The challenges of the Chinese business environment

Citation

Adolphus, M. (2006), "The challenges of the Chinese business environment", Journal of Technology Management in China, Vol. 1 No. 2. https://doi.org/10.1108/jtmc.2006.30201baa.001

The challenges of the Chinese business environment

The challenges of the Chinese business environment

A conversation with Dr Richard Li-Hua Editor of Journal of Technology Management in China

Journal of Technology Management in China (JTMC) is a newly launched international journal focusing on the area of technology management in the world’s fastest growing economy, second only to the US in terms of GDP and purchasing power. China’s recent access to the World Trade Organization has led to huge opportunities for international businesses, yet the risk of failure for joint ventures remains high. The journal, which has just (January 2006) seen its first issue is aimed at both researchers and practising managers with an interest in the area and hopes to increase understanding by publishing research and good practice. It seeks to promote critical discussion on the nature and process of technology management and knowledge transfer that is academically rigorous, multidisciplinary and with a global reach.

Richard Li-Hua, PhD, is a Reader of Technology Management at Newcastle Business School, Northumbria University, UK, where he teaches and researches strategic challenge and management, knowledge management and strategy of international technology transfer in PhD, DBA and MBA programmes. As a Director of the Centre for China Business and Technology Transfer for the last seven years, he has been involved in a number of innovative international development strategy projects, including multidisciplinary consultancy and training programmes, and he also manages collaborative ventures with a number of universities in China.

In addition to launching JTMC with Emerald, Richard is also Founder and current President of China Association for the Management of Technology (CAMOT). His research interests currently lie in strategy of international technology transfer, in particular, the effectiveness and appropriateness of technology and knowledge transfer in China. He publishes widely and advises not only international business, but also the higher education sector and government agencies. He is the author of a number of successful monographs, and is also visiting professor and invited speaker at a number of universities in China and the west.

Before he joined Northumbria in 1997, he had a successful career in China’s construction industry as a senior economist and executive, and has long been involved in managing corporate partnerships, in strategic planning and implementation, international marketing research, business development and contract negotiation for his previous Chinese and current UK employer. He has been Senior Economic Advisor to the Henan Provincial Government, China and International Advisor to ARMCO, Saudi Arabia since 2003.

He was born in China and received his BA in English literature from Henan University, MSc in Construction Management from Southeast University in China and his PhD in Technology Management from Northumbria University in the UK. He is a Chinese national and permanent resident in the UK, but maintains a close relationship with major Chinese universities and government agencies.

A unique vantage point

There is no doubt that Richard is in a unique position to observe developments in both China and the west, and particularly the way in which the two cultures interact. He was born in China, has had both a Chinese and a western education, and now lives in the west, where he has built up a considerable expertise in the area of technology management in China. In fact, his most recent book, Technology and Knowledge Transfer in China, published in both the UK and China[1] has been rated in the top 20 best-selling business books on China by Amazon in 2004 and the top ten by Powells in 2005. Nor is his knowledge merely historic: although now resident in the UK he travels back to China between five and six times a year.

All of which gives him a unique vantage point to experience differences between culture and philosophies, and the peculiar way in which these differences impact upon negotiations and agreements. And standing Janus-faced as he does between two massive cultures gave him a strong sense of mission, and the urge to do something that would help the two cultures talk to one another. The practical fruit of this mission was two initiatives: the JTMC and the organization of CAMOT.

CAMOT, was launched with the objective of furthering understanding between China and the west of each other’s ways. The premise was that the world’s fastest growing economy represents a unique, but often misunderstood, opportunity for the international environment, which often fails to negotiate successfully through the uncertainties and ambiguities in China’s business environment.

CAMOT’s vision is to identify, and promote, and inspire excellence in the management of technology (MOT) and its aims are to provide a platform for researchers and professionals to debate how competitive advantage can be achieved through the application of successful technology management, to stimulate the flow of ideas between China and the west, and to promote strategic thinking as to how core competencies can be achieved through technology management.

CAMOT, composed of high profile academics and practitioners with a global reach, will achieve its aims and objectives by organizing and promoting a number of activities and work with other organizations (notably IAMOT, International Association for Management of Technology, and IFTM, International Forum of Technology Management), and organizing conferences/symposia for those interested in MOT in China and in the west. Dissemination vehicles will be CAMOT’s conference proceedings, web site and newsletter, as well as JTMC.

The challenges of the Chinese business environment

Before moving on to the journal’s content and editorial policy, I am anxious to learn more about the subject matter on which it draws, and what are the peculiarities and challenges of MOT in China, that the west finds so difficult? Richard is an acknowledged expert in this field, and has just signed a contract with Palgrave for a book entitled Marketing Competences and Strategic Flexibility in China, due to be published in October 2006.

Historically a number of factors have had an effect, most arising from a degree of isolationism and the closed door policy which existed in the early years of the New China[2]. Technological development and innovation had been dominated by a strong sense of self reliance: after the establishment of the New China the government’s edict was that you designed and developed on Chinese soil and with Chinese skill. This policy led to great strides in science and research – the atomic bomb and the rocket were all based entirely on China’s own R&D rather than on buying in skill from abroad – but it also meant low exposure to foreign ideas and skill.

MOT was also affected by the political establishment itself. “No doubt China’s political leaders were aware of the significance of technology management.” Richard concedes diplomatically “however, it is arguable whether there was appropriate mechanism for technology management after the establishment of the new China’. Initially, top leaders were drawn from the military; Jiang Zemin’s time saw sweeping changes as those appointed to senior posts had technical backgrounds and research experience in the former Soviet Union. After the economic reforms, however, you were far more likely to gain a top position not only in government but also in higher education if you had studied in the west (the majority of university presidents have experiences of the west or have been awarded advanced degrees in the UK and the USA).

Currently, Chinese business is rapidly becoming a significant factor in the west, and one that cannot be ignored. Pointing out that in France people start learning Chinese in primary school while middle schools teach it in the UK, Richard maintains that to survive in the twenty-first century business environment, you will need a combination of Chinese philosophy and western management science, and the ability to integrate the two perspectives – “My view is that these two components are equally important. Wherever you are from, you will be a lame duck if you neglect these two elements.”

Success, however, is a two edged sword for both Chinese and western businesses, especially in the very competitive environment after China joined the WTO – the former have to compete not only against home rivals but also against the west in their own country. There are two main causes of difficulties: the lack of similarity in ways of operating business, and different attitudes towards negotiations. On the former, the sheer complexity of operational issues in any technology management initiative presents particular problems when faced with knowledge transfer and managing an effective business network in China: many international corporations are finding managing operations there tough.

The unease caused by these issues makes trans-national corporations react in two ways: either they change their foreign national CEOs frequently – as is the case of Audi, BMW and General Motors – or else they appoint a local Chinese man – as in the case of Motorola, Nokia, Intel and Siemens. The latter move reveals both an anxiety, in that they do not know what is going on, and a desire to consolidate. However:

They are not going away from the Chinese market and they want to consolidate their presence in China with a local man who is armed with Western knowledge but also with Chinese management philosophy.

To illustrate different attitudes towards negotiations, Richard cites his experiences in trying to get western and Chinese universities to work together. In the west, a whole host of details need to be agreed before the agreement can be signed, whereas in China they cannot proceed without approval from the government, which they can only progress after they receive the contract.

People in the West will say we have to follow collaborative venture procedures, we have to do the risk analysis, we have to match the curriculum and the syllabus, we have to do a validation/approval event, … while in China the partner is waiting for a love letter!

The western approach is more procedural, whereas the Chinese one more emotional – if you want to do something sufficiently you will do it, whereas in the west we are apt to divorce business from emotion.

Successful business in China arguably depend on who you know rather than what you know. Frequently, the strength of personal relationships can be a determining factor in the outcome of a strategic alliance or business network, quite independently of the influence of business fundamentals. Personal relationships could be regarded as a social capital that is expected to provide positive returns in the market place.

However, Richard is quick to point out that there have been success stories, the prime example being the China Europe International Business School, a collaborative venture between the Chinese government and the European Union, started ten years ago with borrowed faculty from the famous business schools in the world, and now a “young adult” one of the strongest business schools in the world. Another example is the successful programme of multidisciplinary consultancy and teaching/training which the University of Northumbria has operated with several prestigious universities, making Northumbria one of the most successful providers of education in China.

But perhaps an even more striking aspect of collaboration between China and the west is the way Chinese companies are mirroring the entrepreneurial activities of western business by extending their operations into the west. One aspect of the Chinese economic miracle is the combination of first world high technology with the cheap labour and raw materials of the Third World – for example, China’s oldest car maker, the Nangjing Automobile Group has a deal with British MG Rovers to develop technical facilities in the UK.

Even more dramatic is the success of some Chinese corporations, which have grown from state-run enterprises to become trans-nationals. The obvious example is Haier, the Chinese electronic giant based in Qingdao, the outreach of which is truly formidable, with divisions in 165 countries: the US company alone has a $15 million headquarters in New York City and a $40 million Haier America Industrial Park in Camden, South Carolina, USA. The size and success of the group Richard attributes to its CEO, Zhang Ruimin, who combines strong knowledge of ancient Chinese philosophy with advanced western management concepts.

The Journal of Technology Management in China

Given the importance of the subject, it is not surprising that the journal appeals to a wide audience: not just academics, but also business executives and government officials. But does not a journal aimed at both academics and professionals risk falling between two stools, given the former’s appreciation of rigorous research and the latter’s need to cut to the chase? To which Richard responds by pointing out that while one may be working in a library and the other managing a factory, they share a common interest in the subject. He sees CAMOT as providing a valuable platform where people can meet and learn as well as exchanging expertise, with practitioners commissioning academics to do consultancy and training.

Richard is adamant, however, that the journal’s academic standards must be maintained: if practitioners write, they cannot just present a case study on its own without placing it in the context of the academic literature, and they need to appeal to an international audience. At the same time, he does not want papers that are entirely theoretical: the writer needs to state what are the implications for readers, i.e. academics, and/or government decision-makers and/or practitioners. He has what he terms the ABC rule: the paper must cover application, benefits and consequences. All aspects of the business will be covered; he is looking for papers that are truly multidisciplinary, looking at technology management through the lens of international marketing, human resource management, strategic management, knowledge management, accounting, finance, R&D, project management, entrepreneurship and leadership.

To ensure quality, the journal will go down the double-blind review route, and Richard has already established a ten-point set of guidelines and a marking system, according to which papers getting 49 or less will be rejected outright.

1. 1.

   Relevance – the article needs to fit in with the journal’s vision and mission.

2. 2.

   Originality in terms both of theory and practice. What is the contribution to knowledge?

3. 3.

   Clarity of thematic focus.

4. 4.

   Relationship to the literature and theoretical background.

5. 5.

   Rigour of research design and data (although Richard notes that some categories of paper, such as the conceptual paper, will not use empirical research, whereas viewpoint papers will be a vehicle for the author’s views, and will not have a research design).

6. 6.

   Critical quality and analytical rigour – the data presented must be analysed rather than just presented.

7. 7.

   Policy implications – the ABC rule mentioned above – does the paper have implications for government decision-makers?

8. 8.

   Clarity of conclusions.

9. 9.

   Attractive to an international audience – the paper must appeal both to western and to Chinese readers, and not offend either side.

10. 10.

    The quality of the communication – the English grammar and style.

Given the fact that the journal’s first issue has just appeared, it is hardly surprising that many of Richard’s goals over the next 18 months relate to getting the publishing systems to run smoothly. He aims to publish four issues a year, of which one will be a special issue; he has no doubts about obtaining good papers, as CAMOT is proving a highly effective recruiting ground, and he also acknowledges the support of his Managing Editor, Kate Snowden. A key priority is to consolidate the two very impressive (not just in numbers but also academic seniority) Editorial Boards, and establish a relatively stable review board of around 20 academics. Members of the former will also have a role in promoting the journal. Finally, Richard aims for timely publication, acknowledging that getting reviewers to respond on time is “challenging”. Like many editors, he is hoping that JADE online submission and peer review system will improve matters, and expects a successfully placed article to take six to eight months between submission and publication.

Richard admits that it can be a struggle to be listed in appropriate databases such as the social science citation index, but insists that it is important to aim to be listed in two or three years’ time.

And finally …

For my final question, I return to the broader issue of what makes Chinese business so successful, wanting to find out what is unique about Chinese philosophy.

For his answer, Richard contrasts the American style of management, which, before the Japanese economic miracle of the 1970s and the Chinese one of the late 1980s, dominated the business world. Whereas American management is based on self actualization, for example, management by objectives and results, Chinese management is based on self discipline, as one of the four pillars of Confucian philosophy (the others being taking care of one’s family, managing the country, and establishing good relations with other countries.)

Self discipline on the part of the CEO, therefore, is an essential prerequisite of managing the enterprise. (Part of Zhang Ruimin’s philosophy is to be cautious, meticulous, and always complete the day’s tasks rather than waiting until tomorrow.)

In the modern world, only the self disciplined manager has integrity and authority, managing business and managing organizations involves empowerment. If you empower people, you should as manager have integrity and authority. If you cannot discipline yourself, you lack the authority.

Margaret AdolphusEmerald Group Publishing Limited

Notes1. In the UK by Ashgate, and in China by the University of International Business and Economics.2. For a fuller analysis see “Technology management in China: a global perspective and challenging issues” by Richard Li-Hua and Tarek M. Khalil, in Journal of Technology Management in China, Vol. 1 No. 1, 2006.