Diaspora and Trade Facilitation: The Case of Ethnic Chinese in Australia

1
Diaspora and Trade Facilitation The Case of
Ethnic Chinese in Australia

• Rosalie L. Tung, Ph.D., FRSC
• Simon Fraser University (Canada)
• And
• Henry F.L. Chung
• Massey University (New Zealand)

2
Diaspora and Trade Facilitation

• Diaspora scattering or sowing of seeds
• Displacement or dispersion of members of an
  ethnic group from their COO to foreign lands,
  either voluntarily or forcefully
• Traditionally, viewed as victims
• Aliens in a foreign country
• Adapt to new environment
• Challengers (Cohen, 1996) Chinese as trade
  diaspora as Chinese entrepreneurs engage in
  trading activities at a greater rate than other
  ethnic entrepreneurs in Australia
• Early years after liberalization, approximately
  80 of FDI into China came from overseas Chinese
  (Khanna, 2008 Ahlstrom, Bruton Yeh, 2008)
• Between 1980-2004, 1/3 of FDI into China from
  overseas Chinese
• 2006, Hong Kong and Taiwan ranked as largest and
  sixth largest foreign investor in China

3
Chinese Diaspora
1997 (million) of Chinese overseas in 1997 As of total population
Asia 2,382.6 25,515,000 1.1
U.S. 267.7 2,723,000 1.0
Canada 30.1 920,000 3.1 (average N.A.1.2)
Middle America (Panama, Costa Rica ) 160.1 274,200 0.2
South America 324.2 821,500 0.3
Europe 590.2 1,937,900 0.3
Oceania (ANZ, French Polynesia, PNG, ) 28.7 528,200 1.8
Australia 18.5 372,000 2.0
N.Z. 3.6 111,300 3.1
218.1 120,300 6.6
TOTAL 4,001.7 32,804,100 0.8
Source Adapted from Ma and Cartier, 2003,
pp.13-16.
4
Diaspora and Australia

• Why Australia?
• Large country, small population ? outward-looking
• Economic ties shifted to Asia Pacific after U.K.
  joined European Common Market (EU)
• Welcomed immigration 1/3 of its population is
  foreign-born
• China has displaced Japan as Australias largest
  trading partner
• 2006 Australian Census 3.4 self-identified as
  Chinese
• Higher concentrations in Sydney (7), Melbourne
  (5.1)
• Early Chinese settlers from Pearl River Delta
• Differences among Hong Kongers, Mainlanders and
  Taiwanese
• Dialect (40.4 speak Cantonese, 25 speak
  Mandarin 2002 Australian Bureau of Statistics)
• Time of arrival
• Proficiency in English and familiarity with
  Western business practices
• Historical legacy
• Mutual dislike of each other

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Diaspora and Australia (continued)

• Similarities
• Tendency to engage in entrepreneurial activities
• 1991-1992, 93 of business emigrants came from
  Asia (Hong Kong 32 Taiwan 15)
• Desire to participate in fruits of Chinese
  economic miracle
• Brain circulation, astronaut families, parachute
  children
• Immigrants as an important source of social
  capital
• Economic motives to FME Uppsala model of
  incremental involvement (Johanson Vahlne,
  1977) transaction cost (Anderson Gatignon,
  1986) OLI (Dunning, 1988)
• Social networks leapfrogging traditional
  barriers to internationalization (Coviello
  Martin, 1999 Chen Chen, 1998 Filatotchev et
  al., 2007 Johanson Vahlne, 1992 Zhao Hsu,
  2007)
• Immigrant effect (IE) firms owned by immigrants
  and which hired immigrants in key decision making
  positions (Chung Enderwick, 2001)

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Hypotheses

• H1 Immigrants can enable the pursuit of a
  higher resource commitment mode when entering
  into emerging markets
• H2 Immigrants can facilitate the pursuit of
  appropriate marketing strategies where there is a
  significant difference in customer behavior
  between home and target markets
• H3 Immigrants can facilitate the pursuit of
  appropriate marketing strategies where there is a
  significant difference in the PLC stage of the
  product between the home and target markets
• H4 Firms with a longer history of operations in
  the target market are less likely to resort to an
  immigrant effect
• H5a Firms that possess an IE social network are
  likely to enjoy a better performance
• H5b Firms that adopt a high resource FME mode
  are likely to enjoy a higher performance

7
Control Variables

• Firm size
• Product type (manufacturing vis-à-vis service)
• Firms overall experience in international
  business (IBE)
• Host countrys institutional environment
• Political-legal
• Economic
• Competitive
• Cultural

8

Figure 1 Research Framework in the Greater China
Region The Case of Ethnic Chinese in Australia
H2
H5a
Customer
Customer
Product life cycle
H3
H1
H5b
FME mode (high versus low)
Immigrant Effect
Performance
History in the host market
H4
Type of host market
Control variables
----- control variables relationships i.e., not
proposed in hypotheses
9
Methodology

• 6-page questionnaire sent to Australian firms
  listed in Worldwide Directory of Dun Bradstreet
  with operations in Greater China (n710 firms)
• Completed by most senior executive overseeing
  firms operations in respective target market
• 135 usable questionnaires (19 response rate)
• 80 are SMEs
• Majority in consumer (food/beverage, apparel,
  electrical) and industrial products (equipment,
  material, components, chemical) 10 in service
  (financial, shipping, designing, education,
  market research)
• Most important target markets China (44), HK
  (37), TW (18)
• 75 entered via low resource commitment FME mode
• 43 of respondents were IE users (40 hired
  immigrants 3 owned by immigrants)
• IE usage highest for China (52) Hong Kong
  (37) TW (11)
• IE HK, TW and PRC as 3 COO markets (in PLS,
  HK/Taiwan vis-à-vis China)
• Immigrant employee has to be based in Australian
  HQ
• 1 IE

10
Methodology (continued)

• FME mode
• Current FME mode (Cavusgil Zou, 1994)
• 1 high resource commitment (wholly-owned or
  j.v.)
• Size total number of employees (Brouthers, 2002)
• Firms history in target market of years in
  target market
• IBE of years in international business
  (Brouthers, 2002)
• PLC stage 5-point scale (1very similar 5
  very different)
• Type of industry (1Service 0consumer,
  industrial)
• Customer variation 5-point scale (1very similar
  5 very different) in terms of customer
  preference, buying habit, product usage
  consumption pattern
• Environmental 5-point scale (1very similar 5
  very different)
• Political-legal political interference, legal
  requirement on content safety, etc.
• Economic level of economic development, cost of
  labor, price controls
• Competitive nature of competition
• Cultural linguistic difference, variations in
  custom

11
Methodology (continued)

• Type of host market
• China (1) HK/Taiwan (0)
• Australian firms with operations in China
• (a) have slightly more years of IBE, and are
  larger
• (b) primarily in natural resource/extractive
  industries
• (c) risk of doing business are usually higher
• Performance
• Sales average performance in previous 3
  financial years
• Market share average performance in previous 3
  financial years (10-point scale)
• Profit previous years performance (7-point
  scale 1negative growth 7 gt 25)

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China vis-a-vis Hong Kong/Taiwan
(n60) Hong Kong/Taiwan (n75) Overall (n135)
Firm size (full-time employees) 687 138 379
IBE- general 22 19 20
Year in the host markets 9 10 9.8
IE 50 37 43
Non-IE 50 63 57
High resource 33 18 25
Low resource 67 82 75
Product type (service) 14 8 10
Product type (non-service) 86 92 90
Consumer 3.15 3.08 3.12
Product life cycle 2.50 2.31 2.40
Political-legal 3.58 3.18 3.35
Economic 4.47 3.87 4.13
Competitive 3.38 2.88 3.10
Profit 3.98 (4.13, 3.81) 3.97 (3.74, 4.18) 3.98 (3.95, 4.04)
Sales growth 3.96 (4.14, 3.78) 3.15 (3.15, 3.15) 3.50 (3.67, 3.38)
Market share 2.24 (2.14, 2.33) 1.93 (2.00, 1.89) 2.06 (2.07, 2.06)
Variables are measured on a 5-point scale
(1very similar 5very different) The first
set of figures within the parentheses represents
the mean for IE users, while the second set of
figures within the parentheses constitutes the
mean for non-IE users.
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Findings

• H1 Immigrants can enable the pursuit of a
  higher resource commitment mode when entering
  into emerging markets
• H2 Immigrants can facilitate the pursuit of
  appropriate marketing strategies where there is a
  significant difference in customer behavior
  between home and target markets
• Negatively associated with choice of FME mode,
  i.e., more likely to use immigrants where there
  was substantial variation in customer behavior
  between home and host markets
• H3 Immigrants can facilitate the pursuit of
  appropriate marketing strategies where there is a
  significant difference in the PLC stage of the
  product between the home and target markets
• H4 Firms with a longer history of operations in
  the target market are less likely to resort to an
  immigrant effect
• H5a Firms that possess an IE social network are
  likely to enjoy a better performance
• H5b Firms that adopt a high resource FME mode
  are likely to enjoy a higher performance

14
Findings (continued)

• Size and IBE positively and significantly related
  to choice of high resource commitment FME mode
• Product type not significantly related to
  deployment of IE and choice of FME mode
• IE usage did not differ across type of host
  market, i.e., Australian firms that operated in
  China were not more likely to deploy immigrants
  in comparison to counterparts that do business in
  Hong Kong/Taiwan
• Environment has no influence on IE, but has
  significant influence on the choice of FME

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Figure 2 PLS results
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Conclusion and Implications

• Members of Chinese diaspora can play an important
  role in facilitating trade between their
  respective COO and Australia (COR), although
  hypotheses pertaining to variations in PLC stage,
  
• Findings support to need to investigate both
  economic and non-economic motives in choice of
  FME
• Shared ethnicity, a broader concept than a
  business network, can be an important source of
  socialcapital