Brand development: institutional constraints on Chinese businesses

This paper addresses the reasons why Chinese businesses have long been identified as subordinate to world‐class brand owners; why “global” own brand developments are considered to be beyond their competence.

In this paper, we use an institutional perspective to examine the difficulties faced by Chinese firms in own brand development, using empirical data derived from a research project into the business strategies of Hong Kong firms, and contrasting these with the case of what is one of China's most successful foreign ventures, Haier.

The familial form appears to be transforming, due to the employment of a growing stratum of professional middle managers and Chinese family business firms appear to be developing into fully functionally integrated hierarchies capable of product and market development of own branded products. Three institutional supports make this possible. First, the development of parts of the People's Republic of China (PRC) into a quasi‐market economy created a regionally close and large market. Second, technology transfers from leading overseas consumer product brand owners’ supported the development of more sophisticated products and firm capabilities. Third, a steady supply of skilled graduates from Hong Kong and the mainland enabled firms to move further up the value chain and exert more control over their manufacturing and related activities. To go truly global, however, more is required: social capital that connects the firm to the local and national party elites, something that mainland firms may find easier than those from Hong Kong.

Gaining the data meant negotiating access through young professional managers now emerging from Hong Kong universities and was achieved through personal contacts; thus the sample is a small four‐case study. The counterfactual case of Haier is derived not from original research but from website material.

Successful original equipment manufacturing business that goes global will, in addition to the institutional supports identified in the Hong Kong cases, also require elite patronage, social capital and political support.

The paper is of value to managers and consultants interested in international business in China.