Ethnic Chinese Entrepreneurship in Malaysia

On Contextualisation in International Business Studies

Michael Jakobsen

• Publisher: Routledge
• Year: 2014
• Topic: Business
• eBook ISBN:
  9781317594024
• Subtopic: Entrepreneurship
• Index: Business

The study of ethnic Chinese in Southeast Asia has a long tradition. What is most striking in these studies is just how difficult it is to generalise about this ethnic group in the region. Whether or not they have been able to identify as Chinese has to a certain extend depended on different processes of social and political engineering, which in turn make them more or less distinct as an ethnic group. In the case of Malaysia, national political schemes such as the affirmative action policy indirectly force the Malaysian ethnic Chinese to conceive of themselves as a coherent collective, and yet, when asked Chinese entrepreneurs in the maintain that despite the affirmative action policy ethnicity is not the a defining deciding factor when it comes to identifying business partners.

This book focuses on the consequences of these kinds of policies in the field of inter-ethnic business practices and entrepreneurship in Malaysia within the wider context of the relationship between local, national and global markets. It focuses on the complexities of inter-ethnic relations and in particular, the strong economic position of the ethnic Chinese and their impact on the Malaysian economic scene as well as on the wider Southeast Asian region, underlining the degree to which inter-ethnic relations in Southeast Asia are crucial to understanding the political and economic complexitiescharacteristic of characterizing the region. In turn, it takes small and medium-sized enterprises as case studies, and shows how they are being shaped and in return shape the society in which they constitute a part. In doing so, the book highlights how these companies not only relate to the domestic economy, but also cater to the global economy, and presents a compelling argument for the introduction of a glocalised perspective in international business studies.

Ethnic Chinese Entrepreneurship in Malaysia will be welcomed by students and scholars with an interest in Asian studies, political economy, international business studies, inter-ethnic relations and diaspora studies.

Part I
The global context

1
Visualising the global economy

When discussing the current global financial crisis, two striking features are the externalisation of the strong links between international financial markets and the inability of national economies to shield their domestic markets from the negative effects of the international crisis. Combining these two features underlines the fact that the global community consists of nation-states that are bound together in a political and economic community characterised by interdependency and processes of global political and economic integration.

This movement towards an increasing interdependency and internationalisation of domestic economies does not necessarily lead to a harmonious and stable global community, as can be seen by the current difference between Western and Asian markets. As for now, the former are performing at nearly recession level, whereas the latter are experiencing annual growth rates on average of around 5 to 6 per cent; China and India have growth rates rather close to double digits, namely 7.8 and 6.5 per cent respectively.¹

Does this difference between Western and Asian markets allow Asian markets, at least temporarily, to disengage from their troubled Western counterparts in order to nurture their own developmental potential? This chapter explores the viability of disengagement by taking a critical look at the discourse of decoupling. It then proceeds to present an alternative perspective on the global economy by introducing the notion of ‘spiky’ and ‘flat’ economies. This notion of how to think about the global economy centres on whether to employ a multidimensional or a one-dimensional approach to the global economy. A multidimensional perspective argues that the global economic landscape consists of ‘spikes’, ‘hills’ and ‘valleys’. The one-dimensional view sees an evening out of national economic differences due to a global standardisation of financial transactions and production processes, thus the global economy is seen to be gradually becoming more streamlined throughout the world.

After critiquing both the decoupling perspective and the notion of a spiky or flat global economy, this chapter moves on to introduce an affiliated approach to analysing the global economy, this time based on market differentiation as employed within international business studies. According to this approach, the global economy is based on three main types of markets: developed markets, emerging markets and the so-called bottom-of-the-pyramid (BOP) markets. In this approach the main determining factors are the level of institutionalisation of the economy and the role of the state.

A fourth and final approach to analysing the global economy is based on a so-called glocalised mode of perceiving the global economic landscape. The term glocalisation was coined in the late 1980s to emphasise that the globalisation of a product is more likely to succeed when the product or service is adapted to a specific locality or culture in which it is marketed. The main mantra in this context is ‘think global, act local’. Out of these four approaches, the last has been selected as the main approach to be used as the lens through which the case study in this book, the Southeast Asian nation-state Malaysia, is analysed.

1.1 Decoupling: real possibility or intellectual exercise?

The intellectual roots behind the notion of decoupling can be found in the Dependency School that dominated mainstream political and economic discourse during the 1960s, 1970s and 1980s, with its thesis that the world is divided into a so-called First World and a Third World political and economic power structure. The theoretical foundation behind this bifocal view of the world was based mainly on neo-Marxist approaches formulated by scholars such as Emmanuel (1972), Amir (1974), Banaji (1977), Frank (1978) and Wallerstein (1979).

The point of departure for this school of thought was the political and economic processes that had their origin in a Western colonial and imperialist past, which then manifested themselves in a global centre–periphery relationship in which the centre, the West, monopolised and controlled capital accumulation fuelled by resource extraction in the periphery, that is, all countries outside the West, mainly in Latin America and Africa. The link to the discourse on decoupling was provided by Frank, who maintained that so-called Third World countries should de-link from the First World for their economic development, as these links were harmful for the periphery. With fewer linkages to the centre, Third World countries could concentrate on domestic development and import substitution, all guided by a developmental state based on a revolutionary socialist ideology (Frank 1978).

This theoretical macro perspective was later replaced by theories of globalisation in which multinational companies were the main players and nation-states acted as economic facilitators for domestic industrial internationalisation processes, developments that in particular have been discussed within international business theory by Porter (1990), Rugman and Verbeke (2004), Shenkar (2004) and Dunning and Lundan (2009), just to mention a few scholars in this rich field of research. Up until 2008, observers found supportive evidence for budding notions of decoupling, especially in Asian emerging markets. A good case in point is the discourse on ‘Asian values’ during the 1970s, 1980s and early 1990s (see for example Jakobsen and Bruun 2000), and again after the Asian financial crisis in 1997, that showed tremendous economic growth rates, especially in China and India, and much higher growth rates in the rest of East and Southeast Asia compared to the Western economies. As such, Asian economies were perceived as resistant to the contractions in the American and European economies because of their strong and constantly growing domestic markets, large currency reserves and prudent macroeconomic policies, partly based on experiences learnt during the 1997 financial crisis and partly based on perceived modes of doing business compared to their Western counterparts.²

During 2008 and 2009, however, cracks in the notion of decoupling began to emerge. The meltdown on Wall Street in 2008 sent shockwaves through the entire global financial system, not least in the Asian markets. Contrary to what those who believed in decoupling expected, the losses were even greater outside the United States, with the worst experienced in emerging markets and developed economies such as Germany and Japan.³ Even though China was relatively hard hit by the global economic contraction that followed the financial meltdown, it managed to engineer a decent rebound (together with India and a group of larger emerging economies in Asia), whereas the United States, Europe and Japan remain on the verge of recession. In the first half of 2011 it seemed as if the global economy was approaching the second bottom of a seemingly ‘W-shaped’ (also called ‘double dip’) economic crisis.

Taking into account the many fiscal stimulus packages introduced by states in 2009 and 2010 to stabilise national economies around the globe, it seems at least for the time being that those in Asian economies have had the greatest impact on national economies, thus rejuvenating an otherwise rather battered discourse on regional or national modes of decoupling. However, the main question remains whether the current growth of the Asian economies is a sign of a budding decoupling from the global economy, and in particular from Western economies. It is still too early to tell, as we do not know whether the current recovery will be sustained once the effects of the massive stimulus packages begin to fade.

A critical point when analysing these developments from a decoupling perspective is the relationship between decoupling and the underlying process of internationalisation of individual national economies. Even though a given national economy has been stimulated and facilitated in its development by the state, it does not mean that the economy is becoming detached from the global economy. Evidence of continuing links between a national economy and the global economy can be seen in a national economy’s dependence on foreign direct investment (FDI) for its continued growth and through membership of the World Trade Organisation (WTO), for example. In this way, the state is gradually aligning the development of its own economy with the global one.⁴ Turning to political decoupling, the Association of Southeast Asian Nations (ASEAN) has tried this through its developmental regionalism experiment, initiated in 1998. That experience ended in 2001 because of heavy criticism by the major global economic players as an attempt to introduce differentiated levels of competitiveness between the national, regional and global levels, thus damaging the free flow of capital between them (Nesadureai 2004).

Thus, it is problematic to employ the notion of decoupling, as global and local linkages remain strong and pervasive. It seems as if the discourse on decoupling is not aware of the current gradual dismantling of the historically conditioned Western economic hegemony, a condition that is being replaced by a more fluid, interdependent and contextualised economic world order based on shifting centres of capital accumulation. Asia is a very good case in point (and China and India in particular), taking the current developments in this region into consideration. Decoupling or recoupling, if we are to use these terms at all, seem to be less economic in nature and more part of a politically inspired discourse in which the notions of decoupling or recoupling constitute potent political signifiers. Taking this stand on decoupling reduces it to a domestic policy manifestation that reflects a given position in an international landscape of multiple and shifting power centres, thereby unintentionally accepting an increasing global interdependency between and harmonisation of individual national economies (Rugman and Verbeke 2004).

1.2 Beyond decoupling: towards a ‘spiky’ or ‘flat’ perception of the global economy?

Before introducing an alternative approach to analysing the relationship between economic globalisation and national economies, it is important to take a closer look at the current global political and economic landscape to identify the various opportunities and constraints that are impacting the economies in the Asian region. Based on a geo-economic understanding of the global economy, Thomas L. Friedman, in his book, The World Is Flat: A Brief History of the Twenty-First Century (2005), put forward the notion of a flat world as a metaphor for seeing the world economy as an increasingly level playing field. This means that agents in the global marketplace have an equal opportunity in terms of doing business. Friedman based this presumption on what he has identified as ‘the ten flatteners’,⁵ which combined with the so-called steroids⁶ and the triple global convergence⁷ have all led towards greater global interdependency. According to Friedman, the net result of these developments has been a gradual alignment of doing business in the global marketplace especially in the beginning of the twenty-first century.

Because of the so-called time-space compression (Harvey 1990: 240), that is, processes that merge or collapse the difference between time and space, inter- and intra-firm communication tends to be instantaneous. Accordingly, adaptation to local market and institutional conditions becomes an option and not a necessity for a global company. The Nobel Prize-winning economist Joseph Stiglitz has been rather critical of Friedman’s notion of a flat world and thus also of the notion and consequences of time-space compression. In his 2006 book, Making Globalization Work, he writes:

Friedman is right that there have been dramatic changes in the global economy, in the global landscape; in some directions, the world is much flatter than it has ever been, with those in various parts of the world being more connected than they have ever been, but the world is not flat…. Not only is the world not flat: in many ways it has been getting less flat.

(Stiglitz 2006: 7)

Richard Florida (2005), from George Mason University, concurred with Stiglitz that the world is not flat, but ‘spiky’. According to Florida, the world can be divided into three major categories that together make up the modern economic landscape: ‘spikes’, that is, cities that generate innovations, economic production ‘hills’ and the ‘valleys’ in between the two. To illustrate this, he and some colleagues developed a map that shows geo-economically what a ‘spiky world’ would look like. The map illustrates economic activity estimated on the basis of light emissions. Many cities, despite their large populations, barely register because of low levels of economic activity. The ‘spikes’ or cities that are capable of generating technological innovations constitute the tallest peaks on this map and are rather permanent. They attract global talent and create new products and industries.

The ‘economic hills’ are manufacturing centres that support the innovation engines found in the ‘spikes’. The hills can rise and fall quickly; they are prosperous but insecure in terms of investment. Finally, there are the ‘valleys’, which can be found in between the ‘spikes’ and ‘hills’. These are places or areas with little connection to the global economy and thus few immediate prospects for economic development. According to this geo-economic perspective, the world is not flat but constitutes a highly differentiated and interdependent landscape, if we are to believe these categorisations. To further substantiate the notion of a spiky world there are, however, more advanced ways of showing that a differentiated, interdependent and indeed ‘spiky’ economic landscape is closer to reality. One of these ways can be found in international business (IB) theory (Peng 2009; Ahlstrom and Bruton 2010; Peng and Meyer 2011). Besides showing that the various national economies are indeed interrelated and interdependent, theoretical approaches from this school of thought delineate various market types that are a direct reflection of the current forces defining the structure of the global economy.

1.3 From ‘spiky’ or ‘flat’ economies to differentiated market analyses

The IB approach has divided the global economy into three main types of markets: developed markets, transitional and/or emerging markets and BOP markets. The developed markets are those that contain the tallest ‘spikes’. These markets generally can be found in what Fukuyama (1995) has called ‘high-trust societies’. This refers to societies in which a high level of trust is placed in governmental institutions that provide for political accountability and checks and balances of the overall economy, as well as judicial protection and security for social groupings and individuals within civil society. In other words, these markets are defined by rules and regulations and as such attract a vast number of international and domestic investors.⁸ Furthermore, the societies in which these markets are found can be characterised as exhibiting moderate growth rates and having stable political regimes.

The role of the state in developed markets can be organised into two main ideal types: liberal market economies (LMEs) and coordinated market economies (CMEs).⁹ In short, the role of the state in the LMEs can be characterised as minimal. This means that the state plays a minor role in regulating the market and ideally leaves the market to its own regulatory mechanisms with only minor interventions to stimulate the economy. In this category would be the US and UK markets, for example. This perception of the US and UK markets has temporarily changed because of the impact of the current financial crisis. The state has to a great extent increased its intervention in those two markets to facilitate an otherwise faltering economy.

However, there are heavy political costs associated with adopting this new practice of an interventionist state in an LME. This can be seen especially in the United States, where Republican politicians are heavily attacking the Obama administration for being ‘socialist’ in its approach to the current economic crisis, leading to a stalemate within the political establishment. In contrast, the role of the state in a CME can be categorised as Keynesian. Here the state plays a major role as an economic facilitator and regulator, a role that expands and contracts according to fluctuations in the market and the state of the economy. This kind of market is found mainly in ...

Table of contents

• Cover Page
• Half Title page
• Series Page
• Title Page
• Copyright Page
• Contents
• Figures
• Tables
• Introduction
• Part I The global context
• Part II The regional context
• Part III The local context
• Part IV The glocalisation of context Some concluding remarks
• Bibliography
• Index