From the 19th century Opium Wars to the Boston Tea Party — the 1773 midnight raid during which American colonists dumped 342 chests of tea from the British East India Company to protest Britain's monopoly of the tea industry, trade conflicts have been going on since the birth of international trade.
In recent years, the trade dispute dominating global headlines has involved the world's biggest economic powerhouses, China and the US. Exacerbated by the 2019 move by former US President Donald Trump to impose tariffs on Chinese imports and the resulting retaliation by China with duties on US imports, such acts of political protectionism has impacted the economies of markets the world over.
"When the top two economic superpowers lock horns in a trade scenario, there will be repercussions felt globally," notes Jonathan Chee, a Doctor of Philosophy in Business (General Management) Graduate at the SMU Lee Kong Chian School of Business.
"The supply chain communities will have to deal with many endogenous factors that may affect their performances. Understanding the effects of such contingent strategies may help policymakers and firm managers mitigate these challenges."
As part of his thesis, "Examining the Real Costs of US Manufacturing Decoupling Strategies", Jonathan took a closer look at the real costs of a forced decoupling from one supply chain location to another. For example, as China reclaims manufacturing processes in response to US tariffs and embargos, possible repercussions may include the cutting off of supply chains from the rest of the world. Set against a backdrop of uncertain and dynamic geopolitical shifts, Jonathan felt a need to investigate the effects of such a strategy on firms and economies and how firms can continue to compete in China.
Notably, the study delved into a phenomenon that has impacted international politics and trade sentiment — the use of social media. With former US President Trump known for leveraging social media platforms like Twitter as a tool for public communication, Jonathan decided to investigate the impact of social media on modern-day trade relations and decoupling decisions. He conducted a unique event study of foreign social media attacks to understand exogenous threats' effects on the state and analysed subsequent reactions.
Specifically, the study uncovered how Chinese firms — particularly Chinese State-Owned Enterprises (SOEs) — exhibited nationalistic sentiments and reacted accordingly to the nature of the social media output by the former US President.
"Our initial findings showed a very interesting relationship between the sentiments derived by the former US President's tweets with regards to making trade threats, and the stock prices of the focal firms," reveals Jonathan, who found that, within a three-day window, each tweet had a negative relationship with the firm's performance after controlling for the firm's fixed effects.
"We are now conducting cross-sectional and longitudinal studies on other social media platforms to examine if different languages and cultures will exhibit the same effects."
Given that the US-China trade conflict is now in its third year, with little sign of the economic pressure easing under the administration of US President Joe Biden, Jonathan's study is all the more timely as it also explores the viability of alternative sites to China such as Taiwan.
While the latter shares a similar culture with China, the study found that Taiwanese companies faced the challenge of succession planning. As most companies that offer an alternative to China are family-owned, leadership succession is met with common challenges such as differences between the founder and successors. Also, findings suggest that weak leadership succession sometimes occurs because the successor does not intend to carry on the business or when external political forces affect the supply chain. The potential for a leadership void and the firm's poor performance trend may cause it to be vulnerable to acquisitions, hostile or otherwise.
"One of the more interesting findings in our research was the dynamic moderating effect of having two parents on the board of directors in Asian family-owned firms," adds Jonathan. He included in his thesis a case study of a large Taiwanese manufacturer that faced a non-family succession, and was acquired by a Chinese SOE.
"We found that in many Asian founder-successor relationships, where there are known leadership style differences, the presence of the other parent on the board of directors often serves as a mediating factor to maintain an equilibrium balance of power."
As a post-Trump global environment undergoes seismic shifts amid a protracted pandemic, multiple research fields collaborate to recalibrate datasets and research boundaries. Jonathan's thesis emphasises the need to conduct meso-level studies when exploring the topic of decoupling to give a richer context of understanding, which is vital for researchers in the pursuit of causal validity.
