Steven Max Brown and Dr. Dan Nielson, International Relations
Multinational corporations have become a significant part of China’s economy. Every year thousands of new businesses dive into this massive population hoping to capture even a small percent of the market share. Today, billions of dollars continue to pour into projects geared for long term returns as China continues to develop and prosper. The government may claim to be Communist, but the country is already booming with a market economy, private ownership, and entrepreneurial spirit.
It is in this environment that I have spent the last six months, from January to June 1997, interviewing dozens of managers and employees, touring factories, and meeting with many specialists and consultants in China. While the results have been interesting, I have found that my hypothesis was too broad, and the research questions too vague. It is not enough to label multinational corporations as “negative” or “positive” in regards to the impact they may bear on the country. Does this mean that the research was a failure? Absolutely not. I simply narrowed my subject and dug in deeper to get what I was looking for.
As I anticipated, most of the information I obtained praised the multinational companies, (from the United States, Canada, and Britain), because of the incentives and benefits that come with these foreign businesses. Multinational corporations pay higher salaries, bring in new technology, provide “Western” management techniques, and opportunities for training and exposure to the world beyond China’s borders. While these corporations flock to China in an effort to reduce labor costs, they still maintain competitive benefits and incentives for employees. Every year, thousands of new Chinese graduates swarm over these jobs hoping to land an interview, and better yet, a contract.
When asked what role foreign companies will continue to play in China’s development, one manager said, “Foreign companies are bringing in advanced technology, advanced management concepts and skills, production and quality control expertise, as well as modern products into the Chinese markets. Not to mention that these same companies are bringing in substantial financial investments to build up China’s development foundation.” Another Chinese manager said, “The benefits of working in a foreign company include higher efficiency, a modern environment. Plus, the opportunity to learn production, marketing, and customer needs and how they work together.”
In addition, foreign companies are diligently striving to localize their staff. Consequently, hundreds of Chinese “high potential” managers are being trained to be the next general managers to lead these companies into the next century. Working conditions are sanitary and often times exemplary compared to their Chinese counterparts. According to an environmental specialist, it is the foreign companies that are pressing for cleaner standards and stricter adherence to environmental laws. While these statements are impressive, multinational corporations have significant reasons for wanting localization and better environmental standards because these are both steps for reducing costs in the future. Still, I was quite surprised to find so many significant, and positive contributions that these foreign companies are making in China.
The challenges were plentiful, and it was very difficult to get access to the information I was looking for. Obviously, foreign companies are protective and wary about sharing too much information. Secondly, they never want to portray themselves badly and they will often times paint a rosy picture to cover up some of the blemishes that may exist. Yet another problem was that part of the research question still goes unanswered: “Is there any relationship between a multinational corporation that is selling its goods and services within the host country and the treatment of its employees?” I received various replies, none of which were very conclusive, and more research should be done with some more concrete ways to measure the data. Nevertheless, I would venture to say that it isn’t the difference between corporations, but the difference between management styles that would determine the treatment of employees within the corporation. Many companies tend to have similar salaries and benefits, in order to remain competitive, but treatment within the corporation can vary greatly from factory to factory depending on the manager.
Hence, my research questions have been modified and narrowed down to learn more about management techniques. Particularly, to gain a better understanding on the influence of Western management in China. This includes a closer look at cultural differences, and how these differences influence what happens in the work place. Not only does this information tell us more about the impact of multinational corporations, but it also explains the challenges these companies are facing as they establish themselves in a very complex market.
Retention is a daunting task in China because talented employees are extremely marketable and easily swept up by a “head hunter” if the company’s incentives are not good enough. In response, many companies have included Western training to encourage employees to learn new things. Companies are spending thousands of dollars to have their employees attend training seminars and team building courses in hopes of increased skill and productivity. Such benefits attract the highly motivated graduates to work hard and, if all goes well, stay with company for several years.
From the Chinese perspective, it is good to have the foreign companies, but they plead for better mutual understanding. “Far too many foreigners fail to see China as it is, and instead they rely on the past to make decisions for the future,” says one frustrated employee. “We need to understand one another’s cultural differences, respect one another for those differences, and have better communication. The language barrier, and the lack of trust make it very difficult to work together. Chinese managers also find it hard because they are not empowered to make decisions.” Hence, this is a critical issue that companies need to address in order to be successful in the future.
Nevertheless, as the cultural gaps close and mutual understanding grows, foreign companies are playing an important role in the continued development of China’s economy. As one respondent summarized, “Just like the waves on the ocean, the more pressure on the water creates bigger waves. Foreign companies make these bigger waves happen.” Needless to say, business is booming in China in part because of multinational corporations.