The first stage of economic liberalization in the context of foreign trade is marked primarily by the desire for gaining the know-how of efficient production. Interactions with foreign firms expose the indigenous managerial practices to the international best-practices thereby inducing positive reforms in the management system. In other words, from the point of view of efficiency and productivity, effective management of enterprises is an essential component which is greatly facilitated by trade liberalization.

Malik (1997) links the importance of managerial reforms to the important role played by entrepreneurs in an economy. Entrepreneurs not only create jobs and opportunities for people but they also fill in gaps in the economy not provided by the state-run sector. This makes the lives of consumers much easier. And the neglect of the desires and needs of consumers by the state- owned sector was one of the reasons for Chinese economy’s stagnation. A joint research initiative by Babson College and the London Business School came up with the “Global Entrepreneurship Monitor” (GEM). In the study, the authors (Reynolds et al. 2000) concluded that successful entrepreneurial activity has a positive relationship with economic development. The GEM Conceptual Model suggests that the social-cultural-political context within a country must foster certain “General National Framework Conditions,” which can generate not only the opportunities for entrepreneurship but also the capacity for entrepreneurship – in particular, the skills and motivation necessary to succeed. Together, the entrepreneurship opportunities, on the one hand, and the skills and motivation, on the other, lead to business dynamics that yield creative destruction, a process in which new firms are created and older, less efficient firms are destroyed. The overall result for a country is economic growth.

Managerial Patterns in India and China:

Since China embarked on reforming its economy in 1978, several changes have taken place in its human resource management. Before 1978, as with the general nature of the planned economy, the personnel management system was also highly centralized. According to Zhao (2005), the system of management before 1978 was based on the “three irons” policy-

1) “Iron armchair”, which refers to the management of executives and technicians under a permanent job system. Once a person was recruited, he or she would be entitled to hold the position for his or her entire life.

2) “Iron rice-bowl”, which refers to the system of employment that created boundaries between “cadres” and “workers”. A lifelong guarantee of a cadre’s position, and the policy that cadres could be promoted but never demoted, led to a surplus of unproductive personnel.

3) “Iron wages”, which describes the wage distribution system. In the highly centralized planned economic system, the state played an authoritative role in the compensation system of enterprises. Evenly distributed pay had little to do with profits and individual performance.

Quite similarly, post-independence, India also pursued a development policy based on the promotion of the highly planned, state-interventionist “command” economy. From a managerial perspective (Davis et al. 2006) such a development strategy had given rise to an insular and “closed” managerial mindset. This greatly reduced both entrepreneurship and global competitiveness. There existed strong internal labor markets (ILMs) based more on social relationships than rationalized and formal human resource management systems. In the initial years after independence, two professional bodies emerged- Indian Institute of Personnel Management in Calcutta and the National Institute of Labor Management in Bombay. In the 1960’s the personnel function expanded beyond the welfare aspect and in the 1970s emphasis began to be placed on greater organizational efficiency. However, it was by the 1980’s that the use and focus on terms and issues such as HRM/HRD was initiated (Storey et al. 2008). As Chen (2005) points out, it is important to distinguish between practice of managing and management principles. While management principles are universal, the approaches and the practice of management are affected by environmental factors. For our purpose i.e. comparison of managerial patterns in India and China post-trade liberalization, it is imperative to understand the field of comparative management. Comparative management represents a shift away from the traditional focus on a universal organization and management toward seeking patterns of relationships in various settings. Its relevance lies in identifying the importance of culture and environment in the study of management systems.

Role of Culture:

We believe culture plays a key role as the social context in each country influences management development. The influence of culture in shaping capitalist ethics was recognized by Max Weber long ago. In his celebrated work “Protestant ethics and the spirit of Capitalism”, Weber (1930) attributed the development of capitalism in Western Europe to the protestant ethics (which emphasized disciplined obligation of work as a duty and a virtue) held by the first capitalist merchants and industrialists in Europe, what he called the “spirit of capitalism”. This was despite the fact that material infrastructure of capitalism – markets, division of labour, money economy, and trade routes- also existed in countries like India, Palestine and China. The influence of Chinese culture on management practices is so significant that the Chinese managerial system is distinctly identifiable. Confucianism as a belief system has provided the Chinese with great cultural resilience and stability, and it continues to be a great influence in Chinese life even today. Confucian cultural values comprise a considerable amount of authoritarianism, implying a strict hierarchical order. Since everyone knows one's position, status differences are accepted and regarded as important by the Chinese (Selmer et al. 1994). Centralized decision making preserves the leader's superior image and is a relevant adaptation to the expectations of employees, coinciding with the pre-dominant Chinese values of respect for authority, conformity, and hierarchical submission. Talking of culture in China, Guanxi (literally connections or relationships) is a cultural characteristic that has strong implications for interpersonal and inter-organizational dynamics in Chinese society. There is a popular saying that "China is a land of guanxi. Nothing can be done without guanxi." and that "the Chinese manager must steer through a sea of guanxi." Indeed, Guanxi is ubiquitous as the whole society in China is structured around webs of social relationships which are embedded in various bases of guanxi. One can say that guanxi is the Chinese version of embeddedness. In many cases it is the only insurance that transactions will go through. Several principles characterize the guanxi network i.e. it is transferable among parties, reciprocal and intangible. Also, guanxi is utilitarian rather than emotional. It is based entirely on the exchange of favors, not an emotional attachment. Organization theory and strategic management literatures characterize networks as commercial and impersonal, but guanxi focuses on personal relations and the exchange of favors (Park and Luo, 2001). In the new economic environment after the opening up, guanxi has become more important to manage uncertainties and external dependency. Chinese firms develop guanxi as a strategic mechanism to overcome competitive and resource disadvantages by cooperating and exchanging favors with competitive forces and government authorities. It is thus critical for businesses in China, whether foreign or local, to understand and properly utilize guanxi in order to gain an edge over competitors. Guanxi is also a valuable entrepreneurial tool to bridge gaps in information and resource flows between unlinked firms and between firms and important outside stakeholders. Networks provide member organizations greater access to human and financial resources, knowledge, and management expertise. A survey of Hong Kong Chinese executives found that the businessmen believed that once good guanxi had been established, a number of benefits would follow. These benefits included the smooth running of routine business operations, information about government policies, and receipt of administrative approvals. An important guanxi is one established directly with the handful of top officials in Beijing. Tsang (1998) states that, in this case, “the guanxi is likely to be rare because not many companies are able to approach these top cadres. One such relationship may be better than a whole set of relationships with lower ranking officials. This may be why, since China's economic reform, the children of many top cadres, including those of the late Deng Xiaoping, have gone into business. The rare guanxi they possess is their biggest asset. To prepare for the political change in Hong Kong in 1997, some big companies there started to employ the children of senior Chinese officials involved in managing the handover of sovereignty.”

With regard to role of culture in management process in India, it can be said that culture has less impact on managerial practices as compared to China. In contrast to the more homogeneous, less diverse culture that Chinese have, Indian culture is rather diverse, with a multitude of different religious, regional, linguistic, ethnic, even racial groups that have learned to cooperate and coexist in India's noisy democracy. Indian management culture is characterized by the principle of ‘particularism’ and ‘stability’ as compared to the West where ‘individualism’ and ‘mobility’ are the prominent ways of organizations. An analysis of Hofstede’s (1991) ranking for India on the initial four dimensions given by him reveals that India stands relatively high on power distance and uncertainty avoidance and relatively low on individualism and masculinity dimensions. The relatively high uncertainty avoidance implies an unwillingness to take risks and accept organizational change. The relative high power distance implies that managers and subordinates operate from fixed positions and obedience is facilitated by the supposedly superior authority of position holder and not on any rational basis. The relative low level of individualism implies that family and group attainments take precedence over work outcomes. The relative low masculinity implies that employees’ orientation is towards personalized relationships rather than towards performance. On the fifth dimension of long-term vs. short term orientation, there has been a marked shift from the traditional long term orientation to the recent short term orientation. This shift is more valid for industrial sectors directly competing with global firms. This is because (Budhwar and Bhatnagar, 2009) with the presence of foreign operators in Indian organizations, the question of immediate survival has become more important. The socio-economic reality in India is quite complex. It is marked by a distinct phenomenon where caste (social) and class (economic) merge in one. A change in economic class becomes almost impossible due to its deeper linkages with the social class i.e. caste. However, in recent years there has been a move towards inclusiveness at the societal level which also gets reflected in the workplace (Lynton and Singh, 2010). The growing services sector, which needed more and more young employees, has served as another leveler across traditional social barriers. What matters, are good educational qualifications, skills and work-proficiency. In most cases these credentials overcome the social limitations, be it caste or class. So does India’s huge cultural diversity and socio-economic classification have a bearing on the managerial patterns? To some extent it does, like the focus on stability and continuity. In their book, “The India Way: How India’s Top Business Leaders Are Revolutionizing Management”, four Wharton professors- Peter Cappelli, Harbir Singh, Jitendra Singh and Michael Useem -argue that Indian companies are managed differently than their Western counterparts and this difference has helped fuel double-digit growth over the last two decades for many of that country’s leading businesses — despite the recession (Cappelli et al. 2010). ‘People are viewed as assets to be developed, not costs to be reduced. For example, Tata has a long history of investing in employees. The training function is much more integrated into the overall strategy of the firm; the head of HR is often part of the senior management team and may be on the board of the company. Career planning and training — helping employees find paths to advancement within the firm — are more prevalent than they are, for example, in the U.S. In many cases, shedding employees can be the right thing to do, but in the U.S. there’s been some throwing the baby out with the bathwater. of course there are exceptions — companies where employee engagement thrives, such as Google, Apple, and Cisco. More employee engagement means more innovation.’ (Gardella, 2010). This does not imply that Indian managers are inherently more creative than others. But they do ‘operate in a complex, often volatile environment with much red tape’. They serve a huge and profoundly competitive domestic market composed of value-conscious consumers who are normally of modest means. Thus, Indian business leaders are used to finding ways around obstacles, including a lack of resources. It’s a mindset captured by the Hindi term “jugaad”, which refers to a willingness to persistently improvise creative solutions.

Managerial Policy Changes:

Trade and investment inflows and the interactions with foreign firms induced changes in the managerial policy framework in both nations. Liberalization is widely seen as a move from bureaucracies to markets. In China, this shift has taken two forms- 1) a decentralization of administrative power from the central government to provincial and city governments and 2) a decentralization of economic power from the state to economic agents- state owned firms, collective enterprises, and family businesses. It is to be noted that here decentralization has involved considerable measure of managerial discretion. According to Child and Lu (2010), the decentralization of decision authority to enterprise managers, together with a liberalization of the rewards for achieving better enterprise performance, was intended to provide managers with the opportunity and motivation to adopt a more business-like approach than before, when their prime task was to implement production plans set by administrative higher authorities. Foreign Trade Corporations i.e. FTCs have been at the forefront of changes arising out of China’s ‘opening up’ of the economy which produced increasingly liberalized arrangements for international trade. The FTCs have had to cope with deregulation, changes in scope and increased internal competition. Such pressures have brought about changes in personnel and management practices. As such the FTCs which were the traditional conduit for import and export business have undergone massive change. The number of FTCs has grown and their scope has changed dramatically to embrace the agency system, the retention of profits, the payment of taxes and the rights to part of the foreign exchange earnings. With regard to the compensation system, it is increasingly being designed in accordance with international standards. The market determines the group average level of compensation. The new compensation structure includes salary, various welfare benefits, stock options and other methods, for rewarding performance. Profit sharing is also used to retain good employees. Foreign invested firms also bring appreciation of a fair promotion system. Such a system often consists of internal promotion, international promotion, challenging career experience and management opportunities for local Chinese staff. Looking at India, there is a growing influence of ‘Anglo-American’ models of management and corporate governance. As it has been noted-“Software engineers in Bangalore disport themselves on pristine campuses, fitted with state-of-the-art gymnasiums. Call centers near Delhi equip themselves with spare telephone lines, backup generators, and backups for the backups. Their quality standards, management styles, and ideas of corporate governance owe more to western, especially American, models than to the traditions of Indian firms.” (The Economist, 2001).

More and more Indian organizations are creating a separate Human Resource Management or Human Resource Development (HRM/HRD) department. The level of training of employees has increased and there is a move towards performance related pay and promotions. The internal work culture, especially in private enterprises, now places greater emphasis on internal locus of control, future orientation in planning, participation in decision making, and effective motivation techniques (Budhwar and Bhatnagar, 2009). In fact even the public sector in India, which has been the largest employer of people, has success stories in its HRD policies and implementation. Corporations like Hindustan Machine Tools, Bharat Heavy Electricals, Hindustan Aeronautics, State Bank of India and other public sector banks, Steel Authority of India, and Coal India had extensive experiences with HRD policies and experimented with innovative HRD practices. In face of international competition, the employers are under increasing pressure to lay off and retrench workers without government permission. Thus the new trend is towards vigorous downsizing of excessive workforce. Many organizations are adopting voluntary retirement schemes. The economic policy of 1991, envisaged the establishment of a national renewal fund (NRF). This fund was aimed to promote upgrading of skills for those affected by downsizing, to finance VRS in the public sector enterprises, and to promote programmes of skill enhancement in general. Indian organizations competing with multi-national enterprises feel the need to develop a highly diverse workforce of well-trained, motivated and efficient employees. They also have to cope with the subsequent de-skilling, re-skilling and multi-skilling problems, workforce reduction policies, and retention and career development issues. Management is now increasingly used to perform the important function of developing a constant awareness of missions, ensure continuous appraisal of internal strengths, enhance innovation, improve compensation schemes, introduce more informal communication and develop better employee relations (Budhwar and Bhatnagar, 2009). Another notable shift pertains to valuing of professional/technical personnel and inputs within the workplace. The share-market listing of corporations has meant that managerial structures and standards of corporate governance are subject to greater scrutiny. “Increasingly, (Davis et al. 2006) the role of foreign capital in India and the global ambitions of Indian companies make it essential that a deeper alignment of workplace harmony through dynamic HR policies and practices be achieved by vision-driven managers.” It is widely perceived that in India the government has to take efforts for legitimizing its actions to all groups and factions. Kayne (1999) opines that the Indian government can take steps to provide a solid foundation for entrepreneurial efforts. He says that, “in any country, the advocates of an entrepreneurial economy must promote and communicate policies that will provide a clear link between entrepreneurial efforts and overall economic prosperity. That is, voters and taxpayers must understand the reasons why their government is investing in anything as new as entrepreneurship”. Reynolds et al. (2000) found that the perceived social legitimacy of entrepreneurship can be a crucial factor in its success. However, these scholars also concluded that the role of government should not stretch beyond laying the foundation for entrepreneurship (i.e. through tax and regulatory policies, support for education in entrepreneurship and the like). In India, excessive government regulations and related bureaucratic complexities did indeed handicap entrepreneurs. State in India as well as China has always played an active role in the economic development of the nation. In fact this trend has continued even in the post-liberalization phase. Pearson (2005) argues that as countries deepen their integration with international markets, the role of states will change but will not diminish. In China, effort to separate government and industry has broadened into a movement to improve corporate governance. Streamlining the bureaucracy, establishing regulatory institutions, and spinning off state-owned enterprises – laid the institutional groundwork for a new regulatory state. Thus state has become a crucial player at the commanding heights of China’s economy. Market governance in China continues to be a political process. Similarly, the administrative personnel in India, particularly at the state level, have to resist pressures for politicization. There are state regulations for the annual renewal of licenses for shops and commercial establishments, the movement of agricultural commodities under the Essential Commodities Act, and for the inspection of work places. According to Weiner (1990), the assumption is that the state must intervene to prevent the growth of exploitative capitalism, and that detailed regulations are necessary to ensure the safety of workers. That is, in case of India, it is actually slowing the reform process. The state and local party officials, bureaucrats, and police-officers- state “officialdom” in the broadest sense- are reluctant to give up the patronage and profits (“rents”) that are acquired through the regulatory system. The pursuit of market-friendly policies by state governments requires a change in the mindset of state politicians and new skills within the state bureaucracies. In fact, since the 1990s there has emerged a new model of public sector management –variously called as ‘Managerialism’, ‘New Public Management’, ‘Market-based Public Administration’, or ‘Entrepreneurial Government’. Managerial orientation in state policies is part of the governance discourse which has gained prominence in recent times. The basic thrust has been to implement the 3Es: Efficiency, Economy, and Effectiveness. This new model seeks focus on management, not policy, fostering competition, cost-cutting, and a style of management which emphasizes output targets, limited term contracts, monetary incentives and freedom to manage. In the post-reform phase, the Indian state is taking bolder steps in the direction of bringing good governance to the citizen as good governance is now considered essential for luring investment and skilled personnel (Mukherjee, 2004). Public- Private Partnerships (PPPs) have become a desirable mode of governing. There has been a marked shift in the nature of the Indian state in contemporary times from a “centralized interventionist” state towards a “decentralized regulatory” state (Rudolph and Rudolph, 2008).

Managerial Education:

One of the most essential prerequisites to effective management is management education because it increases the knowledge, skills and productivity of managers. In the previously cited “Global Entrepreneurship Monitor: 2000 Executive Report” it was found that a strong education base can foster successful entrepreneurial activities. There are some important differences between management education in China and India. Since English is the language of global business, it makes for an important difference between China and India. The dominant language of Indian business is English, and the existence of English speakers is indeed one of India's distinctive competencies for international business. This largely explains the swift growth of Indian firms in software services and in business process outsourcing in recent years. But China is fast catching up. ‘Chinese parents often sacrifice one salary to afford bilingual kindergarten and schools for their child. English language classes for adults in China have spawned such corporate success stories as the New Oriental Education and Technology Group Inc. and the Wall Street Institute School of English’(Lynton and Singh, 2010). Today, the level of English spoken by many graduates in China who has never left the country or worked with non-Chinese is amazing. India also has a longer history of institutions for higher education in management. According to Tayeb as cited in Davis et al. (2006), India has many excellent universities and one of the biggest cohorts of technically trained manpower in the world. Indian Institutes of Management (IIMs) are now famous internationally. Dayal (2002) gives an account of the evolution of managerial education in India. It was in 1954 that the first program in Business Management was offered by the Indian Institute of Social Welfare and Business Management in Calcutta as a part-time course for practicing executives. Similar programs then started in the Universities of Delhi, Madras and Andhra. In 1959 the planning commission invited George W. Robbins (Associate Dean, Graduate School of Business Administration, University of California, Los Angeles) to recommend an educational program for management. As per the report of Dean Robbins two institutes were set up by the Government of India in Calcutta (1961) and Ahmedabad (1962) respectively. Later four more Institutes of Management were set up at Bangalore (1972), Lucknow (1984), Indore and Kozikode (1997). Two other important developments in this regard were the legislative framework on regulation of engineering and management education in India that came into force in 1987, and the Association of Indian Management Schools (AIMS) that was inaugurated in 1988 (Philip, 2008). In other words, India has been producing professionally trained managers for more than 50 years. Indians can also be seen leadership roles at major global business schools outside China and India while there are no Chinese in similar positions. It is quite often considered that India now has an extraordinary talent pool suited to entrepreneurship. However, an important caveat is that the government must ensure that new entrepreneurs have access to both the functional and entrepreneurial skills needed for success in business startups (Gupta, 2001). Both sets of skills are seen as still somewhat lacking in India. And the best role in this regard can be played by educational institutions. For example, the Indian School of Business (ISB) at Hyderabad has come up with a curriculum suited to the development of entrepreneurial leaders. There will be a new entrepreneurship centre that will be founded, led and managed by several leading Silicon Valley entrepreneurs. In contrast, looking at China it is found that China began establishing modern management education only in the late 1980's. In the 1950s, Chinese managers were sent to the USSR for training and had little to do with the “west”. But in the 1970s, it was found that the ways of thinking necessary to participate in a “market economy with socialist characteristics” were seriously lacking in China. In 1979 a Sino-American industrial technology cooperation agreement was signed, and based on this agreement, the Chinese Industrial Technology Management Training Centre was built at the Dalian University of Science and Technology. In this centre, US academics provided “Western” management knowledge and skills to Chinese SOE managers. This was followed by other training cooperation programs with overseas organizations, e.g. that between the Chinese Government and the European Community (now the European Union) in 1985, which led to the development of the China-Europe International Business School (CEIBS), one of Asia's leading business schools. During the 1990s, more business schools were established by Chinese universities with one or more Western partners which delivered a “Chinese-style” MBA. According to the Global Competitiveness Index 2016-17, India ranks 81 in Higher Education and Training, with the distance to China (54) much wider. While access to higher education in India remains the privilege of a few, the quality is perceived as fairly good. In particular, India ranks 29th (vs. 43 in China) for the quality of educational system, 44th (vs. 50 in China) for the quality of math and science education and an impressive 43rd (vs. 61 in China) for the quality of its management schools (Global Competitiveness Report, 2016-17). Post liberalization, management education in India as well as China has been growing tremendously. There has been a sharp rise in the number of institutes offering postgraduate education in management and the number of students admitted to such programs in India (Ojha, 2005). Similarly, the number of MBA graduates in China has doubled every two years since 1991. One hears stories about “MBA fever” in China, and the achievements of those who have acquired MBAs from Harvard or from prestigious local programs such as Guanghua School of Management at Peking University, Qinghua University or CEIBS (Tsui, 2004). The opening up to foreign investors also led to the awareness about the gap in the average level of education between the Chinese laborers and their foreign counterparts. However, while China had abundant labor, there was scarcity of skilled labor. Well educated young Chinese preferred to work in foreign-invested firms as they offered more attractive compensation and opportunities for further training than did most Chinese enterprises. Chinese enterprises did not encourage systematic training structures. Since liberalization of trade, technical training is receiving more emphasis as the shortage of technical workers is becoming a serious problem in China. Employees are now encouraged to participate in lifelong learning and organization building. Thus post-1978 Chinese leaders have acknowledged the link between market reforms, socio-economic change, innovation and entrepreneurship. In fact, entrepreneurship has become a catch-all concept for change in Chinese popular culture (Wong, 2008). But according to Zhao and Zhou (2004), despite major changes in the Chinese government's management of the economy toward less centralization and greater autonomy for firms, there is still extensive influence of the state on internal organizational actions. Post reform, more-highly educated, and recently recruited managers had the highest probability of being promoted. However, party membership is still important, albeit slightly less prominent promotional criterion, in the post reform era. Child and Yuan (1996) found that in Sino-foreign joint ventures, new techniques and systems could be introduced without much difficulty and resistance. The major challenge for expatriate managers was to implement the strategic level of learning. That is, the real difficulty was to change the mentality of senior Chinese managers. In the former centrally planned economy, managers of state enterprises in China performed the role of implementing instructions imposed from supervising authorities. The enterprises were under state protection and subsidy. Enterprise managers did not have any chance of making strategic decisions. Under the present economic transformation, enterprise managers need to understand the nature of operating in a competitive environment. They have to develop a more market-oriented way of thinking, and it takes time to achieve the required cognitive change. With regard to India, the liberalization of trade and investment policies has created opportunities for Indian firms to learn, refine, develop and further professionalize mechanisms regarding the effective and efficient management of their human resources. Although labor legislation is yet to be changed, the management practices are undergoing rapid change. Internationally competitive costs and an available pool of highly skilled local labor have contributed to a new image for India as a nation moving away from a traditional agrarian base and heavy industries towards a ‘knowledge driven’ society. The new generation assuming corporate leadership in India is much less ideology- driven and focus on individual self-interest and advancement. However, management education in India faces the problem of shortage of faculty and the research thrust is somewhat weak in most Indian B-Schools, except the leading ones (Philip, 2008). As Weiner (1990) opines “with 90 million of its children outside the educational system, India clearly has a long way to go to build a human resource base that can contribute to its present efforts to move from the state-led autarchic industrialization policy to a market- oriented model in which India competes in a global economy.”

Competitiveness:

Changes in managerial practices obviously have an impact on the competitiveness of firms in particular and the national economy as a whole. The process of liberalization and globalization of the Indian economy has brought about Indian and Chinese companies in intensive interaction with global corporations, professionals, capital, ideas, and practices which in turn led to the development of their competitive capabilities (Ramachandran et al. 2004). In China there is the amazing transformation of the Haier Corporation from one small factory in 1984 into a large transnational company in a span of just 20 years. The corporation has designed three kinds of career development program for all employees. Management staff is continually supervised and evaluated. Promotion is the result of competition. Managers are trained at different departments at a lower level before being promoted to a higher position. Lastly, poor performance leads to removal of personnel from their positions (Zhao, 2005). With China’s entry into the WTO, the sustainability of its economic success has become dependent on how effectively the firms in China, especially the SOEs, restructure themselves on the lines of market economy (Ralston et al. 2006). Ma (2000) as cited in Lin and Germain (2003) opines that pre-reform SOEs in China operated in a “stagnant, information-poor environment”. According to Boisot and Child (1996), the main characteristics of a typical SOE comprised a highly personalized bureaucracy, weak inter-functional coordination, outmoded production technology, inefficient manufacturing methods, and lack of technocratic specialization. In his study on Chinese Industrial Firms under Reform, Byrd (1992) found that there were severe scale diseconomies, with many factories making only a few hundred units a year. The growth of the foreign-controlled business sector has brought supreme challenges to the state enterprises. Formerly protected sectors such as financial institutions, telecommunications, automobiles, pharmaceuticals, and petrochemicals are now open to foreign competition. Also, China’s general business regulatory environment has changed. The introduction of international accounting practices and the enactment of ‘Company Law’ in 1993 as well as the introduction and subsequent revision of the ‘Bankruptcy Law’ throughout the 1990s have laid the necessary infrastructure to punish business failure (Steinfeld, 1998). As such, since 1980’s, the SOE sector has transformed enormously and some enterprises have gained competitive edge such as The China Huajing Electronics Group Corporation, The Sichuan Chemical Works Ltd, and The Jingwei Textile Machinery Co. Ltd. One notable example is the Guangzhou Metro Corporation and its transformation from a poorly performing SOE with a dubious reputation into the best-run mass transit company in China. Guangzhou Metro, together with a global management consulting firm, Booz and Co. began the process of an in-depth organizational transformation in 1999. As a series of steps, the company streamlined its organizational structure, revamped the employee-compensation system by setting up an appropriate performance-appraisal system, developed a learning culture, and addressed workflow improvements by instituting management-process reengineering and rationally structuring the company’s internal communication system to enable a more efficient exchange of information (Tse, 2006). Since its transformation, Guangzhou Metro has been persistently delivering strong performance and has achieved many technical “firsts” in China. Similarly, in case of India, Som (2008) points out that while the initial phase of liberalization brought in competition, the second phase of liberalization process (post 1996-1997) brought a form of hyper-competition-“Liberalization created intensive competition through easier entry and greater foreign participation. It opened up many opportunities for growth because of the removal of artificial barriers on pricing and output decisions, investments, mergers and acquisitions, JVs, technology imports, import of foreign capital etc. It enabled corporations to expand, diversify, integrate and globalize more freely.” In a similar vein, Khanna and Palepu (2004) opine “the success and generally positive reputation of India's software firms - in contrast to most of India's other firms - provides at least surface credence to the idea that the global markets to which these firms are exposed has affected their governance systems”.

Taking an example, in analyzing the success of Infosys, what catches attention is the principles of corporate governance it followed. Infosys was the first Indian company to follow US GAAP (Generally Accepted Accounting Principles) and one of the first companies to offer stock options to all qualified employees, not just senior management. The company's board consists of several outsiders, including several international experts, and its practices for evaluating the performance of board members are considered cutting edge. Infosys has thus developed an unusual reputation for probity, honesty and transparency in all its dealings. The single biggest driver behind the globalization of Indian companies is the liberalization process ushered by the government in the early 1990s. The quality of products by Indian companies was upgraded to compete with the world’s best. At the same time, there was also a move towards innovation (i.e. building R and D capabilities) to cut costs and become globally competitive. Some other beneficial consequences were unforeseen. Overseas companies, which came to India to tap the large Indian middle class market, discovered India’s potential as a low cost but skilled production base to tap overseas markets. Perhaps the best examples are the automobiles and auto component industries. Companies like Hyundai have made India a global hub for small cars (Ramachandran et al. 2004). In fact, as Habil F Khorakiwala, Chairman and MD, Wockhardt Ltd. enunciates, the India Advantage is not only about low wage cost. To quote him- “our management costs, our scientists, our legal brains — all of international calibre — offer a cost to value proposition that cannot be found anywhere else in the world. Even overseas companies have recognized the India Advantage. Leading overseas generic pharmaceutical companies like Teva and Sandoz have set up shop in India to leverage the India Advantage. But, what helped India harness this potential and catapult us to the global stage is Indian entrepreneurship. Our entrepreneurs, many of them first generation businessmen, have been the driving force behind globalization. Look at the pharmaceutical industry Companies like Ranbaxy, Dr. Reddy’s, and Wockhardt could not have grown to what it is today if they had not successfully tapped global markets.”

He underlines a “glocal approach” for managing global business with “globally integrated” management processes, manufacturing, information technology, human resources, and supply chain and “locally responsive” approaches for sales, marketing, regulatory affairs, and intellectual property rights (IPRs). The Global Competitiveness Index (GCI) provides a methodological framework to assess competitiveness defined as “the set of institutions, policies and factors that determine the level of productivity of a country (Geiger and Rao, 2009).” It comprises a large number of drivers of competitiveness organized in 12 categories – the 12 “Pillars” of competitiveness. India ranks 39th out of 138 economies in the GCI 2016-2017, while China stands at 28th place. India lags behind almost all comparators in the areas of health and primary education, labor markets, technological readiness and macroeconomic stability. As a matter of fact, China ranks ahead of India in 10 out of the 12 Pillars – often by a wide margin. However, India possesses a number of competitive advantages in several Pillars, namely Institutions, Financial Market Sophistication, and Innovation.” India ranks 35 in business sophistication, with only one notch below China (34). This strong showing can be attributed to the brisk development of certain key industries such as business processes outsourcing (BPO), IT, telecommunications, retailing, automotive, and pharmaceuticals. Seven Indian companies, mainly oil and gas producers, figure on the 2009 Fortune magazine’s Global 500 list of the world’s biggest corporations (Indian Oil; Tata Steel; Reliance Industries; Bharat Petroleum; Hindustan Petroleum; State Bank of India). Similarly, 10 companies are listed on the Financial Times list (Reliance Industries; Oil and Natural Gas; National Thermal Power; Bharti Airtel; Infosys Technologies; Bharat Heavy Electricals; ITC; State Bank of India; Tata Consultancy Services; Hindustan Unilever). When comparing India and China, Shenkar (2004) writes that India is only gaining in a narrow range - software, back-office operations and call centers - while China is globally competitive in a variety of industries, from textiles to appliances. This makes India's presence felt in the outsourcing market but does not necessarily translate into a country-wide impact. However, India is the only country that can compete with China with some important advantages — a more familiar and predictable legal system, better protection of IPRs, and strong English language skills. And the forces of globalization in the sense of search for more cost effective locations for production can make India a huge global manufacturing and supply base (Ramachandran et al. 2004).

CONCLUSION:

On the whole, we saw that managerial practices in both China and India have transformed due to the pressures of global competition provided by liberalized arrangements of trade and investment. The question is whether the changes in management practices in both nations led to enhanced efficiency and productivity or not? In an astute analysis, one should avoid making simplistic conclusions as to which country is performing better. Keeping in mind the 12-year gap in the initiation of economic reforms between India and China, India’s lower productivity growth rates are quite obvious. Besides, India also has its competitive advantages in terms of managerial patterns which might change the balance in favor of India in the long run. In the medium-term, however, China seems well poised to maintain its higher position while advancing and enhancing its growth potential at a fast pace.

REFERENCES:

1. Malik, R. (1997) Chinese Entrepreneurs in the Economic Development of China. London: Praeger.

2. Reynolds, P.D. et al. (2000) Global Entrepreneurship Monitor: 2000 Executive Report. Kansas City, Kauffman Center for Entrepreneurial Leadership.

3. Zhao, S. (2005) Changing Structure of Chinese Enterprises and Human Resource Management Practices in China. In Smyth, R et al. China’s Business Reforms: Institutional Challenges in a Globalized Economy. London, New York: Routledge Curzon.

4. Davis, H.J et al. (2006) Management in India: Trends and Transition. New Delhi: Sage Publications.

5. Storey, J. et al. (2008) The Routledge Companion to Strategic Human Resource Management. New York: Routledge.

6. Chen, M. (1995) Asian Management Systems: Chinese, Japanese and Korean Styles of Business. London and New York: Routledge.

7. Weber, M. (1930) Protestant Ethics and Spirit of Capitalism.

8. Selmer, J et al. (1994) Managerial Behavior of Expatriate versus Local Bosses. International Studies of Management and Organization, 24(3).

9. Park, S.H. and Luo, Y. (2001) Guanxi and Organizational Dynamics: Organizational Networking in Chinese Firms. Strategic Management Journal, 22(5).

10. Tsang, E.W.K. (1998) Can guanxi be a Source of Sustained Competitive Advantage for Doing Business in China? The Academy of Management Executive, 12(2).

11. Hofstede, G. (1991) Cultures and Organizations: Software of the Mind. London, UK: McGraw-Hill.

12. Budhwar, P.S. and Bhatnagar, J. (2009) Changing Face of People Management in India. New York: Routledge.

13. Lynton, N. and Singh, J.V. (2010) Race to the Top: What Sets China and India Apart? India Knowledge@Wharton.

14. Cappelli et al. (2010) The India Way: How India’s Top Business Leaders Are Revolutionizing Management. Boston, Massachusetts: Harvard Business Press.

15. Gardella, A. (2010) Your New Management Role Model: India. Excerpts from interview with Harbir Singh. www.bnet.com.

16. The Economist. Islands of Quality May 31, 2001.

17. Kayne, J. (1999) State Entrepreneurship Policies and Programs. Kansas: Kauffman Center for Entrepreneurial Leadership.

18. Pearson, M. (2005) The Business of Governing Business in China. World Politics (57).

19. Weiner, M. (1990) the Child and the State in India. New Jersey: Princeton University Press.

20. Mukherji, R. (2004) Privatization, Federalism and Governance. Economic and Political Weekly 34(1).

21. Rudolph, L. and Rudolph, S. (2008) Explaining Indian Democracy: A fifty year perspective 1956-2006. New Delhi: Oxford University Press.

22. Dayal, I. (2002) Developing Management Education in India. Journal of Management Research, 2(2).

23. Philip, J. (2008). Management Education in India. Paper presented at the XIII International Study and Practical Conference- “Competitiveness in Information Society: BRICS-countries Experience” held at State University of Management, Moscow, Russia.

24. Gupta, R. (2001) Creating Indian entrepreneurs. In Lal, A.K. and Clement, R.W. Economic Development in India: The Role of Individual Enterprise (And Entrepreneurial Spirit), Asia-Pacific Development Journal, 12(2).

25. The Global Competitiveness Report 2016–2017, World Economic Forum.

26. Ojha, A.K. (2005) Management Education in India: Protecting it from the Rankings Onslaught, Decision, 32(2).

27. Tsui, A.S. (2004) Organization and Management in the Midst of Societal Transformation: The People's Republic of China in Organization Science, 15(2).

28. Wong, L. (2008) Managing for “creativity”: MBAs and the transfer of creativity, Chinese Management Studies 2(2).

29. Zhao, W. and Zhou, X. (2004) Chinese organizations in transition: Changing promotion patterns in the reform era, Organization Science, 15(2).

30. Child, J. and Yuan, L. (1996) Institutional Constraints on Economic Reform: The Case of Investment Decisions in China Organization Science, 7(1).

31. Ramachandran, J. et al. (2004) Indian Companies in Overseas Markets: Perspectives, Patterns, and Implications, Vikalpa, 29(4).

32. Ralston, D.A. (2006) Today’s State-Owned Enterprises of China: Are They Dying Dinosaurs or Dynamic Dynamos? Strategic Management Journal (27).

33. Lin, X. and Germain, R. (2003) Organizational Structure, Context, Customer Orientation, and Performance: Lessons from Chinese State-Owned Enterprises. Strategic Management Journal, 24(11).

34. Boisot, M. and Child, J. (1996) From Fiefs to Clans and Network Capitalism: Explaining China’s Emerging Economic Order. Administrative Science Quarterly, 41 (4).

35. Byrd, W.A. (1992) Chinese Industrial Firms under Reform. New York: Oxford University Press.

36. Steinfeld, E.S. (1998) Forging Reform in China: The Fate of State-Owned Industry. Cambridge: Cambridge University Press.

37. Tse, E. (2006) Transformation of a Chinese State-Owned Enterprise: Guangzhou Metro Corporation. Greater China: Booz and Company Inc.

38. Som, A. (2008) Innovative human resource management and corporate performance in the context of economic liberalization in India. The International Journal of Human Resource Management, 19(7).

39. Khanna, T. and Palepu, K.G. (2004) Globalization and convergence in corporate governance: evidence from Infosys and the Indian software industry. Journal of International Business Studies, 35(6).

40. Geiger, T. and Rao, S.P. (2009) The India Competitiveness Review 2009. Geneva: World Economic Forum.

41. Shenkar, O. (2004) The Chinese Century: The Rising Chinese Economy and its impact on the Global Economy, the Balance of Power, and Your Job. Pearson Prentice Hall.

Received on 02.04.2017 Modified on 24.04.2017

Asian J. Management; 2017; 8(3):912-920.

DOI: 10.5958/2321-5763.2017.00140.8