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Leveraging knowledge in China:the experience of a foreign

entrepreneurWilliam S. Lightfoot

International University of Monaco, Monaco, and

James AlmeidaFairleigh Dickinson University, Madison, New Jersey, USA

Abstract

Purpose This paper aims to present the observations of an Italian expatriate who has made Chinahis home. It provides insights into the reasons he has been successful, which will help western firms

learn how to better do business with the Chinese.Design/methodology/approach This paper is based off an intensive interview with a Westernentrepreneur.

Findings This paper reviews the case of JESA industrial limited featuring comments and theperspective of its expatriate founder as he leads the further evolution of JESA from roots as an industrialmarket research and outsourcing consultancy focusing primarily on small and medium sizedenterprises in Italy, to one that combines western and Chinese knowledge and experience with technicalexpertise and competency to serve a growing base of western businesses and Chinese expatriates.

Originality/value This study is original in that it provides insight from the perspective of asuccessful business person who has gone through the process of integrating into the Chinese businessworld. Linkages are made to other studies, and literature. The paper helps foreign executives in small,medium, and large enterprises understand some of the nuances involved in doing business in and withChina from the perspective of a successful western expatriate.

KeywordsChina, Culture, Innovation, Expatriates, Entrepreneurs, Outsourcing

Paper typeCase study

IntroductionThe opportunities for economic growth in China seem endless. Companies andindividuals from around the world are converging on a market that until relativelyrecently remained somewhat mysterious and seemingly impenetrable. Today, it hasbecome a vast frontier for prospectors from a wide range of backgrounds allconverging on China in an attempt to leverage the numerous opportunities that anenormous market presents. In fact, according to the China Foreign Economic StatisticalYearbook(Xiaoyong, 2003), China exceeded the USA and became the leader in foreign

direct investment (FDI) foreign firms from a wide range of industries view China as afinancially viable place to invest. Attracting FDI is considered a crucial elementstrategically in the economic development of the country (Na and Lightfoot, 2006).China has made great efforts to attract foreign firms, through the designation of specialeconomic zones, as well as through massive expenditures on infrastructure, education,and other factors critical to attract foreign firms. For foreign firms, leveraging theseinvestments requires the development of an innate understanding of the local cultureas well as of the extant business environment. Many of these overseas prospectors lack

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such an understanding and those who have been oblivious to the deficiency have paida significant price. The price (in terms of both time and resources expended) ofdeveloping these skill-sets in house is quite steep. Drawing on the expertise of externalconsultants and advisors represents an attractive alternative for many small and

medium sized enterprises (SMEs) keen to tap into what is forecasted to become thelargest economy in the world during this century.

This is the market space where one company, JESA a small venture started inChina in the late 1990s by an Italian expatriate, operates. JESA initially targeted SMEsfrom Italy, helping their clients establish a manufacturing relationship in China sometimes by arranging outsourcing agreements, often by helping them to set up amanufacturing facility to help position the client for growth in both the domesticItalian market, as well as overseas. Today, JESA is in a unique position primarilyowing to the strength of its people. Its management team includes a blend of westernexpertise, coupled with local Chinese talent. The leader and founder of the company,Saro, has over 16 years of experience living and working throughout China and Asia,in a variety of technical leadership positions. His partner is a financial expert with15 years experience in the stock and fund management market in China. They alsohave a strong team of approximately 60 employees, including five Chinese ProjectManagers with engineering degrees as well as several expatriates from Europe whohelp establish relationships with potential clients from Europe. Each project iscustomized for a client, and may involve activities such as market research, sitelocation, building and managing manufacturing facilities. JESA offers a range ofservices that enable small, medium, and even large companies access an otherwisecomplex market.

JESA is now looking at the future to develop approaches that will leverage the fullcapability of the firm by providing client companies with access to a market that hasenormous potential but with imminent challenges that limit the expatriation of

earnings out of the country. A recent initiative to offer a range of services in the Mergerand Acquisition arena has led the management team to launch a separate unit focusedon helping clients meet their financing needs. This new company would offer privateequity placements for Chinese expatriates. JESA with its roots in projectmanagement and outsource consulting seems poised to become a significant player inentrepreneurial finance.

Outsourcing and cultureThe industrial manufacturing sector in China accounts for more than 50 percent of thenational GDP[1] and over 60 percent of GDP growth in China (Campbell et al., 2004).Companies from across the industrial spectrum, such as Wal-Mart, Carrefour, Ford,and General Motors, are experiencing significant cost savings by sourcing a wide

range of parts, subassemblies, and finished goods from Chinese manufacturers. Theemergence of China as the worlds factory coupled with its rapid rise as a globaleconomic power has generated a great deal of resentment in Europe and in the UnitedStates. The notion that the migration of manufacturing capacity to China will leavecountries in Europe and the Americas in worse shape economically than ever before,has gained increasing currency in these countries. This perceived threat fuelled byoften misplaced populist rhetoric is causing a nativist backlash in these countriessimilar to the backlash seen recently over terrorism. The reality is something different.

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Henry Rowen (2003) pointed out that there are several reasons why China will continueto need external suppliers at least for the foreseeable future. The combination ofrapidly increasing internal demand, a shortage of highly skilled workers, andincreasing wages make it unlikely that China will completely dominate industrial

output over the next 30 years. Moreover, elementary economic concepts assert that costadvantages driven by low-priced labor inputs rarely endure (Table I).

Having business interests in China or in any foreign land, sounds increasinglyexotic for businesses today. Clearly, there are a number of benefits, both strategic andoperational, for a company to operate in more than just its country of domicile. Inaddition to experiencing lower costs by locating parts of the value chain overseas, theopportunity to do business with people from a different culture makes the entireexperience seem more venturesome, and appealing. The exotic nature of doingbusiness in China, for western Expatriates may be due to the significant cultural gapthat exists between westerners and Chinese. (Hofstede, 1980) And the wider thecultural gap, the more challenging it can be for people to adapt, and ultimately succeedin their assignments. Harzing (2002) found that the failure rate for expatriates washighest when the gap between cultures was the greatest. In her analysis of expatriatesfrom Australia working and living in China in the late 1990s through early 2000s,Hutchings (2005) found an increasing number of business people who self selected theirassignment, implying that todays expatriates may be more adventuresome, andtherefore more engaged in adapting the Chinese culture.

However, it does not require more than a few missteps for this experience to berendered troublesome, misguided, and at times even fatal for the aspiring company.For instance, while outsourcing decisions often seem to be driven by the allure of lowerproduction cost of a specific part or sub assembly, there are many costs that companiesneed to consider when deciding whether or not to outsource (Table II).

These challenges of operating in other countries often appear magnified for a firms

operations in China. Western firms outsourcing in China have many hurdles toovercome, before the promised savings appear. As Carboni (2005) notes, a combinationof cultural issues, and practical issues such as shipment, and scheduling can makelabor savings disappear rapidly if not properly managed. Moreover, differences inculture and mindset, if ignored, will further compound the challenges. Consider the factthat a Chinese business counterpart may not consider a contract finalized until thetransaction is complete. A nave western partner may find what looked good on paper

Challenge Discussion

Internal demand Growing at a rate comparable to overall GDP Demand for imports remains high

Lack of highly skilled workers Rate of growth of technical skills will determine long termimpact

Rapid growth in wages Chinese goods may become too expensive in selected markets ex: textile and footwear

Source:Rowen (2003)Table I.

Challenges for China

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has quickly degenerated into a costly fiasco. Campbell et al.(2004) identified three keyfactors that they believe contribute to outsourcing success:

(1) make changes at the home office to address the organizational inertia that canslow down the introduction of a purchasing program in China;

(2) attend to the details, monitoring suppliers as closely as possible; and

(3) establish a firm goal for sourcing and do what they must to achieve it.

They also noted that successful firms build local staffing, and capabilities that givethem in the long run, significant competitive advantages versus other firms that areslower to outsource. Ultimately, Campbellet al.(2004) indicated that companies shouldfocus on finding the right leadership, especially in four key positions:

(1) the heads of the office;

(2) procurement and merchandising;

(3) quality assurance; and(4) control, and logistics.

They assert that the best person for each position should know the company, theindustry, the market, and speak the language.

Failure to find the right people, inevitably leads to a failure to establish a soundbusinessoperation andmay doom theinitiative from thestart. Fan and Zigang (2004, p. 81)noted that most of the failures faced by cross-national companies are caused by neglect of

Costs involved in outsourcing Comments

Parts or sub-assemblies Raw material costs same or higher Savings in labor and overhead (20 lower than

US potentially)

Freight and duty Cost versus time Air versus sea criticality of delivery time

Working capital Cash on demand or letter of credit 30 day terms (30 days to ship via sea)

(Pay before receipt!) Need for 2 to 4 weeks of safety stock

Pre-production support costs Advance prep to ensure spec compliance Multiple trips to make sure of follow through

(patience required!)

Language, time, and scheduling Translator may not have technical know how Lead times can be long Requires managing schedules tightly and excellent

forecasting

Education, experience, partnerships Benchmark versus other firms experiences Compare labor savings versus TOTAL costs Choose non-critical components initially to gain first

hand experience

Source: Carboni (2005)

Table II.Costs involved inoutsourcing

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cultural differences. Companies want to make more money by entering new markets, andreduce costs by leveraging lower production costs in lower wage markets. In pursuingeither or both of these objectives, they may rush in without properly learning about howbusiness is done in these new markets. Fan and Zigang went on to report that:

. . .the great barriers caused by cultural differences like difficulty of communication, higherpotential transaction costs, different objectives and means of cooperation and operatingmethods, have led to the failure of many Sino-foreign cooperation projects (p. 82).

As is often the case, being ignorant or oblivious to cultural nuances in businessrelationships will derail even the most promising alliance. For instance, in China, thenotion of saving face comes with a complex set of rules that baffle many foreigners.Renjun and Zigang (2004) noted that the Chinese think it is acceptable to withhold orcolour information, avoid making commitments, cover up, or simply do nothing whenfaced with a difficult situation. Saving face builds off of the Chinese emphasis onpersonal relationships referred to as guanxi. As Wang et al. (2003) noted, guanxirelationships reduce both risk and competition as relationships and networks are built

on a friendly, cooperative basis.

First, Chinese managers are more likely to favour cooperative strategies than Americanmanagers and American managers place greater importance on contractual safeguards thanChinese managers. Second, when faced with conflicts, Chinese managers tend to use indirectforms of influence that involve the assistance of a third party while Americans prefer to usedirect and open forms. Third, Chinese managers tend to make less risky decisions thanAmerican managers. They tend to adopt the non-participatory approach to decision-making.Fourth, the Chinese pay more attention to build social and interpersonal relations thanAmericans. Last, the equity principle is common in American companies while the equalityprinciple is widely used in Chinese companies (p. 39).

This suggests that local country knowledge and expertise and the ability to communicate

with foreigners is vital before a successful business partnership develops. Local countryknowledge refers primarily to tacit knowledge which as Nonaka (1994) noted has apersonal quality to it andis hard to codify or communicate. This means that for companieslooking to outsource in China, they would need the expertise of individuals who can serveas a technically competent, cultural bridge between them and their Chinese counterpart.Ward and Rana-Deuba (1999) note that expatriates need first to understand the otherculture while Osland et al. (1998) suggest that expatriate managers must adapt theirmanagement style to fit with the local culture. Both parties the western expatriate andthe Chinese counterpart need to build a bridge based on both explicit and tacit knowledge

explicit knowledge being that which is codified and more easily transmitted formallythrough language (Nonaka, 1994). For a western firm, thismeans tapping individuals whopossess western cultural skills including language, a sense and understanding of

western values and approaches to business, and also an innate understanding of theChinese cultural context including language, a fundamental understanding of guanxi,and experience in dealing in a fluid business environment. And while this seems intuitive,finding individuals with the rightblend of explicit and tacit cross cultural skills is noteasy.

Background on JESAChina, in the late 1980s, was still emerging from the Cultural Revolution. WesternFDI flowed in at an ever increasing rate as the doors seemed to be opening.

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Then the Tiananmen Square protests happened and companies and investors startedto lose confidence. It was in this era that Snamprogetti (ENI Group) the large ItalianPetrochemical firm sent a young chemical engineer by the name of Saro to China as aproject manager. The ENI group was hired by the Chinese government to help

develop the local petrochemical infrastructure, using financing from Japan, Korea, andFrance.

Around 1994 the company made what turned out to be a fortuitous decision forSaro: they sent people with limited experience working with the Chinese to managetheir Chinese branch. They clearly were not able to adapt the local culturalenvironment, making bad decisions, while attempting to impose their own westernstandards on local employees and partners. This turned out to be a disaster for thecompany, as the new management team effectively dismantled 20 years of localexperience in a few short months. A disaster for the company turned into anopportunity for Saro, as he decided to leave the firm. Many other people also started toleave the firm such that by 1996, all of the original team had left.

Saro then went to work for another firm for a short period of time, before setting up

his own office in Beijing. As an Italian expatriate, and knowing that 95 percent ofcompanies in Italy have fewer than 10 employees, he targeted small Italianmanufacturers looking to either export to China, or to set up their manufacturing basein China for export back to Italy. His initial opportunities were mostly in marketresearch, but over time, he shifted his focus to providing expertise related to exports.This helped him learn more about this aspect of the market, and effectively completedhis knowledge of the supply chain. His expertise was invaluable to many of thesecompanies who owing to their small size were not able to develop the capacity tomanage such operations in-house.

In 1999, Saro moved his base of operations from Beijing to Shanghai as it was clearthat most investment and entrepreneurial activity seemed to emanate from there.According to Saro (2005): Within a 600 km radius of Shanghai, 20 percent of all ofChinas production takes place, including:

. 40,000,000 pairs of shoes;

. 80 percent of the eye glasses in the world; and

. 95 percent of the lighters.

Shanghai is a real business city. The people have an entrepreneurial spirit; there is asense of cooperation. Cost is also a factor. Shanghai is less expensive to live and dobusiness in. What I spent in one month in Beijing, I could stretch it over two months inShanghai.

Beijing presents quite a contrast to Shanghai. The presence of the federalgovernment is ubiquitous. Sometimes, this could prove beneficial. For instance, inthe early 1990s, Saro had the seemingly impossible task of translating 80 pages oftext from Mandarin to several different languages overnight. Fortunately, Saro wasable to leverage his guanxi connections through one of his Chinese friends who wasa military officer in Beijing. As Saro lamented his situation, his friend assured himthat he would have the translated materials delivered to him by the next morning.The translation was done by military listeners who were proficient in overforty-seven languages and were tasked to listen in on the phone calls of foreigners.The military friend brought the documents to these listeners handed out a single

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page to each of 80 of the 1,000 listeners and had them all translated by the timework started the next day.

Nevertheless, Saro moved to Shanghai in part to get away from the overt presenceof the government, and in part because he saw Shanghai as a better choice to expand

his business network. Since, the move to Shanghai, JESA has further expanded itsofferings to clients, broadening out from its initial base in market research. They nowwork with clients on a range of activities including serving as interim managers forlocal operations, designing work for facilities and products, as well as evaluatingproposals for mergers and acquisitions.

The JESA Industrials Areas of expertise are (www.jesa.com.cn, accessedDecember 1, 2005):

. outsourcing;

. de-localisation and study of the entry strategy into the Chinese market;

. interim Management;

.

M&A;. engineering activity;. engineering and new products development to introduce to the market starting

from the idea or the project; and. engineering of mechanical components and plastic moulds.

JESAs role in supporting western firms has become increasingly valued, as moreand more companies realize the impact China has had on their coompetitiveness.Saro cited the example of a large brass fittings company. Their supply chain waslocated in Italy and the company sourced high quality brass fittings from amultitude of Italian suppliers (OEM). This business represented approximately

50 percent of their overall business for these suppliers. One day, the big Italiancompany told its suppliers that it was moving all of its production to China.Because of this shift, the Italian suppliers lost 50 percent of their business in amatter of weeks, due to delocalization. They ended up laying off 800 employees ina single weekend.

Clearly, such decisions have to be examined in a context that includes not merely acalculus of expenses and profits, but also their social impact. However, the trend ofglobalization also requires companies to become more competitive or perish. At theother extreme, JESA advised a client that has benefited greatly from delocalization,while also benefiting the Italian economy. In 1997, this then small OEM producer ofkitchenware had 25 employees and generated a turnover ofe4 million. After shiftingpart of their production to China in 2003, they decided to hire JESA to construct a new

plant in China with a stated aim of increasing their global competitiveness. By theend of 2005, turnover had increased to e80 million and employment had grown to 500people including additional employees in Italy.

JESA has clearly identified a need and what had started as a one personconsulting firm now includes a headquarters in Shanghai, and four other offices inShanghai, Shenzhen, Wenzhou, and Ulaan Baatar (Mongolia). Their Mongolianoffice was setup mainly to interface with the raw material suppliers based inMongolia.

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Overview of specific client projectsJESAs projects cover a broad range of industries including alternative energysourcing, security, telecommunications, industrial valves, and electrical engines.

JESA currently has 12 factories under their control, and 13 more under production.

Examples of projects JESA are:. production of different injection moulds for the automotive and appliances

sector;. design and production of industrial valves;. production of automatic systems for control of electrical engines;. supply to an Italian intelligence company of automotive controls (spy cams,

acoustic spy microphones, and biometric door locks);. introduction of power cables and optical fibre in Mongolia;. market research in the food, clothing, medical, and industrial sectors and. systems for clean energy (solar, wind power).

Source:Adapted from www.jesa.com.cn accessed December 1, 2005Building a factory in China can be quite complicated. The process itself is fairly

straightforward it takes about 6 to 12 months before ground is broken, 1 year tobuild and set up the factory, 1 to 2 years after factory is operating to transition factoryfrom JESA team to client. The typical factory is about 2 3,000 square meters, andrequires a e2-3 million investment (according to Chinese regulations). JESAs expertiselies in its understanding of how the Chinese think and act, which enables it todifferentiate its offerings from that of other firms. As the leader of the business, Sarohas crossed the bridge from expatriate, to resident he no longer is on a short-term,overseas posting his life, and work are centered in China.

Developing inside knowledgeWhen Saro initially arrived in Beijing as a Product Manager for the ENI group, he waspresented with a ringside view of how business gets accomplished in China and theinfluence that the central government has in this process. Saro noticed that asthe projects continued to evolve, the Chinese government continuously increased thepressure on ENI to hire more Chinese subcontractors, and to buy more and moreproducts and materials from China. One of the big challenges in achieving such a goalwas that the quality of the products and materials sourced from these localsuppliers was not up to the standards of ENI. Therefore, Saro and his team spent agreat deal of time training the Chinese suppliers on how to meet their standards. Theywere sharing their expertise the explicit knowledge necessary to meet certain quality

standards.One such project involving a Chinese supplier required the supplier to weld

titanium. It took Saro and his team several months to train the supplier such that theywere consistently meeting ENIs standards. Today nearly 15 years later, that city inChina is now known for its expertise in high quality titanium welding. The knowledgetransfer had clearly benefited both parties ENI developed local skills that metglobal standards, while the local supplier was able to leverage these skills into anarea of expertise.

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Such field experiences when coupled with his professional training has equippedSaro with some unique and valuable skill sets. As an engineer, he looks at things froma technical point of view (logical and practical). As an experienced project manager, heknows what it takes to deliver a project, and as a resident of China for the past 16 years,

he understands how to negotiate and collaborate with the Chinese. These years ofexperience have allowed Saro to develop some interesting perspectives on living andworking with the Chinese.

Challenges of doing business with the ChineseAll Chinese are entrepreneurs. They will sometimes buy a machine on impulse, andrumour. They do not plan, they just jump in. Saro cited the example of a Chinese clientwho wanted to make chocolate.

They decided that they wanted to make about 500 kilograms of chocolate per hour. We did ananalysis for them that suggested they needed about 200 square meters of production space,and that they could buy one machine made in Italy that could handle all of their production

needs. They ignored our advice, and bought a 5,000 square meter factory, and a bunch oflocally made machines.

As Saro further noted, both western and Chinese business people often make the samemistake. Part of the reason may have to do with the consistently high growth rate ofthe Chinese market to any party with an entrepreneurial mind, China is an enticing,and appealing market where the potential to make a lot of money in a relatively shortperiod of time is compelling.

Negotiating with the Chinese can also be a real challenge, as they keep changing the rules totry to gain additional benefit; if things do not tilt in your favor, switch partners until you arein the better position Negotiating is not a win-win proposition but a win-wear out one. It ishard to develop a trust based relationship under circumstances like these.

Lewis (1996) and Graham and Lam (2003) note that the Chinese are excellentnegotiators to a large extent based on cultural values including the notions of savingface, thrift, and work ethic. And given the high growth rates, the diverse, and prevalentforeign companies that are seemingly everywhere in China, savvy Chinese businesspeople realize they usually have many different partners with whom they can strike adeal. Having a local partner with the right blend of knowledge can help improve thenegotiation process and outcomes for foreign firms.

By comparison, Saro believes that working with American and Europeancompanies is much more straightforward. Once agreement has been reached on aproject schedule, a sequential path can be developed to its completion. With theChinese, one may cycle back every step forward is followed by a step back often to

ground zero. According to Saro (2005):. . . they keep changing the terms. I think they want to wear the other company down.They want to see that as things get worse for you, if it will put them in a better position.It really works to their advantage especially right now. If the situation does not work totheir advantage with you, they can always switch to another seller or buyer. Everybodywants to be in China, and they know it.

Doing business in China is not just about outsourcing existing designs. Saro (2005)notes that:

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. . . the Chinese are starting to innovate they are shifting from becoming excellent copiers, toinnovators. A lot of it has to do with the inflow of Chinese expatriates bringing in westernvalues, ideals, skills and technical know how. Innovation is starting to happen. But there aresome cultural issues they probably need to overcome.

The future of ChinaChinese companies are anticipating their future, placing a greater emphasis onmanagement skill development, and on innovation (Lai et al., 2005). And as competitionincreases for domestic workers, they are beginning to outsource and offshore parts oftheir value chain to South America and Africa. While the central government in Chinahas its own economic and political agenda to promote, they have helped Chinese firmsestablish relationships across the world with a view to strengthen their supply of rawmaterials and oil They have also facilitated the opening up of new trade relationships,especially in Africa and Asia, that can serve as an effective counterbalance to theexisting ones with western countries. The Chinese clearly see both the benefit in terms

of building a stronger global network of relationships, as well as in anticipating theproblems of rising labor shortages in key areas, and the consequent increase in costs.

Leveraging knowledge and skill: JESA strengthsMany companies have a difficult time in dealing with a myriad of challenges. There arefew, if any legal or accounting frameworks to guide or guarantee contracts oragreements. And there are many competitors claiming to have the expertise. Saro andthe JESA team are aware of these developments which puts them in strong positionwhereby they can help foreign companies consider how best to leverage contacts inChina that take advantage of global networks. This is the kind of knowledge thatcomes from having long-term relationships, coupled with an understanding of theculture, language, and market place knowledge that is acquired through years ofimmersion in China an advantage that other consulting firms often lack.

We lost one project to a consultant who claimed he had the expertise to help a company set upa factory in China. The consultant identified a site in a particular city, and the company wentahead and built the factory. The day they were set to open it, a local governmentofficial came by and told the owner that they were not allowed to manufacture the productsthey had built the factory for. Today, the factory sits idle, and the manufacturer lost morethan $2M including the $5,000 they spent for the consultant.

JESA has a strong management team. In addition to Saro, it is comprised of threeChinese professionals, and an Italian expatriate fluent in numerous languages and whorecently completed his MBA at a leading university in Europe. This individual isresponsible for special projects and for market development activities that target

European clients. The Chinese Managers are responsible for the internal operations,including liaising with representatives of the Chinese government. Two othermanagers are responsible for quotations, start up, and follow up activities. JESA alsohas a team of Chinese Project Managers who each has almost ten years of experience,on average, in their respective field. As a result of their experience, and consistent withtheir movement into M&A consulting, Saro has recently brought onboard a partner forthe Asset Management and M&A sectors who is also well connected andexperienced.

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The reluctance among Italian clients to accept and pay professional consultants, hasled JESA to seek clients outside of Italy. With challenges come opportunities, and JESAhas found that while its core competency lies in outsourcing, its future may have moreto do with finance. This has led to a continuous reassessment of JESAs overall

strategy, and ultimately, moves that will expand JESAs initial industrial andoutsourcing focus into finance.

Adapting to changing opportunitiesThe inside knowledge, coupled with client requests, and the JESA teams own experiencehas led Saro and his team to look for other areas of opportunity. What started out as aconsulting practice aimed at helping SMEs from Italy find suppliers in China has endedup as a turnkey outsourcing firm that is expanding their focus on mergers andacquisitions consulting, and setting in motion a plan to develop an asset managementfirm. The private equity fund is set up so that it is controlled by a Chinese company. Itsclient base includes wealthy Chinese expatriates living abroad. The asset management

team includes Chinese and European experts including Saros wife Jenny, as well asthe son of a well known European financier. This new business will identify projects inChina for potential companies seeking investment opportunities. The anticipated exitstrategy for these investors will be the public equity markets in Europe.

SummaryThat growth in China will continue as it has for the past several decades seemsillogical. A slowdown at some point in the relative near future is inevitable. That Chinawill continue to be an attractive place for FDI and therefore, for expatriates is obvious.China continues to make great efforts to attract foreign firms and is entering the finalyear of a radical transformation of its capital city Beijing and other locales inpreparation for the 2008 Olympic Games. What started as a challenge is now seen as an

opportunity. For foreign firms, the opportunity today is no longer simply compelling; itis imperative. The challenge is to bridge the cultural gap to ensure that the investmentsactually pay off. Drawing on the expertise of external consultants such as JESA is anexcellent alternative for firms of all sizes it is virtually a requirement for SMEs wholack the resources to properly develop their own capabilities.

Given their growth, a key question for JESA and its leadership, is whether or notthey will spread their own resources too thin to grow the industrial outsourcing arm,while expanding into the fast paced financial sector. With strong partners, and a greatdeal of knowledge, experience, and expertise to call upon, JESA seems poised tobecome one of the most successful consulting firms in China, helping foreigncompanies invest successfully.

Note

1. Datamonitor; Country Profile. December 2005.

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About the authorsWilliam S. Lightfoot, PhD is a Professor of Management and Associate Dean at the InternationalUniversity of Monaco. He hastaught a wide range of topics related to management, marketing andtechnology in North America, Europe, andAsia. He also hasover 20 yearsof experience workedfora range of global corporations, as well as small ventures in manufacturing and education.

William S. Lightfoot is the corresponding author and can be contacted at: [email protected] Almeida, PhD, is an Associate Professor of Entrepreneurship and the Associate Deanfor the Silberman College of Business at Fairleigh Dickinson University in New Jersey.Dr Almeida worked in the Indian pharmaceutical industry in sales, marketing, and productmanagement positions. He has also spent a year as a visiting researcher in entrepreneurship atthe London Business School.

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Leveraging Knowledge

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