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)
1
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
2
Chinese Diaspora
1997 (million)
# of Chinese overseas
in 1997
As % of total
population
Asia
U.S.
Canada
2,382.6
267.7
30.1
25,515,000
2,723,000
920,000
1.1%
1.0%
3.1% (average
N.A.1.2%)
Middle America
(Panama, Costa Rica )
South America
Europe
Oceania (ANZ, French
Polynesia, PNG, )
Australia
N.Z.
160.1
274,200
0.2%
324.2
590.2
28.7
821,500
1,937,900
528,200
0.3%
0.3%
1.8%
18.5
3.6
218.1
4,001.7
372,000
111,300
120,300
32,804,100
2.0%
3.1%
6.6%
0.8%
TOTAL
Source: Adapted from Ma and Cartier, 2003, pp.13-16.
3
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 Australia’s 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
4
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)
5
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
6
Control Variables
•
•
•
•
Firm size
Product type (manufacturing vis-à-vis service)
Firm’s overall experience in international business (IBE)
Host country’s institutional environment
–
–
–
–
Political-legal
Economic
Competitive
Cultural
7
Figure 1: Research Framework in the Greater China Region – The Case of Ethnic
Chinese in Australia
H2
H5a
Customer
Customer
Product
life cycle
History in
the host
market
Type of
host
market
H3
H1
Immigrant
Effect
FME mode
(high versus
low)
H5b
Performance
H4
Control
variables
-----: control variables relationships –i.e.,
not proposed in hypotheses
8
Methodology
•
•
•
6-page questionnaire sent to Australian firms listed in Worldwide Directory
of Dun & Bradstreet with operations in Greater China (n=710 firms)
Completed by most senior executive overseeing firm’s 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
9
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)
Firm’s history in target market : # of years in target market
IBE: # of years in international business (Brouthers, 2002)
PLC stage: 5-point scale (1=very similar … 5 = very different)
Type of industry (1=Service; 0=consumer, industrial)
Customer variation: 5-point scale (1=very similar … 5 = very different) in terms of
customer preference, buying habit, product usage & consumption pattern
Environmental: 5-point scale (1=very 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
10
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 year’s performance (7-point scale: 1=negative growth; 7 >
25%)
11
China vis-a-vis Hong Kong/Taiwan
(n=60)
Overall
(n=135)
Firm size (full-time
employees)
687
Hong Kong/Taiwan
(n=75)
138
IBE- general
Year in the host markets
22
9
19
10
20
9.8
IE
Non-IE
High resource
Low resource
Product type (service)
Product type (nonservice)
50%
50%
33%
67%
14%
86%
37%
63%
18%
82%
8%
92%
43%
57%
25%
75%
10%
90%
Consumer*
Product life cycle*
Political-legal*
Economic*
Competitive*
Profit
Sales growth
Market share
3.15
2.50
3.58
4.47
3.38
3.98 (4.13, 3.81)**
3.96 (4.14, 3.78)
2.24 (2.14, 2.33)
3.08
2.31
3.18
3.87
2.88
3.97 (3.74, 4.18)
3.15 (3.15, 3.15)
1.93 (2.00, 1.89)
3.12
2.40
3.35
4.13
3.10
3.98 (3.95, 4.04)
3.50 (3.67, 3.38)
2.06 (2.07, 2.06)
379
* Variables are measured on a 5-point scale (1=very similar; 5=very 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.
12
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
13
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
14
Figure 2: PLS results
15
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 noneconomic motives in choice of FME
• Shared ethnicity, a broader concept than a business network, can be an
important source of socialcapital
16