Understanding Global Business

As the business world has flattened, US firms have come to realize that doing business in other countries requires an understanding of that country's culture and norms. We are less inclined to think about the American culture and norms that foreign firms must adopt in order to do business in our country, but it is an essential question for foreign firms. And it is the expertise of Dan Li, assistant professor of international business.

Specifically, she studies the Chinese firms that open plants or branches in the United States, and examines how they adapt to doing business in this country and how they implement what they learn in the US market to their firms back in China. Li spends her time interviewing Chinese executives and collecting survey data about how they run their businesses in order to understand how they make the transition from China’s closed and protected marketplace to the relatively freer American market.

China’s People Shortage

“The foremost challenge for Chinese firms investing overseas is the shortage of human resource capacity. No, you did not read incorrectly. China, the most populated country in the world, is short of ‘people.’ Managing foreign-direct investment is about managing and coordinating complex, cross-border business activities; to succeed, it requires personnel with international experience across all key corporate functions. Chinese firms are short of people who understand the international business environment, are able to work in multicultural environments, and can actually lead and manage.”

Li continues, “As would any firm investing outside of its home country, Chinese firms move abroad seeking broader markets, advanced technologies and managerial skills, inexpensive materials, natural resources, etc.—even lower-cost labor.”

Building Strategic Alliances

Conquering first-world markets is a major challenge for firms from developing countries. Lacking robust institutions like functioning legal systems, readily available credit, and cultures of trust, businesses from the so-called BRIC countries—Brazil, Russia, India, and China—are at a disadvantage when competing against US firms. But according to Li, a number of these firms have discovered that creating international alliances can help to share expertise that makes up for some of the institutional deficits.

“‘Teaming up’ with foreign partners from developed countries like the US provides emerging market firms with access to financial resources, technical capabilities, and even reputation in both domestic and global markets,” Li notes. She recently presented her research in this area at the annual meeting of the Academy of International Business in a presentation titled, “Value Creation by International Strategic Alliances in BRIC Countries.” Despite completing her PhD less than five years ago, Li already has more than 25 research publications to her credit.

As the world’s countries become more involved with each other at various levels of business enterprise, the news isn’t all positive. For example, many in the US are concerned about the amount of US debt being held by China. But Li points out that this situation also puts China at risk. Analysts say that China may hold $800 billion or more in US debts, and Li observes that an agreement for China to gradually reduce the amount of debt owed would actually benefit both countries. “The debt introduces uncertainty for both the Chinese government and the US government,” Li says. “They should have recognized that this would become a problem many years ago, but the fact that the Chinese culture discourages dissent and the fact that there are not enough highly trained financial experts in the country made it hard to detect this problem.”

International Business Background

Kelley’s interest in international business isn’t a recent development. The school was actually one of the first to establish an international business department in the 1950s. Key to Kelley’s research and education in this area is its Center for International Business Education and Research (CIBER), formed in 1992 under the federal Omnibus Trade and Competitiveness Act of 1988 to increase and promote the nation’s capacity for international understanding and economic enterprise. IU’s CIBER provides the business community, faculty members, and students with a research-oriented and multidisciplinary approach to understanding the dynamics of international business. 

A native of Shangqiu, China, Li’s international background is a unique strength that informs her teaching of international business, management, and honors–level strategy at the Kelley School of Business. “I think it is important for students of all majors to understand how internationalized the business world and our lives have become. The very first exercise in my international business class is to have the students pick up ten items they use or own and find out the nationalities of the brands and manufacturing countries,” Li explains. “The students are often surprised by the deep involvement of their lives in international business. On the other side of the world, young college students like ours are happily sipping Coca-cola and turning on their iPods to get a glimpse of the most recent Hollywood movie. We live in a global economy. Our students will be competing on an international scale, as the country has been. They should be prepared for the challenges, and fun.”