INTERNATIONAL HUMAN RESOURCE MANAGEMENT / Write an essay according to the case study to discuss how HRM can help address the issues encountered in internationalisation.

INTERNATIONAL HUMAN RESOURCE MANAGEMENT / Write an essay according to the case study to discuss how HRM can help address the issues encountered in internationalisation. Order Description Case 4. The globalisation of Chinese telecom corporations: the case of Huawei Cooke, F.L. (2012) ‘The globalisation of Chinese telecom corporations: strategy, challenges and HR implications for the MNCs and host countries’, International Journal Of Human Resource Management, 23(9): 1832-1852. The globalization of Chinese telecom corporations: strategy, challenges and HR implications for the MNCs and host countries Fang Lee Cooke* Department of Management, Monash University, Melbourne, Australia; School of International Business, Southwestern University of Finance and Economics, Chengdu, China This paper investigates the motives of internationalization of two leading Chinese multinational corporations, their entry strategy and strategic responses to overcome internationalization barriers. In particular, we explore the political strategy and the corresponding political behaviour these two firms adopt to facilitate their internationalization process. We also examine the business strategy and human resource strategy they deploy in their internationalization endeavour and what impacts these may have on host country development, including human capital development and employment creation. Keywords: globalization; Huawei; human resource; MNC; political capital; social capital Introduction Interests in the internationalization of Chinese firms have soared in recent years (e.g. Erdener and Shapiro 2005; Alon and McIntyre 2007; Luo and Tung 2007; Boisot and Meyer 2008). This expanding body of studies has shed light on the motives, entry strategies and performance of internationalizing Chinese firms across different ownership forms. These studies often adopt an institutional, cultural or strategic management perspective in their investigation. However, detailed studies of high-tech firms in highly competitive industries such as the telecom industry remain limited. This is in spite of the fact that these firms’ internationalization strategy and operating environment in the host countries may differ from those in the manufacturing, construction and mining industries, which make up the bulk of the Chinese outward investment (see National Bureau of Statistics 2010). In addition, while ‘China is currently the most active internationalizing economy among the developing countries’ (Child and Rodrigues 2005, p. 382), ‘the ability and determination of Chinese firms to address their international competitive weaknesses, and the strategies they employ to do so, have been inadequately recognized’ (Child and Rodrigues 2005, p. 402). For instance, few studies have been conducted to examine how Chinese firms deploy political and social capital to overcome their competitive disadvantages and what human resource management (HRM) practices they adopt to support their internationalization. The importance of political perspective and social capital theory is beginning to be recognized in the international HRM literature (e.g. Kostova and Roth 2003; Child and Tsai 2005; Edwards, Colling and Ferner 2007; Ma¨kela¨, Bjo¨rkman and Ehrnrooth 2009). Furthermore, Shenkar (2004, p. 169) argues that international ISSN 0958-5192 print/ISSN 1466-4399 online q 2012 Taylor & Francis http://dx.doi.org/10.1080/09585192.2011.579920 http://www.tandfonline.com *Email: [email protected] The International Journal of Human Resource Management, Vol. 23, No. 9, May 2012, 1832–1852 business (IB) studies should look at ‘the diverse political landscape and the various constituencies that multinational enterprise (MNE) must contend with (but often solicits the support of) when seeking to launch or expand foreign investment’. This argument is highly relevant in the developing country context, an area that remains under investigation in IB studies. The Chinese business system contains a number of unique institutional and cultural characteristics, such as the enduring role of the government and the importance of relational management between firms and institutions. Chinese firms abroad face strong liability of foreignness (LOF) associated with the political and business system of the parent country. Studying internationalizing Chinese firms, therefore, offers an opportunity to extend existing IB theories (Child and Rodrigues 2005). Given the fact that many other developing economies ‘are also characterized by a heavy institutional and political involvement in their business systems’ (Child and Rodrigues 2005, p. 404; also see Dunning and Narula 2004), the case of China has wider theoretical and empirical implications for IB management. Moreover, emerging studies on HRM of Chinese multinational corporations (MNCs) (e.g. Liu and Li 2002; Shen 2005; Zhang and Edwards 2007) have observed how human resource (HR) practices in the Chinese subsidiaries overseas may differ from those in their parent company in China and those adopted by local firms in the host countries. They have also revealed key challenges to the HR function in the cross-cultural setting. What remains little explored, however, is how Chinese MNCs’ business strategy may impinge on theirHR strategy on the one hand, and how and to what extent the HR strategy may support and/or constrain the fulfilment of business strategy on the other. This is a significant research gap given the fact that few Chinese firms are seen to be truly internationally competitive and that HR capabilities of Chinese firms are considered underdeveloped and heavily influenced by the Chinese cultural traditions (Cooke 2005; Warner 2005; Wei and Lau 2005). This paper aims to fill some of this research gap through the study of two leading Chinese-owned MNCs in the telecom industry – Huawei Technologies Ltd (hereafter Huawei) and ZTE Corporation (hereafter ZTE). We choose the telecom industry because this is a knowledge-intensive sector that has not only a relatively high level of global competition hinged on rapid technological innovation but also global integration and resource sharing (e.g. market, technology, business process) among competitors in order to remain competitive by complementing each others’ strengths. Huawei (private-owned) and ZTE (state-owned) were formed around the same time and are competitors. They are considered to be the two top telecom firms in China, which are now presenting some serious challenges to the market position of global giants (e.g. Child and Rodrigues 2005; Dickson 2009). They offer important materials for the study of Chinese MNCs not least because of the nature of their business (e.g. knowledge intensive, rapidly changing technology, high level of national security concern, and highly competitive global market) but also because of the prospect of these materials being used as a building block for comparative studies of MNCs from emerging and transitional economies such as India, the IT industry of which is highly competitive globally. We bring together different perspectives on MNCs as an integrated analytical framework (see Figure 1) to investigate the motives of internationalization of these two leading Chinese MNCs, their entry strategy, challenges and strategic responses to overcome LOF, and the likely impact on both the host country (spillover effects) and the MNCs themselves. In particular, we explore the political strategy and corresponding political behaviour Chinese firms adopt to facilitate their internationalization process. We examine their business strategy and HR strategy in their internationalization endeavour The International Journal of Human Resource Management 1833 and what impacts these may have on host country development, including human capital development and employment creation. Our study is guided by the following research questions: (1) What are the motives that drive the internationalization of Chinese telecom firms? (2) What challenges do they encounter in their internationalization process? (3) How do they leverage competitive advantage, including the deployment of HR, in the international market where their competitiveness is not evident? (4) What spillover effects may Chinese MNCs have in host countries, particularly in developing countries? Integrating IB theories in the study of Chinese MNCs Motives of internationalization and entry strategy According to Dunning and Narula (2004), there are four major motives for FDI: market-seeking, resource-seeking, asset-seeking and efficiency-seeking. Exactly where firms can fulfil these motives are often location-specific. Outward direct investment (ODI) from developing countries is generally directed towards other developing countries. As internationalizing firms from developing economies become more established in their developing country markets, they increasingly target investment opportunities in more advanced economies (Buckley, Cross, Tan, Xin and Voss 2008). International joint ventures (JVs) are the preferred entry mode, especially early in the internationalization process, and host country governments tend to have a strong influence on the level and direction of ODI (Buckley et al. 2008). In emerging economies, greenfield, acquisitions and JVs have been the most common entry strategies (Meyer, Estrin, Kumar and Peng 2009). As Child and Rodrigues (2005, p. 381) noted, ‘Chinese firms are generally making such investments in order to address competitive disadvantages’. While developing countries have been the major destination Motives of internationalization ••••• Market-seeking Resource-seeking Asset-seeking Efficiency-seeking Exploitation of competitive advantage Entry strategies •••• Greenfield development Mergers and acquisitions Joint ventures Organic expansion Liabilities of foreignness and responses • Unfamiliarity with the host country’s culture, language, policies, regulations and other institutional arrangements • The need to coordinate across geographic distance • Lack of experience in managing risks associated with increased political and economic risks in many developing countries • Adopting local practices (isomorphism) • Localization of staff (social capital) • Alliances/linkages with stakeholders/ institutional actors (external resources and political capital): o To gain local knowledge of and access to markets and distribution channels, access to technology and managerial expertise, connections with government, legitimacy with customers and local communities o To shape local institutions and coevolve Spillover effects • Positive spillovers: technology and knowledge transfer, skill transfer, human capital development, job creation, creation of linkages with local suppliers and distributors, and raised productivity of local firms • Negative spillovers: the crowding out of local firms, no long-term transfer of knowledge, technology or skills, poor labour standards, and negative environmental impacts Figure 1. Integrating perspectives on the internationalization of firms. Sources: Child and Rodrigues 2005; Child and Tsai 2005; Cooke 2008; Driffield and Love 2007; Dunning and Narula 2004; Oetzel and Doh 2009 1834 F.L. Cooke countries for Chinese ODI, significant inroads have also been made in developed countries (Alon and McIntyre 2007; Cooke 2008). Liabilities of foreignness LOF is one of the key issues that have been studied in the IB field (e.g. Zaheer 1995). Internationalizing firms are believed to face a number of challenges associated with their foreignness. These include, for instance, unfamiliarity with the host country’s culture, language, policies, regulations and other institutional arrangements such as the role of the trade unions. Other challenges include the need to coordinate across geographic distance, lack of experience in managing risks associated with increased political and economic risks in many developing countries (e.g. Zaheer 1995; Child and Rodrigues 2005; Oetzel and Doh 2009). To mitigate LOF, firms may implement various practices, such as employing local staff, adopting local practices and becoming ‘isomorphic’ with the host country environment to gain legitimacy and increase the MNC’s prospect of long-term survival and business success (e.g. Zaheer 1995; Oetzel and Doh 2009). Oetzel and Doh (2009) argue that studies on LOF have primarily focused on MNCs operating in developed countries. As such, perspectives derived from these studies may be insufficient in explaining the growing presence of MNCs in developing countries, the effectiveness of their strategy in overcoming their LOF, and their impact on the social development of host countries. In addition, since the LOF perspective is primarily concerned with how MNCs conceptualize their LOF and subsequently what strategy they may adopt in relation to the host country, this conceptualization has important implications for the economic and social development of the host country and the extent to which MNCs view host country organizations as their partners (Oetzel and Doh 2009, p. 110). Given the inherent disadvantages of Chinese firms, there are several major challenges that may affect their ability to implement their internationalization strategy successfully. These include insufficient technical and management competence, capital constraints, image problems associated with low-cost and low-quality products. This is in addition to their perceived undesirable attitude towards business ethics and social responsibility, most notably in their approaches to intellectual property rights and labour standards (Cooke 2008). What strategy, then, do Chinese firms adopt to overcome their LOF? This issue is particularly important in other developing countries where Chinese investment has been significant and the Chinese firms’ strategy may have a stronger impact on these countries’ development than they may on that of developed countries. Overcoming LOF: institutional and political perspectives and linkages Institutional theories on the strategic choice of MNCs in host countries emphasize on the institutional constraints imposed upon firms (e.g. Schief 2010), particularly those in emerging economies where governments continue to have significant involvement in business affairs (Peng 2000; Child and Tsai 2005). Within the institutional perspective, firms are assumed to play ‘a passive and reactive role’ (Child and Tsai 2005, p. 96). In critiquing the insufficient attention given by institutional theories to the role of firms in dealing with institutional constraints, authors from the resource dependence perspective argue that firms are able to mobilize resources to ‘establish a degree of independence from institutional demands’ (e.g. Child and Tsai 2005, p. 99). However, it is the political perspective, one which is beginning to gain attention in IB studies, that ‘regards firms as The International Journal of Human Resource Management 1835 having a potentially proactive role in relation to their environment’ (Child and Tsai 2005, p. 96; also see Ferner, Tregaskis, Edwards, Edwards, Marginson, Adam and Meyer 2011). Child and Tsai (2005, p. 96) further argue that, when combined, institutional and political perspectives offer much greater explanatory power to illuminate our understanding on the ‘co-evolutionary processes between institutions and firms’. In a similar vein, Edwards et al. (2007, p. 201) argue for an integrated political economy approach that examines the interrelationships between markets and institutions on the one hand, and the material interests of organizational actors on the other. They argue that the focus should be ‘on how actors look to protect or advance their own interests, the resource they use, and the resolution of conflicts’ (Edwards et al. 2007, p. 203). At the practical level, Oetzel and Doh (2009, p. 112) argue that collaborations between MNCs and local institutions can help embed the firm ‘in the social fabric of the developing country’ and gain long-term competitive advantage. From the host countries’ point of view, it has been argued that linkages1 between foreign investors and local institutions, especially local firms, are ‘essential prerequisites for FDI to have a lasting and sustainable effect’ (Hansen et al. 2009, p. 122, also see spillover effects later). These strands of arguments suggest that MNCs can and should play a proactive role in shaping the evolution of the institutional environment through their strategic interactions with institutional actors in the host country. This opportunity, and indeed responsibility, is even more significant in developing countries, where both institutions and markets are largely in a state of flux. However, when contemplating MNCs’ role in shaping host country environment, it is important to examine also the role of the home country government as a domestic institutional actors. Scholars on the internationalization of Chinese firms (e.g. Nolan 2001; Child and Rodrigues 2005; Buckley et al. 2008) have commonly observed the influence and involvement of the Chinese government in the internationalization decisions of Chinese firms. These studies essentially see government intervention as an institutional factor. Some authors (e.g. Nolan 2001) even argue that without the support of the government, Chinese MNCs are unlikely to be able to compete in the global market. However, few studies have investigated how Chinese firms develop and exploit their political capital, often in the form of connections with the government, proactively and strategically to fulfil their international expansion agenda. As we shall see later, governments of home and host countries in developing economies have played an important role in shaping business opportunities for the Chinese telecom MNCs. These firms also actively cultivate other forms of capital to embed their business in the host countries. Overcoming LOF: strategic HRM, social capital and competitiveness Scholars on international HRM argue that HRM plays an increasingly important role in supporting MNCs’ business strategy and subsidiary performance (e.g. Bartlett and Ghoshal 1989; Taylor 2007; Colakoglu, Tarique and Caligiuri 2009). Moreover, recent studies (e.g. Kostova and Roth 2003; Wilkinson, Eberhardt, McLaren and Millington 2005; Lengnick-Hall and Lengnick-Hall 2006; Taylor 2007; Ma¨kela¨ et al. 2009) have highlighted the crucial role of social capital in the successful implementation of MNCs’ business strategy. According to Adler and Kwon (2002, p. 23), social capital is ‘the goodwill available to individuals or groups. Its source lies in the structure and content of the actor’s social relations. Its effects flow from the information, influence, and solidarity it makes available to the actor’. Adler and Kwon (2002) further differentiate social capital into ‘bonding’ (internal) social capital and ‘bridging’ (external) social 1836 F.L. Cooke capital. Bonding social capital helps actors within a firm to work together to achieve shared goals, whereas bridging social capital ties actors together in social networks outside the firm, enabling firms to generate value from these networks. It is argued that social capital creates ‘a psychological environment conducive to collaboration and mutual support’ and is ‘likely to lead to positive and cooperative behaviors’ (Kostova and Roth 2003, p. 301). The importance of personal social ties in helping firms to develop internationally has been acknowledged (e.g. Anderson 1993; Ellis 2000; Ma¨kela¨ et al. 2009). Other authors (e.g. Luo and Chen 1997; Tsui and Farth 1997) have also argued that the social network (or known as guanxi in the Chinese context) held by local managers gives them competitive advantage over expatriate managers for marketing and sales positions. It is believed that culturally skilled employees are able to negotiate more competently and therefore perform more effectively (Earley and Peterson 2004; Shapiro, Ozanne and Saatcioglu 2008). The practice of deploying social ties and social capital to achieve organizational goals is nothing new in China. In fact, guanxi has long been an interesting topic for study and recent works on guanxi in the business context argue that guanxi has a positive and important impact on organizational performance by lowering the transactional costs and gaining competitive advantage through privileged access to rare resources such as government ties (e.g. Standdifird and Marshall 2000; Park and Luo 2001). Although some scholars are sceptical about the positive effect of guanxi on firms’ performance and suggest that it is playing a diminishing role in the Chinese marketizing economy (e.g. Guthrie 1998; Zhang and Zhang 2006), many argue that social network is necessary in developing countries where legal institutions tend to be weak and local government officials hold excessive power and will remain a crucial factor for long-term business success (e.g. Luo 2001; Park and Luo 2001; Warren, Dunfee and Li 2004). What is less known is how Chinese MNCs create social capital through their HR strategy to gain competitive advantage and the extent to which the host country environment presents opportunities and constraints for them to do so. Spillover effects There is now a substantial body of studies, often from the economic perspective, that attempts to measure spillover effects of FDI in the host country (Driffield and Love 2007). Findings of these studies point to different conclusions, from large positive effect to little effect or even negative effect. More recent studies suggest a contingency approach that links spillover effects with a number of factors (see Driffield and Love 2007). Positive spillovers from MNCs in developing countries include technology and knowledge transfer, skill transfer, human capital development, job creation, creation of linkages with local suppliers and distributors and raised productivity of local firms (Driffield and Love 2007; Oetzel and Doh 2009). Notably, studies on the spillover effects of FDI in developing countries have largely pointed to a negative picture, in part, because of the low capacity of local firms and regions to absorb new knowledge and technology and to raise productivity (e.g. Buckley, Clegg, Cross, Liu, Voss and Zheng 2007; Hatani 2009). More importantly, it has been argued that MNC strategies are creating a pattern of FDI that has a low development potential for the majority of FDI recipient countries in the developing world (e.g. Stiglitz 2002; Dunning and Narula 2004; Luo 2004; Yamin and Sinkovics 2009). Although the amount of FDI into developing countries has been rising sharply in recent years, research evidence suggests that this has yielded only negligible resource commitment to and positive spillover effects The International Journal of Human Resource Management 1837 on the local economy. Some research findings actually point to the negative impact of MNC activities on the host country’s economic, social and environmental development (e.g. Dunning 2006; Oetzel and Doh 2009; Yamin and Sinkovics 2009). Guided by the analytical framework developed in Figure 1, the rest of the paper investigates how the two Chinese telecom MNCs enter host countries, what strategy they adopt to overcome barriers and develop their business, and what likely impact their business activities may have on the host countries. Key findings are summarized in Figure 2. Research methods A case study approach was adopted for the data collection for this exploratory study. This approach was chosen because, as Edwards et al. (2007, p. 204) argue, ‘case studies allow a deep exploration of how the market and the institutional contexts in which MNCs are embedded inform the way they operate, and permit an exploration of the interaction between actors at a range of levels’. Semi-structured interviews were conducted with a total of 33 employees (21 at managerial level) of Huawei and ZTE. Eighteen informants came from Huawei and 15 from ZTE. Interviews were carried out between December 2007 and October 2009. Four of the informants are of Indian origin based in ZTE’s and Huawei’s Indian operations. The rest of the informants are Chinese. The Chinese managers were either based abroad at the time of the interview or had worked abroad until shortly before the interviews, as the head of a subsidiary operation or major business units of Huawei or ZTE. These Chinese managers have all worked in three or more host countries, mostly developing countries, where Huawei and ZTE have subsidiaries. They have worked for Huawei and ZTE for 6 to 11 years and were promoted through the rank. This international exposure gives them great insights into the overseas operations of the case study firms. For confidential reason, this paper will not reveal in which countries they had worked or where they were based at the time of the interview. No more than two informants were interviewed at each subsidiary operation. The 12 non-managerial employees interviewed were IT professionals who had worked for the company for at least two years at the time of the Motive of internationalization • Market-seeking • Resource-seeking (R&D) Entry strategy • Organic growth (i.e. small offices to start with, then grow into multi-site subsidiaries with marketing, sales, R&D, services and manufacturing functions) • Joint ventures LOF and other challenges • Lack of market presence and brand reputation • Lack of language and cultural awareness • Negative stereotype image of Chinese products • Strong host country resistance due to ties with government and ideological alliance • Expansion plan (e.g. acquisition) being blocked by host countries • Lack of identification of HCNs with the firm Embedding and expansion strategy • Mobilizing political capital (ties with governments) • Developing other political and social capital (e.g. CSR, training centres) • Developing and deploying social capital (employment of HCNs) • Acquiring organizational resources/competences through alliances with global and national telecom giants • Linkages with host country institutional actors for co-evolution (e.g. corporation institutions involving local and foreign MNCs, governments, universities, NGOs, local communities) • Developing business with national governments • Developing wholly-owned subsidiaries and regional headquarters to consolidate resources and reinforce market presence Spillover effects on host country • Shaping industrial norms • Employment creation • Raising human capital level • Contribution to economic and social development Potential spillover effects • Crowding out local firms • National security threat to host countries Impacts on/implications for the MNCs • Growing presence in the global market • High financial cost • Organizational infrastructures and competence development lagging behind rapid expansion • Learning from other MNCs and local partnersin host countries Figure 2. Global expansion of Chinese MNCs: challenges, strategies and impacts. 1838 F.L. Cooke interview. Access to the 33 informants was gained through personal contacts. Interviews were carried out individually over the telephone or face to face by the author. Each interview lasted between 50 to 90 min. Detailed notes were taken during the interviews. Interview information was supplemented by company documents and media reports. This secondary data was drawn from the information published on the corporate websites as well as media sources in both Chinese and English language. As Huawei and ZTE are high-profile Chinese companies, there has been a considerable amount of media reporting on both companies’ performance and management decisions in China. Their international expansion move also features regularly in IB magazines and host country media. In addition, both companies have extensive websites published in Chinese and English. Huawei also has an in-house magazine called ‘Huawei People’ that is published in both Chinese and English. These sources of information prove useful as they not only supplement the relatively limited number of interviews but also triangulate (Yin 2003) information provided in the interviews. Given the difficulty in gaining access to leading Chinese firms for data collection and given the fact that there is a relatively substantial amount of information available from public sources on these firms, it has been quite common for researchers to draw substantially on secondary data to inform their studies of Chinese MNCs (e.g. Child and Rodrigues 2005). Nevertheless, caution has been taken in interpreting these materials to avoid bias. Findings and analysis Background of Huawei and its international expansion Founded in 1988 as an IT product sales and distribution company based in Shenzhen (southeast China) by an ex-army officer, Huawei has developed into a leading supplier of next-generation telecom networks and currently serving nearly three quarters of the world’s top 50 operators. It has operations and representative offices in more than 100 countries and regions round the world which serve over 1 billion users. Nearly three quarters of its sales come from the international market. Highly innovation-driven, Huawei invests 10% of its revenue in research and development (R&D), in which 48% of its 62,000 employees are deployed. Huawei has over 20,000 patents and has set up at least 12 R&D centres in different parts of the world to strengthen its position in the region and customize both products and services. These include Silicon Valley and Dallas of the USA, Bangalore in India, Stockholm in Sweden and Moscow in Russia. In addition, Huawei has set up over 30 training centres worldwide to help its customers and local people study advanced management and technologies. The growth path of Huawei is typical of that of MNCs from an emerging economy. In other words, it grows into a strong firm first in the home market. Then, it branches out to other developing countries to avoid competition with the industry’s giants as it builds up its expertise before entering developed economies. Targeting initially at developing countries, Huawei was prepared to take risks in high-risk countries and regions. For example, Huawei entered Russia and its neighbour states in the mid-1990s when other MNCs were stepping out of the region due to political and financial uncertainty. It has grown from being a small representative office in an ordinary neighbourhood to having a strong presence in the region with offices in prime locations on par with prestigious western MNCs. Similarly, Huawei first entered the African market in 1998 and has now representative offices and technical service centres in over 30 countries across the region, including two regional headquarters in Egypt and South Africa. By 2007, Huawei employed over 2500 employees in Africa, out of which more than 60% were host country nationals (HCNs). The International Journal of Human Resource Management 1839 Huawei’s internationalization was achieved mainly by setting up new representative offices and partnerships with prestigious MNCs and national firms in the host country. Huawei has increased its speed of internationalization since 2001, turning its attention to the more developed countries while deepening its expansion in developing countries. Huawei first established its presence in the UK and Germany in 2001, Sweden in 2001 (R&D centre) and 2003 (sales representative office), France in 2003, Italy in 2004 and the Netherlands in 2005 after signing the contract with Telfort to supply the Dutch operator’s UMTS network. By 2004, Huawei’s overseas sales had surpassed that of the domestic market. In 2006, Huawei’s sales revenue was US$11 billion. It now has most of Europe’s major telecom corporations among its customers. Huawei’s European headquarters is strategically located in the UK. It is believed that establishing a presence in the UK allows Huawei to tap into this dynamic and innovative telecommunications market and raise its profile in other European markets. Having won one of the top prizes in the ‘Most Globally Competitive Chinese Companies Award’ initiated by Roland Berger Strategy Consultants (Roland Berger Strategy Consultants 2007), Huawei is deemed one of the best performing Chinese companies in Europe. If Huawei’s expansion in Africa is mainly market-seeking, then its establishment in India is both market- and resource-seeking by tapping into its IT talent pool. Initially launched as a small software development operation in India in 1999, Huawei opened an R&D centre in 2001. Huawei’s Indian R&D centre hub around Bangalore is its largest and most important asset outside China, employing over 1300 staff by 2007. An additional investment of US$100 million was earmarked for further development in the next few years and another 1000 R&D engineers were planned to be recruited. Background of ZTE and its international expansion Founded in 1985, ZTE is a state-owned enterprise (40% owned by the government) and was listed on the Shenzhen Stock Exchange in 1997 and in Hong Kong in 2004. It is China’s largest listed telecom equipment provider specializing in offering network solutions for telecom carriers worldwide. Similar to Huawei, over 10% of ZTE’s annual revenue is invested in R&D aimed at enhancing product quality, reducing cost and achieving higher sales. Nearly half of all ZTE’s staff are involved in R&D. The company owns over 1000 patents, with more than 87% of these being original innovations. ZTE was reported to rank first among its competitors with the most number of handset patents in China. In the first half of 2007, it also topped the league table among the Chinese manufacturers and was in the 5th position in the world with sales volume of 15 million units (Unstrung 15th November 2007). ZTE is widely regarded as one of the leaders of China’s 3G industry, occupying about 30% share of the total 3G equipment market in 2008. ZTE has over 40,000 employees globally and its revenue in 2008 was around US$6388 million. ZTE’s firm growth and globalization process share much similarity with that of Huawei, as it looks abroad for new growth opportunities. ZTE’s internationalization effort has intensified since the early/mid-2000s and has similar global footprints as Huawei. Headquartered in Shenzhen, ZTE has at least 13 wholly owned R&D centres in North America, Europe and Asia and has undertaken research partnership with global electronic giants such as Texas Instruments and Motorola and Agere Systems. The company has become an important global player in the telecom industry, offering products that cover every sector of the wire line, wireless, service and terminal markets with 500 operators in over 140 countries and regions. In 2002, ZTE entered the UK 1840 F.L. Cooke market for similar reason as Huawei. It set up a factory and customer service centres there. ZTE entered the Indian market seriously from 2003 and has establishments in Delhi, Bangalore and Mumbai. It offers a complete spectrum of telecom solutions to the market and has collaborations with a number of Indian-owned telecom giants. ZTE’s Gurgaon factory began its production in 2005 and has the annual capacity to build equipment to handle up over 3 million lines of traffic based on the CMDA standard. By 2007, ZTE employed over 500 people in its Indian subsidiary, over 75% were HCNs. ZTE (India) won the ‘Best of Chinese Companies in Emerging Markets’ award initiated by Roland Berger Strategy Consultants (Roland Berger Strategy Consultants 2007). ZTE set up its business operation Malawi in 2004 and a number of other African countries subsequently. Global business strategy Despite its huge success, Huawei remains a privately owned enterprise (including employee share ownership as performance incentive in the period of firm start-up). Its CEO believes that this will allow the firm more autonomy and flexibility in business decision-making. Huawei’s organizational structure is led by its strategy and marketing department. The key components of its business strategy are innovation, high quality, low cost and excellent customer service by giving top priority to meeting customers’ requirements to enhance its competitiveness and profitability. Customer service is central to its mission statement. In addition to its commitment to providing good customer services, managers interviewed reported that Huawei’s customer focus strategy is achieved through active engagement with customers. These include setting up training centres globally to provide training to customers and inviting potential customers and customers to Huawei’s headquarters for training and inspections. ZTE adopts a product differentiate strategy tailored to different markets. For example, ZTE is known in Malawi for its cheap K1500 handsets, but produces expensive modern handsets for the Chinese market. Like Huawei, ZTE’s competition strategy in the international market typically hinges on high quality and reliability, lower prices and faster customer services than that of flagship multinational giants such as Ericsson, Nokia and Motorola. In other words, the internationalization of ZTE (and Huawei) is to be achieved through the internationalization of market, talent and capital. Compared with Huawei, ZTE appears to be less aggressive in its global expansion strategy. ZTE specializes more in manufacturing and has largely been focusing on developing countries, whereas Huawei has opted on system integration and has made more inroads into the western markets. The different focus between ZTE and Huawei in their product market also affects the extent to which they are accepted by host country governments and businesses, notably in India. For example, while security clearance was granted more readily with the type of application ZTE filed, Huawei’s application was met by a high level of security alarm and its approval delayed by the Indian government due to Huawei’s business focus on after sales maintenance (e.g. Willing 2006). Challenges to developing the international market and strategic responses Managers interviewed identified a number of key challenges during their firm’s internationalization process, particularly in their early stage of internationalization. First, lack of presence and brand reputation in the market is perhaps the most significant challenge. Most people in the host countries have never heard of these two Chinese firms. The International Journal of Human Resource Management 1841 Worse still, Chinese products carry the inherent disadvantage of being associated with low quality and low technology. Second, host country resistance is another formidable barrier to establishing their markets, especially in developed countries. ZTE and Huawei have taken a number of strategic actions to overcome these barriers, as discussed below. Cost leadership Cost leadership plays an important role in both firms’ business strategy that enables them to win contracts. They target developing countries first to open the market. Developing countries are poor countries and sensitive to price. The strategy of Huawei and ZTE is to break into these markets with price advantage first. Once they have developed their reputation and brand, they then go for the developed countries, often through alliances with global giants. A number of informants revealed that ZTE’s and Huawei’s European market had not been making much profit as the products were given to the customers (e.g. British Telecom (BT)) virtually free in order to develop the market and build up confidence from the customers. It is believed that once prestigious telecom giants such as BT use Huawei’s product, then it will have a strong market presence and confidence. Profit of Huawei’s overseas businesses comes mainly from product upgrading and maintenance. It must be noted that the tax refund policy operated by the Chinese government to support strong Chinese firms to compete internationally has played a crucial role in both firms’ low pricing strategy, especially in the early years of their international expansion. However, the Chinese government has been facing increasing pressure from its trading partner countries and the WTO to reform its tax refund policy that has benefited Chinese MNCs like Huawei and ZTE. Although ZTE will continue to be protected by the government due to its state ownership, interviewees admitted that the cost advantage of Huawei is weakening due to the uncertainty of the tax return policy and the rising labour cost in southern China and other developed regions in the country. The low-cost success of ZTE and Huawei, while at the same time providing speedy customer services, is also achieved through the use of excessive overtime of its Chinese employees and internalized performance pressure. These practices are justified by the traditional Chinese work ethics that values obedience, diligence, humility and perseverance, and by the traditional Chinese paternalistic value of mutual reciprocation between the company and the employees. However, Huawei and to a lesser extent ZTE, which is less dependent on overtime, are likely to encounter legal and cultural challenge in implementing these practices among their HCN employees. In this sense, localization will have a negative impact on both firms’ low-cost strategy. Developing and deploying political capital Both ZTE and Huawei have relied heavily on their political capital not only in developing the firm in China, but more importantly in developing their overseas markets, particularly in developing countries. As a state-owned enterprise, the political tie of ZTE with the government is to be taken for granted. For Huawei, it was reported that its founding CEO was the director of the Information Engineering Academy of the People’s Liberation Army that is responsible for telecom research for the Chinese military defence. Huawei’s deep tie with the army provides the necessary political patronage and R&D partner that have played a crucial role in Huawei’s rapid expansion, first domestically and then globally. 1842 F.L. Cooke When the Chinese government leaders visit other developing countries, they are often accompanied by the senior management team of Huawei and ZTE. These two firms use these opportunities to donate their products to the host countries to develop good will which may lead to important business opportunities, often with the national government of the host countries. Most of these donations and business deals coincide with presidential visits involving the nations. It is in the African continent that both ZTE and Huawei reaped the most benefit from the Chinese government’s long-standing financial support to and political ties with African governments. By contrast, state visits between the Chinese and western governments have been much less frequent and less high profiled. No direct contractual agreement has been reported between Huawei/ZTE and the western governments. Instead, they target prestigious western telecomgiants for business partnerships.Acommon observation among managers interviewed is that the media in western host countries tend to take an alarmist and even hostile approach to reporting the business move of their firm. Subsidiaries of ZTE and Huawei are instructed by their headquarters to take a low profile and avoid contact with the media or interviews. Keeping a low profile is a typical Chinese culture, but the intention here is mainly to reduce the chance of making publicity blunders and raising more alarms. In addition, both Huawei and ZTE play an active role in corporate social responsibility (CSR) to demonstrate their commitment to host country development. For example, they donate to local charity causes, provide relief to victims of natural disasters, sponsor education and employ local people. The primary motive for engaging in these CSR activities is to gain local acceptance or at least to reduce host country resistance. Compared with Huawei, ZTE has a much more sophisticated CSR statement on its corporate website, covering issues such as environment and sustainability, human rights and dignity, health and safety, engagement with stakeholders and so on. Not all governments of developing countries are keen to accept Chinese IT firms, which have close ties with the Chinese government. The entry of Huawei and ZTE to India had met with strong opposition from politicians and national business communities for national security and competition reasons. Visa applications of Chinese expatriates to work in the Indian subsidiaries were problematic. In Africa, managers interviewed admitted that relationships with certain African governments still need to be improved. Huawei’s managers further admitted that political resistance from developed countries tends to be even stronger and makes it difficult for the firm to develop businesses. For example, an attempt by Huawei to merge with the US company 3Com was blocked in 2008 for government security reason. Huawei’s £10 billion deal with BT in 2009 also caused much concern for similar reasons. The nature of Huawei’s and ZTE’s relationship with host country governments will affect the way HCNs perceive Huawei and ZTE as prospective employers and their ability to implement HR policies to support their business strategy. Partnership with local firms and universities Both ZTE and Huawei make effort to develop partnership, for example by being subcontractors, with leading telecom firms in host countries to tap into their technical expertise, networks, customer base, brand reputation and other corporate resources and to minimize competition and resentment from host countries. They also develop joint training programmes with universities and national telecom companies in developing countries to help them develop an IT skill pool. However, managers interviewed admitted that these training investments are more intended for gaining local acceptance of the firms than for human capital return. They are practically sunk costs. The International Journal of Human Resource Management 1843 Improving management process Audited by KPMG, Huawei employs prestigious MNCs (e.g. Hays Group and Mercer) to improve its internal management system. This enables Huawei to adopt advanced management techniques used by leading MNCs and bring itself closer to the global players’ standards. This includes adopting management practices that are not commonly used by Chinese enterprises, such as outsourcing. For example, Huawei (India) outsources a significant proportion of the projects it gets from its Chinese parent company to its Indian vendor partners like Infosys, Wipro, Satyam and FutureSoft. The outsourcing decision is not based on cost but a strategy to tap into the skills and knowledge of Indian firms. Similarly, ZTE makes use of prestigious consultancy firms to provide professional management services, such as the HRM functions (see below). Its ‘customer focus’ and ‘precautious action is critical’ company ethos have been the main driving force in the company’s quality management system, which includes a range of international quality insurance accreditations. Deployment of human capital and social capital Overseas subsidiaries of Huawei and ZTE typically started with a small team consisting of one Chinese expatriate manager, one or two Chinese expatriate employees and a local administrator. Many have grown into a much larger operation within a few years. Chinese expatriates were deployed during the initial set up of the overseas operation. More local employees will be hired once the operation takes off. On average, around 70% of both firms’ employees in their overseas operations are HCNs. Many senior managers in the subsidiaries are HCNs and grew up with Huawei or ZTE in their country. They were promoted through the rank. Having HCNs as managers is seen as a more effective way to communicate with local staff. Managers from Huawei revealed that its long-term staffing intent is localization, with a motto: ‘internationalization through localization’. However, key and high-risk positions, such as finance and purchasing, are likely to be staffed by Chinese in the foreseeable future in order to avoid local collusion. This is a strategic mindset shared by ZTE. In addition to promoting their HCN employees to managerial positions internally, the overseas operations of both firms have been filling their key managerial and technical posts (e.g. sales managers, account managers) from the external market in the host countries for their skills in the field, knowledge of the industry and customer relationship management experience. The two firms’ inclination to deploy HCNs for customer interface positions is perhaps not surprising since Chinese are well known for giving importance to developing informal social network for personal and business gains. This finding is in line with previous works, as reviewed earlier, which argue that social capital can lead to enhanced organizational performance and that attention should be given by organizations to develop, maintain and exploit such relationships (e.g. Ferner et al. 2011). Recruitments in Huawei’s overseas operations are carried out by local recruitment agencies. This outsourcing enables Huawei to tap into expertise necessary for effective recruitment of local employees and allows the overseas operations to develop rapidly without having to develop a full in-house HR department. Managers interviewed revealed that some countries, such as India, have more HR available than others, for example Nigeria. In their initial days at Huawei, some Nigerian employees did not even know how to use a computer. It was a challenging task to train them up, but they have been trained up and are now training other local employees. 1844 F.L. Cooke Similarly, ZTE’s overseas subsidiaries outsource some of their HRM functions to local HR partners to tap into their expertise. For example, ZTE (UK) outsources a significant part of its HR function to Aztec HR to help design its HR strategy, HR policies and procedures, cultural values, performance management, employee handbook and HR infrastructure. According to the managers interviewed, this not only enables ZTE to develop its HR strategy, procedures and practices that are in tune with local norms and expectations but also helps it benchmark itself against leading western telecom firms. Challenges to HRM in host countries and management responses Managers interviewed identified a number of challenges to managing local and Chinese expatriate employees in their overseas operations. First, wage level for inexperienced new local recruits may be low as remuneration is based on performance level. Indeed, retention of competent local staff has been a challenge, as Huawei’s and ZTE’s wage levels are lower than those of their western competitors in the local market. Second, local employment laws are different from those of China and as a foreign firm, they need to abide by these laws more stringently than they would be in China. This causes difficulties in staffing level at times, especially when overtime is needed in short notice to meet deadlines or to solve customers’ problems promptly. It is common for Chinese firms to request their staff to work overtime, paid or unpaid, in short notice. However, working overtime may be discouraged in some countries for legal, social and cultural/religious reasons. Chinese employees will be requested by their Chinese managers to work the overtime instead. This differential treatment causes a sense of unfairness from the Chinese employees. Their Chinese managers handle this grievance by ‘educating them and giving them reward and recognition’ (Manager 3, Huawei). However, managers of both firms reported that the reliance of overtime is now much less than in the early stage, as both firms are now more geared up with better professional development and support for their international operations. Third, how to strike the balance between employee development and cost-effective deployment of staff is sometimes a dilemma, as HCN employees demand training and development opportunities and then leave for more prestigious western MNCs (also see below). Cultural difference in work values is a fourth difficulty identified. Three managers who have worked in Africa mentioned that African employees have a more relaxed attitude towards work and their efficiency is lower than that of the Chinese employees. These managers tend to send Chinese employees to work on tasks that are urgent. Fourth, multicultural and diversity management is another issue. Huawei is perhaps one of the few Chinese firms that have taken on the concept of multiculturalism and diversity management proactively. However, cross-cultural teamworking is not always smooth and a range of pragmatic management interventions are deployed to overcome the problem. It appears that Huawei is more articulate in its corporate diversity management statement than ZTE. Fifth, lack of identification from the local employees with their employer and lack of acceptance of the Chinese firms’ corporate culture are the twin challenges that have contributed to retention problems. Although Huawei and ZTE are seen as employers of choice in China, offering sparkling career prospects to ambitious engineer graduates, staff turnover is a problem of both firms’ overseas operations, particularly in less developed countries. Local employees tend to join Huawei or ZTE for the training and then quit to join the operators of western MNCs for higher pay and prestige. Huawei and ZTE subsidiaries have tried different methods to retain staff within the constraint of corporate The International Journal of Human Resource Management 1845 HR policy. For example, HCNs are sent to their headquarters for training and development so that they can better understand the Chinese culture and their corporate culture. Good HR practices used by western MNCs are adopted, such as providing African employees with guarantee letters to the bank so that they can raise a mortgage for their house. When allocating bonus, local employees may receive a favourable share. When local employees have improved their skills and competence level, they are given a higher level of responsibilities and rewards. HCNs are appointed as deputy managers to deal with issues of local staff as they are more familiar with the local culture and customs than the Chinese managers. To compensate the lower salary level of same grades, Huawei and ZTE offer higher grades than their western competitors to local employees of the same skill level. These HR interventions are partially effective. Nevertheless, more trained staff have stayed than those who have left, as one manager puts on a brave face. What is needed, as identified by managers interviewed, is greater flexibility in reward and recognition at the local level in order to retain excellent local employees. The uneven development of HR competencies at the subsidiary level and the lack of capacity to provide support from the HR headquarters are to some extent contributing factors to some of the HR problems identified above. When asked if their corporate HR strategy is adequate in supporting their global business strategy, managers interviewed felt that there is no blueprint available to provide guidance for Chinese MNCs in their internationalization process. As such, both firms are adopting a trial and error approach. Managers operating overseas admitted that they have a relatively high level of autonomy in managing their daily activities as long as they conform to the broad regulations of the company and meet their annual performance targets. Many of the HR interventions are designed and implemented at the local level to suit local needs. This is, in part, because both firms are expanding so quickly that their headquarters cannot cope with all the queries and demands from local operations. In comparison, Huawei managers seem to have slightly more autonomy than their ZTE counterparts. For both firms, effective HRM and employee retention appear to be more crucial to their Indian operations than elsewhere. Both firms have extensive HR policies and practices developed locally to enhance employees’ engagement. In particular, ZTE (India) pays close attention to employees’ requirements and issues, as it believes that understanding employees’ feelings is important in effective decision-making. It is also interesting to note that competence in dealing with industrial relations (IR) issues are emphasized when recruiting HR professionals in ZTE (India), whereas this is not mentioned in ZTE (China) where IR (and trade unionism) does not feature. In both companies’ overseas operations, a range of reward and recognition programmes have been developed locally, particularly in India and Pakistan where recognition plays an important role, as it does in China. In India, annual recognition rewards include best team players, best managers, best innovators, best projects, best quality adherences, best mentors, best trainers and so forth. Huawei and ZTE have ‘Family Day’ events that enable the families of employees to develop a deeper understanding of and bonding with the company. This is a particularly popular management technique in south Asian countries. Birthday parties and wedding celebrations for their employees are also commonly held in these countries in line with the local traditions. Discussion The primary motives of both Huawei and ZTE’s international expansion have been market-seeking and resource-seeking (R&D capacity and close to customers). It becomes 1846 F.L. Cooke evident that they face many unique challenges as well as common ones encountered by other MNCs in becoming a global player. Huawei and ZTE overcome some of these challenges through the development and deployment of political capital and social capital. These include engagement with governments and local communities, CSR activities such as donation and charity events, employment of local employees, sponsoring local education and training of IT skills through the funding of training centres and partnership with host country universities and national firms. Huawei and ZTE also develop partnership with world’s leading IT giants to tap into their brand reputation, technical expertise and market/distribution channels. The mobilization of political capital and alliances with competitors and client firms prove important for Chinese MNCs when their organizational resources, including technical, financial and HR and brand image, are insufficient for them to become players in the global arena. At a deeper level, the philosophy underlining ZTE and Huawei’s IB strategy reflects the Chinese traditional value that emphasizes on harmony in order to gain local and global acceptance and to avoid direct competition and confrontation. This strategy has strong HR implications. Internally, the two companies’ HR strategy does play an important role in supporting their IB strategy. Findings from this study, however, suggest that neither ZTE nor Huawei has developed an integrated global HR strategy that is supported by a sophisticated HR system from their corporate headquarters. Instead, it is a mixture of HR practices transferred from the parent company, initiatives developed by managers at the subsidiary level and perceived best practices adapted from western MNCs. This pragmatic approach reflects that of what Farndale and Paauwe (2007) classified as less transnational firms. Stroppa and Spieß (2010) argue that firm size affects the level of support expatriates receive and those from larger firms tend to receive more support than their counterparts in smaller firms. We would add here that the capability of firms in managing global operations is an important factor in the level of support expatriates and subsidiaries receive, especially young firms that are internationalizing. In addition, ZTE’s and Huawei’s employment of HCN employees and sending them to their headquarters for training as well as sending Chinese employees abroad is a dual strategy to develop social capital to support their business strategy. This exchange enhances the mutual understanding of different groups of employees and helps embed their corporate culture in HCN employees. As Inkpen and Tsang (2005) pointed out, shared goals and shared culture are two important facets of cognitive social capital, an argument supported by Stroppa and Spieß (2010). However, expatriation and inpatriation are costly HR practices and not all HCN employees will be sent to the corporate headquarters for cultural simulation. The important role of cultural values in the strategic HRM in MNCs is well recognized (e.g. Zhang and Albrecht 2010). Indeed, how to encourage HCN employees to share Huawei’s cultural norms and values remains a challenge identified by managers interviewed. Although the high performance and speedy customer response culture practiced by Huawei (and to a lesser extent ZTE) is often achieved through virtually compulsory overtime imposed on the Chinese employees, this managerial prerogative may not be readily accepted by HCN employees. As Fleming (2005) noted, paternalistic management style may be resisted by employees for various reasons. Without employees’ acceptance of organizational norms and values, the opportunity for firms to leverage employees’ cognitive social capital for organizational good remains limited (Taylor 2007). Nevertheless, ZTE’s and Huawei’s deployment of HCNs, though contingent upon many factors, gives the firms immediate access to local language, culture, network and other resources. This makes it easier for Huawei and ZTE to win customers, in addition to The International Journal of Human Resource Management 1847 gaining local acceptance through the demonstration of their commitment and contribution to the host country economic development. Conclusions This paper makes a number of related contributions to the existing understanding of the internationalization process of Chinese firms and MNCs more generally. First, it mobilizes a number of theoretical perspectives in IB and development studies to examine different aspects of the internationalization process of Chinese firms through an integrated analytical framework. Although each theoretical perspective has been effective in explaining certain aspects/processes of the internationalization, a single perspective is insufficient to understand the whole process of internationalization. In addition, some of these perspectives (e.g. political perspective and social capital theory) have only started to gain attention in international HRM studies, but are offering great explanatory power. We argue that in order to develop a comprehensive understanding of the internationalization of Chinese firms, we need to investigate their motives, entry strategy, challenges they encounter and their responses to overcome them, and the likely spillover effects. We argue that these aspects of internationalization interact and shape each other, including the HR strategy and outcome not just for the firm but also for the host countries. For example, to assess the spillover effects of MNCs on the host country, we need to examine their motives of internationalization, the LOF firms face and the strategy they deploy to overcome them in the specific context of the host countries. We found that Huawei and ZTE have positive spillover effects on host countries, for example through CSR, employment and human capital development activities. However, the politics of their CSR strategy should not be overlooked. In addition, the likely negative effects (e.g. national security of host countries) may need to be examined as the penetration of Huawei and ZTE in the host countries deepens. A second contribution is that the study adds to our qualitative understanding ofMNCs. The combination of these theoretical perspectives and the investigation of a range of internationalization issues through a case study approach enable us to identify new issues and extend existing IB/international HRM theories. For example, Huawei and ZTE are collaborating with local institutions and other actors (e.g. other foreign MNCs and local corporations) in the host countries to legitimize their presence and embed themselves. Cuervo-Cazurra and Genc (2008) argue that managers of MNCs from emerging economies are able to manoeuvre more easily, compared with their counterparts from developed economies, in developing countries, which share similarly poor institutional and political conditions with their home countries. The finding of this study extends their argument in that Chinese managers interviewed felt that they tend to have more bargaining power and are able to win through situations more easily in developing countries than they can in developed countries. It further suggests that Chinese MNCs may play a more prominent role in shaping the institutional environment of developing countries. This advantage, however, may come at a price. For example, the political ties Chinese MNCs develop with governments in developing countries may contribute to resistances in the developed world due to the association with corruptions and poor records of human rights in developing countries. In addition, the political strategy deployed by western firms differs considerably from that of those from developing countries (Faccio 2006). Therefore, the political capital and organizational competence developed by Chinese MNCs in dealing with situations in developing countries may not be transferable or applicable when dealing with western MNCs. 1848 F.L. Cooke Third, this study adds to our limited empirical knowledge on the internationalization of young Chinese firms in the high-tech sector, particularly the different situations they encounter in different parts of the world in their globalization endeavour. The study of Chinese MNCs has conceptual and managerial implications for the study of MNCs from other developing countries, an understanding that is to date underdeveloped but of growing significance. Studying the linkages between the Chinese MNCs and institutional actors in the host countries also has policy implications, particularly for developing countries that seek contributions from FDI to raise their technical competence and human capital. The analytical model we have developed here provides a useful framework through which to explore many of these issues. This study has a number of management implications, particularly for new MNCs from emerging economies. One is the importance of aligning its internationalization strategy and execution plan with the local development needs in order to reduce host country resistance and gain local acceptance. Another is to mobilize the political, social and cultural capital of stakeholders in both the parent and host country to maximize the resources available to the corporation to fulfil its internationalization plan. Still another implication is to develop a corporate vision on its HR strategy, but with a high level of local responsiveness. Learning from other MNCs and well-performing local firms in the host country is an effective way to develop the subsidiary’s HR capability rapidly. In particular, understanding the local culture and effective management of local employees, including winning their identification and engagement with the firm, is the key to success. This paper has a number of limitations in terms of its methodology. First, access to HCN employees and other stakeholders in host countries across regions has been difficult due to resource constraints. This has restricted the sources of information to enable the construction of a more nuanced global picture of Huawei and ZTE, particularly the likely impacts or spillover effects of these businesses on developing countries in both quantitative and qualitative terms. Second, these are snapshot case studies, and as such, many stories are anecdotal. Third, the case study of the two leading telecom firms may not be representative of ChineseMNCs across sectors in terms of their HR strategies as well as challenges they encounter during their international expansion process. In-depth longitudinal case studies as well as quantitative studies with large sample size from a wide range of industrial sectors will be useful to deepen our understanding of a topic that is significant not only from an IB and management perspective but also from a global economy and development prospect. Acknowledgements I would like to thank the reviewers for their constructive comments on the earlier version of this paper. This research was supported by a grant from the ‘Project 211(Phase III)’ of the Southwestern University of Finance and Economics, Chengdu, China. Note 1. ‘A broad definition of linkages includes transactions between foreign affiliates and local business and non-business entities like universities, training centres, research and technology institutes, export promotion agencies and other official or private institutions involve longer-term collaborations between the parties (UNCTAD 2001)’ (Hansen, Pedersen and Petersen 2009, p. 122). The International Journal of Human Resource Management 1849 PLACE THIS ORDER OR A SIMILAR ORDER WITH US TODAY AND GET AN AMAZING DISCOUNT :)