2000 words assignment excluding reference
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Lectureslidesweek4.pptx
WEEK 4: THE STATE AND ORGANIZATIONAL & NATIONAL IDENTITY
Emerging Market MNCs: Internationalisation and HRM (CMSE11380)
Dr. Keyan Lai Office: 2.13
Email: [email protected]
Last week: home country effect
The behaviors of EMNCs are deeply embedded in home country institutional environments. e.g. a strong state
the example of Tata Motors & Hero Group
The example of Chinese MNCs
Home country effect may take different forms, but competitive disadvantages associated with country of origin is particularly prominent in the case of EMNCs
This week: why states matter? How to deal with the issue of trust and legitimacy
“[they are] both cooperative and competing, both supportive and conflictual. They operate in a fully dialectical relationship, locked into unified but contradictory roles and positions, neither the one nor the other partner clearly or completely able to dominate” (Gordon, 1988)
Relationships between MNCs and states
Objectives of MNCs
| Performance | Maximize profits and shareholder value. Minimize cost base consistent with customer need. |
| Technology | Undertake R&D at locations optimal to the needs of the firm as a whole Gain access to all necessary technology |
| High-order function | Locate headquarters and other high-order functions to fit optimal pattern of the firm’s overall operations |
| Responsive- ness | Retain flexibility to move profits in optimal manner Retain flexibility to modify the geographical configuration of the firm’s production network to meet changing conditions Retain flexibility to use the labour force as required. |
Objectives of state
| Performance | Maximize growth of GDP. Maximize quantity and quality of employment opportunities. |
| Technology | Stimulate the development of locally-rooted technology |
| High-order function | Maintain indigenous headquarters. Attract and retain key operations of MNCs |
| Responsive- ness | Retain power to gain a fair return on local operations of MNCs through taxation policies Maximize the extent and benefits of local supplier linkage. Prevent the closure/scaling down of local MNC operations Develop a high-skill, high-earning labour force |
| The state’s policies relating to inward FDI | |
| Entry Government screening of investment proposals Exclusion of foreign firms from certain sectors or restriction on the extent of involvement Restriction on the degree of foreign ownership | Finance Restrictions on the remittance of profits and/or capital abroad Level and methods of taxing profits of foreign firms |
| Operations Insistence on involvement of local personnel in managerial positions Insistence on a certain level of local content in the firm’s activities Requirements relating to the transfer of technology | Incentives Direct encouragement of foreign investment, e.g. overseas promotional agencies and investment incentives |
| The state’s policies relating to outward FDI | |
| Restrictions on export of capital (e.g. exchange control regulations) Necessity for government approval of overseas investment projects Policy & capital support and sponsorship |
States need firms to generate material wealth and provide jobs for their citizen
Some states view MNCs as extensions of state foreign policy
Home country state and MNCs
MNCs need states to provide the infrastructural basis their continued existence, both physical and social
MNCs look to home-country governments to provide protection abroad
Home-country trade policies can open up access to markets in foreign countries
Why do countries generally welcome foreign investments from MNCs? What are the benefits to have these MNCs operating here?
Quick discussion
The states look to MNCs for investments to provide employment, stimulate economies, and upgrade the industry/nation economically and socially.
Host country state and MNCs
MNCs in need of favourable institutional environments, e.g. market access, preferential policy, etc (the states have the power to exclude or appropriate a particular investment)
The ‘political embeddedness’ (Kilduff & Brass, 2010) of EMNCs in general
Close ties with the state and politicians
The role of the state keenly felt in EMNCs, e.g.
‘International champions’ for new state-supported ‘Multilatinas’ in Latin America (Henart, Sheng, & Carrera, 2017)
Russian Gazprom seen as the ‘powerful arm of Russia in foreign affairs and foreign conflicts’ ( Panibratov, 2012, p.63)
Strong government sponsorship and support in internationalization process of Chinese MNCs (Cui & Jiang, 2012; Hong, Wang & Kafouros, 2015)
EMNCs and home country states
For economically and politically critical industries (e.g. electricity, defense and aerospace, mining, oil and gas)
Legislative protection through creation of framework of laws
Provision with state contracts and orders
Supervision of nationwide programmes and projects
Incentives and subsidies
Promotion of the industries and firms via media and officials
Personal involvement of top government officials
(Panibratov, 2016)
Russian state and Russian MNCs
Creation of national champions has been a crucial strategic public policy in Brazil
Loans from Brazilian Development Bank (BNDES) to prepare large domestic firms for competition and internationalization
A special department at BNDES to fund Brazilian firms’ expansion abroad
Brazilian state and Brazilian MNCs
“the presence of Brazilian firms abroad strengthens the general lines of the country’s foreign policy”
-- Brazilian Minister of Foreign Affairs in 2007
(Finchelstein, 2017)
The role of Chinese state in the internationalisation of Huawei & ZTE
Creation of favourable policy environment for science & technology research and development
e.g. China development strategy: ‘Revitalising the Country through Science, Technology, and Education’
e.g. In 2006, China launched its 15-year 'Medium- to Long-Term Plan for the Development of Science and Technology', in an effort to make China an 'innovation-oriented society' by the year 2020, and a world leader in science and technology by 2050
Policy development
Financing and policy support in R&D research
‘national-banner enterprises’ will be picked by the central government to enjoy financing from the state to work on new technology research
e.g. the Ministry of Information Industry began sponsoring R&D activities for the creation of a domestic 3G standard in the 1990s.
Furthermore, to facilitate knowledge transfer through policy, the government has placed pressure on foreign companies to ensure knowledge transfer occurs
Financial support
Domestic market protection
Objective: to protect domestic firms from the competition of foreign firms, and maximises the market shares of the former, particular of those national champions
e.g. to encourage telecoms operators to purchase equipment made by indigenous manufacturers, in 1996, the Chinese government began to impose tariffs on imported communication equipment, dramatically increasing the market share of local firms from 63.1% in 1995 to 84.8% in 1996, and 94.9% in 1997
Market protection
International market expansion support
national champion firms receive large amounts of support from the government in developing international markets
e.g. senior managers from Huawei and ZTE are often invited to accompany Chinese officials in visiting other developing countries so that they can donate their products to these countries and further develop important business opportunities
e.g. the China Development Bank extended a credit facility of USD 10 billion to help overseas customers buy Huawei’s products.
e.g. a state-owned insurance company has helped Brazil’s biggest telecommunications operator Telemar NorteLeste SA to finance the purchase of Huawei’s equipment
Overseas expansion
Accelerate internationalization of EMNCs, and enable EMNCs to compete with western MNCs
Have created different forms of firm-specific advantages, but at the same time resulted in lack of certain organizational capability, and being incapable of dealing with certain issues such as industrial relations
A major challenge for EMNCs: legitimacy and trust issue
The double-edged effect
Sponsorship and support from the Chinese state government enhance the competitiveness of Chinese firms, it also provokes a negative reaction from politicians and the public in the host countries (Zhang, Zhou and Ebbers, 2011)
Chinese firms are under suspicion that they are not really market- oriented or profit-driven; instead, their business activities are motivated by a political agenda.
Acquisitions by Chinese firms have become a concern for US policymakers and policymakers in other developed countries because Chinese MNCs are believed to acquire companies to ‘pursue non-commercial objectives’, thus imposing costs and risks on the hosting countries (Globerman and Shapiro, 2009)
The double-edge effect
Organizational Identity & National Identity
Describes how members of an organization think about ‘who we are’ (Albert & Whetten,1985).
‘Who are we as an organization?’,
‘What business are we in?’
‘Who do we want to be as an organization?’
An internal and self-descriptive concept, capturing the central, enduring, and distinctive characteristics of an organization
Organizational identity
“Internally, OI can be a potent means of developing and managing the motivation and ‘engagement’ of staff, thereby extracting ‘discretionary effort’ – that is, labor performed beyond the contractual obligation of employees – at no extra cost” (Kenny, et al, 2016:143)
Executives, managers, individual employees are engaged in the construction and formation of OI.
Organizational identity
Chapter 8. Organizational identity: the significance of power and politics. In Pratt, M. G., Schultz, M., Ashforth, B. E., & Ravasi, D. (2016). The Oxford Handbook of Organizational Identity..
National identity as one element of organizational identity (Anteby & Molnár, 2012:521), e.g.
– “We are a German company”; “We are a Chinese firm”, “We are a Russian firm”.
How do MNCs engages in the construction organizational identity by making varying degree of references to the national identity?
National identity
Rising nationalism in India between World War I (1914-1918) and World War II (1939-1945).
Nationalist movement aimed to free the nation from political and economic dependence of ‘British masters’
Siemens & Bayer positioned themselves as “outsiders” to colonialism, a (better) alternative to British rival MNCs
Capitalized on shared anti-British sentiments
“It became increasingly apparent to German MNEs that non-British origin could be cultivated into a political advantage in the context of growing anti- colonial sentiments”. (p.408)
Siemens & Bayer in India
Lubinski, C., & Wadhwani, R. D. (2020). Geopolitical jockeying: Economic nationalism and multinational strategy in historical perspective. Strategic Management Journal, 41(3), 400-421.
A case study of Shein
Based on the Economist article, discuss the issue of organizational identity and national identity in the case of Shein
How do you evaluate Shein’s strategy in dealing its national identity?
What can other EMNCs learn from Shein?
The notion of “national identity Anchoring”
The emergence of a particular identity trajectory, which may be difficult to reverse
Important stakeholders retain a perception of a strong national identity component when evaluating an organization’s identity, despite attempts at downplaying it.
Distancing from national identity?
“Since the very first day of its birth, Huawei has firmly taken as its inescapable responsibility the prosperity of the national industry and the people of the Motherland; without hesitation, it has taken on the historical mission of revitalizing the national industry...without fear Huawei people launched a strong attack on those big foreign companies. This has gone far beyond the simple purpose of securing survival and development for the company, but it represents Huawei people’s national spirit of never giving up, never admitting defeat, fighting bravely, and winning glory for the country.”
(source: Huawei People Newspaper, Issue 37: 4; November 1996)
“We have already helped most people on this planet to connect with each other. We will enable broader connections between people and things in the future. At the best of times, being the enabler of this Better Connected World is the ideal role for Huawei.”
( Source: Huawei People Magazine, Issue 255: 4; January 2015)
“First of all, I don’t know much about the clash between China and the United States. I am not clear about the conflicts between them either.
What we are studying is
how Huawei can survive.”
(Huawei People Newspaper, Issue 349: 3; July 2020)
The heavy reliance on the national identity element has constrained Huawei in its ability to navigate the ensuing geo- political tensions between the US and China
Huawei is unable to distance itself from these struggles but rather is one of the most prominent victims of the ‘trade war’ between the two global superpowers
Strengthening the national identity in the past can anchor this identity element in the eyes of key stakeholders and audiences. As a result, attempts at weakening it are less effective.
Distancing from national identity?
The states, both home country and host country, play important role in internationalization of all MNCs.
While much research discusses the complex relation between host country state and (western) MNCs, home country state seems particularly relevant to EMNCs.
The support and sponsorship of the home country state have double-edge effect on EMNCs, and have important managerial implications for managers, e.g. who are we?
Some conclusions
