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Entrepreneurial pioneer of international venturing. The case of Huawei.

Article  in  Organizational Dynamics · March 2011

DOI: 10.1016/j.orgdyn.2010.10.010


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Yadong Luo Marc Junkunc

University of Miami Washington & Lee University


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Organizational Dynamics (2011) 40, 67—74

a v a i l a b l e a t w w w. s c i e n c e d i r e c t . c o m

journal homepage: www.elsevier.com/locate/orgdyn

Entrepreneurial pioneer of international venturing:

The case of Huawei
Yadong Luo, Max Cacchione, Marc Junkunc, Stephanie C. Lu

RISE OF CHINA’S MULTINATIONALS the technology and expertise they need. This availability,
together with their mass production capabilities and experi-
Dating back to the 1980s, China’s outward foreign direct ence, has spurred them to manufacture technologically
investment (OFDI) had been present on a relatively small standardized products in other non-Chinese emerging and
scale, accounting for only a small proportion of worldwide developing markets, where the demand for such items is
investments. By the end of 2007, nearly 7,000 Chinese huge. Their low-cost position allows these late comers to
enterprises had engaged in OFDI in 173 countries, establish- offer a price that is very attractive to local consumers, and
ing over 10,000 overseas enterprises in both developed and enables them to increase their market share over those of
developing countries. According to the World Investment advanced and newly industrialized countries that have been
Report in 2009, OFDI by Chinese firms reached $52.15 billion there for some time.
in 2008, more than double the amount in 2007. China’s OFDI The motives of Chinese enterprises that are entrepreneur-
stocks by the end of 2008 amounted to $147.95 billion, over ial and adopt these springboard behaviors can be broadly
30-fold compared to 1990 and five-fold compared to 2000. summarized as (1) asset-seeking or (2) opportunity-seeking.
Many Chinese firms, such as China’s TCL, Lenovo, ZTE, and Assets sought by these businesses may include technology,
Haier, have reorganized their home supply or production know-how, research and development (R&D) facilities,
bases to meet their increased global sales for high-end human capital, brands, consumer bases, distribution chan-
products or have re-branded their homemade products after nels, managerial expertise, and natural resources. Chinese
using acquired foreign technologies and trademarks. The firms may then use the newly acquired technology to upgrade
global success of such entrepreneurial firms is still dependent their domestic manufacturing as well as develop new pro-
on their performance at home, and on their home base as the ducts for international markets. To seek opportunities, Chi-
manufacturing center for their worldwide operations. Home nese entrepreneurial enterprises aim to (1) tap niche
country markets are still their primary territory of operation, opportunities in advanced markets that complement their
and to become truly global or transnational, some large strengths; (2) gain preferential financial and non-financial
Chinese private enterprises recognize that they must directly treatment offered to them at home and/or by host govern-
serve and win consumers in key foreign markets such as ments; (3) increase company size and reputation; (4) escape
Europe, the U.S. and Japan. Because international venturing from institutional or market constraints at home; (5) bypass
also generates many opportunities that are either unavail- trade barriers into advanced markets; and (6) seize oppor-
able or cannot be substituted for the home base, the long- tunities in other developing countries to leverage their cost-
term viability and success of Chinese entrepreneurial enter- effective manufacturing capabilities.
prises lies in their ability to simultaneously leverage core
competencies at home and explore new opportunities abroad HUAWEI: GROWING EXPONENTIALLY
in an integrated fashion.
In addition, Chinese entrepreneurial businesses use inter- Huawei Technologies was initially a small distributor of
national venturing to exploit their competitive advantages in imported Private Branch Exchange (PBX) products, estab-
other emerging or developing markets. Despite the overall lished in 1988 by Ren Zhengfei with an initial registered
inferiority of these companies in terms of original technology capital of 24,000 yuan (about $3,400). By 1989, Huawei
and innovation, Chinese companies can simply buy as much of was developing, and later marketing, its own PBX products

0090-2616/$ — see front matter # 2010 Elsevier Inc. All rights reserved.
68 Y. Luo et al.

and solutions, consisting primarily of wireless hardware that have been declining, with the company’s 7.4 percent figure for
supports cell phone and data networks. Huawei achieved its 2007 and 6.3 percent for 2008. These lag far behind compe-
first mainstream breakthrough into the telecommunication titors such as Nokia and Cisco, who each reported around 21
market in 1993, after accumulating sufficient knowledge and percent net profit margins for 2007. The decline in profit
resources in the PBX business. At that time, the company margins stems from challenges related to operating efficiency.
launched its first digital telephone switch technology, filling In order to address these challenges, the company enlisted the
the supply gap in China’s telecom industry. The product help of IBM, which had been assisting Huawei in integrating
eventually gained market share by penetrating into city finances and operations in hopes of transforming the company
switch offices and toll services. In 1996, Huawei garnered into a Globally Integrated Enterprise (GIE). Optimistically,
its first overseas contract as a fixed-line network product organizing operations will allow Huawei to rise and meet its
provider to Hong Kong’s Hutchison-Whampoa. Later Huawei second challenge — improving its contract delivery process.
released its Global System for Mobile (GSM) communications Huawei has been tackling issues of punctuality concerning the
product and eventually expanded to offer Code Division fulfillment of its contractual obligations. A recent example was
Multiple Access (CDMA) and Universal Mobile Telecommuni- the installation of a cellular network in Thailand, which due to
cations System (UMTS) products as well. its delay led to an unhappy customer, CAT Telecom, being
Huawei Technologies remains a Chinese, private, high-tech reluctant to pay for Huawei’s services.
enterprise located in Shenzhen, in the Guangdong Province. It In December 2008, Huawei Submarine Networks officially
is presently the largest supplier of networking and telecom- commenced operations, allowing the joint venture to provide
munications equipment for mainland China, and in 2008 was infrastructure, systems, and services related to delivering
voted one of the world’s most influential companies, alongside submarine bandwidth worldwide. The submarine cable mar-
Wal-Mart Stores, Google, Apple and Toyota Motor Co. Consis- ket at the time was expanding and was expected to reach $2
tent with the firm’s vision to enhance life through commu- billion annually over the following five years. This joint
nication, Huawei now serves as one of the world’s top venture with Global Marine Systems Limited represents
operators to over one billion users worldwide, with customers another example of Huawei’s efforts to explore new markets
including network operators such as China Mobile, AT&T, and T- and thereby extend its reach across different industries.
Mobile International. After 2001, Huawei increased its expan- The communication and networking markets in the Asia-
sion into overseas markets, and by 2004 the overseas sales had Pacific region are less saturated than their Western counter-
surpassed their domestic sales. As of 2008, Huawei served 35 of parts. These markets are accelerating at a rapid rate, espe-
the top 50 telecom operators and was reinvesting 10 percent of cially in China, which accounts for approximately 30 percent
its revenue into R&D on a yearly basis. In addition to the R&D of the total market. This unbridled growth is fueled by
centers in Shenzhen, Shanghai, Beijing, Nanjing, Xi’an, customers with rising incomes, able to afford cell phones
Chengdu, and Wuhan in China, Huawei also has created R&D and monthly plans. The demand for more handsets leads to
centers in Stockholm, Sweden; Dallas, Texas and the Silicon the need for a greater number of switches and routers to
Valley, United States; Bangalore, India; Ferbane in Offaly, manage the telecommunication traffic. Being capable of
Ireland; Moscow, Russia; and Jakarta, Indonesia. Huawei’s supplying this product happens to be exactly what Huawei
major competitors include Cisco, Alcatel-Lucent, Juniper Net- is best known for. Huawei has been able to capitalize on the
works, and Nokia Siemens Networks. growth of the market by signing several contracts, most
It was Cisco’s Executive Vice President Wim Elfrink who notably for the expansion of China Mobile’s GSM network
posed the question, ‘‘Why is it that when we compete with and others, including Sri Lanka’s Bharti Airtel.
Huawei, we compete with China Inc.?’’ Huawei obtains a Through the bountiful industry opportunities, mergers pose
leading market position in several segments of the telecom important threats to Huawei’s business, the most serious
market. Each segment consists of product offerings for IP- consisting of the consolidation of the telecommunications
based communications, mobile and optical network equip- supply chain both upstream and downstream. On one hand,
ment, along with actual terminals such as cell phone hand- the buying power of operators — Huawei’s clients — is increas-
sets and value-added services in the implementation of ing as they combine into powerful alliances (such as AT&T’s
Operation Support Systems (OSS) for cell phone networks. purchase of Bellsouth and Sprint’s merger with Nextel). On the
Due to the converging nature of telecom services, holding a other hand, Huawei’s competitors are also feeling the effects
market position in multiple segments allows Huawei a unique of the convergence of the networks and are themselves joining
competitive advantage in the value-chain. In 2007, 72 per- forces (Cisco Systems and Scientific Atlanta; Nokia and Sie-
cent of Huawei’s contract sales originated from the interna- mens). The resulting effect is a major shift in the telecom
tional market. The company benefits from a strong industry: the convergence of networks resulting in increased
international presence, though it was not always the case, buyer power and escalated competitor scale and capability
as this percentage represents a considerable increase from a (see Appendix A for Huawei’s competitors).
level of 20 percent in 2002.
In 2008, the company’s revenues reached over $18 billion, ENTREPRENEURIAL LEADERSHIP
up over $5 billion from close to $13 billion in 2007. The
company continuously augments its assets through joint ven- Huawei became a master at international entrepreneurial
tures: total asset value jumped from $11 billion in 2007 to $17 growth strategy, which in many ways reflected the entrepre-
billion in 2008. The resulting increase in related expenses put neurial characteristics of the founder — Ren Zhengfei. Born in
pressure on profits. Huawei was nevertheless able to raise China in 1944, Ren Zhengfei experienced post-war suffering
absolute profitability slightly, from just under $1 billion to over and a three-year period of natural disasters in his childhood.
$1.1 billion in the same year span. Huawei’s net profit margins Due to these catastrophes, there was a strict meal-sharing
Entrepreneurial pioneer of international venturing 69

system in Ren’s family to ensure that everyone in the nine- Ren Zhengfei is a pensive individual and is continually
person family could survive. When distracted by hunger at reflecting on Huawei’s experiences and lessons. The visions
school, Ren ate rice bran. At night Ren shared a bed cover he shares with his employees are extraordinarily forward-
with two, or at times, other children below them nothing but looking. His theory and practice on crisis management has
straw. The early introduction to life’s hardships helped shape had a vast impact on individuals and companies both inside
Ren’s strong will. He is known to have said, ‘‘I couldn’t and outside of the industry. His famous work Huawei’s Winter
understand the meaning of survival better!’’ Ren regards has been cited as the business model for crisis management
poverty as the first pot of gold in his life and views hunger by many companies, especially in the IT industry. From time
as the inexhaustible fuel for pursuing his passions. to time, Ren shares a deep pool of insights about the com-
Diligence, one of Ren’s personal characteristics, is also pany, strategy, and life through public speeches and publica-
one of the magic weapons that Huawei Technologies wields at tions in the insider magazine Huawei People. There have
home and abroad, thus ensuring its continued success. During been over 50 such articles published since 1994.
the process of Huawei’s expansion abroad, Ren always
reminded his people that: ‘‘We don’t have the reputation Intuitive and Sharp at Seizing Opportunities
and networks that our international rivals do. Thus, we have
no choice but to make strenuous efforts. We can make good Ren expressed that Huawei mainly followed two internatio-
use of our rivals’ coffee time.’’ Reminiscent of Ren’s child- nalization strategies: ‘‘encircling the cities from rural areas’’
hood, each of Huawei’s staff once had a mat under their desks and ‘‘leading by cheaper products first.’’ The company
similar to soldiers’ quarters. The mat was for an after-lunch expanded to Shenzhen, Hong Kong, then into emerging mar-
nap or for extra convenience when an employee needed to kets (Russia), developing countries (Asia, Africa and Latin-
rest when working late hours. This practice was later referred America) and finally to developed countries (Europe and the
to as Huawei’s ‘‘mat culture.’’ Though odd, the idea came United States). Ren noted: ‘‘There are a lot of different
from Ren’s desire to have a successful advantage as a com- opportunities in the world due to the imbalanced economic
pany. ‘‘We can treat clients with better service than our rivals development. I am very enthusiastic about exploiting those
in order to earn trust,’’ he said. markets, especially in developing countries.’’
As a private enterprise, Huawei won significant support
Visionary and Forward-Looking from China’s government when expanding abroad. Ren sta-
ted: ‘‘Our government has a successful diplomatic policy
Ren realized the necessity of expanding abroad as early as which mandates winning a lot of international friends. Hua-
1995, seven years after Huawei’s founding. Unlike many wei’s international marketing strategy is to follow China’s
entrepreneurs who wait too long to move into new and diplomatic route, and I believe this strategy will be successful
unfamiliar markets, Ren pointed out that: ‘‘We should not as well.’’ Huawei’s success in this effort was seen, for
wait to expand abroad until everything is ready. Instead, we example, in November 2000, when China’s State Council Vice
will get familiar with the markets, and then conquer them in Premier Bangguo Wu visited Africa, and called on Ren’s
the process of learning from our international competitors. company in particular. The strong diplomatic relations culti-
When domestic markets will eventually get saturated, Hua- vated by Huawei, both within and outside of China, would
wei will die unless we can build an international team in three continue to benefit the company in later years as well.
to five years. Of course, we must realize the fact that we have
no competitive advantages, and that we can only gain the Ready for Change, Creative and Adventurous
market through advanced technology, reliable quality, and
superb service.’’ In 2002 Ren said to his vice presidents: ‘‘In the future, the
His philosophy of pursuing new markets is illustrated by a official language of the board of directors is English; I am 58
metaphor. He says that to be only concerned with short-term years old and I am still learning English.’’ This was simply one
welfare is equivalent to drinking poison as a thirst quencher. example of how he found creative ways to better address
He pointed out that: ‘‘When exploiting overseas markets, growth and credibility in global markets. English is the uni-
price-wars are not encouraged. Alternatively, we should co- versal language of business. Ren further added: ‘‘We have not
evolve with our rivals. We cannot break the rules in their yet gotten rid of our guerrilla style, and the new management
markets for a slight profit.’’ This philosophy guided Ren and style for international expansion has not yet been estab-
Huawei through their international partnerships. lished. We lack professional staff; we are far inferior to
In 2001, during one of the hardest times in the IT (informa- Lucent, Motorola, Alcatel, Nokia, Cisco, Ericsson . . . in terms
tion technology) industry, Ren insisted that Huawei leave more of international experience. We must learn from our inter-
profits to its clients and upstream suppliers in an attempt to national competitors.’’ Learning from its global competitors,
form solid alliances. His belief in the system stemmed from the the firm has recently built R&D operations overseas (India,
idea that future competition would occur among chains in the Russia, Sweden, and the U.S.) and worked with leading
industry, and Huawei could suffer the loss itself rather than consulting companies, such as IBM, the Hay Group, and
damage its alliances. Huawei’s surviving alliance would help PricewaterhouseCoopers, to carry out management transfor-
the company exploit markets and achieve greater success. mation in order to keep abreast of international industrial
Additionally, Ren discovered that most Chinese firms overlook benchmarks. Ren further discovered that his North African
customer service post-sales. Thus, he highlighted that Huawei team provided a successful example of delegating the deci-
should foster maintenance experts and earn clients through sion-making power to the front lines, which helped stream-
superb service from the initial contact to post-transaction line the decision-making process, leading to him promoting
when competing with international rivals. this practice to other regions.
70 Y. Luo et al.

Ren has long held strong motivations to pursue knowledge. One of the major obstacles to Huawei’s global expansion,
During military service, he invented a number of technical apart from distribution and supply chain issues, has been
innovations, several of which were considered scientific research and development. The company readily understood
breakthroughs in China. At the age of 33, he was selected this fact, and has heavily focused on catching up to R&D
as a representative to Beijing to attend the National Con- giants such as Cisco and Alcatel-Lucent. Huawei has over
ference on Science, leaving no doubt that his values and 96,000 employees worldwide, of whom 44 percent are dedi-
judgment about technology is what has led him to a technol- cated to R&D. Huawei has R&D centers located internation-
ogy-intensive industry. ally and in China. The company operates research centers in
Well aware that there was high risk in investing in R&D, Bangalore, Silicon Valley, Dallas, Stockholm, Jakarta, Ireland
due to the rapid speed of technological upgrading, Ren and Moscow, and Chinese centers in Beijing, Shanghai, Nanj-
authorized the use of 100 million yuan ($12 million) to ing, Shenzhen, Hangzhou and Chengdu. Moreover, the com-
develop Huawei’s own technology. Ren persuaded others pany owns 29 training centers worldwide to help study
by saying: ‘‘If this fails, I will jump downstairs and go suicidal, advanced management and technologies.
but you guys can find another way out.’’ Indeed, Huawei had In creating localized operations globally, Huawei gains a
to launch many of its own digital switches for the company’s better understanding of the markets it aims to penetrate.
survival. By 1993, although having experienced numerous Hiring local personnel also contributes to enhancing Huawei’s
failures, Huawei launched a network of 2000 devices with reputation and market goodwill in the foreign localities
a successful large-scale switch hardware. where it operates. This tactical approach supports the com-
pany’s strategy for global expansion. Huawei favors forming
Relentless, Strong Sense of Crisis partnerships as the method for opening new offices abroad.
This strategy allows Huawei to become impregnated with its
Ren held the belief that, ‘‘The warriors I admire most are partners’ technology by internalizing it, leading to a more
spiders. No matter how strong the heavy storm is, and no efficient and cost-effective method than developing the
matter how many times the net has been broken, the spider is technology in-house. Having been extremely active in part-
always working to make amendment. I worship bees as well. nering, the company has in fact signed 10 joint venture
No matter how much praise they receive, they continue agreements in one five-year period.
brewing honey tirelessly every day, and never slow down
following praise or compliments.’’ These metaphors offer Huawei—3COM
insights into Ren’s deep held beliefs and orientation as a
leader. Though he showed the relentless drive necessary for Huawei selects alliance partners based on their R&D cap-
success and imbued it into his company, for decades Ren kept abilities. An example is the Huawei—3COM partnership. This
wondering, ‘‘What if Huawei failed?’’ Even through the suc- particular alliance presents an interesting case of partnering
cesses the company was having, he was unable to see the for defense against the competition. Founded by the inventor
honor or pride, only crisis. ‘‘Perhaps this is the only way to of Ethernet, 3COM’s core products are in computer network
survive . . . I have been worried and depressed,’’ he had said. equipment. In that product arena, it is a direct competitor of
In addition, his thoughts would turn to the members of the Huawei, as both companies produce hardware including
company. ‘‘If Huawei died, how could I pay my employees routers and switches.
salaries? I am not a pessimist, but I should be fully prepared By 2003, due to successful partnerships created in pre-
for the cruelty of global competition.’’ With the type of vious years, Huawei was able to develop high-end networking
success Ren was having, many individuals would rush to be equipment, which was necessary for 3COM to be able to
vice chairman of the Federation of Industry and Commerce, approach the enterprise market. 3COM thus proposed an
or the national representative of the General Assembly. As agreement under which Huawei would provide the enterprise
other Chinese entrepreneurs (e.g., Soho China’s Pan Shiyi and networking equipment to be resold under the 3COM brand.
Huayuan Group’s Ren Zhiqiang) would spend large sums of According to 3COM’s 2003 annual report, 3COM was to own 49
money on public relations (PR) events, Ren never involved percent of the joint venture, and Huawei the remainder. At
himself with such things, instead, he dove further into the the time, Huawei leveraged its size to negotiate control, as it
development of technology, and the understanding of his had revenues of $2.7 billion, while 3COM’s revenues were
competitors and markets. $932 million.
Enterprise networking has been Cisco’s competitive
advantage. Cisco had been feeling pressure from Huawei
VENTURING THROUGH GLOBAL due to Huawei’s product pricing at about half of Cisco’s. In
PARTNERSHIPS fact, Cisco had already been trying to bar Huawei from
distributing its products by filing an intellectual property
Entrepreneurial partnerships have become pillars of an overall lawsuit in the U.S. A working partnership between Huawei
international venturing strategy for Huawei. Being able to and 3COM would accomplish two things. First, it provided
operate globally is not only an advantage, but also a necessity. Huawei with a channel to distribute its products on a larger
Industry consolidations have largely increased the bargaining scale. Secondly, by forming a joint venture, Huawei would
power of Huawei’s consolidating customers, fortunately lead- automatically become owner of the intellectual property
ing to a growth in contract sizes. As network operators expand over which Cisco’s lawsuit revolved. This tactic would be
across country limits, the demand adds pressure on the com- considered brilliant, as it showcased Huawei’s entrepreneur-
pany that provides the hardware infrastructure — i.e., Huawei ial agility and intelligence regarding partnership matters by
— to be able to deliver to them globally. that time, rendering the lawsuit moot.
Entrepreneurial pioneer of international venturing 71

The effort ended up thwarted by the Committee of For- Huawei extends its reach from the terrestrial to the sub-
eign Investment in the United States (CFIUS), which stepped marine domain. Both companies together also feature an
in to uphold the Foreign Investment and National Security Act exceptional organizational fit. Although they hadn’t pre-
of 2007. The problem was that 3COM builds network security viously partnered with each other, they both have extensive
software for the Pentagon, so the partnership was regarded partnering experience acquired from collaborative arrange-
by CFIUS as opening the door to a potential Trojan horse. This ments with other companies. Moreover, they both have
end ruling negated the deal between 3COM and Huawei. As foreign experience, due to the nature of their businesses.
for the lawsuit between Cisco and Huawei, Cisco dropped the Finally, the financial fit is good as well because both com-
charges, and its chief executive officer (CEO) afterwards panies are profitable and currently have available cash to
claimed, ‘‘I would love to partner with Huawei!’’ dedicate to the joint venture’s efforts.

Huawei—Siemens Huawei—IBM

In 2004, Huawei and Siemens joined forces for the develop- The Huawei—IBM alliance started in the year 2000, when the
ment of the 3G mobile communication standard. The joint two firms created a deal whereby Huawei was to have access
venture was controlled by Siemens, owning 51 percent. Each to IBM’s world-class R&D technology centers. IBM’s contribu-
company invested a total of $100 million, and headquarters tion was to supply network-processor and packet-routing
were established in Beijing. The joint venture presented switch technology and ASIC parts to Huawei. In turn, Huawei
considerable advantages to Huawei, since Siemens had actu- was to build its next generation products using IBM’s PowerNP
ally started the development of 3G back in 1998 and had network processors, which were to double capacity on exist-
already invested millions in the technology. While Siemens ing communication lines.
was bringing technology to the table, Huawei was offering its Huawei was using a partnership strategy again to acquire
extensive knowledge of the Chinese market for mobile tech- R&D. ‘‘Collaborating with IBM will enable Huawei to have
nology. At the time the deal was made, the Chinese market faster access to the advanced networking technologies we
consisted of 270 million users, and was growing faster than need to quickly deliver high-end telecommunications equip-
any market in the world. At that point nobody knew whether ment to our customers across the world,’’ said William Xu,
3G was going to become a standard or not. The idea behind senior vice president of Huawei. The deal was also attractive
the partnership was to leverage the joint venture’s size to try to IBM because ‘‘working with Huawei offers an opportunity
to establish and promote 3G, so that it could have a better to extend the reach of IBM’s comprehensive networking
chance of actually becoming an international standard. technologies into China and the exploding telecommunica-
This deal consisted of a conglomerate-structured foreign tions marketplace worldwide,’’ as reported by James North-
direct investment (FDI), which was also used by Huawei to set ington, IBM’s vice president of network processing.
up an R&D presence with a center in Shanghai, a center that One of the challenges that Huawei will have to face as it
produced unique R&D knowledge, different from what was grows is keeping abreast with international industrial bench-
previously produced at either of the two companies. The marks. These benchmarks are associated with process rea-
union featured a strategic, organizational, and financial fit, lignments, organizational transformations, quality control,
as both companies had a common strategic goal, which was to production processes, supply chain development, and most
promote the 3G standard. In addition, both had previous importantly, financial management. In this last area, Huawei
experience collaborating, and their union increased the cash requested the help of IBM and inaugurated an Integrated
flow available for funding the attainment of the objectives Financial Service (IFS) Program. The primary goal of this
related to this venture. program is to integrate the financial reporting functions of
Huawei’s operations around the world via a worldwide plat-
Huawei—Global Marine form. This platform thus provides the backbone to support
Huawei’s global expansion goals. It appears that in this
In 2007, Huawei formed a venture with Global Marine Sys- instance IBM is drawing R&D benefits from the association.
tems, a subsea cable installation and maintenance company. When Huawei and IBM first collaborated in 2000, IBM trans-
The goal of the partnership was to develop the world’s first ferred technology to Huawei. After seven years’ worth of
global submarine network. The new company, Huawei Global stellar growth by Huawei, it is IBM that benefits from the
Marine, officially started operating on December 18, 2008. financial integration contract with its client as it gains invalu-
This low profile partnership has become one of the most able insight into how Huawei conducts telecom business
notable in Huawei’s partnership portfolio. The two compa- across 40 countries.
nies make for an ideal strategic fit as a result of their
complementary technological skills and industrial experi-
ence. Together, they had already completed submarine cable CONCLUSION
extension projects for clients such as CAT, Hibernia, Med
Nautilus, and Level 3. Private enterprises from emerging economies are an increas-
This particular venture would take advantage of Huawei’s ingly critical entrepreneurial force in shaping the world’s
proficiency with optical networks. As for Global Marine Sys- economy and global business. They have become rivals of
tems, it already had 150 years of experience in the submarine many firms, yet collaborators as well, particularly in the
engineering industry and is the largest independent installer wake of the global economic crisis that has hit Western
of subsea cables. By joining forces, Global Marine Systems economies severely. Recently, international joint venturing
benefits from Huawei’s optical network technology, and of these enterprises has become increasingly noteworthy and
72 Y. Luo et al.

prevalent. This surge came from the rapid pace of economic areas in the five years ended 2008, as it leverages its inter-
development and liberal market policies implemented by national performance to grow its capabilities at home and
home governments, offshore availability of market opportu- obtain more business in China. Naturally, opportunities are
nities, entrepreneurial desire to hit the core and key inter- accompanied by challenges, as the company still needs to
national markets and strategic intent to exploit competitive prove its ability to reconfigure and transform its operations to
advantages in cost-effective manufacturing. effectively exploit the newly acquired asset base from multi-
How is Huawei reaping the fruit from all of its partner- ple joint ventures. As mentioned earlier, Huawei’s foremost
ships? First, the company’s reputation is enhanced interna- challenge will be to integrate operations in order to benefit
tionally; second, the quality of this reputation increases in from economies of scale normally associated with growth.
China as well. The results materialize into lucrative con- Only then will attractive net margins materialize in China’s
tracts. For example, Huawei was contracted by: dynamic business environment.
In the final assessment, the types of problems facing
 China Mobile for GSM Expansion. Huawei are problems related to growing from a small entre-
 Reliance Communications in India, for a network expan- preneurial firm to a global force. Growing pains are not
sion. foreign to entrepreneurs. In the current economy, Huawei’s
 Bharti Airtel in Sri Lanka, to build and manage GSM competitors would appreciate operational issues due to
infrastructure during three years. expansion, as opposed to the downscaling issues faced by
 T-Mobile International to provide infrastructure for ser- the majority. Huawei is clearly an entrepreneurial success
vicing five European countries. story, and the role of international venturing has been pro-
 Algeria Telecomm Mobile, to establish support for 700,000 minent in that success. However, as no entrepreneur is
lines. eternal, Ren Zhengfei will one day be replaced at the helm
of the firm. The task of finding a successor may be very
These contracts are only a sample of a considerably difficult, but could be eased by identifying the founder’s
longer list. Moreover, contract sales increased 46 percent personality traits upon which the firm was built, and under-
year-on-year in 2008, for a total of $23.3 billion, while standing how these are instrumental in shaping Huawei as an
competitors worldwide suffered from a slowdown in total entrepreneurial pioneer of international venturing.
contract sales.
By entrepreneurial partnering, Huawei utilizes a spring-
board approach to its global expansion strategy. Huawei’s
joint venture activities are indeed prolific — the company
signed 10 joint venture agreements benefitting it in distinct
Entrepreneurial pioneer of international venturing 73

A wealth of research on Chinese multinationals has been office routers, ATM networking, security, IP telephony, and
developed. Regarding internationalization of Chinese firms, others. Akin to Huawei, Cisco is reputed for frequently
see J. Child and S. B. Rodriguez, ‘‘The Internationalization of acquiring companies and successfully integrating them as
Chinese firms: A Case for Theoretical Extension?’’ Manage- business units.
ment and Organization Review, 2005, 1(3), 381—410; and P.
Deng, ‘‘Outward Investment by Chinese MNEs: Motivations Alcatel-Lucent
and Implications,’’ Business Horizons, 2004, 47, 8—16. Con-
cerning the unique motives and behaviors of Chinese multi- Alcatel-Lucent is a global telecommunications corpora-
nationals, see Y. Luo and R. Tung, ‘‘International Expansion tion. Headquartered in Paris, France, it provides telecom-
of Emerging Market Enterprises: A Springboard Perspec- munications solutions to service providers, enterprises
tive,’’ Journal of International Business Studies, 2007, 38, and governments around the globe, enabling them to
1—18. deliver voice, data and video services. The company con-
On the topic of cross-border partnerships and joint centrates its efforts on fixed, mobile, and converged
ventures see W. Zhan and Y. Luo, ‘‘Performance Implica- broadband networking hardware, IP technologies, soft-
tions of Capability Exploitation and Upgrading in Interna- ware, and services. It leverages the technical and scientific
tional Joint Ventures,’’ Management International Review, expertise of Bell Labs, one of the largest innovation and
2008, 48(2), 227—253; and D. Lei and J. W. Slocum, R&D houses in the communications industry. Alcatel-Lucent
‘‘Global Strategic Alliances: Payoffs and Pitfalls,’’ Organi- has operations in more than 130 countries and as of 2008, is
zational Dynamics, 1991, 44—62. Earlier notable books on led by CEO Ben Verwaayen. For 2008, the company
the topic of international cooperative alliances and joint reported revenues of s17 billion and a net loss of s5.2
ventures include Kathryn Harrigan’s Strategies for Joint billion.
Ventures (Lexington Books, 1983); Kenichi Ohmae’s Triad
Power (Free Press, 1985) and Susan Goldenberg’s Hands
Nokia Siemens Networks
Across the Ocean (Harvard Business School Press, 1986),
which articulate in detail the returns and risks using these
alliances or joint ventures in international expansion. In Nokia Siemens Networks provides communication ser-
regards to triangulating business strategy and competitive- vices. The company is based in Espoo, Finland. It operates
ness with issues in the work here, see D. Lei and J. W. as a joint venture between Siemens AG and Nokia Corp., a
Slocum, ‘‘The Tipping Points of Business Strategy: The Rise company with net sales totaling s50 billion in 2008. The
and Decline of Competitiveness,’’ Organizational company has 60,000 employees worldwide and manufactures
Dynamics, 2009, 38(2), 131—147. Michael Porter’s classic in China, Finland, Germany, India, Italy, and Spain. It offers
Competitive Advantage (Free Press, 1985) is also an network implementation services, managed services, and
insightful reference to the issue of competitiveness for consulting and systems integration services for telecommu-
emerging economy multinationals. nication operators. Led by CEO Simon Beresford-Wylie, a
veteran of Nokia Corp., Nokia Siemens Networks is a strong
advocate for openness and collaboration among all players of
the telecom industry, including its competitors.
Cisco Systems, Inc.
3COM is a manufacturer known for its computer network
Cisco Systems, Inc. is a multinational corporation with infrastructure products, which include routers, switches,
more than 66,000 employees and annual revenue of $39 gateways, PBX and network security platforms. The com-
billion as of 2008. Headquartered in San Jose, California, pany was co-founded in 1979 by Robert Metcalfe, Bruce
it designs and sells networking and communications technol- Borden, and Greg Shaw, and is headquartered in Marlbor-
ogy and services. Len Bosack and Sandy Lerner, a married ough, Massachusetts. The name 3COM comes from the
couple who worked as computer operations staff at Stanford company’s focus on ‘‘Computers, Communication and Com-
University, later joined by Richard Troiano, founded Cisco patibility.’’ In April 2008, Robert Mao was named CEO of the
Systems in 1984. The company’s CEO, John Chambers, is company. Before joining 3COM, Mr. Mao was President and
credited for growing the company from annual revenues of Chief Executive Officer of Greater China for Nortel Net-
$1.2 billion in 1995 to $40 billion as of 2008. Cisco has works. 3COM has acquired several companies at a steady
pioneered many network equipment markets outside rout- pace since 1987 as a method of growth, and reported
ing, including Ethernet switching, remote access, branch revenue of $1.3 billion for 2008.
74 Y. Luo et al.

Yadong Luo is the Emery Findlay Distinguished Chair and Professor of Strategy and International Business at the
University of Miami, School of Business, where he served as chairman of the management department. He
received his Ph.D. from Temple University and is a Fellow of Academy of International Business. He is the author of
over a dozen original books and well over 100 research articles in major referred journals in management and
international business. His research focuses on global corporate strategy, foreign direct investment, interna-
tional joint ventures, multinational corporations in emerging markets, and management in transition economies
(Tel.: +1 305 284 4003; fax: +1 305 284 3655; e-mail: yadong@miami.edu).

Max Cacchione is CEO of Emax Solutions, an ITconsulting firm. He is also managing shareholder of Applied Business
Technologies, an equipment and software provider. Cacchione has consulted for numerous organizations in the
areas of business process improvement, ERP implementation and software development. His research interests
include expansion strategies adopted by global organizations. Max holds a bachelor’s degree in computer science
from Princeton University and an M.B.A. from the University of Miami (Tel.: +1 786 564 8220; fax: +1 305 675 3641;
e-mail: max@abtesm.com).

Marc Junkunc is an assistant professor of management at the University of Miami, School of Business. He
received his Ph.D. from UCLA’s Anderson School of Management, where he also received an M.B.A. His research
interests include knowledge specialization and innovation, entrepreneurship, and entrepreneurship in emerg-
ing economies. He has published his research in management and entrepreneurship journals and has worked
previously in investment banking and as an entrepreneur (Tel.: +1 305 284 8840; fax: +1 305 284 3655; e-mail:

Stephanie C. Lu is a doctoral student in international business and strategy at the University of Miami, School of
Business. She obtained her master’s degree from Peking University, Beijing, China. Her research interests include
global strategy, multinational management, and emerging market businesses (Tel.: +1 305 284 3160; e-mail:

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