Constructing large multinational corporations from China: East meets West at Huawei, 1987-2017

Abstract

The telecommunication enterprise Huawei, founded in 1987, is one of few multinational companies emerging from China to date. The development of the capabilities that allowed Huawei to become a formidable competitor on the global stage undoubtedly owes a great deal to importation of best practice routines from the West with the help of western consulting firms. But Huawei is also distinctly Chinese. In the West, a founder who relinquished all but a 1.4 percent of equity in the firm to give the remaining shares to employees would be an abnormality. Huawei’s collective ownership arrangement (88,000 people own the other 98.6 percent of the shares) enabled management actions that are unthinkable in the West. The top 6,687 managers in 2007, for example, agreed to collectively resign from the company and to be selectively rehired to avoid falling under new labor law restrictions. We develop an account of how Western and Eastern history has shaped the leadership’s decision making through multiple transmission mechanisms. Because the founder is an avid reader and student of history, major strategic decisions of Huawei have been deeply influenced by historical precedent. We argue that Huawei cannot be understood without coming to terms with the imprinting the firm has received both by the Chinese context and the founder’s conviction that the firm needed to learn from historically accumulated Western knowledge.