Research On The Control Mechanism In Geographic Diversification In Chinese Firms: Information Technology Capacity Perspective

Under the new situation of China's reforming and opening, the strategy of geographic diversification is one of the most important strategic choices to upgrade international competitiveness. Nevertheless, because of the fragment and complication of China's markets, how to control these fragmented markets effectively and to exert the coordinated effect become to the keys of successfully implementing geographic diversification. Furthermore, how do Chinese enterprises use information technology, that is, appropriate use capability of information technology to support this control, which is an urgent realistic problem needs to address. At the same time, in theory, Chinese market is fragmented--this reality has been recognized by China's economic theorists, however, the behavior of corporate strategy based on Chinese market's dispersion is still in its infancy. In theory, it is urgent to need integrate Institutional Base View ( IBV) and Resource Base View (RBV) to explain the dispersion of the China market based on such strategic behavior of enterprises, while the strategic and organizational research have been divorced from beyond the capability of information technology and integrated information technology strategy within the framework of control is an in-depth, valuable research opportunity. Practical and theoretical basis of the above background, this paper presents the perspective of information technology capability to study the geographic diversification of Chinese enterprises'control mechanism, and designs to reveal how Chinese enterprises to support the information technology capability to achieve geographic diversification in the domestic organizations on remote control to improve the performance of geographic diversification. That is, this paper is to discuss IT capability for enterprises'headquarters in different regions to obtain the unity of centralization and decentralization to achieve coordinated effect of the flexibility of the internal mechanism and how companies play IT capability to respond to the Chinese market fragmentation and thus enhance the external institutional environment of enterprises international competitiveness.Through literature research, this paper presents the control mechanism, IT capability and performance concept model under the geographical diversification, and then takes on the norms of international academic case study method theory sampling select Qingdao beer, CIMC, Haier Group and Suning Appliance and other industry leaders to conduct case studies, through a variety of methods for data collection, and then takes the content analysis, coding, pattern matching and time series analysis approach to case analysis, while using multiple triangulation among the data methods such as case studies to ensure the reliability and validity. And then this paper carries through literature dialogue, discussion and modifies the conceptual model, and makes a proposition development. Based on this, the following conclusions were obtained: First, information technology capability interacts with institutional factors (Local marketization level), market factors (Potential of industrial integration) and organizational management tradition. Chinese enterprises adopt the control mechanism which is based on activities, centralization and decentralization coexisting in business activities of different value and dynamic coordinated. Concretely speaking, as the information technology capability becomes more powerful and the degree of the local marketization becomes deeper, the enterprises will have the greater possibility of adopting centralized control with higher level. As the information technology capability becomes more powerful and the potential of industrial integration becomes higher, the enterprises will have the greater possibility of adopting centralized control with higher level. As the information technology capability becomes more powerful and the centralized culture in enterprises becomes stronger, the enterprises will have the greater possibility of adopting centralized control with higher level. Second, information technology capability has no directly adjusting effect on the relation of control mechanism and performance, but it works through the efficiency of implementing information technology. The efficiency of implementing information technology has positive adjusted the relationship between control mechanism and performance. Concretely speaking, as the implementation of information technology creates efficiency, the higher degree of centralized control to R&D, finance, sourcing and production, the higher performance will be obtained. As the implementation of information technology creates quick response, the lower degree of centralized control to marketing/service, the higher performance will be obtained. Third, information technology capability has the character of path dependence. In the different history period of enterprises'geographic diversification, in order to accommodate the diversified and complicated environment in different parts of the country, the interaction of restriction and co-evolvement between the advancement of information technology capability and the design of control mechanism has reflected the combination of different controlling level on the key valuable activities, and this has settled the problems of information asymmetry between headquarters and it affiliates in different areas and reducing the interior transaction cost, agency cost and information cost. But this period has experienced a process of negation of negation, driven by the management-oriented and information technology guidance, China's enterprises present the evolvement path of control mechanism for geographic diversification under the special historic period and special institutional environment. Fourth, in the economic transition, China's enterprises in the Chinese fragmented markets adopt the holding company to meet the requirement of legitimacy, but in fact they design control mechanism with IT capability as support, which makes enterprises generate the integration effect of headquarter under the system of the holding companies to pursue efficiency mechanism, which is the pressure on the system, the strategic initiative in response to further competitive advantage. That is, internal information technology capability to take control based on institutional arrangements to pursue an efficient system for up to adapt to external legitimacy as a result of the loss of organizational efficiency. Fifth, even Chinese enterprises have been confronted with enormous institutionalized pressure during the economic transformation of the institutional environment; the strategic choice of companies is not simply based on institution. The enterprises'strategic choice, adaption and response to the institution and ultimately achieving competitive advantages are based on their own resources, capabilities and core competitiveness, and which is consistent with resource-based view.This paper reveals the control mechanisms and its evolution path of geographical diversification of Chinese enterprises in specific historical period as well as the particular institutional environment. The possible innovative points and contributions mainly explained in the following four aspects. First, this paper uses IBV to analyze Chinese enterprises'certain specific strategic behavior based on market fragmentation to expand IBV interpretation scope of China enterprises'strategic behavior in economic transformation, and verify the application of legitimacy mechanism theory in geographic diversification of China enterprises; this is a new context object. Second, this paper integrates RBV views to extend the interpretative intensity of IBV legitimacy mechanism in Chinese enterprises'strategic behavior. Third, this article integrates strategy, control and information technology capability into a framework by reasonable theoretic logic that greatly enrichs the understanding of strategic aspects rather than technical level of information technology, and offsets the current understanding of the lack of information technology. And also it extends the control mechanism. Fourth, this paper uses international normative case study methodology to reveal "how" the internal mechanism is, and promotes the research of context-embedded Chinese enterprises strategic behavior, and this dissertation has some impetus effect on the research of geographic diversification, organizational control and information technology capability.In addition, this paper in practice, through case studies reveals why these companies can become of "excellence" on the same developmental stage of economic transition, facing the same institutional environment? And this paper structured displays and theoretically epurates the behavior patterns, characteristics and path of the adoption and effective integration of geographical diversification strategy at home and the developing into a "world class" enterprise in the current situation of China's reforming and opening, which will have positive forward looking guidance and important significance in practice to policy makers and business decision-makers.