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Transnational Corporations and Business Networks: Hong Kong Firms in the ASEAN Region.(Brief Article)(Review) (book reviews)
GORDON BOYCE

10/01/1999
Business History
161
Copyright 1999 Information Access Company. All rights reserved. COPYRIGHT 1999 Frank Cass & Company Ltd.

HENRY WAI-CHUNG YEUNG, Transnational Corporations and Business Networks: Hong Kong Firms in the ASEAN Region (London: Routledge, 1998. Pp.xxi + 297. ISBN 0415 14016 1, [pounds]50).

Readers who like a blend of theory and empirical research will find Henry Yeung's book to be a stimulating analysis of the scope, structure and internal dynamics of Hong Kong multinationals. Transnational Corporations and Business Networks is not however, an historical work, but rather what he calls a 'cross-sectional' examination of Hong Kong business overseas in the 1990s. Nevertheless, business historians interested in networks and multinational enterprise will find in this book plenty of ideas to think about.

Yeung starts by laying out the context within which Hong Kong business developed and the relevant theoretical framework. Next, he analyses the geographic distribution of Hong Kong's direct foreign investment, the competitive advantage of the firms in question, and the role of business networks in shaping patterns of growth. The third chapter develops the theory in greater detail to set the stage for Yeung's analysis of his empirical evidence. The next three chapters examine strategy, network mechanisms, firm-government relations, and the competitive advantages of Hong Kong transnationals in relation to those of their rivals from more developed countries. Yeung concludes with a masterful presentation of his study's implications, suggestions for future research and a consideration of the outlook for Hong Kong business after the transfer of control to China.

Transnational Corporations and Business Networks is a reaction to Yeung's dissatisfaction with the largely a theoretical, 'non-socio-spatial' work on Third World multinationals. In particular, he challenges the view that Western structures are inherently superior and the characterisation of Third World multinationals as low-technology, price-focused enterprises. He found that Hong Kong multinationals are sophisticated network-based concerns with a broader geographic investment spread than earlier studies suggested. This discovery stemmed from his examination of service sector enterprises, whereas previous work concentrated exclusively on manufacturing businesses. He also revealed that Hong Kong's multinationals were drawn overseas by favourable market conditions and established business ties rather than low-cost labour and incentives offered by host governments. Nor were uncertainties surrounding impending Chinese control a major factor in firms' strategy formulation.

Yeung's key insight is that Hong Kong multinationals have not been propelled offshore by transaction cost-induced motives. Rather, they did so because they 'are embedded in a perpetual tendency to cultivate complex networks of personal and business relationships' (p.229). They are driven by a socially and culturally determined propensity to establish guanxi within firms, between firms and with outside constituents, such as governments and financial institutions. However, Yeung's is not a 'culturalist' explanation of institutional development; fundamental economic factors are important, but in an historically and geographically contingent way. Nevertheless, this networking capability is a more significant component of the competitive advantage of Hong Kong multinationals than conventional and more observable attributes such as quality, service or technological competencies. Their relationship-building capability is what makes Hong Kong multinationals distinctive, and it is this insight that contrasts Yeung's study with the wider literature on American and European direct foreign investment.

Although Yeung provides valuable information on networking processes, his analysis could have been strengthened by fuller consideration of these constructs as information handling systems. I also wondered about their cognitive underpinnings and the relationship between culture and communication. He draws a very stark distinction between the transaction cost theory and sociological economics; there are links between the two schools. Concerning his evidence, I would be reluctant to accept interviewees' statements regarding the motives behind their firms' offshore investment strategies at face value. They might well have good reasons for playing down the attraction of low-cost labour and government incentives. Yeung's study was completed before the Asian crisis unfolded and I would look forward to learning his views on its impact upon Hong Kong's business networks.

Overall, this is an important study that combines case studies, statistical evidence and rigorous analysis in an innovative manner. It will appeal to economists, managers, historians and sociologists interested in networks, multinational enterprise and Asian business. Transnational Corporations and Business Networks establishes Henry Yeung as a scholar of note across a number of disciplines.