SEARCH

SEARCH BY CITATION

Keywords:

  • buyer learning;
  • cultural heritage identity;
  • own brand management;
  • subsidiary learning

Abstract

  1. Top of page
  2. Abstract
  3. INTRODUCTION
  4. THEORY DEVELOPMENT AND HYPOTHESES
  5. METHOD
  6. RESULTS
  7. DISCUSSION
  8. CONCLUSION
  9. APPENDIX
  10. REFERENCES

abstract  While the contract manufacturers in Taiwan take orders from their brand-name buyers, some of them have started to move up to own brand management (OBM). This study examined three factors contributing to the performance of OBM: learning from the key buyer, learning from the key subsidiary and the focal firm's own cultural heritage identity. We found learning from the key subsidiary and one's own cultural heritage identity related positively to OBM performance. Further, there is a counterintuitive negative moderating effect of identity on the relationship between learning from the key buyer and OBM performance. Although preliminary, our results suggest that partners with asymmetric power relationships are prime candidates for future studies to explore the role of identity and pride.


INTRODUCTION

  1. Top of page
  2. Abstract
  3. INTRODUCTION
  4. THEORY DEVELOPMENT AND HYPOTHESES
  5. METHOD
  6. RESULTS
  7. DISCUSSION
  8. CONCLUSION
  9. APPENDIX
  10. REFERENCES

The literature on supplier management was informed by the study of Japanese automakers, particularly that of Toyota (Dyer, 1996; Dyer and Nobeoka, 2000). Although recent studies have begun to address the issue from the small supplier's viewpoint (Dyer and Hatch, 2006; Subramani and Venkatraman, 2003), the discussion retains the focus on how to realize the learning potential offered by the buyer–supplier relationship. While following this tradition, this study draws on the context of contract manufacturing firms in Taiwan and their buyers to present a contrasting view of buyer–supplier relationships. The Toyota model requires a family-like relationship between the lead buyer and its suppliers. Once the family-like feature is missing, the partners may reverse back to arm's length transactions that are prone to the confrontations commonly observed between US automakers and their suppliers (Dyer and Nobeoka, 2000; Gulati and Sytch, 2007). The possibility for the small supplier to learn from its key buyer then becomes constrained in this competing view. Indeed, Dyer and Hatch (2006) found that the US automotive suppliers that supply to both Toyota and the Big Three (GM, Ford and Chrysler) learn less from the Big Three than from Toyota.

To shed light on this diminishing learning prospect from the supplier's view, we focus on a group of firms in Taiwan. Traditionally, these firms act as the suppliers manufacturing goods under the buyer's brand. Recently, some of them have started to shift from this practice of contract manufacturing to own brand management (OBM). OBM represents a break from contract manufacturing and requires the focal firm to move from efficiency to innovation. As a result, the focal firm needs to acquire a different set of knowledge to carry out the transformation. Traditionally, Western firms often transfer their technology and management know-how to their foreign subsidiaries. In contrast, firms in Taiwan and China have much to learn about technology and marketing from their foreign subsidiaries residing in more developed countries. Yet another source of learning is to turn even more inward and rely on one's own cultural heritage identity and pride (Hofstede, Van Deusen, Muller, Charles, and the Business Goals Network, 2002; Ravasi and Schultz, 2006). While learning from the key buyer and the key subsidiary builds up the focal firm's capability, identity can act as a motivator to further enhance this capability.

In sum, we ask as a research question: How does learning and cultural heritage identity contribute to OBM performance when firms make the transition from contract manufacturing to OBM? By uncovering the unique characteristics and patterns of behaviour of indigenous Taiwanese firms, this study contributes to the recent call for a more contextualized approach to research in Chinese management (Tsui, 2006). Specifically, the issue of OBM is a key concern for many indigenous firms in developing economies, including Taiwan. At the same time, invoking the idea of cultural heritage identity positions this paper as a context embedded study. By focusing on a contextually meaningful phenomenon and drawing upon a culturally relevant concept, we hope to achieve the dual goals of uncovering something unique in an indigenous context and connecting it to global management literature (Tsui, 2004).

THEORY DEVELOPMENT AND HYPOTHESES

  1. Top of page
  2. Abstract
  3. INTRODUCTION
  4. THEORY DEVELOPMENT AND HYPOTHESES
  5. METHOD
  6. RESULTS
  7. DISCUSSION
  8. CONCLUSION
  9. APPENDIX
  10. REFERENCES

The iPod is designed by Apple in California and assembled in China by firms headquartered in Taiwan, such as Hon Hai and Asus. This arrangement has been beneficial to all sides (Fallows, 2007). From the perspective of the junior partners, the Asian firms, it helps them to build up their core competencies in manufacturing. However, once they decide to embark on OBM, the same manufacturing competency may become core rigidity (Leonard-Barton, 1992) or competency trap (Ingram and Baum, 1997). Playing the efficiency game may hinder one's ability to switch to an innovation mode (Benner and Tushman, 2002).

Performance in Own Brand Management (OBM)

As the above example of iPod shows, firms in Taiwan have the manufacturing know-how to help China become a factory to the world (Fallows, 2007). However, the efficiency of manufacturing is a very different orientation from that of understanding and serving fickle consumer preferences. The difficulty in switching from contract manufacturing to OBM is similar to the problem facing defence contractors in the US during declining budget allocations after the Reagan era. Many defence contractors failed in their attempt to reach out to the commercial sector. As Anand and Singh (1997, p. 107) observed, ‘since defense firms have been involved in a distinct kind of operation for many years (more than 40 years for many firms), their ways of working, practice and company culture are difficult to change swiftly’. Similarly, after examining five high-tech firms' new product development process, Danneels (2002, p. 1113) came to the conclusion that ‘marketing competence was less prevalent in these firms than R&D competence. Building a new customer competence involves identifying new customers, developing knowledge about those customers, and gaining access to them through sales and distribution channels’. Danneels labeled the ability to overcome the above switch from technology to marketing as ‘second-order’ marketing competence. This second-order competence is essential for firms transitioning from contract manufacturing to OBM.

Learning from the Key Buyer

We adopt March's (1991) dichotomy of exploration and exploitation to reflect learning during the transition from contract manufacturing to OBM. Following March (1991), we equate short-term, immediate learning to exploitation. In contrast, exploration is long-term, deep learning. Exploitation harks back to the bounded rationality view (March and Simon, 1958) that firms are trapped by their own very strengths (Leonard-Barton, 1992). They tend to engage in local searches that look for solutions in areas closer to their own expertise, regardless of the possibility that the expertise may have already been transformed into a liability by the changing environment. Exploration, in March's (1991, p. 71) own words, calls for ‘variation, risk taking, experimentation, play, flexibility, discovery, innovation’. Its chaotic pace is set to obtain the ultimate fruit of groundbreaking innovation.

The literature has shown that maintaining a close relationship between supplier and buyer can promote long-term learning beyond the current business (Subramani and Venkatraman, 2003). Dyer (1996) found that Japanese automakers' specialized supplier networks contribute to their advantage in quality, new model cycle time and lower inventory cost over their US competitors. Dyer and Nobeoka (2000, p. 351) reiterate that one reason why Toyota leads the automobile industry is its superior skills in managing a family-like network of suppliers. By actively creating a shared network identity, Toyota's suppliers are able to learn quickly to increase productivity. An example of exploitation learning from the buyer may be about quality (e.g., six sigma). An example of exploration may be learning about creativity. Hon Hai, the largest firm in Taiwan and the largest exporter in mainland China, recently announced an ambitious plan to get into the movie industry. The press reports it as inspired by Hon Hai's key buyers, Sony and Apple (Shown, 2006).

In addition to the above examples, there is strong evidence that Chinese firms have benefited from their Western partners in learning (Guthrie, 2005). With the enhanced productivity and technology, they have become the crucial link to the global supply chain for their buyers in the West. However, once they start moving up the value chain by adding OBM, they become competitors to their buyers. Guthrie (2005, pp. 174–175) provides a detailed account showing the similar dilemma involving the move from simple assembly to technology transfer. In 1988, Motorola had started to teach its suppliers in China about ‘the principles, practices, and standards of participation in the emerging market economy’ (Guthrie, 2005, p. 174). However, the Chinese aspiration grew to such a point that in the mid-1990s they asked Motorola for a joint venture to transfer technology to one of Motorola's supplier. What was Motorola's response? ‘We really didn't have much choice in the matter. We have been doing well over here for a while, and now the government wants us to share the wealth a little. Ideally, we would keep things the way they are . . .’ (Guthrie, 2005, p. 175)

Motorola's response corroborates the view that issues such as trust (Dyer and Singh, 1998), opportunism (Williamson, 1985) and learning race (Hamel, 1991) may put a cap on higher-level learning that is required for either technology transfer or OBM. Oxley and Sampson (2004) show that most R&D alliances have limited scope for cooperation precisely for these similar concerns. Being aware that it's their skills in R&D and marketing that keep future competitors in check, US firms would choose to give away manufacturing knowledge rather than R&D and marketing knowledge to their partners. Even when both parties are not concerned with partner protectiveness (Simonin, 2004) and sincerely engage in the mutual and deeper learning, Taiwanese firms may not be ready for it. As junior partners, their limited absorptive capacity (Cohen and Levinthal, 1990) may keep them from high-level learning.

One quote provided by Dell to Quanta, the largest laptop producer in Taiwan, sets the tone of the above view of limited inter-partner learning: ‘If the horse is not running fast enough, it's time to replace the horse’ (Fang, 2002, p. 101). This working horse metaphor certainly does not leave much room for learning. In its strong form, this view of limited learning from buyers may even fall into the category of ‘the exploitative role of foreign firms in the Chinese economy’ more than that of ‘technology transfer in the economy’ (Guthrie, 2005, p. 166). Not wanting to create a future competitor, the focal firm's key buyer will teach only to help secure the efficient production of the goods. Once the focal firm decides to move up to OBM, it instantly creates goal disparity with its key buyer. ‘In the presence of goal disparity, cooperation becomes difficult and exchange members are more likely to engage in dysfunctional activities seeking private interests’ (Luo, 2006, p. 132). The buyer will not act as a willing teacher, as the previous Motorola case indicated. Without the teacher's active involvement, the learning will be shallow, regardless of whether it is exploitation or exploration. The linkage between learning and OBM may be tenuous. The focal firm may interpret the buyer's effort in teaching it about efficient production as the start of a close relationship, while the buyer is more likely to see such teaching as a necessary step to ensure efficiency from a low-cost provider. The working horse metaphor may be blunt, but not rare. When firms such as Acer and Asus started their OBM operations, their buyers replaced them with other contract manufacturers who did not branch out to OBM (Lin, 2007).

Learning from the Key Subsidiary

If learning from the key buyer is constrained, the focal firm can learn from within itself, particularly from its key subsidiary. This is one example of why Williamson (1985) advocated the use of internalization to deal with market failures. Aside from the opportunism argument, the very nature of innovation suggests that foreign subsidiaries are an ideal source for learning. For many Taiwanese firms, their key subsidiaries often reside in the USA or, more recently, in China. The key subsidiary can function as an outpost to relate market and technology information back to headquarters (Bartlett and Ghoshal, 1989; Gupta and Govindarajan, 2000). This is similar to Almeida and Phene's (2004) hypothesis that subsidiaries located in technologically rich host countries are more innovative. The headquarters can then combine this set of innovation with its own (Feinberg and Gupta, 2004) to embark on OBM.

An example of exploitation learning from the subsidiary may be learning about adapting one's product to better fit the need of consumers in the host country. However, an example of exploration may be learning about a whole new market. Master Kung, the most popular Taiwanese packaged food brand in China, got its start in instant noodle making in China. Before that, Master Kung did not even make instant noodles in Taiwan. As a result of this exploration learning, the premier Taiwanese packaged food firm, Uni-President, is still struggling to catch up with Master Kung in China (Liu, 2003). Acer offers yet another example of learning from a key subsidiary that proves to be crucial for the whole corporation. Acer's European subsidiary built up an extensive dealer network in Europe a few years ago. Due to the success of this dealer network compared with Dell's direct sales approach, Acer became the number one notebook brand in Europe in the mid-2000s (Lin, 2006). More significantly from the learning perspective, Acer then applied this dealer network approach to its markets in the USA and China. As a result of learning from the subsidiary, Acer is on its way to become the number three PC brand in the world, forcing even Dell to turn to dealer networks in 2007 (Lee, 2007).

In sum, learning from the key subsidiary offers significant benefits over that of learning from the key buyer for two major reasons. First, the boundary of the firm matters (Miller, Fern, and Cardinal, 2007). Inter-firm learning between the focal firm and its key buyer will focus the related issues of opportunism, distrust, partner protection and learning race much more than learning from one's key subsidiary. Second, even in the rare case where the key buyer does not perceive the focal firm as a future competitor, the key buyer is likely to assign operational level management (e.g., the purchasing department) to interact with the focal firm. Deep and broad learning such as that which took place within the Acer Group is less likely to take shape when the learning partners do not share joint decision-making about key issues (Subramani and Venkatraman, 2003). We present our first hypothesis.

Hypothesis 1: Own brand management performance will relate more strongly and positively to learning from the key subsidiary than to learning from the key buyer.

Cultural Heritage Identity

The above discussion deals with knowledge transfer from key buyers and key subsidiaries. While learning from the buyer offers the promise of more advanced knowledge, learning from the subsidiary encounters fewer interorganizational learning obstacles (Miller et al., 2007). When the issue is exploration learning rather than exploitation learning, both sources of learning will be trapped by the sticky issue of codifiability, complexity and teachability of tacit knowledge (Kogut and Zander, 1993). It can be argued that even in the case of exploitation learning, the learning subject of OBM itself is more tacit than explicit. Indeed, Dhanaraj, Lyles, Steensma, and Tihanyi (2004) use new market expertise as one proxy for tacit knowledge in their test of the impact of knowledge transfer on international joint venture performance. Given this double binding of tacit knowledge from both exploration learning and OBM itself, the focal firm's journey toward OBM can be extremely difficult as depicted in the struggle of firms such as Acer, Lenovo, TCL and others.

One way out of this trap may be through the focal firm's own identity. Identity brings the framework from out ‘there’ (interorganizational learning) back in ‘here’ (values). Organizational identity refers to the set of basic values internalized by members of an organization (Albert and Whetten, 1985; Dukerich, Golden, and Shortell, 2002). As the driver of many organizational behaviours (Leonard-Barton, 1992; Meyer, 1982), identity serves to capture other potential sources and types of learning. One example of internal values driving a firm to keep reinventing itself is Apple. Steve Jobs' motto of ‘stay hungry, stay foolish’ helped Apple change both the music distribution and the animated film industries in recent years. In early 2007, the world once again eagerly awaited Apple's iPhone to work magic on an established industry. Similarly, we propose that as the most basic internal values of the focal firm, identity can drive that firm to learn widely and deeply by developing new competence in OBM.

While the identity literature emphasizes identification with one's own organization (Dukerich et al., 2002), another key organizational characteristic is the pride in one's own cultural heritage. Our inspiration for this idea comes from our observation of a group of indigenous firms in Taiwan since the mid-1990s (Horng, 2004). Foremost of them is Acer and its founder, Stan Shih. One of Mr. Shih's famed mottoes is ‘dragon dream comes true’, which refers to reviving the Chinese cultural heritage and restoring its pride. While numerous bestseller business books have been devoted to the story of Acer (e.g., Shih, 2004), very little academic research has focused on Acer's search for cultural heritage identity and its long journey of OBM. While organizational identity has received much attention in the mainstream management literature, the target of the identity is the organization, with much less treatment of the characteristics of the overall society. We are interested in an identity that also reflects the uniqueness of the host society.

A treatment of identity and pride in the overall society can be found in the political science literature. For instance, Hjerm (1998) reported two groups of national pride factors: political and cultural. The cultural group contains elements such as technology, sports, literature and history. This two-factor pride structure has also been recently reported by Smith and Kim (2006), and we focus on the cultural part in this study. Working in the tradition of cross-cultural comparison, Hofstede et al. (2002) provided a contrast of different managerial goals across 15 countries. Although they found national pride to rank near the bottom of the most important managerial goals on average, they reported that national pride was ranked the second most important goal in China. While Hofstede et al. (2002) briefly mentioned that national pride was negatively related to national wealth, the marketing literature has addressed the implications of cultural identity from the perspective of consumer preferences. For instance, Zhou and Belk (2004) studied Chinese consumer readings of global and local advertising appeals and found two opposing preferences. Based on the nature of the product at issue, Chinese consumers prefer either global cosmopolitanism or a desire to elevate Chinese values that are local ‘in order to reinforce a distinctly Chinese identity in a changing world’ (Zhou and Belk, 2004, p. 72).

The theme of going back to one's cultural roots for revival plays a key role in Ravasi and Schultz's (2006) study of responding to organizational identity threats. They found that Bang & Olufsen (B&O), a high-end Danish audio-video systems provider, underwent three cycles of responding to identity threats, such as Japanese competition, from 1972 to 1998. Although the trigger for each cycle was different, each time B&O went back to its cultural heritage for the solution. ‘An international product has no identity. B&O is and always will be a Danish and Scandinavian company’ (Ravasi and Schultz, 2006, p. 443). In our field interviews with a group of Taiwanese OBM firms, their managers similarly expressed this aspiration for pride and identity. The founder of a men's suit company told us that she wanted her customers to feel proud when they wore suits made by her firm. An owner of a sporting goods firm said that the major reason for his effort in OBM was to get his pride back. He used to be greeted with hostility when visiting trade exhibitions, where venders suspected him of copying their designs. One leading IT firm in Taiwan even proclaimed to us that the motivation for its drive in OBM is 30 percent economic and 70 percent psychological.

As alluded to in the above discussion, there are two mechanisms that lead to a possible positive relation between identity and OBM performance: the desire to be unique and persistence. First, as Blau's (1955) study shows, identity can promote the use of unique language by participants to set themselves apart from others. A brand announces distinctiveness (e.g., Aaker, 1991). This common emphasis on uniqueness suggests a positive relation between identity and OBM performance. Second, as Hiller and Hambrick (2005, p. 312) point out, the more top managers believe in themselves, the greater the firm will persistently pursue strategies launched by them. This persistence is required for success in OBM, as Acer's experience shows. In sum, while the desire to be unique directs the focal firm's effort toward OBM, persistence helps the focal firm stay the course on OBM. Through these two mechanisms, identity exerts its positive effect on OBM performance. We therefore present our second hypothesis.

Hypothesis 2: A firm's cultural heritage identity will relate positively to its own brand management performance.

The Moderating Effect of Cultural Heritage Identity

In addition to the main effect, identity also can modify the relationship between learning and OBM performance. The literature on product innovation offers two explanations for why there are transfer problems – ability and willingness (Hansen, 1999). Similarly, in the case of OBM, we propose that while learning builds up capability, identity serves as the motivation. An intuitive prediction is that identity has a positive moderating effect on learning and OBM performance. However, the different nature of learning from the key buyer and learning from the key subsidiary requires further refinement of the moderating effect. While identity and pride can act as motivation to enhance the benefit of learning from the key subsidiary, we hesitate to make such a claim for learning from the key buyer. Specifically, the difficulty of learning from the key buyer compared with learning from the key subsidiary may frustrate the focal firm. In the face of high cultural heritage identity and pride, this frustration may lead to strong and negative reaction against the key buyer. Instead of being perceived as a benign learning source, the key buyer becomes a suspicious outsider. In other words, extensive learning from the key buyer coupled with high identity provides a setting for the working horse metaphor to come to life.

Put differently, while the key buyer may follow the approach of legal contract or economic exchange, the focal firm is likely to be influenced by the implicit psychological contract (Rousseau, 1989). Robinson (1996, p. 575) defined a psychological contract as ‘an individual's beliefs about the terms and conditions of a reciprocal exchange agreement between that person and another party’. Morrison and Robinson (1997) provided a process model of psychological contract violation committed by the employer as perceived by its employees. Notably, they include power asymmetry and cultural distance as part of the starting condition. Both power asymmetry and cultural distance are the defining characteristics between the focal firm and its key buyer as well. A psychological contract violation can lead the victim to experience ‘anger, resentment, bitterness, indignation, and even outrage’ (Morrison and Robinson, 1997, p. 231). Similarly, for the focal firm that harbours the ‘dragon dream’, receiving the ‘working horse’ description is likely to evoke negative emotions. Ironically, learning from the key buyer provides a chance for the focal firm to experience the perception of the breach of psychological contract. High cultural heritage identity and the associated pride make this violation particularly hard to accept. The cascading effects of the negative emotions and actions can, in turn, interrupt the focal firm's effort in OBM, reducing OBM performance as a result. While we predict that cultural heritage identity will strengthen the relationship between learning from the key subsidiary and OBM performance, we expect that this moderating effect will be negative with learning from the key buyer.

Hypothesis 3a: Cultural heritage identity will negatively moderate the relationship between learning from the key buyer and OBM performance. The relationship will be weaker for firms with a strong cultural heritage identity than those with a weak cultural heritage identity.

Hypothesis 3b: Cultural heritage identity will positively moderate the relationship between learning from the key subsidiary and OBM performance. The relationship will be stronger for firms with a strong than those with a weak cultural heritage identity.

METHOD

  1. Top of page
  2. Abstract
  3. INTRODUCTION
  4. THEORY DEVELOPMENT AND HYPOTHESES
  5. METHOD
  6. RESULTS
  7. DISCUSSION
  8. CONCLUSION
  9. APPENDIX
  10. REFERENCES

Sample and Procedure

This study collected survey data first in March 2002 and again in August 2006. Both samples were drawn from the Common Wealth 1000 list (Common Wealth, 2002, 2006). Similar to Fortune 500, the Common Wealth 1000 list contains the largest1,000 firms by sales in Taiwan. Both waves of survey included approximately 630 firms in nine industries: metal, electrical machinery, textiles/garments, computer peripherals and components, computer systems, electronics, communications and networks, semiconductors and optical electronics. These nine industries are the major ones in Taiwan's economy and can be separated into two groups: the high-tech segment and the traditional segment. After pre-testing it with a group of EMBA students at a university in southern Taiwan, the revised questionnaire was sent to the top executive representing each firm. For the 2002 survey, we received a total of 120 responses, a 19 percent response rate. The response rate dropped to 13 percent in 2006, with 83 responses. These response rates are not atypical. As Krishnan, Martin, and Noorderhaven (2006, p. 899) observed, survey response rate in emerging economies commonly falls below 20 percent. To ensure data quality, we deleted responses with excessive missing values and responses that checked on the same column for a whole block of items. The number of firms remained in our final analyses was 166, and they represent two independent sets of samples drawn from two different time periods. There are 11 firms that appear in both years. To avoid counting them twice in our analyses, we therefore retain them only in the 2006 data.

On average, 65 percent of the responding firms are from the mostly IT-related, high-tech industries and are 20 years old. They also have sales of around $US130m, 40 percent of total sales from overseas and a profit margin of 3.62 percent. The number one location for the key subsidiary is China (44 percent of the total), followed by the USA (24 percent) and Southeast Asia (5 percent). The premier location for the key buyer is Taiwan (31 percent of the total), followed by the USA (30 percent) and Western Europe (11 percent). Table 1 shows the top five locations of the key buyers and the key subsidiaries. As for the respondents, 72.3 percent of them hold managerial jobs as opposed to staff. The majority of the staff positions are ‘special assistant to general manager’. The average tenure of respondents is 8.5 years.

Table 1.  Top five locations of the key buyers and the key subsidiaries
Key buyerKey subsidiary
LocationN%LocationN%
Taiwan5231China7344
USA5030USA4024
Western Europe1811Southeast Asia85
Japan1710Western Europe85
China117Japan21
   South America21

Nonresponse Bias

We conducted simple t-tests on sales, sales growth, profit margins and return on assets between the responding group and a random sample of the non-responding group because these data are publicly available from the Common Wealth 1000 list. We randomly drew equal number of firms from the non-responding group and the responding group industry by industry. In other words, if there were 20 respondents from the computer industry, we randomly drew 20 other non-respondents from the computer industry for the comparison. The results show that these two groups do not differ significantly in any of the four variables. While the above test follows the tradition of the literature (e.g., Poppo and Zenger, 2002), there is still the possibility that the two groups differ systemically in the dependent variables. For instance, firms with low OBM performance may have a keen interest in participating in this survey to obtain relevant information for their problem. However, firms with poor performance can be too busy with their performance problem to answer the survey. Either way, it is difficult to gauge the non-response bias arising from the dependent variable. In addition, although the Common Wealth 1000 list contains the largest 1,000 firms in Taiwan by sales, these firms are all relatively small compared with Western firms, and it is possible that not every firm has significant overseas operations and OBM. Beside the lack of academic tradition (Xiao and Bjorkman, 2006), this may be another reason for the low response rate encountered by this study. We therefore do not claim for generalizability. Instead, this study obtains data from a very limited sample as the first step toward addressing the issue of OBM performance that is a major concern for many firms in Taiwan, China and other emerging economies.

Measures

Dependent variables.  This study contains a measurement of firm performance in two areas, OBM and manufacturing. Although manufacturing performance is not in the hypothesis testing, we include it to compare with OBM performance. If there are some logical differences between these two performance areas, we may have more confidence in the criterion validity of the independent variables. Specifically, we expect to see the learning variables having a smaller effect on manufacturing performance due to the fact, discussed earlier, that firms in Taiwan are already proficient in manufacturing and therefore have less need to learn from others to make further improvements. This study opts for broad performance dimensions to measure OBM. Since OBM represents a goal for many firms in Taiwan, using broader rather than technical dimensions may be a better way to capture this aspiration. This scale is an adaptation of a measure reported in a previous study (Horng, 2004). OBM performance includes the following four items: an increase in name recognition, an increase in growth, an increase in profits and an increase in long-term competitiveness. A seven-point scale was used, ranging from −3 (strongly disagree) to +3 (strongly agree). Its alpha is 0.93. To measure manufacturing performance, we adapted the Schroeder, Bates, and Junttila (2002) scale to arrive at four items: production costs, yields, delivery time and turnover time. The same seven-point scale and anchors were used, ranging from −3 to +3. Its alpha is 0.88. The Appendix lists the specific items.

Independent variables.  To measure learning from the key buyer, we developed three items measuring exploitation and another three measuring exploration. The Appendix lists all six items. The two learning types are highly correlated (r = 0.70, p < 0.01), justifying combining them to arrive at the measurement of learning from the key buyer. Its alpha is 0.84. The same six items were applied to measure subsidiary learning, with different wording at the beginning of the scales to prompt the respondents for the different referent. Once again, these two types of learning are highly correlated (r = 0.67, p < 0.01), and we combined the two to measure learning from the key subsidiary. Its alpha is 0.81. Lastly, the cultural heritage identity scale is an adaptation of an existing scale (Horng, 2004, 2006) and it includes three items (see Appendix). Although theoretical inspirations for this construct come from cultural pride (Hofstede et al., 2002) and organizational identity (Albert and Whetten, 1985), the specific items were based on our observation of firms in Taiwan over the past decade. Identity's alpha is 0.86.

Validity of the Cultural Heritage Identity Variable

Since identity plays a key role in our study, we report two earlier studies that offer some evidence on the validity of this construct. The first study used four items to measure cultural heritage identity (Horng, 2004). Two of the four identity items are the same as in this current study. Results showed that identity and supplier relations related positively to OBM performance. The second study used five items to measure cultural heritage identity (Horng, 2006), with three of them identical to those reported in this current study. Results showed that identity related positively to both knowledge transfer and knowledge reciprocation. The two items excluded from the second study are: (i) aspires to engage in mutual learning with foreign buyers; and (ii) treats one's own product as the personification of corporate spirit. To focus on the cultural heritage aspect of identity, we deleted these two less-related items for the current study.

Control Variables

This study includes 10 control variables – industry, firm age, sales, time period, key customer in Taiwan, key subsidiary in China, export percent, R&D percent, advertisement percent and OBM percent. The strategy literature has long required the control of the industry effect. Particularly in learning, high-tech industries by definition require more knowledge intensive operations. A dummy variable was included to capture this difference. It received a value of one for the six high-tech industries (computer peripherals and components, computer system, electronics, communication and network, semiconductor and optical electronics). As for firm age, younger firms may be more receptive to new learning, or older firms may be more skillful at improving on current practice. We controlled for both effects. The literature has also shown size to be an important variable associating with different organizational attributes. Compared with small firms, large firms may have more slack resources to engage in learning. However, large firms may also have more difficulty overcoming inertia to start new learning. This study therefore uses firm's sales in natural log as the third control variable.

The next control group includes three dummy variables. Since we collected data in 2002 and again in 2006, we included the time period dummy. It receives one for 2006 and zero for 2002. We also controlled the location of the learning sources. Our theory requires distinguishing between domestic buyers and foreign buyers. The key buyer in the Taiwan dummy serves this purpose, and it receives one when the key buyer is another Taiwanese firm and zero otherwise. Similarly, a major proportion of the key subsidiary in our sample is located in China. We therefore included the key subsidiary in the China dummy.

Lastly, four different ratios are included as controls. Export percent is international sales as a percentage of total sales and corresponds to the focal firm's degree of internationalization. The literature has shown that international expansion enhances technical learning and performance. R&D percent measures the focal firm's investment in R&D as a percentage of its total sales. A larger R&D percent represents a larger absorptive capacity and can facilitate learning. Similarly, advertisement percent is the focal firm's advertisement expenses as a percentage of its total sales. Along with R&D percent, advertisement percent has been commonly employed in the literature as a surrogate of a firm's knowledge intensiveness. Another ratio is OBM percent, which is the focal firm's OBM sales as a percentage of its total sales. Obviously, there will be no OBM performance to address if the firm engages in no OBM.

Common Method Variance

Since we used one key informant from each company, the data may suffer from common method variance problem. We took steps to assess the severity of this problem. In both 2002 and 2006, we waited a month after the return of the survey and faxed one page of the condensed survey, asking the focal firm to fill in the items for the dependent variables again. The 14 overlapping responses we received for 2002 show a significant correlation (r = 0.55) for manufacturing performance but no significant correlation for OBM performance. On the other hand, the 10 overlapping responses for 2006 have a significant correlation (r = 0.75) for OBM performance but no significant correlation for manufacturing performance. With the above test showing some degree of re-test reliability, we decided to go one step further in 2006. We split the 2006 questionnaire into halves, one for the independent variables and the other for the dependent variables and controls. We asked the focal firm to have two managers fill out each half separately. This split approach alleviates the concern for common method variance since data for the independent variables and the dependent variables come from two separate surveys. In addition to the above attempt to obtain data from different sources to cope with the threat of common method variance, we followed the tradition of the literature to conduct Harman's one-factor test. The result shows no indication of one single factor accounting for most of the variance. We also tried the controlling of a single unmeasured latent method factor approach (Tang et al., 2006, p. 442). We found that the χ2 change was significant (p < 0.001), and all the factor loadings of the items remained significant. Although the above two tests indicate the absence of a major common method variance problem, we cannot rule out its possibility because of our limited data source.

Estimating Construct Validity through Confirmatory Factor Analysis

We conducted confirmatory factor analysis to check for convergent and discriminant validity of the variables with LISREL. One indication of convergent validity is the item loadings (Krishnan et al., 2006, p. 902). Every loading for the multiple item constructs of learning, identity and performance was significantly related to the corresponding construct. Convergent validity was further supported with the fact that all our standardized item loadings were above the 0.50 cut off point. As for discriminant validity, we followed Wu et al. (2006) and included all our independent and dependent constructs in one measurement model. This model demonstrated satisfactory model fit (CFI = 0.93, IFI = 0.93, RMR = 0.07). We next collapsed two constructs at a time and compared the model fit of this reduced model with the full model. We repeated this procedure for all 10 possible combinations. The results indicated that in no case was any one of the 10 reduced models a better model than the full model. The model that has the next best model fit is the one where we combined identity and subsidiary learning into one construct. Its values of CFI, IFI and RMR are 0.83, 0.83 and 0.10, respectively.

Analyses

Due to the high correlation among the independent variables (see Table 2), we follow the tradition in the literature by applying nested regression analyses (Baum, Li, and Usher, 2000, p. 785). A significant incremental F-value indicates that the newly entered variable satisfactorily explains OBM performance. Although deleting a few outliers improves the overall model fit, results pertaining to hypotheses testing remain approximately the same. To maintain a large sample size, we report the results without deleting outliers and with missing values replaced by the average score.

Table 2.  Descriptive statistics and correlations (n = 166)
 MeanSD123456789101112131415
  • Notes:

  • p < 0.05,

  • ** 

    p < 0.01.

  • OBM, Own Brand Management.

 1 Industry0.610.49               
 2 Age21.3011.67−0.52**              
 3 Sales(ln)2.100.540.14−0.15*             
 4 Time period (2006)0.360.48−0.120.31**−0.70**            
 5 Key buyer in Taiwan0.690.470.100.070.15−0.03           
 6 Key subsidiary in China0.440.50−0.060.16*−0.130.22**−0.08          
 7 Export %42.6931.560.22**−0.090.02−0.100.20*−0.09         
 8 R&D %4.745.510.11−0.130.040.03−0.13−0.070.06        
 9 Advertisement %1.503.120.08−0.050.01−0.010.02−0.010.110.26**       
10 OBM %43.5241.20−0.020.07−0.100.04−0.020.030.090.150.13      
11 Buyer learning5.430.740.100.00−0.060.040.000.07−0.030.01−0.03−0.07     
12 Subsidiary learning5.290.770.02−0.040.08−0.110.070.070.15−0.10−0.020.110.21**    
13 Cultural heritage identity5.890.97−0.090.020.08−0.070.00−0.01−0.020.04−0.050.030.31**0.34**   
14 OBM performance5.531.13−0.040.050.01−0.070.05−0.080.080.19*0.060.40**0.130.33**0.33**  
15 Manufacturing performance5.620.91−0.020.05−0.090.19*0.010.00−0.06−0.140.060.000.27**0.30**0.40**0.16* 

RESULTS

  1. Top of page
  2. Abstract
  3. INTRODUCTION
  4. THEORY DEVELOPMENT AND HYPOTHESES
  5. METHOD
  6. RESULTS
  7. DISCUSSION
  8. CONCLUSION
  9. APPENDIX
  10. REFERENCES

Table 2 reports the basic statistics of the key variables. Although no correlation between the independent variables has r > 0.5, the independent variables are clearly correlated. This moderate multicollinearity may not bias estimates, but it can inflate standard errors, causing a conservative bias to tests of coefficient significance (Baum et al., 2000). We therefore followed the tradition of the literature and used nested regression models. In addition, VIF tests in the following regression analyses show that the largest VIF is less than 2.4, well below the five cut-off point (Neter, Wasserman, and Kutner, 1990).

Before discussing the results of hypotheses testing, some correlations between the control variables and the dependent variables deserve a brief mention. First, OBM percent is positively related to OBM performance (r = 0.40) but not related to manufacturing performance, indicating criterion validity. Second, R&D percent also exhibits differential correlations with the two performance areas. While it is positively related to OBM performance (r = 0.19), it is not significantly related to manufacturing performance. Lastly, the time period dummy is positively related to manufacturing performance (r = 0.19) but not to OBM performance, indicating an improving trend for the former.

Table 3 presents the results from nested regression analyses testing the three hypotheses. To test the moderating effects of identity, we followed the tradition and mean centred the independent variables as well as their interaction terms (Aiken and West, 1991). Model 1 is the baseline model, and contains only the 10 control variables. The overall baseline model is significant (p < 0.001), and R&D percent and OBM percent are positively related to OBM performance, confirming the simple correlation in Table 2. Model 2 adds the two learning variables to the baseline model, and its F-change is significant (p < 0.001). While R&D percent and OBM percent remains positively related to OBM performance, learning from the key buyer is not related to OBM performance. In contrast, learning from the subsidiary is positively related to OBM performance (b = 0.42, p < 0.001). Model 3 is the full model with all the 10 control variables and three independent variables. It has an adjusted R2 of 0.29 and the F-change is significant (p < 0.01). While identity and learning from the key subsidiary are positively related to OBM performance (b = 0.26, p < 0.01; b = 0.33, p < 0.01), learning from the key buyer remains insignificant. These results from the full model lend support to Hypotheses 1 and 2. In addition, R&D percent and OBM percent remain significant in the full model as well.

Table 3.  OLS coefficients for Own Brand Management (OBM) performance (models 1–4) and manufacturing performance (model 5)
 Model 1Model 2Model 3Model 4Model 5
  • Notes:

  • p < 0.05,

  • ** 

    p < 0.01,

  • *** 

    p < 0.001, two-tailed test.

Intercept5.185.285.315.425.35
Industry−0.09−0.09−0.020.010.05
Age0.010.010.010.010.00
Sales(ln)−0.14−0.15−0.19−0.230.18
Time period−0.34−0.28−0.29−0.340.64***
Key buyer in Taiwan0.200.160.170.16−0.07
Key subsidiary in China−0.15−0.23−0.21−0.17−0.17
Export %0.000.000.000.000.00
R&D %0.04*0.04**0.04*0.04**−0.03**
Advertisement%−0.01−0.010.000.000.04*
OBM %0.01**0.01***0.01***0.01***0.00
Buyer learning(BL) 0.160.070.010.14
Subsidiary learning(SL) 0.42***0.33**0.33**0.22*
Cultural heritage identity(ID)  0.26**0.25**0.32***
BL*ID   −0.15*−0.04
SL*ID   −0.060.01
F-equation4.01***5.66***6.18***5.77***4.71***
F-change 11.23*8.89**2.42 
R20.210.310.350.370.32
Adjusted R20.150.250.290.300.25
N166166166166166

After reporting the above main effects, we now turn to the results of the moderating effects. Model 4 adds both interaction terms on the main effect full model (model 3). The results show that the interaction term of identity and buyer learning is negatively related to OBM performance (b = −0.15, p < 0.05), supporting Hypothesis 3a. However, the interaction of identity and subsidiary learning is not significantly related to OBM performance, failing to lend support to Hypothesis 3b. To interpret the moderating effect, Figure 1 depicts a typical moderating effect graph where we split the firms into high identity group and low identity group at the mean (Farh et al., 1997). For the low identity group, more buyer learning leads to higher OBM performance (r = 0.20; p < 0.05, one-tailed). In contrast, for the high identity group, buyer learning does not relate to OBM performance (r = −0.02, n.s.). At the same time, the high identity group consistently outperforms the low identity group.

image

Figure 1. Buyer learning and Own Brand Management (OBM) performance by cultural heritage identity

Download figure to PowerPoint

Lastly, model 5 examines the main effects of the three independent variables on manufacturing performance. Due to their already strong manufacturing capability, firms in Taiwan should have less need to learn from others to improve their manufacturing performance. Model 5 is significant at p < 0.001 and has an adjusted R2 of 0.25. While identity and subsidiary learning remain significant, the coefficient of subsidiary learning is smaller than in the case of OBM performance. We conducted an additional analysis of the structural equation model in which we examined the simultaneous effects of identity and learning on OBM performance and manufacturing performance. In results not reported here, we found that subsidiary learning is more significantly related to OBM performance than to manufacturing performance. Theses results lend support to the claim that the focal firm's learning has less effect on its manufacturing performance.

DISCUSSION

  1. Top of page
  2. Abstract
  3. INTRODUCTION
  4. THEORY DEVELOPMENT AND HYPOTHESES
  5. METHOD
  6. RESULTS
  7. DISCUSSION
  8. CONCLUSION
  9. APPENDIX
  10. REFERENCES

Drawing upon the literature on learning, we set out to compare learning from the key buyer and learning from the key subsidiary with regard to their effects on OBM performance. Furthermore, we also explore the role of cultural heritage identity as both a main effect and a moderator. The results confirm our hypothesis that learning from subsidiaries has a stronger main effect on OBM performance than learning from buyers. While our results also lent support to identity's main effect and its counterintuitive negative moderating effect on the relationship between buyer learning and OBM performance, we did not find support for the hypothesized positive moderating effect of identity on the relationship between subsidiary learning and OBM performance.

The above results indicate two major contributions of this study. First, it suggests the need to address the constraint on interpartner learning from the power asymmetry perspective (Luo, 2001, p. 199). When the less powerful suppliers are treated as ‘working horses’, the supposedly bigger learning opportunity and benefit offered by the outside buyer compared with those offered by the internal subsidiary can remain merely a wish. Even when this working horse mentality is less prevalent than the level assumed in this study, the boundary of the firm matters (Miller et al., 2007). As a result, the focal firm may be better looking for solutions from its own key subsidiary instead of from the outside buyer. In this regard, our study replicates the recent trend that sees foreign subsidiaries as sources of innovation (Almeida and Phene, 2004). While the literature tends to focus on the subsidiary's innovation ability in technology, we expand the scope to include the subsidiary's role in marketing innovation.

Second, our study highlights the role of cultural heritage identity and suggests an approach to the study of OBM that goes beyond the traditional functionalist paradigm (Burrell and Morgan, 1979). We need to look at not just what is to be learned, but also values that shape the subjective interpretation of the learning experience itself. In transaction cost theory, the outsourcing decision is usually framed as a make-or-buy choice from the buyer's perspective (e.g., Geyskens, Steenkamp, and Kamar, 2006). The key concern is to reduce transaction cost through considerations such as uncertainty and asset specificity. The values of the actors other than self-interest seem to receive much less attention (e.g., Luo, 2001). The need to bring back the human element is further demonstrated by the negative moderating effect of identity as uncovered in our study. One similar counterintuitive example is that of Chinese students or scholars studying in the USA or Europe in the 1990s. Upon returning to China, many of them ‘produced much of the anti-Western literature’ (Xu, 2001, p. 153). As the literature on the contact and conflict hypothesis indicates, contact sometimes can even make the relationship worse, not better (Forbes, 1997). While brand-name firms from the West may genuinely adhere to their legal contract in good faith, the same focused and businesslike approach to the interaction may be interpreted as a lack of interest in the supplier at best and as a betrayal of the implicit relationship at worst.

To put the above findings in perspective, key limitations of this study need to be addressed. First of all, we relied on perceptual data for both independent and dependent variables. Although we took several measures to reduce the threat of common method variance, it remains one major limitation of this study. In addition to measurements, the lack of longitudinal study design is another key methodology limitation. Learning by definition takes time to unfold. Although this study collected data at two time points, the two samples are from two different sets of firms. As a result, it cannot catch many rich details and crucial turning points (Burgelman and Grove, 2007). Data gathering that covers many years or even decades is another future agenda. Finally, the working horse metaphor remains our key assumption. Its prevalence needs to be tested empirically to assure the logics underlying our model.

Although our data limitations prevent us from broad generalizations, our findings may provide a glimpse to the aspiration for OBM for firms in otheremerging economies, particularly China. We see two possible future OBM research directions. First, if learning from outsiders has limits, the focal firm has the option of acquiring a brand-name firm. Lenovo's acquisition of IBM's PC unit and BenQ's acquisition of Siemens' cell phone business are two such recent cases. This future research direction can draw upon the vast literature on mergers and acquisitions (e.g., Puranam and Srikanth, 2007). Second, an even more fundamental research direction is to ask whether firms should stick to contract manufacturing. The starting point may be a comparison between firms devoting themselves exclusively to contract manufacturing and firms branching out to OBM. Once again, the vast literature on the resource-based view can offer some foundation for theory building (e.g., Barney, 1991). At the same time, researchers need to be sensitive to the unique context of OBM in emerging economies to avoid merely replicating Western theories to it (Tsui, 2006).

We also would like to suggest two future research directions involving identity. In his study of organizational learning and productivity in China, Guthrie (2005, pp. 173–174) describes a Motorola-affiliated Chinese factory this way: ‘Banners and signs hung across the main thoroughfare running through the complex advertising the firm's identity as part of the modern enterprise system’. However inspirational identity may be, it still comes with its own set of limits. For example, we did not find support for our hypothesis relating to identity's positive moderating effect on the relationship between subsidiary learning and OBM performance. One future research agenda then is to explore the context under which identity is likely to exert a moderating effect. Identity tends to rise to the surface when the focal firm faces severe challenges (Meyer, 1982; Ravasi and Schultz, 2006). Its effect will therefore be more pronounced when the focal firm is the junior partner in the power asymmetry dyad. We propose that alliances, joint ventures and mergers and acquisitions with firms from emerging economies and their partners from developed countries are prime candidates for us to further explore the moderating effect of identity.

A second future research direction involves the possibility of an overzealous identity. We tested but did not find a curvilinear effect of identity in this study. However, the literature of organizational culture has provided accounts of where a strong culture stifles instead of liberates firms' actions (Smircich, 1983). IBM before the Gerstner era is one example. We suggest exploring the issue of maintaining a balance between cultural heritage identity and a global mindset (Perlmutter, 1969) to address this possibility. This contrast is similar to that of traditionality and modernity (Farh, Earley, and Lin, 1997). Similar to firms which, in general, need to master both exploration and exploitation to excel (Gupta, Smith, and Shalley, 2006), it is likely that firms from emerging economies need to balance their cultural heritage identity with a global mindset. This can open a window through which a contract manufacturer escapes from the power asymmetry cage.

CONCLUSION

  1. Top of page
  2. Abstract
  3. INTRODUCTION
  4. THEORY DEVELOPMENT AND HYPOTHESES
  5. METHOD
  6. RESULTS
  7. DISCUSSION
  8. CONCLUSION
  9. APPENDIX
  10. REFERENCES

Firms from different parts of the world and in different value chain positions have reasons to cooperate for co-prosperity. However, similar to any other type of interorganizational interaction, learning from the key buyer comes with its own constraints. We have shown that learning from the key subsidiary and cultural heritage identity can alleviate the constraints. In a broader sense, cultural heritage identity merely reiterates the consensus that culture matters. At the same time, cultural heritage identity invites us to be aware of the role of pride, a subject that is nearly missing from the strategy research literature. As Ghoshal and Moran (1996) remind us, choosing the appropriate human nature assumption is key to the direction and influence of a theory. Strategy research can benefit from a discussion that takes into account the identity and pride possessed by participants in emerging economies.

NOTE
  1. We are indebted to two people for this paper. Stan Shih, the founder of Acer, inspired us to take on the subject of OBM and identity through his life-long devotion to OBM. Anne Tsui, the editor-in-chief of MOR, encouraged and guided us to transform this paper from a rough draft to its final form. We thank Ken Hsu, our research assistant, for data collection. We also thank Doug Guthrie and two other anonymous reviewers at MOR for their valuable comments.

APPENDIX

  1. Top of page
  2. Abstract
  3. INTRODUCTION
  4. THEORY DEVELOPMENT AND HYPOTHESES
  5. METHOD
  6. RESULTS
  7. DISCUSSION
  8. CONCLUSION
  9. APPENDIX
  10. REFERENCES

Own Brand Management (OBM) Performance

Please evaluate your firm's performance in OBM in the following areas by indicating whether you agree or disagree to each of the following statements. Check ‘−3’ if you strongly disagree, ‘0’ indifferent, and ‘3’ strongly agree. In the past year, the OBM helped our company to:

  • 1
    Increase the name recognition of our firm.
  • 2
    Increase growth of our firm.
  • 3
    Increase profits of our firm.
  • 4
    Increase long-term competitiveness of our firm.

Manufacturing Performance

Please evaluate your firm's performance in manufacturing in the following areas by indicating whether you agree or disagree to each of the following statements. Check ‘−3’ if you strongly disagree, ‘0’ indifferent, and ‘3’ strongly agree. In the past year, our company was able to:

  • 1
    Reduce production cost as a percentage of sales.
  • 2
    Increase production yields.
  • 3
    Ensure on-time delivery.
  • 4
    Reduce turnover time from raw material procurement to shipment of final products.

Learning from the Key Buyer/Subsidiary

Please evaluate your firm's learning from its most important buyer/subsidiary in the following areas by indicating whether you agree or disagree to each of the following statement. Check ‘−3’ if you strongly disagree, ‘0’ indifferent, and ‘3’ strongly agree. Our learning from the key buyer/subsidiary:

  • 1
    Is useful to immediate daily operations.
  • 2
    Has positive impact on firm's performance right away.
  • 3
    Increases current operation efficiencies and reduces costs.
  • 4
    Changes our firm's fundamental management philosophy.
  • 5
    Helps our firm achieve its long-term mission and objective.
  • 6
    Prepares our firm for future corporate transformation and challenges.

Cultural Heritage Identity

Please evaluate the values of the majority of employees of your firm in the following areas by indicating whether you agree or disagree to each of the following statements. Check ‘−3’ if you strongly disagree, ‘0’ indifferent, and ‘3’ strongly agree. In our company,

  • 1
    We work hard to provide good product to enhance the Island's image.
  • 2
    We view the task of upgrading Taiwan's image as our social responsibility.
  • 3
    We feel proud of our own cultural heritage.

REFERENCES

  1. Top of page
  2. Abstract
  3. INTRODUCTION
  4. THEORY DEVELOPMENT AND HYPOTHESES
  5. METHOD
  6. RESULTS
  7. DISCUSSION
  8. CONCLUSION
  9. APPENDIX
  10. REFERENCES
  • Aaker, D. A. 1991. Managing brand equity: Capitalizing on the value of a brand name. New York: The Free Press.
  • Aiken, L. S., & West, S. G. 1991. Multiple regression: Testing and interpreting interactions. Newbury Park, Calif.: Sage.
  • Albert, S., & Whetten, D. A. 1985. Organizational identity. In L. L.Cummings & B. M.Staw (Eds.), Research in organizational behavior, Vol. 7: 263295. Greenwich, Conn.: JAI Press.
  • Almeida, P., & Phene, A. 2004. Subsidiaries and knowledge creation: The influence of the MNC and host country on innovation. Strategic Management Journal, 25: 847864.
  • Anand, J., & Singh, H. 1997. Asset redeployment, acquisitions and corporate strategy in declining industries. Strategic Management Journal, 18 (Summer Special Issue): 99118.
  • Barney, J. B. 1991. Firm resources and sustained competitive advantage. Journal of Management, 17: 99120.
  • Bartlett, C. A., & Ghoshal, S. 1989. Managing across borders: The transnational solution. Boston, Mass.: Harvard Business School Press.
  • Baum, J. A., Li, S. X., & Usher, J. M. 2000. Making the next move: How experiential and vicarious learning shape the locations of Chains' acquisitions. Administrative Science Quarterly, 45: 766801.
  • Benner, M. J., & Tushman, M. 2002. Process management and technological innovation: A longitudinal study of the photography and paint industries. Administrative Science Quarterly, 47: 676706.
  • Blau, P. 1955. The dynamics of bureaucracy: A study of interpersonal relations in two government agencies. Chicago, Ill.: University of Chicago Press.
  • Burgelman, R. A., & Grove, A. S. 2007. Let chaos reign, then rein in chaos-repeatedly: Managing strategic dynamics for corporate longevity. Strategic Management Journal, 28: 965979.
  • Burrell, G., & Morgan, G. 1979. Sociological paradigms and organizational analysis: Elements of the sociology of corporate life. London: Heinemann Educational Books.
  • Cohen, W., & Levinthal, D. 1990. Absorptive capacity: A new perspective on learning and innovation. Administrative Science Quarterly, 35: 128152.
  • Common Wealth. 2002. Special issue on 1000 Taiwanese corporations. Taipei: Common Wealth.
  • Common Wealth. 2006. Special issue on 1000 Taiwanese corporations. Taipei: Common Wealth.
  • Danneels, E. 2002. The dynamics of product innovation and firm competences. Strategic Management Journal, 23: 10951121.
  • Dhanaraj, C., Lyles, M. A., Steensma, H. K., & Tihanyi, L. 2004. Managing tacit and explicit knowledge transfer in IJVs: The role of relational embeddedness and the impact on performance. Journal of International Business Studies, 35: 428442.
  • Dukerich, J. M., Golden, B. R., & Shortell, S. M. 2002. Beauty is in the eye of the beholder: The impact of organizational identification, identity, and image on the cooperative behaviors of physicians. Administrative Science Quarterly, 47: 507533.
  • Dyer, J. H. 1996. Specialized supplier networks as a source of competitive advantage: Evidence from the auto industry. Strategic Management Journal, 17: 271291.
  • Dyer, J. H., & Hatch, N. W. 2006. Relation-specific capabilities and barrier to knowledge transfers: Creating advantage through network relationships. Strategic Management Journal, 27: 701719.
  • Dyer, J. H., & Nobeoka, K. 2000. Creating and managing a high-performance knowledge-sharing network: The Toyota case. Strategic Management Journal, 21: 345367.
  • Dyer, J. H., & Singh, H. 1998. The relational view: Cooperative strategy and sources of interorganizational competitive advantage. Academy of Management Review, 23: 660679.
  • Fallows, J. 2007. China makes, the world takes. The Atlantic Monthly, July/August: 4872.
  • Fang, G. J. 2002. The sky is the limit: My years at dell. Taipei: Common Wealth. (In Chinese.)
  • Farh, J. L., Earley, P. C., & Lin, S. C. 1997. Impetus for action: A cultural analysis of justices and organizational citizenship behavior in Chinese society. Administrative Science Quarterly, 42: 421444.
  • Feinberg, S. E., & Gupta, A. K. 2004. Knowledge spillovers and the assignment of R&D responsibilities to foreign subsidiaries. Strategic Management Journal, 25: 823845.
  • Forbes, H. D. 1997. Ethnic conflict: Commerce, culture, and the contact hypothesis. New Haven, Conn.: Yale University Press.
  • Geyskens, I., Steenkamp, E. M., & Kumar, N. 2006. Make, buy, or ally: A transaction cost theory meta-analysis. Academy of Management Journal, 49: 519543.
  • Ghoshal, S., & Moran, P. 1996. Bad for practice: A critique of the transaction cost theory. Academy of Management Review, 21: 1347.
  • Gulati, R., & Sytch, M. 2007. Dependence asymmetry and joint dependence in interorganizational relationships: Effects of embeddedness on a manufacturer's performance in procurement relationships. Administrative Science Quarterly, 52: 3269.
  • Gupta, A. K., & Govindarajan, V. 2000. Knowledge flows within multinational corporations. Strategic Management Journal, 21: 473496.
  • Gupta, A. K., Smith, K. G., & Shalley, C. E. 2006. The interplay between exploration and exploitation. Academy of Management Journal, 49: 693706.
  • Guthrie, D. 2005. Organizational learning and productivity: State structure and foreign investment in the rise of the Chinese corporation. Management and Organization Review, 1: 165195.
  • Hamel, G. 1991. Competition for competence and interpartner learning within international strategic alliances. Strategic Management Journal, 12: 83103.
  • Hansen, M. T. 1999. The search-transfer problem: The role of weak ties in sharing knowledge across organization subunits. Administrative Science Quarterly, 44: 82111.
  • Hiller, N. J., & Hambrick, D. C. 2005. Conceptualizing executive hubris: The role of (hyper-) core self-evaluations in strategic decision-making. Strategic Management Journal, 26: 297319.
  • Hjerm, M. 1998. National identities, national pride and xenophobia: A comparison of four Western countries. Acta Sociologica, 41: 335347.
  • Hofstede, G., Van Deusen, C. A., Muller, C. B., Charles, T. A., & the Business Goals Network. 2002. What goals do business leaders pursue? A study in fifteen countries. Journal of International Business Studies, 33: 785803.
  • Horng, C. 2004. Mission, buyer network, and supplier network: Factors influencing the choice of OBM strategy in the computer and electronics industries in Taiwan. Taiwan Journal of Management, 21: 451476. (In Chinese.)
  • Horng, C. 2006. An empirical study of knowledge transfer and knowledge reciprocation in Taiwanese manufacturing industry. Asia Pacific Management Review, 11: 2941.
  • Ingram, P., & Baum, J. 1997. Opportunity and constraint: Organizations' learning from the operating and competitive experience of industries. Strategic Management Journal, 18: 7598.
  • Kogut, B., & Zander, U. 1993. Knowledge of the firm and the evolutionary theory of the multinational corporation. Journal of International Business Studies, 24: 625646.
  • Krishnan, R., Martin, X., & Noorderhaven, N. G. 2006. When does trust matter to alliance performance? Academy of Management Journal, 49: 894917.
  • Lee, L. D. 2007. Contract manufacturers cheer on Dell's three-part turnaround strategy. Economic Daily, May 26: Section A3. (In Chinese.)
  • Leonard-Barton, D. 1992. Core capabilities and core rigidities: A paradox in managing new product development. Strategic Management Journal, 13 (Summer Special Issue): 111125.
  • Lin, J. M. 2006. Acer remains firmly the number one NB brand in Europe. Economic Daily, August 8, Section C4. (In Chinese.)
  • Lin, J. M. 2007. Asus starts its subdivision of contract manufacturing and own brand management early. Economic Daily, July 6, Section A3. (In Chinese.)
  • Liu, S. B. 2003. Master Kung. Taipei: JDIG. (In Chinese.)
  • Luo, Y. 2001. Antecedents and consequences of personal attachment in cross-cultural cooperative ventures. Administrative Science Quarterly, 46: 177201.
  • Luo, Y. 2006. Opportunism in inter-firm exchanges in emerging markets. Management and Organization Review, 2: 121147.
  • March, J., & Simon, H. A. 1958. Organizations. New York: Wiley.
  • March, J. G. 1991. Exploration and exploitation in organizational learning. Organization Science, 2: 7187.
  • Meyer, A. D. 1982. Adapting to environmental jolts. Administrative Science Quarterly, 27: 515537.
  • Miller, D. J., Fern, M. J., & Cardinal, L. B. 2007. The use of knowledge for technological innovation within diversified firms. Academy of Management Journal, 50: 308326.
  • Morrison, E. W., & Robinson, S. L. 1997. When employees feel betrayed: A model of how psychological contract violation develops. Academy of Management Review, 22: 226256.
  • Neter, J., Wasserman, W., & Kutner, M. H. 1990. Applied linear statistical models. Homewood, Ill.: Irwin.
  • Oxley, J. E., & Sampson, R. C. 2004. The scope and governance of international R&D alliances. Strategic Management Journal, 25: 723749.
  • Perlmutter, H. V. 1969. The tortuous evolution of the multinational corporation. Columbia Journal of World Business, 4: 918.
  • Poppo, L., & Zenger, T. 2002. Do formal contracts and relational governance function as substitutes or complements? Strategic Management Journal, 23: 707725.
  • Puranam, P., & Srikanth, K. 2007. What they know vs. what they do: How acquirers leverage technology acquisitions. Strategic Management Journal, 28: 805825.
  • Ravasi, D., & Schultz, M. 2006. Responding to organizational identity threats: Exploring the role of organizational culture. Academy of Management Journal, 49: 433458.
  • Robinson, S. L. 1996. Trust and breach of the psychological contract. Administrative Science Quarterly, 41: 574599.
  • Rousseau, D. M. 1989. Psychological and implied contracts in organizations. Employee Responsibilities and Rights Journal, 2: 121139.
  • Schroeder, R. G., Bates, K. A., & Junttila, M. A. 2002. A resource-based view of manufacturing strategy and the relationship to manufacturing performance. Strategic Management Journal, 23: 105117.
  • Shih, J. R. 2004. Acer's change of the century: Fading out manufacturing, fading in branding. Taipei: Common Wealth. (In Chinese.)
  • Shown, Y. S. 2006. Hon Hai steps into the movie industry. Common Wealth, November 8: 40. (In Chinese.)
  • Simonin, B. L. 2004. An empirical investigation of the process of knowledge transfer in international strategic alliances. Journal of International Business Studies, 35: 407427.
  • Smircich, L. 1983. Concepts of culture and organizational analysis. Administrative Science Quarterly, 28: 339358.
  • Smith, T. W., & Kim, S. 2006. National pride in comparative perspective: 1995/96 and 2003/04. International Journal of Public Opinion Research, 18: 127136.
  • Subramani, M. R., & Venkatraman, N. 2003. Safeguarding investments in asymmetric interorganizational relationships: Theory and evidence. Academy of Management Journal, 46: 4662.
  • Tang, T. L. P., Sutarso, T., Akande, A., Allen, M. W., Alzubaidi, A. S., Ansari, M. A., Arias-Galicia, F., Borg, M. G., Canova, L., Charles-Pauvers, B., Cheng, B. S., Chiu, R. K., Du, L., Garber, I., De La Torre, C. G., Higgs, R. C., Ibrahim, A. H. S., Jen, C. K., Kazem, A. M., Kim, K., Lim, V. K. G., Luna-Arocas, R., Malovics, E., Manganelli, A. M., Moreira, A. S., Nnedum, A. U. O., Osagie, J. E., Osman-Gani, A. M., Pereira, F. C., Pholsward, R., Pitariu, H. D., Polic, M., Sardzoska, E., Skobic, P., Stembridge, A. F., Tang, T. L. N., Teo, T. S. H., Tombolani, M., Trontelj, M., Urbain, C., & Vlerick, P. 2006. The love of money and pay level satisfaction: Measurement and functional equivalence in 29 geopolitical entities around the world. Management and Organization Review, 2: 423452.
  • Tsui, A. 2006. Contextualization in Chinese management research. Management and Organization Review, 2: 113.
  • Tsui, A. S. 2004. Contributing to global management knowledge: A case for high quality indigenous research. Asia Pacific Journal of Management, 21: 491513.
  • Williamson, O. 1985. The economic institutions of capitalism: firms, markets, relational contrasting. New York: Free Press.
  • Wu, J. B., Hom, P. W., Tetrick, L. E., Shore, L. M., Jia, L., Li, C., & Song, L. J. 2006. The norm of reciprocity: Scale development and validation in the Chinese context. Management and Organization Review, 2: 377402.
  • Xiao, Z., & Bjorkman, I. 2006. High commitment work systems in Chinese organizations: A preliminary measure. Management and Organization Review, 2: 403422.
  • Xu, G. 2001. Anti-Western nationalism in China, 1989–99. World Affairs, 163: 151162.
  • Zhou, N., & Belk, R. W. 2004. Chinese consumer readings of global and local advertising appeals. Journal of Advertising, 33: 6376.

Ching Horng (bmacth@ccu.edu.tw) is Professor of Management in the Management Department, Chung Cheng University. His research focuses on innovation, learning and strategic transformation. His research has appeared in Taiwan Journal of Management and Asia Pacific Management Review.

Wayne Chen (wayne.c119@msa.hinet.net) received his Ph.D. from Chung Cheng University. He is a special assistant to the general manager at Jabil Green Point. His research interests include small and medium enterprises, family business and investment in China by Taiwanese firms.