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Edited by Henry Wai-chung Yeung
Chapter 5: Transferring Knowledge to Enterprises in China
Eric W.K. Tsang The rapid economic growth of China has caught the world’s attention. China is gradually emerging as a great economic power. The Chinese government has employed inward foreign direct investment (FDI) as a key element of its economic development strategy since the late 1970s, when the country’s economic reforms started. During the early stage of the economic reforms, the Chinese government learned from the experience of restructuring thousands of loss-making state enterprises that modern management techniques were sorely needed for the country’s continued economic development: ‘We must consciously sum up China’s historical experience and study the concrete conditions and requirements for the economic growth. In addition, we must draw upon the world’s advanced methods of management, including those of capitalist countries, that conform to the laws of socialized production’ (Central Committee of the Communist Party of China, 1984). The absorption of technological and management know-how naturally became one of the oﬃcial objectives of attracting FDI. To date, thousands of foreign ﬁrms have provided not only their capital, but also knowledge to this socialist country – an unprecedented phenomenon in human history (see also Chapter 6 in this volume). On the theoretical front, inspired by Edith Penrose’s seminal work, The Theory of the Growth of the Firm, a recent development in management research is to analyse and develop a ﬁrm’s strategy by focusing on its resources, instead of the external environment. This more inward-looking approach is known as the resource-based view. By focusing upon knowledge as the most strategically...
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