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How can Shanghai's work culture influence its FDI Strategy? Part II by Joshua Smitth
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How can Shanghai's work culture influence its FDI Strategy? Part II |
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Business,Travel & Tourism
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By using Hofstede’s 5–D Model we are able to determine the work culture of Shanghai as well as China as a whole. Following the first part of this article “How can Shanghai’s work culture influence its FDI Strategy’, in this article we will continue to evaluate how can the city’s culture affect its FDI Strategy and inflow, as well as it’s international competitiveness. In the first part we analysed how collectivism, low uncertainty avoidance created a supportive environment for companies looking to outsource their R&D activities to Shanghai, which we identified, based on M. Porter’s work, as being essential to creating an effective FDI Strategy. In this article we will analyse how the last three of Hofstede’s 5 D-Model create the work culture associated with Shanghai and in term how this can influence the city’s FDI Strategy. The first culture factor is the one of Power Distance within the workforce. Power Distance is the extent to which hierarchal inequality is expected and accepted within a nation (Hofstede, 2001), the high power distance present in Shanghai suggests the presence of centralized power, supported by numerous rules (Jones and Teegen, 2001), which may be regarded as contributors to the origins for the autocratic nature of China. Shane (1994) expounds that a high power distance culture facilitates ease in the formation of hierarchy, which in turn installs a sense of control and trust over personnel in organisations’ structure, subsequent results leading to high productivity and economies of scale. A foreign owned business looking to integrate a Shanghai-owned company may find it hard to produce additional valuable contribution to the economic performance of that domestic organization due to its autocratic nature. This is supported by Contractor in his 1990a thesis, explained by Shane (1994) that low levels of societal trust which lead to a smaller emphasis on “contractual relationships” (p.630) within a country mean that there will be low levels of business compositions involving two firms from different cultures. In one sense this installs a unique structure of organizations within Shanghai, which can significantly benefit an FDI Strategy. The second culture determinant we are analyzing today is Masculine / Feminine work culture. “This reflects on whether the dominant values are associated with the collection of money and things as contrasted with values associated with caring for others and quality of life” (Yu-Te Tu, Shean-Yuh Lin and Yu-Yi Chang, 2011, p.177). China is a masculine society, success oriented and driven by competition and achievement, obvious factors linked to competitiveness and successful pursuit in the attraction of foreign investment interest (Hofstede, 2001) Subsequent results are prominent at consumer and at firm levels of the Shanghai business environment. Having a population more open to taking risk (Hofstede, 2001), facilitates the internationalization of domestic consumer demand (Porter 1990) by increasing openness to internationally produced goods (Wu, 2003), which is also a key factor in enhancing Shanghai’s competitiveness as an investment destination. Both these factors, combined with Collectivism and Uncertainty Avoidance, discussed in the previous article cultural determinants that may explain the choice of an FDI Strategy in Shanghai. Some may say that the success of Shanghai’s FDI Strategy has been enormous, as figures from the Chinese press show that Shanghai’s FDI inflow has increased by 13.3% between 2010 and 2011, the figure for 2010 was $12.6 billion. (English News China, 2011, “Shanghai attracts record FDI in 2011”, [online article]).
Related Articles -
FDI Strategy, Foreign Direct Investment Strategy, Nation Brand, Impact of Foreign Direct Investment, City Branding,
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