Brand development: institutional co

Brand development: institutional constraints on Chinese businesses
Judith Hollows
School of Design, Hong Kong Polytechnic University,
Kowloon, Hong Kong, and
Stewart R. Clegg
School of Management, University of Technology, Sydney, Australia
Abstract
Purpose – This paper addresses the reasons why Chinese businesses have long been identified as subordinate to world-class brand owners; why ‘‘global’’ own brand developments are considered to be beyond their competence.
Design/methodology/approach – In this paper, we use an institutional perspective to examine the difficulties faced by Chinese firms in own brand development, using empirical data derived from a research project into the business strategies of Hong Kong firms, and contrasting these with the case of what is one of China’s most successful foreign ventures, Haier.
Findings – The familial form appears to be transforming, due to the employment of a growing stratum of professional middle managers and Chinese family business firms appear to be developing into fully functionally integrated hierarchies capable of product and market development of own branded products. Three institutional supports make this possible. First, the development of parts of the People’s Republic of China (PRC) into a quasi-market economy created a regionally close and large market. Second, technology transfers from leading overseas consumer product brand owners’
supported the development of more sophisticated products and firm capabilities. Third, a steady
supply of skilled graduates from Hong Kong and the mainland enabled firms to move further up the value chain and exert more control over their manufacturing and related activities. To go truly global, however, more is required: social capital that connects the firm to the local and national party elites, something that mainland firms may find easier than those from Hong Kong.
Research limitations/implications – Gaining the data meant negotiating access through young professional managers now emerging from Hong Kong universities and was achieved through personal contacts; thus the sample is a small four-case study. The counterfactual case of Haier is derived not from original research but from website material.
Practical implications – Successful original equipment manufacturing business that goes global will, in addition to the institutional supports identified in the Hong Kong cases, also require elite patronage, social capital and political support.
Originality/value – The paper is of value to managers and consultants interested in international business in China.
Keywords China, Brands, Business environment
Paper type Research paper

Introduction
Let us begin where contemporary Chinese capitalism began. A mass of small family firms make Hong Kong the world’s leading exporter of toys, clocks, calculators, radios, hairdressing apparatus, telephone sets, travel goods and handbags, imitation jewellery
and artificial flowers. Hong Kong ranks second in the world as exporter of clothing,
fur clothing, textiles, watches, footwear and umbrellas (Hong Kong Trade Development Council, 2001). The average size of these firms is eight employees, in an economy of 6.5 million people. In the nearby Pearl River Delta, since the early 1980s, relocated Hong Kong firms have dominated the manufacturing hinterland. Hong Kong is the Chinese mainland’s largest source of foreign investment.
What are the business structures underlying these statistics and how are they changing? Hong Kong firms investing in the Peoples’ Republic of China (China) are not
only small but also rate low in firm-specific advantages such as proprietary advanced technologies and brand names. Instead, their skills are usually in the use of ‘‘mature
and standardized technologies and organizing labour-intensive production, in marketing and ethnic connections, and in well established international export markets’’ (Shi et al., 2001; cf. Chen, 1997; Yeung, 1994). Essentially, these firms are
intermediaries: the dominant business system used in the Hong Kong/Pearl River Delta manufacturing sector is known as original equipment manufacturing (OEM), also
identified by Gereffi and Korzeniewicz (1994) as ‘‘buyer commodity chains’’. Under this system, US, European and Japanese buyers come to Hong Kong to seek manufacturers who can ship products with given designs according to agreed cost, quantity, quality
and delivery criteria, under the overseas brand. The Hong Kong firms develop strong
‘‘design for manufacture’’ skills to achieve cost efficiencies without compromising on quality, which evolve into competencies in product design from their own or client
concepts, known as original design manufacture (ODM).
This study addresses the difficulties Hong Kong firms face in progressing to the next step, known as original brand manufacturing (OBM). OBM requires the firm
developing its own marketing, sales and distribution know-how and structures as well as substantial capital, unlike under the OEM/ODM system, where the Hong Kong firm
neither carries risk nor develops these other competencies.

Theoretical implications for the analysis of Chinese business firms
Past studies (Davies, 1996; Fukuyama, 1995; Carney, 1998; Rowan, 1998) characterize
Chinese family business as owner-controlled simple hierarchies primarily financed from reinvestment of profit, lacking professional management, with low capital intensity, not fully functionally integrated, with little or no product and market development (cf. Whitley, 1992; 1999; 2000), who takes a macro-institutional perspective on the phenomena). A popular perception of Chinese business firms is that weaknesses in their management capacity prevented their development, such that, ‘‘unable to manage expansion in the core business, entrepreneurs have channeled cash into liquid investments, such as property and real estate’’ (Carney, 1998). In fact, Carney (1998) saw the ‘‘desire for family control and income ... [as] likely [to] inhibit the development of organizational capabilities since it deprives the firm of the research, marketing and human resources assets needed to compete in technologically advanced markets’’.
Carney built his conceptions on the work of scholars such as Fukuyama (1995), Wong
(1985) and Redding (1990). The latter provided a definitive analysis of The Spirit of Chinese Capitalism, which defined the internal structure of the typical Chinese family business as ‘‘small and relatively unstructured. Because of cultural constraints on the sharing of trust, it does not develop decentralized decision making, and this acts as an inhibitor to successful growth’’ (Redding, 1990). Fukuyama (1995) followed the same line in noting the ‘‘very great difficulty Chinese family businesses seem to have in making the transition from family to professional management’’. Hamilton (1996) echoed the same

Brand development




387




MRN
29,7




388

considerations: ‘‘large Chinese firms are not vertically integrated, but are rather highly diversified and are organizationally segmented into separately managed units’’.
Control in Chinese family businesses traditionally was through ownership of assets, delegated supervision of routine operations to trusted family or quasi-family members, and close monitoring of business opportunities through networks of friends and
relatives. While an accurate reflection of Hong Kong firms in the 1970s and 1980s, more recently, as Hamilton (2000) suggests, as firms grew larger and more complex, ownership became shared, management segmented, while control remained
centralized. Owners handle external relations; centralize personnel and accounting functions, while delegating day-to-day operations to managers. Hamilton draws on
Fei’s (1992) conception of Chinese society as being based on webs of countless personal relationships, rather than a framework of organizations (see Yeung, 1998). Yeung (2000) suggests, however, that in the overseas operations of Chinese firms outside the Asia
Pacific region, business practices are based more on professional management, formal contracts and delegation of decision-making and control.
Chinese Family Businesses are not a closed system, complete in their own terms but
comprise a chain in a globally linked economy. Strategic alliances with Western multinational firms investing in Asia are crucial sources of technology, capital and market resources for the transformation of Chinese family enterprises into more open
structures integrated into the production networks of triad countries (Zhang and Van Den Bulcke, 2000). The twin demands of engaging in globalization and developing own brands require Chinese entrepreneurs to develop, coordinate and control complex
organization hierarchy, supported by information technology. Mass production and mass marketing operations and other strategic operations in the supply chain are set up in separate subsidiaries for which routine performance reports enable the owner
quickly to monitor deviations from predetermined standards. Highly qualified professionals manage the day-to-day operations of the company and participate in decisions concerning the strategic development of the firm, freeing the owner to focus
on the ‘‘outer webs of personal relationships’’ to obtain resources and opportunities for the development of the firm and family assets (Hamilton, 2000). The owner and any
close family or quasi-family members (the dominant coalition in western management terms) focus on horizontal ties, generating opportunities through networks of friends and friends of friends. Thus, the owner maintains flexibility and speed to transfer
assets and start up new operations, responding to newly emerging opportunities (see Hamilton, 2000). Hong Kong firms employ 1,000 of workers in plants in China, engage in zero defect manufacturing of products, and domina

Kết quả (Việt) 1:

Thương hiệu phát triển: thể chế hạn chế về các doanh nghiệp Trung QuốcJudith HollowsSchool of Design, đại học Bách khoa Hồng Kông,Kowloon, Hồng Kông, vàStewart R. CleggTrường quản lý, đại học công nghệ, Sydney, ÚcTóm tắtMục đích-giấy này địa chỉ lý do tại sao các doanh nghiệp Trung Quốc lâu đã được xác định là thuộc cấp của chủ sở hữu thương hiệu hàng đầu thế giới; tại sao phát triển thương hiệu riêng '' toàn cầu '' được coi là vượt ra ngoài thẩm quyền của họ.Thiết kế/phương pháp/cách tiếp cận-trong bài báo này, chúng tôi sử dụng một quan điểm tổ chức để kiểm tra những khó khăn phải đối mặt bởi Trung Quốc các công ty phát triển thương hiệu riêng, sử dụng dữ liệu thực nghiệm bắt nguồn từ một dự án nghiên cứu vào các chiến lược kinh doanh của công ty Hồng Kông, và tương phản với trường hợp của những gì là một trong của Trung Quốc thành công nhất nước ngoài ventures, Haier.Kết quả-các hình thức gia đình dường như chuyển đổi, do việc làm của một tầng lớp ngày càng tăng của chuyên nghiệp trung quản lý và công ty kinh doanh gia đình Trung Quốc dường như phát triển thành tích hợp đầy đủ chức năng phân cấp có khả năng phát triển sản phẩm và thị trường của riêng các sản phẩm mang nhãn hiệu. Hỗ trợ tổ chức ba làm cho điều này có thể. Trước tiên, sự phát triển của các bộ phận của người dân của Đài Loan (Trung Quốc) thành một nền kinh tế thị quasi-trường tạo ra một thị trường khu vực chặt chẽ và lớn. Thứ hai, công nghệ chuyển từ dẫn người tiêu dùng ở nước ngoài sản phẩm thương hiệu chủ'hỗ trợ sự phát triển của sản phẩm phức tạp hơn và khả năng công ty. Thứ ba, một giảmcung cấp của sinh viên tốt nghiệp có tay nghề cao từ Hồng Kông và công ty đất liền được kích hoạt để di chuyển hơn nữa lên chuỗi giá trị và phát huy kiểm soát nhiều hơn các hoạt động sản xuất và có liên quan. Phải đi thật sự toàn cầu, Tuy nhiên, nhiều hơn nữa là cần thiết: vốn xã hội kết nối công ty với các tầng lớp địa phương và quốc gia Đảng, một cái gì đó mà công ty đất liền có thể tìm thấy dễ dàng hơn so với những người từ Hồng Kông.Nghiên cứu hạn chế/ý nghĩa-đạt được các dữ liệu có nghĩa là thương lượng truy cập thông qua các nhà quản lý chuyên nghiệp trẻ bây giờ đang nổi lên từ các trường đại học Hồng Kông và đã đạt được thông qua liên hệ cá nhân; do đó mẫu là một bốn-trường hợp nghiên cứu nhỏ. Trường hợp counterfactual của Haier có nguồn gốc không phải từ các nghiên cứu ban đầu nhưng từ tài liệu.Ý nghĩa thực tế-thành công thiết bị gốc sản xuất kinh doanh mà đi toàn cầu, ngoài việc hỗ trợ tổ chức được xác định trong các trường hợp Hồng Kông, cũng sẽ cần có sự bảo trợ ưu tú, vốn xã hội và chính trị hỗ trợ.Độc đáo/giá trị-giấy có giá trị để quản lý và tư vấn quan tâm trong kinh doanh quốc tế tại Trung Quốc.Trung Quốc từ khóa, thương hiệu, môi trường kinh doanhLoại giấy nghiên cứu giấyGiới thiệuHãy để chúng tôi bắt đầu mà chủ nghĩa tư bản đương đại Trung Quốc bắt đầu. Một loạt các doanh nghiệp gia đình nhỏ làm cho Hồng Kông trên thế giới hàng đầu thế giới xuất khẩu đồ chơi, đồng hồ, máy tính, radio, thiết bị làm tóc, điện thoại bộ, du lịch hàng hóa và túi xách, đồ trang sức giảvà hoa nhân tạo. Hong Kong đứng thứ hai trong thế giới như là nhà xuất khẩu quần áo,khác-quần áo, dệt may, đồng hồ, giày dép và ô dù (Hồng Kông phát triển hội đồng thương mại, 2001). Kích thước trung bình của các công ty là tám nhân viên, trong một nền kinh tế 6,5 triệu người. Ở đồng bằng sông Pearl River gần đó, kể từ đầu thập niên 1980, di dời Hồng Kông công ty đã thống trị sản xuất nội địa. Hồng Kông là nguồn đầu tư nước ngoài lớn nhất Trung Quốc đại lục.Các doanh nghiệp là gì cấu trúc tiềm ẩn những thống kê này và làm thế nào họ đang thay đổi? Hồng Kông công ty đầu tư vào các dân tộc Trung Hoa dân Quốc (Trung Quốc) khôngchỉ nhỏ nhưng cũng đánh giá thấp trong những thuận lợi dành riêng cho công ty chẳng hạn như sở hữu công nghệ tiên tiến và thương hiệu tên. Thay vào đó, kỹ năng của họ thường sử dụng của '' trưởng thànhvà tiêu chuẩn hóa công nghệ và tổ chức sản xuất thâm canh lao động, trong các kết nối tiếp thị và sắc tộc, và cũng thành lập thị trường xuất khẩu quốc tế '' (Shi et al., 2001; x. Chen, 1997; Yeung, 1994). Về cơ bản, các công tyTrung gian: Hệ thống trị kinh doanh được sử dụng trong lĩnh vực sản xuất Hồng Kông/Pearl River Delta được biết đến như sản xuất thiết bị gốc (OEM), cũngxác định bởi Gereffi và Korzeniewicz (năm 1994) là '' người mua hàng hóa chuỗi ''. Theo hệ thống này, người mua Hoa Kỳ, Châu Âu và Nhật bản đến Hồng Kông để tìm kiếm các nhà sản xuất có thể tàu sản phẩm với được thiết kế theo thoả thuận chi phí, số lượng, chất lượngand delivery criteria, under the overseas brand. The Hong Kong firms develop strong‘‘design for manufacture’’ skills to achieve cost efficiencies without compromising on quality, which evolve into competencies in product design from their own or clientconcepts, known as original design manufacture (ODM).This study addresses the difficulties Hong Kong firms face in progressing to the next step, known as original brand manufacturing (OBM). OBM requires the firmdeveloping its own marketing, sales and distribution know-how and structures as well as substantial capital, unlike under the OEM/ODM system, where the Hong Kong firmneither carries risk nor develops these other competencies.Theoretical implications for the analysis of Chinese business firmsPast studies (Davies, 1996; Fukuyama, 1995; Carney, 1998; Rowan, 1998) characterizeChinese family business as owner-controlled simple hierarchies primarily financed from reinvestment of profit, lacking professional management, with low capital intensity, not fully functionally integrated, with little or no product and market development (cf. Whitley, 1992; 1999; 2000), who takes a macro-institutional perspective on the phenomena). A popular perception of Chinese business firms is that weaknesses in their management capacity prevented their development, such that, ‘‘unable to manage expansion in the core business, entrepreneurs have channeled cash into liquid investments, such as property and real estate’’ (Carney, 1998). In fact, Carney (1998) saw the ‘‘desire for family control and income ... [as] likely [to] inhibit the development of organizational capabilities since it deprives the firm of the research, marketing and human resources assets needed to compete in technologically advanced markets’’.Carney built his conceptions on the work of scholars such as Fukuyama (1995), Wong(1985) and Redding (1990). The latter provided a definitive analysis of The Spirit of Chinese Capitalism, which defined the internal structure of the typical Chinese family business as ‘‘small and relatively unstructured. Because of cultural constraints on the sharing of trust, it does not develop decentralized decision making, and this acts as an inhibitor to successful growth’’ (Redding, 1990). Fukuyama (1995) followed the same line in noting the ‘‘very great difficulty Chinese family businesses seem to have in making the transition from family to professional management’’. Hamilton (1996) echoed the same Brand development387 MRN29,7388 considerations: ‘‘large Chinese firms are not vertically integrated, but are rather highly diversified and are organizationally segmented into separately managed units’’.Control in Chinese family businesses traditionally was through ownership of assets, delegated supervision of routine operations to trusted family or quasi-family members, and close monitoring of business opportunities through networks of friends andrelatives. While an accurate reflection of Hong Kong firms in the 1970s and 1980s, more recently, as Hamilton (2000) suggests, as firms grew larger and more complex, ownership became shared, management segmented, while control remainedcentralized. Owners handle external relations; centralize personnel and accounting functions, while delegating day-to-day operations to managers. Hamilton draws onFei’s (1992) conception of Chinese society as being based on webs of countless personal relationships, rather than a framework of organizations (see Yeung, 1998). Yeung (2000) suggests, however, that in the overseas operations of Chinese firms outside the AsiaPacific region, business practices are based more on professional management, formal contracts and delegation of decision-making and control.Chinese Family Businesses are not a closed system, complete in their own terms butcomprise a chain in a globally linked economy. Strategic alliances with Western multinational firms investing in Asia are crucial sources of technology, capital and market resources for the transformation of Chinese family enterprises into more openstructures integrated into the production networks of triad countries (Zhang and Van Den Bulcke, 2000). The twin demands of engaging in globalization and developing own brands require Chinese entrepreneurs to develop, coordinate and control complexorganization hierarchy, supported by information technology. Mass production and mass marketing operations and other strategic operations in the supply chain are set up in separate subsidiaries for which routine performance reports enable the ownerquickly to monitor deviations from predetermined standards. Highly qualified professionals manage the day-to-day operations of the company and participate in decisions concerning the strategic development of the firm, freeing the owner to focuson the ‘‘outer webs of personal relationships’’ to obtain resources and opportunities for the development of the firm and family assets (Hamilton, 2000). The owner and any
close family or quasi-family members (the dominant coalition in western management terms) focus on horizontal ties, generating opportunities through networks of friends and friends of friends. Thus, the owner maintains flexibility and speed to transfer
assets and start up new operations, responding to newly emerging opportunities (see Hamilton, 2000). Hong Kong firms employ 1,000 of workers in plants in China, engage in zero defect manufacturing of products, and domina