Can overseas migrants develop sustained entrepreneurship? Multiple case studies of Wenzhou migrants in Italy

Analysis of case H

In 2001 H's first cousin brought his female first cousin abroad; at the end of the year she helped H apply to travel to Italy. Over the next two years H brought his younger brother and sister to Italy. “My younger brother and brother in law used to make sofas in China as well. When they first came, they did not understand the language. I understand Italian, so we cooperated. I dealt with the market, specifically dealing with the Italians. Later my younger brother and his wife also came here. They did not make sofas at home and came here to study.” Learning from each other helped these relatives quickly master the explicit operational knowledge, and overcome the “new entrants’ disadvantage”: “After we all got here, the siblings separately engaged in making timber frames, cushions, sofa covers, and sofas, but in cooperation with each other.” Family members worked closely in the business and formed a clear vertical division of labor, reducing communication and opportunity costs in the business chain and improving operational efficiency. In 2006 H and his sister cofounded a sofa factory. The embedded relationship between family members promoted the rapid sharing of industry expertise and market information, helping H to gain a comprehensive grasp of manufacturing technology of products. Expansion of expertise helped H to become not just someone who knew the language but an enterprise owner as well. He not only mastered the complete sofa production process, but was also able to respond freely to controlling costs and opening up new marketing channels. Strong links between family members provide emotional support and improve the ability to obtain social influence and tacit knowledge. Through the exchange of long-term, high-frequency communication among family members, they also formed an agreed-on code of conduct (Dhanaraj et al. 2004).

After H opened the sofa factory in 2006, he felt the changes in the economic environment and the labor supply. “Before 2007, we made couches in batches, and now it’s this one set and that one set, each set of models only needs two copies, and the demand for an entire batch is small. Some workers are also tired. Making sofas is tiresome and it doesn’t bring a lot of money. Some workers moved to other jobs; they do not do it if they do not have to. Next, various departments have stricter inspections on workers, taxes, and managing product varieties. If the layout of the factory, hygiene, or equipment does not meet the requirements, it will be closed.” The changing competitive environment prompted H to use his language advantage to form a more stable relationship of mutual trust with the police, landlords, and contracted factories. “We are very familiar with the police. The police sometimes give us a heads-up before they come, to allow us to be careful. If we can prevent problems in advance we can save a lot on fines. … The landlord trusts me. The downstairs costs 3,000 EUR and the upstairs costs over 1,000 EUR per month. I came forward and now it is not as expensive, only 800 EUR per month. … In the past when business was good, the silly foreigners, you claim how much materials are needed and they give you that quantity. Now they all know how much material a set of sofa needs. Before the price was already low, not making any money. Now it only works if it’s a cost-effective price. If you have a way of going to the company to talk with the boss, telling the boss the price really does not cover it. You have to give a little more to me. If you do not have other competitors the boss may accept.” Establishing trust between related special interest groups like this helps H to focus on the details of the management process improvement, through strict cost control and control of raw materials to improve the quality and reduce costs. “Workers are paid by the piece. Sewing and carpentry are needed to produce a sofa. Wages have a market price. We are very clear about that so as to control the time and costs. Raw materials are under our own management” in order to respond to diverse customer needs. Through close cooperation with the relevant local authorities and individuals in Prato, and by making full use of the advantages of language and communication H is able to improve management efficiency in the sofa factory, and is able to respond effectively to the multibrand, small-batch production mode, controlling costs while achieving continuous quality improvement. Development innovation ability has been greatly improved. The factory also received offers from Prato's two largest sofa factories to provide foundry services. However, with the gradual increase in production scale as well as the course of business, there have been some disagreements within the family. “We hired more people, recruited more people, then the job is not interesting to do anymore. In 2010 our partnership fell apart. Each person operates their own business exclusively and earns their own money.” (All interviews above were conducted with H on April 19, 2014, Prato). Due to the inherent values regarding family and “face” in Wenzhou, H was not willing to comment on the current relationship between his brothers and sisters. Strong ties bringing resources also increased the entrepreneur's commitment to members of the network. The network may be too steady and thus limits innovative decisions; overconfidence may inhibit entrepreneurial enthusiasm, or commitment to developing into a certain stage could be a barrier to sustained innovation.

Analysis of case ZR

ZR arrived in Italy in 1986, and has engaged in catering, bags, and other industries. He acquired basic Italian fluency when waiting tables. In subsequent years he brought his mother and siblings to Italy. In 1993, influenced by his brother-in-law, he came to Prato and went into the clothing business. “I had a state of mind of fear. I had never seen the clothes, and I could only constantly ask and constantly learn.” Fortunately many of ZR’s classmates and relatives were already in Prato. Coupled with ZR’s own efforts to learn, the garment factory achieved resounding success in one year. Recalling his original intention to go abroad, ZR stated, “My family had difficulties, then I wanted to go abroad to change the living conditions for my family. When I first came I was really frustrated, and felt like crying a lot. But no matter how hard it was I was very happy. … When I was in Prato, very few people understood the language. Sometimes my relatives and fellows got sick or needed to give birth; we went to the hospital and they did not understand anything. No matter how tired I was, I went to the hospital with them. The hospital staff all knew me.” A strong sense of responsibility and commitment to family became ZR’s motivation to continuously learn and constantly create value for twenty years. His reputation among his peers also helped ZR acquire critical information in many industries. ZR “started everything from a mere factory worker, learned to use the line trimmer, the double cylinder machine, thanks to his own efforts to learn.” With the dedication and talent, ZR soon learned clothing techniques and industry terminology and rapidly became able to work independently. “I love to learn more than others, always willing to learn. When I was working in Milan, I learned all the basic terminology from different restaurants; later when I opened up the garment factory I slowly learned the terminology in clothing also. If I want to settle down here, I at least need to speak some simple Italian. I used the restaurant experience to communicate with foreigners, and received a good client.” In addition, ZR also stated,” I hold the bar high for all employees; that’s why foreigners like to work with us. The company’s decoration is also completely different than others. Standardized decoration, good management practices—only by keeping up with these will foreigners trust us.” His advantage in language makes it easier for ZR to build trust with Italian customers. Continuous improvement of daily management helped his factory expand rapidly. ZR gained recognition outside of his network community due to continuous learning of existing industry knowledge; his strong sense of responsibility stems from strong ties outside of the network that promoted rapid trust building.

Changes in the environment lead to significant changes in cooperative behavior and innovation efficiency of cluster enterprises, encouraging actors to explore new patterns of behavior and norms. With the growing clothing business, a number of changes in the relational embeddedness within the cluster network occurred. On the one hand, ZR was more emotionally attached to his family members: “I cherish my family, my children, my brother, and my brother's children, they are my life.” On the other hand, ZR increasingly alienated external members: “Now I really don’t want to think about anything else. I just want to do my own things every day. I do not drink or play poker. My hobby is hiking whenever I get a chance, planting flowers; people say my life is very boring. I like the simple life; I do not want my life and communications with people to be complicated. I am also very low-key. I do not want to go out. My brother knows the embassy officials in Rome and Milan very well, but they do not know me at all. My brother says that everything with me is good, only I’m too low-key. Never want to go out there. More than ten years ago the former Chamber of Commerce invited me to attend the Chamber of Commerce many times, and I refused. My classmates say that I do not give them face, do not eat, or go out to play. I just do not want to be social with people. I do better than others, have more money and I never ask people how to do things; I just follow my own principles for management.” However, ZR is concerned about the current changes facing the market: “The affluent market in China means that domestic workers do not return once they go back home. In Prato recruitment is more difficult. In a few more years we will just have to shut down the company because people will not have factories or workers”.

ZR now increasingly seeks external support from a network of Italian partners in whom he has full confidence and in-depth, open communication. This helped ZR fully integrate into the local regional clusters and culture. ZR established a good working relationship with Italian suppliers: “Although all fabrics are made in China, we still purchase them from foreign suppliers. We do not ask foreigners where they purchased them. Chinese people really have cheaper clothes, but the quality is also worse.” ZR appreciates the work attitude of Italian employees, giving core staff full authorization, fully absorbing the views of Italian staff on key issues, and making joint decisions: “I hired four foreigners-an accountant, a designer, a model, and a receptionist for clients. The designer and model were chosen from Italian professional trained people. Foreigners view the job as dearer than their life; Chinese people do not. When working time ends, they go back home, play on WeChat. If I now have to start another business, I will hire only foreigners. Chinese people now play with their phones when working; foreigners take work more seriously. I gave a copy of the keys and other important things, including the remote control and alarm, to the Italian designer. I feel very reassured, without any concern. All cash is in the hands of the foreign accountant; every day I just look at the cash inflow and outflow reports. I also look for him when I need to use money. Sometimes when the clothing prototype is out, I just discuss with the designer whether these model products need to reach 30 percent of profits or perhaps 35 percent, maybe 25 percent”.

With professional help from Italians, ZR’s clothing business has achieved deeper insights and creativity. ZR began designing styles according to customer demands: “The designer and I first consider the needs of customers, combined with my own feelings, and the designer quickly draws style drafts. We choose the style according to customer demand, quickly design, plate, cut on the computer, and then choose the right fabric sample to make a model. The foreigner, in accordance with Italian specifications, draws on the computer. It’s faster than we Chinese people. He can draw a dozen drawings a day. He also adjusts design and our models of procurement according to the fabric sample. In this way the design is a better aesthetic fit with Italian and European customers.” In addition, ZR created a unique style for his brand: “Our suppliers, the company decoration, clothing style must all comply with the customer's taste, and every piece of clothing has its cultural heritage. The shirt brand is basically my own design. My vision might not be the same as others. If such models based on my design do not have taste, without a certain feeling, I immediately throw them away, and redo. If it feels very good then it’s OK. Things that feel good also sell well. The business is slowly getting better”.

ZR also has experience and lessons regarding the development of market sales channels: “This industry is very complex, when summer has not yet begun, you need to immediately plan the second half of the year. It really drains your energy. We are now doing next year’s (2015) large customer orders; the second half of this year we have to add some individual orders. My clients are all foreigners, from Europe and Asia.” In addition to mastering the professional language, ZR now uses the language as a tool to take the initiative in negotiations: “For example, I sit here with foreign clients; although I understood our clients obviously I will pretend to not understand them. It’s good that I’ll get a chance to regret.” (The above quotations are all from interviews with ZR conducted on April 19, 2014, Prato). ZR relied on social integration with the Italian culture to establish a bond of trust with Italian partners, reduce opportunistic behaviors, and enhance sensitivity to external information (James 2003). The symbiotic and equal relationship between partners outside of the network led to the acquisition of tacit knowledge, forming a unique brand and completing the design of new products and new markets. The integration and reformation of tacit and explicit knowledge ensured the smooth realization of new ideas and innovation.

Analysis of case X

X has been in Italy for ten years. She has no relatives in Italy, and made use of her husband’s family network after marrying to found her own business. She engages in the import and export trade and wholesale footwear. For the entrepreneurial process, X recalled, “the marriage gifts were more than 10,000 EUR in cash, because a lot of my husband’s friends are from Li Ao (a town in Wenzhou). They earn a lot. Most people start their businesses by relying on the cash received at marriage. They quickly married, and then added in their savings and started their business.” The support of friends and relatives played a key role in the early days: “From 2004 to 2009 my husband and I had no residency rights. If I saw the police, I fled every time. The companies we opened were under other people’s names. We made an agreement on how much money to pay them, and when there were things we needed we would let them come.” After the amnesty in 2009, X began to legitimately conduct her business. However, X’s business contacts within the family are limited to working together to compete against foreign competitors: “If other people have to get involved, we will unite as a family through large-scale purchases and developing a uniform price to crowd them out.” In addition, “The purchase of goods was done on our own. My husband's sister did not give us guidance. We all purchased from the same place and there was a competitive relationship; we all went around Rome to find our own products. We could not all buy the same goods. It’s not good for sisters and brothers. If she bought this brand, we had to get other brands to separate the customers. … I have always run my own separate business. There is no partnership with brothers and sisters. At the beginning my husband’s sister said, you do not understand Italian, you do not understand anything, and above all you have never not done business, so partnership is the way to do it. My husband and I had the money and we saw this store was cheap. We did not want a partnership. With a partnership there will certainly be no profit because profits have been accounted for to purchase the goods, and we cannot make money.” X believed she had entered the market too late. If she continued with the previous business model and partnered with family members, it would be difficult to have independent careers. Quickly learning the language and engaging in practical exploration of the market became X’s tools for entrepreneurial success: “I learned the language. I felt I could learn Italian on my own, and Italian is also very easy to learn. When I was in France I was using headphones to listen to French during work, and every night I stayed up to recite articles. I studied for one month and could speak the language. There is still some trouble with difficult things, but then I slowly get used to them.” With the language advantage, X established close contact with Italian customers. “Italian people are very smart. They are very sensitive to fashion.” Communication with Italian customers helped X gain a deeper understanding of fashion. X’s judgment on family relationships promoted her awareness of establishing relationships with local customers to expand her business, the only viable strategy for independently expanding the business. While enhancing business execution, it also establishes a wide range of alliances.

X believes that Wenzhou people work much faster than Italians, and are more inclined to recruit workers from Wenzhou. “In 2005 and 2006, I asked friends inside the mall, basically I hired people through relationships. Finding out who was out looking for jobs was a good trick. It is now difficult to recruit. Young people are rare. Sometimes I had to ask the Christian church to help with recruitment.” Moreover, X also finds grasping fashion trends is increasingly important. “Because Italy is the Mediterranean climate, summer is long. Making boots basically means losing business. Even one pair of boots can create great loss. Costs rise year after year.” The changing competitive environment prompted X to instigate a series of reforms in custom shoe making. In general, the footwear business first buys a shoe sample and then duplicates it. Exchanges between X and Italian customers helped her understand the potential of more fashionable elements, and she formed a unique aesthetic taste: “After getting a sample, I make changes to the color or material. It is then easy to sell these models. Although the domestic Guangzhou producers have requirements for quantity, if my thoughts on the shoe are good and even if the order is a small quantity, they still help me make them. I can also find a better manufacturer.” (All the above interviews were conducted with X on August 25, 2013, Wenzhou).

Advantages in language and close interaction with Italian customers helped X to reintegrate knowledge and conduct specific improvements. This contributed to the differentiation of the appearance of the shoes, avoiding the homogenization of competition and making X's trade maintain stable growth. The uncertainty of expected performance brought about by changes in the environment encouraged X to take the initiative and adjust the content and sharing of cultural embeddedness. Cultural embeddedness enhanced the openness of the regional network and promoted new ideas and behaviors to achieve rapid transformation.

Analysis of case ZY

In 1988 ZY immigrated to Italy with his brother and his mother. Because ZY’s father had migrated and successfully started his business in the 1980s, ZY successfully completed his studies in Italy and mastered fluent Italian. ZY’s own entrepreneurial path began with working in the family’s own factory. His status as a member of “the second Wenzhou generation” encouraged ZY to consider innovations in the business model and products to allow the family business to achieve sustainable development. Starting with a general leather processing business, ZY’s business has become an OEM partner with Chanel, Bulgari, and other international brands. In order to expand the company's business as well as to be better accepted by the local people, the company began cooperating with Italian businesses beginning in 1996: “We started from a relatively low-end brand OEM, then the Italians took it up for a while. Later, because of our strength in terms of quality and delivery time, we gradually won the trust of clients, and gradually became the secondary agent’s source of product.” ZY stated that the Italians working with the company gave him a lot of room for development and different platforms, providing even more valuable information than that offered by family members. Because of this information, his business got the opportunity to work directly with the top Italian brands and become the top luggage agent. “The Chinese people from the Italian brand have very high standards. They first look at the style, and then gradually gave us some of the goods to make so that they could look at the quality, look at the speed and look at the price. Once the partnership is established, they start with the simplest products and a small quantity, and then gradually increase the amount and put forward higher requirements. At the same time, you must use German or Japanese machines like JUKI; other production machines in the factory need to be upgraded every year, as well as factory management. In 2007 we moved into the new plant, and started an increasingly close cooperation with the brands. We were the only factory in Florence directly cooperating with the brands.” In order to ensure quality, the brand sent representatives directly to the company's production site for inspection and monitoring. One inspector is responsible for maintaining the brand's safety. They go to companies to check whether there is black market labor; the hygiene, health, and mental state of the workers; the degree of cleanliness in the workshop; and whether there are violations of intellectual property rights. Another type of monitoring checks the quality and process. “They check the quality of the production process, and communicate directly with the company's Italian management. They propose quality improvement requirements to ensure brand quality.” By working closely with the Italian brands, the company’s product quality has been continuously improving. Through continuous equipment upgrades, the company gained production techniques compatible with other brands’ OEM. In order to allow the company to better reflect regional characteristics, “we hired eleven Italian employees who are responsible for quality, financial, and administrative work. They are mostly professionals. We also hired a Chinese woman as a translator who is responsible for informing the workers of what the Italians mean, primarily the content related to technological requirements and quality requirements.” Through continuous improvement of management processes, the company established confidence in the quality of the products and formed consistent business rules and social norms between the company and its partners. This special trust and cooperation between the Italian partners, brands, and Italian staff and entrepreneurs promoted rapid embeddedness in the local culture; cultural embeddedness became the internal driving force for enhancing quality and improving management.

In 2005 ZY gradually began to participate in Italian politics, culture, and social interactions, and has established close ties with the Italian Embassy and the local government. Through his long period of living abroad as well as his interest in wine, ZY learned the status of Italian wine in the world of wine aficionados. He also saw the gap in the Italian wine market in China: “China's wine market is slowly rising, especially in high-quality Italian wines, good quality, but compared to French wines, the promotion efforts are not enough.” (All the above interviews were conducted with ZY on March 18, 2014, Florence). In 2006 ZY began working as an agent for a midrange wine brand. In early 2009 ZY performed a detailed market research on China's overall wine market. He used his own foundry store’s relationship to establish a top Italian wine brand, acquired a winery in Italy, and used direct sales from the winery to import it to China. In 2010 ZY established a wine company in Shanghai, and has invited Italian consulate personnel and business contacts to participate in wine tasting and other promotional activities there. Using the special trust established within the Italian political and business world, ZY captured new business opportunities. With his reputation for access to top luggage brands and OEM experience, he rapidly implemented this diversification strategy and successfully expanded the wine market. He has become China’s largest distributor of high-end Italian wine.

Summary