The Chinese enterprise secret: sustained advantage in labor‐intensive industries

Abstract

PurposeIn the past decade, Chinese enterprises have achieved superior cost advantages in the labor‐intensive industries. This paper explores the valuable resources that Chinese enterprises use to develop such advantages and the effective mechanisms they employ to sustain the advantages.Design/methodology/approachThe study used a multiple case design that allows a replication logic, in which a series of cases is treated as a series of experiments with each case serving to confirm or disconfirm the inferences that are drawn from the others. Twenty‐nine cases were collected. The data analysis consisted of three steps (1): within‐case analysis; (2) cross‐case analysis; and (3) proposition‐shaping analysis.FindingsEvidence from this study indicates that the Chinese enterprises employ a complicated multi‐step framework to develop and sustain their cost advantages. The framework consists of various resources at different levels. Resources at the same level fit, support, and reinforce each other and they work together to achieve certain competitive advantages. The advantages are not constants. They are renewed frequently, and the advantages at previous step serve as the foundation for generating the next round of advantages. The contextual and historical causality between these resources and the advantages result in their sustainability.Originality/valueThe findings of this study make contributions to the existing strategy literature on two fronts. First, the sustainability of a competitive advantage results from the contextual and historical causality between various resources in combination. Second, in addition to physical, human, and organizational resources, valuable resources may also include intangibles, such as culture, norms, large home market size, tough domestic competition, and flexible organizational structures, etc.