Thanks,
Dr Frits
Title:
Overseas Chinese Business Performance: An Investigation into Competitive Advantage of Overseas Chinese Business Firms
UQ Business School, University of Queensland, Australia
September 2004
Abstract
This study examines the competitive strategy of Overseas Chinese firms in South-East Asia. The literature on Overseas Chinese business performance indicates that Overseas Chinese firms are a significant business force in South-East Asia and that these firms have been very successful. The literature seeks to explain this success and advances two main strands of explanation: one attributes success to features of the business environment faced by the Overseas Chinese in South-East Asia, the other to Chinese cultural values. Reflecting on this extensive body of literature, one point stands out: there is no clear definition of what is meant by ‘success’. Moreover, both strands in the literature essentially treat Overseas Chinese firms as one homogeneous group. No one has asked whether Overseas Chinese firms do business in ways that give them competitive advantage relative to indigenous (e.g. Malay or Javanese) or Western firms.
This thesis introduces the resource-based view of the firm (RBV) as new discourse to the study of Overseas Chinese business performance. The RBV seeks to explain why some firms consistently outperform competitors and focuses on a firm’s distinctive capabilities as an explanation of a firm’s ability to obtain competitive advantage. In this research, the competitive strategies of Overseas Chinese business firms have been analysed using insights from the RBV. The research explores whether, within the same industry and the same business environment, individual Overseas Chinese firms pursue competitive strategies that are very different both from each other and from those of competing Western firms.
The methodology used in this research is termed scientific realism. The research design is based on an approach in which theory is built from case studies. The data collection followed two methods: industry analysis and case studies. Eleven firms operating in the latex glove manufacturing industry in Malaysia were studied. The relative recent inception of this industry in Malaysia in 1987 allowed for a retrospective analysis of the case study firms’ competitive strategies from their establishment until the time of the interview.
The research found that there are two main types of Chinese firms in this industry: the professional Chinese firm and the traditional Chinese firm. A ‘competitive and corporate strategy matrix’ was developed to indicate the relative position of the case study firms in terms of competitive strategy (i.e. degree of involvement in marketing, product and production process development, and brand development) and the degree of focus of the firm’s corporate strategy. The business strategy of the two types of Chinese firms differs in the extent to which the firm is involved in product development and the marketing of its products to end-users. The corporate strategy of the two types of Chinese firms also differs with the traditional Chinese firm following a corporate strategy of diversification. The traditional Chinese firm often manages a portfolio of unrelated businesses and adopts an opportunistic approach to investment in the businesses. The corporate strategy of the professional Chinese firms is more focused and allows them to stay in the glove manufacturing industry for the long term by making long term investments.
The theory developed through this research is that there are different types of Overseas Chinese firms that have different competitive and corporate strategies. A combination of a competitive strategy, in which the firm has a high involvement of the marketing of its products to end-user and uses the feedback obtained from this involvement in the development of new products and production processes, and a corporate strategy that allows the business unit to have a long-term commitment and focus on the business activity, will lead to the development of distinctive capabilities. These distinctive capabilities may lead to a competitive advantage of the firm over its competitors.
(c) Frits de Vroet
