Japanese Subsidiaries In China Research Articles

The Determinants of the Boundary-spanning Functions of Japanese Self-initiated Expatriates in Japanese Subsidiaries in China: Individual Skills and Human Resource Management

Abstract Self-initiated expatriates (SIEs) who work for a subsidiary of a multinational enterprise from their country of origin and hence are familiar with both countries' language and culture can be expected to act as boundary-spanners between the assigned expatriates sent from the parent country and host country nationals, and between the headquarters and the subsidiary. We develop a new model of boundary-spanning that encompasses both individual and organizational antecedents and validate the model using survey data from Japanese-affiliated companies in China. We find that familiarity with Chinese language and culture and the potential dual allegiance of SIEs contribute to enhancing their boundary-spanning behavior. We also find that relationships of trust among the parties concerned (social capital) and global career opportunities for such self-initiated expatriates (geocentric staffing) have positive influences on their dual allegiance. Finally, normative and systems integration of human resource management are associated with increasing levels of social capital and geocentric staffing.

International use of the renminbi for invoice currency and exchange risk management: Evidence from the Japanese firm-level data

The use of the Chinese renminbi (RMB) is said to have been increasing in recent years for trade invoicing, due to active promotion policies implemented by the Chinese government. However, only patchy information has been presented in the literature on the use of RMB in Chinese trade. Using the information obtained from two-round, large-scale questionnaire surveys, this paper presents new evidence on the use of RMB and exchange risk management by Japanese subsidiaries operating in China and other Asian countries. We find that Japanese subsidiaries in China mainly use the U.S. dollar, and to a lesser extent, the yen in trade with other countries. However, they increase the use of RMB in intra-firm trade with Japan. The result of Logit estimation indicates that RMB transactions will grow further if overseas subsidiaries have more discretion in exchange rate risk management. Removing capital controls on onshore RMB (CNY) market is another necessary condition to promote RMB internationalization.

The role of Yin-Yang leadership and cosmopolitan followership in fostering employee commitment in China

PurposeUtilizing a paradox perspective, the purpose of this paper is to investigate the leadership-followership dynamic in foreign firms in China, specifically, the extent to which Yin-Yang leadership behaviors of Japanese expatriates and cosmopolitanism of Chinese employees influence employee commitment.Design/methodology/approachData were collected through an online survey of Chinese employees who directly report to a Japanese supervisor in a Japanese subsidiary in China. Based on responses from 97 Chinese employees in three Japanese subsidiaries in China, the authors test if their cosmopolitan orientation and perceived Yin-Yang leadership behaviors of Japanese supervisors are related to employee commitment.FindingsYin-Yang leadership and cosmopolitan followership have a positive effect on employee commitment. Further, cosmopolitanism moderates the link between Yin-Yang leadership and employee commitment such that the follower’s cosmopolitanism compensates for lower levels of Yin-Yang leadership, especially a relative lack of Yin leadership behaviors.Research limitations/implicationsResults suggest that Yin-Yang leadership and cosmopolitan followership work together as a two-way street of cultural adaptability to build employee commitment, highlighting the interplay between leadership and followership in multinational enterprises. Future research should attempt to further refine the Yin-Yang leadership construct, and to gain a larger sample representing multiple expatriate nationalities to corroborate the relationships found in this study.Originality/valueThe study applies a context-based approach to developing culturally relevant leadership, through analyzing both the emic and etic concepts of culture in China. In doing so, the authors extend the application of paradox theories to the cross-cultural leadership literature utilizing the Yin-Yang principle, which is particularly relevant in societal contexts where rapid and dramatic change brings to the fore competing values, needs and employee preferences.

Will a Second Mouse Get the Cheese? Learning from Early Entrants’ Failures in a Foreign Market

We examine the conditions that can facilitate or hinder the effectiveness with which a new entrant learns from the failures of prior entrants by analyzing the experiences of 822 Japanese subsidiaries in China founded between 1979 and 2000. Our conceptual arguments and empirical findings demonstrate that learning from the failure experiences of prior entrants increases a new entrant’s survival chances when entering China. Further, we find that the value of this learning is less effective when there is a greater level of heterogeneity in the causes of these failures. However, this learning is more effective when a new entrant’s parent firm has ownership ties with investors who had ventures that failed previously in China.

MNC Flexibility And Post-Entry Mode Change: The Role Of Learning Ownership Regulations Through Network Embeddedness

This paper proposed a theoretical framework that has linked together network embeddedness, learning ownership regulations, MNC flexibility, and post-entry mode change. Network embeddedness refers to the MNC subsidiarys relations with and reliance on the networks for learning ownership regulations. Learning ownership regulations refers to acquiring, interpreting or confirming ownership regulations of foreign investment in China. MNC flexibility is defined in this paper as the MNCs (Multinational Corporations) ability to manage the risks and exploit the opportunities that arise from changing ownership regulations of foreign investment in China. Post-entry mode change is specified as the MNC subsidiary in China has been changed to wholly foreign-owned enterprise after initial entry as joint venture, including Chinese-foreign Cooperative Enterprise, Chinese-foreign JV and International JV. Japanese subsidiaries in China were studied, specifically three wholly foreign-owned enterprises in Shanghai. The case studies showed that network embeddedness contributes to learning ownership regulations, which in turn promotes MNC flexibility, which in turn facilitates post-entry mode change. In addition, MNC flexibility promoted by learning ownership regulations through network embeddedness can facilitate not only the change from joint venture to wholly foreign-owned enterprise, but also keeping as joint venture.

Control of French and Japanese subsidiaries in China: implementing control mechanisms before and after the global economic crisis

The central research question investigated herein involves why and how multinational firms implement various instruments and mechanisms to maintain control over their subsidiaries in China. During 2005–2007, the authors interviewed expatriate managers in charge of 12 French and 10 Japanese subsidiaries in China. The interviews show that multinational companies base their subsidiary control policy on four main control dimensions: the share of capital, expatriation, the training of local employees and the formalization of the organizational structure. A thematic content analysis of the 22 interviews provides deeper insight into the way, and the reasons why, multinational companies implement these four control dimensions. Since the subject companies all sell globally, this study also considers the effects of the global economic crisis of 2008–2009 on their control policies. Specifically, in early 2010, a sample of expatriate managers commented on the impact of the global economic crisis on their activities in the Asia-Pacific region, as well as on the corporate implementation of the four control dimensions.

Knowledge embeddedness and the transfer mechanisms in multinational corporations

This paper reports a qualitative study conducted at four Japanese subsidiaries in China and Vietnam about their process of international knowledge transfer. Building on the literatures concerning the diverse types and characteristics of knowledge in multinational corporations (MNCs), we explore the broad mechanisms adopted and locally generated by the host country subsidiaries for transferring the foreign knowledge and putting the locally embedded knowledge into practical use at the local settings. The findings indicated (1) the limitations of applying a standardized and universal set of knowledge transfer mechanisms without considering local idiosyncrasies and (2) the contributions of local agents and institutions throughout the process of local knowledge adaptation and development.

Evolving FDI Legitimacy and Strategic Choice of Japanese Subsidiaries in China

We examine how evolving FDI legitimacy in China influences two strategic choices (entry mode and expatriate staffing) of Japanese subsidiaries there over the period 1993–2000, based on data aggregated from Toyo Keizai and the National Bureau of Statistics of China (various years). As FDI legitimacy improves over time, we find that smaller subsidiaries tend to choose the wholly owned subsidiary mode and deploy a higher percentage of expatriates, whereas larger subsidiaries tend to choose the joint venture mode and use a lower percentage of expatriates; and that Japanese subsidiaries are more likely to have a local manager, and this tendency may be stronger for larger subsidiaries. The theoretical and practical implications of these findings are discussed from a density dependence theory perspective.

When, How, and with what Success? The Joint Effect of Entry Timing and Entry Mode on Survival of Japanese Subsidiaries in China

This study examines the question whether joint ventures or wholly owned subsidiaries are more likely to survive in the context of Japanese subsidiaries in China. The author suggests that the answer to this question depends on the time the subsidiary was established. Specifically, it is argued that joint ventures founded during the early stage of institutional reforms are more likely to survive than wholly owned subsidiaries set up at that time, and vice versa for subsidiaries established in the late phase of institutional reforms. The rationale for these propositions is that at the beginning of market-oriented reforms, contributions provided by local partners make shared ownership an optimal entry mode strategy, whereas a relatively stable regulatory framework in the late stage of institutional reforms enables the firm to realize benefits associated with sole ownership more efficiently. Empirical evidence supports both propositions.

Transferring Organizational Learning Systems to Japanese Subsidiaries in China*

abstract Qualitative interviews and observations were conducted to study the cross‐border transfer of organizational learning systems to the subsidiaries of five Japanese manufacturing companies operating in South China. This paper develops a holistic model of the overall process, by integrating knowledge‐oriented, routine‐oriented, and social/contextual perspectives, each of which plays a necessary role in explaining essential aspects. One feature of the transfer of organizational learning systems entailed arranging local access to, and opportunity to replicate, various types of knowledge repository that contained corporate values as well as technical expertise. A second feature involved the development of collective learning routines through dynamic interplay with evolving, locally based, knowledge repositories. A third feature, in two companies, entailed the creation of enterprise contexts that reproduced the socialization and corporate culture maintenance rituals, and the open plan factory and office designs, that were hallmarks of the respective parent companies, and which appeared highly conducive to the transfer of collective learning routines to the local sites. Findings indicate that successful cross‐border transfer of organizational learning systems entails the development and implementation of an overall heuristic design for cultivating collective learning routines through the engineering of enterprise contexts and the responsive management of knowledge repositories.

Network Development and Firm Performance: A Field Study of Internationalizing Japanese Firms

This paper explores the potential competitive advantages from the development of an internal network of subsidiaries and external network of alliances. Given the broad scope and lack of systematic investigation in prior research, clinical field research was conducted in eleven Japanese subsidiaries in China. Our in‐depth interviews revealed that there are benefits and costs associated with the development of both subsidiary networks and alliance networks. While there are exploitation and exploration benefits from subsidiary network development, internationalizing firms (especially smaller firms) are subject to the liability of foreignness. Alliance network development is an effective way to mitigate this liability if internationalizing firms choose the right alliance strategy.

Investing Profitably in China: is it Getting Harder?

Using information from the Toyo Keizai, this article studies the performance of 2,962 foreign subsidiaries across the period 1985–1999 to show a picture of declining profitability from foreign direct investment by MNE’s in China. Despite the influence of macro-level factors, such as the historically fluctuating performance of the Chinese economy, we observed that of the many factors that may affect profitability, subsidiary-specific factors had the greater influence. The findings suggest that there are significant benefits for early entrants into the market, but caution against the use of high majority ownership control. Other evidence showed that larger subsidiaries tended to perform better. Managerial implications for MNEs and the future prospects of foreign direct investment in China are discussed.Since China opened up to the outside world in 1979, it has been attracting increasing amounts of foreign direct investment (FDI), and after 1993 became the second largest recipient of FDI flows in the world. Meanwhile, a major participant in the upsurge in global foreign direct investment in the 1990s was Japan. By the mid-1990s, Japan became the second largest FDI source country in the world behind the United States. China, in particular, has become a major destination for Japan’s direct investments, absorbing one-ninth of all Japanese foreign investments at the end of 1996.1Studying Japan’s worldwide direct foreign investment, we found that the proportion of profitable Japanese subsidiaries in China has been declining. In fact, this was the only part of the world where this was the case. While over 71 percent of Japanese subsidiaries in China claimed profits in 1992, the percentage steadily slipped to around 50 percent by 1999 (see Table 1Table 1Performance of Japanese subsidiaries in China (% profitable)1992 (%)1994 (%)1997 (%)1999 (%)Loss11 (13.3%)27 (16.1%)99 (21.7%)201 (24.3%)Break-even13 (15.7%)35 (20.8%)114 (25%)205 (24.8%)Gain59 (71.1%)106 (63.1%)243 (53.3%)421 (50.9%)Total # Reporting83168456827Source: Toyo Keizai, 1999.). This poses two interesting questions. Is it really getting harder to invest profitably in China? And what could have influenced the profit performance of foreign subsidiaries in China?

Control and co-ordination of Japanese subsidiaries in China: problems of an expatriate-based management system

This paper analyses the international management control (IMC) system that Japanese multinational companies (MNCs) employ to co-ordinate the activities of their subsidiaries in China. It focuses on the role of Japanese expatriates in this IMC system and assesses their performance. In the process, it offers a comprehensive evaluation of the organizational fit of the Japanese IMC model within the current Chinese business environment. Taking Japanese firms as the subject, the analysis identifies areas of incongruity and explains the underlying reasons for problems with expatriate-focused IMC models. In doing so, this paper argues that the Japanese expatriate-based control system in China (as in many other parts of the world) continues to be characterized by an insider-outsider mentality that prevents a real internationalization of overseas operations in the 'transnational' sense.

Competing globally: How Japanese MNCs have matched goals and strategies in India and China

Japanese MNCs have established strong investment positions in the US, Europe and Asia. China has been a major recipient of Japanese foreign direct investment (FDI), while investment in India has grown much more slowly. We argue that the differences extend much beyond the levels of investment—Japanese involvement in India and China is qualitatively different. Japanese FDI in China was motivated by access to location-specific productive resources, and it involved a high degree of technology, management skills and organizational knowledge transfer. The Japanese subsidiaries in China were integrated with the network of international subsidiaries as a part of the MNC's global strategy. Japanese FDI in India, however, was motivated by the desire to access local markets. It involved less transfer of technology and management skills, and Japanese subsidiaries in India operated independently as part of a multi-domestic strategy. We conclude that foreign entrants to the region should be aware and able to respond to the unique advantages of each host country and to the different strategies and capabilities of the subsidiaries of Japanese MNCs.