A comparison between the prc's the Indonesia's textile-related industry's performance after the abolition of the multl fiber agreement"-imposed quota in the global free trade era"

Abstract

This study attempted to investigate the significances of how firms manage their innovativeness and capabilities of their managerial resources to cope with the challenges of the free global trade era after the demise of the MFA's imposed- quota, within the confines of powerful social and political institutions in a transitional economy like the People's Republic of China (PRC) and Indonesia. The industry selected was PRC's textile and apparel industry in comparison with Indonesia's textile-related industry as the largest export top scorer of the country. The "Hongdou Grup" has been selected as an illustration of how hard actually their strive was in order to gain considerable market presence surviving hard-core social- market regimes to the present-day powerful socio-political institutions in China, basing on the capabilities of the management of the firm in creating value through innovations along the contingency theory platform. The conclusion shows that, basing on the contingency approach, strategic choices have a role to play. Although business and institutional environments do have significant influences on firms' performance in a transition economy, firms' performance can be improved through strategic managerial action as an influential determinant also. Indonesia' textile and apparel industry might want to dig some benefits from t!te Hongdou experience as they see fit. Keywords: Capabilities, China, contingency, emerging markets, globalization, Hongdou group, Indonesia, textile and clothing industries, transitional economies) INTRODUCTION Globalization, as indicated by the increased economic interdependence among nations, is a poorly understood phenomenon while becoming one of the key buzzwords of modern times. If globalization still means different things to different people, its manifestations are found everywhere today. To the consumers, globalization means more choices, lower prices, and an increasingly blurred national origin for products and services. For producers, globalization is sometimes viewed as a threat, badly affecting market-shares and opportunities across borders (Hill, 2005; Shenkar and Luo, 2004) . In the external international business environment, adoption of globalization is likely driven by two key trends that have substantially reduced the transactions costs of foreign market expansion. The first is the globalization of markets, which involves countless firms in international sourcing, production and marketing as well The key drivers of globalization are doubtlessly the multinational enterpriseslMNEs, as they foster increased economic interdependence among national markets. The largest 500 MNEs account for over 90% of the world's stock of foreign direct investment/FDI and they conduct between themselves more than half the world's trade in goods and services (Kotabe and Helsen, 2004; Rugman, 2000). Innovation, knowledge and' capabilities have been central themes on the strategy and performance of the firms, especially for firms that operate internationally from an early stage in their development. Despite the sometimes scarce financial, human and tangible resources which characterize most new business, these early internationalizing firms leverage innovativeness, knowledge and capabilities to achieve considerable international market success early in their