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Chinese Multinationals’ Work & Employment Models: A Review & Research Agenda

Chinese Multinationals’ Work & Employment Models: A Review & Research Agenda. Chris Smith Jos Gamble and Yu Zheng School of Management. Outline. Question of transfer in MNCs SSD framework China Case Diversity in transfer likely Some potential forms of transfer Limited current research

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Chinese Multinationals’ Work & Employment Models: A Review & Research Agenda

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  1. Chinese Multinationals’ Work & Employment Models: A Review & Research Agenda Chris Smith Jos Gamble and Yu Zheng School of Management

  2. Outline • Question of transfer in MNCs • SSD framework • China Case • Diversity in transfer likely • Some potential forms of transfer • Limited current research • Conclusions

  3. Transfer of “Work Organisation” & Employment Relations • Production and work ‘best practice’ • Organisational field • Institutions and actors spreading ideas • Transfer theory in general • Forward and Reverse Diffusion • Recent developments • Internationalisation of labour markets • Labour flows increasingly independent of firm • MNCs flexibilization/causalisation of labour – mixed contracts • International recruitment agencies • ‘National’ prefix for MNCs action problematic

  4. Recent Stories of Transfer • Americanisation – 50s, 60s, -> Europe, Asia – tied to assumed ‘superiority’ of American ways - build on practices going back to diffusion of Scientific Management, Taylorism & Fordism from US throughout 20th century • Europe stars – Sweden (‘anti-Taylorist/Fordist’ working methods – short lived); German (superior training systems; stability within firms) • Japan – ’80s – ‘Global Japanization?’ – long-term employment, supplier relations, work regime, quality management etc. • Features - dominant home country practice is exported (‘dominance effect’) • Widespread academic and research support for idea of national champions – role of globalisation of management education • National story is selective – e.g. Japanization = large firm story

  5. SSD: An Analytical Framework(Smith & Meiksins, 1995; Smith, 2005, 2008; Smith and Elger, 1994; 2005) Work, employment, HRM management practices are shaped by three structural forces. But actors within workplaces must actively engage with these practices; not determinism, but reflexivity and actor-centred action • System Effects – political economy – capitalism, state socialism, common structures and social relation • Forms VoC framework – capitalist forms • Developmental process – inequality between developed and developing countries affect orientation towards transfer/learning/dominance • Society Effects– national institutional differences – home and host societies • Dominance Effects– practices of dominant economies, dominant firms, become ‘best practice’ • Corporate Level Effects – relative autonomy of companies as political and institutional spaces to enact, facilitate and block processes of learning and transfer - processualdynamics (Gamble 2010)

  6. Interplay of Practices – System, Society & Dominance • [The] SSD framework…stresses the interplay of different forces. A set of practices such as lean production, for example, may have begun as a dominant idea and then become more systemic in nature, and understanding its nature and effects is assisted by considering the relevant linkages, as opposed to treating it either as a specifically Japanese practice or simply as some context-free approach that will have the same meaning and effects anywhere (Elger and Smith 2005).” Source Edwards et al 2013: 607

  7. The “China” Story • Systems- • Transformation from state socialism to market capitalism; mixed system features, e.g. population controls formed in SS era remain in market era; movement towards neo-liberalism; but strong institutions and weak market relations (e.g. social networks, schools-firms linked in (Smith and Chan).….. • Society – • Common heritage and great economic and geographical diversity of firm-level practices • Developing country – learning markets, making capitalism, inwards FDI and outwards FDI • SOEs decline, reform & revitalisation • Dominance – • Unclear • SOEs strong in Outward FDI • Late appearance of large private firms- national champions?

  8. SSD and Internationalisation of Chinese MNCs • Literature on Chinese OFDI and internationalisation divides: • System - SOEs as only MNCs; private firms perceived as always connected to the Chinese state (e.g. Huawei in US); Chinese MNCs as political actors; misconception that Chinese workers in Africa are ‘convicts’ (Hairong& Sautman, 2012); large China ‘in transition’ and 2 systems literature. • Society – culture and institutions – obsession with guanxi and Confucianism ; culturalist managerialism – values, strategy, decision making, seen as ‘unique’. • Dominance – China in Africa ‘new imperialists’ narrative; China versus US narrative; China Goes Global; Global reach; single company becomes archetypical ‘China’ case - Foxconn; Huawei; Lenovo.

  9. Researching Chinese Outward FDI – IB lit Deng (2013) analysis of 138 articles on Chinese OFDI – • IB papers have nothingto say about processes within the firms, especially work and employment relations. In Deng – there are no references to workers, work or employment in the 138 papers on Chinese OFDI • 57 quantitative empirical studies; 24 use survey or questionnaire data mainly at the firm level; 33 use archival (primarily cross-sectional) datasets at a country or industry level using official Chinese government aggregate data, Thomson Financial SDC database, or the cross-border M&As by listed firms in the Shanghai and Shenzhen Stock Exchanges) • 21 qualitative empirical works, most use multiple cases or in-depth case studies and concentrate on prominent Chinese companies such as Haier, Lenovo, TCL, and Huawei.” • 60 conceptual or perspective papers appear in cross-cultural and international journals. They tend to focus on the macroeconomic analysis of Chinese OFDI trends and patterns and particularly in host countries such as the U.S. and African countries Source: Deng (2013: 515)

  10. China Case – Transfer & Internationalisation • There are theoretical problems with the ‘integrated’ models of ‘transfer’, but empirically the China case challenges the idea of ‘national’ integrated models that have been central to transfer debate – see recent Japanization literature. • China does not present a single integrated business model, but several models – state-owned enterprises, private business, village and townships enterprises, foreign-invested companies (joint ventures). • Zhang and Peck (2013) from a regional economy perspective elaborate 5 models of Chinese capitalism (regional sub-national business models) Guangdong, Sunan (Southern Jiangsu Province), Wenzhou (Zhejiang P.), Zhongguancun (Beijing ‘Silicon Valley’), and Chongqing (City) business models. • Therefore in the Chinese Case we are dealing with an empirically more complicated story. Source: Elger and Smith, 2005; Peck and Theodore, 2007; Zhang and Peck 2012, 2013)

  11. China GDP by province (Economist 2011)

  12. China exports by province (Economist 2011)

  13. China Case cont. • We might therefore have multiple ‘transfer stories’ or models and not a single Sinification narrative of internationalisation or transfer. • Models are in contradiction and conflict with each other; some are rising, others being challenged; some internationalising – • Guangdong model - flexible production, low regulation, low wages, dormitory labour regime (Smith, 2003); • Others based around local resources, and political bargaining within CCP e.g. ‘Chongqing Model’; • Some have state as central actor, which may inhibit ‘internationalisation’ but this has not been the case with investments in Africa and other countries by Chinese SOE companies are ‘resource seekers’ and have developed distinctive management systems based on a simple transfer of enclave ‘casual labour regime’ (CK Lee, 2009)

  14. Chinese Outward FDI • Chinese OFDI small in scale: growth is impressive; in 2011, Chinese OFDI totalled USD65 billionwith an average annual growth rate in the previous five years of 38.6% and the stock of Chinese OFDI amounted to USD366 billion (UNCTAD, 2012). • Chinese OFDI is often compared to Japanese OFDI in the 1980s and South Korean OFDI in the 1990s, but China is much less developed than were Japan and Korea. China’s GDP per capita is about USD5,500, whereas Japan’s GDP per capita reached USD12,000 in the 1980s and Korea’s was USD10,000 in the 1990s. • China’s OFDI remains heavily focused on developing countries (but this changing); is resource focused, (but this is also changing) and unlike Western FDI, it includes significant investment from State Owned Enterprises, especially in Africa and developing regions. • Europe and the US take around 25% each of annual Chinese OFDI. In Europe by number, in 2011 75% of investments are by private firms; but by value, 72% originates from state-owned enterprises (Hanemann and Rosen 2012: 4)

  15. China’s ODI and cross-border acquisitions, 1982-2006 (Nicolas & Thomsen, 2008)

  16. Chinese OFDI in the EU-27 vs. the US, 2000-2012 (Håkansson, 2013)

  17. China – what’s inside goes outside? • The outcome of some 30 years of theorising and empirical engagement with reform and transformation has been mixed. • Lee (2007) divides ‘sunrise’ from ‘sunset’ industries – each with their own labour regimes, labour supply and working class politics. How does this divide affect internationalisation? • Some see in China a dominant form of ‘bloody Taylorism’, epitomised by one reading of the work regime enunciated by the Taiwanese firm Foxconn – military discipline and ideology; task simplification; intensive work combining production and reproduction of labour power in huge industrial compounds that function like enclosed cities(Pun and Chan, 2010; Pun et al 2013) • Huawei – with longer-term relations between workers; limited use of agency workers; more innovation, more investment in skills and training and share ownership between workers and firm – tells another story(Rui, forthcoming) • Which represents the Chinese labour process?

  18. China - Motivations & ‘Models of Transfer’ • ‘Go to know’ – knowledge seeking identified as key motive of Chinese Outward Foreign Direct Investment • ‘Go to dodge’ – investing overseas to get away from Chinese practice at home or hide income (Tax Havens) • ‘Go to prolong’ – Internationalisation to perpetuate home country practices which are under pressure in the home territory • ‘Go as the whole show’ - the state-owned investments • ‘Go to return’ - repatriating or reversing assets from acquisitions back to China to capitalise on continued ‘home country advantages’ (low cost production model/dormitory labour regime) - Volvo case

  19. ‘Go to know’ – knowledge seeking • ‘Go to know’ – knowledge seeking identified as key motive of Chinese OFDI (Child and Rodrigues) • Early case studies on Chinese firms in City of London (Miao Zhang, 2003) – Chinese managers learnt was how to enrich themselves as individuals; opportunistic investments without organisational constraints around the managerial elite, allowed managers to learn and run away from the firms that all went bust.

  20. ‘Go to know’ – knowledge seeking • Huawei case – • Turkey subsidiary of Huawei in Istanbul, there were 1000 employees, but 200 of them were Chinese - high expatriate rate (1 in 5) has to be unique in internationalisation, even in a country like Turkey were wage costs will not be as high as in Western Europe. • Huawei’s domestic employees are greater than those working in the 140 overseas subsidiaries, but more revenue was generated overseas than in the PRC since 2008. Like many Chinese MNCs it has a competitive advantage in having a large pool of inexpensive workers in the home territory, and therefore one of the reasons for OFDI is not to escape the high costs of domestic labour, as is the case with many Western MNCs. • They will not impose an ideological ‘no union’ policy; they are more pragmatic, and work within a country’s culture

  21. ‘Go to prolong’ – Internationalisation is push factor - within and beyond China • ‘Guangdong model’ in Pearl River Delta change – upward pressure on wages; rising costs of materials; rise in the value of the Yuan; labour legislation - 2008/2009 Labour Contract Law; unprecedented external dynamics (e.g. the slackening global demand after the 2008 global financial crisis), have further increased pressure on model; Guangdong local government desire to move up value chain (Zhu and He, 2013) • Firms that did not close, moved within China to cheaper productions sites, and new entrants ‘went west’ and not to the coast; there was also some internationalisation to other Asian countries in order to maintain prolong the ‘Guangdong model’ (cheap labour) active in Vietnam and Malaysia (Zhang, 2012; Miu, 2013) ; • Foxconnin Czech Republic (Sacchetto and Andrijasevic, 2013) (using migrant labour from Romania and Bulgaria in order to lower labour costs; employment through agencies; segmentation of workforce transferred; rigid labour controls

  22. ‘Go as the whole show’ - the state-owned investments’ Chinese Capitalist Peculiarities in Africa (CK Lee) • Chinese “Special Economic Zones” in Africa – another employer or a ‘new imperialism’? • Outbid other firms for mining contracts by 30% on average due to: • Delayed payment - paid at end of contract (2years) • 2 year posting • Migrant agency workers from surplus labour in China • ‘bonded management’ – tied to firm; living at work; men on their own, reduced costs of reproduction; constrained mobility; all Management and professional jobs are Chinese • What we call ‘dormitory labour regime’ (Smith, 2003) is internationalised by Chinese firms. • State to state patronage between Chinese SOEs and African states • Closed enclave ‘special economic zones’ – these can be an example of a space within a country where practices from another national model can be implemented with less pressure from local institutional forces. Some criticisms – see Mohan (2013)

  23. ‘Go as the whole show’ cont. • Not Just in Africa – Singapore case • Chinese Construction Company (state-owned) in Singapore where the majority of workforce (5000) were contracted from China. Scarcity of building labour in Singapore, but politics, with reluctance to employ Malaysians – many of whom prefer to work in the service sector (Rui). • Chinese workers were working away from home, not tied into local solidarities as internal-migrant workers and on 2 year contracts

  24. Go to return - ‘Reverse Transfer’ • Zhang and Edwards (2007) assumes rational transfer & learning based on ‘Chinese government policy’ (‘international borrowings’ (jiejian) 1980s and ‘motivation’ of Chinese expatriates to learn. • Action research? – Zhang trainer in some case study firms • Chinese early arrivers actively adapt to UK environment ‘localization’ • Cases were subsidiaries of SOEs in finance and trade in London • Reverse transfer limited • Naïve managerialism - learning is good for all • Understates political process of transfer; sectional interests of managers; institutional fields of transfer.

  25. ‘Go to return’ – Continue access to labour surpluses at home • Jan Knoerich (2012) argues Chinese FDI is driven by a unique set of needs, namely to get resources that they do not have at home and as such internationalisation is not an expression of having dominated home markets the firms takes its strengths into the international markets . Knoerich suggests that a significant home advantage for Chinese firms is the abundance of cheap labour at home. • Internationalisation can ‘bring back’ production to China - ‘reverse diffusion’ and ‘vanguard role’ of subsidiaries: (Edwards, 1998; Ferner & Edwards, 2000) ‘MNCs attempting to improve their international position by learning from more developed countries’; (Zhang & Edwards, 2007) • But Chinese MNCs home-country advantage being trained, disciplined and inexpensive labour can also mean they design their employment and recruitment systems not to escape but to continue to use or access this labour.

  26. Some generic features of HR & work organisation practices of Chinese MNCs • Observation that Chinese firms when acquiring or investing seek efficiencies through changing the composition of the labour force: • bringing in younger cheaper workers; • students & trainees as full time; • building institutional links to colleges & schools to get labour (Motor bike case in Italy; Huawei case in Africa; Canadian pulp paper firm (Zheng,2014). • Chinese MNCs are dynamic, often heavy users of expatriates. Shen and Edwards (2006) state that Chinese international firms are more ethnocentric in usage of expatriates ; • Use of ‘home based nationals’ extends a long way down the organisation – especially in resource-based FDI – MNC acts as conduit for labour flow from China to overseas investment site and continuation of ‘home based’ management-labour system.

  27. Generic features cont. ‘Despotic labour regimes’ are said to characterise employment relations in Chinese firms • Bonded management - Lee (2009) in work on Chinese firms in Zambia • Heavy use of ‘employment agencies’ for ‘dispatched workers’; contract segregation within the firm – agency and non-agency staff • Labour relations in Chinese overseas subsidiaries. Shen and Edwards (2006) case studies of overseas Chinese companies in different sectors conclude that they shared: • An autocratic management style; • Low employee involvement; Lack of openness in communications; • Absence of formal policies toward employee relations; • Preference for no trade union recognition in Chinese overseas operations

  28. Generic features cont. • Labour is not retained within the boundaries of the firm, and while labour supply may be channelled through firm-level networks, especially for labour capture, workers exercise mobility power by breaking free of these firms and establishing their own companies, or acting in concert with Chinese family networks to establish such autonomous firms. • Spill-over in Africa and Europe (Prato – Italy SMEs) Johanson 2009

  29. How do we deal with PRC & Greater China cases? • Greater China MNCs shaping the Chinese economic growth, work and employment; pattern of FDI from Hong Kong, Singapore and Taiwan into China and now internationally. (Henderson et al 2013) • Often FDI is from PRC but badged as FDI to gain benefits that go to FDI; • Papers on Greater China MNCs in Middle East, SE Asia – often in export processing sectors (Textiles and Toys and Electronics Assembly) and internationalising as labour costs, regulation and upgrading is being pursued in China by central and local authorities. How do we deal with PRC and Greater China cases?

  30. Conclusions - research questions • Key Questions: HRM and expatriate management at Chinese MNCs: • Application of SSD framework to Chinese case • Tensions between ‘home’ and ‘away’ practices, and different effects • Dynamics in SSD in Chinese ‘case’ • Are forms of controls in Chinese MNCs abroad a reflection of home practices; or adaptation to working abroad – avoiding ‘runaways’ - leaving the firm • Does the use of expatriates further down the organisation in Chinese MNCs apply in all sectors? • How does Chinese MNCs heavy use of expatriates change current debate on this issue?

  31. Conclusion – Research Themes • The pattern of Chinese MNCs: • The perspective of work and employment relations by host-country and host-region • The perspective of work and employment relations by industrial sector • The perspective of work and employment relations by company – district styles • AGreater-China Chinese case • A Private Firm Case • A Reformed SOE Case • Others(?)

  32. References Berning, S. C. & Holtbrügge, D. (2012) ‘Chinese outward foreign direct investment—a challenge for traditional internationalization theories?’Journal fürBetriebswirtschaft, 62:169–224 Chan, J., & Pun, N. (2010). Suicide as protest for the new generation of Chinese migrant workers: Foxconn, global capital, and the state. The Asia-Pacific Journal, 18(37), 1-50. Chan, J., Pun, N., & Selden, M. (2013). The politics of global production: Apple, Foxconn and China's new working class. New Technology, Work and Employment, 28(2), 100-115. Child, J. (2009) ‘Context, comparison, and methodology in Chinese management research’, Management Organization Review, 5,1:57–73. del PilarHåkansson, C. (2013). "Chinese Outward Foreign Direct Investments in the EU-27: Defeating the traditional FDI theory?." Deng, P. (2013). Chinese Outward Direct Investment Research: Theoretical Integration and Recommendations. Management and Organization Review, 9(3), 513-539. Edwards, P. K., Sànchez, R., Tregaskis, O., Levesque, C., McDonnell, A., & Quintanilla, J. (2013). Human Resource Management Practices in the Multinational Company: A Test of System, Societal, and Dominance Effects. Industry and Labour Relations Review, 66, 588-696. Elger, T. and Smith, C. (2005) Assembling Work: Remaking Factory regimes in Japanese Multinational Companies in Britain, Cambridge: Cambridge University Press. Elger, T., & Smith, C. (1994). Global Japanization? Convergence and competition in the organization of the labour process. Global Japanization, 31-59.

  33. References cont. Elger, T., and Smith, C. (eds.) (1994). Global japanization?: the transnational transformation of the labour process. London: Routlege. Friedman, E., and Lee, C. K. (2010). Remaking the World of Chinese Labour: A 30‐Year Retrospective. British Journal of Industrial Relations, 48(3), 507-533. Gamble, J. (2010) ‘Transferring organizational practices and the dynamics of hybridisation: Japanese retail multinationals in China’. Journal of Management Studies, 47(4): 705-732. Hairong, Y. and Sautman, B (2012) ‘Chasing ghosts: rumours and representations of the export of Chinese convict labour to developing countries’, The China Quarterly, Volume 210:398 – 418. Hanemann, T. & Rosen, D.H. (2012). China Invests In Europe: Patterns, Impacts and Policy Implications. Rhodium Group. Available Online: http://rhg.com/wp-content/uploads/2012/06/RHG_ChinaInvestsInEurope_June2012_ExecutiveSummary.pdf Henderson, J., Appelbaum, R. P., & Ho, S. Y. (2013). Globalization with Chinese Characteristics: Externalization, Dynamics and Transformations. Development and Change, 44(6), 1221-1253. Knoerich J. ‘The rise of Chinese OFDI in Europe’, in Alon et al (eds.) (2012) Chinese International Investments, London: Palgrave Johanson, G., Smyth, R. and French, R. (2009) (eds.) Living Outside the Walls: The Chinese in Prato, Newcastle: Cambridge Scholars Publishing. Lee, C. K. (2007). Against the Law: Labor Protests in China's Rustbelt and Sunbelt. Berkley: University of California Press. Lee, C. K. (2009) ‘Raw encounters: Chinese managers, African workers and the politics of casualization in Africa’s Chinese enclaves’The China Quarterly 99:647-666. Lee, C. K., & United Nations Research Institute for Social Development. (2005). Livelihood struggles and market reform:(Un) making Chinese labour after State socialism. United Nations Research Institute for Social Development.

  34. References cont. Mohan, G. (2013). Beyond the Enclave: Towards a Critical Political Economy of China and Africa. Development and Change, 44(6), 1255-1272. Nicolas, F and Thomsen., S. 2008. The rise of Chinese firms in Europe: Motives, strategies and implications. Paper presented at a Research Workshop on Chinese Investment in Europe. 2008, Chatham House, London. 17 September. Nicolas, F. & Thomsen S. (2008). The Rise of Chinese Firms in Europe: Motives, Strategies and Implications, Draft Paper at the Asia Pacific Association Conference. Available Online: http://www.apeaweb.org/confer/bei08/papers/nicolas.pdf Peck J. and Theodore N. (2007) Variegated capitalism, Progress in Human Geography 31, 731-772. Peck, J., & Zhang, J. (2013). A variety of capitalism… with Chinese characteristics?. Journal of Economic Geography, 13(3), 357-396. Pun, N., & Smith, C. (2007). Putting transnational labour process in its place the dormitory labour regime in post-socialist China. Work, Employment & Society, 21(1), 27-45. Shen, J. and Edwards, V. 2004. Recruitment and Selection in Chinese MNEs. The International Journal of Human Resource Management, 15(4/5): 814–35. Shen, J. and Edwards, V.(2006) International Human Resource Management in Chinese Multinationals, London: Routledge. Smith, C. (2003). Living at work: Management control and the dormitory labour system in China. Asia Pacific Journal of Management, 20(3), 333-358. Smith, C. (2005). Beyond convergence and divergence: explaining variations in organizational practices and forms. In Ackroyd, S.; Batt, R.; Thompson, P, 602-625. Smith, C. (2008). Work organisation within a dynamic globalising context: A critique of national institutional analysis of the international firm and an alternative perspective. Remaking Management: Between Global and Local, Cambridge University Press, Cambridge, 25-60.

  35. References cont. Smith, C., & Meiksins, P. (1995). System, society and dominance effects in cross-national organisational analysis. Work, Employment & Society, 9(2), 241-267. Smith, C., & Pun, N. (2006). The dormitory labour regime in China as a site for control and resistance 1. The International Journal of Human Resource Management, 17(8), 1456-1470. Tsai K. S. (2007) Capitalism without Democracy: The Private Sector in Contemporary China. Cornell University Press, Ithaca. Yang C. (2012) Restructuring the export-oriented industrialization in the Pearl River Delta, China: Institutional evolution and emerging tension, Applied Geography 32, 143-157. Zhang J. (2013) Global economic crisis and the ‘spatial fix’ of China’s world factory, in Y. ATASOY (Ed.) Global Economic Crisis and the Politics of Diversity, Palgrave Macmillan, London, forthcoming. Zhang, J., & Peck, J. (2014). Variegated Capitalism, Chinese Style: Regional Models, Multi-scalar Constructions. Regional Studies, (ahead-of-print), 1-27. Zhang, M., & Edwards, C. (2007). Diffusing ‘best practice’in Chinese multinationals: The motivation, facilitation and limitations. The International Journal of Human Resource Management, 18(12), 2147-2165. Zheng, C. (2013). Theoretical contexts of managing people in emerging Chinese multinational enterprises. Journal of Chinese Human Resource Management, 4(1), 58-76. Zheng, Y. Towards a triadic framework of understanding power relations in multinational corporations (Mimio) Zhu S. and He C. (2013) Global, regional and local: new firm formation and spatial restructuring in China’s apparel industry, GeoJournal DOI 10.1007/s10708-013-9484-z

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