China as an opportunity and a challenge for Western service providers

Abstract

Services represent a large and growing share of the global economy, and the internationalization of services is increasingly important in the globalization process of production, distribution and innovation. Business activities between the West and the East are a crucial part of this process. China, as a huge emerging market, attracts more and more Western service providers. This dissertation examines specificities and new phenomena of business-to-business (B2B) services in China. It investigates the opportunities and challenges that Western service providers meet in this country, characterized by a mix of Confucian culture and centralized socio-political system. The dissertation explores both specific sectors and topical issues. Regarding the former, it focuses on industrial services and knowledge-intensive business services (KIBS). Regarding the latter, it analyzes the development of creative industries and sustainability efforts in China. The interaction between the West and the East is studied in the light of experience of Nordic companies conducting business in China or entering this market. Qualitative case studies have been used to gain understanding on service business in China. Five manufacturing and three KIBS companies from Finland and Sweden participated in the study. Primary data were mainly collected via the interviews of service providers, their partners and customers, and experts. Governmental and company documents have been used as supplementary data. The theoretical reviews include topical phenomena of the service economy, internationalization of services and cultural differences. The results indicate that the emphasis on human relationships ("guanxi") as a central element of the Chinese culture still impacts on customer behavior, even though there is a variety according to regions and the ownership of companies. Service culture in a tacit form is involved in the philosophical heritage, but services as offerings are gaining ground only gradually. The appreciation of tangibles over pure services has been a traditional phenomenon. In industrial services, spare parts and integrated product-service solutions are popular because tangible elements are delivered. In the KIBS business, there are multiple roles for the Western service providers: a KIBS company can act as an integrator, a concept developer, or a multi-stage actor in the value chain. Creative industries are growing rapidly in China and provide business possibilities for Western companies – a case example in this research is 3D solutions for digital media. Also the Chinese sustainability policy is an opportunity: the participation of Western technological KIBS in the huge eco-city projects illustrates it.