Diaspora and Trade Facilitation: The Case of Ethnic Chinese in Australia

1. Diaspora and Trade Facilitation: The Case of Ethnic Chinese in Australia Rosalie L. Tung, Ph.D., FRSC Simon Fraser University (Canada) And Henry F.L. Chung Massey University (New Zealand)

2. Diaspora and Trade Facilitation • Diaspora – “scattering or sowing of seeds” • Displacement or dispersion of members of an ethnic group from their COO to foreign lands, either voluntarily or forcefully • Traditionally, viewed as victims • Aliens in a foreign country • Adapt to new environment • “Challengers” (Cohen, 1996) – Chinese as “trade diaspora” as Chinese entrepreneurs engage in “trading activities at a greater rate than other ethnic entrepreneurs in Australia” • Early years after liberalization, approximately 80% of FDI into China came from overseas Chinese (Khanna, 2008; Ahlstrom, Bruton & Yeh, 2008) • Between 1980-2004, 1/3 of FDI into China from overseas Chinese • 2006, Hong Kong and Taiwan ranked as largest and sixth largest foreign investor in China

3. Chinese Diaspora Source: Adapted from Ma and Cartier, 2003, pp.13-16.

4. Diaspora and Australia • Why Australia? • Large country, small population  outward-looking • Economic ties shifted to Asia Pacific after U.K. joined European Common Market (EU) • Welcomed immigration – 1/3 of its population is foreign-born • China has displaced Japan as Australia’s largest trading partner • 2006 Australian Census – 3.4 % self-identified as Chinese • Higher concentrations in Sydney (7%), Melbourne (5.1%) • Early Chinese settlers from Pearl River Delta • Differences among Hong Kongers, Mainlanders and Taiwanese • Dialect (40.4 % speak Cantonese, 25 % speak Mandarin – 2002 Australian Bureau of Statistics) • Time of arrival • Proficiency in English and familiarity with Western business practices • Historical legacy • Mutual dislike of each other

5. Diaspora and Australia (continued) • Similarities • Tendency to engage in entrepreneurial activities • 1991-1992, 93% of business emigrants came from Asia (Hong Kong – 32%; Taiwan – 15%) • Desire to participate in fruits of Chinese economic miracle • Brain circulation, astronaut families, parachute children • Immigrants as an important source of social capital • Economic motives to FME: Uppsala model of incremental involvement (Johanson & Vahlne, 1977); transaction cost (Anderson & Gatignon, 1986); OLI (Dunning, 1988) • Social networks : “leapfrogging traditional barriers to internationalization” (Coviello & Martin, 1999; Chen & Chen, 1998; Filatotchev et al., 2007; Johanson & Vahlne, 1992; Zhao & Hsu, 2007) • Immigrant effect (IE) – firms owned by immigrants and which hired immigrants in key decision making positions (Chung & Enderwick, 2001)

6. Hypotheses • H1: Immigrants can enable the pursuit of a higher resource commitment mode when entering into emerging markets • H2: Immigrants can facilitate the pursuit of appropriate marketing strategies where there is a significant difference in customer behavior between home and target markets • H3: Immigrants can facilitate the pursuit of appropriate marketing strategies where there is a significant difference in the PLC stage of the product between the home and target markets • H4: Firms with a longer history of operations in the target market are less likely to resort to an immigrant effect • H5a: Firms that possess an IE social network are likely to enjoy a better performance • H5b: Firms that adopt a high resource FME mode are likely to enjoy a higher performance

7. Control Variables • Firm size • Product type (manufacturing vis-à-vis service) • Firm’s overall experience in international business (IBE) • Host country’s institutional environment • Political-legal • Economic • Competitive • Cultural

8. Figure 1: Research Framework in the Greater China Region – The Case of Ethnic Chinese in Australia H2 Customer H5a Customer Product life cycle H3 H1 H5b FME mode (high versus low) Immigrant Effect Performance History in the host market H4 Type of host market Control variables -----: control variables relationships –i.e., not proposed in hypotheses

9. Methodology • 6-page questionnaire sent to Australian firms listed in Worldwide Directory of Dun & Bradstreet with operations in Greater China (n=710 firms) • Completed by most senior executive overseeing firm’s operations in respective target market • 135 usable questionnaires (19% response rate) • 80% are SMEs • Majority in consumer (food/beverage, apparel, electrical) and industrial products (equipment, material, components, chemical); 10% in service (financial, shipping, designing, education, market research) • Most important target markets: China (44%), HK (37%), TW (18%) • 75% entered via low resource commitment FME mode • 43% of respondents were IE users (40% hired immigrants; 3% owned by immigrants) • IE usage highest for China (52%); Hong Kong (37%); TW (11%) • IE: HK, TW and PRC as 3 COO markets (in PLS, HK/Taiwan vis-à-vis China) • Immigrant employee has to be based in Australian HQ • 1 = IE

10. Methodology (continued) • FME mode • Current FME mode (Cavusgil & Zou, 1994) • 1 = high resource commitment (wholly-owned or j.v.) • Size: total number of employees (Brouthers, 2002) • Firm’s history in target market : # of years in target market • IBE: # of years in international business (Brouthers, 2002) • PLC stage: 5-point scale (1=very similar … 5 = very different) • Type of industry (1=Service; 0=consumer, industrial) • Customer variation: 5-point scale (1=very similar … 5 = very different) in terms of customer preference, buying habit, product usage & consumption pattern • Environmental: 5-point scale (1=very similar … 5 = very different) • Political-legal: political interference, legal requirement on content safety, etc. • Economic: level of economic development, cost of labor, price controls • Competitive: nature of competition • Cultural: linguistic difference, variations in custom

11. Methodology (continued) • Type of host market: • China (1); HK/Taiwan (0) • Australian firms with operations in China : • (a) have slightly more years of IBE, and are larger • (b) primarily in natural resource/extractive industries • (c) risk of doing business are usually higher • Performance: • Sales: average performance in previous 3 financial years • Market share: average performance in previous 3 financial years (10-point scale) • Profit: previous year’s performance (7-point scale: 1=negative growth; 7 > 25%)

12. China vis-a-vis Hong Kong/Taiwan * Variables are measured on a 5-point scale (1=very similar; 5=very different) ** The first set of figures within the parentheses represents the mean for IE users, while the second set of figures within the parentheses constitutes the mean for non-IE users.

13. Findings • H1: Immigrants can enable the pursuit of a higher resource commitment mode when entering into emerging markets • H2: Immigrants can facilitate the pursuit of appropriate marketing strategies where there is a significant difference in customer behavior between home and target markets • Negatively associated with choice of FME mode, i.e., more likely to use immigrants where there was substantial variation in customer behavior between home and host markets • H3: Immigrants can facilitate the pursuit of appropriate marketing strategies where there is a significant difference in the PLC stage of the product between the home and target markets • H4: Firms with a longer history of operations in the target market are less likely to resort to an immigrant effect • H5a: Firms that possess an IE social network are likely to enjoy a better performance • H5b: Firms that adopt a high resource FME mode are likely to enjoy a higher performance

14. Findings (continued) • Size and IBE positively and significantly related to choice of high resource commitment FME mode • Product type not significantly related to deployment of IE and choice of FME mode • IE usage did not differ across type of host market, i.e., Australian firms that operated in China were not more likely to deploy immigrants in comparison to counterparts that do business in Hong Kong/Taiwan • Environment has no influence on IE, but has significant influence on the choice of FME

15. Figure 2: PLS results

16. Conclusion and Implications • Members of Chinese diaspora can play an important role in facilitating trade between their respective COO and Australia (COR), although hypotheses pertaining to variations in PLC stage, • Findings support to need to investigate both economic and non-economic motives in choice of FME • Shared ethnicity, a broader concept than a business network, can be an important source of socialcapital