Introduction to International Business Review on Harvard Business
Review CHINA VS THE WORLD
Whose Technology Is It? by Thomas M. Hout and Pankaj Ghemawat, December 2010
In this review on the article “CHINA VS THE WORLD – Whose Technology Is It? ” by Thomas M. Hout and Pankaj Ghemawat (Harvard Business Review, December 2010, Pages 95-103), the main purpose is to critical evaluate the authors’ opinions and statements. The above-mentioned article deals with the subject of China being one of the biggest and also fastest growing economies in the world and the way China tries to acquire western technologies.
Emerging markets are a great chance for national-, but also for multinational enterprises (MNE’s) to increase their sales, so many MNE’s are interested to open up a business in the Chinese market. The Chinese government came up with many rules and regulations for foreign companies during the last years, for instance to cooperate with a domestic Chinese company (e. g. in a joint venture) and also share the company’s technology with their partner.
Those Chinese companies are often state-owned or at least work closely together with the Chinese state, so the Chinese government achieves those western technologies. Most companies have to get along with those rules and regulations, otherwise they weren’t be able to open up a business in this huge market. We claim that the purpose of the text is to convince the reader that China has a major influence on domestic companies, including native enterprises as well as foreign businesses which operate in China.
Thomas M.Hout and Pankaj Ghemawat state that the Chinese government tries to improve Chinese technology. The two authors emphasize on the misuse of the governmental power by interfering in the economy and giving Chinese companies a competitive edge towards foreign organizations. This is achieved by mandatory cooperation between foreign- and native companies, in which the Chinese companies always have the leadership by owning at least 51% share of this cooperation. Another way to achieve this competitive edge is to give out subsidies or a reduction of taxes just for Chinese companies.
Thomas M. Hout and Pankaj Ghemawat judge this as being not a fair competition and favor a reduction of interference. By referring to data of several statistics, the authors demonstrate the major spendings on Research & Development funding being done by the Chinese government, in order to create this advantage which they seem to think of being false. Including different examples of firms facing operational difficulties and loss of knowledge, Thomas M. Hout and Pankaj Ghemawat provide convincing background information that governmental regulations harm foreign companies.
We complain that the authors do not especially highlight the aspect of companies not choosing China as a market and we would have liked them to discuss this additionally as an oppositional aspect of their article. The connection the reader can draw between this article and the issue we are dealing with in the course of “Introduction to International Business” is how a company cross-borders and how it has to deal with the local differences compared to the experienced ones in the country of origin.
It shows, that even in this globalized world business is not everywhere the same. The Chinese government takes advantage of their important position in the world economy, but sooner or later this behavior will cause even bigger tensions between Chinese- and Western governments, which will lead to a big crisis, if China remains on its attitude towards foreign enterprises. One the one hand you could argue, that China’s government just tries to protect their domestic economy, because foreign enterprises dominate for instance the major part of the Chinese high-tech sector.
But on the other hand, if you belief in western values and the free market economy and you can’t tolerate such behavior. We think the Chinese socialism plays a role in this disagreement, but we are not sure if this is the only reason for this behavior or just an excuse. According to the questions “Whose technology is it? ”, asked in the title of the Harvard Business Review, our answer is, that the technologies developed in China are a mixture of Chinese and Western technologies, but that China weren’t be able to develop such technologies on their own in this short period of time.
- [ 1 ]. Harvard Business Review, December 2010, “China vs. the World – whose Technology Is It? ” Page 96
- [ 2 ]. Harvard Business Review, December 2010, “China vs. the World – whose Technology Is It? ” Page 99
- [ 3 ]. Harvard Business Review, December 2010, “China vs. the World – whose Technology Is It? ” Page 100
- [ 4 ]. Harvard Business Review, December 2010, “China vs. the World – whose Technology Is It? ” Page 101
- [ 5 ]. Harvard Business Review, December 2010, “China vs. the World – whose Technology Is It? ” Page 97