Using Ownership

Incentives in China:
An International
Operations Case
Study

By David Iskander
September 24, 2013

1.How could PeriRadens founder and CEO export a local culture of employee ownership to
China?
PeriRadens success in Silicon Valley is quite eye-catching. Through the growth of a
new company, flexibility in the early years has been a vital key of their success. The roots of
the ownership culture started in Silicon Valley have a very tangible and understandable risk and
reward system. Stated in the case with a one-year cliff and five-year vesting period during the
second year, it is a worthwhile venture for start-up investments.
Meanwhile, the company hopes to expand this business and company culture to
China. Practically, it takes a bit of adjustment to bring the same risk and reward system to the


Chinese office. With a focus on different incentive programs and Chinese lifestyle adjustments,
the program could easily be replicated for the Chinese workforce. On the wider perspective, it
becomes more complicated. That is, the synergy, participation, and unified motives for the
companys vision are imperative for the success of created an ownership culture in both
offices. To do this, PeriRaden must look at the cultural, political, and legal aspects to design an
effective employee ownership culture.
Concerning a companies culture - its values, beliefs, practices, rituals, and customs -
PeriRadens decision to take an employee ownership culture to China will need attention and
direct actions focusing on particular effects or purposes of these actions (Xiaohui). Chinas
political, legal, societal, economical, and individual ambitions all guide the success or failure of
an employee ownership culture in China.
Before moving forward, it is important to understand the absolute critical goal to the
business to have an employee ownership culture, not just in Silicon Valley, but also in the
Chinese office. That is, its importance to the CEO and founder of PeriRaden, Roy Weber, to
have this culture consistent through every office. There are benefits and disadvantages to vary
company culture from one office to another, especially if they are located in different nations
(Scheffknecht). The underlying factor to keep the same values throughout the organization in
different national offices is a key ability to succeed (Scheffknecht). This can be done through
looking at what the Chinese culture values compared to the Silicon Valley employees current
plans and procedures.
Using what Geert Hofstede underlined in his research about the main differences in
culture (power distance, individualism, masculinity/femininity uncertainty avoidance, and long-


term orientation), it is clear that even if a growing percentage of Chinas major state-owned
enterprises (SOEs) are nurturing a employee ownership culture that motives can still be
different and effect the absolute critical goal of the spread of this culture (Hofstede).
PeriRaden could begin to export a local culture of employee ownership to China as it
begins to understand and educate its current workforce on the similarities and differences of
the Chinese culture and lifestyle. Beginning with a deep understanding of the way of life for
the Chinese employee is the first stepping-stone in setting out to have a specific company
culture in China. More so, PeriRaden is looking not just for a similar company culture but also a
unified culture. An employee ownership culture can have many different variations. Thus, it is
important for the United States office and the Chinese office to build a synergy through its two
locations. This starts with the Silicon Valley office being educated about the Chinese lifestyle
to understand their motives and day-to-day work environment while keeping clear lines of
communication through both offices including video conferencing.
The importance of this understanding starts with a basic example of personal
motivation. In America, the rank of a more masculine society ranks at a 62 (Hofstede). This
American behavior is based off shared values to strive to be the best and winner takes all
(Hofstede National Culture: United States). Compared to the Chinese values, the United States
ranks very close. China ranks at 66, which is a masculine society stated by Hofstede as a
success oriented and driven society. Yet, a bit different, the Chinese society will put service
and work ahead of leisure time and family time. Thus, as both cultures strive to succeed and
be the best, each culture looks at the end result differently (Scheffknecht). Americans value
being the best to live a comfortable life (Cooper). On the contrary, the Chinese culture is much


closer on the continuum of this scale to live to work (Cooper). This example exemplifies the
simple yet important notion of understanding the Chinese Culture to create a synergy between
the American and Chinese offices that branches out of personal motivation into many other
concerns.
Another inclusive piece of this research about the Chinese culture and lifestyle draws
attention to what the future holds for the country of China. Emphasizing the current culture is
Chinese rich and long history (China). The Chinese economy has developed from just
domestically owned operations to both domestic and internationally owned operations
(Xiaohui). This move signals an intentional step to play a key role in the global stage of
business and dominance throughout the future of the world (Xiaohui). Additionally, this move
signals China promoting foreign investment and foreign growth inside the borders of China
(Cater, Gilly, and Graham 182). With the encouragement and positive outlook on investments
in China, the effort to expand the office into China will not face as many issues and obstacles.
Lastly, Chinese governments hold strong rules to these types of expansions to control
growth of international organizations in China; yet, overall, China has given up some of its
power to be considered a player in the future of global success and superpower to come
(Xiaohui). On a broad overview of the entire nation of China, the country has given up some of
their sovereignty to attain mutual goals with other nations (Cateora, Gilly, and Graham 160-
161). In depth, PeriRadens expansion into China is subjected to Chinese law on stock
ownership of foreign nations.
Even though China has taken steps to open up to foreign investment and promote
technology-based businesses, it has also taken legal steps to ensure taxes on China-sourced


income and protect domestic businesses (Gelatt). As PeriRaden wans to build a strong
ownership culture in China, the company will need to look into the different legal and political
structures and evaluate its success. Due to the limitation to invest in foreign stock and political
instability, the Chinese office will need to build credibility through proper motivational
channels like stock options, proper work environments, flexibility, and many other facets to
build trust among all necessary parties.
In essence, the way to take an ownership culture to China that is unified with the Silicon
Valley office is to have a deep understanding of culture, current political and legal system, and
underline the deep values of PeriRaden as a technology company.
2. What factors affect Roy Webers decision to offer the Chinese team similar company
ownership as the Silicon Valley team?
To address the factors that are affected by Webers decision begins and end with the
larger issues of building a single vision about the meaning of employee ownership. Even with
many other factors that play a vital role in the success of this decision, brining an ownership
culture to the Chinese office starts with the understanding of the Chinese and American view of
perceived ownership and actual ownership (Mackin). As Mackin discusses the importance
for an ownership culture to have a clear meaning, he addresses that cultures inject different
formalities and impressions. Likewise, in a single business with a vision that needs to be
unified for the success of the business, Roy Webber needs to address these factors with all his
employees in both the American and Chinese offices.
In detail, Mackin states that the perceived ownership relates to the accessible
impressions or definitions that employees of any rank in the organization bring to the
employee ownership settings (Mackin). The factor that Roy Weber now must consider would


be if the United States office and Chinese office both feel, at different levels of employment,
the open ability to take self-initiative and be creative in their specific duties. On the other
hand, Mackin discusses that the perception of actual ownership is more along the lines of, a
formal model about the various dimensions of the ownership idea (Mackin). While this is
debatable, the difference is distinct. The rights and responsibilities of the employees will be
altered in the Silicon Valley team once the Chinese team joins along. Due to a sense of pride
and empowerment, the Silicon Valley team can either support or undermine the new office.
Minor factors like the spread of ownership between more parties, the weight that now
will be carried by the Chinese office, and many more negligible factors will play a large role in
the success or failure of this venture into China. Overall, the perception of ownership in Silicon
Valley needs to respect the new entrants of the Chinese office as team members not
trainees. Likewise, the Chinese office will need special attention to make sure that the
perceived idea of ownership through shares is a link to the participation of the Chinese
office. Their are many easy steps to offset the negative pieces of expansion by reminding the
team in Silicon Valley that the expansion means the company has a bigger capacity to deal
with clients and thus increase overall profits not just in the Americas but also the Asian
frontier. In summary, Roy Weber will have to take the initiative to foster synergy between both
offices creating a unified definition of ownership.

3. Does an ownership culture necessarily require stock ownership by employees?
Considering this question, it deals with an ownership culture in any business. The
bottom line is that in an ownership culture it does not require stock ownership. Outside of this


case, firms have built strong ownership cultures through empowerment and a feeling of
passion through what the business offers the world. Non-profits are well known for giving their
employees a reason to come to work everyday and feel they are titled in the business. More
so, Mackin also notes in his article that business ownership is both fundamental on
organizational and economic life (Mackin). As employees are making a sufficient salary to
supply their basic needs (economic aspect), it is important for the company to build up a sense
of membership in an ownership culture outside of stocks. In the same way, stock ownership on
its own does not suffice to create an ownership culture. An ownership culture is not grounded
on the fact that employees own stock. Many company employees own stock yet never feel as
if they are members. Thus, it is important to foster an ownership culture outside of
stocks. Owning stock doesnt mean an employee feels part of the company. That is, an
ownership culture is not determined only by how much stock you own.

4.What questions should Roy ask, and also of whom, to better evaluate this opportunity?
There are many questions concerning this topic. Nevertheless, in business, much of the
stake cant be measured until logistical steps are taken. Thus, the focus of his questions should
be about possibility and accessibility of growth and potential in China looking forward.
Roy Weber has some knowledge so far. First and foremost, technology enterprises are
promoted in China. Also, the success of SOEs in China with a similar culture reveal that the
possibility for success is quite accessible in China. Furthermore, an in-depth study about the
political forecast of the Chinese government is needed. Due to the instability and whether or


not they promote foreign investment in China would be an important concern for the decision
to invest and how much to invest.
Also, due to short-term goals by many Chinese, the participation in an ownership
culture can be superficial. Roy Weber would be well off to ask and discuss with professional
Chinese businessmen who are indigenous to the country about signs and symptoms of real
success and failure of the Chinese office. A vital concern would be what is called saving face
(Cooper). With the impression of saving face and a motive of short-term goals, the
participation of Chinese employees could seem outstanding yet be a cover up that they may
soon be leaving.
The question also arises about location and job demand. Will the Chinese workforce be
looking for this opportunity and if so, how many. Also, how does the view on foreign
technology companys look to indigenous people of the land. Looking into statistic analysis
about Chinas population and specifically the location of the office is another important factor.
Due to religious like values, will the workforce, even the younger employees be proud
of their job or be ashamed of their job. This question is easy to over look but is needed to
determine if an ownership culture is even possible. With that, in the long-term, will there be a
sustainable competitive advantage for the corporation to last. This can also be looked at
through demographic statistics and talking to people and business owners in the area.
Politically, determining the legal atmosphere of Chinas dealings with foreign investors
does the future look bright and sunny or dark and gloomy. That is, does the future hold
opportunity to grow or possible restrictions to increase. Lawyers who deal with business law in


China will have the best ability to clear up these maters of possibility and what the future may
hold for China.
These questions all impose different applications and challenges for PeriRaden to
expand to an international level. Overall, the questions need to have a short-term and long-
term orientation to see if the investment is worthwhile.

5. How should Roy prepare his American Team, who has worked diligently to build PeriRaden
to this point?
Expanding a domestic firm internationally is a giant step of transition for any company,
large or small. Considering that PeriRaden is come to what it is by an ownership culture states
that the employees take pride in the job they have done. It shows that the employees feel a
sense of involvement. Thus, sending out the opportunity to new members easily can be very
threatening. Considering this issue, understanding the Silicon Valley micro-culture is a great
place for Roy Weber to start to prepare his already diligent workforce.
Joseph Weiss and Andr Delbecq describe the Silicon Valley culture as youthful and full
of skeptics who question the solutions of the past (Weiss and Delbecq). This implication for
Roy Weber constitutes a hearty approach to rank of ownership. In a sense, the people who
have been along since the beginning will expect more from the business. This is against the
idea that the Chinese office may boom in sales greater than Silicon Valley and many other
similar situations that may arise.
Another concern that Roy Weber should prepare to address is if the China office can
keep up with the Silicon Valley culture of intuitive thinking. Constant change and forward
thinking is applauded in the home office. In China, it may be a harder task to switch ways of


thinking to fit what sells best due to cultural differences or even just cultural separations that
are not equal at any given time.
Therefore, Roy should practically meet and discuss openly with the Silicon Valley team
about this venture and the opportunity in expanding to China. With that said, the Silicon
Valley culture caters this type of approach by its basic value of confrontation. Roy should
expect opposition to this move not just from employees but also investors. In some aspects it
threatens the power of the hardworking employees who built PeriRaden to this point. More so,
the cost versus benefit concern will need to be addressed to the investors not just in the short-
term but also the long-term. PeriRaden has one foreign investor that helps but the move
needs to be justified and profitable for all.

6. Were there any concerns in expanding an employee ownership culture, emblematic of
Silicon Valley startups, overseas to China?
Delbecq illustrates Silicon Vallley start-ups for testing the norm, creative problem
solving, and the ability to arrive at a breakthrough technical solution through quality ideas.
Currently, China is still under heavy scrutiny by government officials. The government does
understand the benefits of opening the door to foreign investment yet tries to be conservative
with their approach by keeping so many laws on foreign businesses (Gelatt). However, just as
Silicon Valleys history went against the norms of the society, the promotion of tech companies
in China signals a clear indication that the past will not determine the future.
Expanding to China from the Silicon Valley with an employee ownership culture deals
with legal, political, and economic issues but more so a psychological shift in ideology and
thinking (Mackin). Silicon Valley start-ups value risky and unpredictable futures. China ranks,


on Hofstede's cultural differences approach, on uncertainty avoidance very low. China, stated
by Hofstedes research, shows that entrepreneurial minds are supported and
encouraged. Depending on many different nations, this is not always the case. That is why the
move to China is nothing shy of a great venture for both the Silicon Valley office and the soon-
to-come Chinese office.

7. Lastly, how might Roy webers decision look in five years or more?
The implication of bringing an ownership culture to China creates a whole array of
options for the future. Factors like technology advancements, political landscapes, and overall
business competitiveness and expansion for PeriRaden are some factors that will be influenced
by Webers decision. Overall, the absolute critical goal of an ownership culture in PeriRaden as
a technology company is created to motivate a passion by rewarding diligent
participation. This type of empowerment is favorable in a technology industry were
breakthrough and advancements are highly rewarded valued and necessary for the success of
the company (Weiss and Delbecq).
In addition, depending on the results of the decision and its ability to foster growth in
the company (not harm), Roy Webers company may be looking to expand further. That means
the same task of entering a new culture and environment that looks at ownership
differently. More so, the synergy of PeriRaden is an important piece of a prosperous ownership
culture. Competitiveness is a huge aspect in the American society and whether or not China
has a big fuel to compete, the different offices need to keep at eye level because they are on
the same team (Hofstede). Implications for this culture to be in both offices in the long-term


will deal with many external factors if the internal flow of information and communication is well
rounded.
As China is a more long-term oriented culture, this could have obstacles
(Hofstede). China ranks very high on a long-term oriented society with the need for stability
and structure. Meanwhile, the Silicon Valley office has a more up-to-the-minute type of
attitude that demands ongoing innovation. Plus, there are more issues concerning this type of
culture and obstacles that come along with an expansion like this; but overall, this decision has
many long-term benefits.
With a deep understanding of both cultures and nurturing both on a case-by-case basis
allows Roys decision to sprout new ideas and ways of doing business with all its
employees. This type of culture asks employees to give more of their energy to earn a better
profit (Mackin). This type of culture invites community across cultural differences and focuses
on similarities. The implication of this type of culture for a technology-based company that
needs to stay ahead of the curve to keep up in the demanding business world fosters the right
characteristics and growth opportunities to be taken as it focuses on everyone succeeding
through personal effort.
In essence, Roy Weber, CEO and founder of PeriRaden, is asking of his employees to
build a consensus as a workforce about the meaning of ownership, to take hold of it, and to
reap the benefits of doing so. In a technology based firm, this type of venture to create a
similar culture in China is an exceptional decision that fosters the growth that Roy Weber wants
and is seeking in his company PeriRaden.



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