The Hong Kong toy industry: a qualitative study

Research Doctorate - Doctor of Business Administration (DBA)This is a qualitative study of the Hong Kong Toy Industry and its close association with Mainland China production, where there exists the behaviour of more OEM involvement than ODM. The study commences with: (a) a literature review that examines the relevant articles in PESTL and the strategic dimension, together with Transaction Cost Economics as the mainstream theory; (b) semi-structured interviews with six toy manufacturers to obtain primary data, in order to identify the factors influencing OEM-reliant behaviour and to determine the root of the problem in the Toy Industry. There are discussions of the inadequacy of and barriers to innovation and ODM development, encompassing: (a) manufacturers’ conservative mindset of risk avoidance for the costly investment involved, exposing uncertain market design acceptance; (b) manufacturers’ constraint in innovative idea acquisition and corporate capability; (c) economic, government and institutional environment; (d) the strategic environment of customers’ strong bargaining power over toy manufacturers in a bilaterally dependent contractual relationship; and (e) keen competition at all levels. Opportunistic behaviour is observed between customers and manufacturers for maximizing benefits, as well as within manufacturers’ personnel who may pursue goals deviating from the company direction. The role of transaction costs in the ex-ante investment alignment and ex-post governance is found to be crucial for toy manufacturers in deciding their involvement in ODM or OEM. The need for serious innovation and government support with appropriate alignment has emerged, and are important to sustain the competitive advantage of the Hong Kong Toy Industry. This study presents 11 propositions and suggests further research opportunities