中國傳統文化對商業型態的影響－胡小林的研究個案

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(1)國立臺灣師範大學管理學院全球經營與策略研究所碩士論文 Graduate Institute of Global Business and Strategy College of Management National Taiwan Normal University Master Thesis. 中國傳統文化對商業型態的影響－胡小林的研究個案 A Sun in the night: the power of Chinese culture to improve business environment – Case study of Hu Xiaolin and Dizi Gui.. 研究生：風雨果 Graduate Student : Hugo Winckler. 指導教授：康敏平博士 Advisor：Minping Kang Ph.D.. 中華民國 102 年 8 月 August, 2013. .

(2) . 1 . Using traditional Chinese culture to break away from a deteriorated business environment – a case study.   Hugo Winckler. Abstract: Chinese traditional culture as a possible source of principles for corporate social responsibility (CSR) is a fast developing field of research. The three main Chinese teachings, Buddhism, Confucianism and Taoism, can all be used as a source of inspiration to develop a coherent framework for corporate governance in China. It has been highlighted that, while there is a growing need and demand for corporate social responsibility in China, the western concepts are harder to implement because of their disengagement with the basic local culture. Chinese traditional culture needs to be the bedrock of every attempt made at designing a coherent set of principles. When most research have been concentrating their efforts on a theoretical level, little analysis have been conducted about the economic impact, and feasibility of using Chinese culture as a source of guidance for morally conscious entrepreneurs. Our research aims at exploring an actual case in which a business leader from Beijing succeeded to transform his moral aspiration into a viable business model. Willing to break out from the corrupted business environment he was competing into, he used the ‘Standards for being a good pupil and child’ (Dizi Gui), to develop a set of principles out of which he articulated his decision-making strategy. Key words: Dizi Gui, decision-making, Confucianism, Buddhism, Taosism, corporate culture, business environment, vegetarianism, business ethics..

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(4)                Abstract                Table of content                Paper (Thesis summary)                Thesis CHAPTER ONE: INTRODUCTION                     1.1 ‐ Research topic presentation       1.2 ‐ Research background                   1.2.1Price war                             1.2.2 Doing business through guanxi 1.3 Research Question and research objectives 1.4 Thesis Organization CHAPTER 2: Chinese Business ethics and strategic management              2.1 Historical approach to corporate social responsibility 2.2 Chinese ethics as a business ethics. 2.2.1 Confucianism and the economy 2.2.2 ‐‐ Buddhism and the economy CHAPTER THREE: Research Methodology 3.1 Choice of the research method   3.2 Case study and research methodology 3.2.1 External validity 3.2.2 Internal validity 3.2.3 Content validity 3.3 Case study presentation 3.3.1 Company and industry presentation 3.3.2 Hu Xiaolin personal history presentation 3.4 ‐ Sources 3.5 Interview procedure 3.6 Material collected and used as a basis for our analysis Chapter 4: Data analysis 4.1 – The sun in the night: signaling your microcosm   4.1.1 the radiating culture.   4.1.2 the sun in the night: a cultural microcosm 4.2 – The heliotropic consumer 4.2.1. The value frontier: consumer polarization 4.2.2. Consumer selection 4.2.3 Value proposition 4.2.4 Business development and the use of Guanxi   4.3 ‐ Distancing the moonlighting rivals: raising a competitive wall 4.3.1 Enhancing the relationships with competitors 4.4  – Supplier relationship: 4.5 – Historical analysis   5.1‐ Conclusion: 5.1.1 Chinese culture as a reference point 5.1.2 The family model of the virtuous firm   5.2 research limitations 5.3 recommendations for further research Annex 1 : Videos list Annex 2 : Interview (Written answer) Annex 3 : Dizi Gui Bibliographie . 3 1 3 4 16 18 18 20 21 21 23 24 24 24 28 28 31 33 34 35 35 35 36 36 37 37 38 40 41 42 42 42 44 48 49 49 51 52 53 53 56 59 61 62 62 63 63 64 64 82 95 .

(5) . 4 . The Paper.

(6) . 5 . 1 - Introduction Chinese traditional culture as a possible source of principles for corporate social responsibility (CSR) is a fast developing field of research. The three main Chinese teachings, Buddhism, Confucianism and Taoism, can all be used as a source of inspiration to develop a coherent framework for corporate governance in China (Lei & Heikki 2009). It has been highlighted that, while there is a growing need and demand for corporate social responsibility in China, the western concepts are harder to implement because of their disengagement with the basic local culture (Ip 2009). Chinese traditional culture needs to be the bedrock of every attempt made at designing a coherent set of principles. When most researchers have been concentrating their efforts on a theoretical level, little analysis has been conducted about the economic impact, and the feasibility of using Chinese culture as a source of guidance for morally conscious entrepreneurs. Our research aims to fill this gap by exploring an actual case in which a business leader from Beijing succeeded to transform his moral aspiration into a viable business model. Willing to break out from the corrupted business environment in which he was competing, he used the ‘Standards for being a good pupil and child’ (Dizi Gui), to develop a set of principles out of which he articulated his decision-making strategy. By analyzing his story and the discourse he has developed around his success, it becomes possible to obtain a better understanding of how Chinese culture can be successfully mobilized as a success factor, and a way to improve human conditions within a business environment. An increased need for corporate social morality has been felt in China as the result of the numerous scandals regarding food safety, labor laws, and crony capitalism (Ip 2009). Good business ethics should be reasonable, workable and rooted in Chinese culture (Lei & Heikki 2009). Using a case study methodology, this research will show how such a CSR model can be implemented and in what ways it can be of economic value. 2 – CSR with Chinese flavor. 2-1 Confucianism Confucian virtues can be applied to a business culture to create a virtuous company. The main virtues are: humanness, righteousness, respect for rituals, wisdom, sincerity, and filial piety, all these concepts can be translated into an aspect of CSR (Lei and Heikki 2009). The most prevalent virtues are humanness and righteousness. Humanness is a general concept of benevolence and insists on the fact that a company should act with respect and consideration for others. Righteousness insists that, if profit can be the goal of a corporation, respect of duty remains the basic and most important requirement. A third main virtue is filial piety, which entails that a company should be regarded as a family. The family concept in traditional Chinese culture refers to a complex and rigid hierarchy (Ip 2009)..

(7) . 6 . If Confucian virtues are mostly considered to be applicable to business ethics (Lei and Heikki 2009), it has been noted by some scholars that a doctrinaire view of them may be counterproductive (Chan 2008; Ip 2008). For example, Chan (2008) shows that the concept of filial piety may be an impeachment for an employee to become a whistle-blower. In the same way, a too stringent approach to Confucian virtues may turn a company into an authoritarian entity, whose hierarchy and expected commitment from its employees become obstacles to their well being (Ip 2009), or can pave the way to “a sheepish culture” (Ip 2009). The negative sides of Confucianism and its fittingness to the well development of a company remained an understudied field of research. 2-2 Buddhism Buddhism posits that every individual should live in such a way that every activity in life should be seen as a means of training to obtain liberation in the end. Economic activities are only a subset of activities, and as such should also be used as a way to work toward liberation. “Every moment of life, properly conducted, becomes training, a development of potential, and an increase of the quality of life. We should therefore always ensure that economic activity becomes part of the procedure or process of development of potential to increase the quality of life, because all aspects of life or all human activities are related and interdependent (Numkanisorn 2002)”. We can say that the Buddhist doctrine makes economic activities a way to act righteously, and advocates for respect toward society or the environment. One of the main aspects of the Buddhist ethics is concerned with compassion for all sentient beings (Gould 1995), that entails that one cannot harm other people and should try to be of help to others. Buddhism offers the tools necessary to better oneself toward improving one’s capacity for compassion, and understanding the nature and sources of suffering of others (Gould 1995). 2-3 Taoism One of the main teachings of Taoism is that a man should not try to disturb nature; he should not add obstacles in the way of nature, and he should respect it. The Taoist concept of totality means that there is a fundamental unity between men and nature, and that the relationship between both of them should be reciprocal and distributive. Man has to respect nature and be in harmony with it (Lei and Heikki 2009). This advocates for a higher level of respect for the environment on the part of a company. 2.4 Empirical studies Empirical studies concerning how concretely Chinese traditional moral values can affect a business leader’s decision process remain very few. A ground breaking analysis of how Confucian entrepreneurs handle the trade off between profit and morality offers the first survey of the decision making process (King and Cheung 2004) from a sociological perspective. Our study wants to further their findings by analyzing the phenomena from a smaller scope and more in depth. Another study on the Weizhi Group of Xian analyzes the different virtues than can be put into practice by a virtuous company (Ip 2002)..

(8) . 7 . 3 – Hu Xiaolin, a virtuous entrepreneur. 3-1 Personal history and company presentation Our case study focuses on one company, The Beijing Huitong Huili Jishu Kaifa Youxian Gongsi (hereafter, “the Company”), which is one of the leading companies in the heater manufacturing industry in Beijing. The company mostly operates in the business-to-business market, selling heating systems to real estate development companies. The market, according to data collected during the interview, is made up of around 10 companies, and the Company has gradually grown to obtain around 60 % of the market share, becoming the leading company. Hu Xiaolin studied and used of the Dizi Gui as a guideline for his managerial decisions, starting in 2007, when he began to suffer from anxiety attacks and a general feeling of dissatisfaction with life. After western medicine did not succeed to alleviate his symptoms, he decided to revert to Chinese traditional culture. Being convinced that the main underlying reason for his general tiredness was his lifestyle, he decided to stop drinking alcohol. Even though this decision may seem inconsequential, it was in fact a hard one to make. Drinking is a business activity in China, and is considered to be the standard way of treating costumers. As Hu Xiaolin reported, when he decided to stop drinking, most people tried to dissuade him. Nonetheless, he went on to implement his decision. Seeing that his choice did not hurt his business’s economic performance, he decided to go one step further, and became a vegetarian. During this process he grew convinced of the importance of the moral teachings of traditional Chinese culture, and decided to take them in consideration whenever he made a managerial decision. 3-2 - The Dizi Gui and traditional Chinese culture. The Dizi Gui1, often translated as “standards for being a good pupil and child”, was written during the Qing Dynasty by Li Yuxiu during the reign of the Kangxi emperor (in between 1661 to 1722). The book is based on the teachings of Confucius, and it expresses the basic principles needed to live in harmony with other people. It is divided into seven chapters, which analyze the different aspects of life. The objective of the book was to teach youngsters strong moral values to be used in everyday life. It is still a classic taught in junior high school in Mainland China and Taiwan. The book is written in very simple traditional Chinese, and quite short. It offers the simplest rules of life, in a very down-to-earth fashion. It can be surprising that Hu Xiaolin used such a basic book as a moral guideline in a complex economic world. On the other hand, it is the simplicity of the Dizi Gui that makes it a convenient tool. It expresses simple and easy to memorized principles that can be flexibly adapted and adjusted to different situations. In the same way, when Hu Xiaolin refers to Buddhist principles, he never digs into complex Buddhist theories, but sticks to the most prominent principles like the rule of causation. It is important to point to the fact that Hu Xiaolin is not a rigid and doctrinaire scholar, but a business man who tries to find answers in traditional Chinese culture to help him navigate into a highly competitive and corrupt business environment.                                                          1 For an bilingual online version of the  Dizi Gui : http://tsoidug.org/dizigui_trans_simp.php .

(9) . 8 . As Hu Xiaolin stated during the interviews, he considers Chinese traditional culture as a reservoir of ideas and teachings, which is a summary of years of enlightenment. It has to be taken as a teaching tool from which answers to any questions can be found with certainty. These answers are reliable, according to him, because they have been confronted to the scrutiny of time. It is important to notice that Hu Xiaolin did not accept the teaching of the Dizi Gui as untouchable principles, but as a lens through which to analyze issues and dilemmas. 3-3 Research method and sources The case study was built on a series of semi-structured email interviews of Hu Xiaolin and five of his employees, including the vice president, the head of the engineering, maintenance, and marketing departments. On top of that Hu Xiaolin has delivered a series of conferences, which he recorded, and in which he related his experience and his analysis of his personal story. In order to develop our research model, we used an historical analysis in order to compare what changed in Hu Xiaolin’s way of conducting business, and how these changes were the result of his use of the Dizi Gui as an ethical guideline. We started by an in-depth analysis of the conferences he gave in order to form a first idea and a set of hypothesis. We then designed a questionnaire that was mailed to Hu Xiaolin. The questionnaire was composed of five sections, every section divided in a set of sub-questions, in order to explore the different aspects of Hu Xiaolin’s evolution. Hu Xiaolin answered every one of the questions in a video. His coworkers offered a written reply. All the interview procedure was conducted in Chinese (mandarin). 4 – From competition to cooperation: the harmonious firm 4-1 Radiating one’s virtue Hu Xiaolin’s adoption of the Dizi Gui was not a secret but a visible fact. He made it public by his commitment to become a vegetarian teetotaler. It was also manifested by the fact that Hu Xiaolin systematically gave copies of the book to new costumers and to his employees. As such, he is not only acting in a way that he wants to be more virtuous, but he is also advertising his change to his business environment. This advertisement is made all the more credible because he is offering visual and concrete proof of his new state of mind. Some researchers have already shown that Chinese companies successfully revert to Chinese traditional culture in order to frame more successful advertisement campaigns (Zhu 2008). The reason being that referring to Chinese traditional culture in China enables consumers to rapidly access readily available beliefs and attitudes. Hu Xiaolin took some pain to attach the Dizi Gui to his name and to his company reputation. He made it a clear element of his company’s marketing identity and strategy. This strategy appears to be successful. Hu Xiaolin reported that one of the main factors reported by costumers as a key element in their choosing Hu Xiaolin’s products, is their higher degree of confidence, that they are not going to be cheated. By doing so, Hu Xiaolin changed the basis for competition; he does no longer compete on price, but on differentiation of the service offered. Consumers.

(10) . 9 . chose him, not according to his price setting policy, but based on what he offers. The Weizhi group of Xian (Ip 2002) similarly enjoyed higher valuation from its consumers, because of their advertised virtuousness rooted in traditional Chinese culture. The underlying factor in both cases is the need for security felt by Chinese consumers. 4-2 Treating one’s consumers Zhang Yan, head of the marketing department reports that he used to get drunk with clients at least twice a week. He felt obligated to do so because it was the culturally accepted way to conduct business in China. Refusing to drink with clients would be considered rude, and as such ill advised. Hu Xiaolin expressed the fact, that quitting alcohol appeared at first to be a poor idea2, but knowing that his body could not support the stress of too much alcohol consumption, he crossed the bridge. This step is crucial in the evolution of his decision making process: he discovered that it worked out, and that it is not necessary to do as we are culturally expected to do. He decided to act according to another model, and this model can be traditional Chinese culture. He then went one step further and became a vegetarian. Seeing that his business activities were not hurt, he became convinced of the rationality of his choice. Taking a step-by-step approach, he then decided to realign his business model in accordance to the teaching of the Dizi Gui. For example, Zhang Yan reported that they decided to change their negotiation strategies. They used to call as high as possible and go down, sometimes quickly, so that they could keep their prices lower that the competition to win the bid. Hu Xiaolin decided to change this habit: they now calculate their cost and their expected profits, and call for a price with little room for negotiation. They will not artificially reduce their price in order to obtain a new client. By doing so, Hu Xiaolin explains that he can effectively sort out his clients. All clients are not good clients, it is better to stick to the clients, which are really interested by the products his company is offering. Wang Xuefeng, vice president, reports that this way of negotiating gives clients a feeling of security and enables them to be more relaxed in their proceedings with the company. The approach to negotiation is radically different; it is no longer seen as a competitive process but as a cooperative set of interactions. Hu Xiaolin quotes two principles from the dizi Gui, “If conditions are not favorable do not lightly promise” and “If one lightly promises, then both going forward to do it and backing off from doing it are wrong3”. This principle calls, according to Hu Xiaolin, for a strongly analytical approach to business. A purely competitive approach, with consumers and with competitors, can only conduct to emotional decisions, which may turn into a loss of profit. By using these principles he changed his way of doing business from a highly emotional and interpersonal decision-making process, to a more rational and fact oriented one. 4-3 Breaking out of the price war                                                          2 The idea that one has to drink alcohol to succeed in China is so prevelant that it is even taught in many business schools throughout the world. 3 「事非宜，勿輕諾，苟輕諾，進退錯」, shi fei yi, wuqing nuo, jiqing nuo, jintui cuo. .

(11) . 10 . Hu Xiaolin expressed that before he started to use the Dizi Gui as a guideline, he reverted to the different means of doing business in China: criticizing and slandering the competition, offering bribes, enticing clients, cutting prices to win a bid for a contract. According to Hu Xiaolin, these practices remain the common way of doing business in China. As he reported, his commitment to the Dizi Gui made it necessary to change them. Referring to the rule of causation - if you do evil you will receive evil - he decided to focus his marketing strategy on his products’ specifications and the advertising of his use of the Dizi Gui. Previous researches, based on an empirical study of how entrepreneurs with a strong Confucian culture operate (King and Cheung 2004), show that Confucian entrepreneurs tend to be less preoccupied about the competition than about the quality of their products. The objective is to satisfy as well as possible a need felt by a consumer, and not to crush the competition. This focus on product quality and differentiation tends to finally turn into a competitive advantage. In their study King and Cheung (2004) consistently demonstrated that the desire to compete with morality in cut throat competitive markets forces entrepreneurs to be very concerned about their product positioning, and brand image, or to be innovative in order to survive. This obligation to act according to higher moral rules, when the competition does not, becomes a way to innovate so as to open a competitive space, which is outside the competitive pressure of the rest of the market. It is possible to see a strong similarity in Hu Xiaolin’s way of doing business. His willingness to compete according to moral guidance made him change his business strategy, from a main objective of crushing the competition, to one whose focus was much more on its product offering and differentiation. Wang Xuefeng reports that their new approach to business offers their costumers a sense of security that they cannot find in the competition. The quality of the service proposed by the Company enables her not to worry about the other players in the market; therefore the price war is no longer the main characteristic of their business environment. 4-4 Brotherhood within the supply chain When asked how he managed his relations with his suppliers, Hu Xiaolin reported a story. He used to not care about suppliers’ management, just following the current business practices in Beijing at the time. One day a supplier came to confront him. The supplier stated that because of the legal structure of the contract negotiated with The Company, he was currently out of funds. The provision of the agreement states that payment was made only once the contract was fully executed. As a consequence, it happened that, sometimes, the supplier would run out of liquid assets before the full completion of the legally binding commitment. The reaction of Hu Xiaolin, when confronted with the situation reveals how the Dizi Gui is used as a decision-making tool. The first step in the decision making process was to realize that the Company business strategy was just a replication of the mainframe way of doing business. Relationships with suppliers were handled in imitation of what was done by other companies. Understanding this, Hu Xiaolin was able to break away from the mainframe culture macrocosm, and try to find a new solution for himself. Then in order to find a source of inspiration he referred to the Dizi Gui. Using the Dizi Gui he.

(12) . 11 . was able to retrieve simple moral rules: the importance of harmony (hexie), and the Buddhist rule of causation. These principles set up the framework for an economic analysis of the situation. The final decision is the result of an economic and strategic decision, but it has been influenced by the moral principles in two ways. First, the automatic reference to the Dizi Gui enabled Hu Xiaolin to break away from the business-as-usual logic, and it narrowed down the alternatives that had to be considered in the decision making process. The Dizi Gui has become a reference point used when facing a managerial issue, to set the direction that has to be followed. It is used as the lens through which economic dilemma has to be considered for resolution. In the end, Hu Xiaolin decided to enhance his cooperation with his suppliers and to develop a more integrated supply chain. The change was radical. Originally, the relationship was based on an idea of competition, and now it developed around an idea of cooperation. By using the Dizi Gui, Hu Xiaolin was enabled to take a radically new perspective on how to resolve his business dilemma. This change was made possible, because Hu Xiaolin’s behavior transformed the complete supply chain logic. It was only made possible because he had managed to escape the on-going price war, by offering a new value proposition to his consumers. Being out of the price war, he can stabilize his price setting policy, and as such do not have to exert a very high pressure on his own suppliers. 4-5 A business centered on harmony The different elements end up forming a logical set of business activities fitting together to enable The Company to successfully deliver its value proposition to its costumers. Each element is connected to the others, and is effectively functioning because of the existence of the overall business architecture. The new basic underlying principle of Hu Xiaolin’s way of doing business is a determination to create “harmony”: which can be defined as a noncompetitive relationship based on trust and a will to cooperate throughout the supply chain to create value. These findings corroborate the theoretical “harmony approach to CSR” developed by Lei and Heikki (2009). 4-6 Historical analyses Table 1 is a summary of the historical changes that were enacted out of the use of the Dizi Gui, as a ethical guideline. It shows first how business is conducted in the cultural macrocosm, i.e. as the common way of doing business in the construction industry in Mainland China; then are reported the new standards according to which business is conducted. Table one: Historical analysis summary Client relationships management . Before (Cultural Macrocosm) Banquets, KTV, drinking parties. . Principle used. “Being drunk is most ugly » ， “If conditions are not favorable. After (Cultural microcosm) Diners, but maintains a strict vegetarian policy for himself, and no alcohol. .

(13) . 12 . Prices negotiation . Behavior toward competitors Supplier relationship Main Idea . do not lightly promise”, “If one lightly promises, then both going forward to do it and backing off from doing it are wrong， « Give much, take little 4». As high as possible, and Expected price, according to the prices based on set by competitors.   calculation of costs and expected profits. Criticizing, and Rule of Focus on his slandering.   causation products. Competition . Principle of Cooperation harmony, and rule of causation. 1) Short‐term profit 1) Long‐term maximization. ethical behavior. 2) Emotion and 2) Rational and interpersonal   fact oriented. 3) Competitive   3) Cooperative . The historical analysis offers a clear picture of how the main underlying idea changed: short-term profit maximization has been replaced by a will to maintain a sustainable ethical behavior. We can see that there is strong coherence behind the new business model; it is organized according to strong architectural principles, which are derived from the Dizi Gui, and aims at creating a greater level of harmony within the supply chain. 5 – The Dizi Gui in the decision making-process. 5-1 Cultural macrocosm and cultural microcosm Cultural macrocosm refers to the mainframe culture in which one individual operates. Most companies follow its influence while taking a decision because it is the most common way of conducting business. It is how managers learned to handle managerial issues, and how they see the competition doing. The cultural macrocosm can be linked to the idea of a frame of reference. To the contrary, a cultural microcosm can emerge when a decision maker breaks away from the main frame of reference, and starts to make decisions according to another reference point. As such                                                          4「凡取與，貴分曉，與宜多，取宜少」fan qu yu, gui fen xiao, yu yiduo, qu yi shao. .

(14) . 13 . he does not act out of replication of the mainstream behaviors, but takes his own decision according to another set of guidelines. As Zhang Yan reported: “Chinese society has not changed, it is just that we are acting differently, since we are using the Dizi Gui”. Hu Xiaolin and his associates, by using the Dizi Gui as a basis for their decision making process, broke away from the cultural macrocosm to develop a cultural microcosm. 5-2 Cultural reference point One of the main insights that can be derived from Hu Xiaolin’s case study is the use of the Dizi Gui as a reference point, which is used to break away from the cultural macrocosm, and which is used as the foundation of a new culture, which is going to influence the other players throughout the supply chain. This cultural reference point appears clearly with the metaphor used throughout the interviews by Hu Xiaolin and his associates: a supply chain is like a family. The family model is relevant to describing the relationships within a company. Hierarchy within a company is like hierarchy within a family: a subordinate has to respect his manager like his father, and conversely, the manager has to act like a father for his subordinate. He has to be caring, and has to set a positive example. Similarly, a company has to be like a big brother to its suppliers: it is not supposed to compete with them, or be in an adversarial relationship, but should try to cooperate. By analyzing every aspect of business relationships through this lens, Hu Xiaolin has already biased his decision making process. He makes his decisions within a particular cultural framework, which no longer belongs to the cultural macrocosm. 5-3 The “reference point framework”. Diagram 1: Decision making process. Using historical analysis it is possible to see what changed in Hu Xiaolin decision-making process. In his analysis of an economic situation he used to use benchmarks set by other companies, and align himself with their ways of conducting business, which were consistent with what he was used to know as the normal way of managing a company. He was acting according to the mainframe cultural macrocosm. His commitment to use the Dizi Gui forced him to change his decision making.

(15) . 14 . process. Most of the business practices used by the competition and by his firm did not respect the moral values of the Dizi Gui. In order to maintain his level of ethical commitment he had to use the Dizi Gui as a basis for his decision making process. Nonetheless, being a business leader, using te Dizi Gui is not enough, he would have also to conduct an economic analysis. These two steps have two consequences: first it forced Hu Xiaolin to analyze business opportunities from a new perspective, and suppress some alternatives from the array of choices available to him. As a consequence, he also had to innovate and not only replicate what business leaders in his position usually did. This approach to decision-making is different to the ordinary approach in which the decision-maker tends to choose the ethical theory according to the kind of dilemma he is facing and its intensity (Green & Walker 2009). The main ethical decision-making model, “the contingency framework”, posits that the decision-maker will be influenced in his ethical behavior by a variety of external factors, like reward and punishment, corporate policies, and so on (Ferrel & Greshman 1985). To the contrary, in the case of Hu Xiaolin, the ethical theory is a given that has to be incorporated in the decision process. This use of a unique cultural reference point provides coherence, and disengages from the cultural macrocosm to create a cultural microcosm. This new environment is not free from external factors, but these ones will be reduced because of the single lens through which every ethical dilemma is analyzed: the cultural reference point. From the different interviews emerged the idea that the use of the Dizi Gui was followed by an enhanced will to experiment and to approach the different changes with a trial and error method. Once a decision is made that a managerial issue has to be resolved in a different way than the usual one, an experiment of a possible alternative is conducted, and if it is successful the change is enacted as a new standard procedure. The use of a cultural reference framework and a trial and error procedure enabled Hu Xiaolin to take the risk to operate his business in a completely new fashion, with disregard of the current main way of doing business. 5-4 External and Internal coherence Following a set of principles as the unifying guideline to a decision-making process enables Hu Xiaolin to deliver to his company a strong coherence. All the business activities operate according to the same principles and have a higher degree of fit as a consequence. This coherence is the basis of Hu Xiaolin’s value proposition strength, and it is also what makes it hard to replicate for his competitors. It is not enough to act in the same way; to succeed it is necessary to change the very way business is conducted. 6 – Research limitations and recommendations for further research This one-case case study was instrumental for developing a model to understand what happened in the Hu Xiaolin case, and how other companies can replicate it. The Company’s dedication to using the Dizi Gui as a basis for its decision-making process was unprecedented, and as such, it was not possible to adopt a comparative case study style. The restricted scope of the study is one of its main limitations. Further studies should be done to confirm the validity of the model in a.

(16) . 15 . broader pool of companies, which are using the Dizi Gui, or other moral guidelines, as the basis of their decision-making process. 7 – Conclusion Using Chinese culture as a reference point, Hu Xiaolin succeeded in breaking away from the cultural macrocosm and generated a revolutionary cultural microcosm. This microcosm, based on higher morality level, enabled him to open a market space for himself, so his firm is no longer part of the raging price war. By keeping in line with the Dizi Gui, Hu Xiaolin created a coherent set of values, which developed into a hard-to-imitate competitive advantage, changing radically the value proposition that his firm is offering. He rooted his company in a new culture, in a microcosm. His way of doing business cannot be easily replicated, because it is not the sum up of few external elements, but is the result of a change in the decision-making process. .

(17) . 16 . . The Thesis .

(18) . 17 .

(19) . 18 . CHAPTER ONE: INTRODUCTION 1.1 ‐ Research topic presentation    Our research topic is: the possible positive impact of a more moral organizational culture on a company economic performance. We want to study in what ways a business leader can use higher morality grounds to improve its company economic performances. We want to demonstrate that founding its business model on a more ethical framework can yield direct concrete economic advantages for its stakeholders. Most theories regarding business ethics develop in two directions: either they state that it is necessary to be moral according to higher standards, and explain these standards, or they are concerned with personal conducts: how to adopt certain moral attitudes will enhance our own well‐being or personal performance. Argumentations tend to lack concrete structures and justifications, and use traditional ethics like religion to give grounding to their principles. These argumentations tend to be normative and judgmental: “companies have to adopt more moral behaviors”… These theories tend to be of moderate convincing power for appearing naïve, and in disregard with economic imperatives. On the contrary, our research project is to take concrete actual cases of higher performances yielded by doing business in a more moral way, to try to find and understand the underlying economic principals.   We want to use the case study methodology to investigate the topic: we are interested in one case Hu Xiaolin.   The case study is the personal history of Hu Xiaolin and his use of the Dizi Gui (Rules for the disciples) to conduct business. Hu Xiaolin is the founding father and current CEO of a Beijing base company, which provides heating systems in a business‐to‐business market. Hu Xiaolin is not managing a charity, but to the contrary is the head of a for‐profit company competing in a highly competitive industry. What makes his personal history interesting is that he decided to change his way of doing business. When he started his company he .

(20) . 19 . resorted to common expedients in China to construct business relationships. He heavily made use of guanxi, and personal relationships with clients to conduct business. Getting physically and mentally exhausted from this way of doing business he decides to change it by following the teachings of traditional Chinese culture. Hu Xiaolin has not received education in liberal arts and is mostly self‐ taught, which makes his take on Chinese culture interesting because he sees it with a practical eye. He explained in a series of videos available on the Internet what Chinese culture contributed to his business and how it turned out to be a source of profit and sustainable competitive advantage. . When the possible use of Chinese traditional culture (Buddhism, . Confucianism (Ip: 2009), Daoism) as a source for a theoretical framework of business ethics has given rise to a fruitful scientific literature, little has been written about its practical and economic potential benefits. Our contribution wants to explore this peculiar aspect of the question through the case study of the personal history of Hu Xiaolin5 and his use of the Dizi Gui (Rules for the disciples) to conduct business. Hu Xiaolin is the founding father and current CEO of a Beijing base company6, which provides heating systems in a business‐to‐ business market. Hu Xiaolin is not managing a charity, but to the contrary is the head of a for‐profit company competing in a highly competitive industry. . What makes his personal history interesting is that he decided to change . his way of doing business. When he started his company he resorted to common expedients in China to construct business relationships. He heavily made use of guanxi, and personal relationships with clients to conduct business. Getting physically and mentally exhausted from this way of doing business he decides to change it by following the teachings of traditional Chinese culture. Hu Xiaolin has not received education in liberal arts and is mostly self‐taught, which makes his take on Chinese culture interesting because he sees it with a practical eye. He explained in a series of videos available on the Internet what Chinese culture .                                                          5 Hu Xiaolin expressed himself on the topic of the relationships between Buddhism and Economics in a series of videos for a total length of 12 hours divided into six videos 6 http://www.yima-huitong.com/.

(21) . 20 . contributed to his business and how it turned out to be a source of profit and sustainable competitive advantage. . It has been demonstrated that business ethics has to be grounded on . three foundations: (1) value creation: business ethics should not be considered as a trade off between profit and morality. Business ethics research has to show a way of enhancing profit through morality, in a positive sum game. (Michael E. Porter, Mark R. Kramer: 2006). (2) Strategic tool: business ethics must offer alternative strategic analysis tools to empower decision maker to base their decision on complete information. (3) Culturally based: business ethics to be functioning should be founded on local culture (Ip: 2009), for example western model of Corporate social responsibility should be adjusted to Chinese culture and redefine to incorporate Buddhist and Confucianism ethical teaching.   . Analyzing Hu Xiaolin story offers a way of understanding how it is . possible to link economics, classical Chinese culture, and the development of sustainable competitive advantage. Using his testimony, we will develop a more systematic framework to explain the driving factors of his success. Hu Xiaolin did not conceive his adoption of traditional culture as a strategic move, but the resulting effects of his choice open the door for research. We will show that by establishing a strong moral conduct rooted in every day life and Chinese culture Hu Xiaolin cast a (1) signal to the market which enables him, through creating another way of doing business within the mainframe of business practices, to create value to the costumers (2) and improve the competitive environment (3), and establish better relationships with its suppliers (4). 1.2 ‐ Research background . In this first part, we will study the dynamics of business practices in China . and try to understand what is the business culture. We will show that in the construction industry an ongoing price war is going on, and that business transaction are mostly conducted through personal relationship and drinking parties. .

(22) . 21 . Diagram 1 : Doing business under the moonlight . A) Price war . Many industries, mostly whose products are commodities, found . themselves involved in end‐less price war, which are maintained by the bidding process. For every new contract the different players have to make an offer to the costumer. The bidding process is renewed, so that bidders can reduce their price. An aggressive buyer strategy is to play suppliers against each other to get the lower price.    . Hu Xiaolin, in his lecture on traditional Chinese culture, states that it is . frequent in China, in the real estate business, for companies to be so aggressive when competing on price, that the end result is a loss of money for the company eventually obtaining the contract. This kind of comportment is hard to face for a business leader, since the ongoing price war is more the consequence of the behaviors of its competitors, than is the result of its own doing.   . . B) Doing business through guanxi . . It is commonly assumed that there are two ways of conducting business: . the first way is labeled “rule‐based”, and the second way is “relation‐based”. The .

(23) . 22 . practice of guanxi in China is of special importance because it is deeply rooted in the traditional culture, and has been linked to the Confucian social hierarchy, which deeply emphasizes the need for strong inter‐individual relationships. “Relying on the relation‐based way to conduct business activities is not merely a cultural phenomenon, it is fundamentally determined by the stage of political and economic development in a society” (Li : 2009, page 14). . “Relation‐based” markets are mostly due to a lack of reliability when it . comes to the official sources of information. The media, and the market can not be trusted to provide perfect information, as a consequence private networks may be more effective in obtaining solid economic information (Li : 2009). “Rule‐ based” markets suppose well‐developed legal infrastructures. “ . As a consequence, it sounds little likely, at the time being, for Chinese . companies to depart from the “relation‐based” way of doing business, to a more “rule‐based approach to business”. . The consequence of “relation‐based” markets is a higher risk of . corruptions in official ranks, business counterparts. Since business opportunities are acquired through business meetings, businessmen tend to treat their clients to banquets in order to establish solid relationships. . . 1.3 Research Question and research objectives   . How a business leader can, through changing in its company culture . towards higher morality standards, achieve higher economic performance? . This research topic has a very strong current scientific validity, and . actuality. A growing number of foreign companies are facing difficulties when it comes to handling their relationships with their Chinese suppliers, or clients. A lack of commitment, weak governance, frequent abuses in human rights, can be highly damaging for companies’ brand equity. To understand which kind of cultural framework can be used to enhance good corporate governance in China is a key topic, in order to ensure prolonged and peaceful relationships with Chinese counterparts.   .

(24) . 23 . 1.4 Thesis Organization . The thesis will be divided in five parts. We will start by a literature review . to sum up the current state of research concerning corporate social responsibility, and then we will study the attempts that have been made to use Chinese traditional culture as a basis for corporate governance in China. . In a third part we will analyze our research methodology and explain how . we have collected information regarding Hu Xiaolin. These data will be analyzed in a forth part. The fifth part will be a conclusion summarizing our findings and presenting the possible paths for further studies.   .

(25) . 24 . CHAPTER 2: Chinese Business ethics and strategic management 2.1 Historical approach to corporate social responsibility . The history of the relationship between business and morality has . already gone a long way. Max Weber linked the development of capitalism to Protestantism and to its code of conduct, deducing that one would not have happened without the other. The main idea was that the emergence of capitalistic economy is the result of an ethical change: the pursuit of wealth was a moral action in itself; men of honor were supposed to have an ascetic life, whose end goal was the accumulation of wealth. Max Weber was one of the first writers to connect ethical background to economic performances. But Max Weber was not arguing for higher moral standards for the economic activity, he was only analyzing a phenomenon: the coincidental emergence of capitalism in northern Europe, which was predominantly protestant. Nonetheless, Protestant ethics, at these times, made moral salvation in the afterlife solely connected to the financial success during the moral life, protestants were not supposed to win their access to heaven through other types of good deeds. In that way, Protestantism did not connect economic behavior with a moral obligation of higher moral rectitude.   . Modern business and economic literature from the 50s onwards was also . unanimous on the hypothesis that business entities did not have to concern themselves with ethical concerns, it has to be neutral from a moral value perspective, and its sole imperative was to enhance efficiency. Milton Friedman statement “the corporate responsibility of a company is to increase its profits”7, was for a long time the most formidable8 argument against a social responsibility                                                          7 Milton Friedman : 1971 8 This argument fails to convince me. We can use a simple example to see why: a publicly traded company decides to reduce its cost of production by using some chemical products, although legal they may be hazardous to health if let say you consume vegetable, which have grown in the vicinity. If a stockholder has been nearby this plant and got infected, it is its own money that has injured him. In a publicly traded company, stocks are changing hands very rapidly, and there is no limit to the future stockholder identities. So a company involved in such practices, to make sure that it is not going to hurt its own stockholder, would have to issue a statement concerning the possible health danger. Such a statement would be damaging to the brand image and as such would diminish stock price and possibly the return on investment: consequently a firm cannot do it either. So, as a.

(26) . 25 . approach to the firm. These arguments are mostly based on the agency theory of the firm: firm managers receive a contract, which is to enhance profit for their stockholder. They cannot step outside of this contract without prejudicing their stockholders. A firm does not have any wealth; the wealth of a company belongs to its stockholders, as a consequence it is not up to a company to freely dispose of it. If a stockholder wants to make a moral use of its money it can do it on its own. From an economic theory, it can be argued that there is no proof that a company would be a better allocator of charity money than an individual.   . Nonetheless, with the evolution of the economic perspective on the . relationship between business and ethics, companies started to get more and more involved with the society they were involved in, for example by donating to charity. Than, from the sixties, but gaining real momentum in the 80s with the creation of the concept of the corporate social responsibility, the morality of economic activities became a prominent concern for scholars and business owners. The concept of corporate social responsibility is not a clear one, it has almost as much definition as there are papers on its topic.    . The triple bottom line concept states that to assess the success of a . company it is necessary to analyze it from three different perspectives: the financial performance, the social impact and the environmental impact. This approach to corporate social responsibility emphasis that a company has a variety of objectives it has to comply to, and these objectives are not only economic in nature, but are also concerned with environment the company has to work in. Nonetheless in this way of thinking the social and environmental perspective are still very much disconnected from the economic perspective.   .   .                                                                                                                                                                 conclusion, a firm involved on such practices would face a dead end: it will have to communicate to its stockholders incommunicable news. If we remain within the narrow border of the agency issue, we can easily see that corporate responsibility oversteps the narrow horizon of economic profit, otherwise we would have to admit that a company can use stockholders’ money to produce products whose consumption may diminish stockholders utility functions. Ethical conducts have to be considered as implicitly included in the principal agent mission statement. An agent cannot have a conduct they may be prejudicial to the principal. We can easily understand why. If a company generates return on investment to its stockholder but its stockholder health got injured, the stockholder may have to use the money generated by his investment to pay for his medical expanses. The overall utility function of the stockholder would be diminished, and it is a sure fact that has the stockholder been aware of the risk he would not have made the investment in this company..

(27) . 26 Most Corporate Social Responsibility frameworks fail to convince business . leaders because they present ethics and profits as a trade off. It would be a zero‐ sum gain; a company would have to relinquish some profit to benefit society as a whole. It is easy to argue that in this case business ethics are hard to implement for business leaders: businesses have a core obligation to shareholders and even a legal obligation to maximize profit; it is the task of the government to create incentive structure that would push private actors to act toward the greater good. . Political authorities through their norm setting organs (law‐markers, agencies) set the parameters of the game; this parameters should impact the cost structure or profit opportunities of private players, which will influence the strategic choices of the companies. For example raising the taxes on cigarettes decreases the potential market for Tabaco industry and diminishes the potential margin of the Tabaco industry. Accordingly there should be a clear divide between politics and economics. Private player should maximize their utility function as much as possible, so long they stay within the legal threshold; norm‐ setting agencies should endeavor to influence the rational calculation made by strategy and profit‐maximizing player to induce them to enhance their social responsibility. To make corporate social responsibility a viable option it has to be analyzed no longer as a cost but as a profit, or a as a risk‐diminishing factor. .

中國傳統文化對商業型態的影響 －胡小林的研究個案

中國傳統文化對商業型態的影響－胡小林的研究個案