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USASBE 2008 Proceedings - Page 0555 - page 19 / 23





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USASBE 2008 Proceedings - Page 0573

Furthermore, firm performance may be better understood through the interconnection of relationships (Gulati, et al, 2000).

Prepare to innovate. The competitive terrain in China is anchored on technological innovation (Wang & Zhang, 2005). International entrepreneurs need to join the bandwagon of flexible innovators. In the practice of accounting, the pursuit of constant system enhancements and efficiencies will be helpful.

Know the financial dynamics well. There is a need to understand all financial angles well. As indicated in the Table 1, numerous challenges exist. In the practice of entrepreneurship, Stansfield (2006) emphasized the need to understand financial performance and characterized it as a scorecard for success. In China, there is a need for investors to integrate elements pertaining to adequate financial control in business contracts (KPMG Primer, 2006). The four issues mentioned by the authors, namely revenue recognition, disclosure of related party transactions, taxation and cash flow statements are relevant considerations in a market like China. The application of the Accounting Implementation Time (AIT) Model can be useful.

Manage complexity. Pursuing entrepreneurial ventures in emerging locations is not an easy task. In a survey by Jagersma & van Gorp (2003), foreign companies doing business in China faced 8 major obstacles: 1) management orientation differs significantly, 2) differences in culture are difficult to bridge, 3) market is fragmented, 4) bureaucracy is increasing, 5) lack of judicial code in business conduct, 6) inadequate logistic infrastructure, 7) poor quality of labor, and 8) vulnerable financial system. Entrepreneurs contemplating on a business operation in China should anticipate these complexities and plan ahead.

In managing a business enterprise in China seeking ways to integrate Western and Eastern practices may lead to inroads. Younger generation Chinese executives were observed to be receptive to Western management concepts that promote pragmatic approaches and openness. (Ko,1998). Studies suggest that the strength of guanxi and its impact on ethical practices has started to subside in recent years (Hui & Graen, 1997)

In the field of accounting, Wright, Szeto, & Lee (2003) suggest finding and working with the “best fit” among existing policies, by using systems that work and modifying or rejecting approaches that does not work with the company’s systems. For example, an international company might adhere to Western financial standards on hiring and compensation, but may adapt wage levels to the local norm.

Despite obvious obstacles, there have been numerous business successes in China. Jagersma & van Gorp (2003), identified 6 approaches to business success in China: 1) organizational adaptability, 2) possession of long-term perspective, 3) careful partner and alliance selection, 4) focus on local knowledge building, 5) proactive use of local, regional, and national network and resources, and 6) operate based on simplicity.

International entrepreneurs will find the business environment in China to be unique and challenging, especially in the area of accounting. However, efforts are underway to harmonize accounting systems worldwide. The International Accounting Standards Committee is looking

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