RESEARCH AND PRACTICE
IN HUMAN RESOURCE MANAGEMENT

Highlight, copy & paste to cite:

Siu, N. Y. & Darby, R. (1999). A Study of Management Development Practices in a Foreign Joint Venture in China, Research and Practice in Human Resource Management, 7(1), 87-99.

A Study of Management Development Practices in a Foreign Joint Venture in China

Noel Yee-Man Siu & Roger Darby

Abstract

This paper addresses the key management development issues in China. The case of a multi-national food corporation that has a joint venture in China is used to illustrate the complexities and problems encountered in the implementation of management development programmes. The findings indicate that the success of the programmes is dependent on the commitment from the senior and the middle management levels as well as on its integration to the overall human resource management strategy. It is argued that an integrated cross-cultural management development programme is crucial to the success of the organisational performance in China’s market.

Introduction

The “Open Door Policy” adopted by China in 1979 has brought about enormous growth in the industrial output as well as economy as a whole. The opening up of the vast market has created many opportunities and, at the same time, many problems to foreign enterprises. Because of the unique political, economic and cultural environment in China, it is difficult for foreign joint ventures to introduce their preferred approach in managing the employees and the organisation in China. This has highlighted a crucial issue for international companies to be aware of the cross-cultural implications in the conception, design and implementation of management training programmes.

There is a paucity of studies on management development in China. Academics tend to focus on human resource practices in general and the notion of management development is merely a small part of their studies (e.g. Ding, Fields and Akhtar, 1997; Bjorkman and Lu, 1997; Lu and Bjorkman, 1998; Nyaw, 1995; Tsang, 1994; Verma and Yan, 1995; Wang, 1990; Zhu, 1997). This paper addresses the important issue of the competence and development of the management personnel in China through an in-depth case study of a multi-national corporation.

Managing Change and Management Adaptability

The market economy in China has attracted substantial foreign investment in the last decade. The annual economic growth has averaged 9% since 1978. The 1996 GDP growth was 9.7% (Shameen, 1997). Foreign investment in the early 1996 was US$7.74 billion. In 1995, China was the world’s second largest recipient of foreign investment, after the USA, with a 42% share of all foreign investment in Asia (Business Report, 1996). One can understand the growing importance of China within the world economy.

As China is in the process of modernisation, it has attempted to reform its large-scale industrial enterprises and to address the problems of change. Those changes have included: increased entrepreneurial autonomy, the rise of private and rural enterprises, a massive increase in foreign direct investment, a large increase in exports to the developed world, increased globalization and involvement in the international market (Economist, 1991: 18). Allied to this change has been the interest in the origins of China’s management reforms, their possible Confucian influences, the performance of firms involved, changes in organisational behaviour, as well as new marketing and financial management practices (Wedley, 1992). One key factor for China to encourage economic growth and globalization is to develop its management resources. China has accelerated reform of the personnel system in order to foster a contingent of ‘competent cadres’ (China Daily, 1998). To date, many of the problems faced by China are largely caused by the shortage of qualified managers (Benson, 1996; Child, 1994; Vanhonacker and Pan, 1993) in addition to underdeveloped investment in the economy as a whole.

The formation of joint ventures in China creates immediate pressure for improved performance and change. However, this also engenders a resistance to change and a withholding of information and the avoidance of managerial responsibility. Increased pressure from overseas partners caused local managers to revert to defensive behaviour patterns learned under previous regimes. An acknowledgement of the system of industrial governance is crucial at this stage and can help to explain the behaviour of managers hitherto shaped by a “dependency culture”. For example in China, the avoidance by managers of personal responsibility reflected a “collective irresponsibility” which was learned as a form of self-protection under state socialism (Child and Markoczy, 1993). Further pressure for change in the area of the management of personnel also creates tensions in joint ventures. Within the concept of the “caring” socialist state, the provision of employment security and extensive social benefits including health care and accommodation within state enterprises are very important. Because of this social orientation local managers have been reluctant to adopt tough personnel policies, which particularly influenced the payment of employees according to their performance.

Moreover, the persistence of pre-industrial attitudes and behaviour reflecting a deference to hierarchy remains prominent. Such attitudes and behaviours supported the acceptance of paternalistic state socialism. The communists, in turn, preserved those cultural values which were consistent with the system whilst suppressing values that were threatening or not useful (Child and Markoczy, 1993). Therefore, the dominance of the system dictated the process of industrialisation leading to a centrally planned economy creating inefficiencies, resource constraints and inertia (Kerr, 1983). Political dogma, expressed in an ideological opposition to market forces, material incentives and entrepreneurial spirit all restricted management development which was so long sacrificed to political doctrine.

The dearth of managerial competence in China can partly be attributed to the mode of industrialisation. For a system that is bureaucratic rather than market-led the skills managers require are more relevant to coping with the bureaucracy than managing the modern, competitive economic environment. Furthermore, the shortage of good quality institutions to train managers is a barrier to management development (Borgonjon and Vanhonacker, 1994) whilst also reflecting the fairly recent process of industrialisation and the questionable status given to the role of management in Chinese society. This highlights the necessity for the introduction of a wider training and development strategy to meet the demands of economic growth and the requirement of a changing society.

Management Development in China

The dramatic changes in the Chinese economy have greatly affected the role of the manager in Chinese society. The managers’ role is changing from a concentration mainly on people-handlers towards the need for an awareness of the market, financial management and thinking strategically to encourage competition and deal with joint ventures (Chen, 1988). Consequently, such changes have raised questions about Chinese managers’ abilities to deal with competition, uncertainty, unpredictability and increased autonomy. The localization of the management group in the foreign-invested ventures, due to the cost reasons, puts strong demands on the general management development of local managers and professionals (Bjorkman and Lu, 1997).

Management in modern day China is argued to be characterised as an exact science with a clear and definable knowledge base, with a set of quantitative and operational methods with universal applicability linked to specialised functional skills (Borgonjon and Vanhonacker, 1992; Qiu et al., 1989). This is supported by the evidence of a knowledge-based curriculum for trainee managers where a great deal of emphasis is placed on the traditional numbers-oriented (hard) subjects and far less time is spent on people-oriented (soft) subjects (Bjorkman and Lu, 1997; Warner, 1995). Underpinning this approach are three issues - professional background, tradition and ideology - all combining to dictate this distinctly Chinese interpretation of the theory and practice of management. Management development within the traditional educational system is described as: supporting the more didactic, teacher-centred teaching methods (Boisot, 1987); a concentration on theory rather than on practice with little contact with the wider industrial community; and a dearth of well trained and well qualified management trainers (World Bank, 1985).

China’s successful development as a major economic power can only be achieved with the aid of highly skilled, professionally trained management (World Bank, 1985; Fischer, 1990). In China the management training function is not only aligned to economic structure and development but also to political and ideological beliefs. Since management development is perceived as an important means of enhancing managerial competence and improving competitive advantage (Benson, 1996; Gregory and Wales, 1996; Osbaldeston and Barham, 1992), international companies involved in joint ventures need to be aware of the cross-cultural implications in the design and implementation of management training programmes for Chinese managers and its integration into the strategic human resource system.

Cross-Cultural Training in China

There is limited literature that addresses the issue of cross-cultural training in China. A number of researchers have attempted to categorise the content of cross-cultural training programmes (Tung, 1981; Early, 1987; Mendenhall and Oddou, 1985). For example, with regards to training programmes, five key issues are identified: area studies, cultural assimilation, language preparation, sensitivity training, and field experience. For example, area studies include useful geographical and demographic business information; cultural assimilation involves an introduction to business theories and cultural practices; language preparation considers the wider aspects of business language and communication; sensitivity training illustrates interpersonal skills, e.g. in the interaction between employees and customers; and field experience tests theories and practices in the work place and supported by study visits to overseas sites on a regular basis with a view to improving overall managerial performance.

Mendenhall and Oddou (1985) go further to offer a three-stage methodology including information giving, affective and immersion. An analysis of the above builds on Brislin’s (1979) model which classifies cross-cultural training methods into three types: cognitive (the learning of information and skills from lecture-type non-participatory lessons), affective (the learning of cultural insights through techniques that raise affective responses including culture assimilator training, role-play, and case study), and behavioural/Experiential (programmes involving sensitivity training, field experience, simulations).

Some elements of the cross-cultural training framework have been adopted by the case (which will be discussed in the next Section). Nevertheless, the training framework is not panacea. The success of its application to any multi-national corporations, such as Tasty Food Ltd, is contingent upon the commitment of the management and the extent of its integration into the overall human resource strategy. The present case has shown the complexity of the problems in the implication of their training framework.

Research Methodology

To illustrate the real experiences multi-national enterprises encounter in China, the following case study provides an example of the complexities and possible misunderstandings companies can face when doing business there. Interviewing the Chief Executive, James Smith, who is responsible for the China market was conducted at two different times, one in March 1995 and one in March 1996. In October 1995 a visit was paid to the factory where observations and interviewing twelve managers were carried out. This was followed by an interview with the Personnel Manager in March 1997 and an interview with the Training Manager in October 1997. This has helped to trace the progress of management development issue in their joint venture in the enterprise.

Tasty Food Ltd. - The Case of a Multi-National Food Corporation

Since the mid-1980’s, there was a belief by the top management of Tasty Food Ltd that China “is a good market opportunity”. Tasty Food Ltd started its first contact in China in 1985. In 1988 it purchased a company in Hong Kong which was used as a stepping stone to open the market in China. The first factory was established in Shenzhen, China, in 1989. In the senior management team the positions were filled by expatriates- 4 European expatriates and 12 HK-Chinese expatriates. There is now around 900 staff in the factory. In the last five years the productive capacity of the factory has risen over time from 20,000 to 30,000 tonnes per year. However, labour productivity still remains a pressing problem. By the middle of 1995 the growth rate of the enterprise meant the company had to acquire a new site in Hangzhou (near Shanghai), 100% owned by the company. The productive capacity of the new site is envisaged to reach 60,000 to 90,000 tonnes per year, which is approximately equivalent to the output of the company’s UK factories and will be installed with modern machinery. (Table 1 shows the chronology of Tasty Food Ltd).

Table 1
Chronology of Tasty Food Ltd
Mid-1980s First contact in China (1985)
1988 Purchased a Hong Kong-based company
1989 First factory acquired in Shenzhen, 900 staff employed
1989-94 Production rose from 20,000 - 30,000 tonnes per year
1995 Growth created the necessity to acquire new site in Hangzhou
(100% ownership, productivity planned to be 60,000 - 90,000 tonnes per year)

One key question to multi-national corporations such as Tasty Food Ltd in the process of expansion is: could the expertise and competence of the managers cope with the rapid development? The management development process of the enterprise can be divided into three main stages. They are namely: training for survival, training for functions and training for moving towards integration.

Training for Survival

Under previous labour regulations as well as new Labour Law, the foreign invested enterprises have the obligation to train employees in vocational skills (Ding, Fields and Akhtar, 1997). In the stage of Training for Survival, management development programme was non-existent at the Tasty Food Ltd. Their aim was to become a market leader in the key regions in China in the shortest possible time, thus the company has favoured a short-term ‘quick and dirty’ approach. When this culture was applied to training and management development, the approach and methods were ‘ad hoc’. The senior management only believed that training was used to ensure that the skills of the workers were up to the required standard. A production manager once complained,

“They [ shopfloor workers] are not aware of bacteria. When you ask them to wash their hands they say, ‘My hands are clean, why do I need to wash?’”

Basic skills and hygiene knowledge were regarded as solely imperative to the improvement of the operational standard. In this stage, training was merely developed for the shopfloor workers and was believed to be sufficient for survival, at least in the short run, in China.

Training for Functions

Between 1993 and 1994, the attitude of the senior management in the Headquarters towards management development was changed which was attributed to severe competitive environment. Their two major multi-national competitors were extending their market base in the north, especially in Beijing and Shanghai. The management was well aware of the need for competent managers to combat with serious competition. Nevertheless, the departmentalised culture and the inadequate management system within the Shenzhen factory were widely acknowledged as a major hurdle. Part of the reasons was due to a lack of committed and knowledgeable management team. The reliance was mainly on the expatriate managers and most of them were concerned about their own departments. The situation was reflected in a case where a shopfloor worker placed the wrong expiry data onto a number of product packages but the Quality Control Department had not noticed it. In the end, the Tasty Food Ltd received complaints from customers, who noted that the product was out-dated, when the product reached the market. It emerged that an operative had noticed the mistake but did not inform her manager. Her explanation, when she was criticised, was, “I’m only responsible for packing and not quality checking”. When this matter was discussed in a management meeting, the atmosphere was described by a senior manager as ‘finger-pointing’ instead of ‘problem solving’. The Quality Control Manager commented,

“Every department head is merely trying to protect their own interest and they never want to know what others are doing”.

In order to survive healthily in the future, the Headquarters believed that there was a need for investment in developing native Chinese managers who would gradually replace the expatriate managers in the long run. This stage was named as ‘Training for Functions’ where the priority was given to training the Chinese graduates for various functions. The organisation has focused on two areas where action has been taken. They were namely: the start of a native graduate training programme and the recruitment of an expatriate human resource manager.

First, the company started a graduate recruitment programme in 1994 within China looking for “managers for the future”. The recruitment of the Chinese graduates from Shanghai and Beijing was based on the principle of localisation. This echoed the study of Bjorkman and Lu (1997) that a number of joint venture enterprises have implemented localisation at the management level due to the cost reasons. They would start from the junior management level and if someone could take a leadership role they might be able to progress to a higher level. The management trainees they were looking for needed to be ‘creative, entrepreneurial, positive and aggressive’. The recruitment programme has limited scope and tended to concentrate on graduates from the “food science” institutes. They were recruited mainly for filling the positions in the manufacturing function. In 1996 they started to recruit some MBA students for the areas of marketing and finance. In the end one was recruited for the Finance Department.

Second, a senior Hong Kong HRM specialist was recruited to oversee the development of human resources within China in the autumn of 1994. However, it was widely commented that in his reign the HRM manager showed himself to have no particular knowledge in the training area and no desire to ‘wade in and do things’. All the training programmes had been ‘piece-meal’. In terms of the graduate training programme, the graduates learned the general operations in the first two months. They worked on different jobs for a short period of time. After another six months they were allocated to a specific task so that they obtained a much deeper understanding of at least one particular job. However, it was commented that the quality of the performance was inconsistent. Since the philosophy of the factory was short-termism, it has failed to inspire the management trainees with the idea that it was a company ‘worthy of making a considerable personal effort’. The human resource manager was sacked after one year.

It was widely acknowledged that the record of training was inadequate. The establishment of the training department in 1994 has injected some ‘hope’ to the factory. In his first year of assignment, the training manager seconded from the UK has faced a number of problems including ‘cultural differences’, ‘a lack of fundamental understanding of training among the managers’, and the suspicion of his assistant on his ability since he was a foreigner. Before the mid-1995 his main task was to train the operatives by using the Headquarters’ manual. The objective was that when they finished the training they would be allocated to supervisory positions primarily in the new factory in Hangzhou and then would progress to middle management team. The training principle was that graduates needed to manage 3Ps, i.e. ‘plant, people, and product’. In terms of the training content, the trainees needed to learn eight modules. They attended the course one day a week for 9 to 12 months at the training centre. The methods included: 3 weeks’ role play exercises and discussion followed by assessment. Moreover, they were involved in the on-the-job training. That means, in the first month they were in one department and in the second month in another department. The training manager admitted that the training programme was still far from satisfactory. The problems were complicated by a number of human resource issues.

One of the major problems was a lack of communication between the expatriate managers and the native Chinese. Many of the employees were from the North of China and they had no real attachment to Shenzhen. Their major ‘purpose’ was to earn ‘the quick money’ and went back to their home town. This formed an instrumental view of work. The comments of the expatriate managers on the working attitude of the native Chinese included: ‘they have no perception of career development’, ‘they are quite short-termism’, ‘their desire to accumulate knowledge for its own sake at the expense of real practical experience’ and so on. Two expatriate managers have expressed their views about the motivation of the native Chinese on two occasions,

“Workers tend to be short-sighted. They only come here for money. They’ll go after a couple of years,” said the Quality Control Manager.

“They don’t have any commitment. They just come for money and that’s it,” said the Production Manager.

On the other side, the local graduates perceived that although Tasty Food Ltd has offered some career plan for them but it was always the HK Chinese who obtained the better jobs and their pay was ‘quite low compared with people in another foreign companies’. The trainees received between RMB 1,500 and 3,000 per month depending on their qualifications, which was at least seven times lower than those of the expatriate managers at the middle level. Such instrumental view and the perception of inequity, to certain extent, have contributed to the de-motivation of the graduate trainees. These negative attitudes towards one another have not only badly affected the communication but also the integration of the enterprise.

The problem was further complicated by a lack of commitment from the function heads. The Personnel Manager, who was based in Hong Kong and was involved in the graduate recruitment programme, commented,

“In fact the whole process is very costly, it’s only successful when the follow-up system can support it. We sometimes get feedback from some managers, ‘it’s nothing to do with me’, ‘why should I train the graduates’ or ‘I’m too busy for it...’”.

She often received complaints from some graduates who expressed that they did not receive proper attention from their function heads. Some department heads were not interested in what they had learned and were not willing to ‘release’ them to attend the training workshops. They were described by the personnel manager as ‘frustrating and found no way out’. In the end, they left and joined the competitors of the Tasty Food Ltd. In the past four years, a total of 49 graduates have been recruited but only 25 were still working for the enterprise at present.

Training for Moving towards Integration

Dalton and Austen (1995) argue that employee commitment to the company can be increased by teaching employees certain values, such as equality between top management and workers, and by introducing an approachable management style which looks after the individual. This was lacking in the second stage. In the stage of ‘Training for Moving towards Integration’, both the managing director and the training manager have recognised the problem where the enterprise culture did not match with the training philosophy. Therefore, they decided to develop a ‘learning culture’ from senior to junior management levels.

The focus of the development was on both cognitive and affective aspects. Geringer and Frayne (1990) echo the view that training can be used to encourage people to think and behave in ways consistent with the company’s cultures, objectives and interests. In the first half of 1998, the training manager developed a training programme for the senior management team within the factory. The content of the programme included language training, cultural assimilation, sensitivity training, communication technique and appraising staff. Both lectures and case studies were adopted as the training methods. The first four items were significant for changing the attitude of the expatriate managers from being production-oriented to people-oriented. Staff appraisal was started from the graduate trainees, who were appraised mainly by their department heads. This would be followed by the appraisal of the shopfloor workers and the senior management team. In April, all senior management participated in a training course where they learned how to appraise their staff.

The training manager commented that they tried to link training to other human resource practices, such as staffing, compensation and appraisal systems. He had received some ‘encouraging’ feedback from the management trainees since some felt that their department heads, after attending various training courses, were ‘more open’ in communicating with them and were more willing to teach them particular skills.

Zhu (1997) notes that the problems identified in China’s training and development indicate that there is a strong need to implement more human resource management practices. The training manager argued that the commitment from the management levels was needed and this was a good opportunity for managers to sit together and really examine the fundamental problems and issues. Tasty Food Ltd still has a long way to go in its re-engineering process. Nevertheless, it was proved to be a good start and the success of this organisation is dependent upon the development of their management resources as well as integrating the training philosophy into the overall human resource strategy.

Discussion and Conclusion

China is at a stage of dramatic transition towards a more market-oriented economy. Dynamic and high-calibre management is needed in dealing with the problems of new legislation, market competition and a changing workforce. However, it is argued that, after more than 18 years since the reforms began, China still suffers a scarcity of well-qualified managers (Benson, 1996; Child, 1994). A considerable number of joint ventures tend to adopt a short-term and ad hoc approach in training their own management teams and ignores the long-term significance of management development. All these issues add to the cross-cultural complexities that partly determine the relationships the company and individual Chinese employees enter into.

Tasty Food Ltd is one of the multi-national corporations, which has acknowledged the significance of management development to the long-term survival after three years’ operation in China. The approach of management development has been moved from functional to strategic and the focus has shifted from the graduate trainees to the senior management team. It was still too early to comment on the success of the programme. Nevertheless, the management have acknowledged its importance and a behavioural commitment was seen in the process. The success of the development programme is contingent upon a number of factors. First, enterprises need to increase their commitment and investment in the management development programmes in order to survive in the intensive market competition. Second, the cross-cultural elements need to be acknowledged and highlighted in the programmes. Third, the programme needs to be integrated into the overall organisational strategies. In other words, training must not be isolated from the recruitment, appraisal and the retention strategies.

Companies with major investments in China see one of their key problems to be the scarcity of qualified management personnel. For Chinese managers to be more effective and able to cope with the changing demands both of the internal and external markets, their training processes must be more closely assessed. In most cases, this will involve a complete redesign of both the content and the process of management training. This paper has highlighted the essential antecedents for management development in China. In the long term, a company’s success in China will ultimately depend on the quality and availability of its management stock (Gregory and Wales, 1996). According to Borgonjon and Vanhonacker (1994: 346), management development “is a priority for most of the bigger joint ventures once they get their operations off the ground” and this “will become a driving force in the modernisation of management education and training in China”. Expatriate managers alone cannot meet all the demands made upon them by the joint ventures without a highly trained, competent cadre of indigenous Chinese managers. It is argued that if cross-national organisations intend to develop and sustain their business in the People’s Republic of China, appropriate integration of cross-cultural management development programmes into their own human resource strategy is crucial. This will be essential to the success of the organisational performance in China’s market.

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