Golden Peak Electronics

For the exclusive use of S. Mivehchin, 2022.
HKU857
KULDEEP KUMAR
GOLD PEAK ELECTRONICS: R&D

GLOBALISATION FROM EAST TO WEST
Gold Peak Electronics (“GPE”) was a multinational company (“MNC”) that was among an
elite group of Hong Kong electronics manufacturers. Despite the global recession in 2008, its
parent company, Gold Peak Industries, had achieved US$189.7 million in revenue 1
worldwide, with over 70% of profit attributed to its electronics division.2 Since its founding in
the 1960s, it had grown to become one of the few locally grown, technologically advanced
MNCs that designed, manufactured and sold premium professional and home electronics
products.
GPE’s growth included acquisition of two high-end loudspeaker companies in the UK in 1992:
KEF Audio and Celestion International. Both were highly reputable electronics brands with
well established research and development (“R&D”) capabilities. Brian Li, managing director
of Hong Kong-based Gold Peak Industries Group, hoped to develop GPE’s own brand of
innovative, high-end loudspeakers. In doing so, he aimed at leveraging the established KEF
and Celestion brands, as well as their technology, continual technology development,
distribution channels, talent, R&D expertise and markets. New R&D centres were established
in Hong Kong and mainland China to facilitate this strategy. Each of the three locations was
to act as a specialised R&D site that performed specific R&D functions.
However, GPE had underestimated the complexity of restructuring and integrating the two
newly acquired companies into its existing business. GPE’s management was experiencing
difficulties in creating an environment for knowledge sharing and knowledge creation
between multiple sites that were both geographically and culturally distant. While over the
years the level of R&D activity had gradually begun to increase in the Hong Kong and China
R&D units, the UK research centre continued to be the innovation hub for the company’s
high-end products.
1
GPE (2008) “Financial Highlights”, http://www.gp-industries.com/finance_03.htm (accessed 18 June 2009).
2
GPE (2008) “Financial and Statistical Highlights”, http://202.66.146.82/listco/hk/goldpeak/annual/2008/EWF106.pdf (accessed
18 June 2009).
Maya Kumar prepared this case under the supervision of Kuldeep Kumar for class discussion. This case is not intended to show
effective or ineffective handling of decision or business processes.
© 2009 by The Asia Case Research Centre, The University of Hong Kong. No part of this publication may be reproduced or
transmitted in any form or by any means—electronic, mechanical, photocopying, recording, or otherwise (including the
internet)—without the permission of The University of Hong Kong.
Ref. 09/446C
This document is authorized for use only by Sepideh Mivehchin in Global Economic Competitiveness taught by Sung Min Yoo, Trinity Western University from Mar 2022 to May 2022.
09/446C Gold Peak Electronics: R&D Globalisation from East to West
Engineers in Britain, apprehensive about their job security and losing their trade secrets to
off-site colleagues, were hesitant about sharing their knowledge and expertise with their
Chinese associates. What would be the best way to improve collaboration between the various
sites? Could GPE successfully overcome the geographical and cultural distances between the
UK, China and Hong Kong—distances that made it difficult for GPE to create trust and
cohesion between team members and which limited knowledge exchange and collaboration?
R&D Globalisation
In the late 1980s, high-tech companies faced increased pressure to adopt global strategies for
R&D to remain competitive. 3 In the early stages of globalisation, R&D was typically
internationalised to gain access to foreign markets. But companies soon realised that
globalisation also provided increased access to new knowledge and research results, and
enabled companies to move products from development to market at a much more rapid pace.
The opportunity of globalisation created a need for continuous innovation to differentiate
companies’ products and services, lower costs, and create a range of products to meet the
needs of customers worldwide.
Initially, companies focused on offshoring tangible processes such as manufacturing,

information technology (“IT”) activities, and basic accounting and finance. R&D, on the other
hand, was relatively abstract, complex, and involved sharing both explicit and tacit
knowledge. As travel and communications became easier in the 1990s and 2000s, more
intellectually intensive processes such as R&D, innovation and production engineering
became part of companies’ global strategies to keep up with and surpass competitors.4
Globalisation of R&D allowed companies to tap into new centres of knowledge, reduce costs
and commercialise products at a much faster pace in foreign markets. 5 Furthermore,
companies were able to take advantage of lower labour and operational costs and the fresh
knowledge that could be gained by working with talent from other parts of the globe.6 One
common way to globalise R&D was to acquire or merge with companies with proven
innovative capabilities. Another way was to outsource R&D tasks to both onshore and
offshore companies that offered their intellectual services for product development in high-
tech industries such as healthcare and medical products, IT, and telecom products and
systems.7
However, cost savings were not always the primary reason for seeking to globalise R&D.
With the high transaction costs incurred by such necessities as the setup and maintenance of
networks for IT communications, increased travel, management and co-ordination, and
rapidly increasing global pay scales, most companies used globalisation of R&D as a long-
term strategy to compete for intellectual resources and talent in the global markets.8
R&D Globalisation in Hong Kong’s Electronics Industry

The electronics industry in Hong Kong developed at the end of the second world war when
the city found it had limited capital, lack of land and other resources, and relative isolation
3
Chiesa, V. (1996) “Strategies for Global R&D”, Research Technology Management, 39 (5), pp. 19–25.
4
Bloch, M., Dhankhar, A. and Narayana, S. (2006) “Pharma Leaps Offshore”, McKinsey and Company; Du Pre Gauntt, J. (2004)
“Harnessing Innovation: R&D in a Global Growth Economy”, Economist Intelligence Unit.
5
Kuemmerle, W. (March–April 1997) “Building Effective R&D Capabilities Abroad”, Harvard Business Review, pp. 61–70.
6
Boutellier, R., Gassmann, O., Macho, H. and Roux, M. (1998) “Management of Dispersed Product Development Teams: The
Role of Information Technologies”, R&D Management, 28 (1), p. 13.
7
Chiesa, V., Manzini, R. and Pizzurno, E. (2004) “The Externalization of R&D Activities and the Growing Market of Product
Development Services”, R&D Management, 34 (1), pp. 65–75.
8
Du Pre Gauntt, J. (2004) “Harnessing Innovation: R&D in a Global Growth Economy”, Economist Intelligence Unit.
from other markets. Only a very narrow range of industries could be developed to operate
under such tight conditions. Simple, low-tech electronics manufacturing was one such
industry. Initially, these electronics companies were small, family-owned and labour-intensive.
The electronic product designs usually came from customers that owned electronic brands or,
in some cases, were reverse engineered. There was usually little capital invested in advancing
the technology of manufacturing operations.9
From the 1960s through the 1990s, Hong Kong entrepreneurs were quite successful in
pursuing their “high IQ, low technology” strategy.10 Traditional Hong Kong businesses spent
little time and money on R&D, technology and the innovation process. With an economy
accustomed to experiencing frequent random external shocks, most Hong Kong entrepreneurs
preferred quick returns on their investments. These entrepreneurs were not usually rewarded
for product innovation, and instead favoured low-tech industries with lower entry barriers.11
From the start, Hong Kong’s electronics industry was global in a sense, due to its reliance on
export markets. However, the eventual globalisation of R&D in the Hong Kong electronics
industry stemmed from a history of high competition and did not become important to
companies until several years after the industry was considered to be well developed.
American manufacturers began establishing electronics businesses in Hong Kong in the 1960s.
These companies took advantage of the high volume of cheap labour that came into Hong
Kong from mainland China, and played a key role in establishing Hong Kong’s domestic and
export electronics industry.12 In the early 1970s, however, a number of factors limited the
growth of Hong Kong electronics manufacturers, including an increase in restrictions on
mainland Chinese workers being able to emigrate to Hong Kong, a scarcity of educated
engineering professionals that could develop complex consumer products, and competition in
the electronics industry from other low-cost countries such as Taiwan and South Korea.
Instead of growing in scope and size, Hong Kong companies continued to manufacture simple,
low-tech products and chose not to develop their own global brands.13 With little profit and
the high cost of land limiting the reinvestment of money back into companies, Hong Kong’s
electronics industry quickly fell behind in technological development.14
To improve the situation, the Advisory Committee on Diversification was established by the
Hong Kong government in 1979. The goal of this committee was to define the need for a
technological upgrade of the industry. Despite the committee’s good intentions, however, the
opening up of mainland China to foreign investment in the 1980s delayed the development of
R&D in Hong Kong.15 At the time, it was easier for Hong Kong electronics manufacturers to
compete on lower costs by establishing factories in mainland China than to put their efforts
into R&D. Hong Kong businessmen had one major advantage over their South Korean,
Japanese and Taiwanese rivals. Culturally, they were close to and compatible with their
relatives and friends from across the border in Guangdong (Canton). Also, compared to the
Taiwanese, they were politically more acceptable to the mainland Chinese government. The
combination of the Chinese government encouraging foreign investment and lower labour and
operational costs in China, management expertise and business experience from Hong Kong,
and little competition from other international competitors, Hong Kong’s electronics industry
9
Davies, H. and Ko, D. (2006) “Up-Grading and Performance: The Role of Design, Technology and Business Strategy in Hong
Kong’s Electronics Industry”, Asia Pacific Journal of Management, 23, pp. 255–282.
10
Ibid.
11
Ibid.
12
Li, B. (2006) “The Globalization Strategy for a Small Hong Kong Electronic Manufacturer”, City University of Hong Kong.
13
Company interview on 10 January 2007.
14
Ibid.
15
Davies, H. and Ko, D. (2006) “Up-Grading and Performance: The Role of Design, Technology and Business Strategy in Hong
Kong’s Electronics Industry”, Asia Pacific Journal of Management, 23, pp. 255–282.
was able to establish manufacturing facilities quickly in mainland China. This further delayed
Hong Kong companies’ taking on the risks and costs of developing their own R&D
capabilities.16
In the 1990s, however, the market changed again and competition facing Hong Kong
manufacturers increased substantially. Supported by the Chinese government, mainland
Chinese companies began manufacturing electronics at greatly discounted costs. Furthermore,
with increasing globalisation, competitors from Japan, Taiwan and Europe were also able to
set up production and manufacturing facilities in mainland China. 17 These changes were
instrumental in Hong Kong once again losing its dominant position in the electronics
marketplace.18
Meanwhile, companies in the Hong Kong electronics industry were constantly reminded of
the results of the Diversification Report of 1979, which suggested that Hong Kong should
continue to strive to be innovative and establish a high-tech industry.19 To combat increased
competition, many Hong Kong electronics companies began to realise that they would have to
either find ways to cut costs or somehow differentiate themselves from the pack of Chinese
and other Asian manufacturers. With many electronics companies in Hong Kong still
operating as simple sub-contract manufacturers, the desire to add more value to their
businesses through brand-building and globalisation appeared to be one of the most strategic
and viable ways of promoting growth. One way to achieve these goals was for companies to
globalise R&D, taking advantage of expertise and knowledge acquired from around the globe.
Considerations in Moving R&D to China

Although China had already begun seeding a number of research programmes in the late
1980s, it was not until the mid- to late 1990s that R&D firms really began to flourish.
Businesses saw advantages of decreased costs, access to graduate engineering and scientific
talent, government support, and a huge domestic market. By 2008, 920 MNCs had established
1,100 R&D centres in China. 20 However, there were a number of challenges involved in
globalising R&D.
Resistance from Employees

MNCs headquartered in the West often encountered resistance among their home-country
employees to globalisation of R&D and innovation. While initially only routine business
functions were offshored, employees became concerned when they realised that R&D (in
their view, the “brains” of the company) could also be moved offshore.
Dealing with Diversity

As R&D became more global and involved parties from increasingly diverse backgrounds,
explicit communication became even more important for companies. Although innovation
could be stimulated and diverse expertise could be accessed from around the world,
successful product design depended on efficient communication and collaboration.
The type of information and how it was structured, specified and communicated, as well as
how tacit the knowledge to be shared was, affected the ease of communicating with other
16
17
Ibid.
18
Davies, H, and Ko, D. (2006) “Up-Grading and Performance: The Role of Design, Technology and Business Strategy in Hong
Kong’s Electronics Industry”, Asia Pacific Journal of Management, 23, pp, 255–282.
19
Ibid.
20
Zinnov (2009) “China’s R&D Offshoring Market is Catching Up Fast with India: Zinnov”,
http://www.zinnov.com/event.php?ev_id=31 (accessed 18 June 2009).
parties. The more complex (or “sticky”) the information, the more difficult it was to transfer
from one party to another.21
Furthermore, the mode of communication (ie, whether the information was transferred
through videoconferencing, in-person meetings, e-mail or telephone) had an effect on the
ability to communicate knowledge. Depending on the complexity, sensitivity and urgency of
the information, the need for non-verbal cues, an individual’s response to the communication
method, and the extent to which the receiving party knew and understood the perspective of
the communicator affected how effective these communication modes were in conveying a
particular message.
Challenges of Distance in Collaboration

What constituted the distances between R&D sites was often more complex than just
geographic and time differences. This made innovative collaboration even more challenging.
Such distances included: cultural and language distances, differences in work habits,
infrastructure and issues with technology used for communication, differences in education
and training backgrounds, differences in work processes and governance at different sites, and
regulatory differences.22
Geographic distance traditionally created both technological and social limitations in

communication. Face-to-face interaction was thought to be essential in the beginning stages
of a relationship and early co-located interaction was particularly important to achieving
successful collaboration.23 While virtual teams could be employed, there were cultural and
work-habit differences that inhibited collaboration and mutual trust. Furthermore, time
differences affected scheduling times for meetings, and synchronising the discussion of
spontaneous thoughts. This created further difficulties in managing global projects. Typically,
IT was used for global project management and for establishing virtual teams. However, the
use of technology was not always well managed.24 The establishment and management of
virtual teams needed to take into consideration the level of communication between team
members, availability of and facility with IT instruments (eg, e-mail, R&D databases for
common access to project data, and groupware for electronic brainstorming, including
teleconferencing and videoconferencing), and the security of the technology.25
How different sites were governed and the views regarding these regulations also created
distance between R&D sites. Contrasting policies and management and work procedures
created different incentives among sites and contributed to barriers to collaboration. Views
regarding issues such as intellectual property rights differed between locations, affecting trust
and willingness to work with other parties.26
21
Jensen, R. and Szulanski, G. (2004) “Stickiness and the Adaptation of Organizational Practices in Cross-Border Knowledge
Transfers”, Journal of International Business Studies, 35 (6), pp. 508–523.
22
Kumar, K., van Fenema, P. and von Glinow, M.A. (Forthcoming) “Offshoring and Global Distribution of Work: Implications
for Task Interdependence Theory and Practice”, Journal of International Business, 40 (4).
23
Chiesa, V., Manzini, R. and Pizzurno, E. (2004) “The Externalization of R&D Activities and the Growing Market of Product
Development Services”, R&D Management, 34 (1), pp. 65–75.
24
Boutellier, R., Gassmann, O., Macho, H. and Roux, M. (1998) “Management of Dispersed Product Development Teams: The
Role of Information Technologies”, R&D Management, 28 (1), p. 13.
25
Ibid.
26
Ibid.
Global R&D with Chinese Divisions

Growth of Innovation in China
Until the mid-1990s, R&D was considered a bulwark of Western companies. However,
MNCs operating in China soon realised that a large population of highly educated individuals
existed in their midst. Consequently, they began investing in pools of R&D talent in China.27
Moreover, as a part of its industrialisation policy, the Chinese government insisted that the
MNCs move part of their R&D operations to China. By 2007, a combination of these factors
resulted in China growing into the second-largest investor in R&D in the world and a close
second to the US in expanding its workforce of well-trained scientists and engineers. While
some were educated domestically, others were educated and had worked and trained abroad at
Western universities and companies before returning home.28
A variety of industries and MNCs decided to pursue R&D operations in China. Since the
early 1990s, China had been a target for investment in technology industries, including
computer hardware and software, and advanced materials and biotechnology. 29 The
pharmaceuticals industry came to China much later, attracted not only by cost savings, but by
the potential to develop products faster, with a larger population base and less-restrictive
clinical trials.30
China was on the rise in terms of development of R&D ventures, but it still had some issues
that were holding it back from reaching its full potential. For years, China had been producing
a number of copycat products, from watches to wines and designer clothing. There was
concern that this tendency could cross over into R&D, with the consequence that trade secrets
could be stolen. Furthermore, there were concerns among Western companies about the
quality of research, as well plagiarism and academic fraud.31
Although the government had established a plan to foster innovation in mainland China by
2007, foreign managers felt that, given the lack of a proper legal framework, it would be
difficult to implement. Moreover, it was felt that the establishment of regulations and
standards would take time and resources to implement.32 Because many large companies in
China were state-owned, they were often averse to taking any major risks, including the
uncertainties inherent in R&D.33
Language Barriers
Few local students were fluent in non-Chinese languages. Employers were concerned that,
despite the large number of bright graduates in China, there might still be a talent shortage.34
International R&D ventures were particularly concerned that their local employees might
revert back to Chinese at the work locations, feeling more comfortable speaking in their
native language but at the same time making it more difficult to communicate with co-
workers from other backgrounds.
27
28
Dyer, G. (5 January 2007) “The Dragon’s Lab—How China is Rising through the Innovation Ranks”, Financial Times, p. 7.
29
Goldstein, H. (September 2002) “They Might be Giants”, IEEE Spectrum, pp. 43–48.
30
Bloch, M., Dhankhar, A. and Narayana, S. (2006) “Pharma Leaps Offshore”, McKinsey and Company.
31
Lynton, N. (15 December 2006) “China’s Innovation Barriers”, Business Week Online,
http://www.businessweek.com/globalbiz/content/dec2006/gb20061215_816544.htm?chan=search (accessed 1 February 2007);
32
33
Ibid.
34
Ibid.
Education and Chinese Business Practices

It was felt that China’s educational system, based on Confucian values, discouraged creative
thinking and rarely accepted mavericks. The system placed strong emphasis on theory and
memorising facts, but not much focus on the problem-solving and teamwork that was
typically needed for institutionalised R&D and innovation. 35 These characteristics also
impacted Chinese business practices. Following Confucian dictums, most Chinese workers
still subscribed to entrenched hierarchical values. As a result, open discussions and risk-taking
were stifled and innovation was limited.36
Moreover, with relationships (guanxi) being important for conducting business in China, it
was also difficult for Western companies to operate in local Chinese business settings. The
Chinese were culturally less willing to trust outsiders. This preference for working with those
similar to them often stifled collaboration with teams outside their own community.37
Gold Peak Electronics

GPE, a division of Gold Peak Industries [see Exhibit 1], produced professional and home
electronics products and was involved in the design, manufacture and retailing of a variety of
professional audio products, public address systems, home audio products, electrical
accessories and chargers [see Exhibit 2].38
GPE started off primarily as an original equipment manufacturer (“OEM”).39 Over time, the
company became more involved with original design manufacturing (“ODM”) 40 through
contracts with leading global brands in professional audio. Eventually, Li decided that GPE
should start designing and manufacturing its own brands. In the early 1990s, the company
entered into original brand manufacturing (“OBM”)41 when it decided to transform itself from
a medium-sized electronics manufacturer into an MNC, producing its own high-end, value-
added products, globally respected brands.
GPE’s globalisation strategy included the acquisition of two high-end premium loudspeaker
companies from the UK: KEF Audio and Celestion International. A key goal of these
acquisitions was for GPE to gain engineering and design expertise from engineers in the UK.
GPE needed this expertise to develop its own brand of loudspeakers in its move from mid-
range systems into high-end products. 42 GPE had been in the OEM and ODM car audio
business in the past, but the margins in these businesses were becoming razor thin due to
increased competition from both Hong Kong and mainland China. Li believed that high-end
speakers would likely yield higher margins, as consumers were willing to pay a premium for
them. GPE also wanted to acquire established and reputable brands, their distribution
channels, and their markets. Such acquisitions would enable GPE to develop, manufacture
and market products from start to finish under recognised brand names.
35
Farhoomand, A.F. (2005) “National Innovation Systems of China and the Asian Newly Industrialized Economies: A
Comparative Analysis”, Asia Case Research Centre, University of Hong Kong; Lynton, N. (15 December 2006) “China’s
Innovation Barriers”, Business Week Online,
http://www.businessweek.com/globalbiz/content/dec2006/gb20061215_816544.htm?chan=search (1 February 2007).
36
Lynton, N. (15 December 2006) “China’s Innovation Barriers”, Business Week Online,
http://www.businessweek.com/globalbiz/content/dec2006/gb20061215_816544.htm?chan=search (1 February 2007).
37
Ibid.
38
For details, see GPE’s website: https://www.gpe-hkg.com/gpe.htm.
39
In OEM, a contract manufacturer made products to order, based upon client companies’ designs, either for client companies to
sell under their own brands or for use in other products.
40
In ODM, a company used its own designs and intellectual property to create a product. The product was then sold under
another company’s brand.
41
In OBM, a company focused on manufacturing a product, building its brand and selling the product under this brand.
42
The electronics market was becoming more competitive as mainland Chinese companies
began to focus on R&D. 43 But Li and his management team decided not to move all of its
R&D processes to China. They felt that having a product designed in the UK would connote
high quality to its existing and potential consumers and that the UK engineers tended to be
quite innovative and skilled in technical product development.
In addition to creating value through innovation, GPE aimed to become more profitable by
cutting costs. Labour and other resources were much less expensive in China than in Europe.
Over time, as GPE was being restructured to become leaner, most of the manufacturing
operations of these acquired firms were moved to China. While R&D continued to be located
primarily in the UK, a gradually increasing number of R&D segments were transferred to
China.
For KEF, engineering headcount had not changed much from its acquisition in 1992, within
12 to 16 employees, depending on the workload. However, much of the physical engineering
work moved to China, and the engineers in Europe focused on technology or advanced
development work. Celestion’s engineering team faced more of a reduction in headcount
immediately after the acquisition, dropping from 16 down to 10 employees.
By 2008, only the most exclusive KEF product line, the Reference Series, as well as the
project proposals for new products were being designed in the UK. However, engineers in
China were also undergoing technical training and project work in the UK, and participated in
teams that worked on advanced development work with British engineers. In China, 240
engineers worked in the electronics division, while the UK site only had only around 22 to 26
engineers, down from a total of 30 at the time of the acquisitions.
By 2008, 50% of GPE’s R&D activity was generated by requests from electronics companies
that owned brand names for parts of their products. The other 50% of GPE’s R&D included
both ODM and OBM. These customers came to consult with GPE to assess feasibility of
designing certain products. Meanwhile, GPE continued to develop its own brands internally.
GPE’s Strategic-Level Globalisation Strategy

After acquiring KEF Audio and Celestion International, Li adopted a number of strategies to
move towards globalising GPE. One of his first steps was to create a product creation
committee. This was an ongoing group of individuals that brainstormed and generated new
product development ideas. The group consisted of engineers in the UK that were the primary
designers of KEF and Celestion products, a sales and marketing team in the UK, and a Hong
Kong team consisting of sales and marketing, logistics, IT, accounting, and human resources
personnel, as well as a team of industrial designers that focused on the design and appearance
of GPE products. The company’s small size and diversity of backgrounds in both managerial
and technological skills allowed for innovative product ideas and for detailed product
specifications to be defined up front. Input into projects could be given by all employees,
from design engineers to manufacturing personnel.
The R&D processes for GPE’s products were quite complex [see Exhibit 4]. Smaller
products and product components such as electronics, mechanics and drivers were developed
in mainland China. The Chinese factories took over most manufacturing except
manufacturing of high-performance products, which remained in the UK. The UK engineers
had a long history of producing these high-end products and wanted to be able to oversee their
manufacture and testing.
43
The company also established a system for managing its global supply chain through third-
party logistics companies using a variety of information technologies. This helped improve
distribution management and built sales management and a long-term sales strategy in Asia,
Europe and the US. Brand management of GPE products was improved though increased
market communications, redesign of the brand strategies for KEF and Celestion, and the
establishment of premium retail stores where merchandising could be controlled.
In organising its human resources, GPE restructured and consolidated existing management
into one senior management team which operated at the company’s headquarters, and
appointed management teams for each location. Furthermore, it initiated the exchange and
rotation of management appointments among the various sites to improve cultural exchange,
communication and interaction between sites. The company also established cultural training
for its employees. The training allowed them to experience working in cross-cultural and
globally distributed work teams.44
GPE’s Operational-Level R&D Globalisation Strategy

Although GPE continued to invest in its British engineering departments to improve the
technology of its loudspeakers, in 1994, a loudspeaker development team was established in
China to start moving some of the product development from the UK to China and to further
develop R&D capabilities in China.45 Starting in 1999, as part of GPE’s attempts to foster
knowledge sharing and innovation between locations, engineering personnel were rotated
frequently between the UK and China. Joint concurrent product development between the two
countries began in 2003.46
GPE created specialised R&D sites to perform specific functions, such as manufacturing
design in Huizhou and electronics design in Shenzhen. Different components of a product
were designed in Shenzhen, Huizhou, Hong Kong and the UK [see Exhibit 3], with each site
accepting full responsibility for designing and producing its assigned components.
The location chosen for each site was based on access to sources of knowledge, expertise and
other resources. The UK team had expertise in high-end acoustics. The Shenzhen office was
centrally located near Hong Kong and had access to a talented and diverse employee pool.
Manufacturing facilities in Huizhou were relatively close to Shenzhen and ensured speedy
transfer of technology from research to manufacturing. The Hong Kong central office acted as
a bridge that connected China and the UK.
Communication between Geographic Sites

GPE used a variety of communication methods and tools to transfer product specifications
and exchange progress information between sites.
In-Person Meetings
Despite the distance between locations, there were weekly, in-person meetings held between
the three local sites in southern China. These meetings involved every team and all
engineering team members for assigned projects. The Hong Kong office also hosted monthly
in-person meetings for senior officials and management of different business units involved in
the design and manufacturing of KEF products. The purpose of these meetings was to discuss
44
Li, B. (2007) “The Globalization Strategy for a Small Hong Kong Electronic Manufacturer”, City University of Hong Kong.
45
46
Ibid.
the progress of each product, issues and problems with current projects, and new ideas that
may be proposed. All personnel in China in marketing and engineering required to attend the
meetings, the UK senior management was not always present due to prior engagements or
lack of time available to travel to Asia.
Company Internal Website

The company’s internal website was accessible at all company locations and was used to
document milestones and to gain approval from different levels of management to commence
different stages of product development. When the website was updated centrally, the team
could view it on the internal website almost immediately. The website included a
specification of the standard OBM R&D process, which had been created so that all
employees would have a common frame of reference to meet project goals within a
reasonable timeframe.
E-Mail
E-mail was used for non-urgent questions, to document design decisions and to easily update
everyone involved in a project all at once, particularly for multi-site teams that did not meet
regularly.
Videoconferences
Videoconferences using high-quality facilities were scheduled for once every week. This
technology was also used so that senior executives from England could participate in the in-
person meetings held in Hong Kong each month. The scheduled conferences included:
• A virtual conference that used video conferencing technology was used to discuss
systems was held in Shenzhen and involved both Hong Kong and Huizhou teams.
• A similar virtual conference was held in Huizhou to discuss acoustics for the products and
involved team members in Shenzhen and Hong Kong.
• Personnel in Huizhou and the UK held weekly virtual meetings in which Huizhou
reported updates to the UK for feedback.
Telephone
The telephone was generally only used for local communication in China and, in the case of
emergencies, for calls to and from the UK. This was said to be mostly a cost-based decision.
Issues Limiting Knowledge Sharing and Knowledge Creation

While attempts to transfer an increased portion of R&D activities to China were somewhat
successful, R&D of KEF products continued to be initiated in the UK. Creating an
environment for knowledge sharing and knowledge creation between its UK and China sites
was a challenge for GPE. Over time, it became apparent that several issues were influencing
the effectiveness of distributing the R&D processes. Li observed that GPE had
underestimated the following challenges in its strategic and tactical thinking:
• There were several complications involved in hiring and retaining people with the right
expertise in China. GPE was finding it difficult to find enough talent there to create
innovative, high-end products in Asia. It was also a challenge to create an R&D
environment in the company that fostered knowledge sharing, knowledge creation and
innovation.
• The restructuring and integrating of acquired businesses had turned out to be quite
complex. This complexity was further increased by the company transferring
manufacturing from UK to China, the high financial and human capital costs of
10
acquisition, and the creation of specialised R&D sites. These factors made it difficult to
ensure that collaboration between the multiple sites went smoothly.
• The culture of innovation in the Chinese locations was different from that in the UK.
There was a heritage of doing precision acoustics engineering in the UK companies.
Furthermore, a vast amount of specific knowledge arose out of experience of the UK
research staff, relative to the young engineering staff in China.
The above difficulties were further exacerbated by inherent gaps and differences between the
globally distributed sites. These gaps included physical and cultural distances, differences in
work habits, language, availability and habits in using communication technologies, and
education and training backgrounds.47
In 2008, 16 years after the acquisition of the two UK companies, senior management at GPE
felt that the majority of innovative designs for high-end acoustic products were still
originating from the company’s British division. This was despite a policy that gave engineers
throughout GPE the authority to make their own design decisions. Senior management was
not sure whether this was because the Chinese team was not sufficiently trained in innovation
and product conceptualisation to meet the demands of high-tech product markets, or if the UK
was closer to and had a better understanding of the markets for such high-end products.
A number of human resource issues at GPE affected knowledge sharing and knowledge
creation. To help reduce problems that might stem from cultural differences and improve
communications, GPE created a scheme for employee exchange between China and the UK.
Under this scheme, up to six engineers could relocate to another research centre for a year.
This temporary relocation was meant for the engineers at corresponding sites to get to know
each other and to improve collaboration between the R&D centres. However, Chinese
employees did not mind travelling to the UK; for them, it was acceptable to be separated from
family for work. On the other hand, British families that relocated to China found it difficult
to adjust to living conditions that were quite different from back home, and the employees did
not want to relocate their families or stay in China for any longer than they needed to.
Sixteen years after GPE’s acquisitions, the turnover of its technology staff was very low.
However, the research department in the UK was staffed by experienced researchers. To
encourage innovation in technology and product development, the company wanted to try to
duplicate the same research facilities in other locations. While there was no imminent reason
for concern of job loss, some UK employees still felt that their future job security in the UK
could be threatened by the development of the China division. The UK electronics industry
had already shrunk by 39% from 1997 to 2003 due to low costs and improved turnaround
times among factories in China. Even though engineers in England continued to be a source
of innovation, they were concerned that eventually all design jobs could move permanently to
China.48
The teams shared a common identity as GP’s acoustics development team. However, from a
distance, it was hard to establish trust between the R&D sites. Members of the Chinese teams
preferred to work with people that they had established relationships with and were hesitant to
begin collaboration with the British engineers. Members of the UK team, on the other hand,
were reluctant to share their design processes with the Chinese R&D teams because they felt
that their job security would decrease if they continued to share knowledge with the China
teams.
47
Kumar, K., van Fenema, P. and von Glinow, M.A. (Forthcoming) “Offshoring and Global Distribution of Work: Implications
for Task Interdependence Theory and Practice”, Journal of International Business, 40 (4).
48
Webb, D.P., Reed, F.M., Carpineta, P. and Walsh, K. (2006) “The United Kingdom Electronics Manufacturing Industry 1997–
2003: A Case Study of the Effect of Globalization”, Journal of Engineering Manufacture, 220 (8), pp. 1373–1384.
11
GPE had established a number of technologically advanced ways to foster communications

between geographically dispersed sites. These methods included a sophisticated information
system to monitor the current state of research projects and information on researchers
working on those projects, weekly videoconferencing and in-person meetings. However, there
were limitations on the amount of information that could be exchanged between virtual teams.
Despite virtual meetings occurring at GPE weekly and sometimes daily, Li felt that they were
not frequent enough to foster knowledge sharing and trust. The information shared was
further limited by factors such as lack of ability to have spontaneous discussions, lack of face-
to-face communication and issues with time differences. This limited cross-fertilisation of
ideas among researchers.
The heads of research felt that actual R&D processes often deviated from the specified R&D
protocol. Furthermore, the teams in China and the UK had very different working styles and
management requirements. The UK team were quick to commit to projects, and wanted to
begin the design and sourcing process as soon as possible, while the China teams preferred to
wait for full project confirmation from all team members and senior management prior to
proceeding.
While it was easy for the three Chinese R&D sites to meet in person, there was lower
participation from the UK division in team meetings. Additionally, senior management in the
UK rarely attended the monthly meetings in Hong Kong. The British site only participated in
in-person meetings when deadlines were tight or when the managers believed that there
needed to be a change in the product development process. Time differences, the time it took
to travel and prior engagements were also suggested as reasons for lack of participation in
these meetings, and time differences made it difficult to arrange global videoconferences.
Conclusion
Acquiring the two British speaker companies was supposed to help Li move GPE upmarket
and create stronger, more innovative teams in its Chinese R&D locations. With the
acquisition in place for several years, however, things did not appear to be going as planned.
Fear of losing their jobs sparked resentment among the British engineers. The Chinese
engineers preferred to continue to work primarily with local team members. This resulted in
distance between the offices and a lack of interest in sharing knowledge and in working
together as a team.
How could Li improve collaboration between the various sites? Could GPE successfully
overcome the distance between the UK, China and Hong Kong and promote innovative
collaboration between the dispersed R&D sites?
12
EXHIBIT 1: GOLD PEAK INDUSTRIES (HOLDINGS) LIMITED
Gold Peak Industries (Holdings) Limited, listed on Hong Kong Exchanges and Clearing
Limited, was an Asian-based multinational company and part of the Gold Peak Group. Their
divisions included GP Industries Limited, as well as the GP Technology and Strategic
Division that focused on Lighthouse Technologies. GP Industries was listed in Singapore, and
was involved primarily in the development, manufacturing and distribution of electronics and
related components, including cables and wire harnesses, LED super screens, light fittings
and loudspeakers. Their batteries division, GP Batteries International Limited focused
primarily on rechargeable batteries as well as regular alkaline batteries.
Gold Peak Industries (Holdings) Limited Corporate Structure
Source: GPE’s website: https://www.gpe-hkg.com/gpe.htm (accessed 3 December 2006).
13
EXHIBIT 2: GPE PRODUCT LINES
Products designed, produced and sold by GP Electronics include:
• Professional electronic products such as portable public address systems and professional
amplifiers, mixing controllers and subwoofers;
• Home electronic products including surround sound home theatre systems and high-end
home CD players;
• Various high precision parts and components used in the electronics industry;
• Cables for home and office appliances, infrastructure cables for broadband and LAN, and
power cables;
• Automotive wire harnesses;
• GPE’s own high-end and high fidelity loudspeaker products, KEF and Celestion;
• and various lighting fittings and switches.
Additionally, GP Industries has several manufacturing joint ventures with OEM and ODM
customers to produce both mid and higher range acoustic products for on a contract basis.
14
EXHIBIT 3: GPE R&D LOCATIONS AND BUSINESS FUNCTIONS
Map of R&D GP Electronics Sites involved in KEF Home Audio Systems
Industries.
Global Distribution of GPE GPE Site Distribution in Greater China
Source: GPE’s website: https://www.gpe-hkg.com/gpe.htm (accessed 3 December 2006).
GP Electronics Main Business Functions, Organised by Location
Source: GPE (2006) “GP Electronics Main Business Functions”, Company Presentations.
15
Roles of Each Geographic Location in the Design of GPE’s KEF Home Audio Systems
Each geographic location has specific functions in the R&D of GPE’s own brand, KEF Home
Audio Systems. Roles of the four sites include:
• GPE’s own brands of loudspeakers, KEF and Celestion, are primarily designed by
engineers in the United Kingdom. These designers work with a Sales and Marketing
Team that acts as part of the Product Creation Committee for their high-end speakers.
Most manufacturing has been moved to China, with the exception of the high-end KEF
Reference Series.
• The remaining part of the Product Creation Committee resides in Hong Kong. This team
consists of a Sales & Marketing team, logistics, IT, accounting, personnel, and a team of
industrial designers focusing on the design outlook of GP products.
• Electronics and mechanics are designed primarily by engineers in Shenzhen.
• Huizhou houses development of drivers, some loudspeakers, and the manufacturing of

most of GPE’s products (including OEMs, ODMs, and OBMs).
Employee Distribution Profile
The number of engineers at each of these R&D locations was as follows:
• 200 in Shenzhen
• 10 in the United Kingdom
• 15 in Hong Kong
• 40 in Huizhou
Additionally, most locations have a sales and marketing team. Approximately 80 percent of
employees have worked at the company for over 10 years.
16
EXHIBIT 4: TRACING THE IN-HOUSE R&D PROCESS
GPE took KEF brand products from product concept idea to finished products without
outsourcing any part of the process. The R&D of speakers alone took approximately 6 months,
while for electronics and system products it took 11 months or more. The detailed R&D
process for a KEF R&D project can be simplified and analyzed in five major stages as seen
below:
Major Stages of the Standard R&D Process for a KEF R&D Project.
When the product development team was assigned a project during the project proposal stage,
the same team of engineers, sales and marketing, and project leaders followed the project
through each major stage of the R&D process. However, this ‘team’ was usually
geographically dispersed among the four main R&D sites of GPE: Huizhou, Hong Kong,
Shenzhen, and the United Kingdom. Multiple interactions occurred throughout the project,
but major handoffs of tasks and information occurred between five major stages specified
above, particularly with multi-site interactions occurring between teams located in all four
locations: Shenzhen, Huizhou, Hong Kong and United Kingdom.
17

Golden Peak Electronics

Uploaded by

Document Information

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Golden Peak Electronics

Uploaded by

Copyright:

Available Formats

For the exclusive use of S. Mivehchin, 2022.

GOLD PEAK ELECTRONICS: R&D

Initially, companies focused on offshoring tangible processes such as manufacturing,

R&D Globalisation in Hong Kong’s Electronics Industry

Considerations in Moving R&D to China

Resistance from Employees

Dealing with Diversity

Challenges of Distance in Collaboration

Geographic distance traditionally created both technological and social limitations in

Global R&D with Chinese Divisions

Education and Chinese Business Practices

Gold Peak Electronics

GPE’s Strategic-Level Globalisation Strategy

GPE’s Operational-Level R&D Globalisation Strategy

Communication between Geographic Sites

Company Internal Website

Issues Limiting Knowledge Sharing and Knowledge Creation

GPE had established a number of technologically advanced ways to foster communications

EXHIBIT 1: GOLD PEAK INDUSTRIES (HOLDINGS) LIMITED

Gold Peak Industries (Holdings) Limited Corporate Structure

Source: GPE’s website: https://www.gpe-hkg.com/gpe.htm (accessed 3 December 2006).

EXHIBIT 2: GPE PRODUCT LINES

Products designed, produced and sold by GP Electronics include:

• Automotive wire harnesses;

• and various lighting fittings and switches.

EXHIBIT 3: GPE R&D LOCATIONS AND BUSINESS FUNCTIONS

Map of R&D GP Electronics Sites involved in KEF Home Audio Systems

Global Distribution of GPE GPE Site Distribution in Greater China

Source: GPE’s website: https://www.gpe-hkg.com/gpe.htm (accessed 3 December 2006).

GP Electronics Main Business Functions, Organised by Location

• Electronics and mechanics are designed primarily by engineers in Shenzhen.

• Huizhou houses development of drivers, some loudspeakers, and the manufacturing of

Employee Distribution Profile

The number of engineers at each of these R&D locations was as follows:

• 10 in the United Kingdom

EXHIBIT 4: TRACING THE IN-HOUSE R&D PROCESS

You might also like