Chinese Multinationals` Work & Employment Models

Chinese Multinationals’ Work &
Employment Models: A Review &
Research Agenda
Chris Smith Jos Gamble and Yu Zheng
School of Management
School of
 Question of transfer in MNCs
 SSD framework
 China Case
 Diversity in transfer likely
 Some potential forms of transfer
 Limited current research
 Conclusions
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Transfer of “Work Organisation” & Employment
Production and work ‘best practice’
Organisational field
Institutions and actors spreading ideas
Transfer theory in general
 Forward and Reverse Diffusion
 Recent developments
 Internationalisation of labour markets
 Labour flows increasingly independent of firm
 MNCs flexibilization/causalisation of labour – mixed
 International recruitment agencies
 ‘National’ prefix for MNCs action problematic
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Recent Stories of Transfer
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 Americanisation – 50s, 60s, -> Europe, Asia – tied to assumed
‘superiority’ of American ways - build on practices going back to
diffusion of Scientific Management, Taylorism & Fordism from US
throughout 20th century
 Europe stars – Sweden (‘anti-Taylorist/Fordist’ working methods –
short lived); German (superior training systems; stability within
 Japan – ’80s – ‘Global Japanization?’ – long-term employment,
supplier relations, work regime, quality management etc.
 Features - dominant home country practice is exported (‘dominance effect’)
 Widespread academic and research support for idea of national champions
– role of globalisation of management education
 National story is selective – e.g. Japanization = large firm story
SSD: An Analytical Framework
(Smith & Meiksins, 1995; Smith, 2005, 2008; Smith and Elger, 1994; 2005)
Work, employment, HRM management practices are shaped by three
structural forces. But actors within workplaces must actively engage with
these practices; not determinism, but reflexivity and actor-centred action
 System Effects – political economy – capitalism, state socialism, common
structures and social relation
 Forms VoC framework – capitalist forms
 Developmental process – inequality between developed and developing
countries affect orientation towards transfer/learning/dominance
 Society Effects– national institutional differences – home and host societies
 Dominance Effects– practices of dominant economies, dominant firms,
become ‘best practice’
 Corporate Level Effects – relative autonomy of companies as political and
institutional spaces to enact, facilitate and block processes of learning and
transfer - processual dynamics (Gamble 2010)
School of
Interplay of Practices –
System, Society & Dominance
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 [The] SSD framework…stresses the interplay of
different forces. A set of practices such as lean
production, for example, may have begun as a
dominant idea and then become more systemic in
nature, and understanding its nature and effects is
assisted by considering the relevant linkages, as
opposed to treating it either as a specifically Japanese
practice or simply as some context-free approach that
will have the same meaning and effects anywhere
(Elger and Smith 2005).”
Source Edwards et al 2013: 607
The “China” Story
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 Systems
Transformation from state socialism to market capitalism; mixed system features, e.g.
population controls formed in SS era remain in market era; movement towards neoliberalism; but strong institutions and weak market relations (e.g. social networks,
schools-firms linked in (Smith and Chan).…..
 Society –
Common heritage and great economic and geographical diversity of firm-level practices
Developing country – learning markets, making capitalism, inwards FDI and outwards
SOEs decline, reform & revitalisation
 Dominance –
SOEs strong in Outward FDI
Late appearance of large private firms- national champions?
SSD and Internationalisation of Chinese MNCs
School of
 Literature on Chinese OFDI and internationalisation
 System - SOEs as only MNCs; private firms perceived as always connected
to the Chinese state (e.g. Huawei in US); Chinese MNCs as political actors;
misconception that Chinese workers in Africa are ‘convicts’ (Hairong &
Sautman, 2012); large China ‘in transition’ and 2 systems literature.
 Society – culture and institutions – obsession with guanxi and
Confucianism ; culturalist managerialism – values, strategy, decision
making, seen as ‘unique’.
 Dominance – China in Africa ‘new imperialists’ narrative; China versus US
narrative; China Goes Global; Global reach; single company becomes
archetypical ‘China’ case - Foxconn; Huawei; Lenovo.
Researching Chinese Outward FDI – IB lit
School of
Deng (2013) analysis of 138 articles on Chinese OFDI –
 IB papers have nothing to say about processes within the firms, especially work and
employment relations. In Deng – there are no references to workers, work or
employment in the 138 papers on Chinese OFDI
 57 quantitative empirical studies; 24 use survey or questionnaire data mainly at the
firm level; 33 use archival (primarily cross-sectional) datasets at a country or industry
level using official Chinese government aggregate data, Thomson Financial SDC
database, or the cross-border M&As by listed firms in the Shanghai and Shenzhen
Stock Exchanges)
 21 qualitative empirical works, most use multiple cases or in-depth case studies
and concentrate on prominent Chinese companies such as Haier, Lenovo, TCL, and
 60 conceptual or perspective papers appear in cross-cultural and international
journals. They tend to focus on the macroeconomic analysis of Chinese OFDI trends
and patterns and particularly in host countries such as the U.S. and African countries
Source: Deng (2013: 515)
China Case – Transfer & Internationalisation
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 There are theoretical problems with the ‘integrated’ models of ‘transfer’,
but empirically the China case challenges the idea of ‘national’ integrated
models that have been central to transfer debate – see recent Japanization
 China does not present a single integrated business model, but several
models – state-owned enterprises, private business, village and townships
enterprises, foreign-invested companies (joint ventures).
 Zhang and Peck (2013) from a regional economy perspective elaborate 5
models of Chinese capitalism (regional sub-national business models)
Guangdong, Sunan (Southern Jiangsu Province), Wenzhou (Zhejiang P.),
Zhongguancun (Beijing ‘Silicon Valley’), and Chongqing (City) business
 Therefore in the Chinese Case we are dealing with an empirically more
complicated story.
Source: Elger and Smith, 2005; Peck and Theodore, 2007; Zhang and Peck 2012, 2013)
China GDP by province (Economist 2011)
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China exports by province (Economist 2011)
School of
China Case cont.
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 We might therefore have multiple ‘transfer stories’ or models and
not a single Sinification narrative of internationalisation or
 Models are in contradiction and conflict with each other; some are
rising, others being challenged; some internationalising –
 Guangdong model - flexible production, low regulation, low wages,
dormitory labour regime (Smith, 2003);
 Others based around local resources, and political bargaining within CCP
e.g. ‘Chongqing Model’;
 Some have state as central actor, which may inhibit ‘internationalisation’
but this has not been the case with investments in Africa and other
countries by Chinese SOE companies are ‘resource seekers’ and have
developed distinctive management systems based on a simple transfer of
enclave ‘casual labour regime’ (CK Lee, 2009)
Chinese Outward FDI
School of
 Chinese OFDI small in scale: growth is impressive; in 2011, Chinese OFDI
totalled USD65 billion with an average annual growth rate in the previous
five years of 38.6% and the stock of Chinese OFDI amounted to USD366
billion (UNCTAD, 2012).
 Chinese OFDI is often compared to Japanese OFDI in the 1980s and South
Korean OFDI in the 1990s, but China is much less developed than were
Japan and Korea. China’s GDP per capita is about USD5,500, whereas
Japan’s GDP per capita reached USD12,000 in the 1980s and Korea’s was
USD10,000 in the 1990s.
 China’s OFDI remains heavily focused on developing countries (but this
changing); is resource focused, (but this is also changing) and unlike
Western FDI, it includes significant investment from State Owned
Enterprises, especially in Africa and developing regions.
 Europe and the US take around 25% each of annual Chinese OFDI. In Europe
by number, in 2011 75% of investments are by private firms; but by value,
72% originates from state-owned enterprises (Hanemann and Rosen 2012:
China’s ODI and cross-border acquisitions,
1982-2006 (Nicolas & Thomsen, 2008)
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Chinese OFDI in the EU-27 vs. the US, 2000-2012
(Håkansson, 2013)
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China – what’s inside goes outside?
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 The outcome of some 30 years of theorising and empirical engagement
with reform and transformation has been mixed.
 Lee (2007) divides ‘sunrise’ from ‘sunset’ industries – each with their own
labour regimes, labour supply and working class politics. How does this
divide affect internationalisation?
 Some see in China a dominant form of ‘bloody Taylorism’, epitomised by
one reading of the work regime enunciated by the Taiwanese firm Foxconn
– military discipline and ideology; task simplification; intensive work
combining production and reproduction of labour power in huge industrial
compounds that function like enclosed cities (Pun and Chan, 2010; Pun et al
 Huawei – with longer-term relations between workers; limited use of
agency workers; more innovation, more investment in skills and training
and share ownership between workers and firm – tells another story (Rui,
 Which represents the Chinese labour process?
China - Motivations & ‘Models of Transfer’
School of
 ‘Go to know’ – knowledge seeking identified as key motive of
Chinese Outward Foreign Direct Investment
 ‘Go to dodge’ – investing overseas to get away from Chinese
practice at home or hide income (Tax Havens)
 ‘Go to prolong’ – Internationalisation to perpetuate home
country practices which are under pressure in the home
 ‘Go as the whole show’ - the state-owned investments
 ‘Go to return’ - repatriating or reversing assets from
acquisitions back to China to capitalise on continued ‘home
country advantages’ (low cost production model/dormitory
labour regime) - Volvo case
‘Go to know’ – knowledge seeking
School of
 ‘Go to know’ – knowledge seeking identified as key
motive of Chinese OFDI (Child and Rodrigues)
 Early case studies on Chinese firms in City of London
(Miao Zhang, 2003) – Chinese managers learnt was
how to enrich themselves as individuals; opportunistic
investments without organisational constraints
around the managerial elite, allowed managers to
learn and run away from the firms that all went bust.
‘Go to know’ – knowledge seeking
School of
 Huawei case –
 Turkey subsidiary of Huawei in Istanbul, there were 1000 employees, but
200 of them were Chinese - high expatriate rate (1 in 5) has to be unique in
internationalisation, even in a country like Turkey were wage costs will not
be as high as in Western Europe.
 Huawei’s domestic employees are greater than those working in the 140
overseas subsidiaries, but more revenue was generated overseas than in
the PRC since 2008. Like many Chinese MNCs it has a competitive
advantage in having a large pool of inexpensive workers in the home
territory, and therefore one of the reasons for OFDI is not to escape the
high costs of domestic labour, as is the case with many Western MNCs.
 They will not impose an ideological ‘no union’ policy; they are more
pragmatic, and work within a country’s culture
‘Go to prolong’ – Internationalisation is push
factor - within and beyond China
School of
 ‘Guangdong model’ in Pearl River Delta change – upward pressure on
wages; rising costs of materials; rise in the value of the Yuan; labour
legislation - 2008/2009 Labour Contract Law; unprecedented external
dynamics (e.g. the slackening global demand after the 2008 global financial
crisis), have further increased pressure on model; Guangdong local
government desire to move up value chain (Zhu and He, 2013)
 Firms that did not close, moved within China to cheaper productions sites,
and new entrants ‘went west’ and not to the coast; there was also some
internationalisation to other Asian countries in order to maintain prolong
the ‘Guangdong model’ (cheap labour) active in Vietnam and Malaysia
(Zhang, 2012; Miu, 2013) ;
 Foxconn in Czech Republic (Sacchetto and Andrijasevic, 2013) (using
migrant labour from Romania and Bulgaria in order to lower labour costs;
employment through agencies; segmentation of workforce transferred;
rigid labour controls
‘Go as the whole show’ - the state-owned
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Chinese Capitalist Peculiarities in Africa (CK Lee)
 Chinese “Special Economic Zones” in Africa – another employer or a ‘new
 Outbid other firms for mining contracts by 30% on average due to:
Delayed payment - paid at end of contract (2years)
2 year posting
Migrant agency workers from surplus labour in China
‘bonded management’ – tied to firm; living at work; men on their own, reduced costs of
reproduction; constrained mobility; all Management and professional jobs are Chinese
What we call ‘dormitory labour regime’ (Smith, 2003) is internationalised by Chinese firms.
 State to state patronage between Chinese SOEs and African states
 Closed enclave ‘special economic zones’ – these can be an example of a
space within a country where practices from another national model can be
implemented with less pressure from local institutional forces. Some
criticisms – see Mohan (2013)
‘Go as the whole show’ cont.
School of
 Not Just in Africa – Singapore case
 Chinese Construction Company (state-owned) in Singapore where the
majority of workforce (5000) were contracted from China. Scarcity of
building labour in Singapore, but politics, with reluctance to employ
Malaysians – many of whom prefer to work in the service sector (Rui).
 Chinese workers were working away from home, not tied into
local solidarities as internal-migrant workers and on 2 year
Go to return - ‘Reverse Transfer’
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 Zhang and Edwards (2007) assumes rational transfer &
learning based on ‘Chinese government policy’ (‘international
borrowings’ (jiejian) 1980s and ‘motivation’ of Chinese
expatriates to learn.
 Action research? – Zhang trainer in some case study firms
 Chinese early arrivers actively adapt to UK environment ‘localization’
 Cases were subsidiaries of SOEs in finance and trade in London
 Reverse transfer limited
 Naïve managerialism - learning is good for all
 Understates political process of transfer; sectional interests of managers;
institutional fields of transfer.
‘Go to return’ – Continue access to labour surpluses
at home
School of
 Jan Knoerich (2012) argues Chinese FDI is driven by a unique set of
needs, namely to get resources that they do not have at home and as
such internationalisation is not an expression of having dominated
home markets the firms takes its strengths into the international
markets . Knoerich suggests that a significant home advantage for
Chinese firms is the abundance of cheap labour at home.
 Internationalisation can ‘bring back’ production to China - ‘reverse
diffusion’ and ‘vanguard role’ of subsidiaries: (Edwards, 1998; Ferner
& Edwards, 2000) ‘MNCs attempting to improve their international
position by learning from more developed countries’; (Zhang &
Edwards, 2007)
 But Chinese MNCs home-country advantage being trained,
disciplined and inexpensive labour can also mean they design their
employment and recruitment systems not to escape but to continue
to use or access this labour.
Some generic features of HR & work
organisation practices of Chinese MNCs
School of
 Observation that Chinese firms when acquiring or investing
seek efficiencies through changing the composition of the
labour force:
 bringing in younger cheaper workers;
 students & trainees as full time;
 building institutional links to colleges & schools to get labour (Motor bike
case in Italy; Huawei case in Africa; Canadian pulp paper firm
 Chinese MNCs are dynamic, often heavy users of expatriates.
Shen and Edwards (2006) state that Chinese international firms
are more ethnocentric in usage of expatriates ;
 Use of ‘home based nationals’ extends a long way down the
organisation – especially in resource-based FDI – MNC acts as
conduit for labour flow from China to overseas investment site
and continuation of ‘home based’ management-labour system.
Generic features cont.
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‘Despotic labour regimes’ are said to characterise
employment relations in Chinese firms
 Bonded management - Lee (2009) in work on Chinese firms in Zambia
 Heavy use of ‘employment agencies’ for ‘dispatched workers’; contract
segregation within the firm – agency and non-agency staff
 Labour relations in Chinese overseas subsidiaries. Shen and Edwards
(2006) case studies of overseas Chinese companies in different sectors
conclude that they shared:
 An autocratic management style;
 Low employee involvement; Lack of openness in communications;
 Absence of formal policies toward employee relations;
 Preference for no trade union recognition in Chinese overseas
Generic features cont.
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 Labour is not retained within the boundaries of the
firm, and while labour supply may be channelled
through firm-level networks, especially for labour
capture, workers exercise mobility power by breaking
free of these firms and establishing their own
companies, or acting in concert with Chinese family
networks to establish such autonomous firms.
 Spill-over in Africa and Europe (Prato – Italy SMEs)
Johanson 2009
How do we deal with PRC & Greater China cases?
School of
 Greater China MNCs shaping the Chinese economic growth,
work and employment; pattern of FDI from Hong Kong,
Singapore and Taiwan into China and now internationally.
(Henderson et al 2013)
 Often FDI is from PRC but badged as FDI to gain benefits that
go to FDI;
 Papers on Greater China MNCs in Middle East, SE Asia – often in
export processing sectors (Textiles and Toys and Electronics
Assembly) and internationalising as labour costs, regulation and
upgrading is being pursued in China by central and local
authorities. How do we deal with PRC and Greater China cases?
Conclusions - research questions
School of
 Key Questions: HRM and expatriate management at
Chinese MNCs:
 Application of SSD framework to Chinese case
 Tensions between ‘home’ and ‘away’ practices, and
different effects
 Dynamics in SSD in Chinese ‘case’
 Are forms of controls in Chinese MNCs abroad a reflection
of home practices; or adaptation to working abroad –
avoiding ‘runaways’ - leaving the firm
 Does the use of expatriates further down the organisation
in Chinese MNCs apply in all sectors?
 How does Chinese MNCs heavy use of expatriates change
current debate on this issue?
Conclusion – Research Themes
School of
 The pattern of Chinese MNCs:
 The perspective of work and employment relations by hostcountry and host-region
 The perspective of work and employment relations by
industrial sector
 The perspective of work and employment relations by
company – district styles
 A Greater-China Chinese case
 A Private Firm Case
 A Reformed SOE Case
 Others(?)
School of
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