Demystifying Chinese Management

Issues and Challenges

Malcolm Warner, Chris Rowley

• Publisher: Routledge
• Year: 2015
• Print ISBN: 9780415743792
• eBook ISBN: 9781317693666
• Edition: 1
• Topic: Business
• Subtopic: Business General
• Index: Business

Today, with a new leadership in place, the People's Republic of China enters a challenging new phase as an emerging economic superpower. The Chinese economy has dramatically changed over the three decades since Deng Xiaoping launched his economic reforms in 1978. It has been transformed from a command economy dominated by state-owned enterprises to a market socialist economy with a wide range of ownership forms, both public and private. In turn, its managers and management have correspondingly undergone a major sea-change.

This edited collection attempts to demystify Chinese management, highlighting recent research into these significant changes and their implications in a wide range of business enterprises both in China and overseas. It points to the strategic challenges and issues in terms of realizing the managerial version of the 'Chinese Dream'. The topics covered include business schools in China, corporate social responsibility, financial services, impression management, international human resource management, international competitive strategy choices, internationalization of firms and the role of science parks.

The book was originally published as a special issue of Asia Pacific Business Review.

Demystifying Chinese management: introduction

M. Warner^a and C. Rowley^b,c
aJudge Business School, University of Cambridge, Cambridge, ^bUK; Cass Business School, City University, London, UK; ^cHEAD Foundation, Singapore, Singapore

The Chinese economy has dramatically changed in its nature over the last three decades or so. It has moved from being a command economy into market socialist system over the period and has morphed from an economy dominated by state-owned enterprises to an economy with a wide range of ownership forms, both public and private. In turn, its managers, managing and management have correspondingly undergone a major 'sea change'. This edited collection attempts to 'demystify' a number of these developments in Chinese management and to highlight recent research on strategic issues and challenges vis-à-vis realizing the managerial version of the so-called 'Chinese Dream' in a wide range of business enterprises in China and overseas.

Introduction

Today, with a new leadership in place, the People's Republic of China (PRC), hence to be referred to as 'China', enters a critical phase as an emerging 'economic superpower'. It has now supplanted Japan as 'number two' in the global pecking order. Its gross national product had been growing at an impressive rate for some years now, at around 10% per annum on average, but has recently slowed down to 7.5%, with the prospect of a 'hard-landing' on the horizon (see ChinaFile 2013).

Over the last three decades or so, the Chinese economy has indeed dramatically changed, since Deng Xiaoping launched his path-breaking reforms in 1978 (see Child 1994). It has moved from being a centrally planned to market socialist economy over the period and has morphed from an economy dominated by state-owned enterprises to an economy with a wide range of ownership forms, both public and private ( see Lin 2012). In turn, its management (guanli) strategies and structures have correspondingly undergone a major 'sea change' (see Warner 2014). Western-style management education has also become de rigueur and it has developed a number of world-class business schools¹ (see Warner and Goodall 2009).

This edited collection attempts to 'demystify' such developments in the PRC and to highlight recent research as to how these have come about - and whence they will lead in a wide range of business enterprises in the PRC and overseas. It points also to the strategic challenges and issues vis-a-vis realizing the managerial version of the so-called 'Chinese Dream'.² The themes and topics covered include (in alphabetic order) companies' social responsibility, financial services, impression management, international human resource management (IHRM), internationalization of firms, managerial ties, management education and science parks and strategy choices.

Observers of contemporary China, including its business, management and society, may sometimes have problems of 'making sense' of how these are different from their Western counterparts. Non-specialist readers in particular may often find it their characteristics confusing, even mystifying. Indeed, it is not obvious prima facie why its economy, ostensibly 'communist' but in reality by now in many ways 'capitalist', should have engendered such apparently successful 'managerial' models. In the course of this demarche, it is clear that Chinese management has acquired many challenging levels of complexity, ranging from the systemic, through the organizational, on to the individual. These all also interact with each other within the traditional and evolving cultural context of Chinese society, as well as with the work-ethic (see Kwon and Schafer 2012). Some have even spoken of a 'Confucian' model of Chinese management (see Warner 2014).

This Special Issue covers all these levels in terms of the substance of the research reported in the contributions presented. A broad range of questions may come to mind in 'understanding' management in China. For example, How distinctive is Chinese management theory and practice? How far has it adapted 'exogenous' management influences to 'indigenous' circumstances? Is it now 'converging' with Western management practice? This debate has been rumbling on for some years now and is as yet inconclusive. Given the growing interest in China's rapid economic growth and extensive industrial reform, its management has, in recent years, become an increasingly important topic of discussion (Rowley and Cooke 2012). It thus calls for further consideration and elaboration, and we shall attempt to address the issues we have mentioned in the sections that follow.

In this edited introduction, we shall accordingly try to 'demystify' this phenomenon in terms of making what seems to be a difficult subject easier to understand vis-a-vis what makes it 'distinctive'. The problem with China is that it has as yet not developed either an internationally known indigenous school of management writers who may be 'culturalists' - and/or what has been recognized as distinctively indigenous management theory or a set of theories. Nor has it developed a critical mass of 'universalist' theoreticians in the appropriate fields in question. To date, far too few Chinese management scholars have attempted to generalize across-the-board and create overarching theories. On the contrary, a good deal of academic work has involved replicating Western studies. It has been said that too much Chinese research is cross-sectional and too little longitudinal (see Warner 2011). Again, there are too few China-focused studies that have developed wholly new theories, at least to date.

Yet, Chinese management studies as a field has developed apace over the last few decades or so.³ Indeed, a good deal of empirical research papers by both Western and Chinese scholars beyond the mainland have been published in English, for the most part. Comparable work by scholars in Chinese universities and business schools has also appeared in Mandarin, as well as other languages. So, many studies have now been published to date, both in book form and in article form. There are now journals which specifically focus on management or related matters in China, such as Management and Organizational Research, as well as others, such as the Chinese Journal of Management, Chinese Management Studies, International Journal of Chinese Culture and Management, Journal of Chinese Human Resource Management, Journal of Technology Management in China and the Web Journal of Chinese Management Review, amongst others. Other people-management-related journals publish articles in this category from time to time, such as the British Journal of Industrial Relations, Human Relations, Industrial and Labor Relations Review, International Labour Journal, International Journal of Human Resource Management and so on. Also, Asia-wide journals proliferate such as the Asia Pacific Business Review, Asia-Pacific Journal of Business Administration, Asia Pacific Management Review and the Asia Pacific Journal of Management, as well as the more specialized Asia-Pacific Journal of Accounting & Economics and Asia Pacific Journal of Human Resources and China Economic Review, amongst others (see Warner 2014).

Contributions

Against this background, we can now turn to the specific contributions to this Special Issue. They cover a wide range of topical themes in Chinese management, as noted above, as well as many diverse methodologies. A few are mono-disciplinary, others interdisciplinary. Some are based on narrow case studies, others on wider field samples. Several contributions have a very large number of respondents.

In the first contribution in the Symposium, Andreosso-O' Callaghan and Gottwald discuss their chosen topic, 'How red is China's red capitalism? Continuity and change in China's financial services sector during the global crisis'. They argue that Chinese capitalism is too complex to be wholly captured by analytical frameworks such as the 'Varieties of Capitalism' approach and by concepts such as 'Regulatory' or 'Developmental' state, A continued statist tradition over the years, they continue, has implied the continuity in structures and institutions that underlies policy considerations at all levels in the national context. The existence of a stable 'Leninist' basis of formal institutions in the PRC, as they put it, is then appraised in the context of the financial services sector in this specific contribution. The case study presented shows how the sector is performing relatively well and how despite the country's costs of integration into the world economy and the global financial crisis, China's policy-making, they add, has adapted to the new status quo with a number of regulatory reforms. The analysis shows how private interests and the regulatory authorities are closely linked to the state apparatus and how there appears to be no radical break in view vis-a-vis China's unique blend of 'party state-led capitalism', at least in the opinion of the authors. However, closer examination of the data, they go on to argue, reveals that the following: first, the Chinese banking sector is heavily skewed towards 'the big four' (commercial banks); second, 'shadow banking' and 'underground banking' appear to be on the increase and third, private interests in the financial sector at large, as well as the regulatory authorities, are tightly linked to and/or under control of the state apparatus. China's 'capitalism', so-called, thus clearly does not appear to have adopted an alternative role model or a new global standard - for either advanced or developing economies. The Chinese leadership, they argue, may neither have endorsed nor acknowledged, at least as yet, the existence of the so-called Beijing Consensus or China model that many commentators would like to see highlighted in the headlines, although it has persistently stressed the 'uniqueness' of the Chinese reform experience.

In the next contribution, the authors Fan et al. in turn present an overview of managerial performance: 'The moderating role of context in managerial ties-firm performance link: a meta-analytic review of mainly Chinese-based studies'. The past two decades, they argue, have witnessed growing interest in investigating managerial ties in Chinese enterprises. Such ties, also named guanxi or social networks, they continue, appear to have influenced daily business activities in organizations and societies, especially in the context of Chinese culture. However, previous studies in this topic, they go on to assert, did not provide a definite answer to the query of whether managerial ties alone are truly determinants of firm performance. The authors seek to provide a quantitative approach by searching, integrating and analysing all the relevant studies with the help of meta-analytic techniques. Therefore, through a meta-analysis of 7748 firm samples, reported in 29 mainly Chinese-based studies, their study tested the prediction of 'Resource-Based Theory' (RBT) and 'Institutional Theory' in the context of the 'Managerial ties-Firm performance' relationship. In the study, the authors draw on RBT - with the assumption that managerial ties are related to firm performance - because these ties they believe provide 'strategic resources' in particular, as the basis for firms' 'competitive advantage'. In addition, they argue, the study enriches RBT by classifying managerial ties into two categories: 'business ties' and 'political ties'. The classification they use is important, they claim, because the two types of social ties represent different sources of power and can provide different strategic resources to firms. This meta-analytic over-review suggests an overall significant, positive relationship between managerial ties (business ties and political ties) and firm performance, which appears to be consistent with most prior studies. This result, they say, may help solve the controversy and provides significant empirical evidence for a consistent positive effect of managerial ties (both business ties and political ties) on firm performance in large samples. In addition, business ties appear to have a more positive effect on firm performance than political performance, supporting the findings of much existing research. In answering the question 'do managerial ties always produce value', the meta-analysis suggests that some pivotal contingencies (i.e. cultural type, industrial setting, firm size and measures) partially moderate the managerial ties-performance linkage. Drawing on 'Institutional Theory', the authors claim that they have investigated the temporal evolution of managerial ties (business ties and political ties) in the development of transition economies. The result of the 'meta-regression', they suggest, predicts that that the prevalence of political ties will decline as the publication date increases, which suggests that the value of managerial ties should be viewed dynamically through the lens of 'Institutional Theory'.

Following this contribution, Cen and Cai discuss their findings on Chinese top management: 'Impression Management in Chinese corporations: a study of chairperson's statements from the most and least profitable Chinese companies'. The purpose of their study was to investigate whether 'Impression Management' significantly exists in Chinese corporate annual reports. To the knowledge of the authors, despite flourishing in the Western context, the literature regarding impression management has not yet received significant scholarly attention pertinent to China and its cultural norms. Their specific study, they argue, is consequently designed to fill this research gap - by assessing whether 'impression management' practices crucially exist in chairperson's statements in the annual reports of Chinese-listed companies. The study also aimed to provide a theoretical underpinning that is suitable to explain possible impression management practice of Chinese corporations in particular, something not previously attempted in the literature. The following questions are raised: do the most profitable Chinese-listed companies disclose information in their chairperson's statements in a way that is significantly different from those of least profitable companies? If so, is it in any distinct way related to the particular Chinese cultural norms that underlie chairperson's practices? To answer such questions, an empirical quantitative methodology was adopted. A total of over 200 annual reports were involved in the analysis, which were drawn from the top 50 most and least profitable companies in Chinese share-markets (on the Shanghai and Shenzhen Stock Exchanges, respectively) which have provided chairperson's statements for the two years of 2011 and 2010. Factors including length, passivity, references to personal pronouns and quantitative performance indicators, together with proportion of discussion on future development are analysed. To ensure strong internal validity, the 200 statements were also translated into English to perform the same sets of analysis to ensure that no systematic difference could be identified in terms of the results. If communicative style varies with the two groups of companies across years, given their distinct financial performances, they concluded, the authors believe that this may potentially be reflective of their impression management strategy.

In the next contribution, Li and Ding analyse their focal topic: 'The effect of institutional isomorphic pressure on the internationalization of firms in an emerging economy: Evidence from China'. The study again uses 'Institutional Theory', as in one of the contributions above, to explore the driving force for internationalization of firms in emergent economies, including China. It posits that the internationalization practices of such firms are not only driven by efficiency considerations but also by the desire to conform to institutional 'isomorphic' pressures exerted by the social environment. The impact of three types of institutional isomorphic pressures - coercive pressure, mimetic pressure and normative pressure - on the intensity of internationalization is investigated. Using survey data collected from 174 Chinese firms, this study examines the effect of three institutional isomorphic pressures on the intensity of this process of internationalization. Also, this study examines the interaction effect between external institutional isomorphic pressures and internal firm-capability. Empirical results appear to demonstrate significant positive effects of all three kinds of institutional isomorphic pressures on internationalization intensity. The findings appear to support the proposition that firms seek internationalization for the purpose of gaining legitimacy via conforming to shared norms and values in external institutional environment. The results also point to that the adoption of internationalization strategy is not only for economic benefits, but also for legitimacy considerations, such as responding to government going-global advocate, imitating peer companies' strategy to reduce uncertainty and ensuring partnership with global business partners. The findings, the authors claim, may add to knowledge about the non-efficiency motives of internationalization by firms in emerging economies. They also confirm the existence of interaction effects between institutional isomorphic pressure and firm capability.

Following this, another group of researchers. Fan et al., examine: 'International human resource management strategies of Chinese multinationals operating abroad'. In recent years, they argue, scholars have witnessed a phenomenal growth of foreign direct investment (FDI) by Chinese multinational companies (MNCs) in general, and Australia in particular, has been ranked as one of top investment destinations by China. The growing prominence of the Chinese FDI ...

Table of contents

• Cover
• Title
• Copyright
• Contents
• Citation Information
• Notes on Contributors
• 1. Demystifying Chinese management: introduction
• 2. How red is China's red capitalism? Continuity and change in China's financial services sector during the global crisis
• 3. The moderating role of context in managerial ties—firm performance link: a meta-analytic review of mainly Chinese-based studies
• 4. 'Impression management' in Chinese corporations: a study of chairperson's statements from the most and least profitable Chinese companies
• 5. The effect of institutional isomorphic pressure on the internationalization of firms in an emerging economy: evidence from China
• 6. International human resource management strategies of Chinese multinationals operating abroad
• 7. International competitive strategy choices: comparing firms in China and India
• 8. Returnee faculty members, network position and diversification strategy: an analysis of business schools in China
• 9. The role of the science park in innovation performance of start-up firms: an empirical analysis of Tsinghua Science Park in Beijing
• 10. Confronting the crisis of food safety and revitalizing companies' social responsibility in the People's Republic of China
• 11. Strategic challenges and issues for Chinese managers and management in the global economy: conclusions
• Index