In the 2000s, disadvantages in the traditional proactive sales model used by China's fast-moving consumer goods (FMCG) market began to appear. These disadvantages stemmed from the rise of both labor and logistics costs. Brand owners are suffering from over-extended distribution hierarchies and the high cost and inefficiency of distribution personnel. In addition, distributors' capital chains face significant pressure stemming from the high costs of warehousing and logistics. For retailers, insufficient supply and a limited variety of products are major issues. Launched in 2015, Jinhuobao is a business-to-business (B2B) e-commerce sales platform that specializes in serving small and midsize convenience store owners. Jinhuobao has launched a series of products to address each of the issues that the FMCG market is currently facing: (a) Jinhuotuan, a product that solves the human resource problem by using crowdsourcing and the Witkey model to help brand owners recruit part-time sales teams, thereby reducing channel costs; (b) Jinhuobao, a product that solves the goods problem by using the B2B e-commerce platform model to reduce intermediate distribution links and help terminal retailers purchase goods from more brands at more affordable prices; and (c) Jindou Cloud Warehouse, a product that solves the warehousing problem by using time-share leases, shared warehousing, and three-dimensional management to help distributors cut supply chain costs through an integrated storage and distribution system. Having accumulated a significant amount of big data and warehouse management capacity after two years of development, Jinhuobao began to target a new pain point in the FMCG market — financing difficulties faced by distributors due to their lack of credit — and ventured into the field of supply chain financial services. Jinhuobao works with new retail, a market that many big players have begun pouring into over the past two years (2015, 2016): new entrants include Internet giants such as JD.com and Alibaba. Moving forward, how can Jinhuobao work to develop better supply chain financial products? What capabilities does it still lack? How should Jinhuobao set itself apart from its competitors?
Fast moving consumer goods
Supply Chain Finance
Journal of Financial and Quantitative Analysis
We examine the role of relationship-based resource allocations during the approval process of secondary equity offerings (SEOs) in the Chinese capital market. In this unique regulatory setting, SEO-seeking firms must have their applications approved by an Issuance Examination Committee (IEC) of the China Securities Regulatory Commission (CSRC), a hybrid template between government-directed and market-directed models. We identify guanxi-based relationships as cases in which the partner of an intermediary professional firm (e.g., auditing or law) employed by the SEO applicant also serves on secondment as a full-time IEC member. Our results show that these guanxi-based relationships significantly increase the likelihood of SEO approvals, particularly for suspect SEO applicants with abnormal levels of earnings management, related-party transactions, and inter-company loans. More importantly, we find that guanxi-influenced SEO firms have significantly poorer performance in the post-SEO period, which indicates that it results in inefficient resource allocations. In addition, we show that these quid pro quo arrangements benefit IEC-member intermediaries through higher market shares and professional fee revenues. Overall, our evidence suggests that relationship-based resource allocations lead to negative spillover effects that impose social welfare losses.
Journal of International Business Studies
Firms and governments operate in broad networks in which the home government and its diplomatic service are a critical node – or a “referral point” – between firms and potential partners in foreign locations. Thus diplomatic relations between countries matter for the choice of foreign investment location. Using a network perspective, we argue that the extent to which good diplomatic relations induce firms to invest in friendly host countries depends on their political connections to home governments. Those with stronger ties to home governments can better access and leverage intergovernmental diplomatic connections, thus benefiting potentially from enhanced access to information, reduced political risks, and increased legitimacy. Such ability of politically connected firms is more useful where weak institutional impartiality in the host country inhibits neutral treatment of foreign investors. Empirically, using overseas investment location decisions by Chinese firms, we find that the types of home government ties (i.e., whether they are organizational or personal and whether those relationships are with central or local goverments) and the impartiality of host institutions are both important contingencies affecting firms’ utilization of diplomatic relations. We discuss the implications of our study to research on network theory, political ties, and internationalization of emerging market firms.
foreign location choice
Journal of Development Economics
We examine the impact of counterinsurgency aid on conflict in Afghanistan from 2005 to 2009. To enable this analysis we combine unique aid project data from NATO, household data from the Afghan government, and conflict data from US government sources. Our panel data analysis accounts for district and time period fixed effects across 398 districts and 57 months. Projects in the health sector successfully promote stability, whereas those in the education sector actually provoke conflict. Our findings are robust to reverse causation, confounding aid programs, and other sources of endogeneity. The results shed new perspective on the ‘hearts and minds’ theory commonly discussed in this vein of inquiry.