Myths and Realities of Innovative China the Case of Haier Company – Introduction

Myths and Realities of Innovative China the Case of Haier Company - IntroductionThe enormous growth of Chines economy in last of couple of decades have grasped attention of academicians and practitioners. They are curious to understand the reasons and factors behind this formidable growth and progress of Chinese companies. In 1978, the Chinese government decided to move away from Soviet-style economic policies in order to gradually reform the economy towards free market principles. In this regard, Chinese government encouraged import substitution strategies to export promotion policies. They established Social Economic Zones (SEZs) to attract foreign direct investments and facilitated domestic firms. Social Economic Zones are geographically separate small areas of a country where governments provide special fiscal and financial incentives to foreign and domestic firms for boosting the exports.
Developing countries offer various kinds of incentive packages to attract Multinational Corporations (MNCs) from developed countries. These incentives are usually divided into “soft” and “hard” ones (Kusago and Tzannatos, 1998). Wong mentioned that countries establish SEZs for employment creation, technology up-grading and foreign exchange earnings. SEZs as a means of attracting foreign investment and technology along with promoting Chinese exports. By granting special investment incentives to foreign investors, it was hoped that an export-oriented industrial base might be created in the SEZs via foreign capital and technology. Many of these privileges were also extended to domestic firms to encourage their participation in the SEZs and thereby increase their contact with foreign technology and managerial skills.
Aggarwal has discussed three aspects of SEZs i.e. employment generation, human capital development and technology up gradation. Each aspect exerts two types of effects i.e. direct and indirect. For instance, the employment would be directly generated when the SEZs would hire labor. The indirect employment would be generated through the demand for complementary goods. Similarly, the skill formation effect operates directly when they acquire the skills by working in the SEZs. The spillover effects would take place through the movement of workers to domestic firms. The SEZs would also result into technology transfer to domestic firms.
Johanson and Vahlne stated that with the increasing internationalization, lots of businesses are emerging on the globe. For firms, to survive and to earn a leading role in the fierce global competitive landscape, unremitting innovations are of immense importance. A number of studies in international business field show that the internationalization of a firm is an incremental process, that is, a firm should gradually increase its international involvement. There are several theories that focus on internationalization process of a firm on “its gradual acquisition, integration and uses of knowledge about foreign markets and operations and on its successively increasing commitment to foreign markets”.
Haier is the single most extensive producer of exhaustive family machines in China. It has developed from minor undertaking to being one of the advancing family apparatuses of China. The philosophy of expansion and internalization of Haier is based on innovation. The paper deliberates on success story of Haier i.e. one the leading Chinese company presence all over the globe. The rest of the paper critically analyzes and discusses the developments and strategy of Haier that make him successful in global competitive environment.