Chapter 7: Strategic alliance between Japan and Taiwan on the Chinese market: an empirical analysis of the IT industry
The rapid economic growth of China after its economic reform has been and still is an irresistible attraction for many foreign investors. But not all of them know how to complement one another or to penetrate the Chinese market successfully. In fact, some have encountered serious problems and even failure, as reported in economic and financial news. One of the most significant obstacles has been China’s legal and bureaucratic oversight (Weller, 1998). From foreign investors’ perspective, China’s legal system and bureaucratic structure causes uncertainty far greater than that of the ordinary business environment they encounter in other countries, whether developed or not. In addition, multinational enterprises (MNEs) have faced difficulties overcoming the cultural and societal barriers in managing their subsidiaries in China. Hence, successfully penetrating the vast market potential of China has become one of the hottest topics in international management. Due to language and cultural similarities between peoples on both sides of the Taiwan Strait, Taiwanese managers know better than other foreigners how to emphasize the social network so as to capitalize on their relationship (Guanxi) with China’s localities and overcome the Chinese legal system and bureaucratic structure.1 In contrast, Japanese firms are more used to relying on their industrial conglomerates of Keiretsu (business– industrial conglomerates with both vertical and horizontal integration between firms) to manage the supply chain globally.
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