Proceedings of the International Conference on Chinese Enterprise Research 2007

The following sections are included:

• Speech by Guest-of-Honour

• Preface to the CERC Conference

• Contents

Ladies and gentlemen, I'm very pleased to be here attending the International Conference on Chinese Enterprise Research at the invitation of the Lien Chinese Enterprise Research Centre. Among various international conferences held outside China that I have attended, this is the first of its kind to have Chinese as the official language, so I think we cannot afford to miss such an opportunity…

First of all, I would like to extend my thanks to the sponsor of this conference, the Lien Chinese Enterprise Research Centre, and I also owe my thanks to Nanyang Technological University for inviting me and giving me the opportunity to be here and exchange opinions on the Chinese economy with all the experts present and learn from them…

CHARLES: For the last five years there has been Technopreneurship courses taught at Nanyang Technopreneurship Centre (NTC) and these courses have recently been taught in Mandarin as well as English and this morning, I want to tell you something about it…

The shortage of global competency leaders is an immense challenge for the internationalization of corporations. It is a crucial issue to cultivate and develop global competency leaders during the internationalization of companies, which requires further study in China. On the basis of a literature review on global competency leadership at home and abroad, this paper first proposes a five-level global competency leadership model incorporating a set of basic characteristics. Next, it analyzes the present situation and major problems of global competency leadership development in the internationalization of Chinese corporations. Finally, some measures for global competency leadership development of Chinese corporations are presented.

High growth speed is one of the major aims of Chinese enterprises. In recent years, many enterprises aim to achieve “overdrive growth rates”, “expansion”, and “diversity”. Some enterprises pursue high growth speed through mergers, diversification and franchising. But most of the so-called “super high-speed developmental” enterprises have resulted in failure.

This article analyzes the phenomenon of Penrose effect based on growth theory, offers the reasons behind the failure of high growth enterprises, and proposes some measures in controlling the speed of growth.

In recent years, with the advent of China's economic reforms, particularly SOE (state-owned enterprise) reforms, the mixed ownership economy has been growing rapidly. At the same time, labor relations in China have changed a lot. Under the current socialist market economy system framework, the actions of state-owned and private enterprises are becoming more homogenous. Be they public or private enterprises, the intensification of labor conflicts has become a major obstacle to a harmonious society. Labor relations tend to intensify, and the conflicts more acute. In the past, we refused to admit or overlooked the complexity of this problem, whether consciously or unconsciously, when in actual fact labor conflicts have intensified in the whole country. Within the first quarter of 2007, there were 75,000 labor disputes cases involving 142,000 workers at all levels for the arbitration committee to deal with. In the long run, we must set up an efficient mechanism which can coordinate the interests of both parties (labor and capital), strengthen the management function of the government, speed up the construction of relevant labor-relation laws, implement the law strictly and abolish the old ideas of both enterprises and workers so as to solve the labor conflicts, establish harmonious labor relations, and allow the economy to develop in a sustainable, stable and harmonious manner.

During the last two decades China has been experiencing a rapid economic growth. In 2007, the GDP is expected to grow at an annual rate of nearly 11%. This rapid economic growth requires, among others, vast amount of energy and industrial raw materials. Current estimates indicate that about 20% of China's energy needs cannot be met and that it will be necessary to double energy generation capacity every decade to meet rising demand. Since 1999, China is a net energy importer and China's energy production has been insufficient in meeting the country's energy consumption demands.

China is investing heavily in developing oil and gas fields in and outside of China. Large investments have been made in M & A not only in energy resources, but also in acquiring other strategic industrial raw materials. Heavy investments have been made in developing harbors, LNG facilities, railway lines, oil and gas pipelines in and outside of China. China is also facing environmental and pollution challenges due to its heavy reliance on coal and aging SOEs industries and fuel inefficient transport sector.

Inflation is rising in China, government has imposed penalty on industries exporting goods using scarce energy resources and other strategic industrial raw materials. At present, for exporting goods that utilize scarce industrial and energy resources, companies have to pay from few percent to nearly 40% extra export duties in form of penalties. This peculiar situation makes the situation unbearable for foreign companies who invested in large capital intensive high-tech plants in China for supplying their products to the Chinese market and to the rest of the world.

Several of these companies are now planning to move out of China and locate their production facilities including R&D elsewhere. Furthermore, these companies see no need to have manufacturing facilities in China, since the import duties are very low for goods imported into China which are energy intensive or high-tech. This paper examines in detail the short and long-term implications for China's economic development.

Generally speaking, Mergers and Acquisitions (M&A) deal with many factors such as the establishment of M&A strategies, selection of target enterprises, evaluating the value of enterprises, negotiation and signing of contracts between the parties concerned, and integration after M&A. Compared with domestic M&A, international M&A operate in a more complicated environment, are affected by more factors, suffer more risks, and enjoy fewer opportunities to succeed.

Many empirical researches reveal that integration is a key to successful M&A. If integration were to fail, even the best strategy cannot be executed, nor can the value of the target enterprise be realized or mutual promises kept. This might result in conflict, dilemma, or even failure. How can integration then be effective? A common topic of interest is cultural integration at home and abroad. Some say that Chinese enterprises lack international experience in M&A. If conflict arising from cultural differences is not properly handled, cultural integration cannot be adequately achieved and the M&A will fail. The key lies in identifying what the best culture is and the sources of such a culture.

The innovative integration of Hengli Hi-tech Development Company in Northeast China after its acquisition of German Kelch & Links Co., Ltd. shows that cultural differences may not bring about conflict. The key lies in enhancing mutual recognition and shortening the cultural gap. Therefore, in integration of development strategies, human resources, R&D, financial management, and marketing channels, Hengli focused on forging a common identity, communication, win–win solutions, and respect. After successful integration, it made rapid progress.

Identity refers to recognition and acceptance. In relation to different cultures, a common identity can be forged by showing affability towards others, particularly those similar to oneself. It is a matter of reconciling differences, particularly cultural ones. It can be said that cultural differences exist as a matter of fact, which require mutual understanding, acceptance and recognition to shorten the cultural distances between people. The best culture can only be created by learning from each other's strong points to offset their weaknesses and by mutual recognition. Neither the buyer nor the seller can say that they represent the better culture and force the other party to accept it. They can only achieve recognition and build the culture needed for successful cooperation through communication.

This paper discusses model selection in international M&A integration on the basis of an extensive literature review. It stresses that in order for Chinese corporates to be successful in international M&A integration, it is necessary to be grounded in practical concerns and to constantly innovate. The paper then analyzes the way in which Hengli innovated their cultural integration in international M&A. It also points out that the basis of innovation is risk identification; the path of thinking is to enhance recognition; and the approaches of implementation are process control, i.e., to start with communication, aim at win–win solutions, and result in respect. Lastly, it emphasizes that performance integration depends on multi-effects. The paper has about 10,000 words.

What defines a family business? Many studies argue that it is the influence the owning family has on decision-making and operations of a firm. The extent and manner of such an influence depends critically on family business culture, the extent to which family and business values overlap, as well as the family's commitment to the business. Survey data on 117 unlisted small and medium sized Chinese family businesses form the basis of this study. Analysis showed that there is no relationship between family business culture and performance. However, the family's commitment to the business affects the board composition, working style, and roles of control, service, and family affair management. Comparatively, the influence of overlap between family and business values on the board is less significant, compared to the ratio of the family members in the board and the extent of board involvement in family affairs. Finally, the results indicate that the number of the family members involved in business management affects the family business culture.

This article discusses the nature and mechanism of corporation soft power and analyzes the relationship between soft power and competitiveness.

Based on the demand function and social welfare function, making use of the Cournot equilibrium and Stackelberg equilibrium approaches, we analyze the condition, process and corresponding results of excessive competition between two monopoly enterprises owned by a single organization. Theoretical analysis shows that, if the leading duopoly enterprise continues to increase its market share, total profit, net asset yield and average profit of customer of the two enterprises as a whole will decline, and social welfare will reduce at the same time. Following that, in the case studies of China Telecom and China Netcom, we analyze their business data, and the empirical results support our theoretical conclusion. The empirical results show that, since China Telecom Ltd. has been in the dominant position, if it were to continually increase its market share, total profit, ROE and average profit of customer of the two enterprises as a whole would decline.

Using parameters such as raw food export data, food export increase ratio, international market share and normalized trade balance (NTB) of China, Japan and the United States between 1995 and 2005, we conclude that in terms of its food exports, while China still maintains a comparative advantage, international competitiveness is showing signs of weakness.

This paper investigates the functional problem of the Chinese stock market and reviews the domestic and foreign literature on the stock market's functions such as resource allocation and corporate restructuring. On this basis, we suggest that it is necessary to facilitate the stock market's function of corporate restructuring. Accordingly we analyze this viewpoint from aspects such as innovations of the stock market, mechanisms of the stock market in facilitating corporate restructuring, and a comparison of stock market functions between the United States and Japan. Finally, we offer some suggestions on how to strengthen the function of the Chinese stock market in facilitating corporate restructuring, reducing market risks and promoting the establishment of capital markets.

Dynamic capital structure theory suggests that firms have target debt ratios and other factors such as financial deficit, market timing, implied debt ratio may lead observed capital structures to deviate from the targets. Because of adjustment costs, firms will not make adjustment immediately and completely when there are deviations. The decisions whether to adjust the debt ratios and the adjustment magnitude will be based on the tradeoffs between the costs and benefits of the adjustment. Based on the latest achievements of capital structure theory and empirical research, this paper constructs a comprehensive model to pursue the long-term dynamic path of capital structure adjustment of listed firms in China. Firstly, we estimate a Tobit regression model to predict the target debt ratios and construct a variable — leverage deficit as an independent variable in the second step regression which is scaled by the difference between the target debt ratios and the observed debt ratios; then we use the partial adjustment model to examine how capital structure can be influenced through dynamic adjustments. The results indicate that financial deficit, market timing and stock price changes indeed lead to deviations between the observed debt ratios and target debt ratios. In particular, stock price changes have the strongest influence on capital structure changes. We find also that their effects are partially reversed over long horizons. These empirical results suggest that firms' capital structures tend to move towards their target debt ratios over time although their histories strongly influence their capital structures.

In China, the development of city commercial banks is facing many opportunities and the challenges. This article points out that city commercial banks face many questions such as rapid development in the finance sector amidst poor corporate profitability. In order to solve the above problems, this article proposes that city commercial banks put forth a comprehensive developmental strategy plan, including a viable human resources management strategy.

With the end of the WTO transition period, China's financial industry will be fully liberalized. This paper reviews the development of city commercial banks in China and the background behind banking industry liberalization, summing up the challenges and opportunities faced by city commercial banks, as well as the issues pertaining to their inter-regional development, corporate re-organization, market positioning, branding, introduction of foreign strategic investment, and stock listing. A six-part analysis of strategic choices confronting city commercial banks is then presented.

China's venture capital industry is merely 20 years old. Compared to its foreign counterparts, it is still in its infancy. First of all, this article discerns key features of China's venture capital industry in recent years, including the different types of venture capital firms, venture capital investment scale, industry and regional distribution, the choice of investment project stages, and exit channels. In addition, it undertakes a comparative analysis with foreign joint venture capital companies. Secondly, it describes new developments in the legal and policy environment of China's venture capital industry.

From an analysis of how the logistics industry has evolved in China, this article puts forth a new concept of “logistics organizational network”. Based on analyses from socio-economic aspects, characteristics of logistics service and demand, and reforms in the regulatory framework for logistics management, this article concludes that future developments in the logistics industry will necessarily adopt a network-based approach.

The manufacturing industry has played an important role in the development of Chinese economy. With China's gradual integration into the international market, the Chinese manufacturing industry has encountered increasing global competition. For small- and medium-sized enterprises (SMEs), of the Chinese manufacturing industries, decisions as to how to enter the international market become critically important. This paper sums up different entry modes chosen by Chinese SMEs, when accessing international markets and analyzes the main considerations underlying entry mode selection through a case study of the Wenzhou shoe-manufacturing industry.

This research aims to offer new business insight into knowledge based service enterprises in China. In particular, a service approach, namely, the IIS (innovation intensive service) platform, is adopted as an analytical tool to illustrate the development of service platforms. A case study of the industry cluster in Kunshan City is also used to demonstrate the validity of this research. This approach integrates the platform strategy, service package and network externalities to diffuse innovation. Service packages are created and delivered with a high degree of customization including unique, selective, restricted and genetic services. The result shows that not only can a new business model be applied to assist existing manufacturing in value upgrading, it can also provide a niche opportunity for SMS development under highly intensive global competition.

Why have firms been increasingly engaging in R&D collaborations? What are the implications of such collaborations on R&D performance? Previous research suggests that R&D collaborations are a response to either increasing foreign competition or the need for organizational learning. However, less is known about the relationships between the two rationales and different strategies of R&D collaborations. Moreover, there exists theoretical indeterminacy, as well as rare empirical test, on the impact of collaborations on R&D performance. Using recent large sample firm-level survey data from China, this study has the following findings. First, Chinese firms participate in R&D collaborations in order to both manage uncertainty from increasing foreign competition and facilitate organizational learning. Increasing foreign competition, however, may account more for R&D collaborations with other firms; and organizational learning more for R&D collaborations with universities and research institutes. Second, R&D collaborations have a positive, independent effect on R&D performance, net of the inhouse R&D intensity of the firm and other firm-specific characteristics.

This research aims to develop a firm-level model to study the science-park based university spin-outs (hereafter referred to as USOs) in China. This model will help to holistically understand and analyze the dynamic relationship between USOs’ entrepreneurial innovative capabilities and their performance towards sustained growth. The research will use the dilemma theory to investigate and explicate the building of the innovative capabilities of USOs. In addition, this study also attempts to explore how USOs build their entrepreneurial innovative capabilities to acquire, configure, and re-configure the key assets through reconciling dilemmas, during the various firm-growth processes.

There is a limited research that recognizes the diversity of resources of USOs in China. Studies concerned with entrepreneurial innovative capabilities of USOs at different growth phases also remain sparse. Addressing this research gap will be of great interest to researchers, policy-makers, entrepreneurs, and international investors.

How to improve the university technology transfer efficiency and realize the integration of Sci-Tech and economy as an eristic topic in the Chinese academic society. The divergence is rooted in how to identify the bottle-neck in the transfer process. This article discusses the root causes resulted in the structural disequilibrium among the technical chain, industrial chain and technical innovation chain, and leading to the insufficient technical transfer efficiency from the angle of resource allocation, and therefore, further discusses the principal modes for bridging universities and enterprises. On the basis of the previous analysis, three main modes of university technology transfer are proposed taking into account of China's national conditions: they are technology transfer mode, co-operation and participation mode, and derived enterprise mode. Finally, the features of these three main modes are analyzed, the article, employing the corporate life-cycle theory, goes further to probe into how these modes match with the enterprises at different development stages. This attempt is in the hope of examining the adaptability of the transfer modes from the perspectives of both universities and enterprises.

The paper offers a research framework which can be used to analyze the ways in which Chinese brands are being internationalized. It suggests the following five methods: exporting products, direct investment in overseas factories, merging with foreign enterprises, providing manufacturing products for international enterprises and broadening market channels. Subsequently it presents a theoretical framework illustrating the internationalization of brands. The framework involves four factors as follows: (1) the characteristics of technological innovation, (2) the characteristics of industry structure, (3) situating enterprise brand culture, (4) foundation and support of human resource. These factors are important variables in selecting ways of internationalization. The paper then presents the case study of the Shaanxi Blower (Group) Co Ltd in its efforts at brand internationalization, which according to our analytical framework, is leading in its field in this respect. Through analyzing the four variables, the paper offers a comprehensive treatment of Shaangu's method in brand internationalization which combines investing factory directly abroad and technical cooperation.

This paper deals with how business organizations develop successful brand internationalization strategies to increase their brand value. Based on the view that capability comes from resources and through the analysis of inter-relations between business capability elements and business resource compensability, the feasibility of implementing business brand internationalization strategy is demonstrated under constrained-resource conditions, and the concept of business resource surplus is then put forward. Based on this concept the inter-logic relations and developing strategies of business brand internationalization under resources constraints are investigated, and the relationship between the allocation of resource elements supporting business capability and the business brand internationalization strategies is also addressed.

In recent years, brand internationalization is becoming the carrier of global economic integration and the core of competition among different countries. Nowadays, monopoly of brand internationalization has formed and the threshold of development has been raised. The means of brand internationalization are increasingly updated and the outer environment of brand internationalization for Chinese enterprises is more and more severe. In addition, Chinese enterprises are also confronted with the confusion of route selection and the restriction of their own ability of innovation, marketing, and management. Therefore, we need the government to enhance cultivation, service, and safeguard to promote the healthy development of enterprise's brand internationalization.