Currently a 23 million megacity and one of the world’s fastest growing, Shanghai is a very interesting location for international corporations that want to access the Chinese market or bring their production to China. Shanghai still is a very young city, it was only in the 19th century that it developed to become a world city. In little more than a century, it has become the symbol for rapid urbanization and modernization in China. By means of setting up special industrial zones, like the Pudong area, foreign direct investments were attracted and boosted. Shanghai has developed to become the Chinese mainland’s main commercial, financial and logistics center.
The fast growing economy, the immense urbanization and the modernization of China offer many interesting aspects for academic research. In terms of economic geography, the fast development of China is a fascinating research subject. For my Master thesis project I investigate what challenges Swiss SMEs face when accessing the Chinese market. Research is focused on Shanghai, China’s economic hub and one of the first-tier locations for Swiss foreign direct investment.
Pudong Skyline (Photo: Andrea Keller 2011)
Shanghai is not just an economic hub, but also the symbol of modern China. It is in Shanghai above all places in China that the West and the East clash. Business centers and a huge skyline contrast rickety shacks selling street food. Shanghai seems to be a big melting pot where rich and poor, West and East mix and live with and next to each other. Shanghai is a world city, a metropolis that not only attracts international corporations but also a highly qualified workforce.
Despite its international orientation, Shanghai is still a rough place for international corporations. SMEs above all businesses face many challenges when entering the Chinese market; a SME does not usually have an established network in the foreign economy, often lacks international experience and is exposed to a lot of risk in the foreign market because it has limited resources. For these reasons, many SMEs need external support when internationalizing. Such external support is given by consulting firms, banks, governmental institutions and private networks, but also by business incubators. Incubators increase the success rates of SMEs that are internationalizing, because they provide experience, networks and security.
Swiss Center Shanghai office building (Photo: Andrea Keller 2011)
An example of an institution that has emerged to assist international businesses in their foreign ventures is the Swiss Center Shanghai (SCS). The SCS offers office and workshop space in the Xinzhuang Industrial Park as well as supporting services to Swiss firms accessing China. For my research I conduct corporate interviews with the member firms of the SCS that are located in the Xinzhuang Industry Park and also interviews with selected experts on the subject. What I am trying to find out is what role institutions like the SCS play in the success of Swiss companies in China and especially what networks the companies use. This will give insight on the embeddedness of Swiss companies in China.
Swiss Center Shanghai workshop space (Photo: Andrea Keller, 2011)
Preliminary results indicate that for small companies it is useful mainly in terms of the critical mass to be proximate to other small companies of the same home country. An advantage this can bring is an increase in influence in terms of getting access to bank and government relations, just to name an example. Further, such institutions offer a platform for knowledge exchange and access to information. By sharing their experience, Swiss firms do not make the same mistakes over again but learn from each other.
Many of the interviewed firms agreed that Shanghai is the place to be as an international corporation, not just because of the local industry and the highly qualified workforce, but because of the worldwide recognition of its economic power.
(Andrea Keller)
