The International Expansion of Mainland Chinese Businesses in the Context of Culture – Illustrated by the Example of the Market Entrance of Mainland Chinese Businesses to the German Market Von der Fakultät für Wirtschaftswissenschaften der Technischen Universität Bergakademie Freiberg genehmigte DISSERTATION zur Erlangung des akademischen Grades doctor rerum politicarum Dr. rer. pol. vorgelegt von Diplom-Kaufmann Gregor Miroslawski geboren am geboren am 03.07.1979 in Düsseldorf Gutachter.: Prof. Dr. Michael B. Hinner, Freiberg Prof. Dr. Guo-Ming Chen, Kingston Dr. Klaus Grimm, Heidelberg Tag der Verleihung: 10.06.2008 I Preface This dissertation has been financially supported by the Friedrich-Naumann-Stiftung with funds from the Bundesministerium für Bildung und Forschung (BMBF). I would like to use the opportunity to thank some people without whom this dissertation would not have been possible: Prof. Dr. Michael B. Hinner, Dr. Vetter and Alan McDonnell from the Chair of Intercultural Business Communication for their intellectual stimulation and support during the preparation and creation of my dissertation. Scholarship holders and staff of the Friedrich-Naumann-Stiftung, Niklas Ahn, Martin Bahde , Andreas Klossek, Marcel Wolf and my parents who encouraged inspired, motivated me in the past two years . Special thanks go to the staff of the Delegation of German Industry and Commerce in Shanghai who assisted me with the survey. II Contents PREFACE ...................................................................................................................I CONTENTS................................................................................................................II FIGURES ................................................................................................................. VI TABLES ................................................................................................................. VIII ABBREVIATIONS AND ACRONYMS ...................................................................... X INTRODUCTION ........................................................................................................1 1 INTERNATIONALIZATION OF THE FIRM.........................................................3 1.1 Theoretical Approaches to the Internationalization of the Firm .......................3 1.1.1 The Uppsala Internationalization Model ............................................................................3 1.1.2 The Network Model............................................................................................................9 1.1.3 The Eclectic Paradigm.....................................................................................................12 1.1.4 Dimensions of Internationalization...................................................................................15 1.2 An Introduction to the Choice of Market Entry Mode......................................16 1.2.1 Factors Influencing the Choice of Market Entry Mode ....................................................20 1.2.2 The Transaction Cost Theory – based Approach to the Choice of Modus Operandi of the Firm..................................................................................................................................24 1.2.3 The Resource-based View of the Firm Approach to the Choice of Modus Operandi of the Firm..................................................................................................................................30 1.3 Framework for the Choice of Entry Mode ........................................................35 1.3.1 The Decision Rule ...........................................................................................................35 1.3.2 The Hierarchical Model of Choice of Market Entry Mode................................................37 1.3.3 An Eclectic Framework of the Market Entry Mode Choice ..............................................39 1.4 Market Entry Modes...........................................................................................42 1.4.1 Exporting..................................................................................................................... - 44 - 1.4.2 Licensing..................................................................................................................... - 44 - 1.4.3 Contract Manufacturing .............................................................................................. - 45 - 1.4.4 Joint Venture............................................................................................................... - 45 - 1.4.5 Wholly-owned Subsidiary ........................................................................................... - 48 - 1.4.6 M&A ............................................................................................................................ - 49 - III 2 CULTURE .................................................................................................... - 52 - 2.1 Definition of Culture ......................................................................................- 52 - 2.2 Adequate Means for the Analysis of Culture ...............................................- 55 - 2.2.1 Hofstede’s 5 Cultural Dimensions .............................................................................. - 55 - 2.2.2 Trompenaars’ and Wooliams' 7 Dimensions Model of Culture .................................. - 58 - 2.2.3 Frederik Barth’s relational approach........................................................................... - 60 - 2.2.4 Conclusion .................................................................................................................. - 61 - 2.3 German and Chinese values on Hofstede’s cultural dimensions index ....- 62 - 2.4 Distinct Chinese Culture Characteristics.....................................................- 66 - 2.4.1 Fundamental Beliefs and Values................................................................................ - 66 - 2.4.2 Guanxi......................................................................................................................... - 70 - 3 COMMUNICATION ...................................................................................... - 73 - 3.1 Definition of Communication ........................................................................- 73 - 3.2 Hall’s Low-Context and High-Context Communication Model ...................- 79 - 3.3 Distinct Chinese Characteristics in Communication...................................- 84 - 3.3.1 Insider vs. Outsider Communication Approach .......................................................... - 84 - 3.3.2 Mian Zi (Face)............................................................................................................. - 85 - 3.4 Synthesis Chinese Culture & Communication.............................................- 90 - 4 INTERNATIONALIZATION OF ETHNIC CHINESE BUSINESS ................. - 97 - 4.1 Origins and the Internationalization of Ethnic Chinese Business..............- 97 - 4.2 A Definition of Ethnic Overseas Chinese Business ..................................- 101 - 4.2.1 Organizational features of Overseas Chinese Business .......................................... - 101 - 4.2.2 Business Expansion & Decision Making .................................................................. - 106 - 4.2.3 The Role of Guanxi Networks................................................................................... - 108 - 4.2.4 Conclusion ................................................................................................................ - 112 - 4.3 The International Expansion of Ethnic Chinese Business........................- 113 - 4.4 A Framework for the International Expansion of Ethnic Chinese Business – Chinese Business Networks .......................................................................- 120 - 4.5 Conclusions and Propositions for the International Expansion of Ethnic Chinese Businesses ....................................................................................- 129 - IV 5 INTERNATIONAL EXPANSION OF MAINLAND CHINESE BUSINESS.. - 132 - 5.1 The Chinese Economy.................................................................................- 132 - 5.2 Types of Chinese Enterprises.....................................................................- 139 - 5.2.1 State-Owned Enterprise (SOE) ................................................................................ - 139 - 5.2.2 Private Enterprises ................................................................................................... - 143 - 5.3 The Internationalization of Mainland Chinese Business...........................- 149 - 5.4 Synthesis from the Expansion of Ethnic/Overseas Chinese Business....- 168 - 5.5 Approaches to a Theoretical Framework for the International Expansion of Mainland Chinese Business........................................................................- 171 - 5.5.1 The Investment Development Path (IDP)................................................................. - 172 - 5.5.2 Networks and China’s Outward FDI ......................................................................... - 178 - 5.6 Conclusion ...................................................................................................- 184 - 6 MARKET ENTRANCE IN GERMANY ....................................................... - 186 - 6.1 The German Economy and Market .............................................................-