Academic journal article Asian Social Science

An Exploratory Study on Workforce Development Strategies by Taiwan-Invested OEMs in China

Academic journal article Asian Social Science

An Exploratory Study on Workforce Development Strategies by Taiwan-Invested OEMs in China

Article excerpt

Abstract

This study employs the perspective of global value chain (GVC) to address the workforce development (WFD) strategies conducted by Taiwanese OEMs in China for supporting their GVC upgrading. According to the case-based empirical analysis, five major characteristics of their WFD strategies are identified: 1) Consideration of the imbalance between skills supply and demand for GVC upgrading in China; 2) Inclusion of training industry-specific skills as per international standards, 3) Emphasis on developing "soft skills"; 4) Specific training for key bottleneck positions required by GVC upgrading; 5) Establishment of innovative corporate career development initiatives. This paper contributes to the literature by promoting better understanding of the WFD strategies by Taiwanese OEMs in China as well as examining the critical role of these strategies in facilitating GVC upgrading. Further, since a variety of enterprises interviews were conducted, it answers to a recent call for using first-hand information to analyze relevant issues, providing constructive implications for other Taiwanese OEMs to overcome the critical skilled labor shortage that may hinder their GVC upgrading.

Keywords: workforce, upgrading, global value chain, OEM, Taiwan, China

1. Introduction

Taiwanese original equipments manufacturers (OEMs), in order to achieve low-cost production, have been investing heavily in China, thus playing an important role in promoting China's fast economic growth and maintaining its international status as the world's factory for the past three decades (Lin & Hou, 2010; Lau & Bruton, 2008).

However, the RMB appreciation, rising costs, and inflation pressures have weakened China's cost advantages and largely squeezed OEM's profit margins recently. According to China's 12th Five-Year Plan (2011-2015), a goal was set to raise the national minimum wage by an average of at least 13 percent a year (The State Council, 2011). The current average manufacturing wage, as a matter of fact, has risen to about 2.25 Euro/hour, which is comparable of that of certain Eastern European countries. (Note 1) Considering direct labor cost accounts for the majority of the cost components across an OEM's supply chain operations, a growing number of foreign-invested manufacturers in China, of course including those Taiwan-invested OEMs (Herrigel, Wittke, & Voskamp, 2013; Chin, 2013a) have decided to conduct upgrading strategies to upgrade their positions within the global value chain (GVC) for obtaining higher economic returns.

Given the labor-intensive nature, human capital is seen as an essential element for OEMs to support GVC upgrading. Nevertheless, research discovered that most OEMs in emerging economies or developing countries didn't prepare their workforce well to adapt to the challenges in the process of upgrading (Fernandez-Stark, Bamber, & Gereffi, 2012; Chin, 2013b). Workforce development appeared to be an under-researched topic in the past, as Taiwanese OEMs' operations in China typically employed low-skilled workers with a minimum level of education. To fill this research gap, the purpose of this study is to probe into the workforce-focused issues, especially about the role and dynamics of the workforce development initiatives/strategies by Taiwanese OEMs implementing upgrading in China. More specifically, this paper seeks to understand the effectiveness of the investment by Taiwanese OEMs on enhancing human assets, shedding light on the importance of linking the labor skills development to firm competitiveness by OEMs. As a result, this current research, as an initial step, aims to explore what the workforce development strategies employed by Taiwan-invested OEMs in China are in terms of facilitating their GVC upgrading?

This study makes three main contributions. Theoretically, it contributes to the literature by promoting better understanding of the workforce development strategies by Taiwanese OEMs in China as well as examining the critical role of these strategies in facilitating GVC upgrading. …

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