AIM research project: Capability Development and Learning in China-Based Partnerships

Who is learning what in corporate alliances between foreign multinationals and Chinese firms and why does it matter? What are the implications for future strategy and competitive advantage?

This project, whose core researchers are Professor Mark Easterby-Smith (Management Learning and Leadership) and a team from Warwick Business School, led by Dr Simon Collinson, involves three concurrent studies running to Autumn 2007. Together they represent over £200,000 of funding from the ESRC and the EPSRC under the Advanced Institute of Management (AIM) research. One focuses on large British multinational enterprises (MNEs), another on UK small-and-medium-sized enterprises (SMEs) and the third on European and US multinationals. All three studies have the same objectives.

The research examines how partnerships between foreign firms and their Chinese counterparts in China-based alliances, joint-ventures and buyer-supplier agreements are established and evolve over time. It focuses on collaborative innovation to understand the current scope and future implications of joint product or process development projects, technology-sharing, training and joint-learning activities within these partnerships.

One aim is to compare the benefits of being in China against the potential that foreign firms are ‘breeding’ their future competitors there. We are looking to understand the strategic trade-offs being made by each firm. What is it learning in return for sharing particular assets or capabilities with local Chinese partners? Also, how much have the realised trade-offs differed from the anticipated trade-offs and how are senior managers responding to this shift in reciprocity?

A series of case-studies of alliances and joint-projects within firms are being compiled through semi-structured interviews in China and at the home-country locations of the participating MNEs. Vodafone, GlaxoSmithKline, Oxford Instruments and Airbus are amongst the firms involved to-date. The anticipated outcomes of the three studies will be of interest to managers and policymakers. Some practical lessons regarding the challenges of the China market and the management of local partnerships are emerging from the research. More complex insights into the strategic management of core assets, capabilities and knowledge in global firms, and the restructuring of multinational value chains are also emerging.

Key policy implications stem from a better understanding of the main, leading industries in which China is developing competitive capabilities. Insights into industry-level learning races will improve our understanding of the time-scale over which China is likely to develop competitive advantages in specific technologies or sub-sectors. This will help support the process of response and adaptation in firms and industries affected by the opportunities and threats posed by China’s rapid economic development.