Factors affecting global integration of Chinese multinationals in Australia: A qualitative analysis

International Business Review 21 (2012) 13–26

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Factors affecting global integration of Chinese multinationals in Australia: A qualitative analysis Di Fan *, Cherrie Jiuhua Zhu 1, Chris Nyland 2 Faculty of Business and Economics, Monash University, Australia

A R T I C L E I N F O

A B S T R A C T

Article history: Received 16 June 2010 Received in revised form 18 March 2011 Accepted 21 March 2011

This study utilizes cross-level and in-depth interviews to extend empirical and conceptual studies that have identified the factors underlying the choices made by OECD based multinational enterprises (MNEs) when determining their approach to global integration. The study examines the applicability of these factors in the context of Chinese MNEs with operations in Australia. In so doing, it pioneers the use of qualitative methods to determine which factors affect emerging market MNEs’ global integration and how these elements function and interrelate. Furthermore, the study contributes to theory-building by classifying the factors affecting global integration into organizational, industrial, and environmental groupings. The implications of this study are drawn from the data analysis and directions for future studies are advanced. ß 2011 Elsevier Ltd. All rights reserved.

Keywords: Chinese multinationals/Chinese MNEs Global integration Reclassification and perception analysis

1. Introduction Global integration is a source of competitive advantage for multinational enterprises undertaking worldwide activities as this process can generate efficiencies by assisting specialization of individual units and by facilitating substantial interchange among units. Although some scholars discuss countervailing influences, such as the pressure for localisation when discussing global integration (e.g., Bartlett & Ghoshal, 1989/1998; Doz & Prahalad, 1991; Prahalad & Doz, 1987), this paper follows Luo (2001, 2002) who elected to discuss these twin variables separately. While recognizing global integration is a broad and contested concept, it is defined here as a process whereby an MNE transnationally transfers practices that can create competitive advantages for the firm. Appreciating the need for MNEs to be integrated, scholars have explored a range of factors that are associated with and/or further this process. These include the need to relate integration to overall corporate strategy (Bartlett & Ghoshal, 1989/1998), global supply chain management (Buckley & Ghauri, 2004), functional level integration (Yamin & Sinkovics, 2007), and the role of internal embeddedness (Yamin & Andersson, 2011). However, while global integration can be defined, the factors that drive and/or retard integration and the relative significance of these drivers remain unclear. The latter issues have attracted a large body of scholarly attention which has been overwhelmingly quantitative in character and centred on the MNEs of advanced economies (Birkinshaw & Morrison, 1995; Birkinshaw, Morrison, & Hulland, 1995; Luo, 2002; Taggart, 1997). We extend this literature by adopting a qualitative research design and by focusing discussion on MNEs from China which is rapidly becoming a leading exporter of foreign direct investment

* Corresponding author at: School of Business and Economics, Gippsland Campus, Monash University, Building 5N, Northways Rd., Churchill, VIC 3842, Australia. Tel.: +61 3 99026284. E-mail addresses: [email protected] (D. Fan), [email protected] (C.J. Zhu), [email protected] (C. Nyland). 1 Tel.: +61 3 990 55465. 2 Tel.: +61 3 990 34667. 0969-5931/$ – see front matter ß 2011 Elsevier Ltd. All rights reserved. doi:10.1016/j.ibusrev.2011.03.005

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(FDI). The paper begins with a review of the literature relating to concept development and the underlying determinants of global integration. Two research questions are developed from the literature review: (1) what are the factors that influence global integration in the context of Chinese MNEs and why is it that this is the case? and (2) how can perceived factors be categorized? Next, the research method is explained and the qualitative data is presented and analysed. Finally, implications are drawn from the findings and suggestions for future studies are advanced. 2. Literature review and research questions The notion of global integration was initially developed by Fayerweather and Kapoor (1975) who argued the process is a potential source of competitive advantage for MNEs because it can further specialization of individual units, facilitate interchange among units, and realise economies of scale. Building on this initial contribution Kogut (1984) suggested that by integrating globally firms can gain competitive advantages by exploiting: (1) differences in national resource endowments (comparative advantage); (2) the flexibility and bargaining strength of a multinational network; (3) economies of scale, scope and learning (see also Chen & Cannice, 2006; Kobrin, 1991; Sambharya, Kumaraswamy, & Banerjee, 2005). Although there is currently a consensus among scholars that global integration can help MNEs achieve significant efficiencies, what remains moot is the extent to which the process assists individual firms and what are the primary drivers of the process. Hill (2006) argues cost pressure ultimately is the only significant factor impelling global integration and while this may be correct the claim leaves undetermined the nature of the factors (see Appendix A) that may influence cost. This remains the case despite the fact that the drivers have been subject to vigorous empirical evaluation as argued by, among others, Jarillo and Martinez (1990), Johnson (1995), Luo (2002), Roth and Morrison (1990), Taggart (1997), and as is made clear by Table 1 which overviews the findings of relevant empirical studies. In constructing the table selection was informed by searching Business Source Premier (over 8000 journals), and Proquest 5000 International (5500 journals) utilising key words in two defined areas: global integration and its determinants or driving forces. The twenty-six factors identified are presented together with their relationship with global integration. For each article, Table 2 displays author, publication time and research design. Table 1 reveals a multiplicity of factors are alleged to influence the degree of MNE integration while Table 2 shows that the topic has sustained a continuing body of scholarship since the early 1990s and that empirical studies have focused overwhelmingly on MNEs from advanced economies. Over time, the escalating number of factors came to be recognised as a problem and Venaik, Midgley, & Devinney (2004) were led to argue a robust analysis was required to categorise the drivers and thus systematise analysis. To further this Table 1 Overview of the findings of previous studies: factors affecting global integration. Variables Standardisation Centralization/centralization of technology Human resource/employment Technological intensity/R&D/ Complex innovation Advertising intensity Manufacturing scale Transnationality Information flow Competitors’ action Country specific advantages Quality reputation Premium positioning Extent of global competition Formalization/global coordination of activities Investment required Resource flow Distribution Risk diversification Factor exploitation Resource distinctiveness Resource dependence Control flexibility Heterogeneity of executive group Previous experience Cost pressure Regional headquarters’ role

1

2

3

4

(+)

5

6

(+)

7

8

9

( )*

10

11

(+)

(+) ns (+)

(+)

14 (+)

(+) (+)

13

(+)

(+)

(+)

12

(+)

(+) (+)

s

(+) (+)

ns

(+)

(+)

(+)

(+)

(+) (+) (+) (+)

(+)

s

(+) (+) (+)

ns ns

s ns (+) (+)

(+)

s (+) ( ) (+) (+)

Notes: + = positively related to global integration; standardization of market demands.

(+)

(+)

ns ns

(+) S

= negatively related to global integration; s = significant; ns = not significant. The asterisk sign ‘‘*’’ means

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Table 2 A summary of empirical studies classified in Table 1. Author(s)

Publishing date

Sample size

Valid return rate

Region

Perspectives

1 2 3 4 5 6

Jarillo and Martinez Roth and Morrison Kobrin Johansson and Yip Johnson Birkinshaw and Morrison

1990 1990 1991 1994 1995 1995

50 322 56 36 1800 578

50 147 N/A 36 346 126

Subsidiaries Headquarters Firms Firms Headquarters Subsidiaries

7

Birkinshaw, Morrison and Hulland Taggart Venaik, Midgley and Devinney Grein, Craig and Takada Luo Kim, Park and Prescott Paik and Sohn Yu

1995

322

147

Spain US US US and Japan US World (subsidiaries in US, Canada, UK, France, Germany, Japan) US

1997 2000 and 2004

500 728

171 191

Subsidiaries Subsidiaries

2001 2002 2003 2004 2005

? 500 630 N/A 600

? 168 161 1 142

UK World (Head Offices mainly in Japan, UK, USA) Japan and European countries PR China US Japan China (Taiwan)

8 9 10 11 12 13 14

Headquarters

Firms Subsidiaries Headquarters Firm Subsidiaries

Note: N/A: not applicable; the question mark ‘‘?’’: unclear.

objective, the three scholars grouped the identified influences into pressures and responses, with pressures being external, environmental forces that shape firm strategy and responses being strategic and organizational reactions to these external pressures. We suggest integration factors can also be grouped by considering the differing approaches taken by scholars. Awareness of the particular approach taken may help explain the great divergence among researchers in terms of identified factors and their significance. Table 2 shows that one body of scholars has approached the global integration issue from the subsidiary level (Birkinshaw & Morrison, 1995; Jarillo & Martinez, 1990; Luo, 2002; Taggart, 1997; Venaik et al., 2000, 2004; Yu, 2005), whereas a second group has concentrated on MNE headquarters (Birkinshaw et al., 1995; Johnson, 1995; Kim et al., 2003; Roth & Morrison, 1990), and a third has treated MNE’s headquarters and subsidiaries as a single unit of analysis (Grein et al., 2001; Johansson & Yip, 1994; Kobrin, 1991; Paik & Sohn, 2004). All three of these approaches reveal that integration researchers are characterised by flexibility in terms of data gathering and that while no particular unit of analysis is inherently superior the differences need to be made clear when comparing the findings identified by different studies. The literature review also reveals there is a paucity of research that addresses global integration in the context of MNEs from emerging economies. Luo (2002) discusses integration factors in relation to China but his analysis centres on OECD firms that invest in China not the outward-bound FDI of Chinese firms. Given this is the case, the analysis presented in this paper is innovative, and we suggest a new categorization will need to be considered when discussing the integration issue, that is, whether firms are from a developed or emerging economy. We also suggest that given China is rapidly becoming a major exporter of FDI (UNCTAD, 2010) and will soon be joined by other developing countries, the research on global integration in the context of Chinese MNEs requires analysis from both the headquarters (HQ) and subsidiaries perspective. To further this goal, the following key research question (RQ) is raised for this study. RQ1: What are the factors that influence global integration in the context of Chinese MNEs and why is it that this is the case? Finally, also manifest in Table 2 is a change in focus over time. In the early 1990s, scholars (e.g., Kobrin, 1991; Johnson, 1995) concentrated primarily on the organizational factors that drive or retard global integration. However, by the turn of the century Luo (2002) was well received when he observed that global integration is determined by multilevel factors and that researchers need to explore both organizational factors and influences that exist beyond the organization. We embrace this advice but in so doing suggest that it places an onus on researchers to document how ‘‘multilevel factors’’ are to be classified and whether multilevel factors jointly and simultaneously shape global integration in the context of Chinese MNEs. Given this latter requirement, one of our research objectives is to clarify: RQ2: How can perceived factors be systematically categorized? 3. Methodology 3.1. Research design Most studies of global integration have utilised quantitative rather than qualitative methods. A quantitative approach is however difficult to apply to Chinese multinationals not least because the robust theoretical understanding needed to underpin quantitative analysis of China’s MNEs does not yet exist given their short history with internationalisation. Further, the research questions focus on the what, how and why factors that affect global integration in Chinese MNEs, making this study exploratory and non-hypothesis driven. In short, it aims to accurately portray the characteristics and insights of a

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phenomenon that has yet to be studied to a degree sufficient to justify a quantitative approach (Chapman et al., 2008; Schmitt & Klimoski, 1991). A qualitative approach is also appropriate because it can go beyond the measurement of observable behaviour (the ‘what’), and explore the meaning and beliefs underlying action (the ‘why’ and ‘how’) and these are questions much in need of examination in the case of Chinese MNEs (Buckley & Chapman, 1996; Chapman et al., 2008; Marschan-Piekkari & Welch, 2004). Moreover a qualitative approach is desirable because it enhances researchers’ capacity to examine organizations and societies ‘‘on their own terms’’ (Boyacigiller & Adler, 1991: 281). In short, it aids scholarship in situations where random samples are lacking and/or respondents are unfamiliar with questionnaires as is commonly the case with the managers of Chinese MNEs (Marschan-Piekkari & Welch, 2004). Finally, a multiple case study design is suitable due to the complexity of the internationalisation process. This approach enables the researcher to contain the problem of representation, renders the evidence more persuasive, the analytical results more robust (Dimitratos et al., 2010; Herriott & Firestone, 1983) and permits the researcher to conduct multiple experiments applying ‘replication’ logic (Yin, 2003a). 3.2. Data collection Selecting organizations to be studied is one of the most difficult steps in case study research (Ghauri, 2004; Yin, 2003b). In this study, Chinese multinationals operating in Australia are examined. Australia is an appropriate choice because it was the most popular destination for Chinese outward FDI through 2005–2009 hosting $US29.8 billion, followed by the USA ($US 21.2), Iran ($US 10.7), Kazakhstan ($US 9.7), Britain ($US 8.2) and the Democratic Republic of the Congo ($US7.9) (Scissors, 2010). There are approximately 200 Chinese companies and registered agencies in Australia of which 30–40 conduct significant operations. They are concentrated in natural resource development, minerals processing, real estate and agriculture (CCCA, 2006). Although OECD countries have become the major destination for Chinese outward FDI there is a serious deficiency of research on Chinese MNEs that have invested in developed economies. Hence, a study of Chinese MNEs operating in Australia may not only capture the overall strategic decisions and behaviour of these firms but also help fill a broader research gap. The approach to data collection is designed to generate insights regarding how industry type, ownership form, entry mode strategies, and geographical location shape Chinese MNEs’ approach to global integration. A profile of the selected MNEs is presented in Table 3. The four industries representing the majority of Chinese MNEs operating in Australia are examined these being (a) energy/mining/resources, (b) finance/banking, (c) trading, and (d) manufacturing. Table 3 reveals the ownership characteristics of the case MNEs reflects the norm for Chinese multinationals in that the overwhelming majority are state owned enterprises (SOEs) (Rugman & Li, 2007; Zhang & Van Den Bulcke, 1996, Zhang et al., 2011). Case collection, however, did not ignore the existence of private Chinese multinationals and the legitimacy of private ownership in China’s economic transformation (Fang et al., 2008), hence one privately owned firm was included. Selection of firms was also informed by awareness that although Chinese MNEs commonly undertake joint ventures they generally prefer to establish wholly owned subsidiaries (WOS) (Cui & Jiang, 2009). To obtain qualitative data the researcher must be ‘‘on-site (where the programming is happening) observing, talking with people, and going through program records’’ (Patton, 1990: 244). In 2008 the first named author spent nearly five months on

Table 3 A profile of case Chinese MNEs. Case Chinese MNE

Ownership

Major product/service

Going globala

Location in Australia

Entry mode

Establishment method

Sector

MNE1 MNE2

State-owned State-owned

1990s 2000s

WA Qld

WOS WOS

Greenfield Greenfield

MNE3 MNE4

State-owned State-owned

1990s 1920s

Vic, NSW NSW, Vic, WA

WOS WOS

M&A Greenfield

MNE5

State-owned

2000s

SA, Qld

JV

M&A

MNE6

State-owned

2000s

Qld

JV

M&A

Oil and gas Industrial metals and mining Manufacturing Banking and financial service General metals and mining Power and energy

MNE7

State-owned

2000s

NSW,WA

JV

M&A

Electricity

MNE8

Private

Oil and gas Alumina and primary aluminum production Chemical materials Commercial banking, investment and insurance Gold, copper and other metals Power generation and energy service Electricity generation and service Coke related products

1990s

Qld, NSW

WOS

Greenfield

MNE9

State-owned

1970s

Vic, NSW

WOS

Greenfield

Mining and industrial manufacturing Trading

Machinery and equipment import and export

Notes: WOS: wholly owned subsidiary, M&A: merger and acquisition; and JV: joint venture. Location: identified by State in Australia, SA – South Australia, Vic – Victoria, NSW – New South Wales, Qld – Queensland, WA – Western Australia. a Date/period when the film internationalized its operations. No specific year is given due to research ethics to protect anonymity.

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Table 4 Chinese MNEs in Australia: the interviewees. Chinese MNEs

Company level

Interviewee code

Coding colour

Sector

MNE1

HQ Australian HQ Australian HQ Australian HQ Australian HQ Australian HQ Australian HQ Australian HQ Australian HQ Australian

HQ1, HQ2, HQ3, HQ4 AS1, AS2 HQ5 AS3a, AS4 HQ6 AS5a HQ7 AS6a HQ8 AS7 HQ9 AS8a HQ10 AS9 HQ11 AS10 HQ12 AS11

Black

Oil and gas

Yellow

Industrial metals and mining

Brown

Manufacturing

Purple

Banking and financial service

Orange

General metals and mining

Green

Power and energy

Light Blue

Electricity

Red

Mining and industrial manufacturing

Blue

Trading

MNE2 MNE3 MNE4 MNE5 MNE6 MNE7 MNE8 MNE9

subsidiaries subsidiaries subsidiaries subsidiaries subsidiaries subsidiaries subsidiaries subsidiaries subsidiaries

Notes: For reasons of confidentiality, both the firms and the interviewees are coded so as to guarantee anonymity. Chinese MNE: Chinese multinational enterprises. HQ: headquarters of the MNE. AS: Australian subsidiary. a The interviews were conducted in English as the interviewees are native English speakers and are from an Australian cultural background.

fieldwork. This was conducted in several cities in China (e.g., Beijing, Tianjin, Shanghai, and Taiyuan) and Australia (e.g., Brisbane and Melbourne) where the case MNEs’ headquarters and subsidiaries are located. As noted in the literature review, previous empirical studies have collected data from three sources: the firm as a whole, headquarters only, and subsidiaries only. Although the flexibility exists for examining factors that influence the degree of global integration, one level data collection may contain potential limitations. For example, after examining subsidiary managers’ perspectives to determine the underlying factors driving global integration, Luo (2002: 210) admitted ‘‘greater contributions to the field could be made by examining these issues from the perspective of both headquarters and subunits, looking at what factors are common at both perspectives and which are distinct in affecting integration’’. Therefore, although exploring the underlying factors affecting global integration can be done by any of the approaches present in the literature, combining observations from both subsidiary and headquarters is likely to provide a more comprehensive view and robust results. In this study, interviews were conducted at both headquarters in China and subsidiaries in Australia. During the data collection period, 23 semi-structured interviews were conducted at nine Chinese multinationals (see, the details in Table 4). All of the 23 interviewees were identified as executives who played important roles in strategic decision-making. Twelve of the interviewees were senior executives at headquarters level who held positions ranging from chairman, chief executive officer (CEOs), vice-general manager, chief financial officer (CFOs), chief operation officer (COO), to international project director or executive member of the board of directors. Of the eleven executives interviewed at the subsidiary level, nine held either the CEO or general manager position. The other two interviewees were project or departmental directors. All participants were interviewed either face-to-face, or through pre-arranged telephone interviews. The length of the interviews varied from 45 min to one and a half hours. Where the participants agreed, interviews were digitally recorded or notes were taken when interviews could not be recorded. Notes, including all the details discussed and any corresponding views expressed by the interviewees and impressions of the researcher were written up without delay. As the majority of interviews (19 of 23 interviews as noted in Table 4) were conducted in Mandarin, transcripts were recorded in this language and sent to interviewees for comment and feedback was incorporated into the transcripts. The latter were then translated into English and analysis was undertaken utilising the English transcripts. 4. Data analysis and findings 4.1. The analytical setting Data analysis consists of examining, categorizing, tabulating, testing or otherwise recombining all evidence to address the initial propositions of a study (Yin, 2003a). The process has been described as ‘‘an array of interpretative techniques which seek to describe, translate and otherwise come to terms with the meaning, not the frequency, of certain more or less naturally occurring phenomena in the social world’’ (Van Maanen, 1983: 9). Since the preliminary data analysis began with the data collection process, the analytical strategy of relying on theoretical orientation was primarily employed. This strategy guided the inductive procedure and followed the sequence: (a) coding frame (particularly, the colour coding method as illustrated in Table 3 and Appendix A); (b) category development; (c) identification of key themes; (d) summarizing of findings and explanation development.

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Following the interviews, all responses were grouped into four categories, namely, significant, moderate, not important and not applicable (N/A). For example, some key phases, such as ‘‘very important’’, ‘‘a significant issue’’, ‘‘yes, indeed’’, ‘‘very clear’’, ‘‘considerable’’ were categorized as evidence the interviewee rated the factor as ‘‘significant’’, while comments such as, ‘‘to some extent’’, ‘‘could be’’, ‘‘in some cases’’, ‘‘plays certain roles’’ are grouped as ‘‘moderate’’. Moreover, the difference between ‘‘not important’’ and ‘‘N/A’’ was explicitly distinguished. The following interviewee responses relating to centralization and factor exploitation at both headquarter and subsidiary levels of MNE9 and MNE4 serve as examples. 4.1.1. Centralization HQ12 from MNE9 at the HQ level commented: As you see, we are a big exporting corporation, and we have 36 major overseas subsidiaries. We couldn’t spend our energy on keeping an eye on so called ‘top-down’ management. If you ask whether global integration is an issue, yes, it is. However, in our enterprise, we look at each subsidiary’s real performance. So it is not important in terms of considering centralization as an issue for integration (Lines 158–162; Beijing, China). AS11 from MNE9 at the Australian subsidiary level believed: Not really, well, it is not important for global integration. For example, I’m not sure about other Chinese companies, but I have certainly had power to run our businesses in Australia. We are operating a ‘whole set equipment’ or ‘projectbased’ exporting business, so performance is important, not those bureaucratic things in this company. If any (business) opportunities relate to Australia, our top management will ask for my opinion (Lines 97–100; Melbourne, Australia). Based on these two MNE9 responses, centralization was deemed ‘not important’ at both headquarter and subsidiary level. 4.1.2. Factor exploitation HQ7 from MNE4 at HQ level explained: No, this is not relevant to our corporation. We never considered if we could find other business opportunities in Australia, such as entering the insurance industry. We can’t because we are limited by our business license. We can only undertake commercial banking. If local governments support us, we can only open branches in other locations, but still in commercial banking and finance (Lines 316–320; Beijing, China). AS6 from MNE4 at the Australian subsidiary level explained: We don’t even think of this one . . . neither integration nor responsiveness. Simply, we are not allowed (AS6: Lines 272– 273; Sydney, Australia). Based on these two MNE4 responses, factor exploitation was ranked as ‘N/A’ at both headquarter and subsidiary levels. Interviewee perceptions regarding factors relevant to integration decisions were categorized in an analysis table using the colour coding method (see Appendix A). However, as Appendix A is complex for reporting purposes, a simplified frequency table is presented as Table 5. 4.2. Factors consistent with the extant literature It was found that eleven factors: information flow, cost pressure, manufacturing scale, control flexibility, standardization, centralization, competitors’ action, resource flow, previous experience, HR and employment, and technology intensity are supported strongly by participants. At least 7 of 12 participants at the HQ level or 7 out of 11 at the subsidiary level reported these are very important factors driving their global integration and their rationales were largely consistent with the literature. For instance, opinions regarding the impact of cost pressure were consistent with explanations generated in prior studies (Chen & Cannice, 2006; Prahalad & Doz, 1987) as was the HR/employment factor (e.g., Gupta & Govindarajan, 2000; Bjo¨rkman et al., 2008). Of the latter, one interviewee observed: For global integration, employing people is the key, especially Chinese people acting in key roles, in order to ensure our decisions can be fully understood and executed (HQ3: Lines 80–82; Beijing, China). Likewise, when discussing information flow HQ7 (Lines 182–184; Beijing, China) explained: It is very significant for global integration. According to my understanding, information integration should include operation information, and business information, even information technology. The IT system is integrated in order to support our company’s businesses worldwide, rather than decentralized management. Within the same firm, AS6 (Lines 181–185; Sydney, Australia) commented: Information flow is a very important force. Once we are able to sufficiently share our information in our entire group, for example, if we know the financial risks faced by our branches in Luxembourg, we could think of whether a similar thing will happen to us [in Australia]. At least we would understand or anticipate our Headquarters’ next step on the

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Table 5 Frequency of factors affecting global integration. Factor

Chinese HQ level Significant

Standardization Centralization HR/employment Technology intensity Advertising intensity Manufacturing scale Transnationality Information flow Competitors’ action Country specific advantages (CSA) Premium positioning Quality reputation Extent of global competition Formalization Investment required Distribution Risk diversification Resource distinctiveness Resource flow Resource dependence Control flexibility Heterogeneity of executive group Previous experience Cost pressure Regional HQs’ role Factor exploitation

8 8 7 7 9 6 12 8

5 5 6 3 3 4 7 6 9 2 7 10 3 2

Australian subsidiary level Moderate

NI

3 2 5 3 4 2 4

1 2

3 7 3 4 4 1 2 4 3 3 3 3 2 9 4 2

1 5 1 2 3 7 3 4 4 2

NA

7 8 8 7

2 3

5

1

1

8 1 4 1 1 2 3, 2

3 1 1 1 1 5

Significant

8 5

8 5 10 7 2 5 5 2 6 5 5 4 7 7 7 5 7 10 3 1

Moderate

NI

3 1 2 3 4 3 1 1 3 3 4 2 6 3

1 2 1

2 4 2 3 2 3 6 1 1 1 2

NA

4

1 3

2

3

1 4 2 3

2 5 1

4 3 2 1 3 1 2 1

2 2 2 1 2

3 2 6

5 2

Notes: Significance rating shown on the basis of respondents’ perceptions. NI = not important; N/A = not applicable.

issue, so we feel we are closely tied together if there is a good information flow system incorporated into our organization. The foregoing responses capture how information flow ensures global integration is sustained, monitored and adjusted within a portfolio network. In other words, exchange of information and knowledge are recognised as important tools for facilitating interaction among subsidiaries and/or with international business partners (Jonsson & Lindbergh, 2010). Nine factors including transnationality, investment required, quality reputation, extent of global competition, distribution resource dependence, regional HQs’ role and risk diversification were identified as important by a minority of interviewees. Each was specified as such by 3–6 participants at either the HQ or subsidiary level which indicates that the views of managers provide only limited support for the extant literature. For example, HQ8 (Line: 143; Beijing, China) commented that transnationality is a significant factor because ‘‘it largely increases the difficulty of global integration.’’ Such understanding is consistent with the findings of Luo and Shenkar (2006) who claim elevated transnationality heightens the need to be globally integrated. However, HQ6 (Lines: 103–107; Beijing, China) from MNE3 argued: We don’t intend to be more globally integrated just because of the extent to which our businesses are internationally diversified. Transnationality is a natural consequence of the process of internationalisation. Some of our overseas subsidiaries were established for different purposes. We cannot simply integrate all overseas subsidiaries into our total system. With some subsidiaries, we only keep an eye on their operations and let them grow freely. Further, AS9 (Lines: 98–100; Beijing, China) did not think transnationality is relevant because ‘‘the internationalisation level of our company is not large. As I said before, we are attempting to buy more overseas plants or other resources, but our internationalisation is not greater than our competitors in the industry.’’ This quote is in line with Dunning’s (1993) investment development path (IDP) theory, that is, a firm’s outward direct investment position is subject to its level of economic development. By contrast with the twenty factors confirmed as having an impact on global integration, heterogeneity of executive group and factor exploitation were perceived to be significant by very few HQ or subsidiary level interviewees. Only three of the twenty-three commentators accepted a highly integrated network/intra-system could help them achieve factor exploitation benefits. One typical comment in this regard is as follows: Significantly, a couple of days ago I was thinking whether it would be a good idea to open a traditional Chinese teahouse chain in Australia. So you see it is very different from what we are doing at the moment, but no matter what, we need our board of directors’ support (AS10, Lines: 253–256; Melbourne, Australia)

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4.3. Factors not consistent with the extant literature The majority of the factors perceived as affecting global integration in the international business (IB) literature are evident in the qualitative results. However, factors not supported or supported only at the HQ or only at the subsidiary level need further examination. Firstly, advertising intensity and premium positioning were not deemed significant to global integration at either HQ or subsidiary level. Three studies, Birkinshaw and Morrison (1995); Kobrin (1991) and Venaik et al. (2000), assess these two factors as important to MNEs as they assist unified financial planning, marketing strategies and negotiation with local media. The disconnect with the findings of these studies might be due to the specific products and services provided by Chinese multinationals in Australia. For example, although the study included a manufacturing firm (MNE3), advertising intensity and premium positioning are not important because their products are produced for the industrial rather than the retail market. Secondly, factors such as country specific advantages (CSAs) and formalization do not emerge as significant factors at the HQ or subsidiary level. CSAs of Chinese multinationals have been discussed in prior studies (e.g., Rugman & Li, 2007; Rugman & Oh, 2008; Zhang et al., 2011), and it has been claimed that while China has relatively strong CSAs such as cheap labour and natural resource its multinationals have weak firm specific advantages (FSAs) such as well-known brand names, patents and advanced technology. However, the majority of executives interviewed believed CSAs were not important to their global integration or even their internationalisation. We suggest this may be because Chinese MNEs are at an early stage of globalization and hence lack the experience required to identify the importance of CSAs. For instance, HQ5 (MNE2) explained ‘‘in theory our country specific advantages might affect global integration; however I cannot identify a specific example. The influence might be intangible.’’ (Lines: 166–167; Beijing, China). Moreover, it is worth noting that China is still a developing country and its national competitiveness should not be exaggerated in contrast to advanced economies. For example, HQ1 explained: It is hard to say that Chinese firms can benefit from country specific advantages, such as cheap capital, natural resources, or labour issues. In some instances, yes, our government’s foreign exchange reserves are very high compared with other countries, which in theory can support our going global activities. In fact, although we are a big state-owned corporation this does not mean we have privileges or easy access to financial support. In terms of natural resource, no, the reason for seeking overseas oil and gas resource is that we [our country] simply do not have enough. The labour issue is complicated, unlike other manufacturing firms we can assign few skilled employees to project sites [in host countries] (Lines 127–132; Beijing, China). Within the same company (MNE1), HQ3 argued ‘‘according to our experience in some overseas merger and acquisition (M&A) cases, our weakness is a lack of home country specific advantages. If we were an American firm, the thing would have been different.... So I would suggest you need to discuss country disadvantage’’ (Lines 70–75; Shanghai, China). This quote provides qualitative support for Zhang et al. (2011) argument that Chinese state-owned multinationals are less likely to benefit from their ownership status in overseas acquisitions. At the subsidiary level, the majority of interviewees also failed to identify CSAs as a factor inducing integration but it is worth noting two executives disagreed with one observing: ‘‘I think Chinese companies do have CSAs. They know where they can reduce cost. They have rich experience with all kinds of power generation technology; it might be due to their geographic complexity’’ (AS8, Lines: 193–196). Although this quote is in line with prior studies, it does not confirm the significance of this factor at the cross enterprise level because none of the interviewees at the HQ level believed it to be a significant influence. To respond to Luo’s (2002) call, we only accept as significant factors that are perceived as important at both headquarters and subsidiaries level. A similar finding was manifest in relation to formalization. At the HQ level, the majority of interviewees did not think formalization is a factor driving their global integration; seven out of twelve treated it as ‘not important’ while one third thought it irrelevant. At the Australian subsidiary level the majority of interviewees did not identify this factor but one of the minority responses is noteworthy: Yes, we follow some rules, procedures, such as daily reporting; and introducing documented guidelines for operating special equipment, which are from our headquarters. I think it helps the company’s integration internationally (AS9, Lines 115–118). The above quote offers evidence that some Chinese MNE HQs do impose rules and procedures on their overseas subsidiaries, and this is inconsistent with existing assessments of Chinese firms (Cai, 1997; Leung, 1995). The majority of interviewees however, considered formalization a ‘‘small issue’’ (HQ3, Line: 135) or ‘‘part of routine operations’’ (AS11, Line: 133) and did not accept such activities drive global integration. Given the above, we suggest our findings justify excluding four factors – advertising intensity, premium positioning, country specific advantages (CSAs), and formalization from the list of factors identified in Table 4 as they are not supported at the HQ or subsidiary levels in our sample. In other words, they are not applicable to the case of Chinese MNEs operating in Australia. 4.4. Restructuring factors affecting global integration In addition to exploring which factors are perceived to have an impact on global integration in the context of Chinese multinationals, we need to know how these factors are viewed by senior managers. In our interviews, phrases and/or

D. Fan et al. / International Business Review 21 (2012) 13–26

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Table 6 A reclassification of factors affecting global integration.  Organizational factors            

Centralization Control flexibility HR and employment Heterogeneity of executive group Manufacturing scale Information flow Investment required Distribution Resource flow Previous experience Regional headquarters’ role Risk diversification

 Industrial factors     

Standardization Resource dependence Cost pressure Technology intensity Resource distinctiveness

 Environmental factors     

Competitors’ action Extent of global competition Transnationality Quality reputation Factor exploitation

words that appeared most frequently were – ‘‘relevant to our organization/company’’, ‘‘not relevant to this industry’’ and ‘‘it depends’’. These comments indicated that each organization was unique, that is, there were no instances of identical perceptions between even two MNEs, even in the case of firms in similar industries, such as MNE6 and MNE7. We found that organizational characteristics, industry classification and features, and sensitivity to business environment pressure greatly influence managerial perceptions. With global competition, for example, MNE 5, 8 and 9 in the mining and/or trading industries believe this factor strongly impacts the firm’s global integration, while MNE7 held it is not important because there is no significant relationship between global competition and whether it is necessary to integrate their electricity generation worldwide. Second, whether factors such as standardization and resource dependence are deemed important depends on the specificity of their organization or industry. Managers from case MNE 5 and 7 did not think standardization, including product/service standardization or standardizing business processing/operations, is important in their industry (e.g., general metals or electricity generation and service). Likewise, AS11 (Lines: 138–143; Melbourne, Australia) thought distribution a very important force because: Distribution plays an important role in our industry. This is part of business, so we are integrated. In our system, we must efficiently transfer engineering components from our domestic suppliers to our distribution centres . . . they are in charge of matching based on Australian companies’ requirements. We must be able to trace the shipment in the entire distribution process, which requires a highly integrated system. The foregoing quote captures the significance of distribution as a factor affecting global integration, but other interviewees (HQ7, HQ9) did not concur because in their view distribution is not relevant to their industries (Banking/Financial Services and Power/Energy). In addition, managers’ views were influenced by organizational factors such as investment requirements and the role of regional headquarters which depend on types of service/products provided, and the stage of the firm’s internationalisation. In addition to the use of the Venaik et al. (2004) distinction (pressures vs. responses) and viewing global integration from two intra-firm perspectives, HQs and subsidiary, this study offers another way of viewing factors affecting global integration by grouping them into three categories. We classify the 22 factors which proved relevant to the Chinese MNEs into one of the following: environmental, industrial or organizational, as shown in Table 6.

5. Discussion and conclusion By examining interviewees’ perceptions, it has been found that the majority of factors (twenty-two out of twenty-six) the IB literature argues affect the global integration of MNEs are relevant to Chinese firms operating outside China. However, the cross-level and multiple case study design has revealed that four factors – advertising intensity, premium positioning, country specific advantages (CSAs), formalization identified within the literature are not deemed significant by managers at either the HQ or subsidiary levels. In addition, our empirical evidence does not endorse the weighting the integration literature accords the role of entry mode (e.g., WOS vs. JV), ownership form and location selection. The study presented here is somewhat limited by a sample size of nine MNEs; hence its generalizability is limited. The richness of the data gathered from multiple case studies, though, has provided the opportunity to elaborate on the classification of factors. The insights generated by our study show the factors examined can be placed into environmental, industrial and organizational groupings. This finding is in line with Luo’s (2002) observation that global integration is determined by multilevel factors, spanning the firm, industry and socio-political levels, which can be further grouped into organizational and environmental factors. This reclassification also supports Kostova’s (1999) contextual model of the transfer of transnational organizational best practice within an MNE. According to the latter,

22

D. Fan et al. / International Business Review 21 (2012) 13–26

successful transfer is embedded in three contexts (or variables), namely, social, organizational and relational contexts. The social (environmental) and organizational factors have been identified as playing roles in globally integrated MNEs’ activities. In terms of the relational context, Kostova (1999) emphasizes the commitment of subsidiaries to their HQ, the sense of shared identity with HQ, trust in the parent and resource dependence from the parent company, which are also factors that influence how global integration is achieved. Moreover, the conceptual contribution of the reclassification offers another perspective that could be used for future studies in this field, that is the identification of strategic fit within the three groups of factors in order to determine whether higher or lower global integration is preferable for a particular MNE. Furthermore, this study extends quantitative studies that have clarified and assessed the underlying factors influencing global integration in MNEs with the use of cross-level and in-depth interviews. The findings contribute to our understanding in the IB field not least by incorporating perceived factors into an integrated model and by providing empirical evidence of factors affecting global integration in the context of MNEs from an emerging economy. The managerial implications of this study include the following: first, by examining factors that influence global integration of Chinese multinationals, the study reveals that several factors identified as significant by previous studies are not relevant to Chinese firms in Australia. For instance, advertising intensity and premium positioning are not deemed important by senior executives. Second, the study explores how senior management in Chinese multinationals envisions global integration and the extent to which factors are weighted. Our findings disclose that senior management in Chinese multinationals accord emphasis to the building of effective managerial channels (e.g., information flow, control flexibility, and resource flow) between HQ and subsidiaries, and to achieve managerial efficiency (e.g., cost reduction, standardization and economy of scale). Third, the present study does not distinguish between home country advantages and host country advantages, but the analysis of CSAs challenges Rugman and Li (2007) and Rugman and Oh (2008) who claim Chinese MNEs have strong CSAs (home country or China’s CSAs), such as low labour cost and government support in terms of policy and finance, but weak FSAs. In brief, the findings show Chinese MNEs do not accept they have strong CSAs or at least do not accept CSAs affect the degree of global integration of these firms. Moreover, based on in-depth interviews with senior executives of Chinese MNEs conducted at both HQ and Australian subsidiaries, the research findings indicate Chinese MNEs do have FSAs including leading technology in some fields. The evidence generated suggests that whether Chinese multinationals lack firm specific advantages depends on their industry’s classification, organizational development and the country in which they invest. For example, in the power generation and mining industries, Chinese firms already own world-leading electricity generation and ore refining technology. In Australia, both MNE6 and MNE7 transferred their technology after they entered the Australian market. Through a wellintegrated managerial system Chinese multinationals can quickly absorb or catch up with advanced technology after acquiring foreign assets. This is illustrated in the recognition by senior executives of technological intensity as an important factor affecting global integration. To some extent, ‘‘the success of internationalisation is dependent on the exploitation of these firm-specific assets’’ (Bobillo et al., 2010: 608). This finding not only discloses that Chinese multinationals have the managerial abilities needed to transfer know-how to advanced economies, and to obtain competitive advantage through global integration, but also implies that the competitors of Chinese MNEs in each industry should reassess the under-valued competitive advantages of Chinese multinationals rather than concentrating on the impact of China’s CSA. Nevertheless, some limitations of the study need to be addressed. One of the major constraints is that the examination is focused on managers’ perceptions of factors affecting global integration. Future studies could include multiple sources of data, such as documents and direct observations. The cross-level research design in this study only involves Chinese multinationals’ HQs and their Australian subsidiaries. In future studies, a comparison between HQs and their subsidiaries located in two or more countries could be considered. In so doing, underlying factors, such as risk diversification and factor exploitation can be better explored. A cross-level design is therefore warranted. In addition, the majority of case organizations in this study are large state-owned firms dominant within their industries. Future studies could involve more multinationals that are privately owned and/or small and medium in size, which in turn could improve our understanding of organizational factors and managers’ perceptions across the range of Chinese multinationals in regard to both environmental factors, and their foreignness in overseas markets.

Acknowledgements We are grateful to two anonymous reviewers and the editor of the International Business Review for their helpful and constructive advice. We also thank Professors Yadong Luo (The University of Miami) and Ron Edwards (Monash University) for their insightful comments on early versions. This research is supported by Postgraduate Publications Award (PPA) no. 20101848, Monash University, Australia.

Appendix A See Tables A1 and A2.

D. Fan et al. / International Business Review 21 (2012) 13–26

23

Table A1 The rationale of each factors affecting global integration in the IB literature. Factors

Rationale

Sources

Standardisation

MNEs can save costs through standardization; likewise one of the purposes of global integration is to minimize duplication Global integration can also be measured by the level of centralization, and the subsidiary’s autonomy in selling its products to local markets or through its parents’ integrated systems The function of human resource in organizations, such as MNEs, may facilitates the process of sharing vision, values and norms, building trust among members, and finally achieving the overall integration. The importance of technology as a determinant of transnational integration . . . is exacerbated by the increasing technological intensity of the production process itself. If an MNE that has single or several products wants to sell them in different countries through its local subsidiaries, the company may launch the same or similar advertisements across those countries based on level of advertising necessary in local market. Clearly, it is an integrated marketing activity Economies of scale can be gained from integrating operations across countries Transnationality maintains greater inter-unit integration to jointly exploit existing knowledge or explore new knowledge When an MNE is operating in a volatile environment, information flow within the network is fundamental because it leverages the extent of organizational control over subunits while facilitating the dispersal of existing resources and the creation of new bundles of knowledge. Firms are likely to perceive increasing pressures to integrate operations as competitors make strategic decisions to globalize their businesses. CSAs can be exploited only in an international context, and are maximized when comparative advantages for multiple activities can be linked across the value chain. Globally integrated companies can utilize or integrate quality reputation as a competitive advantage, especially if they lack any other specific source of advantage. MNEs with preference of higher global integration strategies will place greater emphasis on premium positioning. An MNE must highly integrate its global business activities in order to create competitive advantage when facing strong international competition Formalization is a common method of vertical coordination because it can specify appropriate behaviours from the view of top level management If the required cash outflow is very large, either the HQ can integrate internal financial abilities from some or all subsidiaries or the company can integrate its resources in order to seek external financial support. Any MNE subsidiary can be arrayed along two dimensions of knowledge flow, that is, the extent to which a subsidiary receives resource inflow from the rest of the system and the extent to which the subsidiary provides resource outflow to the rest of the corporation. How to respond to the concern of distribution is at the level of strategic plan because it potentially affects an MNE’s overall global integration. MNEs can achieve risk diversification by setting up collectively integrated yet individually differentiated strategic goals for specific foreign subsidiaries. If an MNE establishes a subsidiary that is to exploit factor endowments in a host country, the subsidiary usually acts as a platform for assembly-export or serves as sourcing-supply base for the MNE network, and the MNE’s competitive advantages can benefit from its integrated system. Protecting an MNE’s tacit knowledge and strategic resources requires higher degree of overall integration Resource dependence can facilitate overall integration because it enhances transaction cost economies for the system as a whole. The subsidiary itself is a complex organization, and if every action must be cleared with a higher level, reaction time is slowed and resources are wasted in endless communication If the organization’s own norms and values are well established, newcomers with different values may reduce efficiency and integration. If MNEs are not familiar with a host market, they need to integrate their overseas business through parental contributions of tacit knowledge and internalization of financial risks and operational uncertainties Global integration facilitates MNEs to save costs and achieve global efficiencies. One of regional headquarters’ roles is control and coordinate local operation subsidiaries within the region.

Dunning (1998)

Centralization

Human resource and employment Technological intensity

Advertising intensity

Manufacturing scale Transnationality Information flow

Competitors’ action Country specific advantages

Quality reputation

Premium positioning Extent of global competition Formalization Investment required

Resource flow

Distribution Risk diversification Factor exploitation

Resource distinctiveness Resource dependence Control flexibility

Heterogeneity of executive group Previous experience

Cost pressure Regional headquarters’ role

Rugman and Verbeke (2001) Gupta and Govindarajan (2000); Bjo¨rkman et al. (2008) Kobrin (1991)

Birkinshaw and Morrison (1995)

Porter (1986) Zander and Kogut (1995) Luo (2002)

Birkinshaw et al. (1995) Dunning (1981)

Yip (1989)

Johnson (1995) Roth and Morrison (1990) Bartol, Tein, & Sharma (2008) Venaik et al. (2000)

Luo (2002)

Cavusgil and Zou (1994) Luo (2002) Luo (2002)

Luo (2002) Dunning (1981) Cray (1984)

Murray (1989) Luo (2002)

Prahalad and Doz (1987) Paik and Sohn (2004)

24

Table A2 Perception analysis on factors affecting global integration (the colour coding method applied).

At HQ Level Factor Standardization Centralization HR& Employment Technology Intensity

Significant HQ1,HQ2, HQ4, HQ5, HQ6, HQ7, HQ9 ,HQ12

Moderate

HQ2,HQ4, HQ5, HQ6, HQ7, HQ8, HQ9,HQ10 HQ1, HQ3, HQ4, HQ6, HQ8,HQ9,HQ12 HQ1, HQ2, HQ3, HQ4, HQ6, HQ10, HQ12

Transnationality

Competitors’ Action

Premium Positioning

Extent of Global Competition

HQ2, HQ6, HQ8, HQ11, HQ12 HQ2, HQ5, HQ8, HQ9, HQ12

Formalization Investment Required Distribution Risk Diversification Resource Distinctiveness Resource Flow Resource Dependence Control Flexibility Heterogeneity of Execuve Group Previous Experience Cost Pressure Regional Headquarters’ role Factor Exploitaon

HQ3, HQ11

HQ1, HQ12

AS1,AS2, AS4, AS6, AS7, AS8, AS9, AS10

HQ7,HQ8, HQ11

HQ5, HQ9,

HQ2,HQ5, HQ7,HQ8,

HQ4, HQ11, HQ12

AS1, AS3, AS4, AS6, AS7, AS8 AS9, AS11 AS1,AS2,AS3, AS4, AS7, AS9, AS11 HQ1, HQ3, HQ6, HQ9,HQ10

HQ2, HQ4 HQ2,HQ7, HQ9, HQ10

HQ6,

HQ12

HQ9,

Country Specific Advantages (CSA)

Quality Reputation

HQ11

AS3, AS11

AS2,AS10

AS5

AS5, AS6, AS10

N&A

AS8 AS3,AS4,AS9, AS10

AS1,AS7,AS8

AS7, AS11

AS5,AS6, AS9

AS4, AS5,AS6, AS10

AS1, AS2, AS3, AS5, AS6,AS7,AS8,AS9 AS10, AS11

AS4

AS2,AS3, AS4, AS8, AS6, AS9, AS11

AS1, AS7, AS10

AS5,

HQ4, HQ5, HQ6, HQ7, HQ8, HQ9,HQ10

HQ1,HQ2,HQ3, HQ11, HQ12

AS8, AS9

AS2,AS3, AS4

AS1,AS6, AS11

AS1, AS5,AS10, AS11

AS6, AS7,

AS2,AS3,AS4, AS8,AS9

AS1,AS5,

AS2,AS4, AS10

AS9

AS1, AS11

AS7, AS8

HQ2, HQ4, HQ12

HQ7,

HQ1, HQ3, HQ5, HQ6, HQ8, HQ9, HQ10, HQ11

HQ1, HQ3, HQ4,HQ9,

HQ5, HQ7,

HQ10

HQ3,HQ6,HQ7,HQ11

HQ1,HQ4,HQ10

HQ5

HQ1,HQ2,HQ3,HQ4, HQ9 ,HQ10, HQ12

HQ5, HQ11, HQ12

HQ2,HQ4,HQ6, HQ10

HQ11

HQ5, HQ6, HQ8,

HQ2,HQ9, HQ12

HQ2,HQ4, HQ5, HQ12 HQ2, HQ4, HQ5, HQ6, HQ7, HQ8,HQ11

HQ7, HQ8,HQ11

HQ1,HQ2,HQ3, HQ4, HQ8,HQ11, HQ12 HQ2, HQ3, HQ4,HQ5, HQ6,HQ7, HQ8,HQ9,HQ10, HQ11

AS5

AS2, AS5, AS6, AS11, AS1, AS2, AS3, AS7, AS8, AS9, AS10, AS11 AS1, AS2, AS3, AS4, AS8

Not Important AS9

HQ5

HQ5,

HQ8,HQ12

Moderate AS7, AS10, AS11

HQ4, HQ7, HQ11

HQ1,HQ2,HQ3,HQ7, HQ8, HQ10

HQ1, HQ2, HQ3, HQ4, HQ11, HQ12 HQ1, HQ2, HQ3, HQ4, HQ5, HQ7, HQ8, HQ11, HQ12

Significant AS1,AS2, AS3, AS4, AS5, AS6, AS8

HQ6,HQ7, HQ8,HQ11

AS9, AS10

HQ4, HQ6, HQ9,

HQ12

AS3, AS4, AS5,AS6, AS7, AS10

HQ1, HQ3, HQ8, HQ9,

HQ7,

AS1, AS3, AS4, AS10, AS11

HQ1, HQ4 HQ1, HQ3, HQ6,

HQ3,HQ7, HQ10, HQ11 HQ9,HQ10

HQ3, HQ9,HQ10 HQ5, HQ7, HQ8 HQ9,HQ10 HQ2, HQ3, HQ4, HQ5, HQ6, HQ7, HQ9,HQ10, HQ11, HQ5, HQ6, HQ7 ,HQ10

AS3, AS6, AS7, AS8, AS11 AS1, AS2,AS3, AS5, AS8

HQ1, HQ12

HQ6,

HQ1

HQ5, HQ7, HQ12

HQ2

HQ1, HQ3, HQ4,HQ6, HQ8,HQ9,HQ10,HQ11

HQ6,HQ11

HQ2, HQ5, HQ8, HQ9, HQ10

HQ1, HQ3, HQ4, HQ7,HQ12

AS2, AS4, AS6,

AS3,

AS5,

AS9, AS11

AS5,AS7,

AS6, AS8

AS1,AS3, AS4, AS6, AS7,

AS2,AS5,AS10, AS11

AS9

AS8

AS3, AS4,AS6, AS7, AS1, AS3, AS4, AS6, AS7, AS9, AS10

AS10, AS11

AS1,AS2,AS5,

AS8, AS9

AS2,AS5, AS8

AS11

AS2,AS5,

AS1,AS8

AS1,AS2,AS3, AS7, AS9, AS10, AS11 AS1, AS2,AS3, AS4, AS5,AS6, AS7, AS8, AS10, AS11

HQ1, HQ12

AS4,AS6, AS7, AS9, AS10, AS11

AS2,AS9

AS1,AS3, AS5,AS7, AS10

HQ9

AS5,AS7,

AS1,AS2,AS8

AS3, AS4, AS6, AS7, AS9, AS10, AS11 AS1,AS2,AS3, AS4, AS6, AS7, AS10

HQ6, HQ9,HQ10

AS10,

AS3, AS4, AS11

AS10

AS5, AS9, AS11

AS8

AS2,AS4, AS6, AS8, AS9, AS11

AS4

AS5,AS6, AS8

AS9

AS6,

AS1,AS2,

AS5, AS7,AS8, AS9,AS10

AS2, AS9

AS1,AS3,AS4, AS5,AS7,AS11

AS6, AS8

Notes: Significance rating shown is on the basis of respondents’ perceptions. N/A = not applicable. One colour is assigned to one case organization, which is for clearly indicating the interviewees from the same Chinese MNE.

D. Fan et al. / International Business Review 21 (2012) 13–26

Information Flow

HQ1,HQ3, HQ5, HQ6, HQ7, HQ8,HQ9,HQ10,HQ11,HQ12 HQ1, HQ3, HQ4, HQ5, HQ8, HQ11 HQ1, HQ2, HQ3, HQ4, HQ5, HQ6,HQ7,HQ8, HQ10, HQ11, HQ12 HQ1, HQ2, HQ3, HQ6, HQ8, HQ9,HQ10, HQ12

HQ3, HQ8, HQ10

N&A

HQ2,HQ5, HQ7, HQ10, HQ11

Advertisement Intensity Manufacturing Scale

At Australian Subsidiaries Level Not Important

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