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Women’s Empowerment in Japan: From Tokenism to Critical Mass?

April 19, 2024
By 21688

A decade ago, then Prime Minister Shinzo Abe announced a policy aimed at promoting more women to leadership positions in Japan—a country that has long ranked near the bottom in the Global Gender Gap Index. The pace of progress since then, though, has been embarrassingly slow. Thanh Nguyen (Waseda University, 2014) used an SRG award to analyze corporate data over the past decade to identify where improvements have been made and what more needs to be done to enhance women’s boardroom presence.[1]

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In spring 2014, then Prime Minister Shinzo Abe made a speech on “A New Vision from a New Japan” at the World Economic Forum, stating, “Japan must become a place where women shine. By 2020 we will make 30% of leading positions to be occupied by women.” This led to an increase in the number of female board directors, but Japan still failed to achieve the 30% target by 2020 and had to push back the target date by up to a decade.[2] The situation today is still not promising, as the Global Gender Gap Index in 2023 ranked Japan 125th out of 146 countries; the country has remained near the bottom of the list over the last 10 years. Will Japan be able to reach the 30% milestone by the revised deadline of 2030?

In my research, I gathered updated data about female leadership in Japan from 2012 to 2023. I first measured the impact of recent changes in Japanese policy and law aimed at promoting the appointment of women to management and leadership positions, focusing on Abe’s “Womenomics” policy launched in 2013 and the Act on Promotion of Women’s Participation and Advancement in the Workplace implemented in April 2016. I examined whether firms appointed more female directors during the policy period compared with earlier periods.

Second, I examined the critical mass of female directors and the firms that succeeded in increasing the number of female directors to this level. Critical mass is defined as the number of female directors needed to affect policy and induce real change. I identified firms as being successful in reaching critical mass if 30% or more of their board members were women—the target figure set by the Japanese government. My main research question was whether gender policies actually helped to increase the number of female directors, especially up to critical mass.

Scrutinizing Womenomics Policies

Many countries have introduced a mandatory or voluntary quota for female leaders to address gender inequality. For example, Norway has a 40% female board membership quota, while Britain maintains a 25% female board membership target. By contrast, the Japanese government promotes female leadership not with a quota but through its Womenomics policy package that encourages large corporations to promote gender- and employment-related policies. In particular, firms have been advised to establish and disclose their action plans to improve gender equality and to disclose relevant data.

To answer my research question, I collected data on the directors at listed firms in Japan from the Yakuin Shikiho (Executive Officers Handbook), published by Toyo Keizai Inc., which includes the name, age, position, gender, place of birth, education, and previous experience of each director. My final sample consisted of an unbalanced panel of more than 40,000 firm-year observations from 2012 to 2023. I then created a group of variables representing the characteristics of the board, including “total number of board members,” “total number of female board members,” “ratio of female board members,” “chairperson gender,” and “CEO gender.”

30% Target Reached by Only Small Minority of Firms

I found that only 9% of surveyed firms had at least one female board member in 2012 but that this figure increased gradually each year, climbing to 63.4% in 2023, with 2,482 out of 3,915 listed firms having at least one female board director (Figure 1). This indicates that many more firms appointed female board directors during the years of Womenomics. The steady uptrend was unaffected by the COVID-19 pandemic.

Policymakers may be happy with these changes in corporate governance and claim that the Womenomics policy package has been effective. The truth, though, may not be that rosy. When I calculated the share of female board members and grouped the firms according to this percentage, I found that the group claiming shares of 30% or higher accounted for only 0.59% of all firms in 2012 and a still very low 4.06% in 2023.

This figure has been increasing gradually each year, to be sure, but the pace has been very slow, and the spread is consequently very small. In 2023, among the 3,915 listed firms, only 159 met the 30% target for female board members. This means that although more firms appointed women to the board during the Womenomics years, the number of appointees has been minimal. If this situation continues, Japan will fail for the second time to reach its target of “30% of leading positions to be occupied by women.”

I also examined the number of women serving as the chair, the CEO, and a board member for each year from 2012 to 2023 and found that there has been no uptrend for either the chair or CEO. These figures fluctuated year on year with a very small change spread. Among the 31,520 board members in 2023, there were only 21 chairwomen and 54 female CEOs. In other words, of the 3,915 listed firms, only 54 firms were headed by women—hardly a robust picture of female leadership in Japan.

Figure 1. Share of Female Board Members, 2012–2023

As for board members, in 2012, only 374 of the 26,294 members were women, accounting for a mere 1.42% of the total. If chairwomen and female CEOs are deducted, the total number of female directors in 2012 was 335. Figure 2 shows that even with the jump in the number of female directors from 2012 to 2023, the ratio of female board members was still small. My data shows that in 2023, the percentage of female board members was 10.93% in 2023; in other words, males still occupy 89% of the boardroom. Without fundamental changes, the chances of Japan reaching the 30% target by 2030 appear bleak.

Figure 2: Number of Female Board Members, 2012–2023

I also examined the relative shares of outside and inside female directors. In 2023, outside directors made up 84.33% of the total, implying that firms have tried to increase the number of female directors by tapping human resources from outside the company, appointing such professionals as business consultants, university professors, and leaders of other firms. Indeed, it is easier for firms to appoint a female director from outside the company, since nurturing and promoting female employees to take on management responsibilities takes time.

This pattern highlights another challenge for Japanese corporations: the small pool of qualified female candidates for leadership positions, both inside and outside the firm. Appointing outside female directors is, at best, a short-term strategy, as even the external supply of qualified candidates is small. This is proven by the fact that outside female directors often serve on the boards of several firms. This situation will not fundamentally change until firms begin actively recruiting more female employees and providing them with opportunities for promotion to senior and leadership positions.

Need for Drastic Change

My research was an attempt to provide an overview of women empowerment efforts in Japan over the last decade and to present updated data about female leadership. It led to new findings on the number of female board directors during the twelve years of Womenomic policy (2012–2023).

During these years, corporate governance reforms resulted in more female directors, especially outside directors, being appointed to executive boardrooms, compared with the years before the policy’s implementation. Policies promoting female leadership thus appear to have been effective for listed firms. However, they have had no tangible impact on top positions, like corporate chairs and CEOs. And Japan may once again fail to reach its 30% target without drastic changes over the next six years.

These findings can serve as meaningful references for investors, corporate leaders, and policymakers. There have been calls for stronger measures to promote gender equality both inside and outside corporate settings so that this target can be reached by 2030. Policymakers need to do more than simply ask firms to hire more women and elevate them to leadership positions. And investors, especially institutional investors, must perform their stewardship duties by engaging directly with the companies in which they invest, persuading management teams and board directors to promote gender diversity, which can, in turn, create more sustainable, fairer, better-run, and faster-growing companies.

References

Kubo, K. and Nguyen, T. T. P. 2021. Female CEOs on Japanese corporate boards and firm performance. Journal of the Japanese and International Economies, 62, 101163.

Nguyen, T. T. P. 2021. Effects of board gender diversity on firm investment and performance. Waseda Commercial Review, 461, 47-92.

Nguyen, T. T. P. and Thai, H. M. 2022. Effects of female directors on gender diversity at lower organization levels and CSR performance: Evidence in Japan. Global Finance Journal, 53, 100749.

Nguyen, T. T. P. 2024. Nihon ni okeru josei no enpawamento: Tannaru shinboru kara kuritikaru masu e? Shoken Rebyu, 64(2), 115–129.

[1] This is a short English summary of a paper by the author that was originally published in Japanese. The full Japanese version can be found at: https://www.jsri.or.jp/publish/review/pdf/6402/05.pdf.

[2] https://mainichi.jp/english/articles/20200626/p2a/00m/0fp/014000c.

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Mechanisms for Conflict Resolution in Employment Relations at a Multinational Company in Nigeria and South Africa

November 14, 2022
By 29628

Western and Southern Africa is a hub for multinational companies to operate their business. Olaniyi Joshua Olabiyi, a Sylff fellow in 2019 and SRA awardee in 2021, conducted his PhD fieldwork in Lagos and Cape Town. This led to research on the mechanisms available for multinational enterprises to avert industrial conflict in their host community.

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Introduction and Background

The existence of labor disputes is inherent in all labor relations systems (ILO 2001). Collective bargaining breakdowns usually occur when the process of collective bargaining reaches its breaking point and then results in industrial actions, such as strikes or lockouts. Sound labor relations policy, according to the International Labor Organization (ILO 2001), is based on a system for preventing and settling labor disputes. Employee-employer relationships are characterized by divergent interests and deferred objectives from each party that frequently lead to conflict (Venter 2003).

Photo by rawpixel.com from PxHere.

Methodology of the Study

The study focused on the assessment and effectiveness of conflict resolution mechanisms in Nigeria and South Africa, two host countries of the multinational company Huawei. It focused primarily on collective bargaining mechanism processes. A portion of this work was devoted to applying and interpreting mechanisms that can be used when disputes arise between employers and unionized workers.

In addition, the study conducted a comparative analysis of conflict resolution mechanisms used in South Africa and Nigeria to improve our knowledge of how conflict resolution works in South Africa’s labor relations environment compared to the conflict resolution mechanism in Nigeria. In this study, we investigated the tools and frameworks of legislation that facilitate reconciliation and peace in employment relationships and result in fewer disputes in South Africa and Nigeria.

The study employed a nonexperimental descriptive research design based on a survey approach. For data collection, a combination of qualitative and quantitative methods was applied. In both Nigeria and South Africa, a questionnaire was distributed to 200 employees of the group in that country. After compiling the aggregate data generated from the responses of employees across Huawei group companies in both countries, 363 responses were obtained for data. The data collection activity took place over the course of three-plus months.

Data Analysis Procedure

The methods of data collection and analysis used in this study include both quantitative and qualitative approaches. Interviews and questionnaire surveys were conducted to determine the process followed in addressing industrial conflict.

For qualitative data analysis, 20 senior managers from Huawei multinational were interviewed face-to-face. We asked each manager to describe two or three specific incidents that have mandated the implementation of conflict resolution processes, procedures, and mechanisms within the organization. We then followed how the conflict was resolved by learning what measures were taken to that end. The interviewer asked participants a follow-up question, and they answered according to their knowledge, thus generating sufficient data to meet the research objective. The responses were analyzed using software program called NVivo and ATLAS.ti.

For the quantitative arm, a closed-ended structure questionnaire was used to select a total of 400 employees from the Huawei multinational enterprise group in Nigeria and South Africa as the optimal sample for the quantitative arm. Of the 200 employees who were given the survey at the Nigerian site, 177 completed the survey, 14 did not respond, and 9 were excluded due to undisclosed information. Thus, 177 employees were part of the data collection in Nigeria.

A questionnaire was likewise provided to 200 employees of the company by the South African counterpart of the study. A total of 186 employees responded and 14 refused to respond, so 186 responses were taken as the final sample. In all, 363 responses were gathered from Huawei group employees in Nigeria and South Africa for the study’s data analysis.

To analyze the quantitative data collected using descriptive and inferential statistics, we used the Statistical Package for the Social Sciences (SPSS) version 19.0 for Windows, as it offers a variety of parametric as well as nonparametric statistical tests. A demographic analysis was conducted to determine the demographic composition of the sample. The data was presented in graphs, charts, and tables.

Data Coding and Cleaning

The data collected from Huawei group companies in South Africa and Nigeria needed to be coded and cleaned. Babbie and Mouton (2015) describe how social science data can be manipulated and read by computers and similar machines based on quantitative and qualitative data analysis. By using closed-ended questions with limited answers, data could be analyzed unpretentiously and directly, along with graphs.

There were two sections for demographics and research questions. For the researcher to perform a credible analysis, demographics and research questions were collected independently. Data analysis was performed on the quantitative data to analyze the theme and subject of the research. To ensure that the cleaning and coding processes are free of error, they were systematically observed several times at random.

Findings and Results

The mechanism for resolving conflict was more successful in South Africa than in Nigeria. Moreover, the study showed that industrial conflicts in Nigeria were not well managed. The reason for this was the Nigerian government’s spineless approach to labor legislation and resolution of labor disputes. The lack of intent to improve employment relations was due to the volatile labor relations environment in Nigeria. Within the South African space of labor relations, meanwhile, the labor policy was highly regulated, and the procedures were properly followed and implemented.

A total of 4.0% of respondents agreed that Nigeria’s organization had an appropriate and efficient conflict resolution mechanism. The majority of 44.1% disagreed that there was an effective and efficient mechanism for resolving conflict. In the South African organization, 58.6% of respondents agreed that an effective and practical conflict prevention device exists in their organization, while 2.2% disagreed. The Nigerian organization demonstrated through the low percentage of positive responses to both statements that it did not have a functioning dispute resolution mechanism.

In the survey of South African employees, 58.6% of respondents believed that formal mechanisms are necessary to explain how conflict should be handled within an organization. Another 21.0% strongly agreed that a conflict resolution device is present within the organization, adding up to 79.6%. Conflict resolution mechanisms were perceived as prevalent by approximately 2.2% of respondents and strongly so by 0.5%. The positive responses from 79.6% of employees indicate that a just conflict resolution mechanism is present in South Africa’s organization. This conclusion comes from the fact that if unbiased conflict resolution mechanisms exist between management and labor, it automatically enhances harmony in the workplace.

Of the Nigerian respondents, 44.1% disagreed with the assertion that the organization enforces or ratifies international labor standards. Since the largest percentage of employees disagreed with the statement, it appears that the Nigerian organization disallowed internationally accepted standards of work practice regarding conflict management. In total, 79.7% of respondents agreed with organizations upholding and promoting the international labor framework for conflict resolution, while 4.5% disapproved, 0.6% strongly agreed, and 15.3% said they were neutral about it.

In the South African survey, 82.3% of respondents approved of and accepted international labor standards for managing conflicts in employment relations; 3.2% said they did not, and 14% said maybe or unsure. There was a significantly higher percentage of employees who answered “yes” than those who answered “no.” This is because the organization consented to the worldwide framework for adjudicating workplace conflicts. In view of the foregoing, it is clear that organizations within South Africa use the mechanisms of international labor standards for conflict resolution. This is because they resolve conflict whenever it arises within the organization. Consequently, that organization would practice labor relations in a way that is fair, equitable, and equal in terms of conflict resolution mechanisms.

Concluding Remarks

The study concludes by recommending that host countries of multinational corporations in Africa constantly review their conflict resolution frameworks. This is so that the frameworks serve as a guide for multinational companies operating within their borders. As part of such mechanisms, the study points out that there needs to be a process of sincere dialogue between employers and employees. This must be accompanied by effective channels of communication between them. The study suggests that a nonviolent workplace environment can be facilitated by encouraging accommodating and congruent conflict resolution strategies among employees.

The report from the study revealed a case in which a multinational company that originally intended to infuse the international standard of employment relations into its host country’s conflict mechanisms abandoned and neglected the prevailing international practices of employment relations. In such a circumstance, the host country may have regressed from its labor relations legislation standard regarding conflict resolution. The multinational company has been able to sidestep the normal dispute resolution process by following the easiest route, disregarding normal protocol. Consequently the development of the host country, such as Nigeria, has been adversely affected. If a foreign corporation fails to observe the labor laws of the host country, how will the government sanction this behavior? Is there a procedure or regulation for dealing with such transgressions in the host country’s legal framework? It is common for governments to lack mechanisms to keep them in check.

As is evident from the findings presented in the study, multinational companies believe that they have influenced the host country’s environment by using the appropriate international standard for labor relations practice. This has resulted in the development of mechanisms that limit conflict among members of the workforce. Employees of the company in Nigeria, as well as reports of operations and actions of a multinational company in Nigeria, provide some support for this assertion. Even though multinational enterprises reap a tremendous number of economic and financial benefits, they have served as contrarian vehicles for capital flight from their host nations, exclusively in Africa (Allen-Ile and Olabiyi 2021).

References

Allen-ILE, C. O. K., and J. O. Olabiyi. 2021. “A Preliminary Comparative Perspective on the Role of Multinational Enterprises in Influencing Labour Relations of Their Host Nation.” Advances in Social Sciences Research Journal 6, no. 12 (December 2019): 298–318. https://doi.org/10.14738/assrj.612.6980.

Babbie, E., and J. Mouton. 2015. The Practice of Social Research. South Africa ed. Oxford University Press Southern Africa (Pty) Ltd.

ILO (Internationa Labour Organization). 2001. “Substantive Provisions of Labour Legislation: Settlement of Collective Labour Disputes.” Chap. 4 in Labour Legislation Guidelines. International Labour Organization. Available online at http://www.ilo.org/public/english/dialogue/ifpdial/llg/index.htm (accessed November 20, 2019).

Venter, R. 2003. Labour Relations in South Africa. 2nd ed (revised). Cape Town: Oxford University Press Southern Africa.

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Empirical Research on Financial Crowdfunding at a Leading Research Organization for Alternative Finance

March 31, 2020
By 26667

Wanxiang Cai, who received a Sylff fellowship at Chongqing University in 2016 is currently enrolled in a PhD course at the School of Economics, Utrecht University, Netherlands. His research area is entrepreneurship. Using an SRA award, he visited the Cambridge Centre for Alternative Finance, a leading research center in the field of fintech.

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In recent years, crowdfunding has emerged as a source of online entrepreneurial finance. Although crowdfunding has attracted the attention of both researchers and policymakers, as an emerging form of entrepreneurial finance, we still have very limited information about its global pattern. My PhD research is about the governance of financial crowdfunding, and I suggest it is important to analyze the relationship among social capital, legal institutions, and financial crowdfunding at the macro (national), meso (platform), and micro (campaign) levels. It is essential for me to collect data about financial crowdfunding at the platform and national levels to finish my thesis.

Kings College of the University of Cambridge.

The Cambridge Centre for Alternative Finance (CCAF) is a leading research center in the field of fintech. It publishes several international industry reports every year. The center collects data from more than 1,000 fintech companies around the world and provides information about the development of the alternative finance market in different countries. These reports are the most comprehensive publications in this field and have been extensively cited in academic papers. Furthermore, the CCAF has established favorable relationships with policymakers around the world, including the Financial Conduct Authority (FCA) in Britain, the Inter-American Development Bank (IDB), and the World Bank. Thus, visiting the CCAF can not only help me collect essential data for my research, but also offer me a chance to have a deeper understanding of the industry and get more great insights from policymakers.

The author, left, with several members of the benchmarking report project.

After communicating with Tania Ziegler, the lead in Global Benchmarking at the CCAF, we reached the agreement that I would visit the CCAF and help them write the global benchmarking report, and in return, they would provide me with their survey data for my research. Furthermore, they would also give me a chance to discuss my research with several senior researchers at the University of Cambridge, including Professor Raghavendra Rau, who has a very high reputation in finance. Thanks to Sylff Research Aboard, I had the chance to visit the University of Cambridge and had a great time at the CCAF.

The Mathematical Bridge at the University of Cambridge.

I started my visits on September 1, 2019. I was shocked by the beauty of the city and the sacredness of the university. It was always sunny during my first two weeks in Cambridge, which is unusual in Britain, as it rains all the time. Several colleges are scattered along the banks of the River Cam, including Trinity College, where Issac Newton studied hundreds of years ago. An enormous number of visitors walked along the river, while the students in Cambridge shared with them the glories of the university, such as its history, famous alumni, and recent academic outcomes. These students looked very confident and felt so proud of their university, making me eager to start my research at Cambridge.

I began my research immediately. The first thing that I had to do was to collect data from a vast number of alternative finance platforms. The annual alternative finance report is based on these survey data. Thus, I contacted the founders of the platforms to see whether they were willing to get involved in our research. We collected data from more than 1,600 platforms around the world. Then we summarized how the market volume had changed over the last few years in major countries, as well as platform owners’ opinions about potential risks and regulatory changes. Based on this data, we also provided some preliminary analyses of what affects the growth of the alternative finance market. For example, we found a significant relationship between proper legal protections and the development of the alternative finance market. The information obtained in this way helps me to gain a deeper understanding of the global alternative finance market and is beneficial to my future research.

Meanwhile, I enrolled in an online course called Fintech and Regulatory Innovation. Through this course, I have gained new knowledge about fintech, especially from a regulatory perspective. More importantly, other students in this course are policymakers from around the world. During their discussions, I learned enormously from them. All the students come from central banks or other financial institutions, and they have great insights about the governance of fintech. They not only showed their expertise and experiences in the fintech topics but also raised questions about the future development of the market and potential research on these topics.

In addition to the above, we have discussed my research with several researchers. I have discussed one of my current papers with Wanxin Wang, a PhD candidate at Imperial College London. She also studies the topic of crowdfunding, and in fact, my paper is built on her recent paper published in a top journal. Her paper shares many similarities with mine, and she provided me with several suggestions for my research. I have also talked extensively with Dr. Rui Hao. She is very interested in my research, and she also helped me get a chance to interview policymakers worldwide. We decided to work together on a research project about how the regulations on equity crowdfunding will change. Unlike traditional entrepreneurial finance (e.g., venture capital and business angels), crowdfunding mainly consists of small investors who have limited knowledge about finance and investments, making it difficult to make proper regulations on financial crowdfunding. On one hand, overly strict legal protections on investors may harm small firms and entrepreneurial initiatives. On the other hand, legal protections can resolve extensive information asymmetry between investors and entrepreneurs. Thus, we have decided to conduct interviews on dozens of policymakers around the world. Using qualitative research methods, we would like to study how the regulations on financial crowdfunding will develop in the future.

Lastly, I conducted a study about how equity crowdfunding affects traditional entrepreneur finance. As an emerging form of entrepreneurial finance, we know less about the influence of equity crowdfunding compared to traditional entrepreneurial finance. First, equity crowdfunding may substitute traditional forms of entrepreneurial finance, such as venture capital, business angels, and private equity. Alternative, it may compensate traditional entrepreneurial finance, as it mainly supports small companies. This study contributes to my PhD research, as it explores under which legal conditions equity crowdfunding can contribute to the development of traditional entrepreneurial finance. Using the data from the CCAF and other databases, I have done some preliminary analyses. I have also discussed the idea and methods with Professor Raghavendra Rau. He gave me several comments, and I am improving this paper based his useful input.

In a nutshell, I have benefited extensively from this visiting. I have made friends, shared my research, got feedback, and gained a deeper understanding of my research. I appreciate that the Sylff Association has provided me with the scholarship to support my research at the CCAF. I am confident that other scholarship winners will also benefit from the Sylff.

Christmas dinner at the CCAF.

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Copycats and Patent Wars: The Effects of Quality Investment

December 13, 2019
By 22425

Qinquan Cui, a 2017 Sylff fellow at Sun Yat-sen University in China, is currently conducting research as a visiting PhD student at the University of California, Los Angeles (UCLA). Recently, he published his thesis “Quality investment, and the contract manufacturer’s encroachment” in one of the flagship research journals. In this article, he shares his analysis and perspectives on global business issues.

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Multinational cooperation has become increasingly popular in the manufacturing industry, including contract manufacturing and the setting up of joint ventures in emerging economies. In contrast to integrated business models in the past where the manufacturer had absolute control over material supply, manufacturing, assembling, and retailing, the core manufacturer in the new era has to face competition from business cooperators who can even be copycats. [1,2,3] This owes to the spillover and leakage of technology between different entities in a supply chain, which is a double-edged sword. [4] The positive side has been proven by Toyota’s knowledge-sharing network by learning product information. [5] However, product innovation can be imitated by local suppliers or contract manufacturers from the channel of foreign direct investment and product quality investment, leading to an emerging proliferation of supply chain encroachment. In such a situation, contract manufacturers (CMs) establish direct channels to compete with original equipment manufacturers (OEMs).

An Apple store opposite a Samsung store.
Wang Xiaofei — Visual China Group via Getty Images

The Patent Fights

This type of supply chain encroachment has induced a few intense fights - costly juristic activities. To stop such a practice of market entry, Apple Inc. (an OEM) fought with Samsung Electronics Co., Ltd. (a kind of CM), because the latter had been copying Apple’s product designs and patents for a long time. Recent years have witnessed a battle in which Apple took legal action against Samsung for product plagiarism, which has cost the former more than one billion dollars. [6] However, the United States Supreme Court appeared to be stuck in a dilemma over how to deal with the high-stakes battle between the two. [7] It indicated that it was uncertain how much money the South Korean electronics company owed for infringing patents on the iPhone’s design. Thus, it seems that filing a lawsuit has brought only a faint possibility of blocking Samsung’s encroachment and compensating for Apple’s losses caused by the former’s imitations. The complexity and uncertainty of the legal environment in different countries are mainly accountable for this dilemma.

Apple and Samsung’s legal fight over patents.
Peter Macdiarmid — Getty Images Europe

Strategic Quality Investment as a Weapon

To reduce the contract manufacturer’s incentive of encroachment by imitation, Apple has turned to a more attainable operational strategy—investing in product quality improvement. Accordingly, Apple’s investment in research and development (R&D) has increased significantly; for instance, the fiscal year 2016 saw a 25% increase from the previous year, which contrasted sharply with the 8% fall in revenue. [8]

One important point should be made clear: sometimes the upgrade of Apple’s products is not significant, and thus the differences between the two companies’ products are not distinct, while at other times the update is striking. In addition, the contract manufacturer does not always keep up with the pace of Apple’s product quality upgrade or compete with Apple by imitation. This makes people wonder under what conditions Apple would enhance investment for improvements in product quality and be highly cautious of the co-competitor’s imitations. A question then arises: is the CM’s threat of competition one of the motivations for the OEM to invest in product quality improvement?

The Multiple Effects of Quality Investment

When the collaborator is a copycat, there are two major concerns for the profit-maximizing OEM. First, enduring a CM’s imitation and encroachment without any costly deterrence is a conservative strategy, but the OEM has to share the retail revenue with the CM. Second, investing in quality improvement has multiple effects compared with the strategy of no investment: (1) it may stop the CM from encroaching and benefit the OEM; (2) if the CM’s encroachment cannot be prevented, the OEM’s profit may deteriorate, while the rival (CM) could obtain more retail revenue by imitation; and (3) a profit improvement might be induced by the OEM’s quality investment, regardless of whether the encroachment is prevented or not.

Besides, in order to enter the OEM’s final market, the CM would strategically adjust the wholesale price to affect the OEM’s sourcing quantity. The OEM may then benefit from the CM’s encroachment if the wholesale price becomes lower.

Research Questions

Motivated by the above discussions, my research “Quality investment, and the contract manufacturer’s encroachment,” published in the European Journal of Operational Research, aims to explore the following three questions by analyzing a game-theoretical model. (The main content of this article is based on the above published research.) First, under what economic conditions does the CM’s encroachment occur? Second, should the OEM invest in quality as a mechanism to deter—or encourage—the (potential copycat) CM’s encroachment? Third, under what conditions can the CM’s encroachment achieve a Pareto improvement instead of causing a loss to the OEM?

Main Findings

Without the OEM’s quality investment, the CM always has the incentive to encroach on the OEM’s market and will claim a higher wholesale price in contrast with the ideal scenario without encroachment, but the increase of the wholesale price will be mitigated by the CM’s higher imitating ability. Then the OEM’s profit will decline as the product demand decreases due to competition from the CM.

Furthermore, when there is an attainable quality investment opportunity for the OEM, once the investment is executed, the CM will prefer the irresponsible encroachment only if its imitating capability exceeds a certain threshold. Alternatively, the CM’s encroachment policy may depend on the characteristics of the OEM’s investment. In the latter scenario, the strategic interactions between the OEM and CM become more intricate, depending on the nature of the quality investment and the CM’s imitating capability.

Another key finding shows that the CM’s threat of encroachment can facilitate the OEM quality investment and that quality investment could be preferred if it can blockade the CM’s encroachment even though the quality investment per se is unprofitable. Overall, quality investment is partially effective in deterring the CM’s encroachment. Moreover, it is found that a win-win situation can be induced by the encroachment when quality investment is implemented by the OEM; in other words, if the CM’s imitating ability is not extremely strong, the OEM’s profit can be improved by the CM’s encroachment.

Managerial Insights

The motivations for the OEM’s quality improvement (investment) lie in two aspects. Firstly, it can stimulate market demand for the OEM’s original product, which can generate more retail revenue even as the CM acts as a free rider and copycat. Secondly, quality investment is also a powerful weapon to deter the competitive CM’s encroachment. Moreover, it is found that the CM’s encroachment is certain to happen when its imitating ability is strong, in which case the structure of quality investment no longer matters.

Furthermore, research findings show that the CM’s imitation and encroachment can contribute to a win-win situation for both parties under certain conditions. In this scenario, the OEM’s profit increment is generated by an increased demand for the original product and a lower wholesale price, while the retail price of the original product falls compared with the situation without encroachment.

Quality investment at the crossing.
Lucas Jackson — REUTERS

However, quality investment is not always an effective solution to deterring the CM’s encroachment or helping encroachment improve the OEM’s profit. For instance, an encroachment by a CM with a strong imitating ability and an investment structure characterized by low investment cost and low quality improvement will certainly hurt the OEM’s profit.

This explains why, among those OEMs who established joint ventures (or other forms of cooperation) in developing countries, some would use quality improvement to deter their partners’ product imitation and encroachment, others prefer to invest in quality improvement and wink at the CM’s encroachment, and yet others complain about their CMs’ irresponsible imitation behavior.

As stated by the New York Times, the insights of this research are in line with the prediction that “Apple can find better ways of earning hundreds of millions of dollars than fighting a decade-long lawsuit.” [9] Then the courtroom is not always the place to try to get patent problems solved. Instead, the alternative operational strategy—quality (R&D) investment—would be a more efficient weapon that can deter copycats’ imitations and supply chain encroachments.

References

[1] Chen, Y.J., S. Shum, and W. Xiao. 2012. Should an OEM retain component procurement when the CM produces competing products? Production and Operations Management, 21 (5), 907–922.

[2] Cui, Q. (2019). Quality investment, and the contract manufacturer’s encroachment. European Journal of Operational Research, 279, 407–418.

[3] Cui, Q., C.H. Chiu, X. Dai, and Z. Li. 2016. Store brand introduction in a two-echelon logistics system with a risk-averse retailer. Transportation Research Part E: Logistics and Transportation Review, 90, 69–89.

[4] Aldieri, L., V. Sena, and C.P. Vinci. 2018. Domestic R&D spillovers and absorptive capacity: Some evidence for US, Europe and Japan. International Journal of Production Economics, 198, 38–49.

[5] Dyer, J.H., and N.W. Hatch. 2004. Using supplier networks to learn faster. MIT Sloan Management Review, 45 (3), 57.

[6] Eichenwald, K. 2014. The great smartphone war. Vanity Fair, May 3, 2014.

[7] Kendall, B. 2016. Supreme court hears Apple-Samsung patent case. The Wall Street Journal, October 12, 2016.

[8] Gallagher, D. 2016. What does Apple get for $10 billion of R&D? The Wall Street Journal, October 28, 2016.

[9] Nicas, J. 2018. Apple and Samsung end smartphone patent wars. The New York Times, June 27, 2018.

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Listen to Your Uber Driver: A Comment on the Economic and Emotional Vulnerability of Uber’s Silent Partner

July 12, 2019
By 22416

With the support of the SRA award, Emma McDaid, a 2017 Sylff fellow at the UNSW Business School, carried out her doctoral dissertation research concerning “sharing economy” through interviews of Uber drivers on active duty in Europe. In this article, McDaid shares her research findings as well as her personal experience and viewpoints on fieldwork.

* * *

With the advent of sharing organizations, or platforms, like Uber and Airbnb, consumers and entrepreneurs have inherited more choice and flexibility. Sharing marketplaces are disintermediated, meaning that they operate without a middle partner, so information is shared by individuals online in a reciprocal fashion when they leave star ratings or reviews on their peers. As accounting scholars, we have been busy investigating the impact that such online ratings and rankings (the TripAdvisor ranking index and Amazon product ratings, for example) have on traditional notions of accountability and, indeed, how these mechanisms are responsible for a new audit society—an era heralded by a heavy focus on the verification of lived experience. However, a small number of us are also beginning to address how these metrics are used by organizations to manage platform users. For example, Uber drivers must maintain a customer rating of 4.6 stars (out of a possible 5 stars) in Sydney, Australia, if they want to maintain job security. A rating lower than this and “deactivation,” or dismissal, occurs. Hence, for these drivers, a 3-star rating often means the difference between being employed and being unemployed. In my research, in addition to conducting research in Australia, I have been able to travel overseas with the help of the Sylff travel scholarship to investigate how the rules of platform organizations affect the service providers who hold a key position in the value chain.

The Uber organization reflects a new kind of disaggregated labor market, accessible to its users through a technology application on a mobile device. It is the largest of the ride-sharing model, holding over two million drivers in partnership around the world. With Uber, the users are passengers who request a ride (consumers) and drivers who have the time, skill, and vehicle to provide the service (service providers). Physically, Uber’s service providers are globally distributed, rarely coming face to face with a manager in any centralized hub or factory floor; the nature of work also means that they rarely come face to face with each other. Indeed, the courts continue to deliberate over whether these drivers hold the status of employee or contractor. Regarding this, Uber has argued from the start that its drivers are independent contractors, citing the drivers’ freedom to choose when they source work through the application and the legalities surrounding freedom of uniform and insurance requirements. However, drivers counterargue employee status based on the control that Uber sets over remuneration rates and the limitations surrounding a driver’s rights in choosing trips and accessing such information as trip destination. But while the contractor-employee debate rages on, the critical role that drivers play in the value chain for the Uber organization is sharp and definite. They are the key stakeholders responsible for the creation of economic value for the Uber empire. And this is a valuation that is continuing to rise; the organization was recently valued as the wealthiest privately owned company in the world, with its market capitalization at US$62.5 billion.

Source: Retrieved from Business Insider, December 2015, https://www.businessinsider.com/uber-valuation-vs-market-cap-of-publicly-traded-stocks-2015-12.

Their unique conditions of work prompted me to investigate how drivers were being managed by the organization. Data collection and analysis is ongoing in this regard, but in the following paragraphs, I outline some of the reflections that I have formed from my 2017 and 2018 data collection in Europe and Australia. These reflections are twofold: the first is with respect to conducting field research in these new technologically mediated and disaggregated workforces, and the second regards the most material challenges that I feel Uber drivers are currently facing.

Field Research and the Sharing Economy

I initially collected data in Australia from around the end of 2015. But in 2017, using my Sylff SRA, I left Sydney and arrived in London to conduct field interviews. From there, I traveled on to Paris and Copenhagen. The duration of my research abroad was four weeks in total, and I conducted ten formal interviews with Uber drivers, which supplemented the interviews that I had conducted in Australia. While in Europe, I also gathered a significant amount of data from drivers via phone and through online chat rooms. Although I had mapped out the field and my intentions for data collection, I found that the logistics surrounding field interviews of this type meant that my plans changed frequently. I had to be resourceful and at times imaginative so that I could conduct interviews. Most Uber drivers work perilously hard, and although many expressed interest in being part of my research, interview times were often restricted to moments when demand was low on the application. It was not unusual to have drivers cancel an interview because they had just been pinged through their device for a trip. It was also not unusual to interview drivers before the sun came up, in coffee shops in suburbs surrounding airports—where they might expect a surging fare to come about soon. In short, without the humdrum of everyday organizational life, the field researcher needs to be sensitive to a highly changeable environment, building a significant degree of flexibility into their data collection plans. This requires more perseverance in the field, but being agile in an environment like this can also be deeply rewarding. When successful, researchers are immersed in the participant’s natural lived experience and thus extract a richer ethnographic account of the field.

An Uber Driver’s Challenges

In conducting the interviews, it became clear that Uber drivers are facing a number of challenges. Changes to the minimum fare for a trip, accessing Uber personnel to resolve pay disputes, and defending themselves against customer complaints are examples of some of the more rigorous challenges. These challenges have both economic and emotional effects on drivers. For example, when Uber entered the French market in late 2011, the minimum fare that a driver could demand was approximately €20. Over the past number of years, this has dropped down to €6, marking a 70% reduction. And while advocates for the organization will likely insist that higher minimum fares were required in order to enter new markets, many drivers have become financially vulnerable after signing on with high expectations. Drivers can also be financially vulnerable in times when their pay is incorrect, is delayed, or fails to arrive in their bank accounts—common war stories that participants offered. In these cases, they reach out to Uber through the “Help” function on the application—essentially a chat bot—waiting up to five days for an adequate, non-system-generated response. An Australian driver provided an example of a standard response issued at times like this in the image below.

Unsurprisingly, drivers go through a range of emotions in respect to this treatment. A sense of frustration was commonly expressed. While they accept that the terms and conditions of operating as a driver can often change, these unilaterally imposed rules often change without warning and explanation. Drivers describe having little control other than to start and stop driving. Driver John* commented, “They call it a partnership; there’s no partnership,” while another, Driver Mike*, explained, “See, I’m just a number. I’m just a nobody.” The setting of prices or fares by the technology proved most frustrating, as drivers believe they personally incur costs that should be built into the fare. Driver Paul* described the logic as follows: “They just don’t get it. They have no idea what it costs to run a motor vehicle. To us, us guys who do it full time, it’s a business, a small business. . . . Ask us. Have a round table conference. What are your costs? How can you set base fares and not know what people’s costs are?”

The drivers’ levels of take-home pay are inadequate, which is highlighted in an Australian government report that finds that their earnings fall short of the minimum wage (Stanford, 2018). This has led many people whom I have talked with to use metaphors of slavery when discussing the nature of platform work. And the use of technology as a tool to delegate terms and conditions on a platform does nothing to sooth the feelings of low self-worth that people doing this work experience.

These challenges exist for drivers in an environment where the customer’s voice has much more power than their own. Again, the Uber organization will say that customer complaints should be taken seriously, and indeed they should because of the nature of the service being sold. But drivers complain that their voices often go unheard when complaints are raised. At times like this, refunds are frequently and immediately given at the expense of the driver, and drivers are often deactivated from driving until they protest their rights. For this reason, many drivers now operate a dashcam in their vehicle—as a means to record trips and protect themselves in the event of an unfair complaint.

Dashcams are one of many responses to the position that drivers find themselves in. Other academic studies are reporting evidence that they have worked together to try to manipulate surge pricing by organizing mass deactivation, effectively gaming the technology (Mohlmann and Zalmanson, 2017), and that they continue to engage in strikes and efforts to join trade unions around the world. The precarious legal nature of the work is a problem faced by drivers fighting for change and for solutions to the challenges they face. In researching this field, it is hard not to empathize with their position. It is clearly one that belies the rhetoric often heard with regard to the sharing economy.

Conclusion

Uber has done great things for customer choice, achieving global disruption of an industry long considered the gold standard of secure economic sectors. Introducing competition has made transport more affordable and reduced unemployment rates. However, investment has fallen out of the taxi industry, with market value wiped from taxi plates in many major cities and reduced demand affecting that workforce. And taxi drivers have been vocal about these effects. But despite all the noise that Uber has created, it is important to be mindful of the challenges that are imposed on the Uber driver. We hear frequent hagiographic accounts of what it is like to “be your own boss,” in the media and in society in general, but less about the effects of working in these conditions. These are new industrial practices that use technology in new ways—creating, in effect, a new employee. Action in this regard may need to be taken if consumers want to responsibly enjoy the Uber service.

References

Mohlmann, Mareike, and Lior Zalmanson. “Hands on the Wheel: Navigating Algorithmic Management and Uber Drivers’ Autonomy.” Proceedings of the International Conference on Information Systems (ICIS 2017), December 10–13, 2017.

Stanford, Jim. “Subsidising Billionaires: Simulating the Net Incomes of UberX Drivers in Australia.” Centre for Future Work at the Australia Institute, March 2018.

*Names have been changed to preserve confidentiality.

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Why Do Some Organizations Perform Better Than Others?
Investigating the Importance of Context and Strategy Choices

February 26, 2015
By 19643

Mirjam Goudsmit¹, a Sylff fellow at the UNSW Australia Business School, used her Sylff Research Abroad award to investigate how organizations are affected by “turbulence,” or radical, unpredictable changes in the business environment. For the empirical phase of her project, she went to Israel, which has a long history of instability, conducting research at the Hebrew University of Jerusalem and elsewhere. Her research aims to help organizations achieve their business objectives in various turbulent conditions. A summary of her research is presented below.

* * *

The author at the Hebrew University of Jerusalem

At the core of strategic management research is the explanation of performance differences among business organizations. I look at this question from the perspective that organizations are increasingly confronted with turbulence in their competitive contexts. The term turbulence is considered here as radical, unpredictable change in the environment. The situation is unstable, unsettled, and in turmoil. Instead of calm waters, imagine a turbulent sea that is choppy, bumpy, and at times violently rough. Instabilities are irregular. Organizations have to navigate such waters, that is, such competitive situations.

Triggers of turbulence in a business context include technology developments, political issues and conflicts, unsettled regulations, and ubiquity of information.

Overall, these triggers change to different degrees; some changes are radical and transformative in nature—they disrupt the status quo in an environment and have the potential to alter expectations and what is considered valuable. Think of an unexpected and radically new product that profoundly alters the market. Existing products are afterwards considered dated and less valuable, the willingness to pay for those products decreases, and they are eventually perceived as largely useless and are displaced. A familiar case is the introduction of the iPhone with its significant impact on the nature of the mobile phone industry.

In today’s unsettled times, destabilizing forces operate with increased frequency and impact and present significant difficulties for organizations. One important challenge is to effectively make strategy choices—choices that entail courses of action necessary for carrying out long-term organizational objectives. This challenge follows from the increased difficulty of predicting the future and reduced guidance from experience, that is, what worked in the past may no longer work in the future. Strategy choices can help explain performance differences among organizations. Specifically, ineffective choices may result in decreased performance or even threaten and undermine the survival of organizations. Understanding more about effective strategy choices in turbulent contexts, I believe, is therefore important.

In my research, I am curious about strategy choices that organizations make and how different turbulent conditions might influence the effect of these strategies on organizational performance. The empirical project consists of two sequenced and interconnected phases. In Phase One the aim is to explore and understand more about the research topics through interviews, while the aim of Phase Two is to test and provide statistically valid insights through a questionnaire. The first phase is designed to carefully further develop the research and ideas as a foundation for large-scale investigation in the second phase.

My Research Abroad

In the spring of 2014 I went to Israel for the first empirical research phase. This context represents a long history of instability. My research activity during this time included fieldwork, interviews with organizational decision-makers, and discussions with experts. The visiting institution, the Hebrew University of Jerusalem, provided valuable support, such as office facilities and the opportunity to exchange ideas and discuss research with the faculty and graduate community. Findings from this research abroad provided insights into how decision-makers think about turbulence and strategy in the context of Israel. This exploration, based on the interviews I conducted with businesses, has led to several observations and preliminary insights that are being put to the test in the second empirical phase. I will hereafter touch on some interesting insights. First, the findings suggest that turbulence and its consequences are more complex than previously assumed. Between and within organizations, decision-makers were found to recognize changes in their environment to different extents and in different ways. For example, one manager emphasized the importance of commodity prices and the natural environment, while another emphasized the importance of competition. In another example, one manager considered the environment, or an aspect in that environment, as relatively stable and predictable, while another considered it as relatively unstable and unpredictable.

Turbulence is thus not as universal as previously understood, that is, similar across all organizations and for all decision-makers. How dissimilar perspectives matter for strategy choices and their effectiveness need further investigation. Moreover, organizations were found managing simultaneous, sometimes contradictory changes. An illustration of such environmental factors is limited but major regulatory changes occurring at the same time as many, small changes in relevant technology. Organizations therefore have to attend to this complexity and take action that is possibly more systemic—and thereby more multifaceted.

Second, the unique geographical location in which organizations operate is pertinent. There are context-specific aspects of the situation in Israel, such as the sizeable power of labor unions in some sectors that organizations have to negotiate. Also there is a heightened risk of disruptive geopolitical issues with the potential of escalation and extreme consequences, such as hostility and conflict. These possible issues are revealed on the radar of some organizations to varying degrees, but they are indeed exceptional circumstances—infrequent and unforeseeable. As such, these issues resemble forces majeure, which cannot reasonably be known in advance, controlled, and prepared for.

Some organizations are more exposed to this category of issues, such as when facilities are located in areas of contention. When situations arise, organizations can sometimes only react, such as by closing retail stores or moving portable assets, including employees, to another site, with little room for further maneuvering. Often short-term, quick responses emerge when situations occur that are in conflict with long-term (planned) strategies. How to manage the conflict is exposed as a challenge for organizations.

Furthermore, amidst disruption many organizations aim to continue their business as much as possible. Conservative financial planning and contingency planning were found to be prudent strategic approaches for some organizations to continue achieving outcomes in such a situation, such as by reducing risk and preparing for scenarios. An additional observation is that the local country and organization context more frequently extend across borders. The above geopolitical issues are examples of this observation. Another is that many industries and products were found to be fundamentally global in nature so that competition is essentially global.

Organizations were also impacted by rulings from other countries’ regulators, at distant locations. An example is the Foreign Account Tax Compliance Act that requires foreign financial institutions to report directly to the US government all clients who are “US persons.” This is a big change that is having a big impact on financial institutions worldwide. Crucially, my findings have uncovered the fact that global issues of turbulence can rapidly become local issues and, conversely, local issues can rapidly become global ones for organizations. Organizations therefore have to navigate this increasingly interconnected world that might call for different strategies.

Finally, the findings suggest numerous different strategy choices for organizations, like the several already mentioned above. Some strategies are specific to a particular industry or organization, while others are more general in nature. For example, several managers indicated that their organizations faced persistent constraints from their environment through unions, interest groups, or regulatory bodies. Organizations differed in their responses to these constraints, however. Some adopted a more reactive approach and largely responded to changes after they occurred. Others adopted a more proactive approach and largely anticipated changes before they occurred. Which type of strategy is more effective under what circumstances needs to be further understood.

In sum, in these increasingly turbulent times, I believe this research is meaningful and relevant for both academics and practitioners. As an important foundation and next step for further research, the findings provide more understanding of the important topics of strategy choices and turbulence. The overriding intent of this project is to support organizations achieve organizational objectives in different turbulent conditions. With this research I aspire to benefit organizations worldwide and, ultimately, contribute to the future prosperity of society at large.

¹For supporting this research abroad, my tremendous gratitude goes to the Ryoichi Sasakawa Young Leaders Fellowship Fund, the host institution Hebrew University and its academic community, home institution UNSW Australia and primary academic advisor Dr.George Shinkle, all intermediaries, including the Israel-Australia Chamber of Commerce, and organizations and people who participated in this research for their generous time, efforts, and insights.

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Cars and Capitalism in Contemporary Hanoi

May 1, 2014
By 19597

Streets clogged with motorbikes in Hanoi have become familiar sights, as images are frequently featured in posters and magazines. Is there any room in this city now for automobiles, whose numbers are on the rise? Arve Hansen, a Sylff fellow at the University of Oslo in Norway, explores the socioeconomic transformation taking place in Vietnam through the lens of the nascent transition in the prevailing mode of personal transport from motorbikes to cars.

* * *

Vietnam has undergone a radical socioeconomic transformation during the last three decades under a program of economic reforms known as Doi Moi (“renovation”), officially adopted in 1986. Vietnam has grown from being one of the poorest countries in the world into to a middle-income, emerging economy, and the country is now frequently cited as a success story in economic development. Vietnam has moved from a planned to a market economy under a model described by the Vietnamese government as a “market economy with a socialist orientation.”

These changes make Vietnam an extremely interesting case in the study of both development and consumption. My PhD research into this topic in Vietnam focuses on what appears to be an ongoing transition away from motorbikes as the principal form of transport toward four-wheel automobiles in Hanoi. (It was thanks to Sylff Research Abroad that I was able to conduct long-term fieldwork in Hanoi, something absolutely vital to my project.)

My research approaches the trend as seen from the perspective, respectively, of the government, industry, car dealerships, and consumers. I have particularly emphasized the view of the consumer, using the car both to illustrate the ongoing changes in Hanoi as well as to analyze consumption trends more generally.

“Land of the Honda”

Motorbikes in downtown Hanoi (photo by Huong Nguyen)

Vietnam used to be a country of bicycles but quickly became the “land of the Honda” during the 1990s following the start of the Doi Moi reforms. Today, in a country of 88 million people, there are around 35 million motorbikes. The sea of motorbikes in Vietnamese cities is now an iconic image of the country and one of the most popular motives for photographs by tourists. It has also created a highly individual transport situation, in contrast to the collective ideals of socialism.

Now, the passenger car is increasingly making its way into the streets, in the process clogging up traffic and making the motorbike more dangerous. My interest in Vietnamese automobility started several years ago while riding around the narrow streets of Hanoi on a motorbike and seeing how automobiles, struggling to make their way through traffic, were unfit for those streets. I asked myself why anyone would choose to drive a car there.

The answer is, of course, quite complex. It can also be very interesting as a starting point for understanding the socioeconomic changes and development challenges Vietnam is facing. The automobile is still a very expensive luxury; in fact, Vietnam is one of the most expensive places to buy a car due to high taxes. This, at the same time, makes the car a powerful expression of the inequalities embedded in the new economic system. The limited availability of the car also strengthens its position as a potent status symbol. A striking sight in the narrow streets of Hanoi is the frequency of very big luxury cars. This is a sharp break with the country’s socialist past, when displays of personal wealth were frowned upon and could lead to serious trouble.

In post–Doi Moi Vietnam, the automobile is one of the most obvious symbols of the new reality, in which getting rich is considered glorious and displaying personal wealth has become normal. In contemporary Hanoi, expensive cars are used actively to display wealth—sometimes strategically to show business partners that you are successful.

Advantages and Drawbacks

The new traffic in Hanoi (photo by Huong Nguyen)

Although the car is very much a status symbol, this is not the only reason that people buy them. Most of the purchasers with whom I talked report they were motivated more by safety and family reasons, as transporting one’s family on a small motorbike can be dangerous. The car also allows you to stay cool (and white!) under the scorching sun and dry during the frequent periods of heavy rain. There is also a paradoxical relationship between air pollution and car consumption: riding in a car allows you to temporarily escape the dangerously deteriorating urban air quality. The car is thus both a powerful agent in causing air pollution and a means of escaping from it.

The private car has had a central place in capitalist (and sometimes socialist) development and industrialization around the world. In Vietnam, the car in many ways represents a development dilemma. The car industry is targeted to play a leading role in scaling up Vietnam’s industrialization, with foreign investment (particularly from Japan) leading to positive linkages with, and technological diffusion to, the rest of the Vietnamese economy.

Among many other things, this requires a larger domestic market for cars. Studies have shown, however, that the streets of Vietnam’s cities cannot accommodate a transition to private cars as a predominant means of transportation. In Hanoi, the growing number of cars is already significantly increasing the frequency of traffic jams and further deteriorating the toxic air quality. Greener cars, though, are part of neither the transportation nor industrial plans of Vietnam.

In global discourse, the automobile is frequently (and deservingly) attacked as being one of the most environmentally destructive aspects of private consumption. In Hanoi I spoke with foreign environmentalists who argued that Vietnam needs to realize that the car belongs to the past.

The Car as the Future

Traffic and street vendor in Hanoi (photo by Arve Hansen)

Moving beyond private car consumption may be a worthy ideal, but the argument that the car is history fundamentally fails to understand the position of the car in an emerging economy like Vietnam. In this context, the car represents the future. From the government side, moreover, the car industry and private car ownership are symbols of economic success. And for the growing ranks of the middle class, replacing the motorbike with a car is emerging as one of their main aspirations.

The motorbike is still king in the streets of Hanoi, although it is increasingly being forced into an interesting coexistence with four-wheel vehicles. Most car owners keep their motorbikes as well and choose their mode of transport in a flexible manner, with motorbikes being used for shorter distances and to go downtown, while the car is used for travelling with the family, attending important meetings, or leaving the city. In this way the car also supports the creation of new practices among the middle class, such as travelling outside the city for a weekend holiday.

While people often heap blame on the motorbike for all traffic problems in Hanoi, in a city with very limited public transport options and lack of infrastructure, the motorbike is the main reason why mobility is still fairly good. The government has decided that it will limit the number of motorbikes in the future. Given the lack of alternatives, this may pave the way for the car. It will be interesting to see what the future holds for the two-wheeled icon of contemporary Hanoi.