difference is one of the main sources of conflict in most international joint ventures, including Sino-foreign joint ventures (Yau 2004; Habib 1987; Antoniou and Whitman 1998; Worm and Frankenstein 2000; Pye 1982). Value Differences. Value differences can be a cause of conflict. In fact, one researcher argued that “unquestionably and possibly the most intractable category of problems in Sino-American business relations can be traced to cultural differences between the two countries” (Pye 1982). Misunderstanding of Values. In addition to value differences, misunderstanding each other’s values can cause conflicts. Based on a study of 574 middle-level Chinese managers, Antonoiu and Whitman (1998) found that four principles govern social relationships in China: the credibility of the individual according to his or her reference groups, an emphasis on the group, the pivotal role of the leader, and the indebtedness that arises out of interpersonal interaction. They sug-

conflict and its management in sino-foreign enterprises

53

gested that Western managers should be cautious when they use purely economic or individual-oriented incentives because these may run against the Chinese tradition that stresses harmony, relationships, group orientation, and consensus. Individual Value Differences. Worm and Frankenstein (2000) believed that the main cause of conflict is the value difference between Chinese and foreign managers. They stated that the origin of conflicts is the gulf between Western universalistic values and Chinese particularistic values in running business. In general, “the individualistic Westerners tend to stress impersonal, universalistic obligations while the more collectivistic Chinese tend to stress specific situational obligations based on hierarchical personal relations” (Worm and Frankenstein 2000: 268). Because of such differences, it is difficult to establish trustful and effective interpersonal cooperation between Chinese and Western managers. Doucet and Jehn (1997) agreed that the general cultural differences between Americans and Chinese, such as individualism versus collectivism, can be used to explain conflicts. However, they also argued that group theory, which identifies ingroup and outgroup differences, should be used to examine conflicts in Sino-American joint ventures. Cultural Distance. In addition to general cultural differences, some researchers maintained that cultural distance can affect conflict in general and role conflict in particular (Gong et al. 2001). Following transaction cost theory and agency theory, Gong and his colleagues argued that when the cultural distance between partners of the joint venture is high, both parties tend to be more opportunistic and less committed to the enterprise. Moreover, cultural distance makes it difficult for the principal to control the agent. Hence, they hypothesized that cultural distance is positively associated with the CEO’s role conflict and sense of ambiguity (Gong et al. 2001: 766). Cultural Similarity. Some researchers found that cultural distance sometimes does not cause conflicts, but cultural similarity may. For instance, in their study of 76 American managers in Sino-American joint ventures, Doucet and Jehn (1997) found that Americans working in Sino-American joint ventures actually experienced more hostility with fellow Americans than with Chinese counterparts. There were three possible reasons for this irony. First, American expatriates tend to follow American cultural norms when they interact with each other. Second, Americans tend to follow the Chinese cultural tradition of maintaining social harmony and saving face when they interact

54

xun (george) wang, chan kwok-bun, vivienne ho luk

with Chinese. Third, Americans may treat Chinese as outgroup members and try to avoid overt conflict with them. Johnson and her colleagues (2001) reported similar findings in their study. While examining how parental control causes conflict between parent companies and the managers of newly created joint ventures, they found that, surprisingly, “direct parent control in the IJVs [international joint ventures] results in Anglo managers resisting their own parent control. In contrast, the Japanese and the Far Eastern IJV partners seem more tolerant of their parent company’s direct control.” ( Johnson et al. 2001: 46) Partner Relationship and Conflict While some researchers examined value differences, others explored how partner relationships affect conflict (Hoon-Halbauer 1999, Walsh et al.; 1999; Lee 2001; Hu and Chen 1996; Ding 1997; Mohr and Spekman 1994). In other words, they wanted to find out how structural factors, rather than cultural factors, affect conflict. Partner Relationships. By interviewing sixteen managers who represented the interests of American firms and seventeen managers who represented the interests of Chinese firms in ten joint ventures, Walsh and his associates (1999: 85) concluded that “their different goals (or dreams) might contribute to problems between the two management groups.” Because the partners have different objectives, conflict between them is inevitable. Parental Control. Johnson and her associates (2001) argued that conflict can be seen as an outcome of parental control in joint ventures. The direct and indirect control of joint ventures by parent companies fosters conflict between them, and conflict between parental and local management. The researchers speculated that the greater the parent company’s direct and indirect control, the more there would be partner-partner conflict. However, the data suggested that direct parental control significantly increased local management conflict, whereas indirect control reduced parent-local management conflict ( Johnson et al. 2001: 46). Partner Relationships at Different Levels. Hoon-Halbauer (1999) presented three major findings regarding the various relationships in joint ventures and the potential for conflict in those relationships. First, different and conflicting objectives were the main cause of conflicts between two parent companies. Second, fighting for overall

conflict and its management in sino-foreign enterprises

55

control and operating autonomy was the main cause of conflict between parents and newly created ventures. Third, shared management caused problems of mistrust and allegiance. Furthermore, lack of both formal and informal communication worsened the situation. Power Relations. Power relations between partners also affect conflict. Based on a study of 120 beer distributors in Hainan province, Lee (2001) found that whether international suppliers used aggressive power or non-aggressive power could affect the satisfaction of Chinese distributors. The former type of power refers to coercive, economic, and mediated power; the latter refers to rewards. The data supported Lee’s hypothesis that “IJV suppliers’ use of aggressive power is positively related to the conflict level perceived by Chinese distributors while IJV supplier’s use of non-aggressive power is negatively related to the conflict level perceived by Chinese distributors” (Lee 2001: 152). Based on their study of 265 CEOs in Chinese-based international joint ventures, Gong and his associates (2001) found that the role conflict of CEOs was associated with three factors: who dominated the company, the completeness of the contract between partners, which reflected the nature of their relationship, and the objective gap between partners. All three factors were structural rather than cultural. Characteristics of Partnership. Hu and Chen (1996) studied the relationship between partnership characteristics and performance in joint ventures. They identified four characteristics of partnerships: the level of partner commitment, partner control, number of partners, and the socio-cultural distance between partners. All four characteristics were found to have affected the performance of joint ventures. Although their study did not specifically study the relationship between partner relationship and conflict, it implied that all of these factors would affect conflict and therefore performance. Managers and Conflict Apart from the aforementioned causes, researchers argued that managers and their management style could cause conflict (Hambrick et al. 2001; Gong et al. 2001; Hoon-Halbauer 1999; Walsh et al. 1999). Management Group. Based on their observation of an international joint venture in Tianjin, China, Hambrick and his associates (2001) developed a conceptual model to study how compositional gaps

56

xun (george) wang, chan kwok-bun, vivienne ho luk

between managers could affect substantive and relational conflicts. Compositional gaps are the differences between managers in the international joint venture manager group. Because managers have different observable demographic characteristics such as nationality, age, and gender, less observable demographic characteristics such as education, and psychological characteristics such as values and beliefs, they tend to have different or opposing views on running the venture—which could in turn cause substantive and relationship conflicts (Hambrick et al. 2001: 1048). Individual Managers. Individual managers themselves, especially CEOs, and their personality attributes also may cause conflicts (Gong et al. 2001). Management Style. After studying key conflicts in Sino-European joint ventures, Zhu and his associates (1998) pointed out that conflict could be an outcome of the European management style. For instance, in terms of control of joint ventures, European companies tend to be authoritarian and rigid. In terms of personnel management, European companies tend to send to China technical people with little knowledge of management and little or no cultural training. Manager Perceptions. Some researchers noted the negative views that foreign and Chinese managers have of each other (Walsh et al. 1999). For instance, American managers tend to think that Chinese managers know very little about planning, cannot make decisions, do not want to take risks, and have low professional standards. These strong negative feelings may cause conflict in the day-to-day operations of joint ventures. Multiple Antecedents Other than the cultural, structural, and behavioral explanations, some researchers pointed out that there are multiple antecedents of conflict in Sino-foreign joint ventures. For instance, based on their studies in many countries, Lane and Beamish (1990) concluded that conflict can result from both cultural and behavioral factors. Strutton and Pelton (1997) found that all three factors, namely, cultural arrogance, ignorance, and detachment, should be taken into consideration in studies of conflict. Others maintained that the causes of conflicts in international joint ventures could be both internal and external to the joint ventures themselves (Killing 1982; Hoon-Halbauer 1999). While some researchers felt that joint venture problems tend to be

conflict and its management in sino-foreign enterprises

57

internal, others thought that external factors are more important because the root cause of joint venture problems is that there is more than one parent company, and these parents have conflicting objectives (Hoon-Halbauer 1999: 346). Relationship between Conflict and Performance/Satisfaction There seems to be consensus in the literature we reviewed that there is a relationship between conflict and performance/satisfaction. However, we also need to point out some divergent observations about that relationship, including its nature, variations in it, and its significance (Yan and Gary 2001; Hambrick et al. 2001; Hu and Chen 1996; Ding 1997; Mohr and Spekman 1994; Lee 2001; Xie et al. 1998; Hoon-Halbauer 1999; Fey and Beamish 1999). Conflict Affects Performance Many researchers agreed that conflict as a result of cultural difference and misunderstanding contributed directly to the failure of international joint ventures in China (Lee 2001; Hoon-Halbaucer 1999; Chen 1995; Frankenstein 1997; Ding 1997; Hu and Chen 1996). In a study conducted during 1997, 63% of the respondents reported that cultural difference and misunderstanding had caused the termination of projects (Worm and Frankenstein 2000:265). In his study of 261 U.S.-Chinese equity joint ventures, Ding (1997) found that conflict between joint venture partners significantly hindered joint venture performance. He stated that frequent and severe conflict in Sino-American joint ventures could lead to misunderstanding, distrust, and anxiety between partners. Consequently, the level of cooperation and the integration of activities would be lower, thus affecting performance (Ding 1997: 34). Conflict not only affects performance indicators such as profitability and productivity, but also the satisfaction of the partners. Studying foreign beer distributors in China, Lee (2001) found that the satisfaction of the Chinese distributors was negatively related to their perception of the conflict level. The more they perceived themselves to be in conflict with their international suppliers, the less satisfied they felt (Lee 2001: 152). Xie and his colleagues (1998: 194) argued that conflict among different functional units such as marketing, R&D, and manufacturing while developing new products had simultaneous positive and

58

xun (george) wang, chan kwok-bun, vivienne ho luk

negative effects on new product success. Their comparative study based on samples from four countries supported the hypothesis that conflict can have both positive and negative effects on performance. Types of Conflict and Performance Some researchers argued that different types of conflict have different effects on performance. Hambrick and his associates (2001) stated that substantive conflict can enhance effectiveness for groups when performing non-routine tasks. They further proposed “that there would be a curvilinear (inverted-U) relationship between substantive conflict and IJV performance, with moderate levels of substantive conflict most positively associated with IJV performance” (Hambrick et al. 2001: 1043). Hoon-Halbauer (1999) analyzed how conflicts at different levels can affect performance. For instance, conflict between parent companies had a negative effect and constrained managers in their decisions and actions, which in turn could affect the overall performance of the joint venture. Conflict among the staff in terms of their allegiance also played an important role in determining the performance of the venture (Hoon-Halbauer 1999: 358). Conflict Plays an Important Role in Determining Performance Researchers agreed that different factors can affect the performance of joint ventures, including relationship between partners, internal characteristics, and external conditions of joint ventures (Hu and Chen 1996; Beamish 1993; Hoon-Halbauer 1999). Some researchers argued that conflict in partner relationships is a more important factor in explaining the successes and failures of international joint ventures. Based on their study of 383 joint ventures honored by the China Association of Enterprises with Foreign Investment, Hu and Chen (1996: 172) concluded that performance of Sino-foreign joint ventures is more dependent upon partner-related factors than joint venture- or environment-related factors such as product or industry characteristics and location. Conflict Resolution and Performance Not only conflict itself, but also how it is handled, affects the performance of joint ventures. It was agreed that the success of Sino-

conflict and its management in sino-foreign enterprises

59

foreign joint ventures depends on how partners manage daily operations and resolve conflicts (Xie et al. 1998; Lin and Germain 1998; Mohr and Spekman 1994). As Lane and Beamish (1990) asserted, when conflicts are not effectively resolved, the international joint venture may deteriorate. In contrast, when conflict resolution processes are properly managed, ventures are often energized. Using data from a questionnaire survey, Lin and Germain (1998) found significant relationships between four different conflict resolution strategies and the performance of international joint ventures, which was measured by financial performance, personal relationship with the other partner, and overall relationship. Mohr and Spekman (1994) discussed several conflict resolution techniques and examined the relationship between them and performance. They found that the use of constructive conflict resolution techniques was positively associated with more successful partnerships, and that the use of destructive conflict resolution techniques was negatively associated with successful partnerships (Mohr and Spekman 1994: 144). In addition, prior research indicated that different styles of conflict management have different effects on performance. For instance, Xie and his associates found that “the efficiency aspect of competitive resolution is more influential in new product development situations with significant interfunctional conflict” (Xie et al. 1998: 202). No Significant Relationship between Conflict and Performance However, it is important to report that the relationship between conflict and performance did not always test as significant in empirical studies. Using a sample of 90 U.S.-China joint ventures, Yan and Gary (2001) systematically studied the antecedents and effects of parental control in international joint ventures. They reported a strong positive relationship between the quality of the interpartner working relationship and performance. However, they also found that “the hypothesized negative effect of interpartner conflict on performance was not significant, although the regression coefficient was correctly signed” (Yan and Gary 2001: 407). In addition, the direction of the relationship between conflict and performance seems uncertain. For instance, using role theory, Gong and his colleagues (2001) hypothesized that CEO role conflict and ambiguity are inversely related to venture performance. In other words, the more role conflict and ambiguity there is in an international

60

xun (george) wang, chan kwok-bun, vivienne ho luk

joint venture, the less successful it will be. Contrary to their hypothesis, the data showed that role conflict actually increased satisfaction with venture performance. Conflict Resolution Strategies Previous research identified various strategies used by Sino-foreign companies in dealing with conflict. These strategies were adopted because of certain cultural and organizational constraints (Wang et al. 2005; Yau 2004; Lin and Germain 1998; Strutton and Pelton 1997; Xie et al. 1998; Worm and Frankenstein 2000; Tjosvold et al. 2001; Ding 1998; Kirkbride et al. 1991). Types of Strategies In their study of the relationship between interfunctional conflict and conflict resolution styles in Japan, Hong Kong, the United States, and Great Britain, Xie and his colleagues (1998: 195) analyzed six different conflict resolution strategies: avoidance, accommodation, competition, collaboration, compromise, and hierarchical resolution. They found that these strategies were used in companies with different cultural backgrounds. Other studies observed that Chinese managers tended to take a non-assertive approach to conflict resolution (Kirkbride et al. 1991; Ding 1998). For instance, Kirkbride and his colleagues found that among five commonly used conflict resolution strategies, Chinese managers clearly preferred to use non-assertive strategies such as compromise and avoidance, and “the assertive style of competing appears to be the least preferred style of conflict resolution” (Kirkbride et al. 1991: 373). Moderate strategies such as accommodation and collaboration were found to be moderately popular among Chinese managers. Lin and Germain (1998: 181) identified four common conflictresolution strategies in Sino-foreign ventures: problem solving, by searching for solutions that satisfy the needs of both parties by openly discussing concerns, issues, and priorities; compromising, by finding a sub-optimal solution through negotiation; forcing, which refers to unilateral control by a dominant party; and legalistic strategy, or seeking formal contract and informal binding agreements. They found that the most popular strategy was problem solving, followed by compromising. The least preferred strategy was forcing (Lin and Germain 1998: 186).

conflict and its management in sino-foreign enterprises

61

Using various research methods, including interviews, questionnaire surveys, field studies, and experiments, Tjosvold and his colleagues (2001) conducted several studies of conflict and conflict resolution in China and Hong Kong. They found that Chinese managers not only used the traditional Chinese way of handling conflicts, but they could also learn and apply Western approaches. Chinese values do not necessarily impede cooperative conflict (Tjosvold et al. 2001: 175). Chinese managers are open to cooperative conflict, participate in it, and appreciate it. Selection of Conflict Resolution Strategies Previous research identified several traditional Chinese values that could influence Chinese perceptions of and approaches to conflict resolution (Lin and Germain 1998; Xie et al. 1998; Ding 1998; Kirkbride et al. 1991). For instance, Kirkbride and his colleagues (1991) analyzed several key Chinese traditional values, including emphasis on the maintenance of collectivity, the continuation of harmonious relationships among members, conformity to prescribed social structures and power hierarchy, holism-contextualism, saving face, reciprocity relationships and guanxi (ties and connections). Researchers found that Chinese managers and employees, with their strong commitment to interpersonal relationships, tended to avoid conflicts and use indirect ways of resolving them (Ding 1998; Kirkbride et al. 1991). Other research demonstrated how traditional Chinese cultural values and cognitive orientation influenced Chinese people and led them into adopting a non-assertive approach to conflict resolution. Kirkbride and his associates (1991) concluded that these cultural and psychological factors played a major role in the Chinese selection of conflict resolution strategies. Lin and Germain (1998) explored the circumstances under which certain conflict resolution strategies were used. They concluded that cultural similarity, relative power, and relationship age all affected the selection of conflict strategies. Although the findings were somewhat incoherent, the study did report some interesting observations. For instance, cultural similarity induced managers to use a problem solving strategy instead of a legalistic strategy. Also, relative power induced managers to choose compromise as a strategy (Lin and Germain 1998: 187).

62

xun (george) wang, chan kwok-bun, vivienne ho luk

Xie and his colleagues (1998: 203) pointed out that cultural tradition not only influenced selection among conflict resolution strategies, but it also influenced the effectiveness of the use of those strategies. Their research revealed that the involvement of senior management in interfunctional conflict is more effective in Japanese and Hong Kong firms than in U.S. and British firms. They concluded: “Given that ‘face saving’ is an important characteristic of cultural norms in both Chinese and Japanese cultures, new product development performance in such cultures could benefit more from using the hierarchical method” (Xie et al. 1998: 203). Tinsley and Brett (2001) argued that managers’ norms for resolving conflict were culturally based. Using data from a simulation study, they explored the cultural basis of conflict management norms between Chinese and Americans and how such cultural norms might lead to different outcomes. They concluded that “American managers were more likely than Hong Kong Chinese managers to resolve a greater number of issues and reach a more integrative outcome, while Hong Kong Chinese managers were more likely to involve higher management in conflict resolution” (Tinsley and Brett 2001: 361). Yau (2004) argued that, to a large extent, Chinese management had not changed its style such as in handling conflict, even though the economy had been growing rapidly and there had been more exposure to the Western managerial theories and practices. For instance, he noticed that Chinese managers tended to enhance relationships rather than avoid conflict. He also noticed that Chinese managers tended to remove the entire problem rather than seek alternative approaches in dealing with conflict. Future Strategies Clearly, various conflict resolution strategies have been used in Sinoforeign joint ventures. The reasons for adopting these strategies have been explored, and their successes and failures analyzed. What is next? Some researchers gave suggestions. Xie and his colleagues (1998) argued that managers should not try to avoid conflict in joint ventures because conflict could actually contribute to the success of the venture, particularly in developing new products. The problem in joint ventures is not merely conflict itself, but also how conflict is managed. To improve the performance of joint ventures, managers should be aware of “the ways in which national culture affects

conflict and its management in sino-foreign enterprises

63

the relative effectiveness of conflict resolution methods and success in adapting conflict resolution techniques to match the level of conflict” (Xie et al. 1998: 205). Strutton and Pelton (1997) proposed that Western managers use multiple strategies because conflict in Sino-foreign joint ventures comes in various forms and degrees. They proposed that Western managers adopt highly variable conflict resolution strategies and learn to use Chinese strategies. Because they realized that there is no way to alter the value difference between Chinese and Western managers, Worm and Frankenstein (2000) suggested a more realistic strategy in dealing with conflict. They cautioned Western managers that it is important to understand and acknowledge the realities of key value differences between China and the West. They proposed that Western managers “accept what may seem to be a sub-optimal operation style in order to get the job done” (Worm and Frankenstein; 2000: 262). Discussion and Conclusion In this concluding section, we will summarize the contributions of previous research, both empirical and theoretical. We will also point out some of the limitations of previous research, and discuss the possible directions of future research. Contributions of Previous Studies Empirical research studied various aspects of conflict in Sino-foreign joint ventures. First, it explored the various types of conflict, including intercultural and intracultural conflicts, interfunctional conflicts, conflicts at different levels, both organizational and individual, and areas of conflicts. Second, studies explored the antecedents of conflict. Some research focused on the cultural differences between Chinese and Western partners. Other research used the structural approach by focusing on the partner relationships, and some argued that multiple factors may lead to conflicts in joint ventures. Third, previous studies explored the relationship between conflict and performance, and conflict and satisfaction. Many studies found some association between conflict and performance, while a few found no significant relationship. Some reported various relationships between the two, depending on other factors such as type of conflict and cultural

64

xun (george) wang, chan kwok-bun, vivienne ho luk

background. Finally, research identified frequently used conflict resolution strategies. It analyzed how those strategies were culturally imprinted, and several researchers offered practical solutions for dealing with future conflicts in international joint ventures. Although different studies drew different conclusions, much of the research showed that conflict management in international joint ventures is complicated by cultural differences (Parkhe 1991; Newman 1992). Understandably, most studies of conflict in Sino-foreign joint ventures were conducted by researchers in business and management studies, and in industrial psychology. Perhaps because of their orientation, most of these studies were intent on theory testing rather than theory building. These studies also, implicitly and explicitly, touched upon theoretical issues, applied middle-range theories, or tried to answer macro-level theoretical questions. At this juncture, we offer several observations on the empirical literature that we have reviewed which might have theoretical implications. First, previous research categorized conflicts. One school of thought adopted a cultural approach, characterizing conflict as intercultural or intracultural in nature. Another school adopted a structural approach and looked upon conflict in terms of types of relationships in joint ventures. Second, with regard to the antecedents and correlates of conflict, one school of thought identified cultural differences, particularly in terms of the gap between Western individualism and Chinese collectivism, as the main cause of conflict, while those taking the structural approach tended to believe that business interests and control of power were the main causes of conflict. Third, regarding the relationship between conflict and performance in joint ventures, it was noted that conflict can have both positive and negative effects on performance. Furthermore, the direction of the effects and the levels of the effects depended on cultural conditions and types of conflict. Finally, research indicated that the selection and use of particular conflict resolution strategies was culturally embedded. The effectiveness of these strategies was also culturally constrained. We would like to note that not only were the above theoretical issues discussed in the empirical literature, but also middle-range theories such as role theory, social exchange theory, transaction cost theory, agency theory, ingroup/outgroup dynamics theory, and theories of power, control, and autonomy were invoked to explain the various aspects of conflict in Sino-foreign joint ventures.

conflict and its management in sino-foreign enterprises

65

Shortcomings of Existing Research Our close examination of the existing literature found few comprehensive studies of conflict management in the realm of human resources management. A recent review cited only two such studies (Walsh et al. 1999). Many studies of international joint ventures have focused on how to negotiate with the Chinese and how to use guanxi to enter the Chinese market (Blackman 1997), largely because until now such ventures have been a favoured market entry mechanism in China. Among the few studies of conflict in the realm of human resources management, there were several shortcomings. Most of them focused on managers only and many simply relied on documentary analyses or case studies (Doucet and Jehn 1997; Antoniou and Whitman 1998; Pye 1982). Methodologically, these studies suffer from three limitations. First, while some researchers noted that conflict and conflict resolution in different kinds of international joint ventures are quite different because the foreign partners come from different cultural traditions (Hu and Chen 1996; Worm and Frankenstein 2000; Zhu et al. 1998), most of these studies examined Sino-American joint ventures; there were very few studies of the conflict between Chinese managers and managers from other developed countries (Child et al. 1994). As a result, regional and systematic comparisons are lacking. Second, most empirical studies were hypothesis-testing using statistical data. While these studies did provide some systematic data, they failed to provide rich, meaningful information. Third, many studies treated conflict and its management in joint ventures as a simple business issue, thus ignoring its multi-faceted nature and broader cultural and social implications. With regard to theory, we noted several limitations. First, there has been no systematic attempt to develop a general theoretical framework. Most studies were guided by fragmented middle-range theories or perspectives. The many underlying theoretical implications of these studies remained implicit rather than explicit. A comprehensive theoretical analysis and interpretation of conflict in Sino-foreign joint ventures does not exist in the literature. It should also be noted that there seems to be an assumption that there is one uniform Chinese culture and Chinese people are still following that cultural tradition. We need to point out that there are many variations of the Chinese culture due to regional, age, and

66

xun (george) wang, chan kwok-bun, vivienne ho luk

gender differences, different levels of economic development in different places, frequency and level of contact with foreigners, and so on. Also, since China and the Chinese people have experienced dramatic social transformation in the past twenty years under the current market-oriented reform, it is highly problematic to assume that Chinese people still follow the same tradition described by scholars in the 1950s and 1960s. Furthermore, many studies focused on the negative impact of conflict in joint ventures. We argue instead that conflicts are part and parcel of managerial daily life and may have positive as well as negative effects, and that conflict management may fuel managerial development. The word “conflict” often carries negative connotations. Whether between people or organizations, as in joint ventures, it is seen as something to be avoided whenever possible. The research literature shows, however, that this conventional wisdom is open to question, and there are other ways of thinking about conflict and its management in joint ventures. (1) Moderate levels of conflict are most positively associated with the performance of international joint ventures (Hambrick et al. 2001). (2) Conflict in joint ventures that are intent on developing new products and/or processes has simultaneous positive and negative effects on performance (Xie et al. 1998). (3) The role conflict and ambiguity of CEOs increases satisfaction with performance in joint ventures (Gong et al. 2001). (4) When conflict resolution processes are properly managed, international joint ventures are often energized. Conflict may contribute to the venture’s success, particularly while searching for new products or new ways of doing things. Conflict itself is not the problem, but how it is handled—the emphasis should be on adaptation and improvisation, not conflict-avoidance. Satisfactory conflict resolution has positive emotional consequences; it puts new energy back into the system. “The use of constructive conflict resolution techniques is positively associated with more successful partnerships” (Mohr and Spekman 1994). Much of the literature we reviewed explains problems in joint ventures in terms of differences in cultures, values, or preferred ways of handling conflicts—the culturalist explanation. The Chinese managers were set apart from the non-Chinese, often in the form of sharp and unbridgeable dichotomies, such as Chinese particularlism versus Western universalism. The literature repeatedly suggested that Chinese managers stress the maintenance of the collective: ‘the group before self ’, interpersonal harmony, conformity to existing social struc-

conflict and its management in sino-foreign enterprises

67

ture and the power hierarchy, face saving, reciprocity, and quanxi (Kirkbride et al. 1991). We were also told that Chinese prefer the indirect, informal, non-aggressive, compromising way; and avoid the direct, formal, confrontational, legalistic way. Questions arise as to which of these assertions are about real differences and which are a consequence of social construction, a kind of self-fulfilling prophecy. Is it culture or is it an erroneous attribution to culture, a politics of culture? Is culture more appearance than reality, a front, a ploy, a pretext? Two findings from the literature review point a way out of the culture bind. (1) Chinese and American managers have mutual stereotypical prejudices toward each other (Walsh et al. 1999). (2) Americans who work in Sino-American joint ventures experience more hostility in their conflict with each other than in their conflict with Chinese (Doucet and Jehn 1997). There may well be something at work besides culture, in the way that we usually understand the word. Sharp dichotomies of differences are often artifacts of the human mind, and become self-fulfilling when two different ethnic or racial groups feel the need to magnify their differences from each other. This may occur to facilitate cohesiveness and solidarity within each separate group. In this way cultural encounters can produce—and ossify—differences. But the contrary is also a possibility: the two different cultural groups may become more like each other than before. In such a process, both cultures are transformed. But such encounters presuppose a commitment to an appreciation of differences, without trying to eradicate them through assimilation, a willingness to engage in conflict, knowing something good may result and that conflict can be a precondition of creativity and innovation, and a determination to keep conflict from degenerating into animosity. For instance, Tjosvold et al. (2001) reported that Chinese managers not only can use the “traditional Chinese way of handling conflicts”, they can also learn and apply the Western way. Chinese managers are open to, and even appreciate, cooperative conflict; so in this case, sharp cultural dichotomies are mental, not empirical. Searching for a new way of seeing conflict is perhaps the real motive of studies of conflict in international joint ventures. Such research is not merely about profit and productivity. At a deeper level, it is about cultural encounters, encounters with ‘the other’. It may even be a search for a new culture in transnational enterprises. In that sense, studies of joint ventures have a deep theoretical agenda.

68

xun (george) wang, chan kwok-bun, vivienne ho luk Directions for Future Research

There is little doubt that conflict and conflict resolution will be a major issue in Sino-foreign joint ventures now that China has entered the WTO. In terms of directions for future research, we would like to make some suggestions. First, we need to shift the focus from strategic alliance to human resources issues. We need to systematically identify the major conflicts in the realm of human resource management, such as hiring, training, job assignment and rotation, performance appraisal, pay, and benefits. Second, we need to conduct more comparative studies of international joint ventures initiated by various countries, such as Sino-American, Sino-European, Sino-Japanese, Sino-Korean, Sino-Taiwanese, and Sino-Hong Kong (in this book, see Chapter 10 by Chan and Luk). Also, it may help to build a joint venture research team of scholars from different national and cultural backgrounds who could bring their own expertise into the research. Third, we propose to use an interdisciplinary approach. Conflict should not be just a business issue. It should be studied as a case of interface between different cultures by researchers who are themselves from different academic disciplines, intellectual traditions, and cultural backgrounds. Fourth, it is important to identify the main theoretical perspectives guiding the studies, and systematically compare and contrast these different perspectives. What are the main theoretical considerations of these studies? How do different theoretical perspectives address conflict in Sino-U.S. joint ventures? What are the points of divergence and congruence among these theoretical perspectives? Finally, can these perspectives be integrated to generate a new framework for future research? Acknowledgement This study was supported by a Faculty Research Grant from the Hong Kong Baptist University. REFERENCES Amason, A. and Schweiger, D. (1994), ‘Resolving the paradox of conflict, strategic decision making, and organizational performance’, International Journal of Conflict Management, 5: 239–253.

conflict and its management in sino-foreign enterprises

69

Antoniou, P. and Whitman, K. (1998), ‘Understanding Chinese interpersonal norms and effective management of Sino-western joint ventures’, Multinational Business Review, 1: 53–62. Beamish, P. (1993), ‘The characteristics of joint ventures in the People’s Republic of China’, Journal of International Marketing, 2: 29–48. Blackman, C. (1997), Negotiating China: Case Studies and Strategies. Sydney: Allen and Unwin. Buckley, P.J., Clegg, J. and Tan, H. (2004), ‘Knowledge transfer to China: Policy lessons from foreign affiliates’, Transnational Corporations, 1: 31. Chen, M. (1995), Asian Management Systems, London, UK: Routledge. Child, J., Markoczy L., and Cheung, T. (1994), ‘Managerial adaptation in Chinese and Hungarian strategic alliances with culturally distinct foreign partners.’ Advances in Chinese Industrial Studies, 4: 211–231. China State Statistics Bureau (1997 and 2002). China Statistical Yearbook, Beijing, China. Coser, L. (1956), The Functions of Social Conflict. New York: The Free Press. Cui, G. (1998), ‘The evolutionary process of global market expansion: Experiences of MNCs in China’, Journal of World Business, 1: 87–110. Ding, D. (1997), ‘Control, conflict, and performance: A study of US-Chinese joint ventures’, Journal of International Marketing, 3: 31–45. ———. (1998), ‘In search of determinants of Chinese conflict management styles in joint ventures: An integrated approach’, City University of Hong Kong. Hong Kong. Doucet, L. and Jehn, K.A. (1997), ‘Analyzing harsh words in a sensitive setting: American expatriates in communist China’, Journal of Organizational Behavior, 18: 559–82. Fey, C. and Beamish, P. (1999), ‘Strategies for managing Russian international joint venture conflict’, European Management Journal, 1: 99–105. Frankenstein, J. (1997), ‘Managing in Asia 1997: The business of managing human factor’, Far Eastern Economic Review, September 11. Gill, J. and Butler, R.J. (2003), Managing instability in cross-cultural alliances’, Long Rang Planning, 6: 543. Gong, Y., Shenkar, O., Luo, Y., and Nyaw, M.K. (2001), ‘Role conflict and ambiguity of CEOs in international joint venture: A transaction cost perspective’, Journal of Applied Psychology, 86, 4: 764–73. Habib, C.C. (1987), ‘Measures of manifest conflict in international joint ventures’, Academy of Management Journal, 30: 808–16. Hambrick, D., Li, J., Xin, K., and Tsui, A. (2001), ‘Compositional gaps and downward spirals in international joint venture management groups’, Strategic Management Journal, 22, 11: 1033–53. Hoon-Halbauer, S. K. (1999), ‘Managing relationships within Sino-foreign joint ventures’, Journal of World Business, 4: 344–71. Hu, M. and Chen, H. (1996), ‘An empirical analysis of factors explaining foreign joint performance in China’, Journal of Business Research, 35: 165–173. Hyder A.S. and Ghauri, P.N. (2000), ‘Managing international joint venture relationships: A longitudinal perspective’, Industrial Marketing Management, 29: 205–18. Johnson, J., Cullen, J., Sakano, T., and Bronson, J. (2001), ‘Drivers and outcomes of parent company intervention in IJV management: a cross-cultural comparison’, Journal of Business Research, 52, 1:35–49. Killing, P. (1982), ‘How to make a global joint venture work’, Harvard Business Review, 3: 120–27. Kirkbride, P., Tang, S., and Westwood, R. (1991), ‘Chinese conflict preferences and negotiation behavior: Cultural and psychological influences’, Organizational Studies, 3: 365–386. Lane, H. and Beamish, P. (1990), ‘Cross-cultural cooperative behavior in joint ventures in LDCs’, Management International Review, Special Issue: 87–102.

70

xun (george) wang, chan kwok-bun, vivienne ho luk

Lee, D.Y. (2001), ‘Power, conflict, and satisfaction in IJV supplier-Chinese distributor channels.’ Journal of Business Research, 52, 2: 149–60. Lin, X. and Germain, R. (1998), ‘Sustaining satisfactory joint venture relationships: The role of conflict resolution strategy’, Journal of International Business Studies, 1: 179–96. Liu, X. and Song, H. (1997), ‘China and the multinationals—A winning combination.’ Long Range Planning, 1:74–83. Miller, R. (1997), ‘International joint ventures in developing countries’, Finance and Development, 1: 70–8. Mohr, J. and Spekman, R., (1994), ‘Characteristics of partnership success: Partnership attributes, communication behavior, and conflict resolution techniques’, Strategic Management Journal, 2: 135–52. Munns, A.K., Aloquili, O., and Ramsay, B. (2000), ‘Joint venture negotiation and managerial practices in the new countries of the former Soviet Union’, International Journal of Project Management, 6: 403–13. Newman, W.H. (1992), ‘Launching a viable joint venture’, California Management Review, Fall: 68–80. Parkhe, A. (1991), ‘Interfirm diversity, organizational learning, and longevity in global strategic alliances’, Journal of International Business, 4: 579–601. Pelled, L. and Adler, P. (1994), ‘Antecedents of intergroup conflict in multifunctional product development teams: A conceptual model’, IEEE Transactions on Engineering Management, 41: 21–8. Pye, L. (1982), Chinese Commercial Negotiation Style, Cambridge. MA: Oelgeschlager, Gunn & Hain, Publishers, Inc. Selmer, J. (2005), ‘Cross-cultural training and expatriate adjustment in China: Western joint venture managers’, Personnel Review, 1: 66–85. Si, S.X. and Bruton G.D. (2003), ‘Beyond national boundaries: Considering the views from both sides of the table’, Organizational Dynamics, 4:384. Simmel, G. (1995). Conflict and the Web of Group-Affiliations. Translated by Kurt H. Wolff and Reinhard Bendix. New York: The Free Press. Strutton, David and Lou Pelton. 1997. ‘Scaling the Great Wall: The Yin and Yang of resolving business conflict in China.’ Business Horizons. September-October: 22–34. The US-China Business Council, (2005), ‘Foreign investment in China’, http://www. uschina.org/statistics/2005foreigninvestment.html. Tinsley, C. and Brett, J. (2001), ‘Managing workplace conflict in the United States and Hong Kong’, Organizational Behavior and Human Decision Processes, 85, 2: 360–81. Tjosvold, D., Hui, C., and Law, K. (2001), ‘Constructive conflict in China: cooperative conflict as a bridge between east and west’, Journal of World Business, 36, 2: 166–83. Walsh, J., Wang, E., and Xin, K. (1999), ‘Same bed, different dreams: Working relationships in Sino-American joint ventures’, Journal of World Business, 1: 69–93. Wang, C., Lin, X. Chan, A.K.K., and Shi, Y. (2005), Conflict handling styles in international joint ventures: A cross-cultural and cross-national comparison’, Management International Review, 1: 3–22. Wang, X. and Ralston, D. (2000), ‘Strategies for small and medium-sized U.S. businesses investing in China: Lessons from Taiwanese companies,’ Thunderbird International Business Review, 6: 677–701. Worm, V. and Frankenstein, J. (2000), ‘The dilemma of managerial cooperation in Sino-western business operations’, Thunderbird International Business Review, 42, 3: 261–83. Xie, J., Song, M., and Stringfellow, A. (1998), ‘Interfunctional conflict, conflict resolution styles, and new product success: A four-culture comparison’, Management Science, 44, 12: 192–206.

conflict and its management in sino-foreign enterprises

71

Yan, A. and Gary, B. (2001), ‘Antecedents and effects of parent control in international joint ventures’, Journal of Management Studies, 3:393–415. Yau, O. (2004), ‘Spotlight: Management styles in the West and East’, Management Decision, 5/6: 807–11. Zhu, G., Speece, M., and So, S. (1998), ‘Conflicts in Sino-European joint ventures’, in: Jan Selmer, ed., International Management in China: Cross–cultural Issues, New York: Routledge, pp. 13–28.

Chapter 4

Negotiating Spaces Peter Peverelli This chapter tells the story of a Sino-Dutch joint venture that has been operating in China over the past few years, and takes a fresh look at the various conflicts that have arisen from its inception until the time of writing. A theoretical model will result, the purpose of which is to offer a simple set of analytical tools to describe the complex organizational processes in which transnational ventures of this type are involved. I will gradually introduce the conceptual framework in the case description, and show how it can help to reveal the organizational complexity of the case. The emphasis will be placed on the use of narrative analysis in organizational research. The narratives that are used here consist mainly of articles that are related to the joint venture that appeared in a Chinese industrial bulletin around the time of a crucial event in the history of the joint venture. A limited number of these articles will be analyzed to show how they reflect organizational processes. This part of the theory will draw heavily from the work of Boje and his colleagues (Boje 1991, 2000; Boje et al. 2001). For details of the origins of the theory, see Peverelli (2000). I am personally involved with this joint venture in two contexts, or spaces, to adopt the terminology of that which follows (see Peverelli (2000), which also uses this case). I come to the case as an academic researcher of organizational processes, but I am also involved in the case as a consultant to the Dutch party. In line with my theoretical framework, which will be explained in the following, this means that this chapter is written in two different spaces, and that the text is an ongoing negotiation between those two spaces, although it may be perceived as a single text. Some of the mind jumps in the text will be better understood if this is kept in mind.

negotiating spaces

73

Case History: Joint Venture Swept under the Carpet The Stage Setting and Core Terminology The Western party is a medium-sized Dutch dairy company, Milco. The Chinese partner is Xiangnai, which is a dairy company that is located in Huaniu county in Shaanxi province. Milco is also cooperating with a Hong Kong based trading company, Blackwell. Milco was contacted by Blackwell sometime in the mid 1900s because Blackwell was looking for a foreign partner on behalf of Xiangnai. Milco was willing to consider a joint venture with Xiangnai, on condition that Blackwell would co-invest to consolidate their interest in the endeavor. Milco and Blackwell were first to establish a joint venture in Hong Kong, and then would enter into a joint venture with Xiangnai. Blackwell agreed, and the joint venture started operating on January 1, 1996. The foreign parties held 25% of the equity of the joint venture, and Xiangnai held the remaining 75%. The Chief Executive Officer (CEO) of Xiangnai became the CEO of the joint venture, which was located adjacent to Xiangnai’s existing plant in Huaniu county. We now have enough background information to introduce a few technical terms. The first is social-cognitive configuration, or configuration for short. Configurations are defined as a small numbers of actors that frequently interact on a very specific topic, and consist of a social element—the actors that are involved—and a cognitive element—the ideas, perceptions, and worldview that are shared by the actors (for an elaborate introduction of this concept, see van Dongen and colleagues (1996: 81–108) and Peverelli (2000: 18–21). The second key term is inclusion. The members of a configuration are said to be included in it, and when actors interact in a number of configurations it is referred to as multiple inclusion. When interacting within a certain configuration, actors can access the cognitive element of other inclusions, which is an important driver for ongoing organizational activity. My stage setting introduces three configurations of the CEOs of the three companies as follows (I will use the names of the companies in referring to their CEOs). – Xiangnai + Blackwell: finding a foreign partner for Xiangnai. – Milco + Blackwell: cooperating as the foreign partner of Xiangnai.

peter peverelli

74

B

M

X

B

X

B

M

– Xiangnai + Blackwell + Milco: cooperating in the joint venture. This situation can be represented in the following diagram. The thin lines indicate the relations of identity of the actors in different configurations, and the bold lines connect the actors who are included in the same configuration. This analysis, and in particular the graphical representation of the inclusions of the three CEOs, reveals that Blackwell is included in all of them, and thus exposes a potential problem for Milco: there is no context that includes Xiangnai and Milco that does not also include Blackwell, which means that all of the interactions between Xiangnai and Milco include Blackwell. As Milco has much fewer opportunities for interaction with Xiangnai, Blackwell becomes the relay station in the communication processes between Milco and Xiangnai. We need one more core term to understand what is going on in this case: cognitive space, or space for short. A space is essentially similar to a configuration, but the number of actors is larger, the interaction between the actors is less frequent, and the shared cognitive matter is much more vague. In terms of everyday speech, some examples of spaces are companies, industrial sectors, cities, provinces,

negotiating spaces

75

and nations. A company like Milco is a group of actors (the employees) with a shared cognitive element (how we do things at Milco). However, not all of the employees of Milco will interact with every other employee with equal frequency. Space as it is defined here resembles the sociological term aggregate, but the construct is augmented with a cognitive element. Many spaces start their lives as configurations. Some configurations attract increasing numbers of actors, during which time they will gradually develop into spaces, but most configurations perish after the need for their existence disappears (for an elaborate introduction on cognitive space see Peverelli (2000: 26–126)). A number of such spaces appear in the stage setting, and are detailed in the following. I will begin with the administrative levels. Huaniu, Shancheng, and Shaanxi (and China) are spaces in which activities, institutions, will each be given their own particular sense. For example, an enterprise such as Xiangnai may receive a different sense—with different organizational consequences—from each administrative level. In Peverelli (2000: 90–96), I made an analysis of news items on a Chinese enterprise in the period 1988 to 1999, and found considerably different identities of the enterprise at the municipal, provincial, and national administrative levels. Another type of space is the industrial sector. Although not directly observable from the text, it is known that Chinese industrial sectors, through their supervising organs (typically a ministry) greatly affect the operation of the enterprises that are within their scope. Xiangnai and the joint venture are dairy companies, and the dairy sector is a food sector, which belongs to the designation of Light Industry in China. However, Agriculture also plays a role in food production, and in particular in the dairy industry. The CEO of Xiangnai started out as a farmer, and he and his original enterprise are included in the Agriculture space, which is headed by the Ministry of Agriculture, but many aspects of the enterprise, such as quality specifications, are managed from within the Light Industry space, which is headed by the Bureau of Light Industry in Beijing. There are more of these sectors, but I will restrict myself to these two in this chapter. These types of spaces can be envisioned as a table. The reader should note that this table should not be interpreted from an ‘either/or’ point of view. Xiangnai does not ‘belong’ to one particular cell; rather, each cell in this table refers to a context of

peter peverelli

76

Table 1. A highly simplified matrix of administrative and sector spaces

Huaniu Shancheng Shaanxi China

Agriculture

Light Industry

1 2 3 4

5 6 7 8

Xiangnai. Tables like this are a useful aid to remind us of the infinite nature of organizational complexity. Xiangnai as a Light Industry enterprise in Huaniu makes sense in a different way to Xiangnai as an Agricultural enterprise in Huaniu. In the same way, Xiangnai as a Light Industry enterprise in Huaniu is given a different meaning to Xiangnai as a Light Industry enterprise in Shancheng, and so on. In the initial stage of contact with potential Chinese partners, Western companies should make an inventory of the most important spaces that are involved, and should keep track of the meaning of their activities in each space. This process should continue throughout the negotiation and implementation stages of the project. An interesting example of the different meanings of spaces can be found in the fiscal status of the joint venture. In browsing through the documents that are related to the establishment of the joint venture, I noted that all of the documents that related to tax were issued by organizations that were located in Shancheng. Apparently, the sense that was given to the joint venture in the Shancheng space was that of a tax-generating unit. Initial success The initial success of the joint venture agreement was announced in an article on the front page of an influential Chinese food industry news bulletin that was published within the Light Industry space on December 2, 1997. The appearance of such an article is of utmost importance in our methodology, as it provides a number of clues that allow us to gain an insight into the social cognitive context of the reported events. First of all, the front pages of Chinese publications such as this are rarely filled with ‘news’ in the sense of interesting items and stories that are submitted by neutral reporters to a responsible, equally neutral editor who then makes a final selection.

negotiating spaces

77

The bulk of the space on the front page is filled either with articles from government organizations, or with articles about parties who pay for that prime position. The latter usually also hand in the draft texts themselves, which means that the article that announced the establishment of the joint venture (which was longer than the average article on similar subjects) could very well have been arranged by the local authorities or by Xiangnai themselves. Later in 1996, another article appeared in the same publication, again on the front page, praising the excellent performance of the joint venture. Both articles were written by the same person. The apex of success for the joint venture was probably its prominent position in the statistics of the Chinese dairy industry of 1996 (published in the 1997 China Food Industry Yearbook). The joint venture ranked in eighth in terms of output volume, third in terms of tax generated, and first in terms of profit generated per employee. The Yearbook was published within the Light Industry sector space under the auspices of the China Food Industry Association. At this time, the joint venture partners were engaged in discussions about further investment. The agreement stipulated that Milco would invest considerably more in case of a successful start, but Milco was not content with certain aspects of the cooperation. Milco was especially dissatisfied with the lack of information coming from China, and in particular the problems in obtaining regular financial statements. Almost all of the initiatives of Milco to gain more influence in the daily management of the joint venture failed. Milco’s CEO got in contact with a China consultant (the author) who was based in his home country, the Netherlands, from whom he started seeking background advice on a case by case basis. However, Milco was reluctant to make full use of the consultant, because it feared that this would arouse suspicion on the part of Blackwell that might negatively affect the relationship between Milco and Blackwell. As has been indicated, the Light Industry space was apparently a major context of this project. Xiangnai was able to arrange the regular publication of material pertaining to the company on the first page of a Light Industry based food industry magazine. As these news items were signed by the same reporter, I made a search for other publications by this author, who appears to be the magazine’s local correspondent in Shaanxi province, as all his articles deal with events in Shaanxi. This is a significant clue within my theoretical framework. Chinese reporters that specialize in a certain region or

78

peter peverelli

industrial sector become part of the network of that region or sector, and are frequently used to produce texts such as those that form the central theme of this chapter. It is a win-win situation, because the reporter is in need of ‘news’ and the regional government or companies are in need of publicity. Researchers can use this information as a tool for the detection of social-cognitive structures. The China Food Industry Yearbook is also a Light Industry publication. It is rare for an enterprise with foreign investment to appear in such a prominent position in such a major statistics publication, which seems to confirm that Xiangnai had considerable influence in the Light Industry hierarchy, even outside its home region. This is a good point in our discussion to look at a concrete instance of Chinese-style free publicity as an example of narrative analysis. I have selected an article that summarizes the success of the joint venture. I will first provide an integral translation of the article, followed by an analysis of its contents. For the sake of brevity, my analysis will concentrate on one topic: the way in which the text reveals the complexity in the relationship between Xiangnai and Milco. China Food Bulletin December, 1997 Conquering the market by relying on technology and talent Xiangnai Milco Dairy Co. Develops Spectacularly From our correspondent (reporter ZJJ) The Shaanxi Xiangnai Milco Dairy Co., Ltd. has increased its overall strength by relying on talent and advanced technology and equipment. Profits have increased to a great extent, and the company’s development has entered a rapidly paced phase. Last year, the volume of the company’s main product, high grade milk powder, reached 8000 tons, 33.3% more than in the same period the year before; the turnover was RMB90 million, 29.8% more than in the same period the year before; and a profit tax of RMB7.5 million was completed, 35.3% more than in the same period the year before. Shaanxi Xiangnai Milco Dairy Co., Ltd. is a joint venture between the former town-operated Huaniu Xiangnai Milk Powder Factory and Milco Co. from the Netherlands. After the establishment of the joint venture, Xiangnai Milco Dairy Co., Ltd. invested RMB68 million in importing milk powder technology from the Netherlands to improve the technology that is related to cooling, evaporation, spray drying, and packaging, and to automatically control the specifications of the raw materials and the production process, thus effectively guaranteeing product quality and the efficacy of the staff.

negotiating spaces

79

At the same time, they imported from Germany a vacuum milk powder nitrogen packaging line and production lines for yogurt, lactic acid beverages, ice cream, and UHT milk (UHT stands for Ultra Heat Treatment, which is a way of sterilizing milk such that it can be kept for some time at room temperature), thus bringing the production equipment and environment a big step closer to the international standard. To adjust to the advanced technology, the company quickly recruited highly talented, highly educated, quality technical staff. Dutch experts visit the company each year for a period of 6 weeks to give on the job training. At the same time, 16 experts, including doctoral student supervisor Luo Chengxiang and senior engineer Zhang Baofeng, were hired to come to the company annually for a period of not less than 60 days to complete at least one R&D project. To further improve the talent structure, last year the company hired 10 graduates from higher or intermediate vocational schools to enrich each position. Currently, technical personnel at the level of assistant engineer or higher make up 28% of the total staff, and staff with 10 or more years of experience in dairy make up 55% of the total staff. As a result, a brigade of technicians has been formed that is rarely seen in the industry elsewhere in China.

The uninitiated reader is likely to obtain a completely positive impression from this article. The report is about two parties who are engaged in successful cooperation, and the story of the text can be divided into three parts: an introduction that expresses the success of the company in figures, a section on imported technology, and a section on the development and quality of the technical staff. The last two sections show a linguistic similarity, in that they consist of two parts that are separated by the phrase “at the same time (tongshi ).” The author is describing two different stories that are taking place simultaneously. In the section on technology, we are first informed about the technology that has been imported from the Netherlands, the home country of the foreign partner. We then read that more technology has been imported from Germany to bring “the production equipment and environment closer to the international standard.” This statement implies that the Dutch contribution was insufficient to fulfill all of the company’s technological needs, which can be interpreted as containing the negative implication that although Milco basically did what it was expected to do, its actions also left something to be desired. In the following section, this mode of narration continues. We first learn about the activities of the Dutch experts, which are set off

80

peter peverelli

against the activities of the Chinese experts. Whereas the Dutch experts stay at the company for six weeks, the Chinese stay at least two months and are obliged to finish at least one project during that period. Again, through the layer of factual verbal meaning, we can sense a criticism of Milco, an implicit charge that it is not doing enough to make the joint venture achieve the desired success. In terms of cognitive space, it seems that the cooperation is reviewed in this article from two different spaces. The phrase “at the same time” is like a linguistic wedge that indicates the switch to another social-cognitive environment. The reason for this multiplicity in reporting is to be found in the different audiences for which the article was written. Foreign investment is not regarded as a blessing in all circles in China, and an entirely positive report might have elicited criticism from certain parties, who would have felt that Xiangnai was throwing itself at the feet of Milco. The multiplicity of the narrative tones down the overall enthusiasm to a level that is acceptable to readers with more chauvinistic tendencies. On yet another level, this mode of narrating the success of the cooperation can also be viewed as Xiangnai holding a mirror up to Milco. It is as if Xiangnai is saying: “you did a lot, but not all that we expected.” Technology from other foreign regions was also needed, and the Dutch experts were only able to carry out their work in collaboration with their Chinese colleagues, whereas the Chinese experts appear to have done a better job, as they obliged themselves to actually “finalize” a project. Conglomerization In October 1997, the Huaniu government announced the merger of three of the region’s dairy manufacturers into one large conglomerate, named Xiangnai Group. This conglomerate also included the joint venture. The CEO of Xiangnai was appointed as the CEO of Xiangnai Group, which meant that he was now the CEO of Xiangnai, the joint venture, and Xiangnai Group. Milco was asked to give its consent, which it did. The consultant urged Milco to be wary of the possibility of completely losing control over the operation in China, but Milco replied that, according to local government officials, Xiangnai Group would only act as the sales organization for the member companies, and the members themselves would remain virtually independent.

negotiating spaces

81

The establishment of Xiangnai Group was officially announced in the aforementioned food industry news bulletin, again on the front page, in January 1998. I will look at this article first. Erasing internal consumption; expanding capital Three Dairy Factories in Huaniu Form a Group From our correspondent (reporter ZJJ) Huaniu county in Shaanxi province has recently formed the Xiangnai Dairy Group from three nearby dairy factories that belong to different departments, the idea being to erase internal consumption and expand capital. It is operating already. This is the first multi-departmental dairy group involving multiple ownership in China. Huaniu County in Shaanxi province presently has 33,000 cows, and in a number of years the county has consecutively established three dairy factories that belong to the departments of Animal Husbandry, Township, and Commerce, thus creating a situation of mutual competition for milk resources. As of last year, the government of Shaanxi made dairy manufacturing in the county the first batch of key projects in the effort to industrialize agriculture, and the decision was made to increase the production of dairy products from the current 15,000 MT/yr to 50,000 MT/yr to stimulate the industrialization of agriculture in the entire county. Based on this situation, the government of Huaniu has taken the lead to join, on a voluntary basis, Shaanxi Xiangnai Milco Dairy Co., Ltd., Shaanxi Xiangnai Dairy Co., Ltd. and Huaniu MX Dairy Co., Ltd., using their net assets as equity. Subsequently, the Huaniu Cardboard Box Factory, the Dairy Cattle Training Farm, and the Oat Flakes Factory were incorporated through mergers and liaisons. The group presently has total assets of RMB145 million, and has formed a conglomerate enterprise combining private, collective, state, and foreign capital in which different economic segments coexist.

In June 1998, another article in the same publication, again on the front page, was published on the fierce struggle of Xiangnai Group to survive in the competitive Chinese dairy market. In this article, foreign capital was still mentioned, but the name of Milco was not disclosed. A month later, a list of the top 10 dairy manufacturers of 1997 ranked according to turnover was published, in which Xiangnai Group ranking eighth. With the appearance of those statistics, Milco seemed to have been erased from the history of the Chinese dairy industry. The consultant advised Milco to learn more about the other members of Xiangnai Group, but Milco failed to recover such details. Contact between the various parties was dominated by the discussion on further investment, which was intensifying.

82

peter peverelli

Conglomerates such as Xiangnai Group are a relatively new type of business organization in China (for an introduction, see Keister (2000)). They are usually centered around a large company that is already recognized in the industry or by the authorities of its home region as occupying a leading position. The other members can be ‘tight,’ ‘semi-tight,’ or ‘loose’ members depending on the degree of control that the core enterprise exercises over them. The main purpose of establishing conglomerates is to allow ill-managed enterprises to benefit from enterprises in the same, or related, sectors that are doing well. Such conglomerates can be established by agreement between the member enterprises, but are also often enforced by local governments. Complaints can be regularly heard from companies that are being coerced to join such conglomerates, and even appear in the official press. I will now examine what the article introducing the conglomeration is telling us about the decision to establish the Xiangnai Group. I will again restrict myself to one major theme: the role of the administrative and sector spaces as introduced in the table in Figure 1. The first paragraph of the article emphasizes the role of the county government in the formation of the conglomerate. The departmentalized structure of the Chinese economy, which I have touched on already, seems to be another major theme of the article. It appears twice in the opening paragraph, where it is said that dairy factories from three different departments have been united, the main result of which is a more efficient use of resources. In the second paragraph the departments are mentioned in detail. – Animal Husbandry. This is part of the Agriculture space, and inherits the cognitive element of Agriculture, but also has more specific cognitive matter of its own. – Township. This is an administrative space rather than a sector space. I did not enter it in the matrix, but it is a subdivision of the county, and inherits the cognitive matter of Huaniu, but also has its own specific traits. – Commerce. This is an older name for what is currently known as internal trade, the sector space that is responsible for the domestic distribution of goods, but which also, on a small scale, engages in the processing of primary products. The initiative in the conglomeration is taken at the county level, and the county government is said to have formed the Xiangnai Dairy

negotiating spaces

83

Group. Further in the text we are even told that the Huaniu government “has taken the lead.” The power by which the county has made that decision is specified, and the provincial government had made Huaniu “a leading county in the program of the industrialization of agriculture (nongye chanyehua).” This is a rather formal expression that is adopted by the central Ministry of Agriculture to refer to the modernization of agricultural production. It is not an expression used in everyday parlance, and we can see it here as a coded reference to the national government. In this way, the report tells us that although the conglomerate was established at the county level, Huaniu was acting in accordance with the policies of Shaanxi, and Shaanxi, in turn, was carrying out the policy of the national government. Another interesting choice of words is the statement that the conglomeration has taken place “on a voluntary basis.” One would presume that under normal conditions companies would only undertake such close cooperation if their owners approved the deal. This, of course, invites the question as to why this phrase needed to be used at all. Applying the methodology of narrative analysis, this seemingly superfluous phrase can be regarded as implying its opposite: coercion. The suspicion is thus raised that objections had been made against the conglomeration that had to be dealt with through persuasion. Indeed, the foreign partners of the joint venture did attach conditions to their consent to the joint venture becoming a part of the conglomerate: they agreed to go along with it only if the financial independence of the joint venture within Xiangnai Dairy Group was guaranteed. This took place in October 1997, and the article three months later provided a summary for the partners, indicating to them that the formation of Xiangnai Dairy Group was a wise decision that was initiated by the Huaniu government, that the government was entirely within its rights to do so, and that it was acting in accordance with the policies of higher administrative levels. In the end, all of the parties agreed and, given that Xiangnai Dairy Group “is already operating,” were obliged give their full cooperation. Leave or stay? In the course of 1999, Milco began to contemplate withdrawal, because Xiangnai Group had decided on large new investments, including the acquisition of a number of dairy plants in Huaniu,

84

peter peverelli

without Milco’s agreement. Two articles appeared on the front page of the same magazine on the subject of the dairy industry in Huaniu County, one in the October 1999 issue and the other in February 2000, both of which were written by the same author. In October 1999 article, the county was referred to as the “dairy metropolis of the North.” According to the text, the policy that led to the establishment of Xiangnai Group was based on a strategic document that was crafted by the local government in 1993, long before the establishment of the joint venture. The article of February 2000 reported on the food industry policy of the provincial government, and claimed that the province would specifically support four companies, including Xiangnai Group. No reference was made to foreign involvement, let alone the involvement of Milco, and by that time it seemed as though the name of Milco had been completely erased from the annals of the Chinese dairy industry. The problems with financial reporting continued, and Milco decided to start negotiations to sell its share in the joint venture to Xiangnai in 2000. Communication was still undertaken with Blackwell as the mediator. Xiangnai responded to Milco’s proposal to sell with a very low offer, which made Milco realize how little it knew about the joint venture and its own position in the entire operation. Milco’s CEO, half joking, countered that another option for Milco was to acquire a majority share in the joint venture to gain control of it, and from that position improve its operation. Xiangnai was, surprisingly, pleased with this ‘offer,’ and the mood of the negotiation between the parties instantly switched from each party preparing to go its own way to Milco preparing to take control of the venture. At the end of 2000 a news item appeared in a major Chinese food news Web site that reported the continuous success of Xiangnai Group, in which the joint venture was specifically mentioned as a major member of the conglomerate. The joint venture was apparently making sense again in the Xiangnai Group space. Milco’s CEO visited Xiangnai in January 2001, and found that a new production line of Xiangnai had been installed in the plant of the joint venture, and that the product list of the joint venture included the products of a number of other members of Xiangnai Group. Although not clearly stated, it seemed that a number of costs had also been charged to the joint venture. A financial audit that was executed by a local accounting firm further revealed certain tax irregularities. It appeared that Blackwell had not fulfilled its function

negotiating spaces

85

as watchdog as efficiently as had been expected, and many of the problems that were detected during the visit were thought to be the result of insufficient supervision. After a few months of consideration and internal discussion, Milco decided to continue the China project, but in a less ambitious way without the aim of taking over the entire Xiangnai Group. Milco was still contemplating its options during the time of writing (November 2002). Looking for Symbols of Cognitive Space In the first two parts of this case description, I present two complete articles with a view to clarifying a certain phase in the history of the joint venture. I showed how the analysis of such narratives is an important tool in understanding organizational processes. Having completed the chronological analysis of the case history, I will now turn to another aspect of narrative analysis, that of looking for texts that contain a certain symbol and determining how actors and organizations make sense of the selected symbol in terms of cognitive space. Such an exercise can generate insight into the meaning of the symbol in various social-cognitive contexts. The symbol that I have chosen is the name of the joint venture. I have stated that the name of Milco (which was part of the name of the joint venture) seemed to have been completely erased from the annals of the Chinese dairy industry. In Peverelli (2000) I used another metaphor, and referred to the joint venture as having been “swept under the carpet.” It would be worth investigating whether this has actually happened, and I have therefore searched for texts that contain the name of the joint venture from after the formation of Xiangnai Dairy Group. In an earlier study, (Peverelli 2000: 90–96) I analyzed stories about a particular pharmaceutical company that were published over a period of 11 years (1988–1999) and found that the company had quite different identities at the municipal, provincial, and national levels. It would be interesting to see whether the same can be established for the joint venture. I found the name of the joint venture in the three following contexts.

86

peter peverelli

Xiangnai Group The various narratives that were produced by Xiangnai Group (brochures, Web site, and so on) use the name of the joint venture when introducing the history of the company. The foreign investment is still presented as an extra asset that contributes to the high technological level of the Xiangnai Group. A particular instance is an article that appeared in a political magazine that is published by the People’s Daily. The August 1998 issue of this magazine carries an article that was written by the CEO of Xiangnai, in which he states that the main objective of signing the joint venture agreement with Milco was not to obtain hard currency, but to obtain access to advanced technology. This narrative is cognate with the story of the article that I have already analyzed, in that the joint venture is depicted as a symbol of advanced technology. The name of the joint venture is also still used on the packaging of a number of the Group’s products. For example, its UHT milk, which is still a rather modern product in China, is packed in attractive tetrapacks that cite Xiangnai Milco Dairy Co., Ltd. as the manufacturer. Here, again, the foreign aspect of the company is a symbol of advanced technology, and has the potential to inspire confidence in the consumer. China Dairy Association (CDA) This sector association is an offspring of the China Food Industry Association that operates within the Light Industry Space. In terms of administrative level, it is a national space. The joint venture is mentioned in the member list of of the CDA, but Xiangnai and Xiangnai-Group are not. Membership of such sector associations is not obligatory, and only a limited number of dairy companies deem it worth paying the annual membership fee. The joint venture was apparently made a member of the CDA to represent Xiangnai and, after the formation of Xiangnai Dairy Group, to represent the entire group. The occurrence of the name of the joint venture can be regarded as being linked to Xiangnai and Xiangnai Group in the sense that it must have been the decision of Xiangnai to join the CDA under the name of the joint venture. The name of the joint venture is used here as a symbol for foreign investment, which confers a higher status on the Chinese partners, and all of the parties that are involved.

negotiating spaces

87

Shancheng A number of texts that were produced within the cognitive space of Shancheng, the municipality of which Huaniu is a county, contain the name of the joint venture. The joint venture is one of a very small number of foreign investment projects within the territory of Shancheng, and the language that is used to describe these projects leaves no doubt that the authorities of Shancheng are proud to be able to attract such foreign investment. Foreign investment seems to make sense at this level, rather than at the higher or lower levels. Even on the official Web site of Shaanxi, the joint venture is mentioned in the section on Shancheng, although there is no list of foreign-funded enterprises in Shaanxi. State Quality Inspection Bureau In mid-August 2002 the State Quality Inspection Bureau published its annual list of products that are exempt from quality inspections. The section on dairy products included the UHT milk that is produced by Xiangnai Group, with the name of the joint venture being given in brackets. A possible explanation for the appearance of the name of the joint venture is that for this particular list the actual production unit must be indicated, which would mean that if the joint venture were to be dissolved, then the Xiangnai brand products that are included in the list would lose their quality inspection exemption status, at least until the next publication of the list. In the Chinese context, we may presume that Xiangnai or Xiangnai Group played a role in getting some of its products on the list, but this does not affect our conclusion that the joint venture makes sense to Xiangnai in this context. The impact of being mentioned on this list has been enormous. An Internet search using a Chinese search engines with the Chinese translation of the name Milco as the keyword (November 2002) resulted in 11 new URLs of sites that mainly reported the publication of the new list or food industry information. Chinese visitors to those sites will read the word Milco and cognitively connect it with the positive image of a successful (good quality, well connected) company.

88

peter peverelli Analysis and Conclusions

This case is a classic example of the ‘other agenda’ phenomenon that one hears about so often in connection with Chinese partners (Peverelli 2000: 2). “The Chinese were probably not committed to a long term cooperation to begin with and simply needed a foreign investor for the hard currency, the technology and to show off.” I believe that it is impossible to look inside people’s minds, and I will therefore refrain from commenting on such views. Instead, I will try to explain how people who get involved with cases such as this as researchers, consultants, and so on, can tackle them using the theoretical framework that is offered here. I will concentrate on three issues: the sense-making of the joint venture in various social-cognitive contexts, how to gain insight into the processes of the sense-making, and how this understanding can be used by Milco to redefine its steering power in the joint venture, and even in the entire Xiangnai Group, without having to acquire a majority share in the equity. The Joint Venture: Under and above the Carpet From a historic point of view, the joint venture played a central role in the perception of Xiangnai. The name of the joint venture appeared a number of times in reports on the front page of the most influential publication in the Chinese food industry, and as such reports are virtually always placed by the companies themselves, their publication must have been instigated by the CEO of Xiangnai, either in his capacity as CEO of Xiangnai or as CEO of the joint venture. The publication of articles continued after the establishment of Xiangnai Group, but without mentioning the name of the joint venture. In the pre-conglomeration period narratives, the joint venture was used as a symbol for technological improvement. This was still the main theme of the later articles on Xiangnai Group, but by then the joint venture was no longer being used as its symbol. The focus of communication between Xiangnai and Milco had changed from that of improving technology to that of increasing the level of investment. In other words, the foreign investor had changed from being a provider of technology to being a (potential) source of capital. A rule of narrative analysis is that when actors repeatedly mention a certain idea, or do so in a context in which the statement

negotiating spaces

89

seems obvious, they usually mean the opposite (Boje (2001: 21); see also van Dongen (1991). A child that is eager to make its parents believe that it did not take the last cookie from the jar, will repeat the phrase “it wasn’t me” so often that suspicions will be aroused. I have pointed out that the statement that the various companies joined the conglomerate voluntarily can be regarded as a clue that come coercion was needed to persuade some of the parties to join. In the 1998 article, the CEO of Xiangnai specifically tells the audience that the joint venture was not about foreign investment, but about obtaining foreign advanced technology. This statement was made while Xiangnai was beginning to press upon Milco that the time had come to increase its investment, which indicates that actually investment had become the main issue. As long as technology was the main purpose of the cooperation, Milco was perceived as basically complying with the expectations of Xiangnai, and the publications that featured the joint venture contained the names both of Xiangnai and Milco. As soon as the focus of Xiangnai’s sense-making of the joint venture changed from that of obtaining foreign technology to that of obtaining foreign investment, to which Milco reacted reluctantly, Milco’s importance decreased. The joint venture, which was Milco’s common space with Xiangnai, also got pushed from the center to the periphery. Xiangnai Group was formed, with only Xiangnai featuring in the company name, and Xiangnai Group started to represent the joint venture in virtually all of the news items. After Xiangnai and Milco started discussing Milco’s takeover of the entire Xiangnai Group, the joint venture was mentioned once again in publications to emphasize the inclusion of foreign investment, although they still featured Xiangnai Group as the core theme. Power, Control, and Steering In the remainder of this chapter, I will investigate how understanding the sense-making of the joint venture can be used to rethink Milco’s case in terms of its power, both actual and potential, in the venture. Although it has not been explicitly stated, Milco seems to emerge from the case history as a party with limited power, and hence limited control over the fate of the joint venture. It would be worth reinvestigating the notions of power and control in terms of my theoretical model.

90

peter peverelli

In the terminology of mainstream management, Milco only holds 25% of the equity of the joint venture, with Xiangnai holding the remaining 75%. This gives Xiangnai an overwhelming majority when it comes to the management decisions that have to be made regarding the joint venture. A company such as Milco has two instruments with which to maximize its influence in the operation of the joint venture. The first is the joint venture agreement. During the negotiation phase Milco could have demanded that certain major strategic decisions in the joint venture could only be made with the full agreement of all of the shareholders. If the counterparty had accepted such a provision and confirmed it by signing the agreement, then Milco could later have invoked the agreement in any cases in which the Chinese side tried to force its will on major issues. The second instrument is sense-making, which entails making an inventory of the contexts in which the joint venture makes sense (as I have done) and trying to create a synergy by linking as many of the contexts as possible. The first instrument, which is the legal instrument, may seem the stronger of the two, again from a mainstream management point of view. However, it has proven to be next to impossible to use in the Chinese context so far. Most joint venture agreements between Chinese and Western parties do contain such clauses, but the Chinese partners have shown such a strong propensity to dominate the decision making, even when they hold minority shares, that litigation between joint venture partners would become a daily event in the courts of the major Chinese cities were the foreign party to try to invoke the clause. Needless to say, contesting such issues in court would not be conducive to improved relations between the partners. I do not advise against addressing the insertion of such a clause during negotiations, but it should not be regarded as a means to exercise power during the implementation of the agreement. Rather, it should be seen as a way to create a common context, or in our terminology, a common space, in which the joint venture can be constituted. Within the theoretical framework that is proposed here, the entire negotiation phase of this type of cooperative project should be re-thought as a space-constructing activity by the negotiating parties that results in the construction of a common space in which they each make sense of issues that are relevant to the subject of the negotiation in a similar fashion. That is to say, they agree on a basic set of “ways to do things.”

negotiating spaces

91

However, after the negotiations have come to a successful conclusion and the cooperation agreement has been signed, one should be wary of perceiving the negotiated space as being fixed for evermore. Once the partners start implementing what has been negotiated, the nature of their interaction will change from negotiating a joint venture to implementing the joint venture, or from negotiating a space to interacting within that space. This is a new game with rules of its own. Westerners tend to sanctify an agreement as something that should be followed to the letter, whereas the Chinese tend to interpret agreements differently in different social-cognitive contexts. From a practical point of view, Western partners in Sinoforeign joint ventures would do well not to invoke the agreement too frequently to avoid endless debates. I made the first attempt to redefine culture as the way in which actors cope with multiple inclusions (Peverelli 2000: 52–58). Observing the behavior of Western (northwest European and North American) and Chinese partners in Sino-foreign joint ventures, I found that the majority of problems are caused by the different strategies of the partners in coping with multiplicity. Westerners are aware of their multiple inclusions, but tend to perceive one inclusion as the main, principal, or basic inclusion, whereas the Chinese seem to be able to surf freely between inclusions. For Westerners, moving from one inclusion to another is a principal decision that requires considerable cognitive activity. For the Chinese, it is a way of life. This is probably the main reason for the persistent complaints from Chinese partners that their Western counterparts are too “rigid,” and for the equally persistent complaints from the Western parties that the Chinese are “disloyal” and do not respect agreements (see also van Dongen 1997). This way of defining culture has similarities with Trompenaars’ universal-particular dimension. However, whereas Trompenaars’ dimension is merely based on values, my definition of culture as a way of coping with multiplicity is based on a comprehensive theory of organizing. I believe that the second instrument of exercising power, that of sense-making, offers the widest range of possibilities to gain influence on an operation. Instead of basing that influence on rights that are derived from the initial agreement, influence can be achieved through steering. Steering is the process of influencing the behavior of actors through intervention in the sense-making processes. I prefer this term to ‘control,’ because whereas control denotes making others do what

92

peter peverelli

you want them to do, steering is much more indirect and diverse. Moreover, steering is much more interactive: the person who steers is interacting with those who are to be steered. Obviously, control is also interactive in the sense that even the strictest order will only be obeyed if those who are being controlled acknowledge the power of the person who gives giving the order. However, with steering those who are steered are not necessarily aware of it, and even when are they will not experience the influence on their behavior as a consequence of the power of the other person over them; rather, they will change their behavior because it makes sense to do so. If one insists on maintaining the notion of power, then we can redefine power as being able to influence the behavior of others by making sense. A can make B do something if that activity makes sense to B. This definition retains the traditional definition of power in terms of authority or force. A manager can request a subordinate to do something and that subordinate may comply because they perceive the request to fall within the scope of the manager’s authority in the context of the company. However, the manager may also comply with a request from the subordinate if the request makes sense in a certain social-cognitive context. In other words, sensemaking is also a form of power. I will set out two possibilities for increasing the influence of Milco on the management of the joint venture (and even on that of Xiangnai Group) through sense-making processes. Make the Joint Venture More Prominent within Xiangnai-Group The joint venture, as a foreign funded enterprise, adds a certain quality status to Xiangnai Group. It is generally believed in China that foreign products are of higher quality than their Chinese equivalents, and foreign-funded enterprises use the foreign aspect of their products as a major marketing argument. Milco could build on that and use the joint venture to manufacture products that are regarded as novel or high-tech in China. The joint venture’s current main product is milk powder, but the other companies within Xiangnai Group also produce milk powders, and it is hard to define how the joint venture adds value to such a generic product. UHT milk is a better product for the joint venture, but that too is becoming a generic product in China.

negotiating spaces

93

A more strategic product would be cheese. Cheese production is still rudimentary in China, but it is expected that the demand for cheese will increase in the coming years. Although cheese is almost a staple food in Milco’s home market, it is a novel food in China, and can be marketed as such. Moreover, the fame of Milco’s home country as a major cheese-making region would be a valuable marketing argument. The offal of cheese production, whey, is probably an even more valuable product in China, because demineralized whey powder is a major ingredient in the production of infant food, and China needs to import large quantities of whey powder each year to feed the millions of newborn babies. The joint venture could start to produce and market cheese and whey products, and should use this to profile itself as an important innovative company in the Chinese dairy industry. Within these promotional activities, the members of the joint venture of Xiangnai Group should also be mentioned, so that Xiangnai and Xiangnai Group can share the honor. In many ways, the increasing occurrence of the joint venture’s name on the Internet has already had a similar effect. This will dramatically enhance the joint venture’s position, and thereby its influence, in Xiangnai Group. Initiate direct contact on the Shancheng level My search for contexts in which the joint venture made sense revealed that the joint venture was mentioned in a number of texts that were produced by organizations at the Shancheng level. The CEO of Milco should visit Shancheng during his next trip to China to initiate direct contact with officials there. Such a visit could be announced as a long overdue familiarization meeting. Again, Xiangnai Group should be used to arrange the visit, and the CEO of Xiangnai should join the visiting party so that Xiangnai Group can share the honor that the parties in Shancheng would derive from a visit by a foreign investor. Moreover, Milco would then gain access to Xiangnai’s inclusions in the Shancheng context. Such a visit would increase both the inclusions of the joint venture and its status within Xiangnai Group. In the course of such activities, Milco should never point out the purpose of its initiatives, because people on the Chinese side will experience them as obvious, as ‘what we would do.’ A possible scenario would be that the CEO of Xiangnai would try to dissuade

94

peter peverelli

the CEO of Milco from visiting Shancheng. This should be regarded as an indication that he does not intend to let Milco into his inclusions on that level, in which case the CEO of Milco should insist, and advise his counterpart that, in the event that it is inconvenient for Xiangnai to arrange the appointment, he will arrange it himself. Doing this would not harm the relationship between the two partners. Rather, Xiangnai would realize that Milco is indeed a worthy partner, and one with whom it needs to stay on good terms. Acknowledgements The case that is used to illustrate the methodology that is introduced in this paper is adapted from my own consulting portfolio. The names of the people, companies, and locations have been changed. I would like to express my gratitude to various people who were involved in the case, without the many hours of casual conversation with whom I would not have been able to produce this text. REFERENCES Boje, D.M. (1991), The Story Telling Organization: A Study of Story Performance in an Office-Supply Firm, in: Administrative Quarterly, 36: 102–126. ——— (2001), Narrative Methods for Organizational and Communication Research, London: Sage. Boje, D.M., R.C. Alvarez and B. Schooling (2001), Reclaiming Story in Organization: Narratologies and Action Sciences, in: R. Westwood and S. Linstead, eds., The Language of Organization, London: Sage, 132–175. China Food Newspaper [Zhongguo Shipin Bao]. van Dongen, A. (1997), Culture as Method—Homogenizing and Heterogenizing Strategies of Change: The Case of the International NGO Forum on Indonesian Development (INRID), Delft: Eburon. van Dongen, H.J. (1991), Some Notions on Social Engineering and Steering, in: Veld, Schaap, Termeer and van Twist, eds., Autopoiesis and Configuration Theory: New Approaches to Societal Steering, Deventer: Kluwer Academic Services: pp. 47–54. van Dongen, H.J., W.A.M. de Laat and A.J.J.A. Maas (1996), Een Kwestie van Verschil, Delft: Eburon. Keister, L. (2000), Chinese Business Groups—The Structure and Impact of Interfirm Relations during Economic Development, Oxford: Oxford University Press. Peverelli, P. (2000), Cognitive Space—A Social Cognitive Approach to Sino-Western Cooperation, Delft: Eburon. Trompenaars, F. (1993), Riding the Waves of Culture, London: Nicholas Brealy. Weick, K.E. (1979), The Social Psychology of Organizing, New York: McGraw Hill. ——— (1995), Sensemaking in Organizations, London: Sage. ——— (2001), Making Sense of the Organization, Oxford: Blackwell.

Chapter 5

Sino-Singaporean Joint Ventures: The Suzhou Industrial Park Project Alexius Pereira Introduction Between 1994 and 2001, the China-Singapore Suzhou Industrial Park (SIP), which is located in Jiangsu province, was considered to be an exemplary case of a Sino-Singaporean joint venture. The park was officially designated as another Special Economic Zone (SEZ) in China, of which there were already over 400 by 1994. However, the SIP was unique among SEZs, because there were no other Special Economic Zones in China that were jointly owned and controlled by two national governments, and because the SIP had a “Singapore rather than a China operating system” (Pereira 2003). The initial hope was that these two characteristics would attract multinational industrial corporations that might previously have been hesitant to locate operations in China for fear of ‘gray practices’ such as archaic socialist laws and local corruption. At the onset of the collaboration in 1994, both governments strongly believed that they had a mutual cultural affinity that was based on their mutual understanding of the Chinese language, culture, and practices. Thus, at the beginning of the collaboration, the two governments believed that they could work together closely and efficiently. However, between 1997 and 1999 the SIP faced a series of operational ‘difficulties.’ Unable to resolve the difficulties, the Singaporean government effectively disengaged from the collaboration in 2001. Although the SIP is still technically a Sino-Singaporean joint venture, the Singaporean government is now merely a silent minority partner, and has essentially washed its hands of the SIP project, leaving the park to be run by the Chinese partner. The focus of this analysis is not on the economic performance of the SIP, rather, it engages in an examination of the failed working relationship between the Singaporean and Chinese parties between

96

alexius pereira

1994 and 2001. Cultural affinity was initially believed to be very important in the collaboration, as it would assist in the resolution of conflicts. How then did things go so wrong? The findings and conclusion of this chapter should not be generalized to all Sino-Singaporean joint ventures, as there are many small and medium-sized Singaporean enterprises that have formed long-lasting and productive joint ventures with Chinese entities. Instead, the SIP project should be seen as an exemplary case of the non-functionality of perceived mutual cultural affinity within a joint venture, with particular reference to problem solving and conflict resolution. Cross Cultural Joint Ventures As has been implied, the two collaborating governments believed that there was a Singaporean operating system and a Chinese operating system in the management or administration of Special Economic Zones. The acceptance by the two governments that the two systems were necessarily different meant that the SIP, at least between 1994 and 2001, could be considered to be an archetypal cross-cultural joint venture. A cross-cultural joint venture refers to a business entity that is formed by partners from different cultural backgrounds. Joint ventures are by themselves interesting organizations to analyze, because they involve the collaboration of two or more separate business entities. The logic of the collaboration must be that the returns will be higher than they would be if the entities worked alone; otherwise, it makes better business sense to go solo. Thus, a key rationale for joint ventures must be a level of mutual benefit. However, whenever two different entities have to work together, the possibility is raised that their management styles, corporate cultures, and operational systems will be different, which may lead to operational conflicts. Such conflicts are compounded when the partners come from different cultures, be they national or ethnic cultures. Culture can be defined as a set of practices and values. In cross-cultural joint ventures, cultural difference can be an obstacle to efficient business performance. For example, cultural miscommunication and misunderstandings can lead to inter-personal conflicts at various managerial levels. It is therefore argued that cultural differences incur transaction costs and lead to poor informational flows, which gives rise to a situation of inefficiency and conflict (see Child 1994; and Child and Faulkner 1998). Cultural

sino-singaporean joint ventures

97

differences in joint ventures are not necessarily to be insurmountable; indeed, the proliferation of educational institutions that offer training courses in cross-cultural understanding and problem-solving, usually within the scope of a Master of Business Administration program, suggests that all operational difficulties can ultimately be solved. In this sense, within business circles, cultural affinity is often identified as an effective means of bridging the differences and removing some of the problems that confront face cross-cultural joint ventures. Cultural affinity can be defined as a party’s ability to understand and empathize with the culture of another party (Douw 1999a and b; Douw 2001). Thus, some views, especially from the literature on business management, argue that the greater the cultural affinity between collaborators, the better they will work together. For example, many within business circles believe that there is a cultural affinity between British and American business partners that goes beyond linguistic similarity: they believe that the so-called Protestant Anglo-Saxon culture still informs the work ethic and the values that both sides hold strongly, even though a British and an American company are still inherently different, particularly in their management styles (Child and Faulkner 1998). It has also been posited that the reason why many British firms have chosen India as their main outsourcing location is again because of cultural affinity, which in this case is due to the colonial legacy. In this chapter, I argue that the inter-governmental collaboration of the SIP is an exemplary case study of the (non-functional) role of cultural affinity in a cross-cultural joint venture. Even though most joint ventures take place between business entities rather than governments, the case of the SIP is still useful because, for the most part, both of the governments acted as business partners, rather than political partners. It is important to stress that both governments claimed that cultural affinity was critical to the collaboration, and that it would enhance the relationship between the partners, potentially reduce conflicts, and solve operational problems. As it turned out, the collaborative relationship eventually broke down, although the joint venture is technically still in place. It is the aim of this chapter is to explain why the cultural affinity between the two partners of the SIP project apparently failed to sustain an effective collaborative relationship. The data for this research was mainly gathered in Suzhou between June and September 1999 after the Singaporean government announced its disengagement, and the collection process

98

alexius pereira

involved in-depth face-to-face interviews with 16 officials and bureaucrats from both the Singaporean and Chinese governments who were involved in the SIP. In addition, 68 managers of industrial transnational corporations that had located manufacturing operations within the zone were also interviewed. Finally, secondary data sources, such as books, newspaper reports, magazine articles, official brochures, and press releases, were consulted to supplement the primary data. Before engaging in the actual analysis, it is necessary to understand the economic and social context within which this governmental collaboration took place. China’s Economic Reforms The origins of the SIP project can be traced back to the Chinese government’s economic reforms of 1979 (Perkins 1988; Naughton 1995). An important aspect of the reforms was the opening up of the centrally planned socialist economy to foreign direct investment (FDI) (Shirk 1993). The then premier Deng Xiaoping and a cohort of like-minded leaders believed that FDI was critical to the revitalization of the technologically backward and inefficient Chinese industrial sector through the transfer of technology and managerial techniques (Park 1997). The government was confident that the economy could attract FDI because transnational corporations were interested in the country’s abundant and cheap primary factors of production, even if they were denied access to China’s consumer markets. To draw in FDI, the government launched the Special Economic Zones programs, which established industrial estates in Shenzhen, Zhuhai, and Shantou in Guangdong province, and Xiamen in Fujian province. The government adopted a cautious approach toward opening the economy to FDI because it sought to retain some ideological link to communist-socialist ideals, which meant that the state still protected the many state-owned enterprises. The government was also concerned that full participation in the global economy might mean exposing China to global capitalism, which in turn would threaten the state’s control over politics and society (see Shirk 1993). The Special Economic Zones were organized along the lines of the export processing zones and free economic zone that had been developed by various governments around the world since the 1950s.

sino-singaporean joint ventures

99

These purpose-built industrial zones were self-contained areas in which the economic strictures differed from those in the rest of the country and were geared to the offshore sourcing needs of transnational corporations (Chen 1995). To transnational corporations, the main benefit of operating in these export-processing zones was being able to take advantage of low-cost primary factors of production, and particularly cheap labor, while being exempt from taxes. For the host country, the advantage lay in the jobs that were created and the foreign that was currency earned through wages. Another benefit, in theory at least, was that the export-processing zones provided opportunities for the host country to integrate with the international division of labor without subjecting the entire economy to trade liberalization. Despite the evidence that the transnational corporations usually benefited from such schemes more than the host country, many governments have persisted in the establishment of such zones (Sklair 1993; Chen 1995). By 1985, China’s SEZs had experienced some of the most rapid rates of economic development in the world, with growth rates averaging more than 15% per annum. In addition, these zones saw a massive expansion of employment opportunities and an increase in worker income levels (Luo 1998). However, the SEZs caused some negative social effects, including increasing wealth disparity in urban centers, uneven urban development, environmental degradation, and a growing black market (Wu 1999). Furthermore, foreign investors were very concerned about the poor industrial infrastructure and weak administrative systems of the zones, and provincial agencies and bureaucracies were criticized by many foreign investors for being corrupt and inefficient (Park 1997: 17). However, despite these negative effects, the Chinese government pushed ahead with the extension of the SEZ program, and after 1984 an additional 14 cities or towns were designated as Open Coastal Cities or Open Coastal Economic Areas. In 1985, the Lower Yangtze Delta, the Pearl River Delta and the Xiamen-Zhangzhou-Quanzhou Triangle were designated as Coastal Economic Development Zones, and in the same year Hainan island was designated the fifth and final official Special Economic Zone. By 1990, a myriad of other forms of free trade zones, economic and technological development zones, and high technology industrial development zones had been approved by Beijing, in addition to open provincial capitals, border region open areas, and even state tourist vacation zones. By 1995, there were 422

100

alexius pereira

different zones that permitted foreign investment (Yang 1997), and, unsurprisingly, by 1994 China had become the largest recipient of FDI among developing countries, despite the fact that geographically only 20% of the country was open to foreign investment (Oman 2000). Despite the continuous increase in foreign investment in China, the problems of poor administration remained, and it was in this context that overseas Chinese businesses, usually from Hong Kong or Taiwan, were at a considerable advantage, as they were familiar with business and economic practices in China. For example, Chinese business people could utilize shared systems and institutions, such as the understanding of guanxi, the importance of face-giving, and other aspects of Chinese economic relationships, particularly when interacting with Chinese provincial bureaucrats over issues such as the granting of business licenses, the construction of factories, and dayto-day operations. It was rationalized that the utilization of such cultural systems and institutions was a minor inconvenience, especially as the profits that could be earned from operating in China were extremely high. Transnational industrial corporations were aware of the existence of archaic Chinese business practices, systems, and institutions. Some refused or were unable to cope with these systems, others attempted to learn and to internalize them, and others employed ethnic Chinese managers from overseas, that is, ethnic Chinese who were born and raised in other countries, to lead the company’s entry into the China market. In addition to the perceived vagaries of traditional Chinese business practices, there are two other reasons behind the weak administrative systems in post-reform China. The first was that some local Chinese administrators were unfamiliar with international management techniques, and were still working from a centrally planned socialist management mindset (Park 1997). The second was the problem of corruption, where highly opportunistic individuals were hoping to take advantage of their positions for personal profit and gain from foreign investors (Kwong 1998; Fabre 2001). Interestingly, the problems that were faced by the non-Chinese foreign investors in dealing with local Chinese administrators were similar to those seen in Sino-foreign joint ventures, given that many of the joint ventures took place with Chinese state-owned enterprises, which were headed by state bureaucrats.

sino-singaporean joint ventures

101

The problems that non-Chinese investors face have frequently been noted: the language barrier, the incompatibility of Western and Japanese management styles with Chinese practices, the distinctive bureaucratic organization of the workplace, the difficulties of hiring and firing workers and of eliminating inefficient work practices, low labour productivity, poor quality control, differences in negotiating practices and the long time-frame needed for their completion and most of all the lack of an established legal framework (Lever-Tracy et al. 1996: 67).

As a result, many potential foreign investors delayed entry into the China market because of the high risks, and in response the central government in Beijing began a high profile campaign to stamp out corruption, and particularly economic corruption (Bo 2000). The leadership also began a series of measures to “professionalize” local administrators, and also made moves to “import” the Singaporean model of industrial administration. The Singaporean Model Ever since Singapore had emerged as one of the successful newly industrializing Asian countries in the mid-1970s, the then premier Deng Xiaoping and other senior figures in the Chinese government had been admirers of Singapore’s development strategies (Wong 1999), and were especially interested in Singapore’s ‘authoritarian capitalist’ policies. Many top CCP leaders hope that China will follow Singapore’s route to prosperity in which one party dominates politics (with token representation for other parties) but facilitates private enterprise and foreign investment. The system maintains order but spawns wealth (Clemens 1999: 9).

The Chinese government was interested in how the Singaporean government attracted and utilized FDI from large transnational industrial corporations while managing to retain economic, political and social control. FDI brought much needed capital and technological and managerial inputs to the former entrepôt’s economy, and generated thousands of jobs in a very short space of time for the growing population. Although there were economic and geographical factors that encouraged large-scaled foreign investment in Singapore, including the country’s strategic location in the Asia-Pacific region, its relatively well-trained, and the low cost of labor, perhaps the most

102

alexius pereira

important factors were the high-quality industrial infrastructure and efficient industrial administration that was provided by the government (Mirza 1986; Pereira 2000) and the strong political will of the state that lay behind the developmental strategies (Schein 1996). The Singaporean government—acting through several state bureaucracies—intentionally created administrative institutions that would reassure foreign investors, including the establishment of a foundation of law and property rights, the maintenance of a non-distortionary policy environment (including macroeconomic stability), investment in basic social services and infrastructure, and the implementation of an anti-corruption philosophy (World Bank 1997: 34). Furthermore, the Singaporean government invested heavily in the recruitment and training of the brightest and most capable young Singaporeans to become state bureaucrats and civil servants, and proceeded to remunerate them well to reduce the possibility of corruption or poaching from the private sector (Castells 1992). Since then, the state agency that is tasked with promoting industrialization and economic growth in Singapore, the Singapore Economic Development Board, has been consistently viewed by senior managers of large transnational corporations as being one of the most efficient and honest in the world (Schein 1996: 10). Indeed, the Singaporean government has even been described as being close to resembling Weber’s ideal bureaucracy (Evans and Rauch 1999). At the end of the 1980s, the Singaporean government introduced its new national development strategy, which was known as the Strategic Economic Plan (Wong and Ng 1997). This strategy involved taking advantage of new economic opportunities in the region and moving Singapore out of direct competition with newly developing countries as a location for labor-intensive manufacturing. One of the thrusts of this plan was the regional industrial parks program, in which the Singaporean government would build and manage industrial estates in the developing Asia-Pacific region with the goal of making them profitable so that they could supplement Singapore’s domestic economy in the long run (Perry and Yeoh 2000). Profits from this program were to come from the sale or lease of industrial units to transnational industrial corporations, and from charging tenants a management service charge. The Singaporean government believed that its industrial parks would attract industrial transnational corporations because they offered high quality industrial infrastructure and administration while being located in areas that had low-

sino-singaporean joint ventures

103

cost factors of production. Host governments were keen on this program because these industrial parks would generate employment opportunities, assist in the transfer of technology, and stimulate urban development in the local area. In 1989, the Singaporean government embarked on a pilot industrial park project on the Indonesian island of Batam (Kumar and Lee 1991). The Batam Industrial Park project saw many transnational industrial corporations relocating their operations there, which created so many jobs that the Batam authorities had to import labor from other islands (Grundy-Warr et al. 1999: 310). By 1992, the Singaporean government had decided to expand the program across Asia to countries such as Vietnam, China, Thailand, and India. The Chinese government sought collaboration with the Singaporean government because of a perceived cultural affinity between the two states. Although Western in policy and institutional organization, the Singaporean government is overtly Asian in political ideology. It has stood firm on the maintenance of ‘Asian values’ in Singaporean society, which is reflected in various measures, such as the promotion of Confucian values in schools and the preservation of the use of Asian languages in society. Although English had been established as the main lingua franca and primary language of the national education system in the city state, the government formalized the learning of a second language—known in Singapore as the ‘mother tongue’—as a strategy to retain its Asian cultural identity (Hill and Lian 1995). Therefore, for the ethnic Chinese in Singapore, who make up 65% of the overall population, it is mandatory to learn Mandarin as a core subject in school, and for the Malays and the Indians, the ‘mother tongues’ that are offered in schools are Malay and Tamil, respectively. The Singaporean government has also promoted Asian culture through a series of cultural heritage awareness campaigns (Vasil 1995). As many of the senior staff within the government are of ethnic Chinese descent, they strongly support the government’s efforts to maintain the ethnic heritage of Singapore. According to Lee Kuan Yew’s memoirs, “[Chinese Vice Premier] Li Lanqing said that Singapore-China cooperation had the advantages of a common culture, tradition and language” (Lee 2000: 721). Thus, the Chinese government saw the Singaporean government as being ideally situated as the best ‘middle man’ or “interface” to deal with the West, which in this case referred to transnational industrial corporations.

104

alexius pereira Westerners find it relatively easy to accept Singapore compared with China. And we find it easier to accept Singaporeans than Westerners. So Singapore stands right in the middle (Li Juchuan SIPAC Official, quoted in Asia INC, 1 March 1996).

Therefore, not only was the Chinese government particularly interested in adopting Singapore’s authoritarian capitalist system, it also believed that there was a cultural affinity between the two governments. Sensing an economic opportunity, the Singaporean government agreed to a joint venture in 1994, which eventually became known as the Suzhou Industrial Park (SIP) project. The Singaporean government’s interest in the SIP project was entirely economic, and the SIP was considered to be one of several revenue-generating instruments that would boost Singapore’s slowing domestic economy. The Suzhou Industrial Park—An Overview The SIP is located in Jiangsu province about 80 kilometers west of Shanghai, to the east of historic Suzhou city. In China, it has the official status of a Special Economic Development Zone (CSSD 1999: 2). As has been mentioned, the SIP was a collaborative attempt to create an industrial estate within China with a distinct Singaporean operating system that specifically referred to its system of industrial administration. To implement this system, the two governments agreed on a software transfer to impart Singapore’s accumulated and proven methods of industrial development and administration to China. Software transfer refers to the sharing of Singapore’s successful public administration and economic management experience with the Chinese authorities so that they can formulate pro-business policies in the CS-SIP, and govern with transparency and efficiency . . . SIPAC together with the SSPO will identify the relevant type of ‘software’ to be shared. Mutual visits and training attachments help Suzhou officials understand the Singapore way as well as international practices. Together with Singapore government officials, Suzhou officials decide how best to adapt Singapore’s practices to suit local circumstance by selecting and modifying appropriate elements. Singapore sends its government officials to Suzhou to assist in this adaptational process (CSSD 1999: 10) (emphasis in the original).

Although the software transfer allowed Chinese state bureaucrats to learn about Singaporean institutions, it also served the function of enhancing the park’s attractiveness to foreign investors. Certain for-

sino-singaporean joint ventures

105

eign investors had previously been wary of establishing operations in China because of the perceived difficulties of understanding Chinese business and administrative practices, but it was believed that foreign investors would be prepared to relocate their operation to the SIP because they were familiar with Singaporean institutions. In other words, the software transfer would give the SIP a competitive advantage over the other Special Economic Zones in China. As Lee Kuan Yew said: They [transnational corporations] believe that Singapore’s participation will ease their way into the unfamiliar surroundings in China, and will help them achieve conditions more like what they are familiar with in Singapore (Singapore Straits Times, September 29, 1994).

Another competitive advantage of the SIP was that it had the backing of two national governments, which, it was initially believed, would signal to potential investors that the project had long-term stability. The SIP was designed to cover 70 square kilometers by 2014, and was estimated to cost around US$30 million to develop (Singapore Straits Times, September 15, 1994). The SIP was initially projected to generate over US$20 billion in fixed capital investments from foreign investors, and to create over 360,000 jobs for the population of Suzhou. The project began with the development of the first eight square kilometers, or Phase One. Between 1994 and 1997, Phase One of the SIP was one of the most effective locations in China in attracting foreign investment, and there were strong indications that investment growth for Phase Two (1997 onward) would be equally strong (see Table 1). Table 1. Investment in the Suzhou Industrial Park (1994–1999) Year

Number of Companies

Fixed Investment Commitments (cumulative)(1)

Source

1994 1995 1996 1997 1998 1999 2000 (2)

14 56 69 82 92 132 155

US$0.87 billion US$1.88 billion US$2 billion US$3 billion US$4.3 billion US$6.4 billion US$7 billion

Singapore Straits Times 15 Sep 1994 Singapore Business Times 6 Dec 1995 Singapore Straits Times 5 May 1996 Singapore Straits Times 3 May 1997 Singapore Straits Times 8 Jul 1998 International Herald Tribune 1 Oct 99 Xinhua News Agency 12 May 2000

Notes: (1) Includes additional investment by existing tenants. (2) Data for the first half of 2000 only.

106

alexius pereira

Based on these figures, it can be concluded that the SIP was able to attract industrial multinational corporations throughout the period 1994 and 2001. However, it is not the SIP’s economic performance that is under analysis here; instead the focus is on the relationship between the main stakeholders in the joint venture. Given the SIP’s relatively robust economic performance, the question remains as to why the collaboration broke down, leading to the Singaporean government’s disengagement in 2001. To fully understand the case, the rest of this paper will examine the period between 1997 and 1999, when the project faced several problems and difficulties. It is argued that the inability of the partners to resolve the problem and the conflicts that emerged eventually led to the demise of the collaboration. Inter-governmental Collaboration In 1994, the two governments established the China-Singapore Suzhou Industrial Park Development (CSSD) Private Limited to build, market, and manage the estate. CSSD was officially registered in China as a Sino-foreign joint venture that consisted of a consortium of 24 Singaporean and international companies led by the Singaporean government, which initially owned 65% of the shares in the project, and a Chinese consortium of 12 companies and agencies led by the Chinese government, which owned the remaining 35% of the shares (CSSD 1999: 12). The CSSD was governed by a Joint Steering Council and a Joint Working Committee. Between 1994 and 2001, the Joint Steering Council was co-chaired by the then Vice President of China Li Lanqing and Singapore’s Deputy Prime Minister Lee Hsien Loong. Also on the Council were ministers, vice ministers, and senior bureaucrats from key ministries from both countries. Representing China were ministers and bureaucrats from the State Planning Commission, the SEZ Office, the State Economic and Trade Commission, the Ministry of Finance, the MOFTEC, the People’s Bank of China, and the State Taxation Bureau. On the Singapore side were ministers and bureaucrats from the Ministry of Trade and Industry, the Ministry of National Development, the Ministry of Environment, the Ministry of Foreign Affairs, and the Economic Development Board. The Joint Steering Council met annually if there were no extraordinary calls for meetings. The Joint Working Committee, which reported to the Council, was co-chaired by the

sino-singaporean joint ventures

107

mayor of Suzhou and the chairman of the Singapore Economic Development Board, and met once every quarter to review the software transfer. It was therefore evident that the SIP’s status as a toplevel project went beyond mere rhetoric: it actually involved senior figures from both governments. Between 1994 and 1997, the SIP was performing well economically, in that it was able to attract a relatively high amount of FDI. However, the project began to encounter problems in the latter half of 1997. In December 1997, on a visit to China, Singapore’s Senior Minister Lee Kuan Yew voiced his unhappiness over the presence of a rival industrial estate in Suzhou, the Suzhou New District (SND), which had been developed by the Suzhou Municipal Authority and was competing with the SIP for industrial tenants. Lee said that “right now, the energy is divided between two industrial estates. That’s wasting time, energy and causing too much friction” (Singapore Business Times, December 5, 1997). The SND was an industrial park located to the west of Suzhou’s historic center, and was managed by the Suzhou Municipal Authority. Although this estate was awarded economic development zone status in 1990, which entitled it to seek foreign investment, it really only began competing for FDI after 1997. The Suzhou Municipal Authority had in fact offered the Singaporean government land either beside or within the SND to develop the SIP in 1991, but the Singaporean government declined the offer because it preferred to work from a clean slate (Interview with a SIP official, July 1999). By the end of 1998, over 1,500 enterprises, both domestic and foreign, were operating in the SND, and the cumulative amount of investment stood at US$2.5 billion. According to the SND: over 340 foreign funded enterprises from 30 countries, including multinational corporations, such as DuPont, Motorola, Siemens, Philips, Sony, Panasonic, Mitsubishi, are investing in SND. Thirteen of the World Top 100 and five of the World Top 5 are investing here. There are 12 projects whose total investment is no less than US$100 million each (Suzhou New District Investors Guide 1999: 15).

Ironically, one of the key reasons why the SND received such a large inflow of FDI after 1994 was because of the Singaporean government’s software transfer to the SIP. Although the Suzhou Municipal Authority and the SND Administrative Committee (SNDAC) were

108

alexius pereira

not involved in the transfer, they learned and adapted many of the key practices and institutions through observation. The Suzhou Municipal Authority also engaged in regular transactions with SIPAC, which offered further opportunities for the observation of the imported practices. When asked why the SND had sought to emulate the SIP, an SNDAC official opined that the reason was simple. We had to at least match the SIP [in practices and processes] because this was what investors were expecting as a minimum. I would say that we were not really copying the Singaporean system; instead, I would argue that we were conforming to international standards. If we didn’t do something, we would have no investors at all (SNDAC official).

By late 1997, the SND was effectively competing for foreign investors, who now had a choice of two industrial estates within Suzhou city with relatively similar standards of industrial infrastructure and administration. However, the Singaporean government was not upset by this competition, and instead accused the SND of “bureaucratic shenanigans” (Sydney Morning Herald, March 21, 1998). Lee Kuan Yew accused the administrators of the SND of stealing potential tenants away by undercutting industrial unit prices, which, according to some, meant that the SND did not have a fixed price system, but worked on the basis of offering units for 25% less than whatever the SIP offered. Lee also accused the Suzhou Municipal Authority and the mayor of being more interested in promoting the SND than the SIP, which was a nationally important project (The Economist, January 3, 1998). In the face of such accusations, Chen Deming, the mayor of Suzhou, insisted that his government had behaved honorably in its dealings with Singapore, and stressed that there was “fair competition” for investors and that they had “followed every step according to the contract” (Singapore Straits Times, March 10, 1998). He further claimed that it would have been a mistake for the municipal authority to give ‘50–50’ treatment to the two parks, as the SIP had the backing of two national governments whereas the SND had to “fend for itself ” (Singapore Straits Times, March 10, 1998). It is important to point out that the SIP did not actually experience a reduction in demand for its industrial properties, and as Table 1 shows, the level of FDI in the SIP continued to increase throughout the period. This chapter does not seek to examine exactly how the SND actually affected the SIP’s overall economic performance. The SND issue

sino-singaporean joint ventures

109

is only relevant to the discussion insofar as it affected the working relationship between the Singaporean and Chinese governments. It was at this stage, sometime after 1997, that the Singaporean government requested that the Chinese government “discipline” the Suzhou Municipal Authority in the interests of the continuing viability of the SIP. At the same time, the Singaporean government was worried about global economic uncertainty as a result of the Asian financial crisis, which began in the middle of 1997. Although the crisis did not directly affect China’s economy, it badly affected several national economies in the Asia-Pacific region, which had the effect of drastically reducing consumer demand for a wide range of products (Wade 1998; Henderson 1999). This reduction in demand means that many industrial producers were suddenly faced with over capacity, and transnational industrial producers were obliged to consolidate production and focus on key markets. As a direct consequence, all expansion activities, such as the establishment of additional green field production factories or new FDI, were canceled or postponed. This significantly reduced the number of new investors that sought to establish operations not just in the SIP, but also in other parts of China. You can say that business at the office has been slow since 1997. The new companies that started between 1998 and 1999 were those that were signed up before or during the early months of the crisis. Yes, we have had some business, but definitely not of the size and the scale we got in the early days, and mostly smaller than we hoped for (SIP official, interviewed in Suzhou, July 1999).

With additional competition from other Chinese Special Economic Zones and other similar zones in the Asia-Pacific region, the Singaporean government was seriously worried about the SIP’s profitability, which was its main reason for participating in the joint venture in the first place, and wanted the Chinese government to act decisively. We are in contact with them [the Chinese authorities]. We have not negotiated the issues in further detail. We are now studying the problem in order to have a considered, mature response which we will convey to the Chinese side as our view of how to deal with this problem and we expect the Chinese side to study that and give us their response in due course (Singapore Business Times, January 15, 1998).

Based on information that was gathered in Suzhou, there were rumors that suggested that the Singaporean government had asked the Chinese

110

alexius pereira

government to temporarily close the SND to new investors so that any new FDI in Suzhou would go to the SIP first. The SND would therefore only receive new FDI after the SIP had been completely filled up. Interestingly, Beijing responded with mixed signals. At the national level, many top government leaders, including President Jiang Zemin and Vice President Zhu Rongji, made public statements that strongly supported the SIP (Pereira 2003). However, in Suzhou itself the Beijing government seemed to do nothing, which only served to further frustrate the Singaporean government. The feud between the Suzhou Municipal Authority and the Singaporean government between 1998 and 1999 affected the collaborative relationship between the Chinese and Singaporean governments. On the one hand, the Singaporean government was expecting its partner, the central government in Beijing, to act decisively. However, in post-reform China, in which the provincial governments had been granted economic authority, Beijing was in no position to order the local Suzhou Municipal Authority to shut down the SND (Breslin 1996; Yang 1997). Beijing’s relative silence and inactivity on the issue had disappointed the Singaporean government, and according to a manager of a transnational corporation that was located within the SIP: The Singapore government thinks that [the political system] in China is the same as it is in Singapore, where everyone simply obeys the top leadership. When they [the Singapore government] realized that this was not the case, they knew that they could not get things the way they wanted it. This must have been the reason why they pulled out of Suzhou (manager of a US company interviewed in Suzhou, September 1999).

With the rising tensions between Beijing and Singapore, on June 29, 1999 the CSSD announced that there would be a change of leadership at the SIP, which would be achieved through the sale of shares in the project. The Singaporean consortium, which was headed by the Singaporean government, would sell 30% of its shares to the Chinese consortium on January 1, 2001. This was to have several effects. The transaction gave the Chinese consortium a commanding 65% of the project’s shares in 2001, which effectively signaled that it would assume leadership of the project. The Singaporean consortium remained as a 35% minority shareholder, which demonstrated to the existing industrial tenants that they were not being abandoned in Suzhou. Thus, the term ‘disengage,’ which in this case

sino-singaporean joint ventures

111

meant the relinquishing of control, is more appropriate than the term ‘withdrawal,’ which would have meant a complete sell-off of the project’s shares. The sale of the shares compensated the Singaporean consortium for a portion of their sunk costs, which were mostly invested in infrastructure. The CSSD also announced at the same time that the Suzhou Municipal Authority, rather than a group led by the Beijing government, would assume the leadership of the Chinese consortium. On January 1, 2001, the Chairman of the SND and the deputy mayor of Suzhou, Wang Jianhua, assumed the position of Chief Executive Officer of the SIP. The official spin on the disengagement barely hides the fact that the collaboration between the two governments had totally broken down. After 2001, the Singaporean government was present in the SIP in name and held a minority share, but had actually removed itself from nearly all aspects of operation and management of the project. Of greater significance to this analysis, however, is the fact that cultural affinity was never cited or employed throughout the problem period, and the question arises as to why, if it was initially believed that cultural affinity would be useful in dealing with problems and resolving conflicts, it was not used at all. Whither Cultural Affinity? The aim of this chapter is not to explain the factors behind the overall economic performance of the SIP project. Instead, the focus is on understanding the usefulness of cultural affinity in the collaboration between the Chinese and Singaporean governments. By 2001, the collaboration was over, due to seemingly irreconcilable differences and conflicts that arose from day to day operations. Why cultural affinity was absent during these difficult times, especially when both partners initially believed that it would greatly enhance their collaborative relationship, is the issue that will now be addressed. A possible answer is that there was no actual cultural affinity between the partners in the first place. After the feud over the SND, the Suzhou Municipal Authority was keen to point out that the Singaporean partner did not really understand business culture in China. It claimed that the Singaporean government was too rigid in trying to transfer its own institutions, and cited its high reliance on contracts and other formal documents and ignorance of the

112

alexius pereira

importance of personal ties. In July 1999, the mayor of Suzhou, Chen Deming, told the press that “Singapore investors should be cautious in future tie-ups” (Singapore Business Times, June 29, 1999), and went on to say that the manner in which the Singaporean and Chinese partners had attempted to resolve their differences over the SIP showed that was a cultural divide between the two states. In our co-operation in the past five years, that we have to use an MOU [memorandum of understanding] to solve our problems is because of the cultural differences in the two countries, and the different understanding of the items in the documents (Singapore Business Times June 29, 1999).

In sum, the Suzhou side concluded that the Singaporean government was simply “not as Chinese” as they had claimed, and in many ways, the Singaporean side would probably concur. It is interesting that Lee Kuan Yew, who was a prime mover in the SIP project, noted that the problems between Singaporeans and Chinese were not “a matter of language and culture. The fundamental problem was in our two different mindsets, the way we think, our way of life, our working habits and styles” (Singapore Straits Times, December 11, 2000). In his memoirs, Lee wrote: it [the SIP project] was a chastening experience. Both sides had believed that because of apparent language and cultural similarities there would be fewer problems in dealing with each other; each side expected the other to behave like itself. Unfortunately, while language was no problem, our business cultures were totally different (Lee 2000: 723).

Lee therefore believed that Singaporeans, and by implication the Singaporean government, had a cultural affinity with the Chinese in China, but that however, this affinity was of little operational or business utility in China. However, a sociological reading of the situation shows that there is no way to distinguish between cultural affinity and cultural business affinity: the so-called Chinese business practices are part and parcel of Chinese culture, just like language and social customs. However, the fact that Singaporeans do things differently from the Chinese in China is not the central issue here. After all, the Singaporean operating system had always been conceptualized as being completely different from the operating system in China. The central issue is why the two partners did not solve the operational problems by turning to their mutual familiarity with Chinese culture

sino-singaporean joint ventures

113

and language. Alternatively, it could be asked how cultural affinity could realistically have been used to solve the problems that arose in this case, whether, for example, it could have been used to reduce transaction costs and improve informational flows, or to provide a resource base from which problems could be worked out. The answer is no. In fact, it could be argued that the perceived sense of cultural affinity led the two parties to develop a false sense of security in thinking that they always had something to fall back on if problems arose, when they should have been preparing for the worst case scenario. Conclusion The case of the collaboration between the Chinese and Singaporean governments in the SIP project is unusual, and is probably not representative of Sino-Singaporean joint ventures, cases of cultural affinity, or joint ventures in general. Nevertheless, the Suzhou case is still useful, because it shows that cultural affinity, whether real or presumed, has the ability to open doors. However, in the Suzhou case once the door was open there was no further function that cultural affinity could carry out. The Chinese and Singaporean governments needed the notion of a purported cultural affinity to reinforce the basis for the collaboration, over and above the economic rationales of mutual benefit and resource complementarity. It is also interesting to note that when the collaboration broke down, the main reasons that were offered by the two sides were again cultural, in the broad sociological sense of the term. The most important lesson that can be learned from the failure of the collaboration, which is not the same as the failure of the SIP, is that the two sides refused to acknowledge that the problems that arose were real operational and managerial issues that could happen in any business venture. After all, there is no guarantee that any venture will be successful, regardless of whether there is a cultural affinity between the various partners.

114

alexius pereira REFERENCES

Bo, Z. (2000), ‘Economic Development and Corruption: Beijing beyond Beijing,’ Journal of Contemporary China, 9, 25: 467–487. Breslin, S. (1996), ‘China: Developmental State or Dysfunctional Development?’ Third World Quarterly, 17, 4, 689–706. Castells, M. (1992), ‘Four Asian Tigers with a Dragon Head: A Comparative Analysis of the State, Economy and Society in the Asian Pacific Rim,’ in R. Appelbaum and J. Henderson (eds.) States and Development in the Asian Pacific Rim. Newbury Park: Sage, pp. 33–70. Chen, X.M. (1995), ‘The Evolution of Free Economic Zones and the Recent Development Of Cross-National Growth Zones,’ International Journal Of Urban And Regional Research, 19, 4: 593–621. Child, J. (1994), Management in China in the Age of Reform. Cambridge, UK: Cambridge University Press. Child, J. and D. Faulkner (1998), Strategies of Co-operation: Managing Alliances, Networks and Joint Ventures. Oxford: Oxford University Press. Clemens, W.C. (1999), ‘China: Alternative Futures,’ Communist and Post-Communist Studies, 32, 1–21. CSSD (1999), SIP: Facts and Figures 1999. Suzhou: CSSD. Douw, Leo (1999a), ‘Introduction’, in L. Douw, C. Huang and M. Godley (eds.), Qiaoxiang Ties: Interdisciplinary Approaches to “Cultural Capitalism” in South China, London: Kegan Paul, pp. 1–21. ——— (1999b), ‘The Chinese Sojourner Discourse’, in L. Douw, C. Huang and M. Godley (eds.), Qiaoxiang Ties: Interdisciplinary Approaches to “Cultural Capitalism” in South China. London: Kegan Paul, pp. 22–45. ——— (2001), ‘Introduction’, in L. Douw, C. Huang and D. Ip (eds.), Rethinking Chinese Transnational Enterprises: Cultural Affinity and Business Strategies. London: Curzon Press, pp. 1–16. Evans, P.B. and J. Rauch (1999), ‘Bureaucracy and Growth: A Cross-National Analysis of the Effects of Weberian State Structures on Economic Growth,’ American Sociological Review, 64 (5), 748–765. Fabre, G. (2001), ‘State, Corruption, and Criminalisation in China,’ International Social Science Journal, 53, 169: 459–466. Grundy-Warr, C., K. Peachy and M. Perry (1999), ‘Fragmented Integration in the Singapore-Indonesian Border Zone: Southeast Asia’s Growth Triangle Against the Global Economy,’ International Journal of Urban and Regional Research, 23, 2: 304–328. Henderson, J. (1999), ‘Uneven Crisis: Institutional Foundations Of East Asian Economic Turmoil,’ Economy and Society, 28, 3: 327–367. Hill, M. and K.F. Lian (1995), The Politics of National Building and Citizenship in Singapore. London: Routledge. Kumar, R. and T.Y. Lee (1991), ‘Growth Triangle: A Singaporean Perspective,’ in T.Y. Lee (ed.) Growth Triangle: The Johor Singapore Riau Experience. Singapore: ISEAS, 1–35. Kwong, J. (1998), The Political Economy of Corruption in China. Armonk: M.E. Sharpe. Lee, K.Y. (2000), From Third World To First: The Singapore Story 1965–2000, the Memoirs of Lee Kuan Yew. Singapore: Times Editions. Lever-Tracy, C., D. Ip and N. Tracy (1996), The Chinese Diaspora and Mainland China: An Emerging Economic Strategy. Houndsmill: Macmillian Press. Luo, Y. (1998), International Investment Strategies in the People’s Republic of China. Aldershot: Ashgate.

sino-singaporean joint ventures

115

Mirza, H. (1986), Multinationals and the Growth of the Singapore Economy. London: Croom Helm. Naughton, B. (1995), Growing Out Of The Plan: Chinese Economic Reform 1978–1993. New York: Cambridge University Press. Oman, C. (2000), Policy Competition for Foreign Direct Investment: A Study of Competition among Governments to Attract FDI. Paris: Organisation for Economic Cooperation and Development. Park, J.D. (1997), The Special Economic Zones of China and their Impact on its Economic Development. Westport: Praeger. Pereira, A.A. (2000), ‘State Collaboration with Transnational Corporations: The Case of Singapore’s Industrial Programmes (1965–1999),’ Competition and Change, 4, 4: 423–51. ——— (2003) State Collaboration and Development Strategies in China, London: RoutledgeCurzon. Perkins, D.H. (1988), ‘Reforming China’s Economic System,’ Journal of Economic Literature, 26, June: 601–645. Perry, M. and C. Yeoh (2000), ‘Singapore’s Overseas Industrial Parks,’ Regional Studies, 34, 2: 199–206. Schein, E. (1996), Strategic Pragmatism: The Culture of Singapore’s Economic Development Board. Cambridge: MIT Press. Shirk, S. (1993), The Political Logic of Economic Reform in China. Berkeley: University of California Press. Sklair, L. (1993), Assembling for Development: The Maquila Industry in Mexico and the USA. San Diego: Center for U.S.-Mexican Studies. Suzhou New District Investors Guide (1999), Suzhou: Suzhou Municipal Authority. Wade, R. (1998), ‘The Asian Debt-and-development Crisis of 1997–?: Causes and Consequences,’ World Development, 26, 8: 1535–1553. Wong, J. (1999), ‘China’s Fascination with the Development Of Singapore,’ AsiaPacific Review, 5, 3: 51–63. Wong, P.K. and C.Y. Ng (1997), ‘Singapore’s Industrial Policy to the Year 2000,’ in S. Masuyama, D. Vandenbrink, and S.Y. Chia (eds.), Industrial Policies in East Asia. Singapore: ISEAS and Nomura Research Institute, pp. 91–120. World Bank (1997), World Development Report 1997: The State in a Changing World. New York: Oxford University Press. Wu, W. (1999), Pioneering Economic Reforms in China’s Special Economic Zones: The Promotion Of Foreign Investment And Technology Transfer in Shenzhen. Aldershot: Ashgate. Vasil, R. (1995), Asianizing Singapore: The PAP’s Management of Ethnicity. Singapore: Heinemann. Yang, D. (1997), Beyond Beijing: Liberalization and the Regions In China. London: Routledge.

Chapter 6

Sino-German Joint Ventures: Shared Values and Cultural Divides Irmtraud Munder and Renate Krieg There was a wave in the founding of Sino-German joint ventures in China at the beginning of the 1990s, but a period of disillusionment followed. At the end of the decade an increasing number of German companies appeared to prefer wholly owned enterprises to joint ventures. A reason for this change of preference often quoted by managers is the occurrence of irreconcilable internal conflicts. According to the mainstream academic textbooks, cultural differences are at the basis of most of the problems and conflicts in transnational enterprises (Hofstede 1980; Trompenaars 1994; Wang, Chan and Luk chapter 3 in this volume). This assumption does not go unchallenged, as is attested in most of the essays in this volume, but the preference for the establishment of wholly owned enterprises by German companies in China may be considered to point in the same direction. Therefore, it seems useful to investigate cultural differences as a distinct part of conflict resolution in Sino-German joint ventures. Hofstede (1980) was the first to perform an empirical investigation of cultural values in a work environment. His data are based on an inquiry into IBM employees all over the world. Although quite diverse with respect to their national cultures, they shared a common corporate culture and also, to a certain degree, professional background. Hofstede introduced his concept of the four dimensions of culture, along which cultural differences can be measured: power distance, masculinity, individualism and uncertainty avoidance. This chapter acknowledges that cultural differences are part of social reality, but tries to de-emphasize their importance as postulated in mainstream academic thought, by making an effort to set them into their proper context. Above all, one can argue that factors external to the organization of enterprises play at least an equally important role as internal ones in generating conflict within the enter-

sino-german joint ventures

117

prises. This must be true for countries like China, where foreign companies often operate in contested markets and are exposed to a rough economic environment. But the fixation on cultural differences seems insufficient for a full understanding of what is going on within transnational firms. Most of the chapters in this volume have their specific angle in addressing this insufficiency. This chapter starts from a remarkable finding from a large database on Sino-German joint ventures, which is also used in some of the other chapters in this book. Employees of different cultural backgrounds, in this case mostly Germans and Chinese, can be proven to have a pretty firm idea of one another’s work values, which is an important part of corporate cultures. This raises the question of how far work values exist only in an objective sense, being permanently grafted upon the human personality, as the Hofstede school postulates, or whether they may also be constructed and perpetuated by managers of different cultural backgrounds, who are supposed to cooperate in transnational firms but actually operate as separate groups. In other words, what is the consequence for the analysis of conflicts in settings where differences in value patterns and work attitudes must be perceived to exist in an objective manner, but where those patterns and attitudes are also mutually attributed and may be supposed to develop an existence of their own and so exist subjectively, and as fixed categories, in the collective minds of different groups? If this is really the case, would it mean that the contestants routinely ignore decisive parts of one another’s existence, and cooperate on a very limited basis of compromise, or possibly on the basis of incidentally or supposedly shared values? Could it mean that in basing their demeanor on such flimsy grounds, they will repeat the same conflicts over and over again? If this should be true, it seems clear that the mutual perceptions themselves must be turned into an object of study, because they have come to play a role independent of social reality. They have also become an instrument for the handling of social contradictions, which cover a much broader terrain than the existence of different value patterns and work attitudes alone. It will be argued here, that the latter approach is indeed the most desirable one, if research on work values is to advance. Before doing so, of course, it must first be established whether or not cultural stereotyping does effectively occur in transnational enterprises. Most part of the chapter will be devoted to showing that stereotypes do

118

irmtraud munder and renate krieg

indeed occur, what they look like, and how their existence and substance can be explained. To this purpose, the data will be used from the interviews carried out by Renate Krieg and Kerstin Nagels in Sino-German joint ventures in China and Taiwan between 1997 and 2000, which have also been used for several other chapters in this book.1 It will quickly appear that the findings are quite clear-cut and indeed raise the intriguing questions that have been asked, which encourages speculation on how stereotypical mutual perceptions are connected to the occurrence and management of conflict. Two aspects of this problem are worth keeping in mind from the beginning. First, the idea of delineation, or the role of mutual perceptions on the formation of group identities. This adjoins the approaches to the role of culture in social organization that have been developed from the late 1960s in social anthropology (Barth 1998). Second is the question of the impact of the interview method on the answers provided by interviewees when standard surveys are conducted in the manner of the Hofstede school. The Database The Questionnaires Our analysis is based on 69 questionnaires that were filled out by interviewees working in Sino-German joint ventures. During the project, 200 employees were interviewed in-depth during sessions of one to two hours. After their interviews, the participants were asked to fill out a questionnaire about how to categorize work values according to the supposed national background of those values; they were asked to label each of the work values either as belonging to Chinese value systems, or to German ones. They could also choose to categorize work values as being shared by both value systems, because

1

The interviews were part of the research project “Problems and chances of cross-cultural understanding—conflict potential and chances in coping with management in Sino-German joint ventures” at the Bremen University of Applied Sciences, funded by the Volkswagen Foundation from 1997 to 2000. For other results of this project, see Krieg and Nagels (2001) and the contributions of Renate Krieg, Kerstin Nagels and Monika Schädler to the present volume.

sino-german joint ventures

119

it was supposed that part of the values used in the questionnaire may be considered as universally important and therefore potentially important for both of the value systems. To prevent the interviewees from categorizing all or most of the work values as both Chinese and German, they were asked to consider whether the values tended to be German or Chinese, or the other way around, or tended to be shared by both value systems. The interviewer introduced the questionnaire briefly and then asked the participants to express their own assessments spontaneously. The questionnaire comprised a set of 38 work values (see Table 1.1)

Table 1.1. List of Work Values No. Work value

No. Work value

1 Respect and 11 Excellent tolerance for professional the way of life knowledge and the convictions of others 2 Reasonable 12 Diligence social behavior 3 Modesty

13 Friendliness

4 Ability to assert oneself

14 Collective spirit

No. Work value

No. Work value

21 Pursue one’s knowledge

31 Self-fulfillment

22 Ability to criticize and be criticized 23 Loyalty

32 Continuous process of self-improving 33 Social competence 34 Patriotism

24 Harmoniously getting along with others 25 Creativity

5 Enterprising 15 Sense for spirit justice 6 Determination 16 Healthy, 26 Respect for balanced elderly relation between ideals and reality 7 Honesty 17 Helpfulness 27 Consideration 8 Independence/ 18 Respect of 28 Self-confidence self-reliance knowledge 9 Broad mind 19 Ability to and forwarding integrate spirit 10 Engagement 20 Comradeship at work

29 Self-confirmation 30 Self-discipline

35 Optimism 36 Sense of responsibility

37 Tolerance 38 Understanding of work content in the broader context

irmtraud munder and renate krieg

120

derived from a study by Wong (1993). In her dissertation on subjective theories and the social representation of the educational goals of Chinese and German teachers, Wong derived a culture specific value system for the cultural spheres of China and Germany from a hermeneutic analysis of basic values found in literature that ranged from light fiction to scientific publications, and a subsequent validation by survey. These values were slightly modified to adjust them to the context of work in commercial enterprises. The Enterprises The interviews were conducted in 19 Sino-German equity joint ventures in six different locations in China. The majority of enterprises belonged to the high-end capital goods sector. Most of the joint ventures were located in the urban centers of prosperous regions in China (see Table 1.2). Table 1.2. Nationality of Interviewees by Location of Work Region Number of Chinese Interviews Number of German Interviews Sum

Chengdu

Shanghai

Ertan

Beijing

Sum

8

21

4

9

42

5

16

1

5

27

13

37

5

14

69

The Interviewees Chinese and German interviewees at different hierarchical levels and in different departments were approached. A precondition for selection was that the Chinese interviewees cooperated closely with the expatriates and vice versa. The German interviewees mainly belonged to the higher echelons of the enterprise hierarchy; they were also slightly older than the Chinese interviewees (see Table 1.3). The Chinese group was fairly mixed, ranging from ordinary employees to members of the top management. In the production department, all interviewees were on the foreman/supervisor level and higher.

sino-german joint ventures

121

Table 1.3. Age of Interviewees by Nationality Nationality Age (years)

Chinese

21–30 31–40 41–50 51–60 No answer Average age Sum

14 11 7 4 6 34.4 42

German 2 6 6 7 6 44.9 27

Total 16 17 13 11 12 38.3 69

A majority (81%) of the participants had technical professional backgrounds. We can therefore exclude the possibility that differences in the work value system were based to any significant extent on diverse disciplinary backgrounds (see Table 1.4). Table 1.4. Field of Specialization of Interviewees by Nationality Nationality Discipline Engineering Economics Interpreting Technical Background Sum

Chinese

German

Sum

7 4 7 24 42

14 2 0 11 27

21 6 7 35 69

By and large, the participants’ educational level was quite high (see Table 1.5). Approximately two thirds of the Chinese and half of the German interviewees held academic degrees. Finally, the German interviewees were all male. In the Chinese group, 15 interviewees were female and 27 were male. The Answers: a Synopsis We will first provide a general idea of what the answers were about. Both groups agreed in assigning one quarter of all work values as tendentially Chinese. The Chinese classified half of the work values as tendentially shared and one quarter as tendentially German. For the Germans it was the other way around, with almost half of the

irmtraud munder and renate krieg

122

Table 1.5. Educational level of Interviewees by Nationality Nationality Degree PhD Master Bachelor Others* No answer Sum

Chinese

German

Sum

1 2 29 4 6 42

0 8 5 12 2 27

1 10 34 16 8 69

* Chinese in this category were graduates from technical/vocational Middle Schools. Germans had participated in vocational/professional training according to the German dual system.

work values regarded as tendentially German and only a quarter as tendentially shared (see Table 1.6). Table 1.6. Responses by Nationality Tendency of Work Values Percentage of tendentially Chinese work values Percentage of tendentially German work values Percentage of tendentially shared work values Sum

Chinese Interviewees

German Interviewees

24.6%

26.4%

25.4%

44.5%

50.0%

29.1%

100.0%

100.0%

The graphical distributions (Graphs 1.1 and 1.2) allow a panoramalike look at the responses. They underline the bias therein: in the graphical presentation of the Chinese answers (Graph 1.1), the light gray shared work values predominate over the tendentially German or Chinese ones, whereas in the presentation of the German answers (Graph 1.2), the black tendentially German work values stand out. The work values in both graphs are numbered along the x-axis as listed in Table 1.1, and the y-axis shows the percentage of Chinese or German interviewees who regarded a work value as either tendentially German or Chinese, or identified it as a shared value. From this short synopsis of the answers it appears clearly that the Chinese and the German interviewees had distinct views on what

sino-german joint ventures

123

Graphs 1.1. Work Values from a Chinese Perspective (Response in %) 70% 60% 50% 40% 30% 20% 10% 0% 1

3

5 7

9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 No of Work Value

Tendentially Chinese

Tendentially German

Shared Values

Graphs 1.2. Work Values from a German Perspective (Response in %) 70% 60% 50% 40% 30% 20% 10% 0%

1

3

5 7

9

11 13 15 17 19 21 23 25 27 29 31 33 35 37 No of Work Value

Tendentially Chinese

Tendentially German

Shared Values

124

irmtraud munder and renate krieg

should be considered as tendentially Chinese, German or shared work values. To obtain a more detailed picture of what those views amount to, we now turn to a more thoroughgoing analysis, which takes the values themselves as a starting point, and look at how the values were perceived by the Chinese and the German interviewees. First, we will take a look at how tendentially Chinese work values were seen by the Chinese and German interviewees, then we will turn to the German work values, and finally the shared work values. In a second step, we will take a closer look at the work values that were categorized by most interviewees as tendentially Chinese, which we will call the most Chinese work values. Correspondingly, we look at the work values that were categorized by most as tendentially German work values, which we will call the most German work values. Mutual Perceptions of Work Values The Perception of Tendentially Chinese Work Values Even though the Chinese interviewees classified half of the work values as shared, both groups appear to have agreed to a large extent on which of the work values should be regarded as tendentially Chinese or not. This means that both groups obviously have a clear idea about their own and the other’s values system. Table 2.1 summarizes the work values that were tendentially the most Chinese or the least Chinese according to the Chinese and German interviewees; it also contains the work values on which the interviewees disagreed about whether they were Chinese or as German. Table 2.1. Agreement Respectively Disagreement between German and Chinese Interviewees on Chinese Work Values Most Chinese Work Value

Least Chinese Work Value

Chinese and German Agree

Modesty Harmoniously Getting Along Respect for the Elderly Consideration

Independence Sense of Responsibility Self-confidence Honesty Engagement at Work

Chinese and German Disagree

Tolerance Friendliness Patriotism

Self-confirmation Ability to Criticize and to be Criticized

sino-german joint ventures

125

Four out of the five work values assessed as rather Chinese match in the German and Chinese ranking: i.e. ‘modesty’, ‘harmoniously getting along’, ‘respect for the elderly’, and ‘consideration’. They describe a relation-oriented person with a high ability to integrate and work in a group. Concomitantly, the ‘ability to criticize and be criticized’, the value that may be said to unequivocally reflect an appreciation of individualist work attitudes, is found at a low rank of 24 in our set of 38 values. Following Parsons (1955) we could say that the work values which were labeled as Chinese by the interviewees are expressive-integrative in character, which means that they are oriented towards the integration of groups. This set of values in a Western context is typically ascribed to women. The masculine sphere in this context is labeled as instrumental-adaptive and oriented towards realizing system goals. Work values that were regarded by both groups as tendentially German, such as ‘independence’, ‘sense of responsibility’, ‘self-confidence’, and ‘engagement at work’, belong to this sphere. This outcome raises the question of how the gender of the interviewees may have influenced their responses. However, in our sample gender provides no valid explanation. In the first place, the interviewees as a whole were predominantly male. It is true that in contrast to the wholly male German group an ample one third of the Chinese group was female, but if one compares the responses of the female and male Chinese interviewees, no significant differences can be found. The German interviewees ranked the work values of ‘friendliness’ and ‘patriotism’ high for the Chinese, but low for themselves. The Chinese, on the other hand, experienced the Germans as not so unfriendly. The low acceptance of the work values ‘patriotism’ among the Germans was not really surprising, as in Germany the term is quite disputed and carries negative historical connotations. Interestingly, the Chinese considered ‘patriotism’ as a clearly shared work value. The Chinese interviewees considered ‘tolerance’ clearly as a Chinese work value, whereas the German interviewees assigned it equally to all three possible categories. The ‘ability to criticize’ appeared to the Chinese interviewees to be a shared value, whereas for the German interviewees it was definitely not a Chinese work value, but a tendentially German one. ‘Self confirmation’ was definitely not a Chinese work value for the Chinese interviewees, whereas the German interviewees assigned it again equally to all three categories.

irmtraud munder and renate krieg

126

The Perception of Tendentially German Work Values Both groups of interviewees also agreed widely on the perception of tendentially German work values (see Table 2.2). This finding can be explained in the same manner as in the case of Chinese work values. Table 2.2. Agreements between German and Chinese Interviewees on German Work Values German Work Value

Not a German Work Value

Chinese and German Agree

Independence Ability to Criticize Self-confidence Determination Ability to Assert Oneself

Modesty Harmoniously Getting Along Respect for the Elderly Friendliness Pursue One’s Knowledge

Chinese and German Disagree

Sense of Responsibility Self-confirmation

Honesty Helpfulness

By the selection of the set of tendentially German work values such as ‘independence’, ‘ability to criticize and to be criticized’, ‘selfconfidence’, ‘determination’, and the ‘ability to assert oneself ’, both groups described a career-oriented person with leadership qualities, who is aware of the ongoing problems and solves them autonomously. He or she is capable of providing criticism and accepting criticism from others. Work-related qualities that emphasized an individualistic work attitude predominated. Concomitantly, the highest ranking work value, which can be said to reflect an appreciation of relationoriented work values, namely ‘reasonable social behavior’, is found at a rather low rank of 19 in our set of 38 values. This self-perception fits well with company expectations of a (male) engineer and manager, who copes with a difficult job in mostly unknown terrain. The advertisement of the human resource management department of a German company looking for an engineer for an assignment at home or abroad would fit the characteristics depicted by this set of work values. Typical examples are two job advertisements published in Süddeutsche Zeitung, one of the large German national newspapers, on Saturday February 8, 2003: – AIRBUS, the European air craft consortium, is looking for a production manager who is “characterized by an enterprising spirit,

sino-german joint ventures

127

engagement at work, ability to assert oneself and enthusiasm” (p. V1/23); – HAMO (a medium sized enterprise in the pulp and paper industries) is looking for a production engineer, “characterized by determination, the ability to assert oneself, independence, creativity and ability to cooperate” (p. V1/28);

and in the issue of Saturday July 30, 2005 (p. V1/17): – Siemens VDO Automotive is looking for development engineers, who are “highly motivated and resilient, with the ability to assert oneself, to think analytically and to cooperate, used to a systematic way of working and to work fully determined”.

The header of the almost full-paged advertisement presents a trio of young people, a Caucasian women in between an Asian and an African man. In the eyes of the Chinese interviewees, specific German work values were characterized by a self-assured, rather competitive person without strong ties to the social environment, looking for self-fulfillment through work. Just as in the German self-perception, in the Chinese description of the most specific German work values, relation-oriented values such as ‘harmoniously getting along’, ‘modesty’, and ‘friendliness’ are missing. In addition to speculation about the causes of these perceptions, we can surmise image as the result of the working and living conditions of German expatriates as ‘single combatants’ segregated from their human environment by language and culture. ‘To pursue one’s knowledge’ was either regarded as a shared work value or as a Chinese value, but definitely not as a German value. This may come as a surprise, as we are concerned here with German engineers in a high technology sector. However, we have to keep in mind that compared to the Chinese interviewees their German counterparts held higher positions in the corporate hierarchies concerned, so their responses may have reflected an attitude of ‘I’m going to teach you something’ rather than ‘I will learn something’. The latter attitude may better reflect the position of the Chinese interviewees. For both groups, ‘sense of responsibility’ and ‘honesty’ were definitely not Chinese work values (see also Table 2.1); for the German interviewees they were mostly German work values, and for the Chinese they were mostly shared values. The Chinese interviewees counted ‘helpfulness’ either as a shared or Chinese work value, but definitely not as a German one, whereas the German interviewees assigned it equally to the three possible categories.

128

irmtraud munder and renate krieg

If we compare the German self-perception with their perception by others, we find striking accordance. The German and Chinese interviewees agreed that German work values were dominated by individualist values and those oriented towards getting ahead or realizing system goals, whereas socially oriented group values did not matter. In the interpretation of Parsons (1955), the German set of work values has rather masculine features. However, we have to keep in mind that in contrast to the Chinese group, the German group consisted of only male members in the higher echelons. A clear career orientation is therefore to be expected. Because there were no women in the German sample, it is not possible to check a gender bias in their answers as assumed by Parsons. The Perception of Tendentially Shared Work Values Again, both groups agreed widely on which of the work values were shared (see Table 2.3). However, the Chinese interviewees agreed to a higher extent (see Table 1.6 or Graph 1.1). An interesting case concerns the values for which both groups are of the opinion that they are shared. These are listed in Table 2.3 and can be subsumed under a heading ‘work orientation’. The work values found here are indispensable for managing a high tech company that is operating successfully in a contested market, such as engagement at work, diligence, excellent professional knowledge, helpfulness and to make oneself perfect. Table 2.3. Agreements between German and Chinese Interviewees on Shared Work Values Shared Work Value

Not Shared Work Value

Chinese and German Agree

Engagement at Work Respect for the Elderly Diligence Modesty Excellent Professional Ability to Criticize and Knowledge to be Criticized Helpfulness To Make Oneself Perfect

Chinese and German Disagree

Enterprising Spirit Patriotism Sense of Responsibility Collective Spirit Honesty

Determination Understanding of Work Content

sino-german joint ventures

129

Not surprisingly, both sides agree that the tendentially Chinese values in Table 2.3, namely ‘modesty’ and ‘respect for the elderly’, as well as the rather Western value, the ‘ability to criticize and be criticized’, are not shared work values. Also, the interviews, which preceded the filling out of the questionnaires, revealed different approaches on how to handle criticism and modesty. In cases where the two groups disagreed on whether a work value was shared or not, the Chinese interviewees regarded the values as shared, whereas the German interviewees regarded them as either tendentially Chinese, namely ‘collective spirit’ and ‘patriotism’, or tendentially German, namely ‘enterprising spirit’, ‘sense of responsibility’, ‘honesty’, and ‘determination’. These different perceptions can be a major source of misconception and work conflict. The third quadrant contains two important values for the new category of ‘work orientation’: ‘sense of responsibility’ and ‘understanding work content in the broader context. The different assessment of the work value ‘sense of responsibility’ is striking. When we allow ourselves a detailed look at the answers to the questions on this work value, in the perception of the Chinese this value ranked third as a shared value, whereas the German side claimed that it was typically German, and as a shared value with the third least priority. However, both sides agreed that responsibility is not a typically Chinese work value. Evidently, the meaning of the term ‘sense of responsibility’ is quite different for both sides. One reason for this can be found in how differently the economic systems in which both sides operate are experienced. In a marketoriented, Western enterprise the organizational structure is clearly defined, and so is responsibility: a single person can be held responsible for his/her actions and decisions. In the interviews, the Germans mentioned their need to control the staff members on an individual level. The Chinese side, in contrast, expressed astonishment about the German way of planning and organizing processes that in their opinion could better be managed at the group level. Not surprisingly, the Chinese partners often had difficulties in reconstructing the company’s organizational structure. For them, responsibility was shared by a group. So what looks like a clear organizational responsibility for the German side may look like inflexibility and overplanning for the Chinese. We can summarize the core of our findings as follows: Chinese and Germans working in Sino-German joint ventures assess the work

130

irmtraud munder and renate krieg

values of the other quite precisely. The self-perception and the perception of the other coincide very well for most work values. The Chinese ascribe to themselves relation-oriented, human-centered, social work values, whereas the Germans ascribe to themselves careeroriented, task-centered, individualist work values. Finally, both sides also agree on which work values are shared. Explaining the Clarity of Mutual Perceptions Why are the mutual perceptions of one another’s work values so clearly demarcated? The data analyzed above are puzzling, because the interviewed staff members form a fairly homogeneous group with respect to their technical professional background and with their companies all involved in high-tech production. This fact would make one expect that existing work attitudes would not differ between the two groups in any fundamental sense. We have already disposed of a gender-based explanation. This explanation was suggested by the possibility—derived from the work of Parsons and Bales (1955: 22ff )— of positioning the work values in our database along an axis ranging from one pole, called ‘instrumental-adaptive’, which represents ‘masculine’ values, to another pole, called ‘expressive-integrative’, representing ‘feminine’ values. The work values that were regarded as tendentially ‘Chinese’ by the Chinese and German interviewees stand for the feminine side. Accordingly, the work values that were regarded by both groups of interviewees as tendentially ‘German’ indicate, in the words of Connell (2002), a masculine, hegemonial attitude, thus, corresponding perfectly with the Western, societal expectations of engineers in the higher echelons. It has also been noticed, however, that the response of interviewees did not depend significantly on their gender, so a gender-based explanation must be rejected (see above, section 2). There is another possibility of categorizing the work values: according to the criterion of whether they represent ‘tradition’ or ‘modernity’. Since the rapid rise of most of many Asian economies in the 1980s, scholars, politicians, and consultants have tried to sift out the success factors. Many have called for a specific Asian road to modernization (Tu 1996) in contrast to the road followed by the West (see, for example, Giddens, Lash, and Beck 1994). The literature about Confucian, or traditional values, versus Protestant, or modern values is abundant, and this way of contrasting cultures and

sino-german joint ventures

131

development has also provoked harsh criticisms (Tu 1996: 343; van Ess 2003). The importance of this literature for our argument is limited to the fact that it provides us with the possibility of categorizing the work values in our database according to a traditional versus modern divide. ‘Traditional Eastern values’ include ‘respect and tolerance for the way of life and the convictions of others’, ‘modesty’, ‘collective spirit’, ‘respect of knowledge’, ‘ability to integrate’, ‘pursue one’s knowledge’, ‘loyalty’, ‘harmoniously getting along’, ‘respect for the elderly’, ‘consideration’, ‘self-discipline’, ‘continuous process of self-improvement’, ‘social competence’, and ‘understanding of work content in the broader context’. Modernized Western values include ‘ability to assert oneself ’, ‘enterprising spirit’, ‘determination’, ‘independence/self-reliance’, ‘sense of justice’, ‘ability to criticize and be criticized’, ‘self confidence’, ‘self-confirmation’, ‘self-discipline’, and ‘self-fulfillment’. Other values include ‘reasonable social behavior’, ‘honesty’, ‘broad mindedness and forwarding spirit’, ‘engagement at work’, ‘excellent professional knowledge’, ‘diligence’, ‘friendliness’, ‘healthy, balanced relation between ideals and reality’, ‘helpfulness’, ‘comradeship’, ‘creativity’, ‘patriotism’, ‘optimism’, ‘sense of responsibility’, and ‘tolerance’. With this background, we observe that both groups of interviewees agreed in connecting ‘traditional Eastern values’ with tendentially Chinese work values and ‘modernized Western values’ with tendentially German ones. This means that stereotyping definitively took place; both groups took part in it by sharing and reproducing the mutual stereotyping. The fact that, additionally, the tradition versus modernity divide mostly overlaps with the feminine versus masculine divide mentioned above, invigorates our hypothesis that mutual perceptions are derived not from the observation of actual behavior, but from long existing stereotypes that have dominated the discourses on economic development since the late nineteenth century. It was obviously important for both groups to have a clear picture of how to ascribe cultural differences and similarities to one another, and thus to provide themselves with a clear identity as a group and draw a dividing line with the other. If this kind of stereotyping would increase trust, in the sense of predictability of the other’s behavior, and thus lower transaction costs and help negotiations when conflict occurs, it might be said that stereotyping serves a positive function. We have good reason, however, to argue along a different line. In addition to the clear divides in the mutual ascription of work

132

irmtraud munder and renate krieg

values by our interviewees, we found that if one compares the ‘most/least Chinese’ work values (see Table 2.1) with the ‘most/least German’ work values (see Table 2.2), a reciprocal construction can be noticed. This apparently takes place when stereotypes are being formulated or confirmed. Both groups agree that the least Chinese work values coincide with the most German ones, and concurrently the least German work values correspond with the most Chinese ones. These findings are interesting, not so much because stereotyping does take place at the level of attitudes and mutual attributions, but rather because of the manner in which the stereotypes are being cast. Obviously, group formation is served by stereotyping rather than stereotyping actually saying something about extant social processes and attitudes. Fredric Barth (1998) argues that ethnic groups are not formed on the basis of shared cultures, but rather on the articulation of differences among cultures. Cultural identity is constructed by the contrast between ‘us’ and ‘the other’, and only emerges in the course of establishing contacts. The ‘otherness’ of the other is needed to develop a distinct identity for one’s own group. Such a process of group formation has obviously taken place in the Sino-German joint ventures of our database, and can be traced through an analysis of the data, as provided above, on the mutual perceptions of work values. There is a further finding that needs to be explained. In comparison to the German interviewees, delineation and ethnic polarization among the Chinese respondents was less pronounced, and as a consequence more of the work values were regarded as tendentially shared (see Table 1.6). To explain the difference we will now use some additional information gathered during the interviews. The situation of the two groups of interviewees was neither symmetric with respect to their experience with other cultures, nor with their professional background. All of the German interviewees had lived between six months and several years in China, and—with one exception—(to their regret) had no or little command of the Chinese languages. Some of them had previously worked in other foreign countries. However, only a few of the Chinese interviewees had ever stayed in Germany. Many of the Chinese interviewees reported that the potential for further professional development, the hope for better working conditions, income and benefits, and the expectations raised by the Western character of the company and Western management practices had

sino-german joint ventures

133

motivated them to work with the joint venture companies. Gaining cross-cultural experience was not mentioned as a separate point of interest, in contrast to the German female managers in Renate Kriegs’s contribution to this volume, whose education and career development was closely linked to their assignment in China. Whereas most of the German interviewees went abroad to gain international experience and to improve their career opportunities, China was not necessarily their main interest. Also, compared to the Chinese interviewees, the Germans were in higher professional positions and obviously more career oriented. The Chinese interviewees were in more subordinate positions and had fewer or not very clear career opportunities. This might explain to some extent their different pattern of ascribed work values. Especially with the younger interviewees career orientation was noticeable, but that was not necessarily expressed directly, and many of their career paths still seemed to be vague. Because of this asymmetry in the cultural and professional experience of the two groups we are not to expect similar responses. In the above, the striking accordance of auto and hetero (self and other) stereotyping and the clear attribution of values among the respondents in our database have been put forward as clear evidence that processes of reciprocal delineation and group formation have taken place in the course of mutual exchange processes. These processes might have resulted in an increased sharing of work values, in an augmentation of the common ground and the emergence of a feeling of ‘we’, namely ‘we members of the joint venture’. However, a process in the opposite direction must have taken place: the German and Chinese groups were formed by a mutual process of ‘othering’, by creating their own identity in contrast to the other and in delineation from the other. Therefore, the auto and hetero stereotypes are complementary to an astounding degree. The fact that the German interviewees were more involved in the process of delineation than their Chinese counterparts may also be ascribed to their different social environment. Living abroad and being separated from their accustomed social relations, the German interviewees were probably more motivated to confront the others with their own national identity and value system. Living as a ‘single combatant’ and without close integration into a group may help to additionally strengthen the delineation between ‘us’ and ‘the others’. Moreover, the German interviewees decided to go abroad deliberately

134

irmtraud munder and renate krieg

and were aware that they would expose themselves to another cultural environment, and had prepared for this. The Chinese interviewees did not look specifically for an intercultural experience when signing on to work at a Sino-foreign enterprise. In contrast to the German interviewees, they continued to live as Chinese in their own environment and kept to their existing social relations. The apparent role of mutual stereotyping in group formation also confirms the other premise formulated in our introduction—that we should be cautious in implementing the Hofstede school’s survey method when assigning questionnaires as a means to understanding how collective processes develop in transnational corporations. Two considerations are due here. First, it is well-known in social psychology (Fishbein and Ajzen 1975) that attitudes and action are only weakly correlated, and are very often based on conflicting value systems, which differ widely and give rise to conflicts, misinterpretations, and mutual reproaches. In-depth interviews therefore may result in answers that contradict the results of surveys, as was the case in other interviews we conducted with Dutch or German expatriates, who missed modesty and bemoaned the inability to get along harmoniously with their Chinese staff members, and complained about the egoism and belligerence of those staff members (Cf. Douw 2002). In doing so they refer to the level of concrete actions and not that of value-based attitudes. Such interviews also prove that helpfulness of stereotyping at the level of attitudes in predicting the other side’s behavior in negotiations turns out to be illusionary—especially if the stereotypes are mutually consistent, as in our case. Finally, the question arises of the extent to which mutual stereotyping is triggered by the questionnaire itself, and by the method of asking respondents to categorize work values. To put it more bluntly: does the method produce or reveal the stereotyping? It seems obvious that the contact between the two sides does influence their mindsets in a major way. We assume that processes of group formation and delineation have taken place in social reality, and are also real in the sense that they have come to form part of the interviewees’ mindsets. Thus, we hypothesize that the use of questionnaires may serve as a magnifying glass, and that it tends to enhance existing differences rather than creating them. If our interpretation of these findings is correct, this should have consequences for the way in which conflict is handled in transnational

sino-german joint ventures

135

enterprises. First, we have learned to be aware of the level of communication to which we address our attention (Schulz von Thun 1998), such as by distinguishing sharply between the levels of attitude and of action. Secondly, we should look carefully at processes of group formation and delineation. Having studied these processes for more than 25 years in such diverse arenas as ethnic conflict in Pakistan and collective bargaining in Scandinavian industrial relations, Fredric Barth suggests that we should reverse the process of the ‘othering’, that we should dissolve delineations and create common ground and build bridges between the ‘us’ and the ‘other’ when and whereever possible, in order to achieve a sustainable method for intercultural conflict resolution (1995). By actively creating common ground instead of operating only on the basis of shared values to avoid conflicts, his suggestion by far surpasses those in mainstream textbooks. Although successful in many cases, Barth explains that his approach is somehow against the mainstream of contemporary politics, where there is a tendency to start with opposed constituencies and to try to bring them together. Conclusion Mainstream sociology assumes that different approaches to work values are a root cause of serious conflict in the management of transnational joint ventures. The interviewed staff members in our database of Sino-German joint ventures form a fairly homogeneous group with respect to their technical professional background and with their companies all involved in high-tech production. Therefore, it can be assumed that their work values do not differ fundamentally in reality, and that it is better to interpret the differences in their ascriptions of work values in accordance with Barth’s use of the concept of ethnicity. Put concisely, the results of our investigation into different work values in Sino-German joint ventures are as follows. – Chinese and Germans working in Sino-German joint ventures assess the work values of the other quite precisely. – Self-perception and perception of the other coincide well for the major part of work values. – Chinese ascribe to themselves relation-oriented, human-centered, social work values.

136

irmtraud munder and renate krieg

– Germans ascribe to themselves career-oriented, task-centered, individualist work values. – Both sides also agree on which work values are shared. – The work values regarded as specific for a nationality correspond to the prevailing ethical value system. The clarity and unequivocalness of these results may tempt us to follow the ideas expressed in many textbooks about cross-cultural management and training, and to derive from them recommendations for handling cross-cultural conflicts. Those would be as follows. – Conflicts can be reduced to a minimum if the management is able to operate on the basis of shared values and not on the basis of disjunctive work values. More specifically, emphasize the values necessary for high tech production such as engagement at work, diligence and excellent professional knowledge. – De-escalate situations in which instrumental-adaptive approaches conflict with expressive-integrative ones. Avoid situations where systems of work values conflict fundamentally. We have argued, however, that this straightforward, behavioristic approach might come up short. We have seen how expatriate managers in in-depth interviews depicted an image that differed substantially from the results of the surveys based on questionnaires. That discrepancy points in a different direction. First, the apparent clarity of the concepts of cultural attitudes formulated in the questionnaires, and found in the responses of the interviewees, suggests that we are dealing with stereotypes here, which may deviate considerably from reality as experienced in concrete actions, and should be treated with the utmost caution. Second, our method of enquiry my determine which part of the perception we explore: perceiving oneself, the other, and so-called reality is obviously a complex process full of contradictions and fault lines. In an interview, face-to-face with the sociologist, we may, for example, expect more political correctness and more reflexive answers. By using questionnaires we gain access to a different element of perceptions. The stereotyping might be triggered by the method of questioning as well, in this case by offering the three categories of German, Chinese, and shared values. Especially when confirmed by interviewing, these concepts may be taken at least partly as being used to delineate the identities of

sino-german joint ventures

137

the groups concerned rather than to represent the reality of action. The fact that it is obviously important for both groups to know clearly which values are being shared, and which are not, also indicates that the interviewees provided themselves with a clear identity as a group and drew a dividing line between themselves and the other group. The question, then, is whether these processes of identification and delineation really help us to understand and cooperate with one another, as is predicted in much of the mainstream literature. When conflict occurs, this process of generating identities and delineations may not lead to resolution, because attitude and action are too weakly correlated. Imagine that in a substantial work conflict the other does not act in accordance with the attributed work values: for instance, the Chinese partner is not interested at all in getting along, but is fighting for his own and only his own interests. Here the solution suggested by Barth get us further and allows us to dissolve delineations wherever and whenever possible. Acknowledgements To David Ip we owe valuable comments and suggestions on the first version of this chapter. Leo Douw inspired us throughout the process of writing and rewriting by critical inquiry and most of all sharing new theoretical insights. REFERENCES Barth, Fredrik (1995), ‘Ethnicity and the Concept of Culture’. Paper presented to the Conference ‘Rethinking Culture’, Harvard 1995, also at http://www.tau.ac.il/ tarbut. ——— (1998), Ethnic Groups and Boundaries, Middleton Waveland Press. Bourdieu, Pierre (1979), La distinction. Critique social de jugement, Paris les éditions de minuit. Connell, Robert W. (2002), Gender, Cambridge: Polity Press. Douw, Leo (2002), ‘The Indigenization of Transnational Management: Towards a Research Strategy for the Chinese Cultural Sphere’, in: Tsun-Wu Chang and Shi-Yeoung Tang, eds., Essays on Ethnic Chinese Abroad (Haiwai Huazu Yanjiu Lun Ji), 3 vols., Overseas Chinese Association: Taipei, vol. I (Migration, Entrepreneurs and Commerce), pp. 43–63. Ess van, Hans (2003a)‚ Ist China konfuzianisch?’ China Analysis No. 23, www.chinapolitik.de, May. ——— (2003b), ‘Der Konfuzianismus. München’, Beck. Fishbein, Martin and Ajzen, Izek. (1975), ‘Belief, attitude, intention and behaviour’, Reading, Ma. Addison-Wesly.

138

irmtraud munder and renate krieg

Giddens, Anthony, Lash, Scott and Beck, Ulrich (1994), Reflexive Modernisation, London, Polity Press. Hofstede, Geert (1980), Culture’s Consequences: International Differences in Work-related Values, Beverly Hills, Ca., Sage Publications. Hampden-Turner, Charles M., Trompenaars, Alfons, Trompenaars, Fon and Lewis, David (2000), Building Cross-Cultural Competence: How to Create Wealth from Conflicting Values, New York. Yale University Press. Krieg, Renate and Kerstin Nagels (2001), ‘Changing Attitudes towards Human Resources Management’, in: Leo Douw, Huang, Cen and David Ip, Rethinking Chinese Transnational Enterprises. Cultural Affinity and Business Strategies, London: Curzon Press, pp. 38–63. ——— (2001), When in Rome . . . do as the Romans do. www.ahkbj.org.cn. N.N. (1987), Chinese Values and the search for Culture-free Dimensions of Culture. Journal of Cross-Cultural Psychology, 18, 2: 143–164. Parsons, Talcott and Bales, Robert F. (1955), Family, Socialization and Interaction Process, New York, Free Press. Parsons, Talcott (1968), Sozialstruktur und Persönlichkeit’, Frankfurt/Main, Suhrkamp Reischauer, Edwin (1974), ‘The Sinic World in Perspective’, Foreign Affairs 52, 2: 342–48 Schulz von Thun, Friedemann (1998), ‘Miteinander reden’, Reinbeck, Rowohlt. Trompenaars, Alfons and Trompenaars, Fon (1994), Riding the Waves of Culture: Understanding Diversity in Global Business, New York, McGrawHill. Tu, Wei-Ming ed. (1991), The Triadic Chord: Confucian Ethics, Industrial East Asia, and Max Weber, Singapore, Institute of East Asian Philosophies. ——— (1996) Confucian Traditions in East Asian Modernity. Moral Education and Economic Culture in Japan and the Four Mini-Dragons, Cambridge, Mass., Harvard University Press. ——— (1990), ‘Der industrielle Aufstieg Ostasiens aus konfuzianischer Sicht’, In: Krieger, Silke and Trauzettel, Rolf eds., Konfuzianismus und die Modernisierung Chinas, Mainz, v. Hase&Kohler, esp. pp. 41–56. Weber, Max (2003), Protestant Ethic and the Spirit of Capitalism, New York, Dover Publications. Wong, Wan-chi (1993), ‘Subjektive Theorien und soziale Repräsentation von Erziehungszielen bei deutschen und chinesischen Lehrern’, Inauguraldissertation, Universität Heidelberg, Fakultät für Sozial- und Verhaltenswissenschaften.

Chapter 7

Indigenous and Expatriate Managers in Sino-German Joint Ventures: Natural Antagonists? Kerstin Nagels Research in cross-cultural studies usually works on the assumption that differences between nations are bigger than those between different (sub-) cultural groups within one society/nation. Essentializations are then seen as a necessary flaw in the more important business of reducing complexity to a workable level. In this chapter I will show that this particular form of simplification cannot capture the dynamics of the negotiation of culture in joint-venture businesses. I will discuss efforts to come to terms with nation-shaped cultural identities from three perspectives: cross-cultural alliances, international corporations, and transnational or multicultural managers. The former two circles juxtapose, to different degrees and with different reasoning, local and expatriate managers. The latter identity operates on the ground thus set: being called in to transcend national and cultural boundaries but often lacking the leeway and power to actually escape the confines of these categories. These days it feels to me like you make a devil’s pact when you walk into this country. You hand over your passport at the check-in, you get stamped, you want to make a little money, get yourself started . . . but you mean to go back! Who would want to stay . . . In a place where you are never welcomed, only tolerated. Just tolerated. Like you are an animal finally house-trained. Who would want to stay? But you have made a devil’s pact . . . it drags you in and suddenly you are unsuitable to return, your children are unrecognizable, you belong nowhere. Oh, that’s not true, surely. And then you begin to give up the very idea of belonging. Suddenly this thing, this belonging, it seems like some long, dirty lie . . . and I begin to believe that birthplaces are accidents, that everything is an accident. But if you believe that, where do you go? What do you do? What does anything matter? As Samad described this dystopia with a look of horror, Irie was ashamed to find that the land of accidents sounded like paradise to her. Sounded like freedom. (Smith 2000: 407–8)

140

kerstin nagels

There are solid grounds to question whether the role of the national background of collaborating partners in intercultural management is as decisive as is suggested in the existing academic literature. In this chapter, several perspectives will be presented on the negotiation of culture in Sino-German corporations, and are intended to clarify this point. But it is good to be thoroughly aware of the emotional tensions that may go with the perception of cultural differences in situations of social antagonism or conflict. Therefore, before presenting these perspectives on intercultural management, I will make some more observations on the multifacetedness of cultural identity today, as presented in Zadie Smith’s novel White Teeth. The short introductory dialogue between Samad, a first-generation migrant from Bangladesh to England, and Irie, the daughter of Samad’s English friend and his Jamaican wife, tells us a lot about the conflicting concepts of identity. On the one side there is a man, Samad, who grew up with the sense of belonging to a country, a region, and a family. He never intended not to return from his journey to England, and he struggles to live and uphold his culture in a foreign environment. Losing his sense of belonging, he dreads, is losing the essence of his identity, and existence. On the other side, Irie, as a descendant of a native Englishman and a first-generation migrant, has never experienced this uncontested sense of belonging to just one unity. Her environment, however, is constantly either imposing clear-cut categories onto her or demanding statements about who she is, according to the same categories. Certainly, the idea of giving up the ‘either/or’ character of belonging holds some appeal for her. Not appearing in the dialogue, but of some importance for these introductory remarks, are Archie, Samad’s English friend and Irie’s father, and the Chandlers, an English middle-class intellectual family. Living in an affluent European country, their sense of identity has never been challenged. They would not even put forward a question like Samad’s. They are oblivious to the painful process that comes with exploring the question. Yet they are the ones who set the criteria for judging the answers. Zadie Smith’s novel illustrates eloquently the antagonisms that seem to come naturally among people of different national origins— including managers in transnational enterprises. For this reason, the quote also illustrates the potential shortfalls in the literature and research being done in the realm of intercultural management, or

indigenous and expatriate managers

141

intercultural communication. In this chapter, I will argue that the distinction along national lines has limitations when intending to provide strategic advice to internationally operating companies, but even more so when trying to characterize the work environment of the growing number of transnational, bi- or multicultural managers and, as David Ip puts it, the ‘geographically promiscuous’ (Ip, talk given at Hochschule Bremen, November 2001).’ It is easy to dismiss the importance of national background on the basis of much that has been written by political scientists. In this field, academics have long been arguing that the nation has ceased to be a focal point of interest in the Western world, once again attesting backwardness to those countries who have not ‘understood’ or followed this change (Featherstone 1994). It is equally easy to disqualify national origins as determinants of behavior and values on the grounds of (radical) constructivism (Wadsworth 1996; Witkin and Goodenough 1991). Both theories do not help when dealing with ‘real-world-symptoms.’ The political mainstream around the world defines the categories of identity by national origins or, in the case of ethnic/religious separatists, they strive for nation building as a way to express their distinctive otherness. It is useless to attest that the nation is superfluous when the nation’s power of projection is strong enough to make people take it for real. What we need to bear in mind is that—just as the dialogue shows— indeed there is a growing number of people to whom these categories do not apply any more, be it for reasons of migration or frequent relocation, or for reasons of (political) dissociation with one’s geographic ‘point of departure.’ In cultural identities, globalization has already eroded the nation’s binding forces, especially for the privileged, who find themselves in the position to deliberately choose between ‘identities.’ For them, the possible dissociation from one’s departing culture(s) also results in a certain degree of detachedness from any cultural entity. What to them is a gift and a blessing means vulnerability and lack of orientation to the less fortunate, particularly to migrants like Samad. In this chapter I will discuss efforts to come to terms with nationshaped cultural identities from three perspectives: cross-cultural alliances, international corporations, and ‘transnational’ or multicultural managers (CEOs of Sino-foreign corporations). The former two circles juxtapose, to different degrees and with different reasoning, local

142

kerstin nagels

and expatriate managers. The latter identity operates on the ground thus set: being called in to transcend national and cultural boundaries but often lacking the leeway and power to actually escape the confines of these categories. This chapter is a result of interviews with Chinese expatriate managers in German companies in China, conducted in the course of a larger research project on cross-cultural management between 1997 and 2000,1 as well as talks with ‘bicultural’ students at Hochschule Bremen, interviews with women managers in Hong Kong in 2001,2 and talks with expatriate managers in other countries. Cross-cultural Alliances The point I want to make in this section is that as researchers in the realm of intercultural management, although it is our work to portray and analyze differences across cultures, we should keep an eye open for the very many (individual) definitions of culture manifesting themselves today. Otherwise, we might run the danger of perpetuating essentialist categories just as the infamous Orientalists did in centuries past (see Said 1978; Chen 1995). At a recent lecture on the construction of gender the main argument put forward was that both biological and social sex gender) were social constructs (see also Fenstermaker and West 2002; Butler 1990; Bontrup 1999; Gildemeister 1990). Researchers, so ran the argument, perpetuated these constructs, because nearly all the work on gender started on the assumption that the categories of men and women do exist. Why do we not differentiate, asked the presenter, our research results according to any other criteria, e.g. whether people had long or short earlobes? Would we, if we did, find out that people with long earlobes were more sensitive, more sociable and more apt for learning foreign languages?

1

This research project was made possible by the funding of Volkswagen Foundation. See also the chapters in this volume by Monika Schaedler, and Renate Krieg/Irmtraud Munder for other results of this project. 2 ‘Engendering Cross-Cultural Management’ was funded by a research grant of the State of Bremen and Hochschule Bremen. For the results of this project, see Renate Krieg’s paper in this volume.

indigenous and expatriate managers

143

We should, at the very least, go to great lengths to describe the shortfalls and dangers of the sometimes necessary essentializations we are making. The assertion that members of specific categories—such as race and gender—share distinctive defining features has simply too often been the foundation for the establishment or perpetuation of oppressive social systems (Said 1993). However, the point I want to make is not only an ethical one. Essentializations are often seen as a necessary flaw in the more important business of reducing complexity to a workable level. I want to show that this particular form of simplification cannot capture the dynamics of the negotiation of culture in joint venture businesses. Some Shared Assumptions in Cross-cultural Management Research In the past fifteen years, there has been a tremendous increase in research on cross-cultural management in China. Academics from fields as diverse as linguistics, management studies, psychology, sociology, political sciences and area studies have contributed to our understanding of the communication and management processes that are triggered when Chinese and foreign (business) people interact (Bond 1991; Landis and Brislin 1983; Hampden-Turner and Trompenaars 1993; Hofstede 1980; Redding 1990; Scollon and Scollon, 1994; Selmer 1998). In their diversity, their works usually share some fundamental assumptions of which I list only those relevant for the present discussion. – That cultural differences between nations are usually bigger than those between different (sub-) cultural groups within one society/ nation. – That culture has an important, if not predominant, role in shaping management styles and practices, and that conflict and misunderstanding are bound to arise when management requires the input and cooperation of several different cultures. – That cultural differences must be overcome to act or cooperate successfully. – That there is no one best culture and therefore no one best management style. Instead, each culture has interaction and communication patterns, problem-solving processes, etc. that exist in their own right. When cooperating across cultures, the partners therefore have to negotiate and finally agree on ‘new’ patterns they

144

kerstin nagels

intend to adopt. In theory, this requires from both sides learning to understand, respect and adapt to one another. Before discussing some thoughts on these assumptions on the grounds of the results of our research projects, I would like to clarify that I find these works immensely important, useful, and necessary. Most of them have contributed to creating a better understanding among members of different national cultures, a result that cannot be valued highly enough. They serve as reference to many business travelers, expatriates, and people otherwise engaged in multicultural encounters. Also, the bulk of material to be analyzed when researching differences between national cultures makes generalization and simplification an imperative. Moreover, most authors acknowledge the tensions that arise from globalization for the individual identitybuilding process. Still, they usually debate globalization only to provide arguments against its unifying force, and most texts and remarks on how globalization has narrowed the ‘cultural divide’ come with a ‘yet’ (Smith 2002). That culture should take precedence over any other possible determinant of social behavior and value orientation has been disputed all along. But although some researchers have argued that the socalled culturalists and universalists should search for a creative blending of their concepts (Osterloh 1994; Hermann-Pillath 1997), these efforts have so far not made their way into intercultural management research. It is beyond the scope and intention of this chapter to even outline how this blending of concepts could be achieved, and what its results could be. I therefore limit myself to focusing on sketching the conditions of some of today’s cross-cultural encounters. For one, because of globalization, the context of cross-cultural encounters and the specific actors in it are reaching unprecedented importance: Culture, and the research of culture, therefore together form a conversation, with the construction of culture as its object . . . Culture is neither an essentialist category nor is it a veil over reality: really, it is a construct of meanings that at no time is independent of the concrete discourses of its subjects, including the observers [my translation]. (Herrmann-Pillath 2000: 94)

I understand culture as a discourse that can take place within a given society—and between different social groups—or between soci-

indigenous and expatriate managers

145

eties or social groups from different nationalities. Although there is a tendency to define one’s culture in opposition to the ‘other,’ this ‘other’ does not necessarily have to be a foreigner. It can well be a different social stratum, another generation, the other sex. One implication is that contact across cultures might then be established to seek alliances and advance the interests, or enhance the status of groups that are composed of people with different national backgrounds. We witnessed this endeavor during our fieldwork in the case of young Chinese professionals who acknowledged explicitly that they had entered joint ventures to escape the seniority system in stateowned enterprises in China, and family enterprises in Taiwan (Nagels 1999; Krieg and Nagels 2001a), as exemplified by the following quote: He is very unreasonable and demanding and traditional Chinese and, he’ll comment on my clothes and the way I speak out. He’s the type of person who’s really traditional and he wouldn’t allow his staff to speak their opinions. So all his managers and his staff in his department wouldn’t dare to say anything different from his opinion . . . [the German] is different, really different on the other hand because he will tell me that if I notice something wrong or, um, something that he should know, he wants me to tell him . . . These managers here . . . they want to ask their bosses about everything . . . you know, they want to ask their managing directors for their decisions. But [the German] doesn’t like that very much. He says, I hired a manager and managers should be able to make some kind of decision . . . But [the Taiwanese] is different. Because he wants more and more people to listen to him so he hires managers to just follow his orders (US-educated Taiwanese Executive Secretary to German Managing Director).

Renate Krieg’s chapter in this volume on women’s careers in jointventure companies provides another example of such alliances. She argues that Chinese women’s alleged intercultural sensitivity, or their openness for Western management practices, can be interpreted as a—more often than not, futile—effort to build alliances for their own career advancement. Moreover, in our study on management issues in multinational corporations we arrived at the more general conclusion that gender differences might well be more significant than national cultural backgrounds for understanding the corporate cultures of transnational firms (Krieg and Nagels 2001b). All of these examples point to the importance of power building and interest articulation across national cultures, which might easily

146

kerstin nagels

be overlooked if the attention of the researcher is too focused on determining the traits of, and the differences between, national cultures. There is yet another edge to be mentioned here about power as an important factor in cross-cultural encounters. The abovementioned examples suggest how cultural identity may be deliberately (re)formulated as an ‘active’ effort to gain power. Still, even though at times people might deliberately stress one cultural layer and downplay another, identity is not always self-constructed, or self-chosen. Foucault, Fanon and Said, among others, have expertly shown that for different societies, and in different contexts, how colonial and Orientalist discourse produce ‘identities’ with which the subjects themselves can no longer identify because of their powerlessness (Ashcroft et al. 1998). For research in intercultural management, this means that the ‘us-and-them-divide,’ made up by both Chinese and foreign key actors, has tremendous power of projection. In summary, what is claimed here is that intercultural management research pays too little attention to power relationships. In cross-cultural encounters in international business we have to deal with all of the above-mentioned cultural layers plus the power structure in which each of them is embedded, including the power relationships between the different players. Moreover, we have to acknowledge the different representations of culture and the power to project ‘essential culture’ on the various actors are involved in the game. International Corporations: Universal and Particular When we talk about global players nowadays, we visualize companies with production sites all over the world, brand names that follow us no matter how far we travel, gigantic corporations extending beyond the reach of the state. Most international corporations like to reinforce parts of this image, showing their staff and clients in different countries and nourishing the image of a multicultural outlook on business. Still, most international companies, at least those in manufacturing, maintain and foster links with the nation of their origin, be it in the location of headquarters, (management) recruitment policies or even company philosophy and marketing strategies. Dey (1999) defines corporate culture as the “basic acceptance of living and working together, guided by common moral concepts and

indigenous and expatriate managers

147

rules of behavior, which are developed by members (or a group of members) of an organization on the background of common experience and with validity for their organizational behavior.” Corporate culture, or its representation in company philosophies, is a good point from which to consider how much deviation from ‘the original’ is really desirable or appropriate. ‘Common experience’ that by the definition of corporate culture provides the background to the shared moral concepts and rules of an organization often refers to pre-internationalization times. Moreover, the majority of company codes of conduct were drafted after corruption, environmental or labor scandals had occurred (International Labor Organization 2003). They thus target (potential) consumers, stake- and shareholders mostly in their countries of origin. Therefore, the common moral concepts and rules of behavior of these companies certainly apply in their majority to the original host countries of the companies. In many instances, employees in different countries are expected to mould into the corporate cultural patterns, and expatriates are supposed to incorporate company principles as guiding figures in the molding process. One of the guiding questions in the identification of the number of expatriates to be installed in an overseas operation is the degree of desire of instilling a ‘corporate culture’ (see, e.g. China Unique 2003). The international consulting company Horton suggests for the selection of expatriate managers for China: “they should be flexible on details but firm on principles” (Horton International China 2003). Organizational structures should derive from the corporate culture—they again will reflect on the willingness to differentiate among company branches, or to the contrary, on the decision to unify global business transactions. Whether we find highly centralized structures or not will usually tell us a great deal about a company’s ‘concessions’ to particular circumstances or its insistence on the unified validity of one specific set of principles. I briefly refer to this point later in the chapter. Localization of Management—(Not) a Decision in Favor of the Particular Localization usually is referred to in two contexts. First, in the case of companies that start their businesses abroad essentially as ‘extended workbenches’ and then try to further decrease production costs

148

kerstin nagels

through the localization of content, i.e. the increasing use of locally produced parts. At times, host governments also try to impose related regulations onto foreign invested businesses to promote local industries. The second context in which the term localization is used is the one dealt with in this chapter. Here, localization describes the increasing employment of ‘local’ managers up to the top management positions. As a term and an idea, ‘localization in a globalizing world’ seems to constitute a paradox. Indeed, the farewell to the dependence on local resources, be they material or immaterial, lies at the very core of the spirit of inter- or trans-national business operations. It is this paradox that dominates most discussions on the localization of management. Since the beginning of international production and trade activities, enterprises have had to decide the degree to which they are willing to delegate responsibilities for their businesses abroad. More specifically, they have to decide whether or not the delegation of responsibilities and management competencies to people from outside their headquarters is promising, and desirable. The questions involved have always been put forward a lot more clearly when assignments of foreign management staff are in question. In the last few years, there has been a growing trend of reducing ‘own’ (company headquarters’) personnel in international business—or so it seems. There are at least two major variations in the so-called localization process. Especially for regions and countries that appear ‘distant’ and ‘foreign,’ trade companies and company representative offices alike often choose local management staff right from the beginning. The underlying assumption is that locals will be able to master the specific tasks of establishing and maintaining contacts in their own cultural sphere more easily and successfully than foreign managers. In contrast, enterprises with technology- or capitalintensive production tend to contemplate localization only when having reached a certain ‘maturity’ in their respective affiliates. Many Sino-German joint ventures fall into this category. German companies went into high-tech production as early as the 1980s. Recent tendencies to localize the management of these companies should therefore not be mistaken for a strategic approach to personnel management. One might want to add that localization at the moment is actually the appropriate word for personnel management policies in Sino-German joint ventures—most of them are far from having

indigenous and expatriate managers

149

truly international personnel policies. This means that for most of their foreign staff in foreign affiliates, promotion opportunities are limited to management positions in their own country; only one company in our sample also opened other international postings to promising Chinese managerial staff. The great majority dispatched expatriates first to build up their business operations. What qualified them was their specific expertise and experience with the production process, which is particularly important when one is dealing with a production site for high-quality investment and (to a lesser extent) consumption goods. Only after production and business have proved to run smoothly would local management staff replace the expatriates. Ideally, these managers would have been promoted from within the company. The companies usually endorse localization policies for cost reduction. Expatriate assignments easily cost several times as much as local managers. However, often it is not the German parent company that brings forward this type of cost consideration—more often it is the Chinese partners that push the localization of management (Wang 1996: 107). This ‘pushing’ has the potential of turning into a problem when, in the perception of the Germans, the Chinese are making ‘overzealous’ efforts to replace them. Some of the Germans in our survey indeed questioned the motivation and the ‘hidden agenda’ of their partners. After all, the localization of personnel might bring about a loss of control and influence for the German investors. In my view, this particular aspect of the discussion of localization processes only highlights that in fact, in some joint venture companies, there was a high level of mistrust between the partners. Although they might have settled for a common goal with the establishment of the venture company, both partners pursued aims beyond that compromise. Some, for example, remained independent competitors on the same market. Others had set up several joint ventures with different Chinese or foreign partners that might be competitors among themselves. Against the background of the possible tensions that might arise between the partners in the process of localization, it should be quite interesting to look more closely at the issues that are important for the negotiation of localization. In the remainder of this section, I want to focus on the decision-making mechanisms that are at work on the German side.

150

kerstin nagels He doesn’t have to come from within the company, it has to be an independent, neutral personality. But it also depends on the partners. If you get along well with your partners, then it would be no problem to choose someone from the partners, but when there are differences then there is the danger that such a person might develop quite different goals from the ones [name of the German partner] pursued (German General Manager).

As mentioned above, cost considerations are the most important drive for both the German and the Chinese sides to foster localization of management. Depending on the type of business activity involved, the perspective of making available ‘local knowledge’ is of equal importance. The term ‘local knowledge’ is used here instead of ‘local origins,’ in the sense of a socio-cultural familiarity with the environment, because it seems appropriate to be aware from the beginning that, once more, the national background of the carrier of this type of knowledge does not really matter in the understanding what is really going on in the policies of localization. The term ‘local knowledge’ stresses the contextuality of its scope of application. It is indifferent of race, nationality, gender or age. Moreover, it has more of a capacity to stand for one of many possible qualifications. Local knowledge in this sense is something many German companies by principle have not let their expatriate staff acquire. For a long time, expatriate contracts have been limited to a maximum of five, more often only three years, because, as one manager put it, “afterwards they [the Germans] would cease to want to go head-first through the wall [literal translation of the German saying, ‘mit dem Kopf durch die Wand wollen’]”. The lack of knowledge of local business practices, and the lack of adjustment to the environment, were seen as an asset. Nowadays, some companies are changing this policy, and a growing number of locally or internationally contracted Western managers include ‘local knowledge’ in their expertise. Local knowledge can be particularly useful in the maintenance of contacts, be it with officials, investors (or creditors), suppliers, sales organizations, or clients. The most important point is that with localization you increase your understanding of your social environment, in particular the way Chinese deal with different issues and their attitudes towards the rules of the market. That’s important, more important than the localization of production, because this is a long-term issue. If we only had a short-term

indigenous and expatriate managers

151

perspective, then foreigners could do this as well (Chinese Deputy General Manger).

In an environment as dynamic as China, local knowledge also includes fast access to legal, legislative, and economic information. Despite improved access to information through decentralization and the spreading of new technologies, personal networks remain an important channel of communication. Arguments against localization are often motivated by the fear that it might endanger the ‘unity’ between affiliate and company headquarters, or more precisely that localization essentially means a loss of control for headquarters (see, for example, Deutsches Institut für Japanstudien 2000). Depending on the company and its market strategies (and organizational structures), unity seems desirable for quality standards, communication, the transparency of decisions and the application of a more or less similar management style. Sometimes, company policies such as ‘codes of conduct’ can become an important issue in the discussion of localization. Some companies are afraid that their decreasing personal presence might result in an excessive reliance, and spending, on the above-mentioned networks. Most Germans argue that there is a fine line between networking and bribing, and where to draw the line can be a source of dispute in joint businesses. The fact that many Germans have an undifferentiated, and often biased, perception of guanxi has the additional potential of creating unjustified mistrust. Guanxi is often used untranslated because it means ‘relationship’ or ‘connections,’ but also stands for the larger concept of how people connect and keep connected; when intended pejoratively, it is misused as a synonym for nepotism and corruption. At the same time, some Germans fear that their companies might be covertly ‘taken over’ by people employed for networking purposes. The long-time practice of some state enterprises that engage in joint ventures to ‘park’ their surplus labor force in the joint venture company has contributed its share to raising this kind of concern. All the abovementioned worries show that ‘localization’ also has the added taste of something uncontrollably foreign. This is why, in the past, a number of German companies have tried to recruit ‘bicultural’—in the wider sense—managers for top positions, hoping that they would work as filters, having social maneuverability in the local setting while embracing Western company values. I will come back to bicultural managers in the next section.

152

kerstin nagels

It is not only the level of trust that a manager enjoys from the board that determines the degree of his or her autonomy in the local business, the organizational structures of the parent company (or companies) also play a vital role in shaping decision-making leeway. If the organization is following regional differentiation, local affiliates can act rather autonomously. However, if the organization is highly centralized and structured around certain products or fields of work, coordination tasks will demand at least equal attention from local top managers. Communication between headquarters and affiliate will then be a prominent feature of the position. Accordingly, the profiles of top managers in these two very different settings will differ greatly. In the former, local knowledge will be essential. However, this is only part of the qualification a manager should have for the latter; flexibility, (cross-cultural) communication and coordination skills are at least as important. As mentioned above, this profile makes the recruitment of overseas or ‘Western-educated’ former Chinese liuxuesheng (literally, students studying abroad ) seem reasonable. Still, this approach has its own shortcomings, and problems, as the following section documents. The Best of Two Worlds? Employing Overseas Chinese or Former liuxuesheng for Managerial Posts in Mainland China Sometimes I have the feeling that the difference between Taiwan and China is bigger than the difference between Taiwan and Germany . . . The Chinese here, I think, they are used to some order, they only follow orders or some commands. They never think one step ahead. And to me, that is really a big difference (Taiwanese Manager in Wholly German-Owned Company in China)

When German companies multiplied their investment in China in the 1980s there was hardly any acknowledgement that cultural differences mattered. Consequently, corporate strategies did not involve the recruitment of China specialists. Only later did the management consider employing graduates of Chinese studies programs or Chinese residents in Germany. These Chinese would usually receive training in the company headquarters before being sent to China to take management positions in company affiliates, regional headquarters or joint venture companies. However, the usefulness of recruiting Chinese nationals for these positions has been contested all along for

indigenous and expatriate managers

153

various reasons. Unfortunately, the respective discussion in Germany has not been purely technically motivated. Rather, China specialists feared the ensuing competition for the few well-paid jobs in this field. Moreover, most German companies are not used to working in international teams. If they were willing to recruit Chinese, they would want them to stay in their Chinese operations, thus keeping them out of higher management positions. Moreover, they would be reluctant to give them the full expatriate package. When recruiting Chinese people for expatriate positions, the German companies will expect them to be loyal to the German parent company, and they will expect them to support the introduction of German technical or administrative standards to their Chinese affiliates. In a way, they want them to accomplish translating tasks with the help of their expected ingrained and intuitive knowledge of the Chinese culture and society. However, if you look at corporate strategies, this is often supposed to be a one-way translation. Chinese expatriates do not generally have the leeway to accommodate these two standards. This means that the German companies stress the Chinese expatriates’ cultural roots while at the same time expecting them to incorporate German corporate culture. In contrast, Chinese staff generally expect their management to be Western expatriates. They are supposed to incorporate modern Western management ideas and the latest production technology. Given the difference between local and expatriate salaries, expectations towards their ‘Western-ness’ are even higher. You know I was born and brought up in China. And I can imagine that 10 years ago, we would have been paid the same. And now, I am making ten or twenty times more than they do. And I know how they feel about it (US-educated Chinese manager).

Although they have the same expectations of the professional knowledge of Chinese and Western expatriate personnel, Chinese staff have added expectations of the Chinese expatriates’ intrinsic understanding of Chinese guoqing, i.e. the specific conditions of the country. This will range from their making do with material shortages and abundant labor to the necessity of leaving work early to care for relatives or children and to the precedence of personal relationships over corporate regulations. Chinese staff also expect Chinese expatriates to behave differently socially:

154

kerstin nagels The situation will be harder for me than for real expatriates. So, if I would really act like an expatriate or do things the Germans do normally, you know . . . then I would really be out of the game (USeducated Chinese manager).

This means the Chinese expatriates find themselves between competing claims to their loyalty and identity. However, these claims are usually not accompanied by the will to make them belong. And there remains a certain portion of distrust towards them on both sides. Many of find that neither the Germans nor the Chinese will allow them to make the same mistakes as the (presumably) foreign counterparts: In the beginning, I thought that being Chinese I’d have fewer problems with cultural differences. Unfortunately, my assumption was not right. Their tolerance level for an Asian foreigner was lower than for a Western foreigner, which means there was less tolerance and forgiveness for my mistakes. I have never had to fight as hard for people’s acceptance and respect (German-Chinese trainee).

Once more it seems that a mechanical view of national backgrounds as decisive determinants of problems in intercultural management leads to the wrong solutions. Such an approach fails because it ignores the power relations in which cultural expression is embedded. Outlook Throughout this chapter I have argued against the categorization of people according to their national background. I have made clear that other layers of culture, maybe just as arbitrarily defined, are important; those which come into play when culture is negotiated really depends on the context of the encounter. One might, under certain circumstances, deliberately ‘play’ one layer of one’s culture to set oneself apart from or align with the other. By no means, however, is an individual capable of escaping the ‘identity judgment’ imposed on him or her. This is where power relationships come into play. Categorizations, so it seems, provide people with a sense of orientation and belonging. It is this very belonging, the much-needed expression of trust and acceptance that is often denied to bicultural managers. Just as often the implied polarizations actually serve as, or can be instrumental in, the articulation of power of one category

indigenous and expatriate managers

155

over the other. Belonging to one can then become a confine that one is sentenced to. You want to know how I see myself ? It is against me to categorize myself. Every so often, we are supposed to say who we are. In the beginning of the year, there was a national census. You had to tick whether you were British, British Asian, English Pakistani or whatever else. But why should I call myself Asian or British? That only contributes to racial segregation. I see myself as a human being. I have never been abroad. I don’t even know the country my parents come from. Living here, that’s me [Malik, 30 years old, Bradford, my translation]. (Luyken 2001) REFERENCES Ashcroft, Bill, Gareth Griffiths and Helen Tiffin (1998), Key Concepts in Post-Colonial Studies, London: Routledge. Butler, J.P. (1990), Gender Trouble: Feminism and the Subversion of Identity, New York: Routledge, 1990 Bond, M.H. (1991), Beyond the Chinese Face. Insights from Psychology, Hong Kong: Oxford University Press. Bontrup, H. ed. (1999), Doing Gender: das Konzept der sozialen Konstruktion von Geschlecht— eine Bibliographie mit Einfuehrung, WWU Muenster. Chen, X., Occidentalism. A Theory of Counter-Discourse in Post-Mao China, New York, Oxford: OUP, 1995. China Unique (2003), http://chinaunique.com/business/xpat.htm, accessed 26 August 2003. Deutsches Institut für Japanstudien (2000), ‘Control and Coordination of Japanese Subsidiaries in China—Problems of an Expatriate-Based Management System (Tokyo, 2000), http://www.ahk-china.org/china-economy/berichte-analysenjapanese-subsidiaries-china.htm, accessed 24 August 2003. Dey, G. (1999), ‘Some Reflections on Organisation and Corporate Culture in Joint Venture Companies in China,’ talk given at Hochschule Bremen. Gildemeister, R. (1990), Weibliches Denken—maennliches Denken, oder sind zwei Geschlechter genug?, Kassel: JAG Frauenforschung d. Gesamthochschule. Featherstone, M., ed. (1990), Global Culture: Nationalism, Globalization and Modernity, London: Sage. Fenstermaker, Sarah and Candace West, eds. (2002), Doing Gender, Doing Difference: Social Inequality, Power, and Resistance, New York: Routledge. Hampden-Turner, Charles and Fons Trompenaars (1993), The Seven Cultures of Capitalism: Value Systems for Creating Wealth in the United States, Britain, Japan, Germany, France, Sweden and the Netherlands, New York: Doubleday. Hermann-Pillath, C. (1997), ‘Unternehmensführung im chinesischen Kulturraum’, in Clermont, Alois und Wilhelm Schmeisser, eds., Internationales Personalmanagement, München: Franz Vahlen, 105–24. ——— (2000), ‘Eine Krise der Wirtschaft als Krise der Kultur’, in Birger, P.P., ed., Kapitalismus, Krisen, Kultur, Marburg: Metropolis, 81–130. Hofstede, G. (1980), Culture’s Consequences: International Differences in Work-Related Beliefs, Beverly Hills, CA: Sage. Horton International China (2003), ‘Roadmap to Business Success in China through

156

kerstin nagels

Human Resources Management’, http://www.hortonchina.com; accessed 26 August 2003. International Labor Organization (2003), ‘The Age of Ethics’, http://www.itcilo.it/ english/actrav/telearn/global/ilo/code/ageof.htm, accessed 26 August 2003. Ip, D. (2002), ‘Hybridity and Transnationalism: Identity Issues in Transnational Chinese Enterprises,’ paper presented at the International Conference on China in the World in the Twenty-First Century: Hot Development Issues in Contemporary China, Hong Kong Baptist University, 22–25 May. Krieg, Renate and Kerstin Nagels (2001a), ‘Receptiveness to Changing Practices in Human Resource Management: A Comparison of Mainland Chinese and Taiwanese Employees in German-Chinese Business,’ in Douw, Leo, Cen Huang and David Ip, eds, Rethinking Chinese Transnational Enterprises: Cultural Affinity and Business Strategies, London: Curzon Press, pp. 38–64. ——— (2001b), ‘Bereit für Veränderungen—chinesische und taiwanesische Beschäftigte in (deutschen) Gemeinschaftsunternehmen’, Talk given at the annual conference on contemporary China studies in Germany, Iserlohn. Landis, Dan and Richard W. Brislin, eds. (1983), Handbook of Intercultural Training, Washington, DC: Society for Intercultural Education, Training and Research. Luyken, R. (2001), ‘Gut gemixt und doch getrennt,’ in Die Zeit [Hamburg] Nr. 34, DOSSIER, online edition. Nagels, Kerstin (1999), ‘A Tentative Assessment of the Impact of Generational Change on Cross-Cultural Management Issues in China’, paper presented at the conference on Cross-Cultural Management and the Dynamics of Change in China, Hochschule Bremen. For the German published version see Nagels, Kerstin, ‘Wessen Werte? Interkulturelles Management im Spannungsfeld gesellschaftlichen Wandels in der VR China’, in Bundesinstitut für ostwissenschaftliche und internationale Studien/Ost-West-Kolleg der Bundeszentrale für politische Bildung, Asienkrise, Demokratie, Nationalismus—Neue Wechselwirkungen zwischen Politik und Ökonomie in Ostasien, Köln: Bundesinstitut für ostwissenschaftliche und internationale Studien, August, S.137–42. Osterloh, M. (1994), ‘Kulturalismus versus Universalismus. Reflektionen zu einem Grundlagenproblem des interkulturellen Managements’, in Schiemenz, Bernd und Hans-Jürgen Wurl, eds., Internationales Management: Beiträge zur Zusammenarbeit, Wiesbaden: Gabler, 95–113. Redding, G.S. (1990), The Spirit of Chinese Capitalism, Berlin, New York: de Gruyter. Said, E.W. (1993), Culture and Imperialism, London: Chatto & Winddus. ——— (1978), Orientalism, London: Penguin. Scollon, Ron and Suzanne Wong Scollon (1994), Intercultural Communication. A Discourse Approach, Oxford, Cambridge: Blackwell. Selmer, J., ed. (1998) International Management in China: Cross-Cultural Issues, London: Routledge. Smith, C.S. (2002), ‘In China? Mind your Hat’, in International Herald Tribune, Online Edition, 3 May. Smith, Z. (2000), White Teeth, London: Penguin Books. Wadsworth, B.J. (1996), Piaget’s Theory of Cognitive and Affective Development: Foundations of Constructivism, White Plains, NY: Longman Publishers. Wang, Z., (1996), Deutsche Direktinvestitionen in der Volksrepublik China, Berlin: Springer. Witkin, Herman A. and Donald R. Goodenough (1981), Cognitive Styles: Essence and Origins. Field Dependence and Field Independence, New York: International Universities Press, Inc.

Chapter 8

Human Resource Management in Sino-German Joint Ventures in China: Building for the Future Monika Schaedler This chapter outlines some of the dilemmas faced by human resource managers working in China. The task of these managers is to improve the competitive edge of their firms by organizing the development of personnel skills. But their endeavors are viewed here as active participation in the creation of a viable transnational corporate culture. In the Sino-German enterprises treated below, one source of dilemmas is the need to comply with the requirements of presentday human resource management that embodies an articulate set of Western (more specifically, Anglo-Saxon) values and norms, but has to be accommodated with existing cultural patterns. The resulting problems have been of a most pressing nature since the mid-1990s, when the labor markets for foreign firms working in China became tighter and the need to compete for qualified personnel on a broad range of incentives increased. Those problems will only become more pressing in the near future, because of the increased global competition China is facing after its entry to the World Trade Organization (WTO) in 2001. This also means that indigenous Chinese firms have become part of the game and that individual transnational firms may be viewed as laboratories for much wider ranging reforms in Chinese enterprises as a whole. Since the early 1990s, foreign-invested enterprises have not only been regarded as promoters of the modernization process in China’s industry, but they have also been expected to be ‘agents of change’ in the economic transformation process and to support the country’s transition from a planned to a market economy. Together with capital and technology, foreigners bring Western-style management knowhow and practices to China. They are viewed as the benchmark for company reform. Many young educated people in China expect them to be a learning base and training ground for modern, especially Western, knowledge. To fulfill these rather diverse expectations, one

158

monika schaedler

company management function is especially challenged—human resource management. This chapter, however, not only looks at how Western human resource management is being introduced to China. In our world of ever more rapid change and globalization, flexible and adaptive answers are demanded by the management of organizations. It doubtful that qualities of so-called Western, or modern or scientific, management—such as the emphasis on rationality, efficiency, monetary rewards, linear thinking, specificity of tasks and roles, compliance, and obedience (Whiteley et al. 2000: 172)—adequately fulfill this role. It is no longer commonly accepted that personnel management systems are, or should be, developing in that direction. This is why a new paradigm is emerging in Western management theory, based on complex adaptive systems (CAS) theory. CAS can be described very roughly as an open system, consisting of many heterogeneous agents, with actions decided on as a response to the continuous adaptation to anticipated responses by other people. Whiteley and her colleagues (2000: 174–84) suggest that the Chinese relational system has many characteristics in common with CAS, and an interesting question is whether and how Western and Chinese elements are being blended or integrated with new forms of human resource management in China. Based on these considerations, this chapter analyses human resource management in foreign-invested enterprises in China against the background of the changing environment of economic reform and of the demands from increased competition due to China’s entry to the WTO. Pre-reform human resource management in Chinese state enterprises, which should rather be termed ‘personnel administration’, was characterized by elements of the then prevailing planning system as well as by traditional Chinese values. It is a long way from this pre-reform personnel administration to human resource management as defined by present-day Western management theories; it is also probable that human resource management in Chinese enterprises will keep some of its special characteristics, at least for the time being. The chapter thus looks at the influence of diverging cultural requirements on present-day human resource management attitudes and practice. Foreign-invested enterprises with parent companies in Europe and the US represent a modern part of China’s urban economy, in which two systems and two cultures meet in daily oper-

human resource management

159

ations. But since the modern sector is increasingly and purposefully interlocked with the rest of China’s economy, we will ask how developments in that sector influence the future of human resource management in the Chinese business world as a whole. The chapter draws heavily on eleven interviews1 with managers or staff in the personnel administration of eight enterprises in China (2 in Beijing, 3 in Shanghai, 2 in Chengdu, and 1 in Xiamen) and for comparison one in Taiwan, in 1998, and on interviews in seven German-invested companies in China in 2003.2 The surveyed enterprises comprise joint ventures of large multinational companies as well as subsidiaries or joint ventures of German medium-scale enterprises. Thus, the sample reflects the broad scale of different forms of German investment in China. The small number of interviews used for this chapter means that no claims can be made that the findings are completely representative. However, rather than provide an exhaustive overview of the problems confronting human resource managers working in China today, it is the intention of this chapter to sensitize the reader to the dilemmas faced by this important management function in highly dynamic types of enterprise. Human resource managers are not only viewed as employees acting on behalf of their own company, but also as cultural brokers who are actors in the process of broader social change. The chapter begins with a short overview of the changes in the conditions external to labor management that have affected it, mainly the development of labor markets and related reforms. The main part of the chapter examines selected functions of personnel management based on personnel managers’ statements and perceptions 1 These interviews (see Appendix 1) are a small part of a survey on cross-cultural management conducted in FIEs in China by the Bremen University of Applied Sciences in 1998 (Renate Krieg and Kerstin Nagels, supported by Guenther Dey, Monika Schaedler). The whole survey comprises more than 200 interviews with the managers and staff members of 23 German-invested enterprises in six locations in China and two in Taiwan, with 31% German, 5% other nationality, and 65% Chinese interviewees. Also available are more than 75 interviews conducted by our Chinese partners mainly with Chinese employees. The language of the interviews in most cases was the native language of the interviewee. See also the introduction and the chapters in this book by Irmtraud Munder/Renate Krieg, Kerstin Nagels and Renate Krieg. 2 The main focus of these interviews (see Appendix 2) was the topic of conflict management in Sino-German companies.

160

monika schaedler

of employees. The concluding section outlines the determinants of present-day personnel management in Sino-German companies in China, and ends by formulating questions and hypotheses to be examined in future research. Reforming Personnel Administration in China: The Changing Social Environment The introduction of human resource management in China is conditioned by a complicated set of factors that are external to the management proper, the most important of which are the development of labor markets, and in relation the organization of social security, the functions of trade unions, and the introduction of new incentives and rewards. These factors are all part of the broader process of social change through which China has gone since the 1980s; they determine the direction of the changes in values and attitudes that the introduction of human resource management in China aims to achieve. In accordance with Whiteley’s elaborations on CAS theory for management, we should look at this broader process of social change not as a transition from an undesired past toward a wishedfor modernity, but from the vantage point of the creative manipulation of ‘old’ and ‘new’ social constructs, concepts and ideals, which lead to different forms of modernity, specific to ever-changing, concrete situations. First, the emergence of a labor market has thoroughly affected the practice of labor management in China. The labor market in China has been developing since the second half of the 1980s but is still segregated, with a high mobility in the rapidly growing private sector and restricted mobility in the urban state sector. Foreigninvested enterprises are confronted with these special features, a development that can also be seen in the recruitment practices of these enterprises. In the first years when foreign investment was possible only in the form of joint ventures with state-owned enterprises, most employees came from the joint venture partner. For newly recruited employees, German enterprises preferred to select from the growing pool of university graduates, if not from other foreign-invested enterprises. A substantial number of German interviewees believed that young employees were both more able and more willing to perform, and not ‘spoiled’ by the old system.

human resource management

161

One major problem is the still rather low level of both general and professional education of the majority of the population. During recent years, China has pushed its educational endeavors, especially in tertiary education. The number of university students has risen by 2.5 times, from 2.06 million in 1990 to 7.2 million in 2001, and the number of university graduates increased by 70%, to 1.04 million in 2001 (China Statistical Abstract 2002: 162) and then again within only two years nearly doubled to 2.12 million in 2003 (China Daily 2003). The government’s intention to modernize and be among the highest level of global economic players fits well with the Chinese people’s eagerness to learn. Following the Confucian tradition, education is again highly valued. Chinese universities cooperate with foreign universities in establishing MBA programs and using foreign textbooks. Tens of thousands of Chinese families send their children abroad to enroll in business studies. Business handbooks, guide books to successful entrepreneurship and “modern” management practices, famous entrepreneurs and managers’ (auto)biographies, etc.—many of them originating in the United States—are bestsellers in China’s flourishing book centers. China’s tertiary education boom has even gone so far that from 2002 onwards the Chinese press has been reporting on problems of university graduates finding jobs. This does not mean, however, that skilled labor is now abundant in China; rather, it signals the mismatch of the supply and demand for labor. For company management positions, there is still a lack of qualified personnel, because the mass of job-seeking university graduates do not fulfill the needs of the companies. This is mainly due to their lack of practical experience. Foreign managers have mentioned time and again that university graduates had a sound theoretical knowledge but lacked practical experience and thus had problems putting their knowledge into practice. This problem is further enhanced by the fact that there is no tradition of professional education in China. Even the so-called vocational schools and technical schools among the secondary educational institutions have no practical teaching—a heritage of traditional China and its disregard for manual labor. These schools are even small in number compared to comprehensive middle schools, and parents in general do not opt to send their children there, as these schools are seen as detrimental for professional careers. Professional education takes the form of on-the-job training, which was no problem with lifelong employment in former state enterprises but puts pressure on

162

monika schaedler

today’s modern enterprise system. Especially German managers, who are used to the long-standing dual vocational education system in Germany, stress this point as a major problem. A final point to be noted is that, at present, enterprises of all forms of ownership known in China are competing on the labor market. Whereas enterprises with the pre-reform state and collective ownership forms now only represent about one third of total urban employment or of total industrial output value (China Labour Statistical Yearbook 2002: 3, Table 13–1), others such as the so-called limited liability corporations, private enterprises, share-holding enterprises, and foreign-invested enterprises play an ever increasing role. This makes for a much more diverse demand for skilled labor and management personnel, and consequently a more sophisticated approach to personnel management. Secondly, as a corollary of the emergent labor market, social security arrangements and labor contracts are changing rapidly. The “iron rice bowl”—lifelong employment with a sound company-based social security and welfare package for state employees—was destroyed after 1986, and a contribution-based social security system was to be established nationwide from the end of the 1980s onwards. However, there are still high expectations on the part of the employees toward their employers in this regard. Lifetime employment was replaced by contract-based work, and employment guarantee has been abolished. The enterprise-based welfare coverage is being replaced by social or private systems. The reform process of state enterprises has been a mixture of speeding up and slowing down. Then Prime Minister Zhu Rongji’s push for enterprise reform in 1997 led to gradual dismissal and replacement of some 30 million employees from state-owned enterprises. Some years later, however, after facing ever more and vigorous protests and strikes, the new Chinese leadership under Prime Minister Wen Jiabao stopped the dismissals, putting social stability first. Thirdly, the question is raised of whether the emergence of labor markets ushers in a different system of labor representation. Regarding trade unions and workers’ congresses, however, although a new employer-employee relationship came into being with private ‘capitalist’ industry, labor union activities are allowed only under the roof of the tightly controlled All-China Trade Union. Endeavors to establish independent unions have regularly been smashed in the embryonic stage. Furthermore, workers’ congresses that are nominally empowered to supervise the management of the enterprise have never

human resource management

163

played significant roles in Chinese enterprises. This is also true for today’s management in Chinese state-owned or other enterprises. These institutions were hardly mentioned in our survey, a finding confirmed by the study of Warner, Goodall and Ding (1999: 232), who attributed little significance to these institutions in foreign-funded joint ventures. Despite the lack of representative organizations for labor, however, great changes took place in the systems of incentives and rewards. In many enterprises, the former relatively egalitarian wagegrade system no longer exists, and there are immense differences in wages, bonuses etc. within and between enterprises; also, performance management applies moral, financial, and group and individual award systems. The changes outlined above are shown schematically in Table 1, Part I. In their study of human resource management in Sinoforeign joint ventures, Goodall and Warner contrasted personnel administration in the work unit, or danwei, of pre-reform China with human resource management as outlined by leading Western human resource management economists.

Table 1. Personnel Administration in Pre-Reform Chinese Urban State Enterprise Sector vs. “Western” Human Resource Management Personnel Administration in Chinese Pre-Reform Urban State Sector

Human Resource Management

I. External (systemic) conditions Industrial System/ Employers

Only state and some collective enterprises

Enterprises of all ownership forms

Labor market

No labor market Centrally planned job allocation

High labor mobility

Social security

Administered by enterprise Non-contributory for workers

Separate from enterprise Contributory

Labor contracts

Lifetime employment ‘Cradle to the grave’ welfare coverage Enterprises not permitted to fire employees

No employment guarantee State or private welfare

Trade union

Controlled by the Party ‘Transmission Belt’

Independent Worker protection

164

monika schaedler

Table 1. (cont.) Personnel Administration in Chinese Pre-Reform Urban State Sector

Human Resource Management

Workers’ Congress

Controlled by Party members Workers as ‘masters of the house’

No equivalent

Incentives and rewards

Egalitarian, but related to age, length of service, loyalty Non-material rewards 8-grade system for labor 16 grades for management Housing, schooling, medical care

Performance-related Profit-related Material profit-sharing Wide variety of pay structures

Performance management

Moral exhortation Group rewards

Finance driven Individual and group

Administration Control, conformity, discipline, punishment, record keeping (the keeping of the so-called personal file for each Chinese employee (renshi dang’an))

Strategic human resource management Multi-skilling Job enrichment Administration

II. Functions of Personnel Management Personnel Department

Source: Adapted from Goodall, Keith and Malcolm Warner (1997), ‘Human resources in Sinoforeign joint ventures: Selected case studies in Shanghai, compared with Beijing’, The International Journal of Human Resource Management 8: 5, October, p. 571.

It seems clear that the introduction of human resource management in China is taking place in an environment of quick diversification of the economy and labor relations, and is responding to the formation of labor markets, which are developing modern features but at the same time retaining important characteristics of the older systems. In this manner, the external conditions surrounding the introduction of human resource management in China are now suspended somewhere between those underlying the personnel administration in the Chinese pre-reform urban state enterprise sector and those in which ‘Western’ human resource management is supposed to be embedded. We now turn to the main part of this chapter, on the role and functions of human resource management in contemporary China (see also Table 1, Part II).

human resource management

165

Emerging Personnel Management Practices It should be noted that despite the Western connotations and origins, the introduction of human resource management in foreigninvested enterprises is an overwhelmingly ‘Chinese’ affair, at least among the companies we researched. With one exception, all personnel managers in the companies visited were Chinese; in many cases the personnel manager had come from the Chinese joint venture partner. Also, human resource management seems to be confined to the larger companies. Of the companies visited, only large ones had independent personnel divisions (directly reporting to the general management) and departments for personnel development. In medium-sized and small companies, personnel management was normally located in the general administrative division, and it often took on a rather administrative character. It must be acknowledged that the differences that we observed in the concepts of personnel management referred to, as John Child dubbed it, a “foreign concept that the personnel function exists to provide a service to management through assisting the selection, training, assessment, motivation and organization of employees”, whereas “the personnel management role in Chinese organizations [was] geared towards the maintenance of control and conformity, supplemented by an ideological appeal to the virtues of work” (1994: 259). However, despite consenting to the ‘foreign’ concept, the German side usually only became involved in personnel management when it came to recruitment. German companies as a rule prefer to appoint German and other expatriate managers in technical, production, and financial positions, not in personnel management. This situation raises questions about the role of human resource managers in foreign-invested enterprises in China as cultural brokers, and makes it clear that human resource management will be a contested issue for some time to come. New Definitions and Demands for Personnel Management Despite the situation outlined above, it should be noted that human resource management is generally on the rise in China. One important finding from our own interviews and from the existing literature is that most foreign companies in China do pay attention to many of the human resource management functions that may be

166

monika schaedler

described as modern or Western (see Table 1). This is especially true for the functions of motivating and binding well-qualified and competent employees, which is not surprising in view of China’s general lack of those categories of personnel. Looking from the side of the enterprises, for example, in a survey of 199 German-invested enterprises in early 1998, ‘loyal staff ’ was seen as an important success factor (ranking third), and the lack of qualified personnel as an imminent danger for their business (ranking second) (Song and Bernstorf 1998: 6). Another survey in 1996 ranked high staff turnover or the problem of staff retention third among the major problems facing human resource professionals (Whiteley et al. 2000: 138). Concomitantly, it is striking to find out what factors lead employees to change jobs. Not surprisingly, for the majority of our Chinese staff interviewees, high income was one important reason for joining the enterprise. Equally important, however, was the potential to learn something to further their professional development. Western ‘modern’ management practice did have an appeal for the group of young job seekers (Krieg and Nagels 2001: 44). This is in line with the results of a 1998 survey on the career decisions and job attitudes of 80 graduates from the China Europe Management Institute in Beijing (the predecessor of CEIBS in Shanghai), which pointed to the following top reasons why managers leave their companies: 38% mentioned inadequate career development opportunities, 20% mentioned dissatisfaction with interpersonal relationships, and only 19% mentioned inadequate salary (Goodall and Burgers 1998: 51). Similarly, in one Beijing company in our survey “not being satisfied with the present work and striving for higher development” accounted for 40% of the turnover rate (D13 1998: 10). And a substantial number of our interviewees supported the summary of Goodall and Burgers (1998: 51): “a greater number of respondents cited ‘soft’ factors, such as job-development opportunities and interpersonal relationships, than ‘hard’ factors, including higher salaries, as key to their employment decisions”. It seems that there is a sound social basis for the introduction of human resource management on the workfloor of enterprises in China. Management has an interest in keeping its personnel, and employees seek improvement of their individual skills and competences. What we found, however, confirms the impression of the slow and selective introduction of human resource management in China’s foreign-invested enterprises. The definitions of human resource man-

human resource management

167

agement that were provided by our interviewees show large differences in the importance attached to its introduction as well as to its concrete contents, ranging from simple ‘old-fashioned’ personnel administration to allowing a very comprehensive role for human resource development. Two extreme examples illustrate this broad range of understanding. One personnel manager of a small, wholly foreign-owned company, only recently established and just at the point of starting production, gave an extremely vague answer to a question concerning her areas of responsibility: My duty is the communication between both sides [the Chinese and the German] . . . My duty also is to recruit personnel. These are the most important duties. And then of course I have to organize things like social welfare et cetera (Personnel Manager, A7, in German, 1998)

In striking contrast, the Chinese personnel manager of a joint venture of a multinational company described the functions of personnel management very elaborately: Personnel management in our company mainly has three, no four, functions: The first function is service, this is the basis. It comprises different services for the personnel, what belongs to personnel affairs and what relates to the individual staff, services for the individual staff and support, but also [second] personnel administration. [The first function] as said, is the basis. The second function is a must. This is not necessarily the most important function, but nevertheless important. Here the codes of conduct, questions like working discipline etc. are being fixed. A further [third] function is develop, the function to develop the staff, to recognize, to develop and train their potential. This is the largest part in this area. [Fourth] From a special level [of the development of the company] onwards, the largest function is strategic partner. In this function there is a lot of co-ordination with the company management; when the company develops strategies, we here participate, namely developing the strategy, and at the same time participate when the company has cultural program or changes in the company, large projects. Then this area participates through consultation; this is a function of consultation. (Personnel Manager, B9, in Chinese, 1998: 1)

The range of possibilities for definitions of human resource management emerging from these two quotations corresponds with the results of the research by Whiteley and her colleagues in 1996 and

168

monika schaedler

1997. They filtered out four models of human resource management in foreign-invested enterprises in China, the order from 1 to 4 representing the ever-increasing importance of human resource management. 1. Administrative: Administered basic activities such as recruitment, record keeping, training in company rules, computing salaries. 2. Personnel management: Linked personnel management activities to company goals in a limited way. Waited for directions to recruit, arranged training, designed or managed some management development activities. Linked performance to rewards. Developed retention strategies. Controlled systems in place with formalized instructions. Carried out administrative tasks. Worked with other departments. 3. Strategic human resources: Designed human resource strategy to enable business plan. Long-term view of the human resources. Plan transformed into human resource policies and practices. Use of management models. Succession conscious and developmental approach. 4. Integrated: In the sense of being involved with the development of business strategy. Holistic view of the organization and a role in the design and management of change processes. (Whiteley et al. 2000: 117f, Table 1). They furthermore observed that the integrated model “might not have yet arrived in many FIEs” (Whiteley et al. 2000: 116). On the whole, it seems that the attention companies pay to human resource management depends to a great extent on the size of the company. Whereas small and medium enterprises in some cases did not even provide a personnel or human resources department and the role of personnel management was described very narrowly, some of the large enterprises, especially subsidiaries or joint ventures of multinational companies, maintained more elaborate human resource departments that had extended functions and visions. But there were also exceptions among large multinational corporations, represented here by the very unclear definition given by a Chinese personnel manager who had been assigned deputy personnel manager to the joint venture of a large multinational corporation by the Chinese partner, where she had been working previously in the personnel department. Some months before our visit, she had taken over full responsibility in her department:

human resource management

169

Personnel management . . . well personnel management is a very complicated thing, because it refers to that concrete advantage of people; therefore this thing, you want to do it well, you have to. If you do it a little defectively, then it comes out at once, that’s it. [Laughs] It’s complicated, that project. (Personnel Manager, A6, in Chinese, 1998)

Asked her responsibilities, the same person gave a picture of something between the above ‘administrative’ ‘and ‘personnel management’ models of Whiteley and her colleagues. – Recruiting, recruitment formalities, and record keeping (personal files) – Formalities for expatriates (visa, passport, and residency permit) – Salaries, bonuses, and insurance – Social aspects (retirees, pension payments, birth control, training) (Personnel Manager, A6, 1997: 4). Some managers pointed out that personnel management in China is characterized by the very fact that it is going through a stage of transformation. It seems that some companies do not pay much attention to human resources and instead keep to old-style personnel administration, whereas others explore and adapt to Westernstyle human resource management functions. One German deputy personnel manager of a large Beijing joint venture described this transformation as follows: We try [to show] that we support company goals with personnel policy, with how we form things . . . in order to strategically support enterprise goals. Therefore, I especially have a lot of personal contact with the General Managers, because all these things have very strong implications, whether it is education, whether it is motivation, such things as wages, money of course. (Personnel Manager, D1, in German, 1998)

As another example, the Chinese personnel manager of a large joint venture referred to the characteristics of transformation, saying: Last week I made some suggestions to our Vice General Manager towards the restructuring of the Personnel Department and that the emphasis of the Personnel Department should be on developing human resources. Indeed, the current name personnel department (renshibu) should be changed to human resource department (renli ziyuan bu) . . . That is, the key personnel at the key posts, we have to examine them, to review them, we have to concentrate on training them, on developing them, that they gradually improve their technical, their management skills. That is from that, that point of view of simple personnel

170

monika schaedler administration, I think, this is one step forward (Personnel Manager, D13, in Chinese, 1998).

These data suggest that the biggest advances in the introduction of human resource management are to be found in the larger companies rather than in medium and small enterprises, but that even in the larger companies human resource management is often not fully developed; its functionaries are still engaged in a struggle to get it recognized as a substantial part of enterprise management. Problems in Personnel Development Personnel development comprises both the opening of career opportunities and their realization by offering adequate training opportunities. It may be described as the most extended part of human resource management, as was attested by the personnel manager quoted above (B9, see above), who put it more comprehensively as follows: Personnel development, that is . . . it consists of visions, missions, objections, strategy and actions. The vision that’s where we want to go, that has to do with personnel skills, this has to be done first . . . Personnel skills have to be developed through a lot of training. Here you see the staircase for the development of talents . . . The key personnel have to be developed and we want to realize this via such a staircase. To develop these skills, staff is being selected who have the potential. This staff will then be trained and educated, led to that. On the way they are being reviewed and motivated, they get to a stage where they have to perform something, they get a goal and [then] empowerment. That’s what we want to do (Personnel Manager, B9, in Chinese, 1998).

Personnel development focuses a lot on the individual: “we try hard so everybody has the feeling that in this company he or she also develops very well” (Personnel Manager, B4, in Chinese, 1998). In the companies surveyed, the major emphasis in training was given to technical skills, and it was mostly employees from production who were sent abroad for training. But it appears that some companies had begun to systematically develop their top management. Some young managers with leadership qualities were given the chance to complete training courses; if there are suitable positions, they would be promoted (staff member, D2). As training at the management level consists of single modules, individual career models are being developed (Personnel Manager, D1).

human resource management

171

Our findings again correspond with the results of the study conducted in 1996 by Whiteley and her colleagues: 73.2% of the companies of their sample “had a training and development policy. [Furthermore, large firms] were more likely to set a training budget than small ones” (Whiteley et al. 2000: 124). Most companies encouraged their staff to attend external courses by granting sponsorship (Whiteley et al. 2000: 125). Large enterprises started to concentrate training in special departments or even institutions. As training activities in one company were uncoordinated and efforts wasted, it introduced a so-called “company-college” to integrate all of these activities (D1). Multinational companies with several joint ventures in Asia, in particular, now concentrate training activities in training centers led by the holding company. Also, training is not limited to China or Asia. Most companies also offer training modules in Germany (H5) or other foreign countries, both as an incentive and to further the understanding of German culture and especially the German parent company’s culture. This being noted, in the implementation of personnel development, personnel managers also meet many problems. Some mentioned the mismatch of training needs and opportunities: The workers’ needs are manifold, rather complicated. Some often demand training; some are not very interested . . . According to the administrative regulations of the German [parent] . . . company, time for training should not exceed 2% of the total work time . . . that is four days a year maximum. Presently, some people do not reach this goal at all . . . [but] others may receive . . . up to ten days training a year . . . Maybe this employee did not work well, but he received a lot of training. Some people were very busy and did not participate. This is a contradiction (Personnel Manager, B12, in Chinese, 1998).

Others complained about the lack of cooperation from the leaders of other departments: “they focus on business. We focus more on the people and the quality of the people”; and “the other department leaders do not release their staff for training. Only when they want to promote their staff do they ask the personnel department for support” (Personnel Manager, F4, in English, 1998). Some of our interviewees (staff members) further mentioned that although they knew that the company offered some training, such as on company policy, they were not sure about the aims (D). Also, it became clear that they did not feel informed about the training opportunities and felt uncertain about how to obtain the necessary information:

172

monika schaedler I should tell my boss directly that I need training . . . I think it is this way, but up to now I didn’t do it. Because in general, lately we are quite busy . . . Therefore, like that time, last year I went to X company for training . . . and this just accidentally came to my desk so I looked at it and gave it to my boss . . . Because X company each year has a training plan, but you don’t get to see this training plan; the boss gets it, and then if the boss thinks there is need for training, he will put it down and give you notice when the time comes . . . [The person responsible from] the special department for training was quite good. So I gave him a call and he unconsciously revealed it to me, that there is this training, so I went to my boss and told him (staff member, B6, in Chinese, 1998).

Concerning personnel development, the style of leadership and the company’s organizational structure also appear to matter. Overall, Western enterprises prefer rather flat hierarchies that allow for close participation of the staff. Asian enterprises, however, have an autocratic management structure and a strong company leader (Ebrahimi 1999: 206). Chinese pre-reform state enterprises did not offer opportunities for staff participation. Our survey of Sino-German joint ventures revealed a mixed picture in this regard: many people expressed their wishes for clear commands and a distinct enterprise hierarchy, but some staff members hoped for more participation and a flatter hierarchy. Interesting with respect to training and promotion is that some enterprises introduced additional levels of hierarchy to be able to fulfill the deep wish for promotion according to the logic, “the more levels, the more opportunities for promotion” (Krieg and Nagels 2001: 46ff ). Finally, our interviews revealed differences related to age and gender. Many German interviewees contemplated about the eagerness of the young generation to learn and be promoted, which was proven in our talks with young Chinese staff members. Sometimes, however, the interviews also gave the impression that very young staff members in particular tended to overestimate their qualifications. This may result from the one-child policy and the accompanying parental preferential treatment of the single child as much as from the traditional perception of university graduates as a most prestigious élite. One interesting point was a difference related to gender. Women and men were equally interested in training activities, but women connected training with their present occupations and men often sought to enhance their knowledge and qualifications so they could establish their own businesses later on.

human resource management

173

Managing Interpersonal Relationships Although China is changing radically in this respect, some personnel managers still emphasized their duty to attend to interpersonal relationships within the company. As mentioned above, 20% of the management graduates of the China Europe Management Institute in Beijing raised dissatisfaction with interpersonal relations as a reason to quit their job (Goodall and Burgers 1998). It is true that Western staff also highly value good interpersonal relations, but one could argue that due to both the Chinese culture of guanxi and the tradition of the danwei, the necessity of maintaining good interpersonal relationship seems dominant. In the hierarchical order of Chinese society, guanxi or social relations—especially networks of social relations—is an important concept in the daily life of the Chinese. This concept is embedded in a net of mutual obligations and emotional components. Its basic background is social uncertainty, and studies show that due to political and social experiences Chinese people have developed greater mistrust towards their environment and other people than, for example, Americans, and thus seek trust in social relations (Heberer 2003: 280–82). Also, the concept of the danwei or work unit emphasizes interpersonal relationships, as employees used to be totally dependent on it. Bad relationships within in the danwei could harm the employee’s work sphere, living conditions, and even his or her life and that of the family. The personnel manager of the subsidiary of a multinational company worded this special obligation for personnel management as follows (original English terms in italics): This relates to the habits of the Chinese, to their mentality; they need work they want to do for long term; then they are prepared to contribute to the company. The company is something like their family and they want to develop together with the company. This is something like a Chinese habit. (Personnel Manager, B9, in Chinese, 1998)

The personnel managers of two medium-sized firms saw dealing with the personal affairs of their staff as their major concern: The personnel department still has a lot of things to do one would not think of. For example, some staff . . . in one instance they loose their identity card, in the other instance they loose their credit card . . . for all these things, these very diverse things, they come to our personnel department and ask for support (Personnel Manager, A6, in Chinese, 1998).

174

monika schaedler A whole range of various things, including these workers’ working accidents, these workers’ family affairs, actually, in all cases the worker comes to this department. Because if not to this department, where should he go? . . . If he has to apply for medical treatment in case of a working accident, . . . then [he stays at home and] I have to visit him representing the company, to give him the feeling that the company cares for him . . . (Personnel Manager, A27, in Chinese, 1998).

Without exception, even general managers paid visits to the homes of management staff members who fell ill, showing their sympathy (Author’s interview with the German general manager of the subsidiary of a German multinational company, Beijing, 2003, March 7). Another example is the subsidiary of a joint venture which, during its foundation, had absorbed too many employees from the Chinese partner and now decided to reduce staff. The personnel manager reported about two cases of dismissal. In both, there were familial financial difficulties concerning the child’s school fees or the high living costs in the city of Shanghai. The manager took a lot of time and effort to consult a range of administrative bureaus to find support. She also explained the company’s situation to the workers and found that their demands were rather modest, focusing on continued contributions to their pension funds. Finally, they agreed on a monthly allowance of about 600 yuan until the end of the contract (Personnel Manager, A6, in Chinese, 1998). Yet another personnel department staff member reported that laid-off staff members came to seek the company’s support for personal matters (staff member, D2, in Chinese, 1998). From the first quotation of this section, it might be concluded that Chinese employees expect more of a corporate identity for their firm to function well. Our 1998 survey, however, gave the overall impression that it was very difficult for foreign-invested enterprises to develop corporate identities. In joint ventures, there was a common feeling of loyalty among Chinese staff members who were recruited from the Chinese partner towards their former working unit, whereas the German expatriates with only a few years in China felt more committed to their German company. In all, the loyalty of the Chinese employees was more towards a single person than towards an entity (Krieg & Nagels 1999). The recent report of a German general manager in Shanghai on his difficulties to convince the Chinese staff of a department to stay with the company after the trusted expatriate would return home confirmed this observation (Author’s Interview, Shanghai, 2003 March 3).

human resource management

175

Thus for a company in China today, care for interpersonal relationships, though described at the outset as a relic of the past, seems to be an important means of human resource management to motivate and bind good personnel today and in the future. Determining Rewards and Incentives A major task of human resource management is of course to determine rewards and incentives. Foreign-invested enterprises are commonly expected to exceed Chinese state- and collective-owned companies by the amount of the salary as well as the diversification of incentives. Of the approximately 150 foreign companies in the 1996 survey of Whiteley and her colleagues (2000: 161–162), more than 70 percent carried out annual wage and salary reviews for the several categories of employees, and nearly 14% every month for manual/ technical staff (p. 161). 91 percent had an incentive scheme (p. 161) of which the most popular types were discretionary bonus (between 71 and 74 percent for different categories of employees) and individual payment by result (between 51 and 53 percent). Our 1998 survey of German-invested companies revealed that many employees, especially the younger ones, were not satisfied with the remuneration system. They felt that individual performancerelated rewards should make up a higher share of the monthly income than, for example, age-related and service-time wages, and that promotion should follow performance-related rationale rather than consider seniority. This aspect was especially pronounced in enterprises with a strong Chinese joint venture partner and a large number of employees who had formerly worked working for that partner. Looking at the salaries, this is . . . I think this is not enough . . . still not . . . perfect. That is, it does not really represent, I mean, the relationship of individual salary to . . . own performance, to my personal contribution to the company, that this is really connected a hundred percent. It is not the case that if I perform extraordinarily, work well, I will get a lavish salary. There is no really good system for that. I mean there still exists a . . . well, that all are just about the same still, this problem. (Secretary to German Manager, D2, in Chinese, 1998] The salary system is inadequate. Educational background and capability should be included as criteria for the salary. The German side doesn’t pay enough attention to this problem; it is the Chinese side that is mainly responsible. In the beginning the German side made an attempt to interfere, but I don’t know why, I don’t have the impression

176

monika schaedler that they could exert any influence, at least not enough influence for my taste. (Chinese Engineer, D1,2, in Chinese, 1998).

This disappointment of the younger generation is probably due to their “dollars and cents” attitude, defined by Whiteley and her colleagues (2000: 159ff ), who also confirm our findings that in the longer run, as the country becomes more prosperous Chinese employees will take a more career-oriented perspective (p. 163). It is well known that concerning ‘cash income’ European companies cannot compete with American companies; hence the dissatisfaction stated. Our interviews in 2003 revealed that there is common sense at the management level in German-invested companies in China that remuneration should definitely and strongly relate to performance. Related systems had been or were being introduced rapidly in wholly foreign owned enterprises. Implementation in companies with a strong Chinese state owned partner, however, met with resistance. When evaluating individual workers’ performance, some section managers argued that each employee had performed outstandingly in the period defined, and therefore remuneration could not be differentiated on the individual basis (E 2003). Transforming Security and Welfare The Personnel Department, furthermore, has to fulfill a duty, a relic from the socialist system and unknown to companies in the West: keeping the so-called personal file or dang’an. For every urban school graduate there is such a file containing information about work results, social behavior, and political background. The file, an instrument of political control, is normally held by the Chinese Communist Party or the personnel administration of the related company and has to be kept confidential. When a person changes workplaces, these files have to be handed over to the new employer. In our survey, the Chinese personnel managers of two joint ventures mentioned that getting hold of and keeping these files was a special and demanding task (A27, B4 1998). In 1994, when discussing why the German partner refrained from interfering in the personnel management of the joint venture, the German General Manager referred to the confidential character of personal files (Author’s personal communication in Shanghai, September 1994). Things in the political context did not seem to have changed greatly at the company level, at least in some places, at the end of the 1990s.

human resource management

177

In contrast, the sphere of social security is currently undergoing one of the greatest changes in the Chinese economy and society, as enterprises are in the process of transferring their sole responsibility for social security to social institutions, and enterprise payment for social security is being transformed into social insurance contributions by the enterprise and the individual. Our surveys, however, showed that the companies offered substantial corporate social welfare to their employees in addition to the socialized state regulated contributions. As a means to motivate their staff, some companies: – paid additional insurance contributions such as for property insurance (D13 1998), a supplementary pension insurance (D13, A27 1998) or a third-party insurance (D13 1998); – paid additional housing allowances—one company granted an additional 30% of salary to those who formerly did not take part in the distribution of housing (D13 1998); this personnel manager even mentioned that the lack of housing was a reason for staff to leave the company in 10–20% of the cases; – paid a supplementary sum for the care of children under 6 years of age (60 yuan a month, D13 1998); – provided free lunch or lunch subsidies (D13, B4 1998), or a monthly meal allowance (300 yuan a month, H5 1998); or – provided free company transport to and from work (A6, D2, D13, B4 1998) (cf. Goodall and Warner 1997: 582). Summarizing section 2 of this chapter, personnel management deals with recruitment, development, incentives, leadership, dismissal, interpersonal relationships, personal affairs of the staff, and the personal file. The challenge for human resource managers in each situation is to pay sufficient attention to the general management for these functions, and then to find the right mix of these functions. Human Resource Development in Transition and Beyond The elaborations above based on our interviews with personnel managers of the nine Sino-German joint ventures in 1998 and on the interviews in 2003 result in a very diverse picture of human resource management, varying from a very narrow understanding oriented toward the former personnel administration function, to a very comprehensive understanding emphasizing personnel development. This

178

monika schaedler

raises the question of which factors shape present-day personnel or human resource management in Sino-German joint ventures; knowledge about those factors may indicate the future development of human resource management in business enterprises in China, whether foreign or domestic. It seems that company philosophy—represented by the company management, the company leadership, and the personnel management—is a determining factor. Of these three, the knowledge and influence of the human resource manager seems especially important. Less determining seems to be the human resource policy of the German parent company. This is reflected by the fact that two subsidiaries of the same German parent company presented rather diverse pictures of their human resource management practices in our 1998 sample, which underlines Kerstin Reden’s (2002) statement about the high autonomy of subsidiaries. Until recently, the foreign side has generally paid little attention to human resource management. Pearson (1991: 173, quoted in Ng 1997: 195) noticed that, “the personnel management uniformly came from the Chinese side”. Ng (1997: 195) suggested that, consequently, foreign capital was insulated from “any dialogue, haggling, and control vis-à-vis the laboring masses”. In our 1998 survey, as mentioned previously, only one German manager out of 62 interviewed was responsible for human resource management. In joint venture companies, Germans tended to claim the management of the production and finance departments, whereas for the Chinese side it was important to be in charge of personnel management. In the late 1990s foreign companies already new the significance of staff problems in China, but little was done about them. However, the pressing problems of finding and keeping qualified management personnel and the need to focus clearly on human resource management finally seem to have drawn the attention of German human resource managers in China. This is at least what some of our interviews in 2003 suggest. Several companies had recently engaged Western-educated Chinese management staff and started to implement human resource management instruments that are taught in Western business handbooks (A, B, C, D 2003). Yet another factor discussed above was that the extent and depth of human resource management may also depend on the size of the company, with the bigger companies at the forefront of the effort to introduce the appropriate practices. In this respect, however, we

human resource management

179

also found examples to the contrary, as did Zhu and Warner (2004) in their 2002 survey of human resource management in 12 companies (of which four had been foreign funded). For the time being we suggest that the significance of this factor is doubtful. A question raised in the introduction to this chapter was how human resource management in foreign-invested enterprises in China may influence human resource management theory as a whole. We have shown that China is in a transitory phase, in which elements of the former system still play a role, such as the care for the daily needs of individual employees, the diverse additional welfare elements, or the keeping of personal files. Some of these elements, such as the personal file, are expected to disappear, whereas others may well blend with Western components of human resource management. This seems to be true especially for the traditional Chinese culture of guanxi, also expressed in the care for the employees, and nowadays the attempt to bind the staff to the company. To come to grips with the rather bewildering variety of changes that are presently going on in our field of investigation, we refer to the new paradigm devised by Whiteley and her colleagues of an open management system, consisting of many heterogeneous agents, with actions decided on as responses to continuous adaptation. Our analysis of the determining character of interpersonal relationships in the tradition of guanxi for present-day human resource management practices, e.g. to bind good personnel, can be seen as an indication for human resource management to grow into an adaptive organizational system that is better equipped for the requirements of our ever rapidly changing globalizing environment. And thus, newly developing practices in China starting from foreign-invested enterprises may on their own provide new ideas for human resource management theory and are worth further intensive study. One last important question raised at the outset of this chapter was whether human resource management in foreign-invested enterprises will also affect Chinese domestic enterprises as a whole. There seems to be a strong influence, for the following reasons. Chinese companies will have to reform to face the international competition resulting from China’s entrance into the WTO. Foreign-invested enterprises are often seen as being at the forefront of modern management practices, as they have immediate access to the appropriate knowledge. One of the interviewees explicitly stated that he applied for his job so he could absorb new knowledge in the area

180

monika schaedler

of human resource management. As increasingly more Chinese companies develop quickly and offer good income and career perspectives, former Chinese joint venture managers switch to these enterprises, where they apply the knowledge acquired in their previous positions (cf. Wu 1999). Energetic and enthusiastic human resource management managers, like some of those interviewed, behave in this way and successfully spread their newly acquired know-how and experiences to wholly Chinese-owned companies. Therefore, joint ventures play an active role as mediators of Western management knowledge for Chinese companies. Acknowledgements Funding for this research was provided by the Volkswagen Foundation (AZ II/72854) and the German Federal Ministry of Education and Research (FZ 1706302). I would like to thank Renate Krieg, Leo Douw, David Ip, and Irmtraud Munder for providing invaluable suggestions on early versions of this chapter, and especially again Leo Douw for continuous patience and encouragement to stay on board. REFERENCES Child, John (1994), Management in China during the Age of Reform, Cambridge: Cambridge University Press. ——— China Labour Statistical Yearbook 2002, ed. by National Bureau of Statistics, Beijing. ——— China Statistical Yearbook 2002, ed. by National Bureau of Statistics, Beijing. ——— China Statistical Abstract (Zhongguo Tongji Zhaiyao) 2002, ed. by National Bureau of Statistics, Beijing. Ebrahimi, Bahman (1999), ‘Motivation to manage in China: Implications for Strategic HRM’, in Warner, Malcolm, ed., China’s Managerial Revolution, London & Portland OR: Frank Cass, pp. 204–222. Goodall, Keith and William Burgers (1998), ‘Frequent Flyers’, The China Business Review, May–June, pp. 50–52. Goodall, Keith and Malcolm Warner (1997), ‘Human resources in Sino-foreign joint ventures: Selected case studies in Shanghai, compared with Beijing’, The International Journal of Human Resource Management 8: 5, October, pp. 569–594. Heberer, Thomas (2003), ‘Guanxi’, in Staiger, Brunhild, Stefan Friedrich and HansWilm Schütte, eds., Das grosse China-Lexikon, Darmstadt: Wissenschaftliche Buchgesellschaft, pp. 280–82. Krieg, Renate and Kerstin Nagels (2001), ‘Receptiveness to changing practices in human resource management: A comparison of mainland Chinese and Taiwanese employees in German-Chinese business’, in Douw, Leo, Cen Huang and David Ip, eds., Rethinking Chinese Transnational Enterprises, London: Curzon, pp. 38–63.

human resource management

181

——— (1999), ‘When in Rome . . . do as the Romans do’, www.ahk-china.org (German Chamber of Commerce, Beijing), 2003–06–28. Ng, Sek-Hong (1997), ‘Industrial Relations in joint ventures in China: A Revisit’, in: Steward, Sally and Anne Carver, eds., A Coming of Age: Developments in SinoForeign Joint Ventures, Advances in Chinese Industrial, Studies, Vol. 5, Greenwich, Conn. U.S.A.: JAI Press, pp. 191–216. Song, Xinyu and Jan Bernstorf (1998), ‘Personalprobleme in China—ein Kernproblem deutscher Firmen’, China Contact, No. 7, pp. 6–7. Reden, Kerstin (2002), Personalpolitik auslaendischer Investoren in China: Wettbewerbsfaehige Strategien im Spannungsfeld zwischen Produktmarkt und Arbeitsrechtsregimes, Muenchen, Mering: Hampp. Warner, Malcolm, Keith Goodall and Daniel Z. Ding (1999), ‘The “myth” of human resource management in Chinese enterprises’, in: Warner, Malcolm, ed., China’s Managerial Revolution, London & Portland OR: Frank Cass, pp. 223–246. Whiteley, Alma, Sara Cheung and Shi Quan Zhang (2000), Human Resource Strategies in China, Singapore, New Jersey, London, & Hong Kong: World Scientific. Wu Shihong, Nifeng feiyang [Up against the wind], Beijing: Guangyang ribao chubanshe, 1999. Zhu, Ying and Malcolm Warner (2004), ‘Changing Patterns of Human Resource Management in Contemporary China: WTO Accession and Enterprise Responses’, Industrial Relations Journal, Vol. 35, Issue 4, July, pp. 311–328.

Chinese PM f

H5

Medium

Medium

German PM f and Chinese Vice PM f

F4

Large/260

Large

Chinese PM m

B9

Medium/120

Chinese PM m

Chinese PM staff f

B4

Medium/180 (capacity 400)

D13

Chinese PM f

A27

Small

Large/3.800

Taiwanese PM f

A7

Large/240

Company size/employees

D1,2 D1 German Vice PM m D2 Chinese Secretary PM f and Vice Division Head m

Chinese PM f

A6

PM = Personnel Manager f = female, m = male

Interviewee: Nationality, position, sex

JV

100

JV

40

50

70

74

100

JV

Medium-scale

Multinational

Multinational

Large

Multinational

Multinational

Medium

Medium

Multinational

Share of foreign German parent capital (%) company

Large

—

Large

Large

Large

Large

Large

—

Large

Personnel Department

Xiamen

Taiwan

Beijing

Beijing

Personnel Department under the Commercial Administration, 3 staff

Personnel Department

?

Personnel Department with 6 divisions

Chengdu ?

Chengdu Personnel Management temporarily led by manager of Finance and Accounting

Shanghai Personnel Division, 1 staff member

Shanghai Company under construction, personnel management by Finance and Administration Manager

Shanghai Division of Commercial and Administration Department, 3 staff members

Chinese parent Location company

Appendix 1. Selected Companies of the 1998 Sample

182 monika schaedler

Large

Large

Large

Large

D = A6 of 1998

E = D1,2 of 1998

F = D13 of 1998

G = B4 of 1998

70

?

40

70

50

60

Large

Large

B

100

Share of Foreign Capital (%)

Large

C

A

Company Size

Multinational

Multinational

Large

Multinational

Multinational

Multinational

Multinational

German parent company

Appendix 2. Selected Companies of the September 2003 Sample

Large

Large

Large

Large

Large

Large

—

Chinese parent company

Chengdu

Beijing

Beijing

Shanghai

Shanghai

Shanghai

Shanghai

Location

human resource management 183

Chapter 9

Gender in Cross-Cultural Management: Women’s Careers in Sino-German Joint Ventures Renate Krieg In a speech at Bremen University in 1999, a female manager noted that “women are better positioned to communicate in a cross-cultural setting, because they have to act within an environment of a different culture throughout their (professional) life.” This might sound like an overstatement of female advantages in a male dominated professional world, but it has been taken up in the field of cross-cultural psychology. Yet the phenomenon has not been examined further in relation to the management of internationally engaged enterprises. In a survey of cross-cultural management in technology- and capitalintensive enterprises with German investment in China and Taiwan, German managers commented that they experienced cooperation with Chinese women that was free from interference and relaxed in comparison to their work relations with male Chinese colleagues and employees. To explain this as female employees in foreign invested enterprises having greater cross-cultural competence might be too far-fetched. After all, in this case it might simply account for the establishment of a trusting and relaxed work climate. This does not necessarily mean that women are more capable of acting or able to assert themselves in a cross-cultural setting than their male colleagues. At the same time, the survey revealed that the adaptability of Chinese women to a different cultural setting in a foreign invested enterprise is not necessarily (or only as an exception) rewarded with professional upward mobility. Nevertheless, against this background the debate in cross-cultural research about the determinants for success in cross-cultural interaction gains new relevance. This also poses the question of whether cross-cultural competence is a critical factor for success, or whether at different hierarchical levels so-called ‘soft abilities’ might hamper upward mobility. In the survey on cross-cultural management in Sino-German joint ventures, male German expatriates explicitly stated their high esteem

gender in cross-cultural management

185

for the qualifications and qualities of the female staff. In comparison to German enterprises in similar sectors, a fair share of Chinese women were working in positions that are taken by men in Germany. Nevertheless, a deep rift between the high esteem and the positioning in the enterprise hierarchy could be observed, with only very few women located at the upper management levels (Krieg 1999). There were few female German expatriate in the surveyed enterprises. Taking into account that production was the major field of expatriate assignment by German joint venture partners in the sample and the low ratio of women in technical professions in Germany, it comes as no surprise that the pool of female managers that enterprises can draw on is still rather small. Moreover, the joint ventures reasoned that it was not possible to send women as expatriates to Asia. Women, so it was argued, would have difficulty in coping with the different business environment. More importantly, Asians would have difficulties in dealing with female managers because female superiors were not well accepted in the region, and female managers would have difficulties in gaining the respect of customers. Women in International Management The issue of women in management has gained research attention since the 1990s (Adler and Israeli 1994; Bischoff 1999; Davidson and Burke 1994, 2000; Nerge 1993; Wunderer and Dick 1997). Although many questions remain unanswered or have only been partially addressed (Davidson and Burke 1994), studies on the issue are quite extensive and will, to a certain extent, be a basis for the present reflections. Research on female managers in an international setting or on a comparative basis is still limited. In the field of comparison in international management, especially on how women operate in international management positions, how they are perceived, and how their behavior is assessed, not many studies are available. Adler and Izraeli have edited two important volumes on female executives in various countries (1988, 1994). However, the volumes mainly deal with the position and situation of female managers within their respective societies. Similarly, Davidson and Burke (1994, 2000) present two volumes of research findings on major issues facing women in international management. In her study comparing European female senior managers on international assignment, Linehan (2000) focuses

186

renate krieg

on senior managers’ perceptions of international managerial career moves by females. She shows how cultural and legislative barriers in Western European countries limit the number of female managers. This, in turn, reduces the availability of female managers for international assignments. One of the most influential works on the cultural comparison of management (Hofstede 1984) deals rather indirectly with the effectiveness of ‘male’ and ‘female’ behavior in cross-cultural interaction. Hofstede’s cultural dimensions embrace the poles of ‘male’ and ‘female’ on the level of national cultural differences. He contrasts a masculine side with a dominant, sometimes aggressive and self-assertive behavior to a feminine side with a restrained conduct, a demeanor gearing towards harmony and consensus. He acknowledges a strong difference between women and men in regard to the effectiveness of these dimensions in more ‘masculine’ national cultures (such as in Japan), but concludes that the differences between national cultures have a fundamentally bigger impact on determining behavior than differences of sex (or, in other connections, between different social groups). One of the few studies differentiating gender in the field of cross-cultural cooperation with China is based on this analysis (Shi and Erdener 1999). In one of her studies, Nancy Adler (1988) examines North American female managers in different Asian countries around the Pacific basin. The study is structured around three of the most common ‘myths’ about women in international management. The three ‘myths’ are 1) women do not want to be international managers, 2) companies refuse to send women overseas, and 3) foreigners’ prejudice against women renders them ineffective, even when they are interested in overseas assignments and succeed in being sent. She labels these ‘myths’ because, “although widely held by both men and women, they never have been tested” (Adler 1988: 233). Westwood and Leung (1994) scrutinized the experience of female expatriate managers in Hong Kong. Research Settings This article draws on the results of two qualitative surveys. The focus of the already mentioned survey on cross-cultural management was to question the frequent assumptions about Chinese local manage-

gender in cross-cultural management

187

ment practices by comparing German invested enterprises in mainland China and those in Taiwan. The survey had not been designed as a gender study. Based on the difference between the high esteem for female employees and their actual positioning within the enterprises, the second survey was centered on female managers.1 In semistructured interviews, German expatriate and local women were asked to elaborate on different aspects of working in a cross-cultural setting, including the arguments of the alleged problems of acceptance for female managers in Asia previously mentioned. They were also asked to reflect on their experience and perceptions as female managers in relation to managing gender identity, coping and succeeding as expatriate and local female managers, the alleged cross-cultural competence of women, their understanding of culture, and training for women to promote their careers. The interviews were conducted mainly in German invested enterprises in Shanghai and Hong Kong. The data on female managers in such enterprises is incomplete. The German Chambers of Commerce in both cities compile lists of these enterprises, but not all companies list their executives and the lists serve only as indicators and give a glimpse of the structural gender differentiation of executive managers according to the nature of the enterprises. In all sectors men outnumber women, but a substantial number of female executives can be found in services and trade. Reflecting this situation, the female managers in our sample worked mainly in services with some bias toward finance and trade. The nature of their jobs was diverse: they were all located at the upper management level (upper middle and top management), had decision-making power, and were responsible for supervising employees. All of them were well educated, with a majority having some level of tertiary education. More German than Chinese female managers were single, and among the married managers more Chinese had children. The female expatriates in Hong Kong and Shanghai were younger compared to the male expatriates of the first survey, with the majority of interviewees in the Shanghai sample in the age

1 The survey was part of the research project ‘The Aspect of Gender in CrossCultural Management—Women’s careers in Sino-German Joint-ventures’ at the Bremen University of Applied Sciences, funded by a research grant of the State of Bremen and Hochschule Bremen from 2001 to 2002. Interviews with Chinese and German female managers were conducted in Hong Kong and Shanghai. The interviews lasted one to two hours and were tape-recorded.

188

renate krieg

group between 30 and 40 years. A fair share of the women in the Hong Kong sample were also aged between 30 and 40 and between 40 and 50 years. I base the evaluation on Mayring’s (1997) standardized structure. Career Development of Chinese Women As our first survey in mainland China showed, the strikingly high praise for female employees by German expatriates did not correspond with their chances for upward mobility within the enterprises. In this regard, our observations were consistent with earlier research on managerial women in China. Actually, in many German-invested enterprises female staff made up the large majority of the workforce in administration, and also held a fair share in production. On the management level, however, the picture was different. Similar to findings in earlier research in Chinese enterprises (Feng and Xu 1993: 110), the Sino-German joint ventures of our sample had a fair mix of male and female employees in lower management positions. In the higher echelons of management very few women could be found. In our sample, which we by no means claim to be representative, only one female manager belonged to the higher management; she had been promoted to the position of division manager of the production division shortly before our visit. The majority of female managers held positions in the lower or medium management levels. Most of them were located in administration, especially in the accounting and personnel departments, and a minority held management positions in production. Foreign language skills are generally ascribed to women rather than to men, and a larger number of female students can be found in the corresponding fields. After graduation from university or upon finishing professional training, women are predetermined to act in a cross-cultural environment. Therefore, it does not come as a surprise that a majority of female interviewees with backgrounds in foreign language studies worked as interpreters, secretaries or both. With such educational backgrounds, career prospects were to some extent limited. For me personally, I always have the feeling my personal opportunities for development are quite small. Because I, well, can say, that is, do with this language. Therefore, well, everybody thinks you don’t have a profession, that your profession is not really a profession like

gender in cross-cultural management

189

maintenance. Especially people like us working in the office; we don’t have many opportunities for development (Secretary/Interpreter, Beijing 1998).

The lack of recognition of the importance of language skills was especially pronounced among younger interviewees. Moreover, in their role as secretaries or interpreters relaying managerial instructions, women also met male resistance or were simply ignored. In this respect, age certainly played an important role: I have the feeling that the people here are looking down on the interpreter, and also on the translator. You just speak English, you don’t know anything . . . I don’t want to say that . . . I say that this is open here. But when I worked in other companies, there they quite valued the interpreter. For them, the interpreter is there for communication . . . I don’t know, maybe it is because people here are all quite . . . they all have technology, all have a some special skills or knowledge. Maybe they just think that language just doesn’t count for anything . . . They just don’t think we are anybody. That’s how it is (Secretary/Interpreter, Shanghai 1998).

There were some men in these positions, but contrary to the female interviewees they were more often positioned as assistants to the expatriates, with interpreting and secretarial work being just two tasks in their more complex job description. In addition, their positions were more often connected with the perspective of upward mobility within the enterprise, with the prospect of being promoted to more responsible positions as managers of smaller departments or even becoming successors to their expatriate superiors. When asked whether she thought that she would work as an interpreter after her studies, one interviewee replied: I thought about it because my first major was English . . . only afterwards I studied international political economy, international relations, this mainly had to do with contact with the outside, to get in contact with the outside . . . this is an advantage for my contact with people from different countries. That is why I had thought about it. But I never would have imagined working as a secretary [laughs] (Secretary/ Interpreter, Beijing 1998).

A substantial number of female employees in our sample worked in a field different from their educational background. The change to an occupation attributed as ‘female’ was sometimes connected with a perceived decline in status, especially no other career options were available. Furthermore, the lack of opportunities for young female employees in foreign invested enterprises to receive training and thus

190

renate krieg

further their careers has been an issue for discussion within the Chinese Women’s Federation (Wu 1994). More male employees in our sample had climbed the internal career ladder than female employees. Only a minority of the interviewed managers—male or female—had been recruited from the outside to fill vacant management positions. Nevertheless, among the younger male interviewees the degree of dissatisfaction with personnel policy and the wish for a stronger involvement by the German side especially on issues such as promotion was rather salient. In this respect, the female interviewees were much more modest. One reason for the gap between the high esteem that the German expatriates expressed for female employees and the actual possibilities of those employees for upward mobility within the enterprises might be the lack of German involvement in personnel management. Furthermore, the measurable ‘hard’ criteria of recruitment policies did not seem to be applied in the case of promotion. Usually, German companies leave personnel management issues in joint ventures to the Chinese side to handle. They seldom take an active approach at promoting staff or junior managers, even if they hold them in high esteem (Krieg and Nagels 2001). This makes it harder for female employees as they have less access to networks that could offer alternative career opportunities. In fact, women managers often possess less ‘local knowledge’ in the sense of their embeddedness in network structures. They also enjoy less social acceptance (like confidence in their management skills) than their male competitors. The positive assessment of their communication skills, diligence, and loyalty has favorable affects on the appreciation they receive in their companies and their job stability, but it does not trigger an ‘upward-mobilityautomatism’. The reported and praised tendency of female staff to transport and enforce unpopular decisions (such as in the classical dispute between accounting, with a majority of female staff, and sales, predominantly staffed with men) further reduces their chances for promotion by network. German Women’s Career Outlook In our first survey two groups of German male expatriate managers could be distinguished. The first group were older managers for whom the assignment to China was the last step in their career. The

gender in cross-cultural management

191

second group consisted of younger to middle-aged managers for most of whom the assignment was an important step to further their career within the enterprise. In contrast, none of the female managers in Hong Kong or Shanghai belonged to the age group close to retirement; all of them belonged to the second group. A substantial number of female interviewees in Shanghai had a Chinese studies background and had spent some time in China at some point of their education. For them, the professional and in many cases their language qualification was a major motivation to seek employment in German enterprises active in China. Compared with their male counterparts, the perspective for the female interviewees to further their careers within their enterprises was not as clear. The majority of the German female expatriates of the Hong Kong sample had actually been sent to Hong Kong or Asia at some point of their career by their employer. In one case, the woman had been given preference over a male candidate who had just become a father. Only a minority had given up their careers in Germany to accompany husbands or partners to Hong Kong. Whenever this was the case, they had gone to Hong Kong with the intention of finding employment. In Shanghai, a majority of the women were sent by German enterprises or organizations. The distinct difference between the two samples is that a number of female expatriate managers in Hong Kong had made decisive steps in their career by changing jobs in Hong Kong or within Southeast Asia; most of the interviewees had climbed the career ladder while working in Hong Kong. To a large degree they were of the opinion that they could develop their careers in Hong Kong much faster and further, and that it was much easier to climb the career ladder than they thought it would have been in Germany. In Hong Kong, the expatriate assignment was not always limited to a certain number of years. Some interviewees had been offered their present positions while working for another company in Hong Kong, while others had actively looked for a job either to stay in or go to Hong Kong for various reasons. They were thus hired on local conditions, but with the high salary level for middle and upper management levels in Hong Kong this had no negative effect on their lifestyles. Their salary and side packages depended on their negotiation skills, and all of them were quite satisfied with what they got. For quite a substantial number of them the prospect of returning to Germany was clearly not an option. Nine of the 11 Hong

192

renate krieg

Kong managers had worked in the region between five and eleven years, which was far longer than the women in the Shanghai sample. Most of the women in the Shanghai sample were on their first assignment abroad, and the time for expatriate assignment was usually limited from two to five years. A substantial number of the female managers in Shanghai did not necessarily see their assignments as opportunities to further their careers within the enterprise. Some of those with a China-study background or who had worked for some time in the China business of the company in Germany were aware of the risk of being too much inclined towards China without the opportunity to overcome this one-sidedness. But as in Hong Kong, some of the women in Shanghai showed reluctance to return to Germany and were planning to find employment either in Hong Kong or Singapore. Similar to Westwood and Leung’s (1994) findings, the German female managers in Hong Kong and Shanghai thought that working in a culturally different environment turned out better than anticipated. The forces that Chan (1994) invoked in the case of migration as being emancipatory in consequences may have been relevant to them. Chan proposed a relationship between migration and the creation of opportunities and wealth. This corresponds with Peter Berger’s idea that when one steps out of an otherwise constraining structure, migration can have the effect of freeing the individual’s spirit, because the fact of migration has transformed the condition by changing the rules of the game or even by changing the game itself. Particularly in the Hong Kong sample, but to a certain extent in the Shanghai sample, upward mobility for the women managers had been possible in an unprecedented way. They pointed out that manifold career opportunities existed in the region and that career women were very well accepted in the respective societies (with the exception of Japan and Korea). They experienced less gender pressure and gained more social acceptance. It is quite remarkable that here in Hong Kong, as a woman, if you take advantage of the situation you have much more opportunities to move upward. Yes, also to use contacts and just to show what you are able to do. There are certainly more opportunities as in other places. Like in the US or in Germany you only can go step by step. But here in Hong Kong or in China, if you are good you can take a few steps at the time. This . . . is just great, very, very positive” (German Managing Director, Hong Kong 2001).

gender in cross-cultural management

193

Furthermore, unlike in Germany they were less tied down by the mythology of motherhood. In Germany, women often are confronted with the choice to either pursue their professional career or have a family and children. If they decide to pursue both they face the burden of managing their professional and family careers. In the last decades family and gender politics in Germany have tried to overcome this without much success. Efforts have been made to change traditional gender roles, but there is a desire not to hand over the care and education of children to institutions and keep the responsibility within the family. In the societal setting, the compatibility of career and family has been and still is the responsibility of women. Vinken (2002) calls the situation “the miracle of the German mother” and states that many women still are conform with this “out-dated role”. This conformity was also reflected in our samples, with a minority of women stating their conviction that women cannot have both a family and a career, but have to decide for one or the other. Modernization in a gender-democratic sense in Germany is still a necessary political goal and gender policy has to include men as subjects (Sauerborn 2002). Younger, well-educated women (and to some extent younger men) especially try hard to combine their professional and family careers. The interviewees described the more relaxed situation in their expatriate assignments. In Shanghai one interviewee even went so far as to elaborate on a ‘baby-boom’ among female expatriates, with many planning and giving birth to children. At the same time, they asked whether it would be possible to combine family and professional careers upon their return to Germany. They were concerned about the social pressure on working mothers in Germany and mentioned the internalization of the responsibility to take care for children. The situation they observed in Shanghai and Hong Kong led some of our interviewees to think that women there were less confronted with the necessity to decide between either a career or a child. However, media reports from China (Wang, 2004) show professional women in China are increasingly confronted with such a decision. However, it is socially well accepted that women delegate childcare. Thus, at first glance the double burden does not seem to be an obstacle in their aspirations for careers. But taking a closer look at the situation of professional women the double burden becomes obvious: they are as much responsible for the care of the family and children as German women. A recent survey conducted by the

194

renate krieg

Democratic Party in Hong Kong revealed that many women are prepared to sacrifice their career to take care of the family (Lee 2002). It seems there is a difference in the age of the children when they are held more responsible. In Germany, mothers of infants are expected to take care of the child whereas in Hong Kong it seems much more accepted that strangers take care of infants. In Hong Kong, a mother is held responsible to take over as soon as the children become of school age, whereas in Germany when the children go to school many German women try to continue with or take up their careers. Acceptance of Female Managers In our first survey not even a handful female expatriate managers worked in the enterprises visited. German expatriates in production enterprises assumed that women managers in China had were socially unacceptable. They presumed that this was a major reason why fewer expatriate female managers were employed. This assumption not only applied to the assignment of female expatriate managers, but also to the promotion of local female managers. In spite of the Germans’ positive assessment of both the professional qualifications and work attitudes of local women, they worked to maintain existing gender stereotypes. In general, male German managers in China in the first survey though that the difference in working with men and working with women was smaller than in Germany or Europe. This led to the conclusion that “women here have a very different position in professional life. They are equal, absolutely”. Only very few added remarks that slightly altered the picture: “men have more power . . . Women are often pushed aside” or You have to struggle hard to be accepted as a female superior— although I have to say that this is not much different from back home. There are some ‘eggheads’ as well who say they won’t have women in leading positions. In this regard, Chinese women seem to be in a similar position as German women. Men—not only Chinese men— seem to have difficulties to accept ‘outstanding’ competence and performance of women . . . a man’s world won’t like to admit that all of a sudden there’s a young lady telling you about the facts . . . men have problems with this kind of change (Male German division manager, Shanghai 1998).

gender in cross-cultural management

195

These stereotypes make it difficult for women to gain recognition of their authority, and lead to a lack of managerial credibility in the eyes of colleagues and superiors. Thus, work and performance pressure on women managers is considerable (Cheng and Liao 1994; Korabik 1994; Liu 1992). There is also an anticipated reluctance to accept female superiors. However, even in cases where professional qualifications justified women taking over management positions, the German partners did not necessarily support their promotion. I see in the company, women do have problems with women. They don’t have any problems if the boss is a man, but having a woman as boss does create quite some problems. More problems than men have with a man as their boss. But even more difficulties arise if a man has a boss who is a woman. But this also depends on how respected a person is and also on her performance. But as I have seen with the lady I already mentioned, who is really good, knows what she wants and so on, she does have problems with the Chinese men, but even more problems with the Chinese women. They just say that they don’t want to work with her (Male German General Manager, Shanghai 1998).

The ‘strong woman’ (nü qiangren) in China and ‘women like husbands’ (nü zhong zhangfu) in Taiwan are unwelcome characters, as both lack the qualities of tenderness and subordination expected from women (Meng 1995; Cheng and Liao 1994). In Hong Kong, the negative image seems to be weaker. There, not only German expatriates but also local female managers once and again pointed out the high visibility of women managers in the city. According to Westwood and Leung (1999), the ratio of male to female managers in Hong Kong is similar to many Western European countries. Thus, the high visibility of female managers in Hong Kong might have to do with the situation in Germany where the number of female managers is still rather low in comparison to other European countries or the US (Domsch and Macke 2001). However, research in Hong Kong shows that women and men with direct experience of working with female managers held more favorable attitudes toward them (Bond 1991; Leon and Ho 1994). Still, the elaboration of a human resource manager in Hong Kong shows that ambivalence towards strong and ambitious women does exist: Like the women managers I encountered . . . a few of them, I have to say, are quite aggressive. And actually, you know . . . the kind of culture we have . . . or the values we have, these women are perceived as not

196

renate krieg as . . . how should I put it? . . . The perception of them is not . . . as good normally. Because if women are too aggressive they would be perceived as . . . [Unfeminine?] Yeah, yeah . . . the comments could be from men and could be from women as well. They’d say, women . . . this, this woman or this lady, she is so ambitious, she is . . . just too much, you know. So you tend to get . . . negative comments when you . . . act too ambitiously. So . . . we have to . . . you know, you have to contain yourself a little bit, like, I would saying in this environment . . . but on the other hand, there are quite a number of people . . . I mean women I know, who have the capability in them . . . who limit themselves just like me, because they know they have other commitments. So . . . in that sense, yes, they . . . are . . . not as eager about as men do, because they have the burden. I feel like they have the burden . . . just . . . and I personally feel it there is a kind of burden . . . you just can’t get rid of. You have other responsibilities. So . . . you don’t feel like you should be that . . . hungry for power, because you know . . . there are limitations. Even if you’re hungry for that . . . you can’t do it, because you have other commitments . . . Maybe you have to tell yourself, ‘hey, you have to balance’. [laughs] (Human Resource Manager, Hong Kong 2001).

The reaction towards ‘strong women’ is by no means only a Chinese phenomenon. As Spieß (2000) argues, in spite of having minority status female managers in Germany often also are perceived as disquieting, especially by men. Depending on the situation, the same characteristic ascribed to women is either interpreted in a positive or in a negative way. Female care is expected from women, but might also be seen as pedantry. Women are expected to be socially and emotionally competent, and if they meet this expectation it might be pejoratively seen as an emotionally driven weakness. The change of meaning of supposedly female characteristics has a long history and can be found in different variations (Rentmeister 1985). Women in leading positions affect the common bond and equality between men and are addressed through gender stereotypes. In this way, position and professional competence can be ignored (Spieß 2000). But not only men are hesitant about female managers. Characteristics ascribed to women also cause reluctance in female employees to work for a female superior. Actually it is kind of funny, because when I recruit people working for me, a lot of times . . . I encounter this kind of comment ‘Oh, working for a woman manager?’ There is always this . . . particular, I am not sure whether this happens in . . . in other places, but definitely in Hong Kong, and probably in . . . the China region, a lot of times you

gender in cross-cultural management

197

encounter people who hesitate. If they have to chose working for a man manager and a women manager, they prefer a man manager, because, they . . . actually emotionally a, a male manager will be more stable, they would be more reasonable, they would be less detailoriented. So they would tend to give more freedom to their subordinates, whereas women managers, they tend to be . . . more bossy, more control, emotional, you know, that sort of stuff. So this is sort of . . . I would consider this being stereotype, but a lot of people told me that. In fact, I got two ladies who are working for me, and when I . . . was interviewing with them, they both asked more or less the same questions, ‘what would be your style?’ and so. That really concerned them, like, you know . . . in my own work . . . am I a control freak, am I emotional, am I emotionally stable, this sort of questions. For them it is important, and they think that, you know, women tend to be . . . well, less popular as managers. [laughs] (Human Resources Manager, Hong Kong 2001).

In our second survey we asked the German enterprise representatives whether it was justified to argue that women in leading positions in Asia have problems of acceptance. All of the interviewed women negated the argument, emphasizing more or less unanimously that especially in Hong Kong, but also in other countries in East and Southeast Asia, women in leading positions are much more prevalent than in Germany. Asked about their experiences as female managers and whether they had encountered situations that made them specifically think of their roles as female managers, two groups could be distinguished. One group stated that they had never come across such situations. A majority of this group worked in sectors with a high ratio of female employees. In this case, the assessment of expatriate and Hong Kong female managers was similar. In the second group, the women worked in more mixed or more male dominated environments. Similar to the findings of Adler (1988) and Westwood and Leung (1999), the German women managers had to deal much more with prejudice and doubt from their male compatriots than from local colleagues and business partners. I would say German colleagues, they have this surprising look while reading my name card: ‘Umm, managing director, this is rare and how big is your company, and in mechanical engineering, this is unusual’. In the beginning there always is this sort of skepticism, ‘how did she make it?’, but with the Chinese this is less problematic . . . Actually the Chinese are more emancipated in this respect. Well, I mean, here in Shanghai about 99 percent of foreign women are the wives of expatriates who are here because of their husbands . . . It often happened

198

renate krieg that I was asked, ‘what is your husband doing here?’ It does cause a peculiar situation when I tell them that I am not here because of my husband, but because I work here (German Manager, Shanghai 2001). Actually I would say I don’t have the feeling that we are treated differently from the men, especially not here in Hong Kong. And especially my Chinese business partners don’t treat me differently, it actually is a very, very agreeable co-operation . . . But, in the beginning, if men don’t know a woman in a leading position they’ll treat her cautiously. Because they’ll think ‘my God, how far can I go . . . is she capable, can she handle this’, yes, and they’ll wrap her with care. But as soon as you have proved your knowledge and also your competence in doing your job, you’ll be treated like a man and also enjoy a high reputation . . . are highly regarded . . . Yes, I do think, as a woman you first have to prove your competence . . . but here if you can prove it you’ll be accepted very fast (German Managing Director, Hong Kong 2001).

This emphasis on not being treated differently from men can be connected with Adler’s (1988) findings. In her research on female managers in the Pacific Basin, there was a pattern in which Asians saw “female expatriate managers as foreigners who happen to be women, not as women who happen to be foreigners”. Several studies show that in Germany in the 1980s management functions were often based on traditional male career patterns (Antal and Krebsbach 1988), a phenomenon which still can be found today. Antal and Krebsbach list prejudice against women in the work environment and state that they are slowly disappearing, a view which is supported by the interviews. However, systematic barriers that reduce the opportunities for exposing male managers to women in management still exist. Of course there are problems, which I have to solve and our organizational tasks are not always easy and I sometimes do have to fight over some issues. But it never occurred to me that this could be related to the fact that I am a woman. This thought might have occurred in Germany . . . well maybe (German Human Resources Manager, Hong Kong 2001).

Women managers in our sample had thought about their role as female managers at different times, and on different occasions. Considerations on this issue ranged from organizational culture reflecting a predominantly male culture: “you are working mainly in a men’s world . . . and my counterparts are all men”, to the differences between women and men in management and communication styles. None

gender in cross-cultural management

199

of the interviewees in Hong Kong or Shanghai recounted direct discrimination in their career paths. Many of them, however, reported the need for adaptation to existing organizational structures: Well, I never had the feeling that I was discriminated against or that I didn’t get a job because I am a woman, no, never. But, the effort you always have to make, to adapt to this actually male dominated world, because without communication you don’t get ahead, you don’t get promoted. And as a women you actually always have to make this effort. And the men, well, they sense that it is different with women, yes, but . . . I would say that for them it is actually not necessary to attune themselves in such a way (German Financial Manager, Hong Kong 2001).

In their research on female expatriate managers in Hong Kong, Westwood and Leung (1999) also found that the necessity for women to work harder was a recurrent topic of discussion. In our sample, the need to prove their professional competence to establish acceptance and credibility was more pronounced among expatriate and local female managers in Shanghai. It is unusual that women are in such positions and this already tells a lot about how much confidence there is that women, also Chinese women, are capable to do something like that. Not much actually. And then it is always said, ‘yes, you are especially nenggan [competent]’, and I answer, ‘no, just normal’. They never would talk like this about a man, they never told my [male] colleague how nenggan he is! (German Managing Director, Shanghai 2001)

One of the German managers in Hong Kong compared the situation in Germany with Japan and Korea. In their comparison with Germany a substantial number of interviewees concluded that in Hong Kong or China once you had established credibility as a female manager it was much easier to unfold your potential. Younger women in particular talked about their experiences of having to prove their professional competence. This seemed to become less pronounced with age and experience, but never really disappeared. Naturally as a women, and when I was still younger this certainly was more pronounced, I sometimes have the feeling that you have to prove yourself, to show your competence. And that what you say means something. Well, it sometimes still requires extra energy to a certain degree to convince my counterpart. Yes, sometimes this is just the case. [Within or outside the enterprise?] It can be both . . . It was worse with my former job. I remember a meeting where our man from

200

renate krieg China, a Chinese, was also present. We went inside and later he told me that he also sensed the atmosphere. So I just stood there and did my presentation. By doing so the atmosphere changed completely. Many times it is just the extra effort you have to make if someone thinks a woman can only be the secretary . . . Sometimes it’s just like that, they think she cannot have an important position, there is no need to pay attention. So you always have to make the effort to convince them, but this somehow becomes a second nature . . . And there is still the same story, which has something to do with the fact that a woman has to be more qualified than a man. I think this can be related to the communication problem between women and men (German Financial Manager, Hong Kong, 2001).

Management Qualities, Leadership Style, and Power In their review of gender differences in managerial behavior and effectiveness, Vinkenburg and colleagues (2000) point out that the “typical good manager is (still) described in traditional masculine terms”. Gender differences in management are widely discussed in the research field, and three views can be differentiated as the basis in most studies: ‘women are opposite and deficient’, ‘women are just like men’, and ‘women are opposite and superior’ (Vinkenburg et al. 2000, cited after Tavris 1991). The viewpoint that ‘women are opposite and deficient’ is used to explain the slow promotion of women into management and is often supported by statements that women are lacking in self-esteem. This lack of self-esteem was mentioned by a number of interviewees, mainly in the sense that they were too modest when it comes to presenting their performance positively or in their demand of remuneration, for example. German female expatriates in Hong Kong and Shanghai mentioned the difficulty that they faced in showing their competence and performance in a favorable light. In Hong Kong and Shanghai their perception of local female managers differed from the self-perception. Local women managers were described as ‘very tough’ and able to assert themselves. Chinese female managers, especially those in Shanghai, were described as very determined in pursuing their careers. Both, the ‘toughness’ and ‘determination’ of these female managers are contrary to the qualities of tenderness and subordination demanded of women. However, the samples are far to small to interpret this as a departure from the traditional concept of femininity, and Westwood and Leung (1999) there are signs of a subtle re-emergence of traditional

gender in cross-cultural management

201

gender values in Hong Kong now that sovereignty has returned to China. The viewpoint that ‘women are opposite and superior’ takes gender differences as the strength of women and is in line with discussions of the feminization of management in relation to the necessity of change in enterprise culture that have been prominent in recent years. The issue has been discussed in both professional and popular media. Vinkenburg and colleagues (2000) point out that the “question remains whether the ‘feminization of management’ will lead to a larger proportion of women in management positions”. In Germany, there are high expectations of the potential for innovation that is related to the feminization of management, but whether this will result in a growing ratio of female managers is still to be seen. In January 2001, Wirtschaftswoche (Economic Week) asked, “are women better than men?” The article cited the outcome of two surveys among managers in the US, with female managers scoring better than their male counterparts in many disciplines. It concluded that although the surveys were not designed to look for gender-specific leadership qualities and the recognition of differences is nothing new, this knowledge only now seems to suit the spirit of the times (Bierach 2001). In research, feminine leadership qualities are seen to be more critical. In discussing leadership qualities differentiated on gender-specific lines, Nerge (1992) sees the risk that women (and men) are tied to certain characteristics. In this respect existing myths are carried on, even if weaknesses hitherto ascribed to women are now reinterpreted as strengths. Arguments based on older research on socialization do not take into account newer findings about the similarities between women and men and the differences among women (Spieß 2000). In their review of gender differences in managerial behavior, Vinkenburg and colleagues (2000) show that only a few differences have been consistently and empirically confirmed. They conclude that this might be “due to the fact that both men and women currently in management positions resemble a similar management prototype”. They point out that changes in society might have an impact on the outcome of research in the future, because most of the research undertaken so far has focused on managers who started their careers 15 to 20 years ago, when gender-stereotypical expectations were still more profound. They conclude that “despite persistent stereotypes about gender differences, there are in fact no reasons not to promote

202

renate krieg

women who are both motivated and capable of performing as a manager into top management positions.” In our survey, those disputing differences elaborated that differences in leadership qualities are related to personality and not to gender. Their arguments were very much in line with the viewpoint that ‘women are just like men’ which is, according to Vinkenburg (2000), often used to illustrate that there are few legitimate reasons to deny qualified women who want a career access to management positions. Those agreeing to differences saw them mainly in the greater social competence of women, their better communications skills, and their orientation towards relations. None of the interviewees agreeing to differences between men and women thought that ‘women are opposite and deficient’ or ‘women are opposite and superior’. One pointed out that men have to learn that: Different does not mean deficient, different just means different and we have to learn to be more flexible in this respect and to take advantage of these differences (German Financial Manager, Hong Kong 2001).

The question of whether the motivation to become a top manager is different for men and for women led to a variety of answers. A substantial number of interviewees thought that the motivation was the same for women and men—to earn money and to do something meaningful with one’s live. But some German female expatriates in Hong Kong related the question to a quite different outcome: that of status and power. I don’t know how far the craving for power or something like that plays a role, because . . . somehow this does play a role for many men, but certainly not for all (German Financial Manager, Hong Kong 2001). With this I do have a feeling, but I don’t know whether this really is correct. I do think . . . that for men it is important . . . on the one hand . . . certainly also to gain acknowledgement, but I also think to gain certain autonomy and with this power—I’ll put the ugly word in quotation marks. With women I rather have the feeling . . . that it maybe rather . . . that it matters less to get into such a power position. I don’t know . . . this is difficult . . . I think much is written about this kind of stereotypes and I think this also leaves its marks on you. Whether this . . . always happens like that, I’m not really sure. But I could imagine that men generally . . . they maybe like it more if they have the say, can decide, also can decide about their employees, to have a certain supremacy (German Consultant, Hong Kong 2001).

Several studies show that many women striving for leading management positions have an ambivalent relationship with power, whereas

gender in cross-cultural management

203

men in leading positions are conscious of their power and think that power is essential. Spieß (2000) argues that due to their experience with male displays of power and the contradictory requirements and reactions towards women who exert power, women have an ambiguous relation to power. Spieß cites Hagemann-White (1992), who asks whether women actually do have more difficulties in claiming and exertung power. In her view, the question cannot be answered by a simple model of to ‘have’ or to ‘lack’ power and differs on the basis of motivation research in psychology between a ‘socially oriented’ and ‘egotistic’ striving for power. She concludes that for women, the exertion of power has a different context than for men. We therefore asked interviewees in the Hong Kong sample to comment on the statement that ‘women aspire less for power, are less interested in power and status than men’. A minority of our interviewees supported the statement: Yes, I believe this . . . Because . . . it is a male character trait to strive for power and to fight for power (German Manager for Finance and Administration, Hong Kong 2001).

The majority of interviewees in Hong Kong disagreed with the statement in a variety of ways. For many of the women the concept of power had a negative connotation and they argued that the interest in striving for power was different for women and men. In her research on female and male leading managers in Germany, Bischoff (1990; 1999) observed a change in perceptions of power. In her fist study women rejected a claim of power for themselves, whereas in her second study a majority of managers stated that there was no difference between female and male managers in striving for power. However, she expresses doubt about this because in her research she came across many women who had problems with the fact that they were holding power, a phenomenon she did not discover with men. She explains that women might experience power as power over weaker persons, whereas men take a powerful position as a legitimate tool to reach targets (Bischoff 2001). Certainly, some answers in our interviews revealed the ambivalence of women toward power, but some answers did not support Bischoff ’s explanation. The way power is defined is, after all, to have power over somebody. I have 50 subordinates and I can fire them whenever I want. Well, in Germany this is not possible because the trade union does have a say in it. But if I don’t like them I really can show them. And this is not the kind of power . . . no not really the kind of power women want

204

renate krieg after all. Power is . . . I don’t even know how to say this in German, well to enable others to unfold their potential, yes. And then, after all, it is not the power, but to say, OK, let us all work together, for myself and for us. And it is to take responsibility for others. I think this is what we, as women, what many women see as a major step and what they want to do when they are in leading positions (German Administration Manager, Hong Kong 2001).

For some of our interviewees the relation toward power had changed over time or with growing professional experience, and their interest in it was more in line with the abovementioned social orientation. [I am] less interested, well maybe not less interested, but differently interested in power, I think. Power always leaves a negative impression, always has this negative touch. Well, I want to hold a leading position to, well, to be able to make a contribution, to influence where the enterprise goes, which targets the enterprise formulates and, above all, how you reach them (German Managing Director, Hong Kong 2001). This is changing . . . I have to say it is more natural now . . . When I look back on my professional life, due to my personal development my point of view probably also changed (German Financial Manager, Hong Kong 2001).

Discussion: Similarity and Diversity Comparing the perceptions and experience articulated by local and expatriate female managers in Hong Kong and Shanghai with Western studies—mainly of the situation of female managers in Germany and Europe—reveals a number of similarities. This leaves the impression that the situation of female managers is common in several respects. Despite the reported high visibility of female managers in Hong Kong, they remain under-represented in the business world. Societal and organizational structures limit their progression into senior management. Business organizations are far from being gender neutral. They are constituted on and reflect ‘masculine’ structures, ideologies, and values. In this environment, women are confronted with the necessity to manage their gender identity. Indeed, a different phenomenon caught our interest. Women seem to have different priorities, in the sense that there are various options in the planning of one’s life that may be equally desirable and fulfilling. For them their careers are good, but their families are also important. There are also other things like friends or parents whom they care about and who would be equally valid to dedicate their

gender in cross-cultural management

205

lives to. In this respect, local and expatriate female managers showed unity—it seemed that being female was more important in establishing identity than being of different nationality. I also had the impression that German and Chinese women managers in Hong Kong and Shanghai seemed to be a lot alike in their management styles and their perceptions of their role in business. There were quite a number of cross-references to each other, and something like a joint perspective (diverse within as it may have been) on the ‘other’, which was male management structures. National differences were hardly ever mentioned. This is not to say that culture or national identity were not important, but often they did not really seem to be an issue—whereas power relations were. In mainland China, the power divide in joint venture businesses of our first sample often ran along the lines of nationalities. In the second sample, the power divide did not necessarily exist in that way. Taking up the statement that women are better positioned to communicate in cross-cultural settings, reality is creating a sharp paradox: women are cross-culturally competent, but suffer from very little or limited upward mobility. Personal competence is not enough to overcome social barriers to open up opportunities; in other words, the social is too strong for the personal. This is the same sociological story, told time and again, all over the world. Acknowledgements I would like to thank Leo Douw and Chan Kwok Bun for providing invaluable remarks and suggestions on the first version of this paper, and for remaining a source of inspiration and encouragement all through the process of re-writing it. REFERENCES Adler, N. (1984), ‘Women do not want international careers: and other myths about international management’, Organizational Dynamics 13: 66–79. ——— (1988), ‘Pacific Basin Managers: A Gaijin, Not a Women’, in: Adler, Nancy and Dafna N. Israeli, eds., Women in Management Worldwide, London: Sharpe, pp. 226–249. Adler, Nancy and Dafna N. Israeli, eds. (1988), Women in Management Worldwide, London: Sharpe. ——— (1994), Competitive Frontiers. Women Managers in a Global Economy, Oxford: Blackwell.

206

renate krieg

Antal, Ariane Berthoin and Camilla Krebsbach-Gnath (1988), ‘Women in Management: Unused Resources in the Federal Republic of Germany’, in Women in Management Worldwide, London: Sharpe, pp. 141–156. Bierach, B. (2001), ‘Cherchez la femme’, Wirtschaftswoche, 4, 18.1: 72–77. Bischoff, Sonja (1999), Männer und Frauen in Führungspositionen der Wirtschaft in Deutschland: neuer Blick auf alten Streit, Köln: Wirtschaftsverlag Bachem. Bischoff, S. (2001), ‘Die Schlagzahl erhöhen’, in Weidner, Jens and Yolanda M. KollerTejeiro, eds., Mit Biss zum Erfolg. Durchsetzungsstärke und positive Aggression im Management, Mönchengladbach: Forum-Verlag, pp. 53–60. Bond, Michael Harris (1991), Beyond the Chinese Face: Insights from Psychology, Hong Kong: Oxford University Press. BMFSFJ (2001), Bundesministerium für Familie, Senioren, Frauen und Jugend, Bericht zur Berufs- und Einkommenssituation von Männern und Frauen. Chan, Kwok Bun and Chiang, C. (1994), Stepping Out: The Making of Chinese Entrepreneurs, Singapore: Prentice Hall. Cheng, Wei-yuan and Liao, Lung-li (1994), ‘Women Managers in Taiwan’, in Adler, Nancy and Dafna N. Israeli eds., Competitive Frontiers. Women Managers in a Global Economy, Oxford: Blackwell, pp. 143–159. Davidson, Marilyn J. and Ronald J. Burke, eds. (1994), Women in management: current research issues, vol. I, London: Chapman. —— (2000), Women in management: current research issues, vol. II, London: Chapman. Domsch, Michel E. and Harriet Macke (1991), ‘German Reunification—Impacts on the Situation of Female Employees’, MIR—Management International Review, 39, 1: 71–91. Feng, Tongqing and Xu Xiaojun (1993), ‘Zou xiang shichang jingji de Zhongguo zhigong neibu guanxi he jiegou (The Internal Relationship and Structure of Chinese Employees in Enterprises Geared to the Market Economy)’, Zhongguo shehui kexue (Chinese Social Science), 3: 101–120. Hagemann-Whithe, C. (1992), ‘Machtstreben und Männlichkeit: Extrafunktionale Qualifikationen im Hochschullehrerberuf ?’ in Angelika Wetterer, ed., Profession und Geschlecht, Frankfurt a.M.: 1992, pp. 246–256. Hofstede, G.A. (1984), Culture’s Consequences: International Differences in Work-Related Values, Newbury Park, CA: Sage. Korabik, K. (1994), ‘Managerial Women in the People’s Republic of China: The Long March Continues’, in Adler, Nancy and Dafna N. Israeli, eds., Competitive Frontiers. Women Managers in a Global Economy, Oxford: Blackwell, pp. 114–126. Krieg, R. (1999), ‘Engendering Cross-Cultural Management—The Cases of Mainland China and Taiwan’, paper presented at the International Conference on CrossCultural Management and the Dynamics of Change in China at Hochschule Bremen, Bremen, Germany. Krieg, Renate and Kerstin Nagels (2001), ‘Changing Attitudes towards Human Resources Management’, in Leo Douw, Huang, Cen and David Ip, Rethinking Chinese Transnational Enterprises. Cultural Affinity and Business Strategies, London: Curzon Press, pp. 38–63. Lee, S. (2002), ‘Women put family before work’, South China Morning Post, 10/7, http://hongkong.scmp.com/hknews/ZZZMP38QX6D.html (10.07.2002). Leon, Corinna T. de and Suk-ching Ho (1994), ‘The Third Identity of Modern Chinese Women: Women Managers in Hong Kong’, in Adler/Israeli (eds.), Competitive Frontiers. Women Managers in a Global Economy, Oxford: Blackwell, 1994, pp. 43–56. Linehan, M. (2000), Senior female international managers: why so few? Aldershot: Ashgate. Liu, B. (1992), ‘A Summary of Issues in Women’s Employment’, translation in Chinese Sociology and Anthropology 29, 3: 7–51; first published as ‘Guanyu nüxing jiuye wenti zongshu’ in: Xiong Yumei, Liu Xiaocong and Qu Wen, eds.,

gender in cross-cultural management

207

Zhongguo funü lilun shinian (Women’s theoretical studies in China, 1981–1990), Beijing: Zhongguo funü chubanshe, pp. 310–357. Mayring, P. (1997), Qualitative Inhaltsanalyse, Weinheim: Deutscher Studien Verlag. Meng, X. (1995), Gaige dachaozhong de Zhongguo nüxing (Chinese Women in the Age of Reform), Beijing: Zhongguo shehui kexue chubanshe. Mo, P. (2002), ‘Housework—it’s a woman’s job, say HK males’, South China Morning Post, 30/8, http://hongkong.scmp.com/hknews-ZZZFMW8RHJD.html (30.08.2003). Nerge, S. (1992), ‘Neuere europäische Forschungen über Frauen im Management’, Informationsdienst d. Forschungsinstituts Frau und Gesellschaft, 10, 1–2: 119–130. —— (1993), Frauenfrühling im Management? Europas Management zwischen Kulturpatriarchat und Emanzipation, Berlin: Ed. Sigma. Rentmeister, C. (1985), Frauenwelten—Männerwelten: für eine neue kulturpolititische Bildung, Sechster Jugendbericht Sachverständigenkommission, Opladen: Leske + Budrich. Sauerborn, W. (15.4.2002), ‘Das Geschlechterverhältnis bleibt unangetastet’, Frankfurter Rundschau, p. 6. Shi, Xinping and Carolyn B. Erdener (1999), Region and Gender Effects on Chinese Culture Dimensions: Implications for Business Negotiations in China, Hong Kong: Hong Kong Baptist University, Business Research Centre Papers on Cross-Cultural Management, CCMP 99002, March. Spieß, G. (2000), Frauen in Führungspositionen: eine Neupositionierung der Geschlechter zwischen Anpassung und Widerstand, Köln: Deutscher Städtetag. Stroh, Linda K., Arup Varma and Stacey J. Valy-Durbin (2000), ‘Women and Expatriations: Revisiting Alder’s Findings’, in Davidson, Marilyn J. and Ronald J. Burke, Women in Management. Current Research Issues, vol. II, London: Sage, pp. 104–119. Tavris, C. (1991). ‘The mismeasure of women: paradoxes and perspectives in the study of gender’, in J.D. Goodchilds ed., Psychological Perspectives on Human Diversity in America, Washington DC: APA. Die Welt (11.10.1999), ‘Frauen tun sich schwer auf dem Weg nach oben’, http:// www.welt.de/daten/1999/10/11/1011mk132921.html. Vinken, B. (2002), ‘Das Rätsel der deutschen Mutter: Bereitwillig passt sie sich eine überholten Rolle an. Es geht auch anders’, Chrismon, 1: 40–41. Vinkenburg, Claartje J., Paul G.W. Jansen and Paul L. Koopman (2000), ‘Feminine Leadership—A Review of Gender Differences in Managerial Behaviour and Effectiveness’, in Davidson, Marilyn J. and Ronald J. Burke, Women in Management. Current Research Issues, vol. II, London: Sage, pp. 121–137. Wang, Lin, ‘Zhiwei VS BB’ (Position vs Baby), Shenzhen zhoukan—Shenzhen Weekly, 25.10.2004, http://www.sznews.com. Westwood, R.I. and S.M. Leung (1994), ‘The female expatriate manager experience’, International Studies of Management & Organization, 24, 3: 64–85. —— (1999), ‘Women in management in Hong Kong and Beijing: between pragmatism and patriarchy’, in Fosh, Patricia Andy W. Chan, Wilson W.S. Chow, Ed Snape and Robert Westwood, eds., Hong Kong Management and Labour. Change and Continuity, London and New York: Routledge, pp.199–219. Wu, B. (1994), ‘How Long Can the “Youth Ticket” Be Used in Foreign Enterprises?’, Nüzi shijie, March: 22–23, translated in Chinese Education And Society, 28, 3 (March/ June) 1995: 25–28. Wunderer, Rolf und Petra Dick, eds. (1997), Frauen im Management. Kompetenzen, Führungsstile, Förderungsmodelle, Neuwied, Kriftel im Taunus und Berlin: Luchterhand.

Chapter 10

Conflict Management Strategies and Innovation in Sino-Japanese, Sino-Korean, and Sino-Taiwanese Joint Ventures in China Chan Kwok-bun and Vivienne Ho Luk This chapter reports a comparative study of conflict and the strategies for managing it in Sino-Japanese, Sino-Korean, and SinoTaiwanese joint ventures in China. The methodology of the study involves the cross-cultural comparison of conflict and the conflict management strategies that are adopted by managers in these international joint ventures. The cross-cultural comparative framework and its epistemological validity is constructed and validated through the sampling of common socio-cultural indicators that are prevalent in many of the countries under study. Our focus is on the most common types of conflict, their causes, the conflict management strategies that are used, and the resultant changes, if any, to corporate culture. In our study, we began with the recognition that a certain type of corporate culture is necessarily tied to the core national values of investors, be they foreign or local, but that these core values are subject to change as a result of the dialectic of the social dynamics of structural conflicts, and attempts to resolve such conflicts. When a transnational corporation operates in China, we expect to see some emergent hybridization or cross-fertilization of Western and Chinese cultures, rather than a displacement of one cultural practice by the other. Such hybridization trends manifest themselves in the everyday life of operational transactions, which results in the gradual emergence of a more or less identifiable, innovative corporate culture that signifies a new derivative of the original cultures. Moreover, our study clearly shows that in conflict management, cultural boundaries are negotiated between the conflicting parties in a context that is highly differentiated, even in an intra-East-Asian regional setting. A few terms used in this chapter require conceptualization and delineation. Hybridization or hybridity refers to the creation of dynamic mixed cultures. Sociologists and anthropologists use a different

conflict management strategies and innovation

209

term, syncretism, to describe such a phenomenon, having long observed the evolution of mingled cultures from two or more parent cultures (Cohen and Kennedy, 2000: 363). Homi Bhabha (1986), writing about colonial India, develops the concept further. He sees hybridity as a transgressive act that challenges the colonizers’ authority, values, and representations, and thus constitutes an act of self-empowerment and defiance. Bhabha explains that the British colonizers were trying to convert the local Indians to Christianity and urging them to be baptized, but most of the local people were Hindus or Buddhists who instead asked that the Bible be adapted to the local conditions. Of course, the Bible could not be changed to suit the Indians. Thus, the issue of mixing the Bible with Hinduism became a flash point in relations between the colonizer and the colonized. Nonetheless, the Indians capitalized on the cause of cultural hybridity and challenged the authority of the colonizer in a conscious act of self-empowerment and defiance. The published social science literature on corporate culture or identity is characterized by a description of the material part of identity and corporate identity, which is conceived of in a unilinear and unidirectional fashion, thus resulting in a static definition. Peverelli (2004; Chapter 4 of this book, also by Peverelli) suggests that we should begin to investigate the construction of (corporate) identity in the context of a comprehensive theory of organization. He argues the context of identity construction has been neglected in the literature on corporate identity because corporate identity has been approached as a separate problem and as a distinct field of academic research. Instead, he argues, corporate identity should be studied as part of an overall theory of organizing. One of the key concepts of this theory of organizing is ‘social-cognitive’ context. Peverelli argues that it is possible to construct an entirely new way of looking at corporate identity that would contemplate it as a process of identity construction during the continuous interaction between the actors involved in a company and its social-cognitive context. The result is that a new corporate identity will emerge from what the actors involved in a company wish to be, as well as what its environment wishes it to be. Moreover, an enterprise develops multiple identities in multiple social-cognitive contexts. Enterprises are organizations; they are constructed and re-constructed in the field of ongoing social interaction. Peverelli stresses that instead of speaking about corporate identity we should speak of organizational identity, which may

210

chan kwok-bun and vivienne ho luk

include corporate identity. Indeed, the identity is the organization itself. He emphasizes that organizations are social-cognitive structures that only exist in the perception of a group of actors in a company. Furthermore, it is necessary to include a group of enterprises as subjects to observe the processes of multiple groups constructing their identities. In the context of our study of the strategies of conflict resolution in Sino-foreign joint ventures, it is necessary to observe the social-cognitive processes involved in the ventures to obtain a dynamic view of their corporate identity or culture. Sinification is a purposeful attempt to imbue Western culture with Chinese attributes (Murray, 1919). The idea of sinification is not so much about determining which culture—Western or Chinese—predominates in a Sino-foreign joint venture, as about demonstrating that it is a ‘mixed system’, which represents an ‘intervening space’ in the hybridity of foreign and Chinese cultures if and when it occurs. This intervening space is a site where identity contestation and reconfiguration take place. The Shifting Boundaries of Joint Ventures Amid globalization, economic restructuring is a powerful force. Organizations and private enterprises are expanding into world markets and transforming themselves into transnational corporations. Multicultural relations are inherent in such organizations. A result of the organizational processes that characterize economic restructuring is both the transgression of state borders by organizations seeking economic opportunities and partnerships beyond their national sites and the transformation and re-making of boundaries both within and without the organizations. The emergence of transnational partnerships raises problems of passing involvement in relation to cohesion, commitment, identity formation, management based in local culture, and intra- and inter-organizational conflict. The trend toward the fluidity and complexity of boundaries—both physical and symbolic—within and without organizations is due to diminishing timespace horizons. This, however, does not imply that boundaries are disappearing. Organizational change always challenges existing identities and sets new directions for identification. Mergers, acquisitions, and strategic alliances generate new organizational forms and necessitate the redefinition and renegotiation of organizational boundaries.

conflict management strategies and innovation

211

There are manifold ways in which organizational boundaries are affected by economic restructuring and, at the same time, affect social processes within and between organizations, in the booming economies of the Asia-Pacific region. Chinese workers have only a vague idea of the law of contracts. Many contracts stipulate the roles, competences, duties, and responsibilities of Chinese managers and their foreign counterparts. Where these contract terms and clauses are unequivocally defined and precisely spelled out, however, Chinese workers frequently do not abide by them in the way that they are intended (Trommsdorff, 1991). As a result, there are frequent ‘disjunctures’ between the formal organizational structure, as stipulated in the contract, and the informal structure through which things in Sino-foreign enterprises actually get done. These contractual disjuctures (or contractual liabilities, in the legal sense) are ‘social spaces’ in which the contestation of identity between foreign and Chinese workers frequently occurs. This, as Stuart Hall (1996: 4) points out, means that cultural identity is never unified, but is increasingly fragmented and fractured; never singular, but multiply constructed across different, often intersecting and antagonistic, practices and positions; and is constantly in the process of change and transformation. Culture, as defined above, is constantly self-constitutive, generative, and transformative. By exploring and exploiting these ‘contractual disjunctures’ or ‘social spaces’, it is possible to gain a better understanding of the ‘trajectories’ of the shifting cultural boundaries in Sino-foreign joint ventures. Collection and Analysis of Data Our data were derived from a study of thirty joint ventures, including six Sino-Japanese, six Sino-European, six Sino-American/Canadian, six Sino-Taiwanese/Hong Kong, and six Sino-Korean joint corporations of various industries that were established in Shenzhen between 1981 and 2000. About twenty percent of them were large corporations with 1,000 to 4,500 employees, fifty percent were medium-sized firms with 100 to 1,000 employees, and thirty percent were small firms with less than 100 employees. The data that are reported in this chapter were gathered primarily from semi-structured interviews and focus group meetings that we conducted with the senior management and

212

chan kwok-bun and vivienne ho luk

junior employees of Sino-Japanese, Sino-Taiwanese, and Sino-Korean companies selected from business directories. The interviewees were recruited through personal contacts and referrals, and they were invited to participate voluntarily. The respondents included general managers and heads of human resources, finance, administration, operations, and marketing and purchasing, and some junior employees. Two managers from each joint venture, one Chinese and one foreign, were selected for individual in-depth interviews. On average, the individual interviews and focus group meetings lasted sixty to ninety minutes, and were conducted in English or Putonghua. With the permission of the participants, the responses of the interviewees and focus group members were audio-taped and later transcribed. The instrument that was used in this research was a semi-structured interview schedule that covered key questions about how Chinese and foreign managers in the same company perceive the major causes of conflicts that relate to human resource management, and how they manage these conflicts. A modified version of the interview schedule was used in the focus group meetings to identify the reasons for conflict over human resources practice, and ways in which such conflict was handled. The methodology of our study involves the construction of a crosscultural conflict-change analytical framework to guide the comparative analysis of Sino-foreign joint ventures. The framework consists of an ideal-typical schema that proves useful in the analysis of conflict and the comparison of conflict management strategies, and anticipates and synthesizes the outcomes of conflict regulation behavior and the resultant change to corporate culture. Against this ideal-typical normative analytical framework, analyses of conflict and change can be identified, compared, and formalized. An authentic comparison is possible only if non-culture-specific variables have also been isolated. It is necessary to construct universal categories that are not merely reflections of the cultural values of a particular society, but rather are common denominators across cultures, and to include the deeply ingrained structural constraints that are exemplified by the social fabric of each country. Only through the conceptualization of such universal categories and the use of deductive reasoning is it possible to make a comparison of the dynamics of conflict-change processes and empirical patterns in a cross-cultural setting. The empirical indicators upon which a selection of the common denominators of cultures and the underlying structural conflict-change

conflict management strategies and innovation

213

forces is based were deduced from the interview data that were collected during the fieldwork and, to a lesser extent, from the published literature. Such empirical indicators include acculturative stress, styles of social discourse, work-related communicative strategies, technical and managerial know-how, communist and capitalist work ethics, socio-cultural and psychological complexes, the protection of institutional interest and power, personality clashes, variance in lifestyle and career goals, variable criteria of performance evaluation, and personal or organizational coping strategies. Our study hypothesizes a substantial degree of universality of these empirical indicators, and that there is enough similarity across cultures to warrant meaningful comparisons to be made along several dimensions of these cultural universals. Sino-Japanese Joint Ventures Most Common Forms of Conflict and Their Causes Inside and outside the factories of many Sino-Japanese joint ventures, there was little contact among the Chinese and the Japanese managerial staff, as noted by Ms. Zhang who was charged with quality control in a joint venture: The Chinese and the Japanese managers do not communicate well with each other. We [the Chinese] have few opportunities to liaise with them [the Japanese]. Personally we can’t figure out their intentions (Interview at Sino-Japanese joint venture No. 1, transcript, p. 6).

Not as concerned about the feelings of the Chinese workers, the Japanese managers were seen to pursue results by whatever means available. Ms. Zhang continued: I have the feeling that, relatively speaking, Japanese managers emphasize results; they don’t care too much about the process; this is a conclusion we have reached (Interview at Sino-Japanese joint venture No. 1, transcript, p. 6).

Hiring practice was another issue that divided the Sino-Japanese management. Chinese managers preferred to recruit from the open labor market, whereas Japanese managers preferred to recruit young graduates directly from college campuses, as they argued that graduates are more malleable and impressionable, and are more amenable to training and the molding of work habits. Chinese managers were

214

chan kwok-bun and vivienne ho luk

prepared to raise the salary of workers who had made some progress, whereas Japanese managers did so only when they had seen good results. However, a Chinese human resources manager provided the following commentary: In the matter of recruitment, really, there is some difference; just like what he [the Japanese manager] said, it is better to hire directly from the colleges. We have tried two batches of new recruits from the labor market. They may be as good as those recruited directly from the college, but they are less malleable than the college students. After all, they have formed their work habits and persist in these habits. Now, I feel I have come around to their [the Japanese] point of view. Initially, I thought we should recruit only experienced workers, but after we have done so, it turns out that the results are not that good (Interview at Sino-Japanese joint venture No. 1, transcript, pp. 9, 11).

The Chinese labor laws provide for a five-day working week, but the Japanese managers demanded six days. The Japanese managers worried about the cost overrun, and they got around the law to cut costs, and sometimes even cut corners. A Chinese manager complained: As to the execution of the law, whether they are Japanese, Koreans or Hong Kongers, they are, relatively speaking, more concerned about cost. But the American and European enterprises, if they invest here, will abide by the local law. The Asian enterprises just won’t abide by the Chinese labor law (Interview at Sino-Japanese joint venture No. 1, transcript, p. 4).

The Chinese managers had no hesitation in firing incompetent workers, whereas the Japanese managers would transfer them to other posts that were more suitable to their talents and skills. When a Japanese firm did not have professional interpreters, each functional department was responsible for maintaining sound communication. Despite this, communication was found to be unsatisfactory in many firms, because there was little contact between junior Chinese staff and Japanese officers. The Chinese and Japanese managers had very different interpretations of technical know-how and modern industrial management. A Japanese manager made this comment: I feel the major difference lies in the management of the factory and profits. This is the major difference, not a difference in race . . . we Japanese talk about the managerial experience and expertise of the staff, and what we have talked about has a meaning that is quite different from what the Chinese would have intended. This is the major difference, a difference of definitions (Interview at Sino-Japanese joint venture No. 1, transcript, p. 20).

conflict management strategies and innovation

215

Japanese managers were not particularly talkative in either social or business circles, and indeed, silence holds a special meaning in Japanese culture. One of the cases from our data was a Chinese majority equity joint venture in which a Chinese manager was working with a silent ( Japanese) partner. That Japanese and Chinese management concepts have little in common was an understatement in this joint venture, which produced electronic equipment. The Chinese managers did not bother with the Japanese any more than the Japanese cared to traverse Chinese turf. The most cherished watchword of modern Western management—teamwork—sounds hollow in Chinese companies, most particularly during the early stage of a joint venture, when no corporate culture in the remotest sense of the phrase has crossed the minds of Chinese workers, let alone having value. It was revealed in several interviews with managers that in many joint ventures, technical competency and on-site training were rather unpopular ideas, because the Chinese workers did not like the prospect of having to do extra work. A Japanese manager in a joint venture that produces color television monitors observed: Generally speaking, they [the Chinese] will say, “this is not my responsibility.” Because previously there has been a division of responsibilities, if he thinks this is somebody else’s work and you tell him to do it, he will resist at once. This is tough (Interview at Sino-Japanese joint venture No. 2, transcript, p. 7).

In other Sino-Japanese joint ventures that we visited, labor-management conflict was negligible. Nonetheless, Chinese trade union power never failed to make its presence felt in aspects of production and collective bargaining—a reality that is gradually being accepted by Japanese managers. The downside was that Chinese unionism undermined worker morale and sapped motivation. Worse still, it condoned malingering and the avoidance of responsibility. A Chinese human resources manager in a Japanese electronic engineering company conceded: We take trade union power very seriously. There are a lot of things for which we have to seek the approval of the workers’ union and let the union get involved. That is one thing we have gradually accepted and recognized. Therefore, with regard to the involvement of the Chinese management, the upside is that the workers’ feelings are respected more than before, and the downside is that the workers’ esteem is lost, the acumen is lost, and responsibility is shifted upward, [the workers] being reluctant to accept responsibility. This is what happens sometimes (Interview at Sino-Japanese joint venture No. 3, transcript, p. 3).

216

chan kwok-bun and vivienne ho luk

To tackle the problem in this company, the Japanese proprietor organised a course in Japanese culture in the firm, and Chinese workers were lectured on the merits of the Japanese work ethic, but no similar course in Chinese culture was forthcoming. At odds with the Japanese cultural norm was the peculiar behavior of some Chinese engineers insisting on being addressed by their professional title, to the annoyance of the Japanese. Though conservative in their outlook, the Japanese were pragmatists. If and when conflicts did arise, they would rather bury the hatchet and get on with business. The Japanese frowned upon internal bickering. They hated to see the problems of their organization make the headlines in the local press, and they flatly rejected press interviews. The Chinese penchant for regional parochialism and kinship-oriented factionalism was another anathema to the Japanese. Job-hopping Chinese workers also flew in the face of Japanese managers, who valued loyalty over pecuniary rewards. To rectify the situation, Japanese managers offered staff training courses to their Chinese staff. The Japanese investors adopted the US protocol for staff development, the promotion of work safety (a notorious problem in the Chinese workplace), and operational knowledge as part of staff evaluation. Most Japanese firms were results driven. Workers were prohibited from chatting on the shop floor or truancy. Japanese factory rules and regulations were laid out in meticulous detail. As the Japanese saw it, wage differentials in China were predicated on the economic principle of opportunity cost, relative efficiency, and the different standards of living in Japan and China, which justified the awarding of higher salaries to expatriate Japanese executives. However, Chinese workers have been socialized into the communist ideology of distribution that is based on equalitarianism, and of equal pay for everybody. In actual practice, however, many Chinese managers nowadays subscribe to the Japanese wage policy. A Chinese manager in a Japanese enterprise that produces accessories for computer printers agreed: Under this remuneration system, it is indeed unfair at the beginning, it’s like getting used to eating ‘the big rice bowl,’ but suddenly comes the responsibility system, and there is a psychological imbalance too, feeling that, “I believe I have contributed a lot, why should I receive less than the others?” At this point, the contradiction is enormous, and that’s why some people have quit. Just as our boss has said, the assessor and the assessed have a different stance—they think differently. I

conflict management strategies and innovation

217

feel our boss is more correct, that is what I believe in: the more you work, the more you get (Interview at Sino-Japanese joint venture No. 4, transcript, p. 1).

Strategies of communication also varied. The Chinese managers supplied detailed explanations of the work procedure to the Chinese workers, whereas the Japanese managers demanded strict compliance to specifications. Japanese culture is characterized by strong feelings of national unity, social cohesion, self-discipline, and selfdenial. To a Japanese manager, once a policy is formulated it ought to be implemented strictly. In contrast, Chinese workers need to be told what and how to go about doing things. Moreover, they need to be motivated by material incentives. Efficacy of Conflict Resolution Strategies Over the course of our interviews at Sino-Japanese joint ventures, a variety of strategies of coping with conflicts were identified: avoidance/retreatism, accommodation/reconciliation, consensus building/ consultation, preemptive attack/confrontation, negotiation/competition, collaboration/compromise, and bureaucratic buck passing. At any one time, one strategy or a combination of many could be deployed, and their effectiveness varied according to the nature and gravity of the issue in question. A cross-cultural approach to conflict resolution in joint ventures has the advantage of integrating the best practices of both Eastern and Western methods in a cross-cultural setting. What comes out of this hybridization of Eastern and Western strategies is a new corporate culture that is an emergent localized or sinified corporate culture. Constructive or cooperative (as opposed to disruptive) conflict resolution often leads to a better understanding between the business partners, and hence the strengthening of the partnership. If there were no conflicts, then the partners would be deprived of the opportunity to get to know each other better. Frequently, disagreements revolve around the quality of products, and many contradictions are resolved through frequent consultation or mediation. In many conflictive situations, the Chinese Communist Party (CCP) representative in the factory sided with the Chinese disputants. The Japanese proprietors could not help but be more acquiescent, which thus avoided overt conflict. One strategy that was used by the Japanese managers was to organize training courses in Japanese culture and work ethics in which Chinese workers learned about

218

chan kwok-bun and vivienne ho luk

Japanese business practices. Nevertheless, lessons in Japanese management inevitably created acculturative stress for the Chinese workers. When asked if the training course in Japanese culture was targeted at the Chinese staff, a Chinese human resources manager explained: Yes, you can say that but there is no deliberate attempt to force one to accept the Japanese culture, although plenty of textbooks come from Japan. Objectively speaking, it achieves the desired effect (Interview at Sino-Japanese joint venture No. 3, transcript, p. 3).

Confucianism has shaped the basic value system of the Japanese. In Japan, Confucianism has been actively promoted by politicians, corporate leaders, and educators. The Confucian value of social harmony and the doctrine of benevolence have nourished a relatively conservative and pragmatic worldview among the Japanese people. Japanese managers did not like publicity any more than their Chinese colleagues did. Communication did not constitute a serious problem, as many Chinese managers could speak Japanese. In Sino-Japanese joint ventures, differences of opinions were usually reconciled by reasoning and coordination. Not every Japanese manager was an autocrat. As long as Chinese workers were told clearly what was expected of them, conflicts were satisfactorily resolved. By far the prickliest problem was wage discrimination, but given the present wage system in China that pays according to the work that is done, there was nothing much that Chinese wage earners could do. As the income gap in China widened, the Japanese investors were able to find justifications for wage differentials, and, at any rate, were unlikely to pick on discontented Chinese workers in their factories. Moreover, they had no quarrels with the way in which the Chinese managers handled human resource issues in their factories. Japanese investors were able to respond to the Chinese reality with flexibility and patience, and resolved their disagreements by persuasion rather than coercion. On the contrary, as one Chinese manager observed in an interview, the Chinese managers punished defiant workers with fines, adding that if a carrot did not work, then a stick would certainly bring the recalcitrant workers back in line. Japanese managers, however, expressed serious misgivings about such a punitive tactic. Conflict-Change Process of Dispute Resolution Japanese Confucianism has been a driving force behind Japan’s rapid economic growth in the pre- and post-War eras. China and Japan

conflict management strategies and innovation

219

share some traditional Confucian norms. Paradoxically, however, conservative Confucianism also proves to be a formidable stumbling block to change when change is integral to renewed economic growth. In Japan, there have been numerous attempts at managerial reform, such as the abolition of permanent employment and the attempted construction of a new corporate culture. One could argue that the impact of national values on economic performance cannot be overemphasized. It could also be argued that conservative values such as Confucianism have outlived their use, and have become a curse for economic revival. (Tai, 1989) Perhaps, then, Confucianism needs be sidestepped to clear the way for a major political and economic overhaul. This inevitably raises the question of what social values, after traditional Confucianism is shelved, could possibly fill the ideological void in terms of business ethos. After all, guiding values are social products that grow out of a long process of social interaction. Perhaps some illumination could be found in the current industrial reform in China. Chinese managers in the state enterprises have learned from the capitalist West to be more competitive and costefficient by downsizing the production line and improving quality. However, the idea of trimming the workforce has certainly not gone down well with Chinese workers, who were practically guaranteed a job for life in the state sector until recently. A new kind of work ethic is thus sorely needed. Under the influence of Western management, Chinese enterprises have been talking about the need to develop a corporate culture and corporate governance with distinctive Chinese characteristics. The onset of Sino-foreign joint ventures provides a good opportunity for Chinese managers to fashion a new corporate culture under a new management, and a new corporate identity that they can call their own. On one visit to a Sino-Japanese joint venture, we discovered that the Japanese management was adapting to change in the Chinese business environment with considerable success. It was claimed that in this establishment there was “a good mix of 50 percent Japanese thinking and 50 percent Chinese thinking.” Likewise, the Chinese were amenable to the Japanese style, which resulted in a cross-fertilization of what were perhaps the best practices of both Japanese and Chinese management. The outcome of such integration was an embryonic form of a sinified corporate culture in some of these Sino-foreign joint ventures. A Japanese manager described the dynamics of SinoJapanese cultural interaction thus:

220

chan kwok-bun and vivienne ho luk This company has Japanese and Chinese staff. Sometimes we consider their opinions. This [cultural change] is a good sign. The Chinese staff here have changed considerably . . . The change is in their ability to understand the way we think and do things, and gradually get used to it. Japanese and Chinese people have a different way of thinking and doing things (Interview at Sino-Japanese joint venture No. 3, transcript, p. 5).

Elsewhere, the change of Japanese-style management and the fashioning of a new enterprise culture was summed up by a Japanese analyst: Since the collapse of the bubble economy . . . Japanese business is experiencing agonizing pain over structural change and the creation of a new synthesis. Companies are forced to sell off their welfare/recreational facilities, to adopt an early retirement system, and to scrap excess production facilities. The practices that were so praised in the 1980s are now totally rejected and nowhere to be found (Ohtsu 2002: 409).

Sino-Taiwanese Joint Ventures The Most Common Forms of Conflict and their Causes Taiwanese managers were criticized by Chinese workers for their chauvinism, and for being patronizing and paternalistic. An effective coping strategy that was adopted by Chinese workers to overcome this problem was to resort to organizational networks to realize their personal and organizational goals through bureaucratic channels. Similar to the situation in the Sino-Japanese joint ventures, there had been a lack of trust between the Taiwanese and the local managers. Although many Taiwanese investors were keen to cultivate a specific market niche in mainland China for their value-added gadgets and finished products, they lacked the requisite management skills to sustain a smooth working relationship within the local Chinese management team in joint ventures. It would not do to simply transplant the Taiwanese management style into local companies, and neither would it work to look at their Chinese colleagues as poor cousins who were longing desperately for their fresh inputs of finance and technical know-how. The highly militarized style of management that is characteristic of Taiwanese companies invariably invoked the wrath of Chinese workers. The Taiwanese and the local Chinese did not see eye to eye on many issues. As a result, there was a social distance between them.

conflict management strategies and innovation

221

Since the burst of the bubble economy, the Taiwanese economy has been sliding, whereas the Chinese economy has been holding its own. Economic pundits have prophesized that as the two economies converge, their ways of thinking will become congruent. This raises an interesting theoretical question of whether economic development predates democracy, or whether the opposite is true. China-watchers point out that since the inception of the market-oriented economic reform in China, a new middle class has gradually emerged that jealously guards its newfound freedom and quality of life, and its value system has also changed. Many Chinese managers that we interviewed expressed that they did not want to become workaholics as many senior administrators in the West were. Although traditional Confucian values still hold sway in Taiwan, Chinese mainlanders live in the shadow both of conservative Confucianism and radical Maoism, and are torn between feudalism and transitional socialism. Both Taiwanese and Chinese managers in international joint ventures are presently going through a stage of cultural adaptation and synthesis, and the acculturative stress affects the behavior and thought of people on both sides of the Taiwan Strait. In our interviews with Taiwanese and Chinese managers, the most frequently heard criticism that was levied against the Taiwanese managers was that they were highly critical of the behavior of local workers, and did not care much about how those workers felt. It was perceived that the Taiwanese had a strong sense of superiority, and despised the local workers. They turned a blind eye to work safety and ran their factories like a family-owned business. A local Chinese manager put it bluntly: Some Taiwanese don’t pay attention to this [a fair way of doing things]. This is what I have said before: as investors, we can talk freely. Many managers are hired from Taiwan, and some have no work experience as cadres, but they show off and claim that: ‘I am a Taiwanese through and through.’ But what is a ‘through-and-through Taiwanese?’ . . . In the 80s, their [the Taiwanese] sense of safety was very poor. At that time, a lot of workers died in fires. But the men they [the Taiwanese] have hired are not paying any attention to this [safety] . . . It is just that our styles of management are so different. They have a familytype management, an autocratic style, that is, “you work for me, I call the shots whether it is right or not; if I tell you to do it in this way, you do it” (Interview at Sino-Taiwanese joint venture No. 1, transcript, pp. 4–5).

222

chan kwok-bun and vivienne ho luk

The Taiwanese managers did not seem to understand that in mainland China, bureaucratic power is so overwhelming and pervasive that it affects everybody. Properly harnessed, however, this bureaucracy could be a big boost to worker morale. Salary discrimination topped the list of conflict in Sino-Taiwanese joint ventures. Lingering fear and mutual suspicion prevented the Taiwanese managers from working in close rapport with the mainland Chinese. As was revealed in several of our on-site interviews with both Chinese and Taiwanese managers, the Taiwanese had a bunker mentality toward the Chinese, and there was a very serious problem of miscommunication and mistrust within these partnerships. Taiwanese informants indicated that the local Chinese blindly worshipped authority, are over-socialized by the official media, harbored an outward sense of deference to the Party leaders, and displayed a proclivity to solve personal problems by resorting to the bureaucratic apparatus. However, the Taiwanese adopted an ironclad management style, and created a production system that was highly regimented and oppressive, which was seen as an outdated business culture that was abhorred by the local workers. Our Chinese interviewees also indicated that Asian businessmen were not as generous and law-abiding as Western businessmen. For instance, the Chinese labor law requires foreign investors to fund trade union activities, but Asian businessmen tended to drag their feet on this. A Taiwanese informant also noted that Chinese workers used falsified educational credentials to apply for jobs. Moreover, employment contractual problems often drove a wedge into the already strained relationship between labor and management. Still clinging to the archaic idea of an all-mighty bureaucracy of Maoist China, modern Chinese management theory has only just begun to catch up. Chinese workers do not know anything of career planning, and many of them are transients from other provinces. We were told in an interview that as soon as these migrant workers have earned enough money, they return to their hometowns, build houses, and move on to something else. In fairness, as one Chinese informant conceded, foreign investors are becoming more humanistic in their dealings with Chinese workers, and thus the workers are slowly becoming more abiding and stable, but there will not be a sudden and complete changeover. A Chinese human resources manager from Hong Kong explained:

conflict management strategies and innovation

223

We are able to see that the way they [the foreign investors] deal with the local people may be more humanistic, that is, more humane, not in a completely rigid way; it is this system that we see is changing. The culture here, on this side, as I said, won’t be a hundred percent change; that is impossible. Any enterprise operating in another country can’t change the way its workers think, or their culture, a hundred percent (Interview at Sino-Taiwanese joint venture No. 3, transcript, p. 23).

The Efficacy of Conflict Resolution Strategies Chinese workers in state enterprises relied on the organization to help resolve their problems, and in return gave the organization their support. The Chinese bureaucracy is known for its resilience against any attempts to reform it. It is never easy to confront vested interest in building a new culture in a state enterprise, let alone to turn an old, bulky, inefficient state enterprise into a profitable and competitive business proposition (Brand 2000: 85–121). Nevertheless, since the global economic recession set in, Taiwan’s production costs, rising wages, labor shortages, and escalating land prices have driven Taiwanese investors to greener pastures in other parts of the world, and the Chinese mainland is the most immediate choice. As soon as the Taiwanese were permitted to invest in the mainland, constant flows of capital were directed toward many of the new economic zones, with the amount of capital now nearing the level of that in Hong Kong, and rapidly surpassing that of the Southeast Asian countries. Taiwanese entrepreneurs were initially attracted to China because they share a common heritage of culture and language, or so they thought. However, Taiwanese businessmen found out in no time that doing business in China was anything but plain sailing. Many Taiwanese investors discovered to their dismay that they could not transplant their managerial skills to their operations on the mainland, and neither did their lack of cultural awareness of stereotyping behavior win many friends. The conflict resolution strategies of Taiwanese managers differed from those of their mainland colleagues. Chinese managers tended to resolve problems together with their co-workers, whereas Taiwanese managers treated them as personal affairs. The way in which the Taiwanese dealt with a problem smacked of patriarchalism, and their Chinese colleagues were often left in the dark about developments. Despite a common language, there was a serious failure of communication. Taiwanese managers

224

chan kwok-bun and vivienne ho luk

favored a military style of management, but a militarized management style has not been effective in the mainland because the majority of Chinese workers are accustomed to a more informal and less regimented way of life. A recent study reported a litany of complaints that Taiwanese entrepreneurs levied against Chinese workers, such as malingering, disobeying instructions, uncooperativeness, lack of personal commitment, and, worst of all, an idealistic ‘iron rice bowl’ communist egalitarianism (Schak, 1999: 236–66). One of the commonly used coping strategies in the Sino-Taiwanese joint ventures was to wage a discipline-enhancement campaign that was composed of practical and moral-political ingredients such as a propaganda drive with sloganeering, individual and group psychological counseling, coercion, and material incentives. As a last resort, the Taiwanese management employed a more humanistic approach of appealing to the conscience of the local workers, which was not as effective as the material-based strategy because of the short-sightedness and low level of formal education of the Chinese workers, most of whom were migrant workers. The Taiwanese diversified their investments in the mainland to hedge against their losses, and were prepared to make financial concessions to their Chinese partners and modify their managerial method to accommodate the idiosyncrasies of Chinese management, which puts a premium on social relations, the right to work, and social security. The rekindled cultural awareness of the Taiwanese managers enabled them to modify their single-minded preoccupation with cost-cutting and efficiency. One of the worst managerial problems that haunted these partnerships was a deliberate attempt by both sides to block vital information and technology transfers, whereby the Chinese managers did not know what the Taiwanese managers were doing and vice versa. This was a tacit rejection of each other’s methods of management, and was less an example of incompatibility than mutual hostility. Conflict-Change Process of Dispute Resolution Though Taiwanese and mainland Chinese share a common cultural heritage, the cultural chasm that separates them is all too evident. The ‘two Chinas’, as cynics call it, are slowly drifting apart as both governments play power politics and indulge in scare tactics across the Taiwan Strait, while the US government acts as a power-broker, playing one side against the other.

conflict management strategies and innovation

225

Both Taiwanese and Chinese joint venture partners are going through a stage of reciprocal cultural adaptation and sensitization, which is being mediated by the economic exigencies that are peculiar to joint ventures in China, the structural limitations of reform of the state sector, the economic imperatives of the Taiwanese entrepreneurs to expand the export market, and the capitalization of bilateral projects in mainland China. At the same time, industry in China is also adjusting to a restructuring of the economic landscape, especially in the reform of the state sector to stamp the tide of recurrent deficits (Brand 2000). Despite the vicissitudes of the managerial acrobatics that have been experienced by Taiwanese investors in mainland China, none of the Taiwanese businessmen we interviewed expressed the desire to pull out of China or regretted having invested there. The reason is simply that it is still profitable to do business in mainland China, however meager the margin might be. Meanwhile, they were looking forward with eagerness to the potential of a huge market share that will be the reward of investment in the vast Chinese hinterland and the coastal cities. In many Sino-Taiwanese joint ventures, from what we can gather from our interviews, there appeared to be a diversification of communicative strategies, a willingness to learn from each other’s managerial experiences, a strengthening of on-site training and an increasing awareness of the culture of the other partner. As has been previously pointed out, the Taiwanese management had been able to incorporate many local conditions into their existing practices to improve the working relationship, while at the same time capitalizing on China’s fledging capitalist economy. A new and localized corporate identity is beginning to take shape in many Sino-Taiwanese joint ventures. Sino-Korean Joint Ventures The Most Common Forms of Conflict and their Causes Korean personnel generally had higher salaries than the local Chinese, and this discrimination created a racial conflict within the workforce. The Korean management also took labor discipline seriously, and found little difficulty in sacking workers who were engaged in frivolous bickering. The communicative strategies that were adopted by Chinese workers and Korean managers also varied. One Korean

226

chan kwok-bun and vivienne ho luk

informant told us that Chinese workers did not mean what they said, and that when the Chinese said that they understood, they actually did not. Koreans praised Chinese workers who apologized after they had made a mistake, but claimed that the Chinese did not like to admit guilt. A Korean manager explained: I have told a Chinese colleague, “If a Korean scolds you, you must not talk back, but say simply, ‘I know’ or ‘I am sorry, I made a mistake.’” That’s it, but the Chinese just won’t say it. Then, the Koreans ask why it is so difficult for the Chinese to say they are sorry. Our colleagues just won’t budge. Afterwards, I asked them why they didn’t say it. They replied, “we don’t have that habit” (Interview at SinoKorean joint venture No. 4, transcript, p. 6).

Nevertheless, our Korean informant was quick to add: The remainder of things, I feel, is okay. Now, the [Chinese] workers accommodate the boss’s culture more (Interview at Sino-Korean joint venture No. 4, transcript, p. 6).

In social discourse, communication was not a serious problem, as many of the Korean managers spoke a little Putonghua, or communicated through an interpreter. Chinese work habits were different from those of the Koreans. Korean managers wanted Chinese workers to tidy up their own workplace after work, but Chinese workers did not comply. Outside the compound, Chinese and Koreans had little contact, and lived in separate dormitories. Not knowing the logic of the Chinese mind, the Koreans felt that the Chinese bureaucracy was very difficult to deal with. The Koreans insisted that if a Chinese worker could not complete a job on schedule, he or she ought to report this fact immediately and explain why. They got very upset if a Chinese worker promised to do something but failed, and they loathed workers who bragged. A Chinese manager who was responsible for merchandising explained: Things are improving now. In the past, the boss always felt the Chinese system was different, and that it was very hard to get things done. That’s why he often said to me, “In Korea, it is easy to do this thing, but in China, it’s so hard” (Interview at Sino-Korean joint venture No. 5, transcript, p. 1).

The Korean managers could be quite flexible about punctuality, but they invariably set a high standard for the quality of work. During an interview, a Korean CEO characterized Chinese workers as selfish

conflict management strategies and innovation

227

and poor rule-followers. A Korean manager said that Koreans were caring people and liked to teach each other, whereas the Chinese were selfish, egotistic, and overly self-protective. The Chinese managers valued the good character of workers, whereas Koreans emphasized talent. There had also been some disagreements over customer service, because the Chinese way of dealing with customers was not agreeable to the Korean management. Like the Japanese, the Korean investors lamented the disloyalty and inconsiderate behavior of their Chinese workers. A Korean CEO made this remark: Korean workers are more efficient, and they have higher salaries [than the Chinese]. There are plenty of work opportunities in Shenzhen; therefore it’s easy to switch jobs. In the North, it’s difficult. But in Shenzhen, Chinese people change jobs frequently. Koreans won’t jobhop; once they’ve got in, they work hard at it, fighting for opportunities for advancement. The higher they get, the more loyal they become. I myself have worked in a big company for over twelve years, and I have never changed job. This is the only time I’ve come out [to set up this company], and it is a company I own myself (Interview at Sino-Korean joint venture No. 3, transcript, p. 1).

Many Korean investors had made it a company policy that slow workers could be upbraided, and that dismissal was not a practical option, although the level of salary varied according to performance, and was not discussed publicly. As with the Taiwanese enterprises, the Korean factory rules were written out in meticulous detail, and indeed the Korean managers generally had an eye for detail. The Chinese managers were not as interested in delving into the nittygritty. Rather, they emphasized the all-round development of the workers. As to work attitude, Koreans took their work seriously, but were not as harsh as Japanese proprietors. Chinese, Koreans, and Japanese share many of the traditional cultural norms of Confucianism, and comparatively speaking, Korean culture is positioned between that of the Chinese and the Japanese. Efficacy of Conflict Resolution Strategies If and when labor-management conflicts occur in China, especially regarding salary and other welfare benefits such as bonuses, the trade union often steps in. However, Korean managers were not at all comfortable with union intervention. Chinese workers often fell into

228

chan kwok-bun and vivienne ho luk

the habit of quarrelling, and in certain cases that were reported to us, the Korean management had to fire the squabbling workers immediately, which antagonized the unions. The Korean managers were known for getting irate inside the establishment whenever workers questioned their style of handling discipline. What some Korean managers did to mitigate this was to adopt a strategy of using Chinese people to manage Chinese workers. A Korean manager in Shenzhen explained why: If the Chinese management style is different, wouldn’t it be better if the Korean boss is more responsive? I sometimes feel that it’s better if the Chinese manage the Chinese. You can’t easily harmonize Chinese and foreign styles of management. But after going through this kind of conflict, it is, as a matter of fact, beneficial to the company, because if we don’t spit it [the conflict] out it can never be understood, and as we all understand that this is a problem of cultural differences we may try even harder to understand each other. That’s why Chinese workers who have been around Korean companies long enough have come to know the Korean people a little better (Interview at SinoKorean joint venture No. 4, transcript, p. 6).

As noted previously, Chinese and Korean management styles were often at loggerheads with each other. Among other forms of conflict, the more noteworthy included the criteria for staff evaluation. The Koreans disclosed the outcome first, and explained later, whereas the Chinese explained the reasons first, and then revealed the outcome. Korean managers kept the results of staff evaluations in strict confidence, whereas Chinese managers publicized the results. The two sides had different conceptions of work ethic and time. Korean managers liked workers who were devoted to their work, and kept their workstations neat and tidy. Although the Korean managers were quite flexible about punctuality, they took deadlines seriously. In many cases, as our Korean interviewees told us, Korean managers refrained from using a heavy-handed approach in dealing with recalcitrant Chinese workers. Rather, they patiently reasoned with them, got their points across, and tailored the work according to the skills and talents of the individual Chinese workers. A Chinese manager indicated that many Korean managers seemed to have an uncanny ability with words. They were extremely persuasive, and this helped to allay a lot of tensions between the Korean managers and the Chinese workers. A far-reaching conflict resolution strategy that was often adopted by Korean management was, like

conflict management strategies and innovation

229

the Japanese approach, to provide labor training courses for Chinese workers to inculcate the concepts of corporate loyalty and togetherness, while at the same time holding back unjustified terminations of employment contracts to stave off interference from the unions. Nevertheless, in many conflict situations, the Koreans favored an internal and direct approach to conflict resolution, whereas in others they allowed the conflicts to be resolved through mediation or arbitration by a third party. A long-term strategy of conflict resolution was grounded in the opening up of more communication channels, a willingness to learn from each other, and an inculcation of an innovative, adaptable, and responsive corporate culture. The Conflict-Change Process of Dispute Resolution Over the last decade, Korean corporations have been attempting to reform their management methods according to the American and Japanese models. Korean companies began to adopt a non-sexist recruitment policy, a performance-based remuneration system, a less authoritative managerial style, a more efficient decision making mechanism, and even a new dress code. There has been an encouraging trend of a reduced level of labor-management confrontations overall. A Korean manager indicated that the managerial buzzwords in the new corporate culture in Sino-Korean joint ventures are flexibility and adjustment. Koreans had attuned themselves to the local culture after they became more sensitive to the multi-faceted norms of Chinese society. There had been a difference between Korean businessmen and their Chinese collaborators in how to interpret joint venture contracts. Whereas the Koreans adopted a strict application of the provisions of the contract, the Chinese adopted a liberal interpretation of its terms. If the Koreans had not adopted a more flexible approach toward doing business in China, then they would have packed up and left before their investment plans had got off the drawing board. A Korean CEO remarked: When I returned to Korea, some of my friends said I had changed a bit after I had worked in China. But I myself don’t feel anything (Interview at Sino-Korean joint venture No. 6, transcript, p. 6).

He continued: The Chinese have come to our company and have learned to manage it in our Korean way. I think this is good for their development . . . They

230

chan kwok-bun and vivienne ho luk have made improvements in their thinking, for example, when they perform a task, they think more, and more comprehensively. This is good for them, and besides, their motivation is heightened (Interview at Sino-Korean joint venture No. 6, transcript, p. 6).

Korean proprietors in China were beginning to see that it was important for them to shake off their traditional Korean cultural baggage of social norms and class consciousness, at least momentarily. Unless and until they do so, they are in for a tough ride in the Chinese business world. Even though Korean partners may not really have changed much of their character, the thinking about the scale and direction of future development of companies is definitely changing. A Chinese sales manager noted: [The boss] has not changed much; he has been very supportive though. Whatever he does he does it for a good reason. If you do it correctly, he will praise you; if you do it wrongly, it’s normal he will say a few words. Sure, the company is changing; the boss himself may not change much, but his thinking about the future development of the company may have changed somewhat (Interview at Sino-Korean joint venture No. 3, transcript, p. 17).

The Evolution of An Innovative Cross-Bred Corporate Culture Managing conflict presents difficult challenges in joint ventures in China, and the literature is filled with many stories of good businesses that have gone sour. As conflicts cannot simply be swept under the carpet if a business is to continue and the goodwill of international relations is to prevail, effective intercultural interaction in Sino-foreign joint ventures is imperative. Managers from different cultural backgrounds are prone to conflict over the reconciliation of profit-sharing schemes, styles of management, and many other procedural matters. Perhaps the only way out is a willingness to accommodate one another’s options and to work together as a team for a common goal. A manager will opt for different conflict resolution strategies on a trial-and-error basis to deal with a dissenting colleague from a different culture. This requires the concerted effort of managerial adjustment, a high degree of adaptability, incremental learning and unlearning, and continuing adaptation and adjustment. At the corporate level, conflict resolution signifies a fundamental systemic change through administrative trial and error. At the individual managerial level, it denotes a stressful process of acculturation

conflict management strategies and innovation

231

in many key areas of business in China, such as searching for appropriate responses to unfamiliar practices in human resource management, the redistribution of benefits, technology transfer, and the transfer of modern managerial know-how. The outcome of organizational and managerial experimentation is the gradual emergence of a new corporate culture and identity, and a new species of ‘global managers’. However, no corporate culture can transplant itself with complete success into an alien culture. Multinational corporations that attempt to graft their home cultures onto local enterprises run into difficulties. The mindsets of foreign and local managers need to be reoriented to suit a new business culture, and to meet the challenges of the multicultural dimensions of globalization. Several conflict resolution strategies can be identified in a crosscultural, multi-national corporate setting in response to both cultural and structural constraints. The major cultural constraints in the Sinoforeign joint ventures in this study of ours pertained to the differential manifestations of traditional Confucian values as practiced by Chinese, Korean, Japanese, and Taiwanese managers. The key structural constraints were generated mainly by the peculiar nature of multi-equity joint ventures, in which foreign partners had different investment objectives, such as profit making, than the Chinese, who emphasized the transfer of technology and modern management skills over purely commercial profit. The historical specificities of a socialist transitional economy such as China, where the power of the Chinese bureaucracy still dominates every aspect of socio-economic life, have created institutional constraints that have a large impact on performance. Broadly speaking, in the present study, conflict resolution strategies can be differentiated as cooperative, conciliatory, or disruptive. Acquaintance with such conflict resolution strategies is an important initial step in guiding ‘global managers’ to successfully navigate the transition from mono-cultural to multi-cultural global management. Yet corporate culture is not a cut-and-dried concept. Itself an amorphous entity, it is constantly evolving, and is consequential to the transactions between foreign and local cultures. In today’s global business environment, change is the name of the game. Society exists in a state of dynamic equilibrium, wherein the resolution of conflict provides new opportunities for change, both individual and corporate. The evolution of an innovative crossbred corporate culture in Sino-foreign joint ventures is enhanced by the frequent interactive processes of dispute resolution, conflict regulation, and the intersection

232

chan kwok-bun and vivienne ho luk

of conflict outcomes whenever they occur. As was indicated earlier, where dispute resolution strategies are invoked to resolve conflicts between business partners, they set off a cross-fertilization of Sinoforeign corporate cultures. Three major dispute resolution strategies are noteworthy in Sino-Japanese, Sino-Taiwanese, and Sino-Korean joint ventures: disruptive, conciliatory, and cooperative strategies. Disruptive Strategy Confucianism has shaped the basic values of the Japanese, Chinese, Korean and Taiwanese peoples. In many of the conflictive situations in the Sino-foreign joint ventures in this study, the CCP representative and the local workers stood on the same side. Following the lead of Korean and Taiwanese proprietors, a coping strategy that some Japanese managers undertook to defuse an explosive situation was to organize training courses in Japanese culture and work ethic for the Chinese workers. Nevertheless, lessons in Japanese management inevitably created acculturative stress for the Chinese workers. Moreover, many Japanese managers insisted on using their own ideas, especially in doing business with Japanese customers. Wage discrimination was another problem. However, as the income gap in China is widening, Japanese investors were able to find justifications for not changing the existing wage policy. In addition, whereas some strict Chinese managers in Japanese joint ventures punished deviant workers with fines, the Japanese managers expressed serious misgivings about the efficacy of such a tough stance. The way in which the Taiwanese tackled a problem conjured up a picture of feudalistic patriarchalism. Taiwanese managers favored a military style of management, laced with material incentives and moral-political indoctrination. The conflict resolution strategies of the Taiwanese managers differed considerably from those of their mainland colleagues. The Chinese managers resolved problems jointly with their co-workers, whereas the Taiwanese managers treated them strictly as family affairs, and left their Chinese colleagues out. The militarized management style was not effective in mainland China, because the majority of Chinese workers are under-educated. Furthermore, one can detect, in Sino-Taiwanese joint ventures, a deliberate attempt on the part of both sides to hold back vital information from one another, obstruct technology transfer, and reject each other’s method of management.

conflict management strategies and innovation

233

The management style of the Korean managers was at odds with that of the Chinese. The Korean managers summarily sacked bickering workers, but this antagonized the workers’ union. One clever conflict resolution strategy that was adopted by the Koreans was to use the Chinese to control the Chinese. However, if and when labormanagement conflicts did occur, especially regarding salary and other welfare benefits such as bonuses, the Chinese trade union stepped in. The Korean managers were not at all happy about union meddling, but the Chinese bureaucracy is still an awesome force to be reckoned with, even in today’s China. However, the strategy of confrontation led to a standoff between labor and management, if nothing more. Conciliatory Strategy In Japanese joint ventures, contradictions were resolved through frequent consultation or mediation, and direct confrontation was to be avoided whenever possible. As the Chinese Communist Party (CCP) representative in the factory often sided with the Chinese disputants, the Japanese proprietors could not help but back down, which thus avoided overt conflict. As long as there was a clear understanding between the Chinese workers and the management, most of the conflicts were resolved. The Japanese investors were able to respond to the Chinese reality with flexibility and patience. Chinese managers reined in rebellious workers by punishing them with fines, but the Japanese managers expressed serious misgivings about such a tactic, usually preferring a more conciliatory approach. It seems that the Japanese managers were learning to cope quickly in a rapidly changing China. In many cases, the Korean managers refrained from using a heavyhanded approach in dealing with defiant Chinese workers. Rather, they patiently reasoned with them, and tailored the work to their abilities. The Koreans also allowed conflicts to be resolved by mediation or arbitration. Korean corporations have been attempting to reform their own management method according to American and Japanese models. There has been an encouraging sign of a muchreduced level of labor-management confrontations in Korean and Japanese companies. Many Koreans have grown more sensitive to the local culture, and the local Chinese have reciprocated by being more sensitive toward Korean culture. Korean proprietors are beginning

234

chan kwok-bun and vivienne ho luk

to see that it is important for them to jettison their cultural baggage. An ideal conflict resolution strategy will materialize only after a relatively lengthy period of administrative trial and error, and a willingness to adopt each other’s cultural traits and social patterns. The Taiwanese investors were often surprised to discover that they could not transplant without modifications their old managerial skills directly to their operations in the mainland. The conflict resolution strategies of the Taiwanese managers differed significantly from those of their mainland colleagues. In a show of goodwill, however, the Taiwanese management employed a more conciliatory approach by making many changes, such as working more closely with the Chinese as a team, as the Korean and Japanese proprietors had done. Additionally, the Taiwanese are now diversifying their investment strategies to recoup their losses, and are prepared to make further financial concessions to their Chinese partners while modifying their managerial method to accommodate the eccentricities of the Chinese management. The Taiwanese managers also rectified their previous obsession with cost cutting and efficiency, and began to pay attention to the needs of the local workers. Cooperative Strategy A cross-cultural approach to conflict resolution in joint ventures has the advantage of integrating the best practices of Eastern and Western orientations. What has come out of this hybridization is an embryonic formation of a new corporate culture that is a localized or sinified corporate culture and identity. A constructive or cooperative (as opposed to disruptive) conflict resolution strategy has led to a better understanding between the Chinese, Japanese, Taiwanese, and Koreans, and has consolidated many partnerships. Conversely, the absence of conflict may have deprived some partnerships of the opportunity to sort out differences and to arrive at resolutions. In many conflictive situations in Sino-foreign joint ventures, the CCP representative in the enterprise invariably acts as an arbitrator, for better or for worse. One positive strategy that the Japanese, Korean, and Taiwanese managers used to cope with labor disciplinary problems was to organize courses in individual corporate cultures and work ethics. In some instances, the CCP representatives offered their own training sessions to impart a socialist corporate culture to the enterprise. An interface was then created between foreign and Chinese

conflict management strategies and innovation

235

corporate cultures, which fostered a new, localized, and adaptive corporate culture in these Sino-foreign joint ventures. Nevertheless, lessons in Japanese, Korean or Taiwanese management skills inevitably created acculturative stress for Chinese workers, but these in turn created the need for new coping strategies, which subsequently led to further adaptive changes. A long-term strategy of conflict resolution should be predicated on the opening up of communication channels and the allowance of diverse communicative styles, in addition to a willingness to learn from each other and an inculcation of an innovative, responsive, and localized corporate culture and corporate identity. Tensions could also be considerably reduced by cooperating more closely with the trade union. In Sino-Korean joint ventures, the Koreans favored an internal and more direct approach to conflict resolution or arbitration. Although still controlled by patriarchal Korean families, Korean corporations, like their Japanese counterparts, have been able to face challenges with enough flexibility and adaptability. Chinese workers have also taken a positive step in the direction of embracing Korean and Japanese cultures after having worked for some time in these companies. In Sino-Taiwanese joint ventures, despite a serious failure in communication, the Taiwanese managers were able to pursue a humanistic approach by appealing to the conscience of the local workers in an attempt to settle differences. However, this strategy was not as effective as the punitive measures that were formerly used. Similar to the actions of the Japanese and Korean companies, Taiwanese management had been able to incorporate many local conditions into their existing practice to improve their working relationship with the mainland Chinese, such as by toning down their formerly militarized mode of management. As a consequence, a new and localized corporate culture of various shades and hues appeared in Taiwanese joint ventures, as transpired in the Sino-Korean and Sino-Japanese joint ventures. Discussion and Conclusion This study presents a conceptualization of conflict management or resolution strategies for human resources issues in Sino-Japanese, Sino-Taiwanese, and Sino-Korean joint ventures. Such a conceptualization is predicated on a conceptual framework and analytical

236

chan kwok-bun and vivienne ho luk

strategy that is comparative in approach and justified by a selection of socio-cultural indicators that are considered universal to all of the social formations that are under study here. Our study concludes by providing a synopsis of the three major conflict management or resolution strategies that were adopted in these Sino-foreign joint ventures, and their conflict outcomes. We argue that when such dispute management and resolution strategies were invoked to regulate or resolve conflicts between business partners, they set off a concomitant cross-fertilization of the traditional culture of Chinese enterprises and that of foreign corporations. As a result, a new sinified corporate culture emerged, rather than a displacement of either of the original cultures. Our study is primarily concerned with the conflict and change in human resources management that are an integral part of the normal processes of administrative change, and with finding enduring solutions to the conflicts that many Sino-foreign joint ventures are experiencing in China today. One of the important findings of this study is that it is useful to contemplate corporate identity as a process of identity construction during the continuous interaction between the actors who are involved in the company and its social-cognitive context. The result is that a new corporate identity will emerge from what the actors who are involved in a company wish to be and what its environment wishes it to be. Moreover, an enterprise develops multiple identities in multiple social-cognitive contexts. Enterprises are organizations; they are constructed and continuously re-constructed in ongoing social interaction. Moreover, other major findings show that studying conflict and its management and resolution highlights the intertwining and interdependent attributes of human needs, corporate needs, and the time-honored cultural values in the corporate world to reveal the evolution of a corporate culture that is constantly being defined, redefined, and imbued with fresh meaning. The meaning of corporate culture in a joint equity enterprise is subject to negotiation if and when a conflict resolution strategy is pursued by either party. The agreements that arise from this negotiation have the advantage of forming a part of a constitutive sinified corporate culture in Sino-foreign industries. This eventuality is considered consonant with a cooperative or conciliatory approach to conflict resolution or conflict regulation in joint ventures. However, when such human needs, corporate needs, or cherished cultural values are not negotiable or cannot be traded off, then a disruptive approach seems

conflict management strategies and innovation

237

more probable than a cooperative or conciliatory strategy. A disruptive approach to conflict resolution is often tension-ridden and potentially destabilizing, but a cooperative or conciliatory option is sometimes not effective in eradicating animosities completely. Therefore, a Sino-foreign joint venture that is rife with conflict needs to reduce tension to sustain corporate life, if only to render that conflict more bearable in the short term, but a conflict resolution strategy that forestalls any future occurrences of conflict necessitates a far more complicated process than is permissible with the cooperative or conciliatory management of conflict. Despite this, a cooperative or conciliatory strategy and a disruptive strategy are not mutually exclusive. In fact, all three strategies often co-exist even in the most acrimonious of conflict situations, although cooperative and conciliatory strategies collectively constitute a more realistic course of action. In looking for broad empirical patterns of conflict resolution or conflict regulation strategies in Sino-foreign joint ventures in China, this study identifies three major approaches: disruptive, conciliatory, and cooperative. Confucianism has shaped the basic value system of the Japanese, Chinese, Korean, and Taiwanese peoples. Our findings show that in many of the conflict situations that were reported in Sino-foreign joint ventures, a coping strategy of sorts was devised by the management to defuse an explosive situation. Nevertheless, different dispute management or resolution strategies were favored by different managers of different cultural backgrounds. Therefore, a foreigninitiated conflict resolution strategy that attempts to dispense with the local culture frequently creates acculturative stress that afflicts the people that are involved. For example, a conflict resolution strategy that was disruptive to management-worker relationships was highly controversial, such as the feudalistic patriarchalism of the Taiwanese managers that was detested by the Chinese workers. Similarly, on occasions, the Korean managers had recourse to a confrontational strategy in dealing with Chinese workers, which resulted in a tense relationship between Korean and Chinese managers. In Japanese joint ventures, direct confrontations were averted through frequent consultation or mediation, although in most cases, the Japanese management prevailed. At other times, the Japanese managers relented in a conflict situation, and overt conflicts were avoided when the balance of bargaining power tipped in favor of the Chinese side. When faced with a conflict event, some Korean managers avoided using a heavy-handed approach in dealing with

238

chan kwok-bun and vivienne ho luk

the Chinese workers. Similar to the Japanese approach, the Korean managers resolved conflicts through mediation or arbitration. Many Korean managers are now sensitized to the local culture, and Chinese workers have reciprocated by viewing Korean culture more positively. There is now a considerably reduced level of labor-management antagonism in Sino-Korean, Sino-Japanese, and Sino-Taiwanese companies. In these corporations, a variety of conflict resolution strategies have been attempted, and different coping strategies led to different conflict outcomes. A cross-cultural approach to conflict resolution in joint ventures had the advantage of integrating what were the best practices of the Chinese with other Asian methods. What emerged from this hybridization or cross-fertilization of Chinese and Asian strategies was a new corporate culture that is localized and sinified. Constructive or cooperative (as opposed to disruptive) conflict resolution strategies created a better understanding between the Chinese, Japanese, Taiwanese, and Koreans, and thus consolidated many partnerships. Nevertheless, cooperative and disruptive strategies often coexisted in these Sino-foreign joint ventures, although cooperative strategies were more numerous by comparison. A coadaptive situation of cooperative and disruptive conflict management took place, whereby a conciliatory strategy was ultimately accepted by each party as a ‘sub-optimal’ solution, but nonetheless a solution that was conducive to continuous cooperation. A conflict resolution strategy will not last if it openly flouts the fundamental values of a partner, and damages the interests of that partner, and neither will a joint-venture enterprise ever survive a non-cooperative, acrimonious corporate culture. However, as conflict is inevitable in Sino-foreign joint ventures, it is important to realize that only through effective conflict resolution can partners truly benefit from cooperation. Finally, an important finding of the study is that the phenomenon of organizational processes characterizing the economic restructuring that is engendered by globalization involves both the transgression of state borders by organizations seeking economic opportunities and partnerships beyond their national sites and the transformation and re-making of boundaries both within and without those organizations. This trend tends toward fluidity and the complexity of boundaries. Such a model would contemplate corporate identity as a process of identity construction during the continuous interaction between the actors involved in the company and its social-cognitive context.

conflict management strategies and innovation

239

The result is that a new corporate identity will emerge from the dialectic of transactions between the actors involved in a company and its environmental context. An enterprise necessarily develops multiple identities in multiple social-cognitive contexts. Enterprises are organizations; they are constructed and continuously re-constructed in ongoing social interaction within and without them due to diminishing time-space stability. This, however, does not imply that boundaries are disappearing; they are simply being made and re-made. Acknowledgements We wish to acknowledge the support of the Hong Kong Baptist University through a Faculty Research Grant and the contributions of Bertrand Wong and Xun (George) Wang to the study reported in this chapter. REFERENCES Bhabha, H. (1986), ‘Signs Taken for Wonders: Questions of Ambivalence and Authority Under a Tree Outside Delhi, May 1817’, in Gates, H.L. ed., Race, Writing and Difference, Chicago: University of Chicago Press, pp. 163–84. Brand, Marc D. (2000), ‘State Ideology, Global Economy and Coping Strategies: The Case of a Chinese State-owned Enterprise Adjusting to International Economic Demands’, in Heidi Dahles and Harry Wels, eds., Culture, Organization and Management in East Asia: Doing Business in China, New York: Nova Science Pub. Inc. Child, J. (1990), The Management of Equity Joint Ventures in China, Beijing: CEMI. Cohen, R. and P. Kennedy (2000), Global Sociology, Washington Square: New York University Press. Ding, Daniel (1997), ‘Control, Conflict, and Performance: A Study of US-Chinese Joint Ventures’, Journal of International Marketing, 3: 31–45. Hall, Stuart (1996), ‘Who Needs ‘Identity’?’ in S. Hall and P. DuGay, Questions of Cultural Identity, Sage Publications, p. 4. Kirkbride, Paul, Sara Tang and Robert Westwood (1991), ‘Chinese Conflict Preferences and Negotiation Behavior: Cultural and Psychological Influence’, Organizational Studies, 3: 365–86. Lin, Xiaohua and Richard Germain (1998), ‘Sustaining Satisfactory Joint Venture Relationships: The Role of Conflict Resolution Strategy’, Journal of International Business Studies, 1: 179–96. Murray, J. (1919), A New English Dictionary, Oxford: Clarendon Press, Vol. 9, Part One. Ohtsu, Makoto (2002), Inside Japanese Business, New York: ME Sharpe. New York. Peverelli, Peter (2004), ‘Chinese Corporate Space: In Search of Chinese Corporate Identity’, unpublished paper. Schak, David C. (1999), ‘Culture as a Management Issue: the Case of Taiwanese Entrepreneurs in the Pearl River Delta’, in Leo Douw, Cen Huang and Michael

240

chan kwok-bun and vivienne ho luk

R. Godley, eds., Qiaoxiang Ties: Interdisciplinary Approaches to Cultural Capitalism in South China, London: Kegan Paul, pp. 236–66. Tai, Hung-chao, eds. (1989), Confucianism and Economic Development: An Oriental Alternative?, Washington D.C.: Washington Institute Press. Tjosvold, Dean, Chun Hui and Kenneth Law (2001), ‘Constructive Conflict in China: Cooperative Conflict as a Bridge between East and West’, Journal of World Business, 36, 2: 166–83. Trommsdorff, V. and C. Schuchardt (1991), ‘Success Factors of Chinese-German Business Cooperation: A Progress Report’, in Campbell, N. et al., eds., Advances in Chinese Industrial Studies: The Changing Nature of Management in China, Greenwich, Connecticut: Jai Press Inc., pp. 205–16. Walsh, James, Erping Wang and Katherine Xin (1999), ‘Same Bed, Different Dreams: Working Relationships in Sino-American Joint Ventures’, Journal of World Business, 1: 69–93. Worm, Verner and John Frankenstein (2000), ‘The Dilemma of Managerial Cooperation in Sino-western Business Operations’, Thunderbird International Business Review, 42, 3: 261–83. Xie, Jinhong, Michael Song and Anne Stringfellow (1998), ‘Interfunctional Conflict, Conflict Resolution Styles, and New Product Success: A Four-culture Comparison’, Management Science, 44, 12: 192–206. Zhu, Guolie, Mark Speece and Stella So (1998), ‘Conflicts in Sino-European Joint Ventures’, in Jan Selmer, ed., International Management in China: Cross-cultural Issues, New York: Routledge, pp. 13–28.

Chapter 11

Conflict and Innovation in International Joint Ventures: Toward a New Corporate Culture in China Chan Kwok-bun, Vivienne Ho Luk, and Xun (George) Wang Since the late 1970s, Chinese leaders have encouraged foreign investment in China. With a huge market of potential customers and a large low-cost labor force, China continues to attract foreign capital for its industrial development and economic growth. China’s need for foreign investment is huge. The Chinese government estimated that by the end of 2004, the country would need $74.4 billion in investment. Foreign investors have been impressed by China’s high-speed economic growth over the past two decades. They invest ambitiously to capture a share of the vast Chinese market. Many multinational corporations and international joint ventures have been set up in China since the early 1980s, and more will be expected to enter the fray now that the country has joined the World Trade Organization (WTO). Unfortunately, conflict in interpersonal interaction plagues many of these international joint ventures in China; foreigners and Chinese have been unable to resolve conflict satisfactorily. The Department of Labor reported that the number of disputes in enterprises with foreign investment increased by 74.4 percent in 1994 compared with that of the previous year, and by 93 percent in 1995 compared with 1994. However, it is important to note that the number of foreign investments and the amount of foreign investment funds also increased in these years. In some cases, industrial disputes threatened the very raison d’etre of these international joint ventures. The purpose of this chapter is to explore how conflict in human resource management arises, evolves, and is resolved in international joint ventures in China. It aims to analyze how cultural differences are translated into different causes of conflict in industrial relations in China and how such conflict is resolved. Dispute resolution in joint ventures is undertaken on the assumption that conflict can be functional or dysfunctional, or both, as far as management-labor

242

chan kwok-bun, vivienne ho luk and xun (george) wang

relations are concerned, and that it is in the best interest of both partners to resolve the conflict satisfactorily. This chapter argues that conflict in human resource management, commonly perceived as a corollary of East-West cultural differences, can occur on both the structural and individual levels (Wang, Chan and Luk 2003: 1–34; in this book, Chapter 3). Attempts to resolve conflict on the structural level (i.e. the socio-economic, politico-ideological, and legal setup of the joint-venture enterprises) and/or on the individual level (i.e. attitudes, personality, mind-set, and other idiosyncrasies of proprietors, managers, workers, and sundry personnel) may give rise to a new sinified corporate culture in China or, according to Peter Berger (2002: 1–16), an ‘alternative globalization’ in China within the contemporary world of many ‘globalizations’ where one dominant globalization, that of the Western model, seems to prevail. The theoretical value of our study is in alerting the business community to the social dynamics and problematics of multicultural interaction in human resource management in international joint ventures and in delineating a coherent conceptual framework of convergence theory to guide such an analysis. Its practical value is in making realistic suggestions to those in the business community who are intending to establish joint ventures in China in terms of how to approach conflict resolution in human resource management. International Joint Ventures in China Emerging economic regions have attracted many foreign investors and have been playing a critical role in the global economy (United Nations Conference on Trade and Development 1997). Joint ventures are a popular form of business operation for multinational corporations in emerging economies such as China, and they play a pivotal role in the globalization of the world economy (Child, Markoczy and Cheung 1994: 211–231; Cui 1998: 87–110; Isobe, Makino and Montgomery 2000: 468–484). Joint ventures have become a significant form of foreign investment in China since the launching of the ‘Open Door’ economic policy in 1978 (Shenkar 1990: 82–90), and wholly foreign owned enterprises have also quickly become popular. There has also been a greater emphasis than before on invertors using China as an export platform. International joint ventures in China continuously attract the atten-

conflict and innovation in international joint ventures 243 tion of researchers from a wide range of disciplines. Numerous studies have been conducted and have generated interesting results and a variety of frameworks to describe and analyse these joint ventures (Antoniou and Whitman 1998: 53–62; Child and Stewart 1997: 65–86; Ding, Fields and Akhtar 1997: 595–613; Goodall and Warner 1999: 21–36; Hyder and Ghauri 2000: 205–18; Strutton and Pelton 1997: 22–34). Many researchers assert that Sino-foreign joint ventures are mutually beneficial to both partners. Foreign partners bring direct investment, capital flow, advanced technological and managerial expertise, and export market expansion, whereas Chinese partners offer manufacturing facilities, access to the domestic market, cheap labor, and skilled Chinese managers with knowledge of local government regulations and bureaucracies (Beamish 1993: 29–48; Hambrick, Li, Xin and Tsui 2001: 1033–53; Liu and Song 1997: 74–83; Wang and Ralston 2000: 677–701). Conflict in Joint Ventures and Conflict Resolution Strategies Studies of Sino-foreign joint ventures have examined their operational aspects, such as management control, technology transfer, human resource management, financing, marketing and production management (Child 1990). Researchers have observed that conflict between Chinese and foreign partners is inevitable because the two partners have different objectives, organizational structures, and cultures (Lane and Beamish 1990: 87–102; Hoon-Halbauer and Keow 1999: 344–71; Walsh, Wang and Xin 1999: 69–96; Zhu, Speece and So 1998: 13–28). For instance, Chinese partners are primarily interested in attracting foreign capital, management know-how, advanced technology and products, whereas foreign partners are interested in the enormous Chinese domestic market and the availability of cheap labor. Some of the most typical and severe forms of conflict identified by Ding (1997: 31–45) in his study of 261 US general managers and Chinese managers occurred in functional areas such as quality control, wage and labor policy, import and export procedures, administration and supervision. Lin and Germain (1998: 179–96) identified four common conflict resolution strategies in Sino-foreign ventures: namely, problem solving, by searching for solutions that satisfy the needs of both parties by openly discussing concerns, issues and priorities; compromising, by

244

chan kwok-bun, vivienne ho luk and xun (george) wang

finding a sub-optimal solution through negotiation; forcing, which refers to unilateral control by a dominant party; and legalistic strategy, which refers to seeking formal contract and informal binding agreements. They found that problem solving was the most preferred strategy, followed by compromising, and that the least preferred strategy was forcing. Cultural similarity induced managers to use a problem solving strategy instead of a legalistic strategy, and relative power induced managers to choose compromise as a strategy (Lin and Germain 1998: 186–87). Traditional Chinese values such as the emphasis on the continuation of harmonious relationships among members, maintenance of the collectivity, conformity to prescribed social structures and power hierarchy, holism-contextualism, saving face, and reciprocity relationship and guanxi (ties and connections) could influence the perception of Chinese managers and employees and their approaches to resolving conflict (Ding 1997: 31–45; Kirkbride, Tang and Westwood 1991: 365–86). Xie and his associates (1998: 192–206) stated that cultural tradition not only influenced the selection of conflict resolution strategies, but also influenced the effectiveness of the use of these strategies. They concluded that involving top management in inter-functional conflict is more effective in Japanese and Hong Kong companies than in US and British companies, and that ‘face saving’ is an important characteristic of cultural norms in both Chinese and Japanese cultures (Xie et al. 1998: 203). In researching conflict resolution in China and Hong Kong, Tjosvold and his colleagues (2001: 166–83) found that Chinese managers not only used the traditional Chinese way of handling conflict, but that they also could learn and apply the Western approaches. Chinese managers are open to cooperative conflict, participate in it, and appreciate it (Tjosvold et al. 2001: 175). Worm and Frankenstein (2000: 261–83) suggested that it is important for Western managers to understand and acknowledge the reality of major value differences between China and the West. “Western managers should accept what may seem to be a sub-optimal operation style in order to get the job done” (Worm and Frankenstein 2000: 262).

conflict and innovation in international joint ventures 245 The Study and Research Methods Data for the present study were collected by means of semi-structured interviews and focus group meetings conducted from May to December 2002. The sample was composed of senior managers and junior employees of 30 international joint ventures in Shenzhen, the first special economic zone in China. Out of these 30 joint ventures, there were 6 Sino-Japanese, 6 Sino-European, 6 Sino-American/Canadian, 6 Sino-Taiwanese/Hongkong, and 6 Sino-Korean corporations of various industries, including electronics, electrical appliances, petroleum, food manufacturing, transport, telecommunications, logistics and import/export trade. They were established between 1981 and 2000, and about 20% of them were large corporations with 1,000– 4,500 employees, 50% were medium size with 100–1,000 employees, and 30% were small size with less than 100 employees. The data on which this chapter is based derived primarily from interviews we conducted at the Sino-American and Sino-European companies over the same period. Our research team drew the sample from business directories and recruited the participants through personal contacts and referrals. Initial contacts were made by telephone to briefly explain the objectives of our study, followed by phone calls or faxes to confirm the date, time and venue of the interviews. All were invited to participate in this study on a voluntary basis. About 70 joint ventures were contacted, and 30 of them were willing to participate in the study. The participants included general managers and heads of key units (human resources, finance, administration, operation, marketing and purchasing) plus some junior employees. Two managers from each joint venture (one Chinese and one foreign) were selected for individual interviews: that is, a total of 60 managers were interviewed. In addition, 13 focus group sessions were conducted, and each focus group consisted of 3 to 5 non-managerial employees from 13 joint ventures. In general, the individual interviews and focus group sessions lasted 60 to 90 minutes. They were conducted in English and Chinese (Putonghua); in some cases, a translator was involved when the interviewees preferred to use their native language, such as Japanese or Korean. With the permission of the participants, the interviews and focus group sessions were tape recorded and transcribed to ensure that our fieldwork produced quality data.

246

chan kwok-bun, vivienne ho luk and xun (george) wang

The instrument used in this research was an interview schedule covering key questions on how Chinese managers and foreign managers in the same company perceive the major causes of conflict relating to human resources management and how they manage conflict. The same instrument was used for the focus group discussions to understand from the employees’ perspective and experience the major reasons for conflict over human resource practice and the way in which conflict is handled or resolved. Descriptive information of each joint venture, such as the nature of business, enterprise ownership, age and size, was also obtained. Socio-economic Background to International Joint Ventures in China Recent economic reforms and the open-door policy in China have led to the introduction of a number of social and economic developmental strategies previously variously adopted by Taiwan, Singapore and South Korea. Well before China became a member of the WTO, it had started to develop a Western-style pluralist society, one that is characterized by the market-oriented economic reform, the relaxation of press censorship and restrictions on the private ownership of property, and relatively free population movement. Politically, it has even recently allowed a free election of local leaders in one township on the basis of one man, one vote, which was undreamt of in the past. Socially, economic and cultural globalization is emerging in China. The Chinese government sees globalization as part of the national effort at modernizing China. The Chinese social and cultural elites have recently begun to embrace globalization and are largely responsible for the propagation and signification of Western cultural values (such as freedom of opinion and the press, civil liberty, individualism, human rights; the government’s role in protecting life and private property and individual economic activities; and the development of a free market, laissez-faire governance, social security and other welfare policies, and social democracy). In this study, the concept of culture refers to a way or ways of life. Social groups can differentiate from each other by their different attitudes, beliefs, languages, dress, manners, tastes in food or music, and a host of other features that comprise a way or ways of life. Such differentiations can occur at different levels. For instance, youth

conflict and innovation in international joint ventures 247 cultures may be separated from each other by their different ways of life, as may generations or social classes. At the other end of the scale, whole societies have different cultures or ways of life. Modern societies are becoming increasingly culturally fragmented. In these circumstances, it is unclear whether such societies can be said to have a common culture (Abercrombie et al. 2000: 83). In contrast, cultural amalgamation occurs when two cultures merge into a single new culture that contains old elements of both, and entirely new elements subsequent to a synthesis of the two cultures ( Johnson 2000: 72). Hence, culture is neither singular nor unchanging, and is best seen as a “process of identity construction during the ongoing interaction between the culture in question and its environment” (Peverelli 2002; in this book, Chapter 4 also by Peverelli). Corporate culture refers to the values, beliefs, and principles that serve as a foundation for an organization’s management system, and the set of management practices and forms of behavior that both exemplify and reinforce those basic principles. On the one hand, these principles and practices endure because they have meaning for the members of an organization; they represent strategies of adaptation that have worked well in the past and that the members believe will work well again in the future. On the other hand, at the level of everyday life experience, such practices and forms of behavior adapt and change while the organization is in interaction with its environment. Thus, a theory of corporate culture must take as its starting point the observation that the values, beliefs, and meanings that enable an organization to endure, adapt, and transform itself are the primary source of motivated and coordinated activity (Denison 1990: 2). The sinification of Western corporate culture refers to the Chinese appropriation of the essential elements of Western culture into local Chinese traditions such that some of the elements of Western culture are retained to enable sustainable Sino-Western economic cooperation. To sinify is to invest with a Chinese character (Murray 1919). In international joint ventures, many Chinese managers consider the ways in which Western concepts of management can be applied or adapted. This type of cultural encounter has been shaped not only by a foreign management philosophy, but also by its mediation through Chinese Communist Party politics (Young 1995: 390–409). A familiar example of such a cultural re-contextualization is the Western adaptation of the Chinese practice of social networking ( guanxi or favor-granting) in business transactions. While the word

248

chan kwok-bun, vivienne ho luk and xun (george) wang

‘Western’ has been used frequently by many writers and in many contexts, there has not, unfortunately, been much precision in its use. In the present context, ‘Western’ refers to the quality or state of being while living in or originating from the West, in particular Europe or the United States ( Jewell and Abate 2001). While the Chinese government benefits from the globalization process as it reinforces its political legitimacy and economic power and becomes a major proponent, the public also accepts the incursion of Western cultural influences, though in some instances only in a modified or localized form. The Chinese government upholds its role as the nation’s ultimate censor of Western cultural artifacts. Hence, globalizing forces have only partially succeeded in disseminating Western cultural values in China. A notable instance of the Chinese modification of Western cultural practices is the change in the American fast-food culture typified by McDonald’s in China which, together with Coca Cola, is one of the best known icons of American popular culture world-wide. McDonald’s is a joint venture enterprise in China. It is renowned for serving fast food to sit-in customers and to automobile drivers passing by. The Big Mac and cola are sometimes delivered to the drivers waiting outside by waiters or waitresses on skateboard. That is what fast food is all about; the patrons are not supposed to stay long inside the restaurant or double-park their vehicles by the roadside for a long time. Customers in China change this fast-food culture by staying much, much longer inside the restaurant, even after their meals, turning it into a place of social gathering, a Disneyland playground, or an occasion of birthday celebration for children and their parents. By and large, Chinese social and cultural elites and the populace participate actively in the emerging global culture. The Convergence Hypothesis, Hybridization and Cultural Innovation While much of the rest of the world is plagued by a global economic recession, China’s economy continues to grow at an enviable rate of 7.5 percent annually. In retrospect, while the former Easternbloc countries failed in their economic reform movement toward mixed economies, China has done relatively well. Indeed, China is well on its way toward the realization of the convergence hypothesis (Tinbergen 1961: 333–41; Schumpeter 1942; Galbraith 1967).

conflict and innovation in international joint ventures 249 The convergence thesis of modernization theory suggests that the more a society strives to modernize, the more it will be obliged to share in a modern (not necessarily democratic), rational way of life (Tsai 1998). China is no exception to this ‘rule’ as it increasingly comes to resemble Singapore and Taiwan. Socio-economic convergence and political liberalization will help narrow the chasm between the mainland and Taiwan. China has successfully fashioned a ‘transitional socialist mixed economy’ (which as its principal features contains private and public commercial enterprises, joint ventures, plan and market, regulation through market and administered prices, state, private, and institutional (banks, other financial institutions, etc.) shareholding, the profit motive, planning, power as incentives, other administrative and fiscal regulations of macro-economic control, etc.) as it continues to revive its regulatory and planning mechanisms to tie in more closely with the rest of the global economic system. A good example of this is China’s recent upward adjustment of the exchange rate of her currency, culminating in joining the WTO. More recently, the academic literature provides a primary forum for a renewed debate over the ‘convergence-divergence’ thesis in relation to the issue of corporate governance/management models (Van Den Berghe 2002: 7). Some academics believe that globalization will lead to a single model that closely resembles the American corporate governance model because that model is the most successful (e.g. Coffee 1999: 641). Some accept the convergence thesis but do not agree that such a global model will be a carbon copy of the Anglo-American governance model. They believe that a hybrid system will emerge, based on the best features of the main governance models. There are two reasons behind the belief in a hybrid system. First, proponents like Van Hulle (1997: 16) argue that the two major systems will attempt, under the influence of internationalization, to take over each other’s mutual advantages. As a result, the convergence of the outsider system (publicly listed, financially more powerful corporations) and the insider system (non-publicly listed, less financially powerful corporations) will lead to a hybrid best practice. The second reason, according to Handy (1997: 3–4), is that the issue is not so much one of convergence toward the outsider system (i.e. the more powerful system does not always prevail in the hybridization process) but of convergence toward a mixed system. His argument is that a consensus model will emerge due to a paradigm shift within the knowledge society. Other authors (e.g. Branson 2000) state that global

250

chan kwok-bun, vivienne ho luk and xun (george) wang

convergence will not take place. They try to prove their thesis by referring to cultural diversity, different economic and legal systems, and different goals and aspirations. The ideology of the convergence theory is now prevalent in China. It signifies a gradual movement away from the Maoist vision of a socialist China and then the embrace of the capitalist policy promulgated by Deng Xiaoping in the early eighties. The integration of China into the capitalist-dominated world economic system necessarily goes with it a return to Western values, hence the socio-economic and cultural convergence between East and West. The convergence between socialist China and the capitalist West is tending toward a common hybrid. This hybridizing convergence between two fundamentally different socio-economic and cultural systems is, of course, a dynamic process in which each system borrows and selects from the other traits, institutions, regulations, and cultural values. That is, the Sino-foreign hybridization combines, in China and in the West individually, the market mechanism and state central planning in very specific ways. Cultural convergence that leads to cultural innovations is best exemplified by the modified fast food culture of McDonald’s in China. In this process, the old economic and cultural values are being redefined, and new innovations created—the economic innovation of a ‘transitional socialist mixed economy’ and cultural innovations that Peter Berger (2002: 1–16) posits as “alternative cultural globalizations”. That is, positive elements are borrowed or selected by each side of the East-West equation. In so doing, the hybrid is upgraded after converging, to the benefit of both. We may call this evolutionary convergence. Of course, socio-economic and cultural convergence can take a more static form: that is, a socialist China is only converging to a somewhat different socialist economy and polity without undergoing any fundamental qualitative change. As corporations, multinational enterprises, and joint ventures grow larger and larger, as technological and administrative innovations become progressively routinized through the expanded role of inhouse research and development, the management of giant conglomerates also tends to be highly bureaucratized. This applies to both the socialist and the capitalist modes of production. We may also label this as evolutionary convergence, the outcome of which is a ‘managerial society’ in which managerial organization narrows the structural differences between East and West, and in which a huge techno-administrative structure dominates. As giant corporations

conflict and innovation in international joint ventures 251 converge to complex bureaucracy, the modern production process becomes increasingly complex and alienating to labor, so much so that workers no longer find personal fulfillment in the work that they perform. They may even lose their distinct national cultural identity—an identity crisis—in the big melting pot of globalization because convergent evolution draws Western and Eastern values closer together. This point is well depicted in Yan’s recent study (2002: 21): During my 1998 fieldwork I met a successful businesswoman in her late thirties. She owns real estate companies in two mainland cities and an import-export firm in Hong Kong; she also owns a house in Connecticut and several years ago became a US permanent resident, though she often has to travel in and out of China to manage her businesses. She told me that she basically spends an equal amount of time in all four locales, but she only has the feeling of being at home when she is at her American residence, where she can retreat completely from her work. ‘I think I am a world citizen’ [shijie gongmin] [italics added], she once told me quite matter-of-factly.

The concept of ‘cultural assimilation’ (like ‘multiculturalism’) is a debatable one—though a question worth debating. The question is whether it is appropriate or theoretically useful to think of popular culture politically. It is argued that culture is an area in which a continual competition over the determination of meaning takes place; it is also an area of contestation in which weak groups attempt to resist the imposition of meanings that bear the interests of stronger groups. It is this that makes culture ideological and political (Kuper and Kuper 1996: 160). Positive and Negative Convergence/Synthesis West and East converge for the mutual benefit of both parties in joint venture operations—a positive synthesis in China, though there is no reason why they would not converge for the worst for both: that is, a negative hybridizing convergence or negative synthesis. The hybridization or synthesis of two distinct economic systems or cultural entities results from changes that are internal to each of them as much as from the borrowing or reciprocation of economic institutionalization and regulations. In globalization politics, the hybrid convergence of two relatively distinct social formations stems from the interdependence between them, in terms of direct East-West economic relations such as trade, capital flow, technology transfer,

252

chan kwok-bun, vivienne ho luk and xun (george) wang

intelligence exchange, direct investment, market expansion, antidumping of low cost commodities, and so on. If the hybridizing convergence benefits both systems, then we can call it positive synthesis; if not, it is a negative convergence. An important cultural aspect of negative convergence is that two different transnational systems reciprocally ‘contaminate’ or ‘infect’ each other. Modern capitalist enterprise within the framework of multinational corporations is by its very essence bureaucratic and authoritarian, such that it would be unable to expand the freedom of workers or guarantee their basic rights on the shop floor once it operates in a socialist country like China, which is similarly characterized by its bureaucratic and authoritarian practices. To the extent that the Chinese factories are turned into highly oppressive sweatshops as a result of an East-West convergence, it is a negative convergence. However, in joint ventures in China (in contrast to solely owned foreign enterprises or the state sector) there is a degree of ‘relative autonomy’ (or partial insulation from state interference as a foreign investment incentive additional to material incentives like tax and land price concessions) whereby Western proprietors are able to institute a liberal policy of management that is conducive to positive convergence or positive synthesis of the best practices of both East and West. For example, some joint ventures in China are very reluctant to dismiss workers even if they are not up to their jobs; in such cases, a worker is first transferred to another post more suitable to his or her talents, and failing this, the worker is given a relatively long period of time to find a new job elsewhere and is often compensated with rather generous severance payments. Also, some joint ventures put a lot of emphasis on on-the-job training for the new recruits and prepare them for a life-long career as opposed to a stint in the enterprise. Some joint ventures even go so far as to award outstanding workers with the company stock options, which means that the workers become shareholders and bosses of the enterprise, an incentive mechanism that is frequently employed in Western companies to increase productivity or to save a faltering company from insolvency. These Western management policies are a far cry from de-motivating factors or disincentives in the Chinese state sector such as the ‘iron rice bowl’ mentality. However, if and when Sino-Western collaboration gives rise to large-scale layoffs or run-away inflation, it definitely represents a negative convergence or negative synthesis.

conflict and innovation in international joint ventures 253 However, any attempt to institutionalize what are perceived as the best practices in Western management in joint ventures enterprises in China remains problematic at best. The core of the problem lies in the basic structure of economic organization in China. The single most frequently cited thorny issue in management-labor relations as demonstrated by our field data has been the salary disparity between local and foreign personnel. Because the differential distribution of salaries is a direct result of the imperfect capitalist (and socialist) market marked by imperfect competition, wage disputes will continue to be a prominent feature of labor disputes in joint ventures if the Chinese government elects not to intervene and if the government and foreign investors continue to address the issue in terms of cultural differences rather than viewing it as an inherent structural limitation of a mixed economy. Very often, salary disputes are simply glossed over by the senior management or rationalized as a cause of cultural differences or nationalistic animosity between East and West, as a Taiwan-born Chinese manager in a Sino-American joint venture enterprise in Shenzhen put it: The biggest conflict between the foreign partner and the local partner is in the area of salary. All the foreigners who came to China to work receive a very high salary. By comparison, the labor cost of Chinese workers is very low. But if the outcome and effect of foreign staff are not very impressive, there may exist a huge potential of a crisis because people think it is unfair, especially in this place. China is a country that strongly stresses its national consciousness; because of this very strong national consciousness, salary inequality would be transformed into an antagonism between two national peoples; the central issue of the problem would be exacerbated; this could not be right (Interview in Sino-foreign joint venture No. 1, transcript, p. 32).

In a Sino-Swedish joint venture company in China, a local Chinese manager explained the cause of salary inequality thus: For foreigners in China, the most conspicuous difference, not to mention the minor ones, is their higher positions, incomes, and rewards; these are the most conspicuous. We can feel the difference; the first feeling that comes across our minds is that they are foreigners through and through . . . [To reduce wage inequality] I feel that China has to become a much stronger nation . . . When China’s economy has developed, the status of China and its people in the world will be elevated. I believe that in the future whether income, the economy, or the status of the people will all be elevated . . . it [wage inequality] will be determined by the overall background, a fact of life that is difficult to

254

chan kwok-bun, vivienne ho luk and xun (george) wang change. After all, they [the foreigners] have their advantages; they are connected to Sweden; perhaps, in communicating with Sweden in many aspects, they can do it better than us; it is their advantage (Interview in Sino-foreign joint venture No. 2, transcript, p. 5).

Elsewhere, in a Danish shipping company, one of the largest in the world, the conflict between a Chinese manager and her Danish counterpart over the starting salary of a new worker was highlighted: [The Chinese interviewee replied . . . ] There are some individual unfair cases. For example, there is a new worker whose starting salary is relatively low, but he feels rather satisfied. But our [Chinese] standard is that if you fit this position you should get this pay; it won’t do if you are content with less pay, then, we shall give you less; that is not our way. But the Danish manager does not agree with me; he says that I don’t quite understand people; he adds, if he [the worker] demands $2,000, and even if you give him $1,500, he will accept. I just don’t quite agree with what he says; I say, that’s not right; he should get what he deserves; otherwise, he will find out some day. Although salary payment is confidential, there are many channels through which he will find out; it will be all right for him to find this out at the beginning because his present wage is still higher than that of his previous job in the state company. But his mind is not at ease; then, you will be creating this trouble. We have had a few run-ins over this problem (Interview in Sino-foreign joint venture No. 3, transcript, p. 4).

Be that as it may, our data indicate that there have been no major disruptions to production in joint ventures in China simply because of wage disputes. On the contrary, a global system is in the making. Hybridity or Polarity? The Debate of Space Originally, hybridization was an anthropological interpretation of the relationship between Westernization and local cultures. It argued that indigenous cultures are not simply destroyed but are amalgamated with Western cultures through a process of adaptation. The notion of hybridity has been adopted in the sociological analysis of postmodernity to challenge the alleged lack of ‘purity’ in hybrid cultural forms. It argues that there are no ‘pure’ cultures, and that hybridity is a general element of cultural diffusion. Vattimo (1988) has employed the concept of hybridity to identify the conservative nature of those critics who deem Westernization to be a threat to cultural purity. In the process of globalization, hybridity refers to the articulation of global processes with local or regional customs and traditions.

conflict and innovation in international joint ventures 255 Bhabha argues in his major work The Location of Culture (1994) that in the contemporary cultural condition, notions of unitary identity are no longer viable. Bhabha’s work suggests a sophisticated move beyond the polarity of a cultural politics. His own model for political change is that of the hybrid moment: the transformational value of change lies in the re-articulation of elements that are ‘neither the one’ ‘nor the other’ but ‘something else besides’, which contest the terms and territories of both. It should be emphasized, however, that Bhabha’s notion of hybridity, of ‘something else besides’, is quite different from a quasi-Hegelian notion of ‘synthesis’ (Sim: 1995). Bhabha presents a celebration of the liminal identity (i.e., identity in-between) that is associated with the postcolonial condition. He has tried to interrogate and destabilize fixed ideas of identity, visualizing postcolonial intellectuals and critics as living a ‘borderline existence’ or an ‘intervening space’ or ‘third space’. By exploring and exploiting this ‘third space’, Bhabha argues, “we may elude the politics of polarity and emerge as others of ourselves” (Bromley 2000: 98). A number of critics have analyzed the crossbreeding of cultures (Todorov 1992, cited in Bromley 2000: 96). Hybridity has both localized the global and globalized the local. Bromley points out that there are two problems with Bhabha’s rendition of hybridity as a ‘space-in-between’ or ‘third space’. First, the concept of cultural hybridity tends to be used in an uncritical and celebratory way that overlooks the often negative experience of persons of ‘mixed race’, the impoverished and marginalized for whom the so-called ‘new ethnicities’ are not a viable option. Second, the hybrid of ethnogracially defined identity is almost always foregrounded as the exemplar of the hyphenated identity (e.g., Chinese-Canadian, Afro-American) and the exception, whereas the supposed norm remains to be the supposedly pure American or British or the Northern European white (Bromley 2000: 100). Bhabha’s ideas of cultural hybridity and ‘third space’ are criticized by Friedman (1997) and Ahmad (1995) for ignoring class and gender inequalities in contemporary Western societies, and for his overly optimistic celebration of postcolonial intellectuals living in big cities and generalizing from their particular and privileged experience of cultural hybridity as a way of explaining the total bi-cultural migrant experience (Bromley 2000: 102). Moreover, the critics argue that Bhabha mistakenly calls postmodern alienation ‘hybridity’, ‘contingency’, or ‘post-colonality’. Bromlely argues that hybridity is neither simply a postmodern phenomenon, nor is it

256

chan kwok-bun, vivienne ho luk and xun (george) wang

exclusively a site of possible resistance or the counter-cultural for self-empowerment and defiance by downtrodden people in society. Nevertheless, cultural hybridity can be a remaking of culture, taking place through diverse local cultural and artistic expressions in the ghettos of metropolises. The Fracturing Boundary of Cultural Hybridity Under globalization, the proliferation of new hybrid cultural identities, even in the ethnically mixed, poor communities in industrialized nations, indicates that there are cultural spaces opened up by hybridity despite the continued prevalence of racial and gender discrimination. It is also important to point out that crossing over the cultural boundary is not easy or permanent. The politics of identity continue to be played out in a perpetual battle over the determination and negotiation of meanings with hegemonic forces. As Bhabha puts it, the ‘in-between’ is the space of growth, imagination and possibility. It is the ‘yet’ of hybridity (cited in Bromley 2000: 106). Pratt (1992) develops two central concepts in her work. The first is that of ‘code-switching,’ in which speakers switch smoothly between two languages or cultures. Cultural contact can be seen as a codeswitching resource, a fluid and hybridized convergence of multicultural discourse and material practice, and of simultaneous difference and not-difference (cited in Bromley 2000: 107). This is a process of cultural hybridization. The second concept is that of ‘contact zone’ or ‘mixed system’ which, Pratt acknowledges, is a ‘space’ heavily constrained by inequality and conflict, but is also capable of being seen as the ‘spatial’ and ‘temporal’ co-presence and co-adaptation of cultural subjects previously separated by geopolitical and historical disjunctures. Now, however, these separate cultural subjects interact within and across the ‘contact zones’ or ‘mixed systems’, which are social spaces where disparate cultures meet, clash, and come to terms with each other, often in highly asymmetrical relations of power. This ‘contact’ perspective emphasizes how cultural subjects are constituted in and by their relations to each other. A ‘contact’ perspective treats relations of power (e.g., in politics and trade) not in terms of separateness, but in terms of co-presence, co-adaptation, interaction, interlocking understanding and behavior, often within diametrically opposed cultural settings and unequal relations of power

conflict and innovation in international joint ventures 257 (Pratt 1992: 7). The basic cultural boundary is the one that divides the world into ‘our internal space’ and ‘their external space; (Gustafsson et al.: 2004). This, as Hall points out, means that cultural identity is never unified but fragmented and fractured; it is never singular, but constructed across different, often intersecting and antagonistic, practices and positions, always in a process of change and transformation. It is also important to situate the debate about identity within all those historically specific developments and practices which have disturbed the relatively settled character of many populations and their cultures, in the midst of globalization (Hall 1996: 4). The Rise of a New Sinified Corporate Culture The joint ventures and foreign trading companies set up in China transfer to local entrepreneurs the ideology of a rational management policy that is characterized by individual accountability and procedural justice. The Chinese government reciprocates with the ideology of a desirable, stable, and disciplined workforce for production based on Western technological planning and Chinese command industrial policy-making, as observed in Yan’s study (2002: 22–23) of cultural transition in China: The managerial elites in joint venture and foreign companies are more Westernised than their counterparts in state-owned companies, and many of them have obtained MBAs or other graduate degrees from abroad. It is interesting that these people actually promote Western culture in the workplace, for example, in terms of an institutionalized management system or communications and socializing skills. (The most extreme case I encountered was one in which Western dress codes were imposed on all employees, while additional rules regarding the use of makeup were imposed on female employees).

An innovative global system of industrial management is making its appearance in China—a system that relies on the best practices of what can be extrapolated from Chinese and Western economies and cultures. There are structural limits to what the foreign proprietors can do to achieve their production goals—for example, wage disputes and work-related grievances being more notable management problems. The setting up of joint ventures in China reduces the Western monopoly over management and production and facilitates technology transfers and capital investment while the foreign proprietors learn to adjust themselves to the established Chinese practices. This

258

chan kwok-bun, vivienne ho luk and xun (george) wang

point is underscored in one of our interviews with a mainland manager regarding management issues in joint ventures: He [the boss] after all has lived here for many years; at the beginning he doesn’t quite accept this [the Chinese way], but gradually he is changing . . . in thinking. There are some Chinese viewpoints he is reluctant to accept; perhaps, he feels that they are backward ideas. But he is making money in China; he will say kind words. Our boss says our company invests a lot, technology is very advanced, our commodities are leading the world. He says we use the management style of the Silicon Valley to manage our company here, to use that kind of management and corporate culture that can highlight the characteristics of our company. In my opinion, we cannot copy the American style wholesale; it ought to be compatible with the Chinese realities . . . American culture treasures individualism, but Chinese culture values collectivism . . . Americans talk about rationality, law and order, rules and regulations, but Chinese cannot do all that. Sometimes, I explain this to my American boss that Chinese staff cannot go by the rule rigidly. What the Americans will do is that if a person is not up to his or her job as a manager he or she will be relegated to an engineer. But the Chinese staff will not accept such an arrangement because what the Chinese thinks is that what goes up shall not come down; this is the difference between Americans and Chinese (Interview in Sino-foreign joint venture No. 4, transcript, p. 10).

At another US-financed company that manufactures electronics gadgets in Shenzhen, a mainland Chinese manager shared her views: For example, our company has a finance manager whose professional work and interpersonal relationships leave much to be desired. I asked our [American] boss to talk to him about his work because other departments had lodged a complaint against him; moreover what this manager did sometimes was bad for business and management. But the boss said he is the finance manager; he knows what to do and what not to do. But I said, you should talk to him as the boss and ask him to make amends. Still, the boss said that is a personality problem; what can we do about it? On this, conflicts arise frequently between the boss and me (Interview in Sino-foreign joint venture No. 5, transcript, p. 2). He [the boss] has been here for two years and has changed a lot; in many ways he understands China far better now. For example, in the past, he never participated in the meetings of the Foreign Investors’ Association. But I encourage him to go and let him know that that is a good way to get to know the Chinese realities and management style. My boss is now more used to a more intimate kind of contact rather than the ‘symbolic gesture’ of the Foreign Investors Association (Interview in Sino-foreign joint venture No. 5, transcript, p. 2).

conflict and innovation in international joint ventures 259 Sometimes I take him [the boss] to the Customs Department for a chat with the officials. The reason is that at one time, at the border crossing, the Customs officers checked our goods; it was merely official routine, and it took them two to three hours to finish the checking. My boss was getting very impatient and upset about the prolonged checking, and then he asked, ‘Why does Chinese Customs take so long to check the goods? That is not the way we do it in America.’ Nevertheless, there is nothing he can do to change that. Now that he has made a few enquiries himself and understands better the way the Chinese officials do things in China, he comes to accept it. Of course, he accepts it not out of choice, nor that he likes the way the Chinese Customs handles his goods, but that he finally comes to his senses and accepts the management style of our company somehow (Interview in Sino-foreign joint venture No. 7, transcript, p. 3).

The quotations above indicate an important management strategy if any major disruptions to production are to be avoided. The challenge facing Western proprietors in joint ventures in China is how to maximize positive convergent tendencies and minimize negative convergent tendencies. It is apparent from our interviews with both Chinese and foreign managers that considerable reciprocal borrowing and learning has taken place in the midst of and as a consequence of the interface or encounters between two cultures, two different ways of doing things. Foreign managers learn that it is important to establish social ties and connections with local officials and businessmen in their daily business conduct, that the Chinese officials and bureaucrats represent local forces to be reckoned with, that they have a lot to learn in adapting a foreign system of values and practices to the local circumstances. For instance, Swedish managers have learned to be more patient and tactful than before with the Chinese bureaucracy. The Chinese have learned from their foreign colleagues why it is important to have a proactive attitude, to take personal initiative, to be creative and innovative, to take punctuality more seriously, to balance personal and collective interests, and so on. Such reciprocal borrowing and learning marks the beginning of an eventual integration of otherwise divergent business as well as cultural practices: We the Chinese are learning from the Swedes, consciously, slowly; they [Swedes] are also influenced by us. For example, what the Chinese often say about social connections [ guanxi] the foreigners do not care much about. But if you come to work in this place [China], you’ve

260

chan kwok-bun, vivienne ho luk and xun (george) wang got to pay attention to it. That is to say, we have to tell these bosses and slowly influence them such that they would pay attention to social connections at the appropriate time because in China if you don’t pay attention to this, you cannot do a whole lot of things (Interview in Sino-foreign joint venture No. 7, transcript, p. 3). Foreigners do not like to participate in social activities in China. They will say, “I am very busy; I don’t want to participate”. But I often persuade my boss to spend some social time with the Chinese. After having stayed in China for five years, he has got used to the Chinese culture gradually. He now follows our advice on how to go about doing things in the local way. I think, our boss has been influenced by us a lot (Interview in Sino-foreign joint venture No. 8, transcript, p. 4). Our human resources department is formulating a lot of labor policies; in doing so, we need to consider the Chinese reality and culture. On the broad issues, we respect the general guidelines provided by the Swedish; in concrete details, we have to refer to the local circumstances and adjust accordingly. For instance, at the end of February I went to Sweden. They said our human resources department in China needs to understand the culture of the headquarters and their mode of operation. Then, and only then, would we be able to know what is good and what we should absorb. On the other hand, we should also tell them our local experience such that we will learn from each other (Interview in Sino-foreign joint venture No. 9, transcript, p. 1). In China, it is done in this way, but in their own country, it is done in another way. We wonder whether it is possible to integrate the two different ways of doing things on the understanding that they won’t break the Chinese law and yet also take into account the very good welfare system [practised in Sweden] (Interview in Sino-foreign joint venture No. 9, transcript, p. 2). Speaking of cultural differences, whether on the Chinese side or the foreign side, I think, it is a matter of identification with the core cultural values for both sides. I think a point of utmost importance is how Chinese workers come to identify with corporate culture and its core values, and how to immerse themselves in this working environment as soon as possible. This is a very important point. In practice, staff training is particularly important; how the company trains its workers on the core values of the company, including the systematic dissemination of these core values, is a very important factor for whether the workers would acquire these cultural concepts (Interview in Sinoforeign joint venture No. 10, transcript, p. 2).

conflict and innovation in international joint ventures 261 Conflicts between Western and Chinese Styles of Management Our field data show that there is a wide array of palpable cultural differences in what Chinese and Western managers perceive as the best means to resolve management issues such as labor complaint procedures, salary disputes, and staff evaluation, and what the best coping strategies are in times of communication failures. From the interview data we gathered, the following cultural differences are noteworthy insofar as they lead to disputes over management: 1. Conflicts arise out of each partner’s emphasis on its own rights: e.g., the foreign investors are preoccupied with technology and technical know-how whereas the Chinese are over-protective of their own business franchise. 2. The foreign partner emphasizes the collective interest of the company whereas the Chinese emphasize departmental interest. 3. The foreign partner encourages communication between fellow workers whereas the Chinese encourage communication between subordinates and superiors. 4. The foreign partner emphasizes self-motivation and a proactive attitude whereas the Chinese are accustomed to following orders. 5. Conflicts arise as a result of failures in communication between the foreign and Chinese partners. For example, the Chinese style of expression is more subdued, the foreign more direct; the Chinese are not mindful of the exactness of the information received whereas the foreigners are very concerned with informational accuracy and preciseness. 6. Disputes arise as a result of different work styles. For example, the foreign partner emphasizes work standardization, predictability, and rule following whereas the Chinese prefer wide latitude in work and less rigidity. 7. Conflicts arise as a result of ethnocentric viewpoints or feelings of nationalism. For example, Chinese workers are sensitive to the work style and attitude of the foreign partner, oftentimes (mis)interpreting the difference in management culture as a difference in race. 8. Conflicts arise as a result of language barriers. For example, the vast majority of Chinese workers are poor English speakers and the foreign managers are no better in their Chinese language. The result is that misunderstanding and social-psychological distance are created in day-to-day management.

262

chan kwok-bun, vivienne ho luk and xun (george) wang

9. Disputes arise as a result of staff performance evaluation. For example, the foreign practice of staff evaluation keeps the results confidential whereas the Chinese practice discloses the results to the employees. 10. Chinese proprietors have different conceptions of time and use time differently to achieve different purposes. Foreign investors put a premium on efficiency, productivity, and optimal use of time to achieve desired results. Chinese businessmen tend to spend a considerable amount of time on social and interpersonal activities to build up a good business rapport leading to the final conclusion of business transactions. They like to mix business with pleasure, so to speak. The basic question boils down to how to reconcile Western management style with traditional Chinese industrial practice without jeopardizing the prospects of joint ventures. This is a daunting task for the Western and the Chinese managers as many of these management problems are inherent structural constraints of joint ventures that defy simple solutions and are often disguised as cultural differences between West and East, as evidenced in our data. It is invariably during moments of encounter with things different that one begins to develop heightened senses of self-consciousness and self-awareness as well as an inner deliberation about what one must do about such perceived differences. The prevailing sense of cognitive dissonance could possibly be resolved, among other possibilities, by a compromise in opting for a third way of doing things, an alternative to an allegiance to either self or other. This third way must be found quickly for the immediate emotional satisfaction to both parties, which, once accepted, internalized and practised, represents the becoming of a creative, novel, force which will change all. Theorized as such, creativity must be seen as the result of dialectics of conflict, even brutal collision or confrontation, between two different cultures or sets of values. Conflict is thus the precondition, the fountainhead, of creativity. Conflict sets in motion the evolution of a new, integrated, fused, sinified corporate culture, which apparently is in the making in many international joint venture enterprises in China. An analysis of differences and conflict is thus by necessity an analysis of circumstances under which inventions and creations are distinct logical possibilities.

conflict and innovation in international joint ventures 263 Cultural Resistance in the Dialectic of East-West Corporate Management The argument over cultural differences couched in racial, ethnic, or nationalistic terms is a highly emotionally charged issue that exacerbates labor relations, especially in the state sector where the communist mentality of trade unionism and solidarity is still very strong. In many instances, the foreign entrepreneurs are eager to implement a corporate culture of their parent companies that is characterized by Western liberalism, procedural justice, transparency, individual accountability, self-motivation, loyalty, creativity, role interchangeability, meritocracy, non-discrimination, and so on. Yet the introduction of a purely Western corporate culture and an aggressive marketing strategy in Chinese industry encounters resistance and can backfire on the West. This is the kind of scenario we discussed earlier when a negative convergence or hybridization or synthesis may occur. Yan’s (2002: 21) study of cultural globalization in the Chinese context demonstrates clearly just how such a resistance on the part of a Chinese managerial elite may come about in a comparable situation: Ms. Wu was Microsoft’s chief executive officer in Beijing until June 1999 when she resigned for . . . her dissatisfaction with the ways that Microsoft had taken over the Chinese market. She thought that some of the strategies that Microsoft had used to compete with Chinese companies were immoral and thus unacceptable. She had been torn between a good CEO and a good Chinese citizen and chose to quit after her superiors at Microsoft’s headquarters heard her complaints and protest. ‘After all . . . I am a Chinese.’ (Italics added.)

In our study, one of the respondents stated emphatically: After all they (Westerners) are doing business in China, taking advantage of the cheap labor and tax advantages here (Interview in Sinoforeign joint venture No. 1, transcript, p. 2).

In a Sino-American joint venture, one of our respondents spoke of the low-cost industrial infra-structure supplied by the local government: In 1984, people thought it was necessary to have Chinese partners because they understood how to get things done. There were not many solely owned American companies then. Every one of them doing business here was a joint venture. But they [the Chinese government] have provided very useful guidelines and of course they have provided the

264

chan kwok-bun, vivienne ho luk and xun (george) wang land here as contributions to the joint ventures (Interview in Sinoforeign joint venture No. 1, transcript, p. 2).

This remark echoes the long-time pent-up feelings of many aggrieved Chinese workers in joint venture enterprises and gives substance to Ms. Wu’s resignation from Microsoft in protest of its questionable corporate behavior. Ms. Wu is torn between two systems, a Western capitalism and a Chinese liberalizing socialism. Additionally, there are the ambivalent (hence sometimes hostile) attitudes of the local Chinese managers toward Western values. Many of these managers come from Hong Kong, Singapore, and Taiwan, or are locally born Chinese. Most of them received their MBA training following Western curricula. Hence, they tend to identify with the Western management style more closely. But there are other Chinese managers who do not embrace Western management uncritically, though their resistance is more nuanced and subdued; it manifests itself mainly in self-denial or patriotism. Their ambivalence toward and resistance against Western domination stems from a deeper level of Chinese cultural consciousness and sub-consciousness, itself being a reflection of the deep-seated structural constraints of the internal mode of operation of joint ventures and a long history of traumatic experience of national subjugation by Western powers in the past one hundred years or so. Their cultural ambivalence, resistance, or even hostility, which is dramatized in Ms. Wu’s case, expresses itself in the predicament that on the one hand they are attracted to such attributes of Western management as humanism, equality, meritocracy, autonomy, creativity, and respect, but on the other hand they are put off by the Western entrepreneurs’ preoccupation with techno-structure, science, rationality, rationalism, and the profit-motive, thus ignoring the human side of production. This paradoxical approach of management on the part of foreign proprietors catches some mainland managers in a bind. Mainland managers feel that their local knowledge and expertise are not being fully utilized and respected. The time-honored business fiats that are instrumental to Chinese business success such as patience, face-saving, interpersonal relations, local connections ( guanxi ), ways of dealing with Chinese officials like those of the Customs Department, or the sensitivity of Chinese workers to bad news or zealousness for good news, proper ways of resolving inter-departmental conflicts, and so on, are being ignored. Many of these social-psychological and cultural elements are specific to the unique economic environment of

conflict and innovation in international joint ventures 265 China and are essential ingredients of a successful management strategy in doing business there. Unfortunately, many foreign investors do not seem to grasp these inside tricks of sealing business deals in China. As to the importance of local knowledge, such as about hiring practice, in avoiding conflicts over human resources management in China, it is instructive to quote our interviewee who was a senior American manager: They [Chinese staff ] do not take responsibility; they try to find an excuse and blame somebody else. There is a lot of finger-pointing. More than in the West . . . Well, in the West, we do not act like that; when we talk about it [among the Americans] we will say that, well, it is my mistake and let’s solve it; we handle problems more directly. Here (in China), it is frustrating. There is another thing; you know, in America, we are worried about racial sensitivity, gender sensitivity. Here [in China], they do not have the sensitivity we have in the West. Something that the local says we can never say in the America. In a normal day here, people around me, I hear them say things which we consider as racial slurs because you say bad things about different races of people . . . I find that people here are being discriminated against in employment; when people [of the human resources department] bring the resumes to me and say, “you cannot hire these people; they are too old; you do not want this person; she is a woman. I try to get people around me to be more sensitive to discrimination” (Interview in Sino-foreign joint venture No. 6, transcript, p. 2).

Elsewhere, our data indicate that foreign managers are eager to operationalize and institutionalize their vision of corporate culture and establish objective operational procedures based on the universal concept of fairness which as a matter of principle opposes all sorts of discrimination, cronyism, and nepotism rather than adhering to particularism that lends credence to patronage appointment. The attempt to institutionalize a set of Western values in China in total disregard of the local cultural peculiarities is bound to run into trouble. Thus, the stage is set for more conflicts in management-labor relations when competing values get in the way of management: Take staff dismissal as an example, his viewpoint and mine are similar, i.e., we both respect the Chinese ‘Labor Law’; the Americans are praise-worthy in this respect because in their view, even if they have decided to fire a worker they will see to it that the dismissed worker leaves happily even if they are not obliged to do so according to the provisions of the Chinese Labor Law. On this point, however, our conflicts are bigger; he [the boss] is a kind-hearted man. But I have told him, “if you don’t adhere to the principle [the legal

266

chan kwok-bun, vivienne ho luk and xun (george) wang provisions] how can we manage this company?” He replied, “Sister Chen, there are many things I like to get over with quickly; I don’t like foot-dragging” (Interview in Sino-foreign joint venture No. 6, transcript, p. 3).

It will be recalled, however, that some foreign managers who worked in China for many years have wisely learned to adapt to the local way of life and the local strategy of problem solving. They now think and behave differently from their superiors back home in the parent company—as our interview with an American manager at a joint venture enterprise demonstrates: There are major daily conflicts between my engineering department and the quality control department . . . Well, neither side respects the other. We just argue . . . And the same thing is very typical in the United States; people there do not generally like quality control people because their messages are always negative. It appears that all the things you have done are always wrong. They never seem to be a part of the solution . . . Here, I talk to them and discuss the differences [between my engineering department and the quality control department] and I found a solution. I try to find a solution . . . It is a little bit different in the United States. The difference is that the two departments do try to work together to obtain a solution a little bit more than what we do here in China (Interview in Sino-foreign joint venture No. 4, transcript, p. 10).

Very often, as our data show, the differences of opinions between some expatriate managers and their parent companies induce certain knock-on effects on the frontline managers in joint ventures in China. For example, one aspect of staff grievances relates to the way that management handles fairness and justice. Some Chinese manages feel that they are treated unfairly in salary payment and performance evaluation by senior foreign managers. Questions like what a fair distribution of income is when adjudged on the economic principle of opportunity costs and comparative advantage and what fair criteria are to evaluate staff performance defy simple, straightforward solutions; questions such as these are beyond the comprehension of many Chinese workers in management. Hence, conflicts in management are a fixture of industrial relations in joint ventures. Chinese-born managers trained in Western management are hybrids, marginalized persons, who live on the peripheries of two cultural entities of the Chinese way versus the non-Chinese way. These people may well be agents of cultural innovations in the enterprise; but they may also be victimized by mutual suspicions and distrust that

conflict and innovation in international joint ventures 267 further compound the problem of management. Mainland Chinese managers who are rejected by both foreign managers and their fellow countrymen become strangers in their own land. On a different plane, our data also show that many of the local and foreign managers manage to fashion an innovative management strategy in joint ventures that works well for both partners, that is, that administrative innovation represents a positive convergence or hybridization or synthesis. We can label this a new sinified corporate culture—a positive convergent hybrid of East and West corporate culture that emerges out of the dialectic of competing cultural values. The emerging hybrid corporate culture in joint ventures in China, being a product of the cultural dynamics of reciprocal learning and adaptation between East and West over a relatively long period of time, heralds the beginning of a new sinified corporate culture as well as a new managerial elite in corporate management in modern China. Discussion and Conclusion The post-Mao economic reform in general and Deng Xiaoping’s open-door policy in particular provide a unique opportunity for international economic cooperation and development. An off-shoot of this opportunity is the establishment of joint ventures of different varieties that are quickly becoming a popular form of Sino-foreign economic collaboration. The Chinese government’s ingenious reinterpretation of Marxist socialism that theorizes China as being currently progressing through the preliminary stage of a mature socialism presupposes that the vestiges of capitalism inevitably survive into post-revolutionary China. That is, in the current market-oriented economic reform, China is developing Marxist-Leninist socialism with Chinese characteristics or, simply put, a mixed economy. Against this very interesting socio-economic and politico-ideological background, our study is an attempt to investigate how conflicts in human resources management arise, evolve, and are resolved in Sinoforeign joint ventures in China. Specifically, it aims to posit that cultural differences play a role in causing conflicts in industrial relations in China, while arguing that most conflicts can be resolved satisfactorily by a bilateral or multilateral process of purposeful learning based on mutual adaptation, adjustment, trust and a common objective.

268

chan kwok-bun, vivienne ho luk and xun (george) wang

In most cases, a reconfiguration of social and economic relations also takes place within the enterprises. Our study assumes, a priori, that conflicts can be functional or dysfunctional, or both, as far as building constructive management-labor relations is concerned, and that it is in the best interest of both partners to resolve the conflicts satisfactorily. Thus conceived, we are taking an important first step toward understanding the causes and consequences of conflicts in management-labor relations. When we focus on dialectical East-West relationships, we draw attention to the social dynamics and problematics of human interactions—a developmental process of action and reaction or ‘thesis and antithesis’ that emphasizes change, not the status quo, or stresses that it is invariably in a state of ‘dynamic equilibrium’. Although conflict situations of a relatively static nature in a Sino-foreign joint venture do bring about superficial changes to an enterprise, such conflicts are never a sufficient condition for an enterprise to produce a qualitative change in its management style, let alone a new sinified corporate culture or a quantum leap into a futuristic corporate management modality. The results of our study illustrate that a dialectical or conflict perspective enables us to analyze the social dynamics of human interaction in Sino-foreign joint ventures. It cannot be stressed enough that our results indicate that the interplay of various social forces within an enterprise gives birth to a new sinified corporate culture that is indispensable to sustaining that enterprise within the very unique circumstances of a China undergoing an unprecedented open-door economic reform guided by a sinified Western ideology and political legitimacy of preliminary socialism. The guiding conceptual framework of this study is convergence theory. The convergence thesis of modernization theory suggests that the more a society strives to modernize, the more it will be obliged to share in a modern way of life. China is no exception to this ‘rule’ as it increasingly comes to resemble Singapore and Taiwan. China has successfully fashioned a socialist mixed economy and a more open civil society. Hence, the socio-economic and cultural convergence between China and the West has become a reality—a common hybrid. This hybridizing convergence of two fundamentally different socio-economic and cultural systems is a dynamic process in which each system borrows and selects from the other important traits, institutions, regulations, and cultural values. Cultural conver-

conflict and innovation in international joint ventures 269 gence that leads to cultural innovations is best exemplified by the modified fast food culture of McDonald’s in China. In this process, old economic and cultural values are being redefined, and new innovations created. The Chinese economic innovation of a ‘socialist mixed economy’ and cultural adaptation of what distinguishes the West from the East create an “alternative cultural globalization” as adumbrated by Peter Berger (2002: 1–16). When positive elements are borrowed or selected by each side of the East-West equation, the hybrid is upgraded, ushering in an evolutionary convergence. Yet, socio-economic and cultural convergence may take a more static and unilinear form without necessarily undergoing any fundamental qualitative change in the East-West relationship. Then, the East-West relationship can be said to be in a state of dynamic equilibrium until newly emerged conflicts tip the balance in favour of either party of a joint venture. Hence, the conflict-change cycles are forever spiraling upward or leveling off, yet never downward over the long haul. The concept of ‘cultural assimilation’ has been a controversial one in the social sciences. The question is whether it is appropriate to think of popular culture politically. Arguably, culture is an area in which a continual competition over the determination of meaning takes place; it is also an intensely contested area where weak groups attempt to resist the imposition of cultural norms and other symbolic values that bear the imprints of dominant groups. It is this which makes culture ideological and political. However, in the political economy of joint ventures in China, unlike that in the state sector, there exists a degree of ‘relative autonomy’ whereby Western proprietors are at liberty to institute a liberal policy of management that is conducive to a positive convergence or positive synthesis of the best practices of East and West. Nevertheless, the crux of the management problem lies in the basic structure of economic organization and social relations in China such as salary disparity between local and foreign personnel, which points up the fact that there are structural limits to what the foreign proprietors can do to achieve their production goals. Therefore, the challenge facing Western proprietors in joint ventures in China is how to maximize positive convergent tendencies and minimize negative convergent tendencies. If and when negative tendencies do persist and are putting a joint venture at risk, a new cycle of the conflict-change dialectic will work itself out in a succession of partisan mediations and adjustments.

270

chan kwok-bun, vivienne ho luk and xun (george) wang

Conflict and change in corporate management are therefore a fixture of industrial relations in joint ventures in China. If the hybridizing convergence benefits both partners, then a positive synthesis ensues; if not, it is a negative synthesis. A significant cultural manifestation of negative synthesis or negative convergence is that several different transnational economic systems reciprocally ‘contaminate’ or ‘crossinfect’ one another, neither being not completely immune to the influences of the other, so much so that a joint venture becomes ultimately unsustainable. The emerging hybrid corporate culture in joint ventures in China, like a sinified ideology of preliminary socialism, is a convenient ideological innovation designed to facilitate the economic ties between East and West which are necessitated by the capitalist imperatives of market expansion in an uneasy East-West alliance of globalization politics. At the level of microeconomics, a hybrid corporate culture emerges out of the cultural dynamics of the interplay of reciprocal learning and adaptation between East and West over a sufficiently long period of time. In the process, we are beginning to see a new sinified corporate culture and a new breed of managerial elites cropping up in economic joint ventures in China today. The real issue of a hybridized ‘mixed system’ in international joint ventures is not so much about which culture—the foreign or the local—finally prevails. It is about a constantly shifting and contextbased calibration of a ‘mixed and mixing system’. The idea of the ‘contact zone’ or a ‘mixed system’ is a ‘space’ constrained by inequality and contradictions, but is also capable of being seen as the ‘spatial’ and ‘temporal’ co-presence and co-adaptation of various cultural subjects previously separated by geopolitical and historical disjunctures. Now, however, these discrete cultural subjects interact within and across the ‘contact zones’ or ‘mixed systems’. Thus, ‘contact zones’ or ‘mixed systems’ are social spaces where disparate cultures meet, clash, and grapple with each other, often in highly asymmetrical relations of power as they are lived out across the globe today. This ‘contact’ perspective emphasizes how cultural subjects are constituted in and by their relations to each other. A ‘contact’ perspective treats relations of power (e.g., in politics and trade), not in terms of separateness but in terms of co-presence, co-adaptation, interaction, reciprocal understanding and learning, often within diametrically opposed cultural settings and unequal relations of power. The basic cultural boundary is one that divides the world into ‘our internal space’ and ‘their external space’. This, as Hall (1996: 4)

conflict and innovation in international joint ventures 271 points out, means that cultures and cultural identity are never unified, but increasingly fragmented and fractured, and are never singular, but subject to construction across different, often intersecting and antagonistic, practices and positions. Culture is about emergence, change and transformation. That is, culture is self-constitutive, generative as well as transformative. Acknowledgements We wish to acknowledge the support of the Hong Kong Baptist University through a Faculty Research Grant and the contribution of Bertrand Wong to our research reported in this chapter. REFERENCES Abercrombie, N.S. Hill and B.S. Turner (2000), The Penguin Dictionary of Sociology 4th Ed., London: Penguin Books. Ahmad, A. (1995), ‘The Politics of Literary Postcoloniality’, Race and Class, 36, 3: 1–20. Antoniou, P. and Whitman, K. (1998), ‘Understanding Chinese Interpersonal Norms and Effective Management of Sino-Western Joint Ventures’, Multinational Business Review, 1: 53–62. Beamish, P. (1993), ‘The Characteristics of Joint Ventures in the People’s Republic of China’, Journal of International Marketing, 2: 29–48. Berger, P.L. (2002), ‘Introduction: The Cultural Dynamics of Globalization’, in P.L. Berger and S.P. Huntington eds., Many Globalizations: Cultural Diversity in the Contemporary World. Oxford: Oxford University Press, pp. 1–16. Bhabha, H. (1994), The Location of Culture, London: Routledge. Branson, D. (2000), “The Very Uncertain Prospect of Global Convergence in Corporate Governance”, paper downloadable at http://papers.ssrn.com, cited in L. Van Den Berghe (2002), Corporate Governance in a Globalising World: Convergence or Divergence? A European Perspective, Norwell, Ma.: Kluwer Academic Publishers. Bromley, R. (2000), Narratives for a New Belonging: Diasporic Cultural Fictions, Edinburgh: Edinburgh University Press. Chan, K.B., Luk, V. and Wang, G.X. (2005) ‘Conflict and Innovation in International Joint Ventures: Toward a New Sinified Corporate Culture or “Alternative Globalization in China”’, Asia Pacific Business Review, 11, 4: 461–82. Child, J. (1990), The Management of Equity Joint Ventures in China. Beijing: CEMI. Child, J., Markoczy, L. and Cheung, T. (1994), ‘Managerial Adaptation in Chinese and Hungarian Strategic Alliances with Culturally Distinct Foreign Partners’, Advances in Chinese Industrial Studies, 4:211–31. Child, J. and Stewart, S. (1997), ‘Regional Difference in China and Their Implications for Sino-Foreign Joint Ventures’, Journal of General Management, 23:65–86. Coffee, J. (1999), “The Future as History: The Prospects for Global Convergence in Corporate Governance and its Implications”, Nw. U. L. Review, p. 641, cited in L. Van Den Berghe (2002), Corporate Governance in a Globalising World: Convergence or Divergence? A European Perspective, Norwell, Ma.: Kluwer Academic Publishers.

272

chan kwok-bun, vivienne ho luk and xun (george) wang

Cui, G. (1998), ‘The Evolutionary Process of Global Market Expansion: Experiences of MNCs in China’, Journal of World Business, 1:87–110. Davidson, W.H. (1987), ‘Creating and Managing Joint Ventures in China’, California Management Review, 29, 4: 77–94. Denison, D.R. (1990), Corporate Culture and Organizational Effectiveness, N.Y.: John Wiley & Sons. Ding, D. (1997), ‘Control, Conflict, and Performance: A study of US-Chinese Joint Ventures’, Journal of International Marketing, 3: 31–45. Ding, D., Fields, D. and Akhtar, S. (1997), ‘An empirical Study of Human Resource Management Policies and Practices in Foreign-Invested Enterprises in China: The Case of Shenzhen’, International Journal of Human Resource Management, 8: 595–613. Friedman, J. (1997), ‘Global Crises, the Struggle for Cultural Identity and Intellectual Porkbarrelling: Cosmopolitanisms versus Locals, Ethnics and Nationals in an Era of Dehegimonisation’, in Werbner and Modoon (eds.), Debating Cultural Hybridity, London: Zed Books, pp. 70–89. Galbraith, J.K. (1967), The New Industrial State. Boston: Houghton-Mifflin. Goodall, K. and Warner, M. (1999), ‘Enterprise Reform, Labor-management Relations, and Human Resource Management in a Multinational Context’, International Studies of Management and Organization, 29: 21–36. Gustafsson, J. et al., eds., (2004), Intercultural Alternatives, Copenhagen Business School Press, p. 164. Hall, S. (1996), ‘Who Needs “Identity”?’ in S. Hall and P. DuGay, Questions of Cultural Identity, London: Sage Publications. Hambrick, D., Li, J., Xin, K. and Tsui, A. (2001), ‘Compositional Gaps and Downward Spirals in International Joint Venture Management Groups’, Strategic Management Journal, 22, 11: 1033–53. Handy, C. (1997), “The Invisible Fist”, in The Economist, 15th February, pp. 3–4, cited in L. Van Den Berghe (2002), Corporate Governance in a Globalising World: Convergence or Divergence? A European Perspective, Norwell, Ma.: Kluwer Academic Publishers, pp. 3–4. Hoon-Halbauer, S.K. (1999), ‘Managing Relationships within Sino-Foreign Joint Ventures’, Journal of World Business, 4:344–71. Hyder, A.S. and Ghauri, P.N. (2000), ‘Managing International Joint Venture Relationships: A Longitudinal Perspective’, Industrial Marketing Management, 29, 3: 205–18. Isobe, T., Makino S. and Montgomery, D. (2000), ‘Recourse, Commitment, Entry Timing and Market Performance of Foreign Direct Investments in Emerging Economics: The Case of Japanese International Joint Ventures in China’, Academy of Management Journal, 43: 468–84. Jewell, E.J. & F. Abate, eds. (2001), The New Oxford American Dictionary, N.Y.: Oxford University Press. Johnson, A.G. (2000), The Blackwell Dictionary of Sociology, 2nd ed., Oxford: Blackwell Publishers. Kirkbride, P., Tang, S. and Westwood, R. (1991), ‘Chinese Conflict Preferences and Negotiation Behavior: Cultural and Psychological Influences’, Organizational Studies, 3: 365–386. Kuper, A. and Kuper, J. (1996), The Social Science Encyclopedia, 2nd ed. London: Routledge, p. 160. Lane, H. and Beamish, P. (1990), ‘Cross-cultural Cooperative Behavior in Joint Ventures in LDCs’, Management International Review, Special Issue, pp. 87–102. Lin, X. and Germain, R. (1998), ‘Sustaining Satisfactory Joint Venture Relationships: The Role of Conflict Resolution Strategy’, Journal of International Business Studies, 1: 179–196. Liu, X. and Song, H. (1997), ‘China and the Multinationals—A Winning Combination’, Long Range Planning, 1: 74–83.

conflict and innovation in international joint ventures 273 Miller, R. (1997), ‘International Joint Ventures in Developing Countries’, Finance and Development, 1: 70–8. Murray, Sir James, (1919), A New English Dictionary, Oxford: Oxford Clarendon Press, Vol. 9, Part One. Peverelli, P. (2002), Cognitive Space: A Social Cognitive Approach to Sino-Western Cooperation, Delft: Eburon. Pratt, M.L. (1992), Travel Writing and Transculturation, London: Routledge. Schumpeter, J.A. (1942), Capitalism, Socialism and Democracy. London: George Allen and Unwin. Shenkar, O. (1990), ‘International Joint Ventures’ Problem in China: Risks and Remedies’, Long Range Planning, 23: 82–90. Sim, S. (1995), The A–Z Guide to Modern Literary and Cultural Theorists, N.Y.: Prentice Hall. Strutton, D. and Pelton, L. (1997), ‘Scaling the Great Wall: The Yin and Yang of Resolving Business Conflict in China’, Business Horizon, Sept–Oct: 22–34. Tinbergen, J. (1961), ‘Do Communist and Free Economies Show a Converging Pattern?’ in Soviet Studies. Oxford-shire: Carfax Publishing, 12, 4: 333–41. Tjosvold, D., Hui, C. and Law, K. (2001), ‘Constructive Conflict in China: Cooperative Conflict as A Bridge between East and West’, Journal of World Business, 36, 2: 166–83. Todorov, T. (1992), The Conquest of America, New York: Harper Perennial. Tsai, W.H. (1998), Convergence and the Future of Reunification between Mainland China and Taiwan: A Developmental View. Baltimore, University of Maryland. United Nations Conference on Trade and Development (1997), World Investment Report: Investment, Trade and International Policy Agreements. New York: United Nations. Van Den Berghe, Lutgart (2002), Corporate Governance in a Globalising World: Convergence or Divergence? A European Perspective, Norwell, Ma.: Kluwer Academic Publishers. Van Hulle (1997), ‘Is het system van corporate Governance belangrijk? Op zoek naar de impact van verschillen in modellen’, Vlaams Wetenschappelijk Economisch Congres, Leuven, cited in L. Van Den Berghe, (2002), Corporate Governance in a Globalising World: Convergence or Divergence? A European Perspective, Norwell, Ma.: Kluwer Academic Publishers, p. 16. Vanhonacker, W.R. and Pan, Y. (1997), ‘The Impact of National Culture, Business Scope and Geographic Location on Joint Venture Operations in China’, Journal of International Marketing, 5, 3: 11–30. Vattimo, G. (1988), The End of Modernity, Oxford: Polity Press. Walsh, J., Wang, E. and Xin, K. (1999), ‘Same Bed, Different Dreams: Working Relationships in Sino-American Joint Ventures’, Journal of World Business, 1: 69–93. Wang, G.X., Chan, K.B. and Luk, V. (2003), ‘Conflict and Its Management in Sino-Foreign Joint Ventures: A Review’, David C. Lam Institute for East-West Studies Working Paper Series, Paper No. 10, pp. 1–34. Wang, X. and Ralston, D. (2000), ‘Strategies for Small and Medium-Sized U.S. Businesses Investing in China: Lessons from Taiwanese Companies’, Thunderbird International Business Review, 6: 677–701. Worm, V. and Frankenstein, J. (2000), ‘Interfunctional Conflict, Conflict Resolution Styles, in Sino-Western Business Operations’, Thunderbird International Business Review, 42, 3: 261–83. Xie, J., Song, M. and Stringfellow, A. (1998), ‘Interfunctional Conflict, Conflict Resolution Styles, and New Product Success: A Four-culture Comparison’, Management Science, 44, 12: 192–206. Yan, Y.X. (2002), ‘Managed Globalization: State Power and Cultural Transition in China’, in P. Berger and S. Huntington, eds., Many Globalizations: Cultural Diversity in the Contemporary World. Oxford: Oxford University Press, pp. 19–47. Young, G. (1995), ‘Liu Shaoqi and the Sinification of Leninism’, in S.C.R. Starrs

274

chan kwok-bun, vivienne ho luk and xun (george) wang

and A. Wedell-Wedellsbory, eds. (1995), Cultural Encounters: China, Japan, and the West, Aarhus University Press, pp. 390–409. Zhu, G., Speece, M. and So, S. (1998), ‘Conflicts in Sino-European Joint Ventures’, in J. Selmer, ed., International Management in China: Cross-cultural Issues. New York: Routledge, pp. 13–28.

List of Contributors Chan Kwok-bun is past President (2002–2004) of the Hong Kong Sociological Association, Head and Professor of the Department of Sociology, and Director of the David C. Lam Institute for East-West Studies at the Hong Kong Baptist University. He is author of Stepping Out: The Making of Chinese Entrepreneurs (Singapore: Prentice Hall, 1994); Crossing Borders: Transmigration in Asia Pacific (Singapore: Prentice Hall, 1995), Chinese Business Networks: State, Economy and Culture (Singapore: Prentice Hall, and Copenhagen: Nordic Institute of Asian Studies, 2000), Alternate Identities: The Chinese of Contemporary Thailand (Singapore: Times Academic Press, and Leiden: Brill Academic Publishers, 2001), Past Times: A Social History of Singapore (Times Editions, 2003), Chinese Identity, Ethnicity and Cosmopolitanism (Routledge, 2005), and Migration, Ethnic Relations and Chinese Business (Routledge, 2005). His current research interests are in migration, transnationalism, cosmopolitanism, and diaspora; ethnic identities; business networks and ethnic capitalism; medical sociology; and family and marriage. Leo Douw is a Lecturer in modern Asian history in the Faculty of Social and Behavioural Sciences at the University of Amsterdam. His research is concerned with the modern history of Chinese economic thought and Chinese transnational entrepreneurship during the twentieth century. His publications include South China: State, Society and Culture During the Twentieth Century (KNAW Publications, 1996) (with Peter Post), Qiaoxiang Ties: Interdisciplinary Approaches to ‘Cultural Capitalism’ in South China (Kegan Paul International, 1999) (with Cen Huang and Michael R. Godley), and Rethinking Chinese Transnational Enterprises: Cultural Affinity and Business Strategies (Curzon, 2001) (with Cen Huang and David Ip). Renate Krieg is a freelance researcher. She received her academic degrees (MA and Ph.D.) in sinology from the Free University of Berlin after studying in Berlin, Beijing, and Shanghai. Her present research concentrates on China’s social change, employment, and social politics, and on foreign business in China, cross-cultural aspects of business, and development cooperation in China. Between 1985

276

list of contributors

and 1988 she worked as a representative of the German Academic Exchange Service in Shanghai. Her publications include Soziale Sicherheit im China der neunziger Jahre (IfA 1995), articles in academic journals, book chapters and conference papers on social security in China and on aspects of cross-cultural management in German enterprises in China. Vivienne W.M. Ho Luk is currently Director of the Wing Lung Bank International Institute for Business Development, Co-Director of the Institute for Enterprise Development and Management Research, and Associate Professor of the Department of Management at the Hong Kong Baptist University. Her research interests include human resource management, entrepreneurship and SMEs, women in management, and cross-cultural management. She has published in management and behavioral science journals such as the Journal of Management, the Journal of Vocational Behaviour, Human Relations, the Asia Pacific Journal of Management, the International Journal of Employment Studies, the Journal of Managerial Psychology, the International Journal of Management, Personnel Review, Compensation and Benefits Review, Asia Pacific Business Review, the International Journal of Cross Cultural Management and Sex Roles and Equal Opportunities International, plus book chapters, conference papers, research reports, and case studies. Irmtraud Munder is Head of the Center of Culture and Languages and Professor at the Faculty of Digital Media of Furtwangen University of Applied Sciences in Germany. In cooperation with the Center of Technology Assessment in Baden-Württemberg she initiates interorganizational networks of German small- and medium-sized enterprises that are looking for production facilities or other market opportunities in the Asia-Pacific region. Her current research interests are in the interaction of technological advancement and societal modernization from a cross-cultural perspective, including aspects of gender, religion, age, and regional culture, as well as in exploring the cultural dimension of the transition to a knowledge based society through tracing development trends in the IT-sector. Kerstin Nagels did her first degree in business and Chinese studies at Hochschule Bremen and the Chengdu University of Science and Technology. For her diploma thesis, she analyzed instances of success and failure in Sino-German communication and economic

list of contributors

277

cooperation. Her focus of research has been on cross-cultural management and the construction of cultural identity. In 1996, she graduated from the MA Area Studies China Programme at the School of Oriental and African Studies, London. Between 1996 and 2002 she worked as a facilitator and trainer for various organizations, and as researcher for Hochschule Bremen. In 2002 she joined the German Agency for Technical Cooperation (GTZ) as the coordinator of an R&D project in vocational education and training. After an eighteenmonth assignment in Chile she is now back at GTZ headquarters, working on related issues in Asia, Africa, and Latin America. Alexius A. Pereira is an Assistant Professor in the Department of Sociology at the National University of Singapore. He received his PhD in sociology from the London School of Economics and Political Science. He is the author of State Collaboration and Development Strategies in China (RoutledgeCurzon, 2003) and several research articles in journals such as the Journal of Contemporary China and Entrepreneurship and Regional Development. He is currently researching the impact of foreign direct investments and transnational corporations in Asia, as well as other sociological aspects of Singaporean society. Between 2002 and 2006 he served as the Executive Secretary of the International Sociological Association’s Research Committee on Economy and Society. Peter Peverelli has been studying China in the broadest sense of the word since the age of 14. He received a Ph.D. in Arts at Leiden University and a Ph.D. in Business Administration at Erasmus University Rotterdam. He has worked for the Dutch company Gist-brocades N.V. as its Chief Representative in China and has been working as an independent consultant since 1991. He currently combines his consulting activities with teaching business administration at the Vrije Universiteit Amsterdam. His main fields of interest are general organization theory, corporate identity, long-term Sino-Western joint ventures, and new types of enterprises in China with mixed ownership. Monika Schädler is Professor for China’s economy and society in the Department of Business Studies at Hochschule Bremen (Bremen University of Applied Sciences). She received her academic degrees in economics (diploma/M.Sc.) and sinology (Ph.D.) from the University of Hamburg after studying in Berlin, Hamburg, and Beijing. Her

278

list of contributors

present research concentrates on China’s employment and social politics, foreign business in China, cross-cultural aspects of business, and development cooperation in China. She accompanies her students’ internships in foreign and Chinese companies in China. She also gives expert advice and assessments for German and international development projects in China. Recent research projects include “Conflicts and Chances of Managing Sino-German Co-operation Projects”, a project funded by the Volkswagen Foundation, “The Aspect of Gender in Cross-Cultural Management: The Case of German-Chinese Economic Cooperation”, and “Conflict management in German invested companies in China”. Among her recent publications are articles on social security and human resource management in China. Xun (George) Wang is an Associate Professor of sociology in the Department of Sociology/Anthropology at the University of WisconsinParkside. He was educated in mainland China and the United States. His main publications include On the Frontiers of Science: Social and Behavioural Sciences (Tsinghua University Press, 2005) (with Guoli Liu) and Human Resource Management (Tianjin University Press, 2005 and 2000) (with Juan He). He has successfully developed and directed seven major projects with a total budget exceeding US$550,000. His recent research focuses on several different but interrelated areas, including state-owned enterprise reform in China, foreign investment in China, conflict in Sino-Foreign joint ventures, and human resource development.

INDEX

adaptation 230 hybridity 254 administrative human resource management 168 age, personnel development 172 alienation 255 alternative cultural globalization 269 assumptions conflict research 65 cross-cultural management research 143 autonomy 55, 152 beliefs, corporate culture 247 bureaucracy, Singaporean model 102 business brokerage 23 business enterprises 3 career development Chinese women 188 German women 190 migration 12, 192 career development opportunities Chinese women 190 personnel management 166 career-orientation, rewards 176 categorization, national background 154 central plan 37 change 231 Confucianism 219 cheese 93 childbearing, career development of women 193 China Diary Association (CDA) 86 China Food Industry Yearbook, Xiangnai Milco 78 China-Singapore Suzhou Industrial Park Development (CSSD) 106 Chinese markets, Western penetration 28 Chinese values, perception 124 code-switching 256 cognitive space 74 communication, conflict 213, 225 company levels, conflicts 50 company philosophy, human resource management 178

competitive advantage, SIP 105 complex adaptive systems (CAS) 158 compradors 4, 25 e.v. compromising (conflict resolution) 243 concepts of identity 140 conciliatory resolution strategy 233 configuration 4, 73 conflict management, cross-cultural comparison 208 conflict resolution 243 efficacy 227 performance 58 conflict resolution strategies 60 conflict types 50 performance 58 conflicting objectives 54, 231 Xiangnai Milco 88 conflicts 48, 243 contact zone 256 between management styles 261 positive functions 8, 66 values 117 Confucianism 218 conglomerization 80 consensus model 249 contact zone 256, 270 contextualization, power and control 90 contextualizing economics 3 contractual disjunctures 211 convergence 15 convergence-divergence 249 convergence thesis 16, 248, 268 cooperative conflict 9 cooperative resolution strategy 234 core national values of investors 208 corporate culture 146 hybridization 208 innovate cross-bred 230 Japanese joint venture 219 modernization 257 resistance 263 values 117 corporate identity interpersonal relationships 174 process of construction 236 corruption 100

280 cost consideration, localization 150 cross-cultural alliances 142 cross-cultural comparison, conflict management 208 cross-cultural conflict resolution 217 cross-cultural joint ventures 96 cross-cultural management, gender 184 cultural affinity 97 cultural ambivalence 10, 264 cultural assimilation 251, 269 cultural conflict 3 cultural differences 19, 52, 116 assumed 67 identity 132 management 145, 261 stereotypes and prejudices 6 cultural distance, conflicts 53 cultural fragmentation 247 cultural hybridity 255 cultural identity difference 132 promoting 103 cultural innovation 248 cultural resistance 263 cultural similarity absent 111, 223 conflicts 53 cultural space, hybridization 256 cultural tradition, conflict resolution 244 cultural values, see values culture 144, 246 paradox 18 dang’an (personal file) 176 danwei (work unit) 173 dialectical East-West relationships 268 disengaging from joint venture 110 disruptive resolution strategy 232 dynamic equilibrium 269 economic restructuring, organizational processes 238 education modernization 161 women 188 embedding 24 business brokerage 35 essentializations 139 expatriates 149, 152 German women 191 women 185

index expectations expatriates 153 women 196 exploitation compradors 29 localization 36 female managers 185 acceptance 194 forcing (conflict resolution) 244 foreign direct investment (FDI) 98 foreign enterprises, compradors 25 foreign investors, competing for 108 foreign-invested enterprises, modernization 157 gender 142, 184 personnel development 172 German values, perception 126 globalization cross-cultural encounters 144 economic restructuring 210 middlemen 31 modernization 39 socio-economic development 246 values 251 guanxi 100, 151 cultural ambivalence 10 human resource management 179 interpersonal relationships 173 guoqing 153 hua jingli (Chinese managers) 30 human resource management 11, 157 development 177 introduction in China 160, 164 models 168 hybridity 15 hybridization 208, 248 conflict resolution 217 mixed system 270 polarity 254 positive and negative synthesis 251 identity, hybridization 255 identity construction 209 image, joint venture 92 inclusion 73 individual corporate cultures 234 individual value differences 53 industrial sector, cognitive space 75 innovation 17 innovative cross-bred corporate culture 230

index integrated human resource management 168 intercultural conflicts 50 inter-governmental collaboration, SIP 106 international corporations 146 interpersonal relationships 173 intracultural conflicts 50 intra-enterprise differences 6 iron rice bowl 162 joint ventures 40, 47, 242 case Suzhou Industrial Park (SIP) 95 case Xiangnai Milco 73 foreign investment 160 implementing 91 swept under the carpet 85 joint venture agreement, power and control 90 labor market, emergence in China 160 labor-management, conflict 215 language compradors 26 management conflicts 261 leadership style, women 201 learning 5 legalistic strategy (conflict resolution) 244 lifetime employment 162 Light Industry Space 75 local factors 4 local knowledge 47, 150 women 190 local management 148 localization 24 arguments against 151 business brokerage 35 management 147 political change 41 loyalty expatriates 153 human resource management 166 interpersonal relationships 174 localization 42 management conflicts 55 cultural differences 145 personnel development 170 women 12, 185 management-labor relations, salary discrimination 253

281

management qualities, women 200 management strategy, convergent tendencies 259 management styles conflicting 261 Sino-Korean joint ventures 228 Sino-Taiwanese joint ventures 220 Maoist radicalism 37 meanings, corporate culture 247 middlemen 23, 30 migration, emancipatory function 12, 192 mistrust, localization 149 mixed cultural backgrounds 11 mixed system 256, 270 modernization communist interlude 37 compradors 29 convergance thesis 249 cultural fragmentation 247 education 161 foreign-invested enterprises 157 human resource management 169 modernization theory, convergence thesis 16 modernized Western values 131 multicultural relationships 210 multi-equity joint ventures 231 multiple inclusions 91 mutual perceptions 130 mutual stereotyping 134 Naigai Cotton Company, comprador system 34 national background, categorization 154 national origins 140 negative synthesis 251, 269 negotiation, Xiangnai Group 84 negotiation of culture 139 networking, guanxi 151 non-assertive conflict resolution 61 operational conflict 52 organizational identity 209 other agenda-phenomenon 88 parental control 54 partner objectives, conflicts 51 partner relationship, conflict 54 partnership conflicts 55 perception of values 124 performance conflict resolution 62 conflicts 57

282

index

management conflicts 262 rewards 175 personal affairs, involvement management 173 personal file 176 personnel development 170 personnel management 165, 168 localization 148 positive synthesis 251, 270 power 92 conflicts 55 control over joint venture 89 cultural differnces in management 145 women 12, 203 prejudices 6 women 197 problem solving (conflict resolution) 243 process of culture 18 professional asymmetry 133 questionnaire, values 119 reciprocal learning 259 recruitment compradors 25 conflict 213 reform process, social security 162 relationship conflicts 50 representative organizations for labor 163 resolution strategies 232 rewards 175 safety, blind eye 221 salaries, performance 175 salary discrimination cultural ambivalence 266 disruptive resolution strategy 232 management-labor relations 253 Sino-Korean joint ventures 225 Sino-Taiwanese joint ventures 222 satisfaction conflicts 57 personnel management 166 sense of belonging 140 sense of responsibility 129 sense-making, power and control 90 shared values 128 shifting cultural boundaries 211 Singaporean model 101 Sino-Japanese joint ventures, conflicts and resolution 213 Sino-Korean joint ventures 225

Sino-Taiwanese joint ventures, conflicts and resolution 220 social behavior, determinants 144 social interaction, corporate culture 209 social security, modernization 162, 177 social-cognitive configuration 73 socialist mixed economy 269 socio-economic convergence 249 socio-economic development 246 space 74 Special Economic Zone (SEZ) 95 competition 109 staff participation 172 Standard Oil Company, comprador system 33 stereotypes 6 values 130 women 186 strategic human resources 168 strong women 195 structural differences 7 studies of conflict 49 substantive conflicts 50 Suzhou Industrial Park (SIP) 95 Suzhou New District (SND) 107 syncretism 209 Tianjin Economic and Technological Development Area (TEDA) 42 time, cultural difference 263 trade union power, conflict 215 traditional Chinese values, conflict resolution 61 traditional Eastern values 131 traditional gender roles 193 training, personnel development 171 transitional socialist mixed economy 249 transnational corporate culture 13 transnational enterprises 2 transnational entrepeneurship, middlemen 31 transnational partnerships 210 Treaty of Shimonoseki 32 turnover, human resource management 166 unequal economic development 4 values cause of conflict 52 conflict resolution 244 conflicts 216 Confucianism 221, 231

index corporate culture 117, 247 corporate identity 226 cultural ambivalence 10 globalization 251 hybridization 209 stereotypes 130 transnational corporate culture 13

Westernization 257 women 11, 184 work unit 173 Xiangnai Group 82 Xiangnai Milco 73

283

INTERNATIONAL COMPARATIVE SOCIAL STUDIES ISSN 1568-4474

1. WILSON, H.T. Bureaucratic Representation. Civil Servants and the Future of Capitalist Democracies. 2001. ISBN 90 04 12194 3 2. RATH, J. Western Europe and its Islam. 2001. ISBN 90 04 12192 7 3. INAYATULLAH, S. Understanding Sarkar. The Indian Episteme, Macrohistory and Transformative Knowledge. 2002. ISBN 90 04 12193 5 (hardcover) ISBN 90 04 12842 5 (paperback) 4. GELISSEN, J. Worlds of Welfare, Worlds of Consent? Public Opinion on the Welfare State. 2002. ISBN 9004 12457 8 5. WILSON, H.T. Capitalism after Postmodernism. Neo-Conservatism, Legitimacy, and the Theory of Public Capital. 2002. ISBN 9004 12458 6 6. ROULLEAU-BERGER, L. Youth and Work in the Post-Industrial City of North America and Europe. With an Epilogue by Saskia Sassen. 2003. ISBN 9004 12533 7 7. AALBERG, T. Achieving Justice. Comparative Public Opinion on Income Distribution. 2003. ISBN 9004 12990 1 8. ARNASON, J.P. Civilizations in Dispute. Historical Questions and Theoretical Traditions. 2003. ISBN 9004 13282 1 9. FALZON, M.-A. Cosmopolitan Connections. The Sindhi diaspora, 1860-2000. 2004. ISBN 9004 14008 5 10. BEN-RAFAEL, E. and Y. STERNBERG (eds.), Comparing Modernities Pluralism Versus Homogenity. Essays in Homage to Shmuel N. Eisenstadt. 2005. ISBN 90 04 14407 2 11. DOUW, L. and CHAN K-b. (eds.), Conflict and Innovation. Joint Ventures in China. 2006. ISBN 90 04 15188 5