PALGRAVE STUDIES OF INTERNATIONALIZATION IN EMERGING MARKETS Huawei Goes Global Volume I: Made in China for the World Edited by Wenxian Zhang Ilan Alon · Christoph Lattemann Palgrave Studies of Internationalization in Emerging Markets Series Editors Marin A. Marinov Aalborg University Aalborg, Denmark Svetla T. Marinova Aalborg University Aalborg, Denmark Emerging market nations such as Russia, Brazil, China, South Africa and India as well as Eastern European territories, are in the process of changes and growth that require specific study and attention. The international business strategies employed in these territories target new opportunities, the study of which provides scholars the opportunity to evolve interna- tional business theory. Covering three main themes - international business, management and marketing –Palgrave Studies of Internationalization in Emerging Markets will encompass a multiplicity of topics. Examining the new ways in which firms from emerging economies develop and implement their internationalization strategy, as well as their management and mar- keting strategies, the series will encompass specific issues such as social entrepreneurship, operations and regional specifics of internationaliza- tion. Looking closer at the specifics underlying the development of emerging market nations and their firms, this series aims to shed light on the current and future issues associated with the challenges and opportu- nities offered by the varying contexts of emerging markets. The book proposals for this series undergo a single blind peer review by three specialized highly respected established academics out of a pool of 28. The book proposal is sent to the reviewers that are selected based on its specific topic and content taking into consideration the geographic contextual specificity. The reviews with specific comments and recom- mendations are sent to the authors/editors of the perspectives publication who address them. Afterwards, the revised book proposal is evaluated by the Commissioning Editor of Palgrave Macmillan and Book Series Editor. The final manuscript is single blind peer reviewed. For more information on our peer review policy please see our website: https:// www.palgrave.com/gp/book-authors/your-career/early-career-researcher- hub/peer-review-process?countryChanged=true For information on how to submit a book proposal for inclusion in this series please contact Liz Barlow: [email protected]. For details on the book proposal process please visit our website: https://www.pal- grave.com/gp/book-authors/publishing-guidelines/submit-a-proposal More information about this series at http://www.palgrave.com/gp/series/15456 Wenxian Zhang • Ilan Alon Christoph Lattemann Editors Huawei Goes Global Volume I: Made in China for the World Editors Wenxian Zhang Ilan Alon Rollins College University of Agder Winter Park, FL, USA Kristiansand, Norway Christoph Lattemann Jacobs University Bremen, Germany ISSN 2662-1185 ISSN 2662-1193 (electronic) Palgrave Studies of Internationalization in Emerging Markets ISBN 978-3-030-47563-5 ISBN 978-3-030-47564-2 (eBook) https://doi.org/10.1007/978-3-030-47564-2 © The Editor(s) (if applicable) and The Author(s), under exclusive licence to Springer Nature Switzerland AG 2020 This work is subject to copyright. All rights are solely and exclusively licenced by the Publisher, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilms or in any other physical way, and transmission or information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed. The use of general descriptive names, registered names, trademarks, service marks, etc. in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use. The publisher, the authors and the editors are safe to assume that the advice and information in this book are believed to be true and accurate at the date of publication. Neither the publisher nor the authors or the editors give a warranty, expressed or implied, with respect to the material contained herein or for any errors or omissions that may have been made. The publisher remains neutral with regard to jurisdictional claims in published maps and institutional affiliations. Cover illustration: Getty / Esra Sen Kula This Palgrave Macmillan imprint is published by the registered company Springer Nature Switzerland AG. The registered company address is: Gewerbestrasse 11, 6330 Cham, Switzerland From Wenxian Zhang: To Karen, Michelle and Nathan. From Ilan: To Anna, Kareen, Maya and Noa. From Christoph Lattemann: To my parents Sieglind and Hermann. Foreword World-class companies by definition change the world in some ways. As the Chinese economy becomes the second largest in the world, a small number of Chinese companies such as Alibaba, Tencent, and Xiaomi have become world class. However, a few world-class companies around the world—and none from China—have changed the world to the same extent as Huawei has done. What is Huawei? What does it do? How does it change the world? These brief questions can strategically summarize these two excellent vol- umes edited by Wenxian Zhang, Ilan Alon, and Christoph Lattemann. To invite so many scholars around the world and to edit and make sense of their research that deals with only one company are something I have never seen in my three decades of research. One of the most insightful ways to understand any company, in my admittedly biased view, is to invoke a strategy tripod perspective, leverag- ing the industry-based, resource-based, and institution-based views. Huawei is an excellent example for a strategy tripod analysis. From an industry-based view, Huawei’s rise from the telecom equip- ment industry and its recent expansion into the consumer electronics industry can be analyzed from the changing industry dynamics associated with these industries. Some of the Vol. 1 chapters have focused on the fascinating dynamics associated with these two fast-moving industries. vii viii Foreword From a resource-based view, the key to Huawei’s global success is its development of overwhelming resources and capabilities. Volume 1 has a number of solid chapters on this crucial topic. In global competition, being good enough is not good enough. Given the liability of foreign- ness, how do world-class companies crack new foreign markets? The answer is to deploy overwhelming resources and capabilities—keyword being overwhelming. Imagine overwhelming resources and capabilities to be a lot of value (like pluses + + + +), and liability of foreignness to be some drawbacks (like minuses – – –). Then after offsetting the liability of foreignness (taking out the minuses), there is still a significant number of pluses centered on delivering superb value to customers. Although the U.S. government has banned Huawei from working on installing 5G telecom networks in the United States, governments from major allies such as Britain and Germany defend their decisions of allowing Huawei to do such work in their countries. While British and German govern- ments have their own reservations about Huawei, the advantages that Huawei brings are simply overwhelming. No other firm in the world— and neither Ericsson nor Nokia, two European firms in their home mar- kets (EU)—can deliver such an enviable combination of world-class performance and cost competitiveness. The debate about Huawei among Western allies is a great example to invoke an institution-based view. From the early founding of The North Atlantic Treaty Organization (NATO) to the ongoing powwows of G7, the Western allies are supposed to have a united front dealing with the Eastern bloc. Both their formal alliance agreements and informal norms over lasting several decades have nurtured such a united front. They gen- erally can find common ground, and disagreements have been papered over. However, it is amazing, surprising, or disturbing—depending on your point of view—to see one company alone has threatened such a united front. The United States has openly threatened Britain and Germany that if they choose Huawei, Britain will no longer enjoy unlim- ited privileges within the Five Eyes alliance (an intelligence-sharing alli- ance whose three other members are Australia, Canada, and New Zealand) and Germany within the Fourteen Eyes alliance (a more expansive ver- sion of Five Eyes). Other sanctions may be imposed as well. Is the emer- gence of Huawei worth undermining such precious and enduring allied relationships? Foreword ix In its debate with allies concerning Huawei, the United States cannot beat something with nothing. As no viable U.S. competitor that can rival Huawei’s world-class combination of high capabilities and low prices cur- rently exists, the U.S. government has started entertaining directly invest- ing in and controlling the only two remaining rivals, Ericsson and Nokia, and turning them into state-owned enterprises (SOEs) (like how General Motors [GM] was turned into a state-owned enterprise in the 2009 bail- out). The thinking goes, in future negotiations with allied governments, it would be easier to push such U.S. SOEs (formerly Swedish-owned Ericsson and Finnish-owned Nokia)—similar to the way of pushing U.S.-made fighter jets—than to prevent allies governments from using Huawei but to present no viable offerings. In the absence of any expres- sion of interest by the private shareholders of Ericsson and Nokia, the very thought of turning non-U.S. private firms into U.S. SOEs shows both outside-the-box creativity and pulling-out-one’s-hair desperation— all triggered by Huawei. Which company can trigger such changes? Regardless of whether one likes or dislikes Huawei, everyone would agree it is a respectable force to reckon with globally. From an institution-based view, Vol. 2 is devoted to how Huawei has changed—and will change—the rules of the game around the world. Everybody already knows how Huawei is changing the economic (and geopolitical) relationship between China and the United States. The example I give here is about how Huawei is challenging the geopolitical rules of the game governing intra-allied relationships among the Western allies. This example is too new to be captured by any chapter. However, this is unlikely to be Huawei’s last chapter. It is cliché to say world-class companies change the world. Another recent world-class disrupter that comes to mind is Uber. Again, a strategy tripod can help us dissect Uber’s triumphs and frustrations. It is changing the dynamics of the taxi industry, it certainly has some overwhelming capabilities, and it is causing a lot of cities and countries around the world to change their rules of the game that regulate this industry. However, Uber probably will never be able to change the geopolitical relationship between countries. For the same reason, perhaps that is why I have not seen two volumes of penetrating chapters contributed by scholars worldwide focusing on Uber—or any other company. But x Foreword Huawei is different. Even among world-class giants, Huawei seems head and shoulders above the rest. Lastly, I wish to congratulate Zhang, Alon, Lattemann, and their con- tributors. Among countless scholarly and news pieces on Huawei, their two volumes are head and shoulders above the rest in both breadth and depth. I highly recommend such world-class scholarship embodied in these two volumes. Jindal Chair of Global Strategy, Mike W. Peng University of Texas at Dallas Author, Global Strategy, Global Business and Global