International experience has become a price-of- admission skill for rising Western executives in an increasingly globalized market. At the same time, Asian nations with booming economies have intensified their need for talent, including seasoned executives imported from the West (Bolino 2007; McDonald 2010). Although this appears to create a win-win for both Asian employers and potential expatriates from the West, bridging the cultural divide is never an easy task for a business leader. And one scenario creates a particular wrinkle: the Western expat working for a state-owned enterprise (SOE) in China.
Adaptability is the name of the game in all overseas assignments, but for Westerners working in state-controlled industries in China, it’s even more pronounced. Such expatriate executives adopt leadership and communication styles that mirror those of local Asian executives.
A bit of background: China’s rapid economic growth (a rate of 10 percent per year since 1979) can be traced directly to the implementation of several economic reforms in 1979, shortly after the death of Mao Zedong (Morrison 2009). Generally speaking, these reforms relaxed the government’s economic control (previously it had engaged in tight regulations such as price fixing), decentralized enterprises, and opened the country to foreign investment. Between 1980 and 2010, China’s economy skyrocketed to eighteen times its initial measured size, and by 2010 it was declared to be the world’s second-largest economy (Morrison 2009). This explosive growth and unprecedented involvement with the West (including foreign investments, imports, exports, and hosting offshore manufacturing) created a steep learning curve about private business ideology and practices. Enter the need for expatriates.
Decades after the 1979 reforms, however, China still retains some measure of state control over industries such as banking, utilities, telecommunications, mining, petroleum, and transportation (Morrison 2009). State-owned enterprises are afforded unique protections, such as typically being the only Chinese entities permitted to invest overseas or other forms of insulation from competition. They might also have access to deep reserves of government capital. Rather than recede as China’s economy modernizes, SOEs are in fact growing. One indication of their power and influence: they make up the majority of companies listed on the country’s two stock indexes. Another indication: the U.S.-China Economic and Security Review Commission estimated in early 2012 that state-owned companies accounted for about 45 percent of the nation’s economy.
Today, more expatriate executives are taking positions in such companies, which are expanding into areas previously dominated by the private sector (Park and Vanhonacker 2007). Expatriate assignments always present challenges, but working for a state-controlled enterprise raises the stakes significantly. Rather than joining offices that have headquarters or strong ties to the West—and thus are accustomed to Western business models and cultures—these executives must navigate a highly political, often bureaucratic system. This trend torques our previous understanding about who makes a successful expat leader. What does it mean to be a Western executive in a state-owned company? Who will thrive in those roles?
