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Why Do Local Chinese Manage Foreign R&D Units in China? Towards a Multiplicative Capacity View
Type
conference paper
Date Issued
2006-08-15
Author(s)
Abstract
During the last 10 years, 400 out of the Fortune Top 500 have established at least one R&D unit in China. Surprisingly, more and more of these are being managed by local Chinese whereas theory would suggest management by expatriates. We investigate into this highly relevant phenomenon that seems to contradict existing theory on international R&D. From a discussion of agency theory and resource based perspectives on this problem, we develop hypotheses, contending that Western firms' R&D units acquire capabilities in China and trans-fer them out of China, using local Chinese managers to foster this process. We then set out to test our hypotheses, using data from a survey we did on Western firms' R&D in China.
Our results show that if the firm can overcome uncertainty avoidance and information asym-metry by establishing trust, management of foreign R&D by local Chinese can serve to multi-ply capabilities generated by the Chinese R&D unit throughout the whole firm. Finally, we use these results to propose an extension of Cohen and Levinthal's absorptive capacity which we term 'multiplicative capacity'.
Finally, we use this framework to reason how firms can leverage competitive advantage on an international basis by not just absorbing local capabilities, but by multiplying them through-out the global firm.
Our results show that if the firm can overcome uncertainty avoidance and information asym-metry by establishing trust, management of foreign R&D by local Chinese can serve to multi-ply capabilities generated by the Chinese R&D unit throughout the whole firm. Finally, we use these results to propose an extension of Cohen and Levinthal's absorptive capacity which we term 'multiplicative capacity'.
Finally, we use this framework to reason how firms can leverage competitive advantage on an international basis by not just absorbing local capabilities, but by multiplying them through-out the global firm.
Language
English
Keywords
China
international business
competitive advantage
international business strategy
R&D
expatriates
human resources
HSG Classification
contribution to scientific community
Refereed
Yes
Book title
Proceedings of the 2006 AOM conference
Publisher
Academy of Management
Publisher place
New York
Start page
34
Event Title
66th Academy of Management Annual Meeting (AOM) 2006 "Knowledge, Action and the Public Concern"
Event Location
Atlanta, Georgia (USA)
Event Date
11.-16.08.2006
Subject(s)
Division(s)
Eprints ID
28416