ASIAN FIRMS IN THE GLOBAL ECONOMY

(Completed in End 2006)

Principal investigator:

Professor Henry Yeung, Geography, NUS

Other key team members:

Associate Professor Shin Jang-sup, Economics, NUS

Dr. Lee Yong-Sook, Geography, NUS

(1) THEORETICAL CONTEXT

This research was guided by a theoretical framework capable of grasping the economic, organizational and institutional dynamics of the processes through which Asian firms are articulated into the global economy. The theoretical framework was that of the global production network (see Dicken et al., 2001; Henderson et al., 2002; Coe et al., 2004; Hess and Yeung, 2006). Production networks – the nexus of interconnected functions and operations through which goods and services are produced and distributed – have become both organizationally more complex and also increasingly global in their geographical extent. While similar organizational entities are variously termed “differentiated networks” (Nohria and Ghoshal, 1997), “coordinated networks” (Ensign, 1999), “inter-organizational networks” (Gulati and Gargiulo, 1999) and “strategic networks” (Gulati et al., 2000) in the strategic management literature, our conceptualization of global production networks goes beyond firm-specific attributes to incorporate the social-institutional contexts in which these firms are embedded. In other words, we took into account both firm-specific strategies and peculiar national political-economic conditions in our assessment and explanation of Asian firms in the global economy.

In this theoretical framework, we postulated that global production networks not only integrate Asian firms (and parts of these firms) into structures which blur traditional organizational boundaries, through the development of diverse forms of equity and non-equity relationships, but also integrate national economies in Asia (or parts of such Asian economies) in ways which have enormous implications for such their economic and social well-being. At the same time, the precise nature and articulation of such firm-centered production networks are deeply influenced by the concrete socio-political contexts within which they are embedded, produced and reproduced. This process is especially complex because while national firms are essentially territorially specific (primarily, though not exclusively, at the level of the nation-state), the production networks themselves are not. They “cut through’ national boundaries in highly differentiated ways, influenced in part by regulatory and non-regulatory barriers and local socio-cultural conditions, to create structures which are “discontinuously territorial’. The geographical scale at which production networks are being configured continues to widen (Castells, 1996, Dicken, 1998; Coe and Yeung, 2001; Yeung, 2002a; 2007).

Although there is a very large network literature in the social sciences, little of it addresses how these networks are constructed and “stitched” in the global economy and the role of firms from specific economies in “driving” these networks at the global scale. The global production network (GPN) perspective that we used for this project explicitly recognizes that:

· firms, governments and other economic actors from different societies (e.g. Hong Kong vs. South Korea) have different priorities vis-à-vis profitability, growth, economic development and so on. Consequently, the production chain’s implications for firm and economic development at each nodal point cannot be “read-off” from the logic of the chain’s organization and the distribution of corporate power within it. The GPN perspective, in other words, accords a degree of relative autonomy to domestic firms, governments and other economic actors (e.g. business associations and trade unions, where relevant) whose actions potentially have significant implications for influencing the economic and social outcomes of the chains for the locations they incorporate.

· The articulation of national firms into the global economy is determined as much by their firm-specific strategies and competitive advantages, as their embeddedness in the social and political-economic contexts of their home economies. These home country conditions therefore influence significantly the degree and significance of success of these national firms in the global economy.

(2) OBJECTIVES

1. To assess, in a comprehensive and comparative manner, the nature and extent of influence in global production networks orchestrated by leading firms from the four Asian Newly Industrialized Economies (Hong Kong, Singapore, South Korea and Taiwan) in today’s global economy,

2. To evaluate the complex interrelationships between the firms’ influence in global production networks and the national-institutional contexts of their home economies;

3. To construct a comparative database on the top 50 leading firms each in Hong Kong, Singapore, South Korea and Taiwan, based on qualitative and quantitative research; and

4. To develop collaborative research links with top academic institutions in Hong Kong, South Korea and Taiwan for future research projects.

(3) ACHIEVEMENTS

The first three objectives have been well achieved through intensive field-based personal interviews and research activities in all four Asian Newly Industrialized Economies (Hong Kong, Singapore, South Korea and Taiwan).

Personal interviews:

The team members have conducted over 75 personal interviews with CEOs, Managing Directors, and Presidents from the top 50 firms in Singapore, Hong Kong, Taiwan, and South Korea, including Sembcorp Industries, Keppel O&M, CapitalLand Ltd., Hong Leong Asia, OLAM International, Singapore Telecom, and Singapore Technology Engineering, Bank of East Asia, Dah Sing Financial Holdings, Guoco Group, Orient Overseas Container Ltd (OOCL), CLP Holdings, Cathay Financial Holdings, Acer Inc., BENQ Corp., Delta Electronics, China Airlines, Samsung Electronics, Hyundai Motor Co., Hyundai Engineering, and Construction and Korean Airlines. We interviewed a total of 72 leading Asian firms between June 2004 and November 2006: 20 Hong Kong firms, 13 South Korean firms, 24 Taiwanese firms, and 15 Singaporean firms. These firms were selected on the basis of their 2003/2004 operating revenues or turnover captured in the OSIRIS database published by Bureau van Dijk Electronic Publishing, a comprehensive database containing detail financial information on publicly listed companies worldwide. We selected the top 50 firms from each of the four NIEs and approached them for personal interviews with their top executives. Among the 72 leading Asian firms interviewed, 16 were in the top-10 and 29 were in the top-20 by operating revenues in their respective economies. Twelve of them were ranked in UNCTAD’s (2005) World Investment Report’s Top 50 transnational corporations (TNCs) from developing economies. Some 37 of the interviewees were CEOs/Presidents or Managing Directors, whereas another 32 were Executive Directors, General Managers, or (Senior/Executive) Vice Presidents. In some cases (e.g. Samsung Electronics), personal interviews with several top executives were conducted.

Apart from these corporate interviews, we also conducted 18 personal interviews with top government officials such as Permanent Secretaries and Director-Generals from various ministries and statutory boards that are directly involved in promoting domestic firms to become major players in the global economy, including the CEO of IE Singapore. In all corporate and institutional interviews lasting between one to two hours, we took an open-ended approach and used only brief interview aides. Extensively background information from all available public sources was consulted to form the basis of customized qualitative questions during each interview.

Collectively, almost 100 qualitative transcripts have been obtained and transcribed and this massive amount of unique data will form the main basis of our theory development and publications in the near future. A 20-page long Executive Summary of the key research findings will also be produced in the first half of 2007 and it will be sent back to all interviewees and released to the media. We are certain that significant public interest will be gathered through this Executive Summary.

Research activities:

During our fieldtrips in the four NIEs, we collected a lot of quantitative and qualitative data and materials on general economic development, industrial policies, business environments, and political change in these economies. This secondary dataset will be highly useful in contextualizing our writing and publications that will be based on our primary data. Meanwhile, we have been able to construct the comparative database (Objective 3) through publicly available materials such as annual reports of the companies and commercial databases. These data are now established in an Excel spreadsheet and statistical analysis can soon be conducted.

Research links:

During our various research trips to Hong Kong, Taiwan, and South Korea, we were based in the following institutions. We have since developed significant research contacts and future collaborative links with them:

School of Geography, University of Hong Kong

Department of Geography, Hong Kong Baptish University

Chung Hwa Institution of Economic Research, Taiwan

Department of Geography, National Taiwan University, Taiwan

Samsung Economic Research Institute, South Korea
Korea Development Institute, South Korea

Korea Automotive Research Institute, South Korea

Department of Geography Education, Seoul National University, South Korea

Significance of research:

Our project has so far generated quite a lot of interest among scholars interested in international business development in the Asia Pacific and regional studies. The PI was invited in 2006 to give two plenary lectures in the following conferences and the papers will be published in the respective journals that sponsored the lectures:

1. The Asia Pacific Viewpoint Lecture entitled “From followers to market leaders: Asian electronics firms in the global economy” at the International Geographical Union Regional Congress in Brisbane, July 2006: forthcoming in Asia Pacific Viewpoint, Vol.48(1), pp.1-25, 2007.

2. Plenary Lecture entitled “Situating Regional Development in the Competitive Dynamics of Global Production Networks: An East Asian Perspective” at the annual conference of the Regional Studies Association in London, 24 November 2006: forthcoming in a special issue of Regional Studies, 2008.

With our unique primary and secondary datasets, we are in a very good position to conduct comparative analysis of how leading firms from the four Asian NIEs have become significant players in the globally competitive economy. This research breaks new ground in the field as most existing studies have been conducted in relation to firms from specific NIEs and are not explicitly comparative in nature.

Meanwhile, the wider theoretical framework of global production networks (GPNs) has already made a significant impact in the social sciences. During the project’s tenure, the following highly cited papers have been published by the PI and collaborators from an earlier major project funded by the UK’s Economic and Social Research Council:

Coe, Neil, Hess, Martin, Yeung, Henry Wai-chung, Dicken, Peter and Henderson, Jeffrey (2004), ‘”Globalizing” regional development: a global production networks perspective’, Transactions of the Institute of British Geographers, New Series, Vol.29(4), pp.468-84. (Cited 27 times; ranked a Highly Cited Paper in the ISI Essential Science Indicators).

Hess, Martin and Yeung, Henry Wai-chung (2006), ‘Whither global production networks in economic geography? Past, present and future’, Environment and Planning A, Vol.38(7), pp.1193-1204. (Cited 2 times).

The PI’s direct involvement in the development of the GPN theory has enabled this URC project to add complementary strength to the GPN approach in understanding the global competitiveness of Asian firms.

(4) PUBLICATION AND DISSEMINATION OF RESULTS

Actual Publications as of August 2007:

Journal articles = 5 published and 2 forthcoming

Editor book = 1

Book chapters = 4

Unpublished manuscripts = 4

Yeung, Henry Wai-chung (2005), Outward Foreign Direct Investment (OFDI) by Singaporean Firms: Enterprise Competitiveness and Development, Paper Prepared for the UNCTAD Commission on Enterprise, Business Facilitation and Development Expert Meeting on “Enhancing Productive Capacity of Developing Country Firms through Internationalization”, Geneva, 5-7 December 2005 TD/B/COM.3/EM.26/2/Add.3

Shin, Jang-Sup and Jang, Sung-Won (2005), Creating First-Mover Advantages: The Case of Samsung Electronics, Unpublished Manuscript, Department of Economics, National University of Singapore.

Yeung, Henry Wai-chung, Liu, Weidong and Dicken, Peter (2006), ‘Transnational corporations and network effects of a local manufacturing cluster in mobile telecommunications equipment in China’, World Development, Vol.34(3), pp.520-40.

Yeung, Henry Wai-chung (2006), ‘Change and continuity in Southeast Asian business’, Asia Pacific Journal of Management, Vol.23(3), pp.229-54.

Yeung, Henry Wai-chung (2006), ‘Understanding Singapore’s global reach: outward investment trends, firm-specific motivations, and government policies’, East Asian Economic Perspectives, Vol.17(2), pp.40-77.

Yeung, Henry Wai-chung (2006), ‘Innovating for Global Competition: Singapore’s Pathway To High-Tech Development’, in Bengt-Åke Lundvall, Patarapong Intarakumnerd and Jan Vang (eds.), Asian Innovation Systems in Transition, Cheltenham: Edward Elgar, pp.257-292.

Neil N. Coe & Yong-Sook Lee (2006), 'The Strategic Localization of Transnational Retailers: The Case of Samsung-Tesco in South Korea', Economic Geography, Vol.82(1), pp.61-88.

Shin, Jang-Sup and Jang Sung-Won (2006), An Anatomy of the Technological Leadership of Samsung Electronics: Strategy and Organization for Creating First-Mover Advantages, Seoul: Samsung Economic Research Institute (in Korean)

Yeung, Henry Wai-chung (2007), ‘From followers to market leaders: Asian electronics firms in the global economy’, Asia Pacific Viewpoint, Vol.48(1), pp.1-25.

Yeung, Henry Wai-chung (2007), ‘Globalizing Asian business: dynamics of change and adjustment’, in Dennis A. Rondinelli and John M. Heffron (eds.), Globalization and Change in Asia, Boulder, CO: Lynne Reinner, pp.85-107.

Yeung, Henry Wai-chung (ed.) (2007), Handbook of Research on Asian Business, Cheltenham: Edward Elgar.

Yeung, Henry Wai-chung (2007), ‘Unpacking the business of Asian business’, in Henry Wai-chung Yeung (ed.), Handbook of Research on Asian Business, Cheltenham: Edward Elgar, pp.1-16.

Yeung, Henry Wai-chung (2007), ‘The dynamics of Southeast Asian Chinese business’, in Henry Wai-chung Yeung (ed.), Handbook of Research on Asian Business, Cheltenham: Edward Elgar, pp.356-80.

Hsu, Jinn-Yuh, Poon, Jessie P. and Yeung, Henry Wai-chung (2007), ‘External leveraging and technological upgrading among East Asian firms in the United States’, European Planning Studies, Vol.15(6).

Shin, Jang-Sup (2007), Changes in the structure of the memory industry and the rise of Korean companies, mimeo

Yeung, Henry Wai-chung (2008), ‘Situating regional development in the competitive dynamics of global production networks: an East Asian perspective’, forthcoming in a special issue of Regional Studies, Vol.42.

Project-related publicity:

During the project period, the PI was invited by the UNCTAD and the Commonwealth Secretariat to give expert opinions on both outward and inward foreign direct investment (FDI) in Singapore. His comments on Asian firms were also quoted in The Financial Times (London), Agence France Presse (Beijing), Business Times (Singapore), and local radio.

Article quoting PI in The Financial Times, London, entitled "Asian family business" by Louise Lucas, 18 July 2005, p.16.

Article quoting PI in Agence France Presse, Beijing, entitled "Stronger yuan could dramatically boost China's overseas acquisition drive" by Peter Harmsen, 23 June 2005.

PI as an invited speaker at the Global Entrepolis@Singapore Family-Linked Enterprises Summit organized by the Singapore Manufacturers' Association, 12 October 2004, Suntec Singapore International Convention Centre. The PI’s presentation was reported in (1) The Business Times, Singapore, entitled "Family-linked enterprises under the spotlight" by Nande Khin, 13 October 2004, (2) LianHe ZhaoBao Business, Singapore, entitled "Entering into regional markets" by Tan Lei, 13 October 2004, and (3) NewsRadio 93.8, Singapore, entitled "Family-linked enterprises must turn professional" by Christie Loh, 13 October 2004.

The PI is also invited to give a keynote presentation at a high-level policy seminar on “Strengthening ASEAN Integration: Regional Players and Enterprise Regionalisation”, organized by the ASEAN Secretariat and UNCTAD in cooperation with ASEAN Business Advisory Council and ASEAN Chambers of Commerce and Industry, to be held in Bangkok in October 2007.

Future publication plans:

The PI and two collaborators will co-author at least three more journals articles to be submitted to such top journals as Environment and Planning A, Economic Geography, World Development, Cambridge Journal of Economics, and Industrial and Corporate Change. The PI is still planning to write a monograph on Asian firms in the global economy to be submitted to a major US university press for eventual publication.