SHRM

Dynamic strategic human resources in international management:

Preliminary results from cases of Spanish firms in China

 

 

Abstract:

 

This paper analyses the preliminary results from cases of Spanish firms in China, to further understanding of the dynamic strategic human resources process in international business. Employing data-driven thematic analysis process in a qualitative case study, the preliminary findings from three case sites are presented and a dynamic international strategic human resource model proposed. Three major clusters were identified in our analysis from four sub samples (two firms that were successful, one unsuccessful and one moderator organization): 1. Vision, strategy and objectives (three codes with three themes each); 2. Strategic human resources (four codes with ten themes); and 3. International business practices (three codes with nine themes). emerged.  Inter-rater reliability was established at 85% and accepted as it was above the standard of 75%. The constructed model using the three clusters that emerged from the analysis illustrates the interaction between strategy and human resources in organization for their international management, especially under the circumstance of turbulent emerging markets such as China. The model, once validated with our remaining samples, will be explored in further research on sustainable competitiveness of a firm in Chinese context.

(184 words)

 

Key words: Strategic human resources, learning, international business, Spain, China

 

 

 

Dynamic strategic human resources in international management:

Preliminary results from cases of Spanish firms in China

 

 

 “..故经之以五事, 校之以计而索其情: 一曰道,二曰天,三曰地,四曰将,五曰法.”

–孙子  Sun Zi

 

“…The essence of innovation is to recreate the world according to a particular vision or ideal. It is a way of behaving, indeed a way of being, in which everyone is a knowledge worker, an entrepreneur. This approach puts knowledge creation at the very centre of a company’s human resources strategy.”

 –Nonaka, I.

 

Introduction:

 

China’s economic development and global business impact has been recently identified as significant and of interest to practitioners and organizational researchers. Some researchers have argued this rapid rate of development has been impeded by the lack of systematic knowledge about managing in highly variable dynamic contexts. In China, not only is competition intensifying, but the rules regulating competition are also changing. These conditions raise fundamental economic, sociological, and organizational questions about management during periods of transition (Tsui, Schoonhoven, Meyer, Lau & Milkovich, 2004: 134). In a recent report by Economía Exterior (2004), China’s market is described as the boom of the Asian giant. However, only a few managerial perspectives have been highlighted offering little theoretical, empirical and practical insights to allow effective learning for executives and organizations interested in this booming market. This paper focuses on presenting a preliminary empirically derived model through a qualitative methodology that offer practical insights and bridge strategy and human resource management within the Chinese context.

 

Numerous researches testify to this emergent interest in China although mostly employing macro economic models, highlighting political and legal issues, or associating the results with applied economics and managerial strategy. For example, Anderson (2004) argues China’s economy would maintain its dynamic growth; Boisot & Child (1996) explains China’s economic change in network capitalism; Khanna et al. (2005) proposes three strategy choices to fit emerging market by mapping institutional context and composite index where China was one of the key regions studied; Peters (2005) compares and contrasts the economic models and performance of India and China based on endogenous growth and foreign direct investment; Barciela’s (2004) analyses of why Spanish firms were still distant from China; Soler’s (2002) efforts to explain Spanish experience in investing in Asia with three cases of Catalan firms in China; and Liu & Shi (2003) suggesting strategy of transnational corporations for Chinese enterprises based on macro, mid and micro environmental analysis. During the 2^nd Forum Spain-China held in November 2004 in Barcelona, difficulties in Chinese management at firm level were raised as critical and that there is no obvious solution proposed for managerial practitioners (Casa Asia, 2004). One of the principal reasons for this fact is the lack of empirical studies even though some scholars have highlighted this concern in reputable journals such as the globalization of China’s brands (Zeng & Williamson, 2003); China’s negotiation styles and practices (Graham & Lam, 2003); studying Japanese firms in China and Taiwan (Takeuchi, Wakabyashi & Chen, 2003); western multinationals in China (Li, 2003; Braun & Warnern, 2002): and the experience of Spanish executives in China (Fernandez, 2003).

 

Despite the burgeoning of research involving China, one of the most important, yet least appreciated developments in the world affairs (especially in recent years) has been the dramatic growth in ties between China and Europe (Shambaugh, 2004). As it is indicative that Spain could catalyze future solid relationships between Europe and China due to its active presence in European Union and emerging business partnerships in China, a comparison between successful and unsuccessful Spanish firms in China with the intent to surface individual and organizational practices that would offer both practical and theoretical insights to further this stream of research.

 

According to Economía Exterior (2004), 1978 marked the milestone for Chinese economy when Deng designed the reform policies and open economy. Since then, it has been in the process of transition from a planned economy to a market economy. Today, China’s economy is more market driven than planned with 95% of industrial prices based on market. About 25 years ago, the production sector was almost 100% state owned. Presently, this has changed dramatically: a third is state owned, another third through private ownership, and the final third through cooperative ownership or other formulations. Hence, researchers such as Tsui et al. (2004) legitimates Chinese context for management research, providing richness in changing environment for exploring potential alternative business models; and Fanjul (2004) considers that China may be a model of globalization that could serve as reference for many developing countries. China’s opening commerce, the attraction of foreign capital and ongoing reformation are the key factors of its dynamism – its resulting context positively effecting post-industrial, industrial and emerging countries. Therefore, while globalization has been often criticized for its threat, it could also provide an opportunity for growth and diversification for both large multinationals enterprises (MNEs) and Small and Medium Enterprises (SMEs) (i.e. Streeten, 2001; Grosse, 2000; Bambrick, 2003; Stonehouse, Hamill, Campbell & Purdie, 2000; Narula, 2004; Saniz, 2003).  

 

As Foreign Direct Investment (FDI) in China is still increasing although it has been top ranked since 2002 according to the data from OECD and China Commerce Ministry, in spite of controversial results of investments (i.e. Sanmartin, 2005), the particularity of Spanish firms in China and their relatively short history calls more attention of the recent boom of doing business in China and justifies the attraction of the interests and the willingness of such bilateral country collaborations. Therefore, the purpose of this study focuses on this particular interest in the case of Spanish firms’ internationalization in China – what is its current state and to explore why and how some firms have achieved better performances than others. The paper starts with a brief description of the current state of Spanish firms’ internationalization in China as contextual information; then the research objective and theoretical perspectives are presented, followed by the research method and preliminary findings; finally the discussion of the preliminary findings are conducted with a conclusion validation and further exploration of this research stream as part of the research agenda.

 

Research Context:

 

As enterprises are the major drivers of economy and economy that for other developments, a glance of Spanish firms in China from these two lenses would situate us better in the current research context. The interests of Spain in China have principally been economic in nature and less developed compared with other aspects (e.g., cultural). Although the importance of Spanish presence and its consequences in China during last quarter of century has been well received and acknowledged in the Spanish business world, the actual lack of Spanish presence in this potential market compared to other countries is affecting positive bi-lateral collaboration in terms of practical business development and implementation between these two countries. Bregolat (2004) indicates this fact: there are merely some 500 Spaniards expatriate residents in China, compared with more than 5,000 German, British or French; some 200 Spanish firms, compared with thousands from other principal countries of Europe. The absence of big Spanish companies in China is another factor that contributes to this unappreciated situation, even though Telefónica and Accciona, two principal Spanish companies bought some share in Chinese enterprises recently. Furthermore, Spanish exportation to China is only 0.6% of the total exportation of Spain, and Spanish investment in China is only 0.05% of the total FDI in China.

 

The landmark for Spain and China was their diplomatic relations established in 1973. Since then, the economic and commercial relationship has increased significantly. Although the Tiananmen incident in 1989 provoked many countries to impose economic penalty for China, Spain maintained the mixed commission of Economic Affairs and Credits to China thanks to Mr. Francisco Fernández Ordóñez (the first Foreign Affair Minister in European Economic Community (EEC) that visited China after the incident). Maintaining this relationship caused several Spanish enterprises to start investing in China since 1980s, among them Técnicas Reunidas, ALSA Group, and JoyCo Group.

 

In 2000, the Plan Marco Asia Pacific of Spanish government states: The insufficient level of the presence in Asia is unsustainable nowadays and clearly contrary to the political, economic and social interests of today’s Spain. In 2005, the governmental Chinese Plan assigns 690 million euros to promote Spanish business relationship with China to boost its presence in China. Spain recognizes China as an important economic region in the world as China has been the principal receptor of Aid Found for Development (FAD) in last years according to Plan Marco Asia Pacific in 2002; China entrance into World Trade Organization (WTO) in December 2001; and China becoming the biggest Asian market for Spain, ahead of Japan. This recent investment boom in China is shown in Table 1, which indicates that 41.27% of the whole accumulated Spanish investment in China occurred in 2002 and 2003. As can be seen, Spanish investments in China is still much below the position that Spanish economy holds in the global scale.

 

 

 

 

 

 

 

 

 

 

 

Serra (2004) explains this comparative weak presence of Spanish firms’ in China due to the following characteristics: 1) The actual presence of Spanish firms in China is predominated by SMEs causing them to face the challenges and the difficulties associated with insufficient resources both in term of financial and human resources; 2) The principal Spanish firms with high level international presence are in the service sector which China just started opening very recently to foreign investment. Hence, these big Spanish service companies like Banco Popular (one of the principal Spanish banks) settled their representative offices in Hong Kong and Shanghai only recently; 3) compared historically with what other European countries that entered China’s market before 1949, Spanish presence in most parts of Asia is still very young opting to invest in other regions in the world, especially in Latin America, for the geographical and cultural proximity. This third characteristic is perhaps the principal explanation for the lack of experience, communication and networking for Spanish business development in China. Spanish investment in China has gone through a sharp learning curve. From a business perspective, the need to integrate Chinese market is viewed as important but difficulties due to distance, lack of knowledge of the Chinese market, its operation, its laws, and high cost in the negotiation processes –all obstacles specially relevant in the case of SMEs (Fanjul, 2003) – is generating a crucial gap that should be filled. 

 

A creative formula would be needed for Spanish firms to adapt to the circumstances, explore and facilitate access to business opportunities offered by China. Soler (2003) suggests training of human capital, cultural exchanges and ‘country image’, financial capital, commercial and investment promotion, exchange of persons in the scientific and tourism fields, diplomats and institutions as possible steps for a future action plan. Employing Serra’s (2004) perspective that those who are competing in the real market are firms and not the state, two aspects need to be studied: 1) education of experts and executives specialized in Spanish-Chinese business (including research, training, and exchange of personnel, with emphasis on cross-cultural management); and 2) integrated institutional support program (including promotional events, financial assistance and diplomatic supports for commercial and investment opportunities).

 

Research questions and propositions:

 

Theories and practice developed by management scholars are primarily derived from observations of formal organizations in highly developed western economies, specially in the United States, Canada and Western Europe (Boyacigiller & Adler, 1991).  Tsui et al. (2004: 134) argue that findings from such a vantage point would not necessarily be transferable to understand management and organizations in economies that are less developed or those whose economies are in the process of emerging to global competition or to explain and predict firm behavior when the transition from a centrally planned economy to a market economy continuously challenges the political system governing the economy that require frequent policy adjustments to create a changing set of conditions to which firm must adapt.

 

Research on firms in China has been on the upswing in order to develop a better understanding of nationalistic trends outside of the western approaches. The interface and dynamical interactions between firms set in a different nationalistic context extends beyond this emergent research trend. This research offers the latter approach in research to look at Spanish firms in China.  Spanish firms have their own characteristics in the process of internationalization, especially in China. Folguera (2000) argues that Spanish firms are very different in their internationalization process due to its different historical economic development process from other European countries or developed countries. Dolan, Knoppen, Diez & Bell (2004) in their study of values and culture, also argue that Spanish companies have their particularities in organizational culture and management style from other western management. Therefore, Spanish firms need to break away from the mimesis of those used by other western countries in a context that has very different economic and managerial characteristics (Serra, 2004).

 

Given China’s unique social, cultural, historical and political mosaic, Tsui et al. (2004) raise the question that one might expect different structural or dynamic characteristics of firms when compared to organizations in developed western economies rather than applying largely existing paradigms to understand firm and individual behavior in the Chinese context. The review of the current state of Spanish firm’s in China, shows evidence that there is high enthusiasm in incorporating China into corporative strategic plan, and many firms are demonstrating their interests in increasing their presence there. As Tsui et al. (2004) state, China offers a unique context with useful blend of historical, political, cultural, social, and juridical changes which is rare in contemporary societies.

 

In spite of high market competition in the world, Nueno (2004) considers that there are still needs of all kind of products and China continues to increase with demand in all areas with many opportunities.  In competing in China’s market, many times the strength of local competencies haven’t been taken into consideration compared with international well known firms till now, when emerging Chinese brands like Haier, Lenovo and Huawei (Zeng & Williamson, 2003) appear frequently in international business newspapers. While many times articles stress on the low cost of production, some scholars go further to excavate more sustainable elements. For instance, Chen (2002: 118), after many years of study and following up the case of Lenovo, one of most successful Chinese firms, points out that two main factors for its success in the global market are its strategy and human resources. Also, Levono’s corporate culture and assessment system contribute to its sustainable development. Meanwhile, Wang & Kang (2002) and Tang (2004) described the case of Haier and Huawei as well based on management of their people. Having spent a few years observing some Spanish firms in China, using these two factors as the key issues from which we derive our propositions would be a feasible departure point. Therefore, this research explores a managerial model focused on strategy and human resources to achieve better firm performance in an emerging economy under this specific Spanish - Chinese context. Two research questions formulate this study: (Q1) Why do some China-based Spanish subsidiaries perform better than others? (Q2) How do strategy and human resource management intervene in some China-based Spanish subsidiaries to perform better? Some of the propositions for this research are: (P1) Better firm performance is based on better strategic human resource management (the interaction of human resources and strategic management). (P2) The relationship between strategic management and human resource management is interactive and bi-directional. (P3) Strategic human resource management needs to be viewed holistically including different stakeholders (Freeman, 1984; Freeman & McVea, 2001) instead of narrow angles of view, especially in an emerging international market like China. 

 

Theoretical Perspectives:

 

According to Arias (2004), the practices of an entry strategy in China requires two basic elements: resources (both financial and human resources) and an ample knowledge with detailed objectives in this market. In other words, firms have to dedicate sufficient resources, be well informed about the market and tendency, and overcome the myth of China, which is the superficial reality that prevents firms taking adequately advantages of abundant commercial opportunities in China. Suggested by many experts, it is necessary to study the determinants of demand, the cost structure, the distribution channel, the competitors’ activities and the legal situation independent of which kind of product. However, the perplexing China’s market is far more complex than applying traditional internationalization models or basic design for market entry model. All the above analysis is necessary but not sufficient for obtaining sustainable competitiveness in such a dynamic and changeable market like China. Some professionals and executives are preoccupied that there seems to be no sustainable ‘strategy’ for this market, what was designed three years ago may be completely obsolete today (COPCA, 2004).

 

Scholars like Johanson & Vahlne (2003), already state that some case studies of international ventures show that the traditional internationalization models and others pertaining to the internationalization process of the firm do not capture some important phenomena in the modern international business world. Meanwhile, other scholars have been studying the new internationalization phenomena from different angles such as timing, stages, strategic, learning and network approaches. For example, Malhotra, Ulgado and Agarwal (2003) studied the different entry modes; Chang (1995) the international expansion strategy of Japanese firms; Luo and Peng (1999) learning in international economy; Li (1995) strategic choices in international market; Barkema, Bell & Pennings (1996) in foreign entry, cultural barriers and learning; and Luo’s (1999) study on time based international expansion.  

 

As this research proposal is about studying time specific for current contemporary issues, stage specific for MNEs with physical installation - subsidiary in another country - and market specific for Spanish firms in China, the internationalization theory for the study needs to imply many aspects such as strategy, culture, learning and others which may emerge during the data collection process. In order to depart from some reference point, some additional basic reviewed literature is presented in this part. In strategic management field, Barney (1991) provokes further debate of ‘what is strategy’ (Porter, 1996) in last decade, and Resources Based View of the firm (RBV) becomes a legitimate research field since then (Barney, 2001). However, although RBV has been agreed as the most essential issue for sustainable competitive advantage for firm, which resources and how resources contribute to firm performance and hereby sustain competitive advantage remains in black box for exploration. Based on Grant’s (2005) classification of the firm’s resources, human resources reveals to be important among other firm’s resources to create organizational capability and hereby to contribute to Sustainable Competitive Advantages. Nevertheless, despite of all agreement on this importance, the correlation between human resources and firm performance is not certain.

 

Wright, Dunford & Snell (2001) provide a preliminary framework, by suggesting core competence, dynamic capabilities and knowledge as a bridge between the emphasis in the strategy literature on who provides sources of competitive advantage and the focus in the HRM literature on the process of attraction, development, motivation and retention of people. It is true that the strategic importance to a firm’s success with the emphasis on people has contributed to the interaction and convergence of strategy and HRM issues, and HRM systems have been developed over time to be unique to contribute to the creation of specific human capital skills, but most of arguments stay vague due to the lack of empirical finding; or the emphasis on knowledge weakens the attention on their embedded object: “knowledge worker” (Nonaka, 1994).

 

Khanna (2004) also argues that multinationals may worry that their intangible assets, the source of their competitive advantage, will walk out the door with the employees. From the above approaches, it has been observed that the “people factor” albeit its importance throughout the internationalization process is missing or poorly treated in the latter. While the human factor is recognized by business as an important asset in contributing to firms’ effectiveness, it still remains as the “poor kid on the block” in its parallel theoretical developments applied to the issues of international strategic human resource perspective. By and large, numerous scholars conclude that matters of human resources management in its strategic level need to be addressed.

 

Under the domain of Strategic human resource management (SHRM), theories emerged in 1980s in responding to the uncertainty in human resource management (HRM). The term of SHRM intends to bridge HRM and strategic management, to justify the contribution of HRM to firm performance. It has amply tested the correlation between human resource management and firm performance, even though the recent articles in the field still show the need of advanced theoretical framework (Wright, 2003).

 

The main argument is that there is no clear definition generally accepted for SHRM yet and the definition of SHRM has varied according to different schools of thoughts (Dolan, Valle, Jackson & Schuler, 2003). Some have concerned that as an extension of Human Resource Planning; and others have seen that as the way for companies to have competitive advantages in front of the human resource problems that are not well-defined and have a difficult solution (Mirvis, 1985; Ulrich, 1987; Rothwell, Prescott & Taylor 1998). Further more, although it has been widely accepted that there are three perspectives in Strategic HR research field: universal, contingency and configurational, recognized or not by the author (i.e. Delery & Doty, 1996; Becker & Gerhart, 1996), the recent review of the SHRM literature exhibits a lack of appreciation of the core underlying issues, especially on the exploration of strategic aspects for linking HR to firm performance. Based on the increasing concern for interaction effects and system-level characteristics, Colbert (2004) inputs the complexity perspective into the previous perspectives as a sequential stage in Strategic HRM theorization, and suggests exploring propositions by selecting comparative companies and collect qualitative data on their respective HR architectural schemes, along with supporting documentation.

 

It has also been widely argued that theoretical framework differ substantially from USA and European perspectives (i.e. Boxall & Purcell, 2003) and whether these theories could be applicable in Chinese context is very questionable (Tsui et al, 2004). Most researchers in the United States adopt an implicitly managerialist approach, focusing on how HR can benefit shareholders, while researchers in Europe emphasize the importance of balancing the interests of multiple stakeholders such as employees, unions, governments and society. The European view tends to emphasize the importance of context; and the US view, “best practice”. No agreed theoretical framework in the research of the domain, very different perspectives in different contexts, and the lack of previous qualitative studies, call for in-depth view of the firm for the context of Spanish firms in China.

 

Three models respectively from USA, Europe and Asian context have been identified as reference points for an open ended qualitative research design. The identified model from US is of Briscoe & Schuler (2004: 38) – Strategic IHRM: matching HRM to IB strategy, which places SHRM into the international context and intents to integrate various approaches for the development of international firms. The model displays that around three issues: International strategy, international employee type, and human resource policies and practices. The essential distinction of international business strategy is based on three factors: the degree of internationalization and geographic scope; the basic choices by a firm for entry into international business, and the extent of global mind-set or global orientation of the firm and its executives. All these three issues create important perspectives for viewing the development of IHRM, itself, and its strategic ties to the MNEs. According to the defined structure of the research proposal, it concerns issues in the most advanced stage of international strategy: foreign subsidiary and joint ventures with principal control from Spanish firms (more than 51% of shares), which could contain mayor complexity to allow a potential insight of the managerial view of firm. The model of Brewster & Hegewish (1994) – Human resources management in global business environment, represents more European viewpoint, demonstrating a holistic interest of organization. This model gives a horizontal HR structure for the unit of interviews – different stakeholders of organization. This two-dimension structure also inserts firms inside of the contextual environment such as the sector and global business. Finally, Khatri & Budhwar (2001), based on the review of SHRM literature, identify five HR issues through an Asian context to answer the question of how to manage HR strategically: organizational structure, organizational culture, HR competencies, HR strategy, and HR outsourcing. For them, these five elements are the key for SHRM in Asian context.

 

      Nevertheless, these three models keep the SHRM inside of black box and maintain the insight dynamics invisible. For instance, Briscoe & Schuler (2004) distinguish the different roles of HR in different categories and specially the role of the HR department shifts at the level of the global firm. Hence, the complicity of HRM in the global business is stated but how to correlate with strategy and firm performance is unclear. Therefore, although these three approaches are the underlying theoretical framework for the research proposal, they will serve as guidance through the study rather than rigid frame, with an open-ended research design to testify them.

 

The definition of firm performance as dependent variable is Based on what is used by Bird & Beechler (1995) in assessing U.S.-based Japanese subsidiaries. Since the angle of analysis is from strategy and human resources, both HR performance and firm performance are needed to be indicated for the assessment of China-based Spanish subsidiary’s performance. These HRM-related outcome measures are: 1) levels of employee morale, 2) level of average employee tenure, 3) rates of employee promotion, and 4) rates of employee turnover; These firm performance measures are: 5) profits, 6) sales growth, 7) level of performance on parent-prescribed objectives, 8) overall performance, and 9) relative performance to their competitors. Henderson (in Stern & Stalk, 1998: 179) was convinced that the measurements linked only to the short-term profitability of a business would damage its long-term performance. Therefore, the performance measurement employed must be aligned with the strategy: first, information (costs, revenue, cash flow, market share, etc.) is collected in a way that allows progress toward strategic goals to be evaluated objectively; second, the timing of performance evaluation must match the time horizon of the strategy; finally, performance measures need to be evaluated regularly to ensure that are still creating incentives that buttress the strategy. Based on that suggestion and in accordance with Kaplan & Norton’s (1996) view of strategic financial planning, one more measure is added to measure firm performance: the level of achievement of the target established in the initial strategy planning, which could be in financial term, or commercial term, or others, depending on the original strategic definition of the firm.

 

Research Method:

 

The over-complexity and rhetoric-based theory of strategic HR demands a simple empirical-study-based framework to catch the actual international phenomenon as suggested by Johanson & Vahlne (2003). This thought drives to the attempt to approach a theoretical framework based on qualitative empirical study, intending to define SHR simply for the field research, according to the suggestion of Markus (2004) that most principal theories are simple. With the establishment of the framework, the further research can continue to explore the “black box” inside of firm and to identify how strategy and human resource interact to sustain competitive advantages and therefore to achieve better firm performance. According to Khatri & Budhwar (2001), Boxall (1996) and Becker & Gerhart (1996), using quantitative methods, most of current field studies provide varied results in diverse papers: some confirm the positive correlation between SHRM and firm performance, while others merely discover any; Researchers report a number of limitations with the existing SHRM research, among others, it especially lacks in-depth qualitative studies.

 

Concluded from previous statements and corresponding the research objective, which pretends to understand and approach insights of SHR issues, and explore why and how some China-based Spanish subsidiaries perform better than others, qualitative case study is considered as the most advantageous research strategy compared with others such as experiments, survey, history and archival analysis (Yin, 2003). This is due to that qualitative method is able to provide deeper understanding and full contextual information of the phenomena studied, in addition to enabling the foundation for more complete theory development (Berg, 1998; Eisenhardt, 1989; Purcell, 1999; Hunt & Boxall, 1998).

 

With regards to what Yin (2003) argues as criteria for improving quality for case research: construct validity, internal validity, external validity and reliability, a research procedure (Figure 1) is set up to have rigorous design and analysis. The selection of sample cases are based on their performance with division into sub-samples (Boyatzis, 1998) to be comparable. Besides the research design follows three rationales: a study of similar context comprising the comparability in between; multiple sources of evidence; deep semi-structured interviews and observations are employed, Boxall (1996) noted that most of the studies of SHR have collected data from HR managers, which limits the information source and ignores other organization members, especially the strategic decision makers. Therefore, the principal interviewees are strategic decision makers, with the sequential one suggested by the principal interviewee. At least one of the interviews is with the responsible for

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Chinese management, which could be strategic planner, General Manager in China, or other correspondent positions. As well, at least one more sequential interview per each case site will be followed to explore different viewpoints. Other sources of evidence such as published articles and videotapes as well as secondary documents are used as complementary information, to control bias as managers in position tend to tell “half truth” in their favor.

 

 

Case selection:

Stake (1994) argued that “we receive our cases rather than we choose them”. The cases are prominent interest before formal study begins. At the beginning, the phenomena are given; then the cases are opportunities to study the phenomena. Twelve Spanish firms in China are selected for this qualitative case research and four experts from public institutions and professional consultancy are invited to provide objective professional data as moderator samples. Among these twelve cases, eight are successful sub-samples and four unsuccessful sub-samples, with equal division into consumer goods industry and non- consumer goods industry to control industrial bias.

 

The selection of cases for the exploration is based on the discussion with four experts in the field using the criteria of availability, accessibility (Stake, 1995) and complexity. In order to have sufficient complexity in site for data analysis and theory exploration, criteria of size (number of employees), stage (internationalization phase) and antiquity (years of installation) are set as filters. These criteria of filtering sample cases allow selecting sub-samples with major complexity for exploring their experiential history. The criterion of firm size from a previous study done by Takeuchi, Wakabyashi & Chen (2003) on Japanese firms in China and Taiwan is adopted for this study: more than 30 employees. The criterion of stage is considered in accordance with the axial of international strategy of Briscoe & Schuler’s (2004:56) model: foreign subsidiary and joint venture with control by Spanish firm’s side (more than 51% of shares).An antiquity of more than five years of installation in China is set considering the balance between the short history of Spanish firms in China and the need of enough historical data to explore. As a consequence, the selected cases will representing 36% of the eligible population, considering merely one sixth of Spanish firms in China is qualified for the selection.

 

Data collection and Analysis procedure:

Linking data with propositions and the criteria for interpreting collected data is especially problematic among five principal components for case research proposed by Yin (2003). The data are collected based on what Stake’s (1994:242) view of ‘spending substantial time, on site, personally in contact with activities and operations of the case, reflecting, revising meanings of what is going on’. Semi-structured questions are used during data collection process combining qualitative techniques such as Fontana & Frey (1994) with interviewing, Alder & Alder (1994) with observational techniques, Hodder (1994) with the interpretation of documents and material culture, Harper (1994) with visual methods, and Clandinin & Connelly (1994) with personal experience methods.

 

The pilot study is performed first with a group of sub-samples, which contain two successful sub-samples, one unsuccessful sub-sample and one moderator sample. To set criteria for interpreting the finding, the Data-driven code development of Thematic Analysis (Boyatzis, 1998) for its advantageous analysis in bridging qualitative data and systematic analysis procedure, is introduced to provide a solid foundation for this analysis. Consequently, this advantage of Thematic Analysis to translate between the worlds of qualitative and quantitative research helps to overcome the difficulty in setting criteria for interpreting the findings in case study.

 

The transcribed qualitative data in different sub-samples go through themes and code development process which is described by Boyatzis (1998): reducing the raw information; identifying themes within sub-samples; comparing themes across sub-samples; creating a code; determining the reliability of the code. The relevant raw information is selected and marked firstly with unit of coding of sentence, which reduces the raw information a shortened ‘outline’ form and easier for comparison across units of analysis. To sense and articulate potential themes present in a subset of Spanish firms in China, different themes are identified in accordance with collected qualitative data in sub-samples, with concern for recording any glimmer of themes or patterns among the subset. At the point the researcher feels exhausted the potential themes within each subset of Spanish firms in China, they examines the lists of themes and looks for relationships between themes, then writes and rewrites these potential differentiating themes. In this step, reading and rereading the original qualitative data is critical to accuracy and honesty in the process of developing an inductive code. The created code identifies themes in the same concept and labels that group to differentiate a code from another. The conceptualization of the code (label) is not generated until all themes in group are gathered (clustering themes). To test the reliability of the code, qualitative data are distributed to forty Master students in International Management who received thematic analysis training previously. The code development process is repeated among them in eight teams.

 

Preliminary findings:

 

As a result from the first subset (two successful sub-samples, one unsuccessful sub-sample and one moderator sample) a total 34 themes emerges based on manifest and latent level coding, which are categorized 12 codes and three clusters. The themes and codes proposed are discussed and challenged by eight groups of International Management Master Students who have received training on thematic analysis method. With an interrater reliability of 85% (the agreement on the themes or codes), the result is considered reliable as it is more than 75% (Boyatzis, 1998). As a result of this challenging, three themes are added and one definition of theme is modified.

 

The preliminary findings based on thematic analysis on the collected qualitative data from Spanish firms in China, highlight the confirmation of the three propositions. First, it is confirmed that current Spanish firms in China are principally small and medium size enterprises, therefore, to achieve better firm performance need optimization of internal resources, to take advantage of external opportunities. And in this sense, the internal resources, especially the human resources contribute dynamically to the design and implement of firm’s strategy. Those who have been keeping this dynamism between strategy and human resources and / or their knowledge, achieve better firm performance. Based on the confirmation of the first proposition, it can be observed that the second proposition is confirmed as well, since the dynamism between strategy and human resources must be interactive and bi-directional to keep this reciprocal relationship. As it is showed in the Table 3, one of the principal visions or philosophies for better performance in China for Spanish firms is possessing holistic vision for strategic human resources, with consideration and concern on different stakeholders as an integrative part of management, such as public administration, suppliers, clients and of course, managers and employees. The Table 2 and 3 exhibit the summary of discovered themes, codes and clusters, and their respective examples.

 

Table 3: Clusters, Codes and Themes Examples

 

Vision, Strategy & Objective: The ability to formulate and implement strategy for sustainable competitive advantages.

Vision / Philosophy:	Examples:
1. Holistic vision – consideration of different stakeholders	“If we want to triumph, we need to dedicate time and work with patience and professionalism…we visit clients, receive delegations to know our production plants, to know our country, and to know also projects that we have participated; …we compare with our competitors; …our professionals are proud of contributing and participating in big industrial projects; … more than one hundred of Spanish suppliers have entered Chinese market through our hands, while collaborating in our office with the engineers of our clients continuous to be very important…”
2. Leadership vision	“The restriction of the foreign investment in the sector has made that …few foreign companies have been in charge of leading the change in the sector.”
3. Revolutionary vision	“…It is a revolution in the sector….there was no concept of service, less the security, and this situation was repeating in all country….Now there are (well-established) reds for sales, good connections…even more, some clients make reservation on Internet…the quality of service, the attention to clients, the management of traffic, the security and many other aspects have appeared and evolved till situating at levels quite approximate to these of developed countries.”
Strategy design:	Examples:
1. Long term orientation	“In the first place, it must be noted that in China it is indispensable to work with a mentality of medium and long term … The time of maturation, negotiation and project development is long…”
2. Market commitment	“… it is indispensable … to demonstrate commitment with this market….At present, China demands more implication in the market.”
3. Optimization of resources	“…we are small and have to prioritize our resources in our decision making…”
Objective and implementation:	Examples:
1. Defining clear objectives in short, medium and long term	“The objective was and continues to establish a network and communicate between principal cities with a high level of service similar with what we offer in European countries where we operate...under the initial circumstance, we limited ourselves in …”
2. Good entry reference	“In the past, with our same competency …FAD allowed us obtain valuable references y now we could develop project with more than 200 millions Euros with commercial or own financing.”
3. Flexibility an Adaptability	“In first day we arrived in China, we noticed that what we planned was totally out of Chinese reality and we have been flexible to adapt that and resigned our plan.”

 

Strategic human resources: The ability to contribute human resources to sustain firm’s strategic competitive advantages.

Structure:	Examples:
1. Infrastructure to facilitate working process (hard – structure)	“…On the other hand, the construction of infrastructure …has helped our activities, improving the service quality and the productivity of our company.”
2. Good management controlling system (soft – structure)	“These companies, together with new privatized ones in the sector, saw themselves forced to improve their controlling system, to reduce their obsolete structures and to change their ways of management and service to clients in order to look for results which allow them to survive in the new competitive environment.”
Leadership:	Examples:
1. Personality:
1.1. Adaptive	“The most important of all, we think that we have known to accept these new challenges and adapt ourselves with success to these changes.”
1.2. Innovative	“The huge changes that China is living obligate us to double our efforts and to be more imaginative, flexible and creative at the moment of working with such competitive market.”
1.3. Comprehensive	“To understand this changes is necessary to note that, at least the general starting situation. At their starting point, without much technical instruments, young Chinese technological companies were few and of low level; In term of foreign companies, few were situated and, in general, their products was not adapted to the reality of the country.”
1.4. Pragmatic	“At the beginning of our activity in China, we had to establish ourselves in another category of business due to the legal obstacles, since at that moment the foreign investment was not allowed in that sector.”
1.5. Self-awareness	“On the other hand, we must be conscious with that it is very competitive and demanding market...and we prepare with our best.”
1.6. Positive	“…That (success) doesn’t mean there haven’t been problems, but we have resolved them with positive spirit from both parts…”
2. Ability:
2.1. Ability of identifying opportunities	“We didn’t establish our first companies in the business till 1990, when taking advantage of the change of the legislation of foreign investment in the sector.”
2.2. Ability of breaking away barriers	“In term of myth of distance or cultural barriers, we consider that are more psychological than real. China is closer to Spain than some Latin American countries in term of flying hours. Lastly, the language and cultural difficulties are not more than what could be found in other companies in Arabic world or even in some European countries…”
2.3. Ability of embracing good judgment	“…Our experience is that the things are not so simples – easy business doesn’t exist – neither the difficulties are so big or insuperable...”
3. Availability / Professionalism
3.1. Availability in mentality	“Always it needs to have at present that all in China is difficult, meanwhile, remember that all is possible in China.”
3.2. Availability in mobility	“The development of projects in various areas of Chinese geography, from the northeast frontier to the costal of Tannin…”
3.3. Availability in efforts-Hard working	“We had to put more efforts than our competitors – principally Japanese or European companies …”
Human Resources Policies:	Examples:
1. Excellence in human resources	“Moreover, the clients’ knowledge of international market and of our competency, together with the increasing productivity, demand Spanish companies to face Chinese market with the best possible preparation, in terms of technique and commercial, and to designate their best human resources to this market.”
2. International competitiveness of employees	“The presence of the international competency – whichever Spanish businessman travels first time to China will find there with their principal international competitors …we should be very competitive and face the market…”
3. Localization of managers and employees	“We have been working hard in developing a local executive team to guarantee the stability of the business in long term: our principal managers are Chinese…”
Knowledge & Learning:	Examples:
1. Continuous learning	“At the beginning, after some trips, short after arriving, we thought that we knew much and then we had learned all or almost all about the country, but there always has been some that turns us back to the reality…The process of knowing mutually is much longer than we expected and wanted.”
2. Continuous knowledge updating in multilevel	“…The low level of knowledge of the most employees and executives of the companies has provoked that, in many occasion, the application of new technology would bring more damage rather than benefits...” “Market changes too quick in China as well the product life circle is shorter”

 

International Business Practices: The practices in dealing international business implying strategic human resources process.

Market implication:	Examples:
Image building in new market	“…different from them (Japanese or European companies), we could not count with a fully developed country image, and technologically or industrially advanced in China...hence, we need to build up by our own.”
Cross Cultural Management:	Examples:
1. Mutual understandings	“Each time we started to visit China and to receive delegations in Spain with more frequency. It is not only for them to get to know our company, but also to show them our country, our factories of equipments and the industrial installation…”
2. Looking for similarity (common objectives and elements) to work in team	“… in spite of differences, we have many things in common and even more important, we could do things together…This country has been facing problems and situations that, in many aspects, were similar with what we lived in Spain in 60s’and in 70s’.”
3. Mutual recognition and respect	“We learn that negotiating in China is a hard task. However, once we shake hands and reach an agreement, we encounter with honest clients and partners…thanks to that, all and each project that we carry out in China has culminated with success, and recognized by our clients, and they conceded the most important award to us…”
4. Time dedication to build up trust	“There is a Chinese saying: First friends, then business. We apply that and have dedicated lots of time and efforts to improve the relationship with Chinese partners and the administration, to achieve an atmosphere of trust…to generate a fundamental base for a better business development. This atmosphere needs to be maintained with serious, honorable and continuous work during the long business cooperation.”
5. Being positive, patient and perseverant	“Due to the different conception of time, it is necessary to have doses of patience and perseverance to navigate in the complex Chinese bureaucracy, …even if it is getting better, there is still a long way to go through for the situation to be optimistic.”
Human resources practices:	Examples:
1. Continuous training of personnel	“The development of technology, the evolution of mentality and the training of local personnel, have been determinant factors for the change.”
2. Motivation	“Not always the economic condition is the nest motivator, we listen Chinese managers’ opinion and let them express their ideas…they feel the company as their own.”
3. Fidelity and retention	“The rotation of executives is very high in China in general. To have long term commitment, we developed series of human resources practices to retain them, such as company mortgage for housing, and other family benefits…”

 

Conclusion and Discussion:

 

Figure 2 presents the theoretical model for a dynamic strategic human resources management in international business. This framework is developed from the preliminary findings of Spanish firms in China using thematic analysis procedure. It is divided into three main blocks for a firm to manage their business in international market, especially applicable in

emerging economy: Vision, strategy and objective; Strategic human resources including elements of structure, leadership, HR policies and learning; and International business practices.

 

This division of blocks builds up ISHR architect into three abstract levels: firm level general architecture, factors pertaining to SHR, and factors pertaining to international management. In a sum, this model expresses that the definition of vision, strategy and objective of a firm influences the strategic human resources in a dynamic process to be applied in international business practices.

 

In terms of the vision, strategy and objective, “Vision or Philosophy” of a firm determines the strategy design (formulation) and hence the objectives and implementation. In this context of Spanish firms in China, a holistic vision, a leadership vision and a revolutionary vision are underlined, confirming that Chinese market is in transition therefore it is necessary to visualize the business from different perspectives and deal with different stakeholders instead of solely concern on market and internal labor factors. Many business opportunities emerge in a transitional market, therefore, even for a small and medium size enterprise, it could aspire for being leader in a market niche, which is especially critical as local competitors tend to have advantages in cost and quick imitation with follow-up strategy while an out- comer needs a differentiation strategy and aspires to be leader in the market. Due to the fact of the constant changing environment in this emerging market such as China, sectors and industries are undergoing structuring or restructuring, there are many revolutionary challenges that western firms including Spanish ones will have to cope with highlighting the need to express their vision to include the ability to detect these opportunities. Consequently, the strategy formulation in this kind of changing market needs to have long-term orientation and commit to the market for future profits. As most Spanish firms as well as other entrepreneurs in a foreign context often have scarce resources, an optimization of the usage of resources could maximize output and sustain long-term strategy. Deriving from long-term strategy, the correspondent objectives need to be clear in different time phases: short term objectives, medium term objectives and long-term objectives. Especially for short-term objectives, the strategy implementation sought after for adequate entry reference would be a great start point. However, since the China market is in transition and therefore fluid, the initial strategy formulation and implementation needs to be flexible and adaptable to the local market’s constant changes.

 

The four elements of strategic human resources (structure, leadership, HR policies and learning) interact and influence each other mutually. Structure refers to both hard infrastructure and soft management controlling systems as platforms to provide adequate working environment and facilitate work in progress. Often the first transplanted firm would follow the organizational structure of parent company in Spain. This structure determines the selection of the required leader, whose personality, ability and availability influence the sub process of HR policies that creates or designs the learning environment in its subsidiary, which in turn provokes changes in the structure of the subsidiary – the cycle continuing until an interruption occurs. In the selection of leader for Chinese subsidiary, Spanish successful firms have place emphasis on their personality to be adaptive, innovative, comprehensive, pragmatic, self-awareness and positive. In term of their ability to operate in such a unstable market condition, their special capacities in identifying business opportunities, to break away barriers and to embrace good judgment are highlighted. A leader’s mental construct influences the decision on human resources policies, combining with parent company’s policies (depending on the level of independence of the subsidiary from the mother company’s decision), pointing out three key factors for China-based Spanish subsidiaries: excellence in human resources, international competitive employees and localizing executives and employees. These three factors correspond to some misconceptions of Spanish firms of China, and their traditional international models, as well as the difficulty and high cost in expatriating and repatriating Spaniards. Due to the long tradition in doing business in Latin American countries, most Spanish firms have not been well prepared for a so distant (especially in psychological aspects), so competitive, so large scale, and a difficult-to-understand market like China. As a consequence, the excellence and competitiveness for international executives need to be redefined for Spanish enterprises. A good work team well formed in facilitated working condition, learning environment is positive to update continuously the knowledge of employees, executives and hereby of organization. As the external environment is changing constantly, the learning process needs to be continuous as well to sustain firm’s competitiveness.

 

We also highlight some special features for international business practices. Depending on the competency and ability of the firm as a whole, different levels of market implications, cross cultural management and HR practices are required. In the case of Spanish firms in China, how to build a consistent image in this new market is a critical area that they need to learn as the Germans and French companies have. The aspect of cross-cultural management holds special weight in internationalization, since the psychological barriers are still impeding many Spanish firms’ operations.

 

In the analysis, successful Spanish sub-samples emphasize on mutual understanding, looking for similarity to work together as a team, mutual recognition and respect, time dedication to build trust, and being patient and perseverant as the perception of time are very different as in the case of other cultural variables as well. In terms of human resources practices in this international management arena, three factors have been considered critical in the case of China-based Spanish subsidiaries: continuous personnel training, motivation and retention. High rate of rotation in Chinese executives and employees have constantly interrupted some unsuccessful China-based Spanish subsidiary making it impossible to implement strategy with consistency with a positive strategic human resource cycling method to formulate better firm strategy. Motivation is one of the keys to retain executives besides the economic condition. Some successful Spanish firms points out that it is important for Chinese executives to participate in the decision making process, therefore they require respect in their roles and capabilities of the company despite the origin of the parent company. Continuous training as well has been an effective methodology to promote better understanding and foster better ties in interpersonal relationships.

 

Interaction within and among these three blocks is dynamic as many underlying elements are common and many themes interacting (cause and effect) upon each other. The inherent dynamic property of strategic human resource model in international management highlights the interactive and bi-directional relational nature of a firm’s strategy (formulation and implementation) with their human resources. The cause-effect relations among these elements are ambiguous and bi-directional. The model constructed from the preliminary findings of the qualitative data from Spanish firms in China, the theoretical model needs to be further developed through replication studies of other Spanish firms in China and perhaps even other companies situated in other chaotic and changing contexts as part of this research agenda.

 

Based on the two-fold objective of this paper, we conclude that understanding how some China-based Spanish subsidiaries achieve better firm performance through strategy and human resources interaction and exploring theoretical models that demonstrate the principal elements of SHR in international management in a turbulent emerging market are critical aspects that impact the dynamic strategic human resource management model in international management.

 

 

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