Super Good Case on DTF

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Front. Bus. Res. China 2012, 6(1): 96119DOI 10.3868/s070-001-012-0005-4

Received September 9, 2011

Fu-Lai Tony Yu ()Department of Economics and Finance, Hong Kong Shue Yan University, Hong Kong, ChinaE-mail: [email protected]

Pinky Wan Ping TseDepartment of Economics, Hong Kong Baptist University, Hong Kong, ChinaE-mail: [email protected]

RESEARCH ARTICLE

Fu-Lai Tony Yu, Pinky Wan Ping Tse

Right Time Right Place and Right People

and Chinese Entrepreneurship: A Case Study of

Taiwans Din Tai Fung Dumpling House

Abstract In examining corporate success, many scholars overlook an important

contributing factor, namely entrepreneurship. However, Chinese wisdom believes

that the right time, right place, and right people (Three Rs) are crucial for

business success. This study utilizes theories of entrepreneurship from the

Austrian School of Economics to reinterpret the three factors for business

success. This new interpretation is then applied to explain the success of afamous dumpling house in Taiwan, Din Tai Fung. This study argues that although

favorable timing is critical to business success, it requires an entrepreneur to

grasp the opportunity when it comes. The seizure of a golden chance requires

alertness and preparation. More importantly, this study argues that even during an

adverse period, a crisis can be turned into a profit opportunity. Whereas a

favorable location is also regarded as a key factor, this study goes beyond sheer

spatial dimensions. Location also encompasses culture, social customs, norms

and traditional folklores. This paper argues that an entrepreneur transplants

culture and social customs from one location to another, thus, gaining pure

entrepreneurial profit. Finally, the right people in an entrepreneurial sense

involves a harmonious social network and good personal relationship (Guanxi).

By maintaining a harmonious relationship with staff members, partners, customers,

and suppliers, entrepreneurs can get things done. This case study provides a

new insight into Chinese entrepreneurship in East Asia.


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Right Time, Right Place, and Right People and Chinese Entrepreneurship 97

Keywords Chinese entrepreneurship, Confucianism, catering industry, Austrian

School of Economics

No matter what the economic condition in Taiwan is, this restaurant [Din Tai

Fung] always records high revenue. There is a long queue outside the premise

every day.

Ma Ying-Jeou, Taiwan Leader

NOWnews, 13th

February 2001

1 Introduction

International catering franchises, such as Starbucks, Burger King, McDonalds

and KFC, have entered the global market early and captured huge market shares.

Many studies have investigated their marketing strategies and reasons for success.

On the contrary, few Asian catering franchises are able to expand their businessesbeyond their starting places. Unlike other international brands, although Taiwans

Din Tai Fung focuses on traditional Shanghai cuisine, it makes an outstanding

achievement in Asia and international markets without much advertising and

promotion. As a result, it becomes a famous brand in Taiwans catering industry.

Theories of entrepreneurship in economics and management have been used to

explain global success of multinational corporations from developed nations

(Langlois and Robertson, 1995; Foss and Pedersen, 2004). As will be argued, Din

Tai Fung restaurant achieves success by adopting traditional Chinese wisdoms in

business operation. Hence, we would like to find out if theories of

entrepreneurship developed in the western world can also explain the success ofChinese enterprises with cultures and practices utterly different from the west. In

doing so, this paper synthesizes the Austrian theory of entrepreneurship with the

ideologies of Chinese business practices. More specifically, the paper will

establish an Austrian theory of Chinese entrepreneurship. This model will be

used to reinterpret the international success of a business enterprise in Taiwan,

and in particular, the Chinese recipe of success in achieving a project, namely the

right time, right place and right people. Din Tai Fung, which is a famous

restaurant in dumpling cuisine, will be used as a case study to illustrate how

these three factors are compatible with Austrian entrepreneurial strategies.

Din Tai Fung was founded by Bingyi Yang in 1958. It was initially a storeselling cooking oil on Xinji Road in Taipei city. From 1972, it sold home-made


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98 Fu-Lai Tony Yu, Pinky Wan Ping Tse

small Xiaolongbao (steamed pork bun)1, a typical Shanghai snack. Apart from

local people, tourists from Southeast Asia, Europe and the United States visit the

restaurant for a taste of the renowned Xiaolongbao. According to the Readers

Digest (October 2006), Din Tai Fung is listed among the Best of Taiwan

restaurants. It is also ranked as one of the top ten gourmet restaurants in the

world (The New York Times, 17 January, 1993).

This paper starts by developing a theoretical framework on Austrian theory of

Chinese business practices. More specifically, it utilizes theories of

entrepreneurship from the Austrian School of Economics and the ideology of

Confucianism2 to explore the relationship between the Three Rs (namely the

right time, right place, and right people) and entrepreneurship (Section 2). The

case study of Din Tai Fung will be presented in Section 3, and conclusions will

be given at Section 4.

2 Towards an Austrian Theory of Chinese Entrepreneurship:

An Entrepreneurial Interpretation of the Three Rs

In this section, we shall put forward a synthesis of traditional Chinese business

wisdom and the Austrian theory of entrepreneurship. In doing so, this paper will

provide an entrepreneurial interpretation of the three Rs in traditional Chinese

thinking. In this way, we shall arrive at an Austrian theory of Chinese

entrepreneurship.

Entrepreneurship has always been the central theme in Austrian School of

Economics. Within the Austrian camp, Israel Kirzners concept of

entrepreneurship, which includes the notions of alertness and opportunitydiscovery, is regarded as one of the most significant advances in the theory of

market process (Douhan, Eliasson, & Henrekson, 2007).

2.1 Kirzners Theory of Entrepreneurship: Alertness to and Exploitation of

Profit Opportunities

Apart from Joseph Schumpeter and Frank Knight, Israel Kirzner is the most

influential scholar contributing to the theory of entrepreneurship in economics

1Xiaolongbaois a Shanghai dumpling steamed in a small bamboo basket.2 For a discussion of the impact of Confucian business practice on the performance of a

Taiwans real estate firm, see Tsai, Young, & Cheng (2011).


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during the 20th

century (Gunning, 1997).3 As a follower of Ludwig von Mises,

Kirzner (1973) built his concept of entrepreneurship upon the foundation of

Mises human action theory. On this, Kirzner (1973: 33) noted:

Human action, in the sense developed by Mises, involves the course of

action taken by the human being to remove uneasiness and to make himself

better off. Being broader than the notion of economising, the concept of

human action does not restrict analysis of the decision to the allocation

problem posed by the juxtaposition of scarce means and multiple ends ...

but also the very perception of the ends-means framework within which

allocation and economising are to take place ... Mises homo agens ... is

endowed not only with the propensity to pursue goals efficiently, once ends

and means are clearly identified, but also with the drive and alertness

needed to identify which ends to strive for and which means are available.

Hence, we can trace an important element of Kirzners concept of

entrepreneurship, namely, alertness, from Mises. In the market process, the

opportunities that human agents are alert to are monetary profits. The entire role

of entrepreneurs lies in their alertness to hitherto unnoticed opportunities

(Kirzner, 1973). Through their alertness, entrepreneurs can discover and exploit

situations in which they are able to sell for high prices that which they can buy

for low prices. Alertness implies that the actor possesses a superior perception of

economic opportunity. It is like an antennae that permits recognition of gaps in

the market that give little outward sign (Galid, Kaish, & Ronen, 1988: 483).

For Kirzner, alertness to profit opportunity implies arbitrage activities. Kirzner(1973) argues that the existence of disequilibrium situations in the market implies

profit opportunities. Entrepreneurs endeavor to exploit these opportunities, thus

eliminating errors, so that the economy moves towards the state of equilibrium.

At equilibrium, individuals plans in the market are matched and coordination of

economic activities is achieved (Hayek, 1945).4

Kirzner (1979) further explained business failure in terms of the subjectivist

theory of knowledge and argued that the source of business errors is a failure to

3 Israel Kirzner was awarded The International Award for Entrepreneurship and SmallBusiness Research in 2006. For a recent review of Kirzners contributions, see Douhan,

Eliasson, & Henrekson (2007).4 For a further discussion on Austrian theories of entrepreneurship, see Yu (2001) and Yu &Shiu (2011).


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notice economic opportunities. In his view, ignorance consists in inexplicably

failing to see facts staring one in the face. It represents genuine error and hence

genuine inefficiency. In Kirzners example (1979: 130),

A person walks along a street and sees a store with signs offering to sellapples for one dollar; but, perhaps thinking of other things, he enters a

second store where he pays two dollars for identical apples. He may have

seen the signs in the first store, but his perception of them was so weak as to

mean that, when he paid two dollars in the second store he did not, in fact,

know that he was rejecting a preferred opportunity for one less preferred.

Within the framework of his knowledge, the two-dollar apples were indeed

his best opportunity; he made no error. Yet, surely, in an important sense he

will, when he realizes his mistakes, reproach himself for having been so

absent-minded as to pass by the bargain, which he saw, for the more

expensive purchase. In this sense, he did commit an error, the error of notacting on the information available to him, on not perceiving fully the

opportunity before his very nose

Kirzner (1979: 146) claimed that business people will regret later for their errors

of overlooking an opportunity in which they can notice. Once people have gained

the relevant knowledge and look back on their ignorance without having

anything to excuse it, sheer regret results.

2.2 The Chinese Recipe to a Successful Business Project: The Three Rs

The Chinese believe that a successful project depends on three crucial factors,namely, the right time, right place and right people. Xunzi, a Confucian

philosopher, examined the factors that yield the greatest harvest to the farmers as

below (Knoblock, 1988: 170):

If farmers and husbandmen remain simple and hardworking and limit what

they are able to do, then above the natural sequence of the seasons is not

lost in Heaven, below the benefits of Earth are not lost, and in the middle of

the concord of humanity is obtained, so that the Hundred Tasks are not

frustrated.

According to Xunzi, the right time (Tian Shi) means favorable timing or a


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golden opportunity granted by the nature (Tao, orDao)5; the right place (Di Li)

denotes favorable geographical location; and the right people (Ren He)

represents harmony between the division of labor and coordination within a farm.

The three Rs are equally important and none of them can be ignored. Apart from

Xunzi, Mencius and other Confucian philosophers also emphasized these three

components in a military warfare. The concept of the three Rs can be applied to

economic, political and business affairs.

2.3 The Right Time

According to Xunzi and Mencius, the right time refers to favorable timing or

chance granted by the nature. Luck is bestowed by destiny that is out of control

of human beings. Luck or blessing means a fortune to individuals. Paradoxically,

people may not be able to manipulate luck if they are unaware that the chance

has come.

2.3.1 Making Use of Timing to Win

An entrepreneur or a leader will notice an opportunity if it is there. The Battle

of Red Cliffs is a good illustration. At the end of the Han Dynasty (220 A.D.),

Zhuge Liang (Kongming), a military strategist and astronomer, helped his allied

troops beat Cao Cao and win the battle by using strong easterlies.6 It is argued

that Kongming won the battle by the help of favorable weather, which was luck

granted by God. However, Kongmings contribution should not be

underestimated. Being an expert on astronomy, Kongming showed his skills in

weather observation. He took the benefit of the change in weather at the right

time and won the battle. He became a legend in the Chinese history.

5 According to Lao Tzu (Laozi), Tao refers to the force behind the natural order (Magno,

2004). This force keeps universe balance and order. It is equivalent to the supreme God in

western civilization.6 The Battle of Red Cliffs was a battle between the allied forces of the southern warlords Liu

Bei and Sun Quan and the northern warlord Cao Cao. The latter was unfamiliar with wind

directions over the terrain of the Yangtze River. He ordered to moor his fleet to avoid sea

sickness. By contrast, Kongming, a military strategist for Liu Bei, was familiar with landscape

and weather in the Yangtze River. He instructed the allied forces to crash burning ships

towards Cao Caos fleet when southeasterlies blew. Shortly afterwards, smoke and flamesstretched across the river and many sailors and troops of Cao Cao were burned to death. The

allied forces utilized the wisdom of Kongming and won the battle (Luo, 1360).


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2.3.2 The Right Time Implying Entrepreneurial Alertness to Opportunities

Whilst God is generous to sprinkle lucky dust on a person, it requires the person

to identify and capture the opportunity when it is the time. Kirzner (1979: 170)

argued entrepreneurial behavior may not be arrived at deliberately, rationally,but neither is it arrived at purely by chance (emphasis added). A successful

enterprise is attributed to entrepreneurial capability on grasping opportunities

rather than relying on sheer luck (Kirzner, 1979: 180). Entrepreneurial agents

always switch on alertness system to discover profitable opportunities (Yu, 2001:

15). If a person simply sits and waits for luck, he/she will be like a foolish farmer

who stands by a tree stump waiting for a hare.7

2.3.3 Proactive Entrepreneurial Strategy: Turning a Crisis into an Opportunity

Entrepreneurs ability to turn a crisis into an opportunity is an important element

for business success. Since consumer behaviors and preferences change rapidly,

success today can suddenly turn into sour tomorrow. In the rapidly changing

world, nobody knows exactly what will happen in future (Farson & Keynes,

2002: 29). New challenges or crises can arise at any time.

Unfortunately, in face of difficulties arising from a crisis, most individuals get

locked-in by their old thinking and perceive the crisis as bad luck. They resist

new things and fail to turn the crisis into a profitable opportunity. On the contrary,

when entrepreneurs actively respond to external shock, devise new method to

tackle the crises and revise their business plans, the crisis will become a

profitable opportunity (Yu, 2001: 19, 2223; Lane et al., 1996: 107124; deBono,

1992: 15, 17). In a rapidly changing economy, dealing with crisis is a continuous

mental process for entrepreneurs.

The capability to deal with change depends on the flexibility of the firm. Yu

(2000: 388) argued that small firms in Taiwan maintain high degree of flexibility

by adopting guerrilla strategies. They respond to external shocks rapidly and

effectively. With a small plant size, when restructuring fails, Taiwan

entrepreneurs close their business quickly and redeploy resources to another

7 Stand by a tree stump waiting for a hare is a Chinese fable written by Han Feizi, a famous

Chinese philosopher of the Legalist school of thought (280233 B.C.). One day, a scared hare

smacked into a tree, broke its neck and died. The farmer happily got the hare. Since then, he

sat by the tree and waited for another hare. As days went by, neighbors laughed at his naivet.Weeds grew in his field and the farmer lost the harvest. No crazed hares came to crash into the

stumps. The moral is that people should work hard instead of waiting for windfall.


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profitable business without rendering high costs (Yu, Yan, & Chen, 2006: 63).

Entrepreneurs face new challenges and devise new plans. New methods need

to be put into test. Since new ways of doing things induce changes in habits and

customs in the society, frustration is inevitable during experimental process.

Winston Churchill once noted, success is the ability to go from failure to failure

without losing your enthusiasm (Minniti & Bygrave, 2001: 1). Minniti &

Bygrave (2001) also argued that entrepreneurs learn from successes and failures.

Failure is regarded as a prerequisite for future success instead of stigma

(Zacharakis, Bygrave, & Shepherd, 2000; Yu, 2007: 64). Entrepreneurs recognize

crisis, overcome constraints and turn a crisis into potential opportunity.

2.4 The Right Place

Xunzi believed that farmers heap bumper harvests on fertilized land. Mencius

contended that soldiers defeat the enemy by constructing solid walls on astrategic site. A Chinese idiom, a pavilion located waterfront gets the moonlight

first8 means that a person enjoys advantages in a favorable location. As an

example, when the Opening-Up Policy was implemented in the mainland of

China in 1978, Hong Kong entrepreneurs were the first group to relocate their

businesses in the Pearl River Delta to take advantages of cheap labor and land,

because Hong Kong is adjacent to Guangdong Province (Yu, 2007: 41).

2.4.1 Entrepreneurs as Regional Arbitrageurs

As discussed in the previous paragraph, location advantages denote close

proximity and convenient transport. However, the right place does not only

refer to location in spatial dimension. It also includes cultural, custom, religion,

institutional and historical characteristics which are crucial for foreign direct

investment. Although location is fixed, culture is linked with people. Yu (2001:

65) argued that one form of Kirznerian entrepreneurial strategies involves

regional arbitrage activity, i.e., entrepreneurial alertness to cost reduction

opportunities over space. By transplanting the ways of living from one place to

another, entrepreneurs can capture profit opportunities from the right place.

8

A waterfront pavilion gets the moonlight first is a Chinese metaphor written by Su Lin inancient Sung Dynasty. It is followed by flowers and trees on the sunny side meet spring

earlier.


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2.4.2 Transplanting Culture and Business Knowledge to a Familiar Place

If entrepreneurs are familiar with a place, then transaction costs of setting up a

business in that location will be reduced, and hence they get twice the result

with a half of the effort. For example, many Taiwanese entrepreneurs were bornin the mainland of China, and grew up in their hometowns. After leaving their

birthplace, many are able to bring along their culture and ways of living with

them to new places. Furthermore, Taiwan was ruled by Japan for 50 years.

During that period, Taiwan people were cultivated in Japanese culture and

language via Kominka movement. As a result, entrepreneurs in Taiwan have been

incubated with Sino-Japanese culture. They are then able to establish businesses

in Japan by transplanting business knowledge and cultures they gained in the

mainland and Taiwan.

2.4.3 Investing in Foreign Countries of Different Cultures

It is easy to transplant business concepts to a place with the same culture as the

entrepreneur. Yet it is very difficult to introduce a new product or way of life to

an unfamiliar economy, because of cultural and social barriers. For example,

Taiwans computer giant Acer performed well as an OEM supplier to ITT, AT&T

and other market leaders. After gaining substantial innovative capabilities, Acer

intended to launch its own brand of computer in the U.S. market. However, due

to cultural barriers and unfamiliarity with marketing strategies in the foreign

market, Acer failed. As a result, Acer reverted back to OEM contracts. This case

illustrates the difficulties of launching a new brand overseas and, cultural and

social barriers count (Ernst, 1998: 45).

One method to overcome cultural barriers is to hire a local firm in the foreign

markets as a guide. For example, in the past, European merchants in Hong Kong

did not understand Chinese culture. They employed local people known as mai

pan or comprador to act as a middleman. With their expertise on Chinese culture

and personal networking in Hong Kong, mai pan helped foreign entrepreneurs

reduce transaction costs and deal smoothly with local customers (Li, 1948: 130;

Chan, 1991: 56; Yu, 2007: 34)

2.5 The Right People

According to Mencius, the right people means social harmony and good


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coordination. Amongst the three Rs, Mencius regarded social harmony as the

most important. In a battle, a band of soldiers with one mind is invincible.

Mencius noted, opportunities of time vouchsafed by heaven are not equal to

advantages of situation afforded by the Earth, and advantages of situation

afforded by the Earth are not equal to the union arising from the accord of Men

(Legge, 1930: 556). Hillary Clinton, the Secretary of State of the United States,

quoted a Chinese idiom that when people are of one mind and heart, they can

move Mount Tai to show the importance of harmonious relationship between

China and the United States (Austin 2009). Harmony is crucial for business

success, especially in Chinese family firms. Yu (2007: 118) remarked,

The Chinese culture regards harmonious (relationship) among family

members as the foundation for a prosperous business. Harmonious group

relationsgive rise to flexibility and are capable of reducing internal

communication costs (internal capabilities). Extending harmoniousrelations to external business networks, Chinese family

enterprisesmaintain production flexibility and reduce inter-firm

coordination costs (external capabilities).

Employees in an organization may not comply with the philosophy and goals of

the firm. Entrepreneurs thus need to organize the efforts of staff members and

partners to achieve the companys goals. In Chinese economies, a good Guanxi

(or social relationship) means business success (Hamilton, 1996: 72, 82).

According to Hong Kong History, a TV programme produced by Radio

Television Hong Kong, Chinese Guanxicapitalism has been widely practised inChina and Chinese Commonwealth (Kao, 1993). Immigrant families organize

family benevolent associations for members who come from the same village or

region and speak the same Chinese dialect. These associations provide members

support and welfare. They also maintain intra-ethnic business networks and

service for merchants or business associations to protect ethnic Chinese interests

in such businesses as restaurants and laundries (Li, 2009).

Yu (2001: 56) remarked that Chinese family businesses rely on networks and

nepotism rather than working in isolation. To ensure the reliability of business

networks, Chinese firms pay special attention to personal obligation, reputation

and face. Business connection, reputation, trust and Guanxi are important forChinese entrepreneurs to achieve their business goals. Yu (2007: 256) concluded,


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the greater our trust in the people with whom we trade, the greater the

accumulation of wealth. Some business people overemphasize what they are

interested in but ignore what are in their interest. As a result, they live in a

world of self-delusion being conceited, envious, malicious, quarrelsome, and

resentful (Wood, 2004: 551) and incapable of building up good business

connection, trust, and Guanxi.

2.5.1 The Right People Implying Entrepreneurial Capabilities in an

Organization

Yu (2001: 5761) differentiated two kinds of entrepreneurial capabilities for a

successful business organization, namely internal and external capabilities. The

former refers to the ability of an entrepreneur to manage his/her firm internally.

This has something to do with interpersonal skills of the boss and charisma

leadership. The latter refers to entrepreneurial capabilities in handling externalrelationships including social network, Guanxi in the market. Chinese believe

that living in harmony brings wealth to the family. To establish harmonious

relationship, Confucianism emphasizes benevolence and humaneness. Whether it

is internal or external capabilities, entrepreneurs can reduce conflict and increase

competitive advantage of the enterprise by 1) being a role model in the enterprise,

2) collaborating with people in the same philosophy, and 3) putting oneself into

anothers position.

2.5.2 A Role Model in an Organization

Confucianism believes that if employers do well, managers and subordinates will

follow suit. Entrepreneurs are the role models in their businesses and good

teachers of propriety, righteousness, and faith. Confucius said, if a superior

loves propriety, the people will not dare not to be reverent. If he loves

righteousness, the people will not dare not to submit to his example. If he loves

good faith, the people will not dare not to be sincere. (Lui, Zhou, & Cheng,

2006, Chapter 13: 4). Furthermore, if a man is morally upright, then tasks will

be done even though he has not given out any order. Otherwise, his order will not

be carried out even if he has given one. (Lui, Zhou, & Cheng, 2006, Chapter 13:

6). Entrepreneurs with charismatic leadership can convince staff members to

achieve the goals of the firm. When employees are convinced to be a part of thecompany, they will be less likely to undertake opportunistic actions. As Witt


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(1998: 161177) argued,

A persuasive business conception adopted by an employee may detract

her/his attention in a self-reinforcing manner from non-compliance

alternatives that actually exist. Hence if the entrepreneur can dominate the

informal communication process within the firm so that elements of her/his

conception become tacit cognitive commonalities among the firm members,

this may enable the entrepreneur to get the employees cognitively involved

into her/his endeavour.

2.5.3 Collaborating with People of the Same Vision

Yeung & Tung (1996: 53) pointed out who you know is more important than

what you know. Entrepreneurs do business with people of the same business

philosophy and reduce the risk of failure. A firms expansion relies onentrepreneurs endeavor and their partners. Entrepreneurs enhance their

companys performance by collaborating with partners of the same philosophy.

Confucius once said, if people follow different paths, then it is not possible for

them to work together (Lui, Zhou, & Cheng, 2006, Chapter 15: 39).

2.5.4 Putting Oneself into Anothers Position

Putting oneself into anothers position or reciprocity is an essence of

Confucianism. As Confucius (Lui, Zhou, & Cheng 2006, Chapter 12: 2) noted,

When you go out to meet someone, treat that person as if he were an

honored guest. In the same way, ruling a country is like presiding over a

ritual. What you do not want must not be imposed upon others. You should

be free from complaint whether in your country or your family.

Entrepreneurs avoid making offensive acts to other people. The Chinese believe

that people will meet their rivals eventually, just like mountains and rivers will

meet again one day.9 If people are odious to you, you have to be lenient and not

to intimidate them. Even in extreme adverse situations, entrepreneurs always

9

Mountains and rivers will meet again comes from The Scholars, a novel written by WuJingzi (17011754). It says that there must be one day for the mountains and rivers to meetagain; how couldnt people treat others well and help each other?


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treat their rivals with respect. Otherwise, harmonious personal relationships will

be destroyed.

Benevolence and humaneness also manifest in the western culture. Adam

Smith expounded in his Theory of Moral Sentiments that there is a beneficent

order in nature which, if left to take its own course, will bring to mankind

maximum happiness and prosperity (Wood, 2004: 149). However,

benevolence and humanity are not enough. In the Wealth of Nation(1776), Smith

stated,

(Individual) will be more likely to prevail if he can interest their self-love in

his favor, and show them that it is for their own advantage to do for him

what he requires of them. Whoever offers to another a bargain of any kind,

proposes to do this. Give me that which I want, and you shall have this,

which you want, is the meaning of every such offer; and it is in this manner

that we obtain from one another the far greater part of those good offices,which we stand in need of. It is not from the benevolence of the butcher, the

brewer, or the baker that we expect our dinner, but from their regard to

their own interest. We address ourselves, not to their humanity but to their

self-love, and never talk to them of our own necessities but of their

advantages.

In sum, a benevolent and humane entrepreneur creates profit opportunity that is

shared by and mutually beneficial to others in the society. We can summarize the

foregoing synthesis into Table 1:

Table 1 The Synthesis

Wisdom of Chinese

Business Strategies

The Austrian

Theory of

Entrepreneurship

Implications to Business Success

Right time Alertness to

opportunities

Equipped with knowledge and well prepared to

seize a profit opportunity when it arrives.

Right place Regional

arbitrageurship

Transplanting culture and ways of living

spatially

Right people Entrepreneurial

capabilities in an

organization and in

the market

1. Internal capabilities: Interpersonal skills

within an organization, role model &

charismatic leadership.

2. External capabilities: social network &

Guanxi


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3 Interpretative Method by Storytelling and Case Study

The purpose of this study is to re-interpret traditional Chinese wisdom in

business practices by the Austrian theory of entrepreneurship. Our interpretative

approach10

means that it is preferable to use a storytelling approach in theempirical analysis.

11 Storytelling via case studies allows a deeper understanding

of issues over time. Yin (1994: 9) argued that case studies are the preferred

empirical strategy when a how and why question is being asked about a

contemporary set of events over which the investigator has little control or no

control.12

Data and materials in this study rely largely on secondary sources,

such as Din Tai Fung Annual Report. Since Din Tai Fung is well known in the

catering industry, there is no dearth of reports on Din Tai Fung in newspapers and

magazines. These include The New York Times, Business Weekly, Capital,

Asiaweek, Far Eastern Economic Review, International Business Week, and

Fortune. Taiwans business journals such as CommonWealth, Taiwan Panorama

Magazine, Business Today, Money: Taiwan and Taiwan Entrepreneurs also

conductinterviews with the boss of Din Tai Fung from time to time. Therefore,

reliability of the information from these magazines can be checked against from

each other.

In the next section, an entrepreneurial perspective of the right time, right

place and right people will be applied to understand the success of Din Tai

Fung.

4 Case Study: Din Tai Fung

As mentioned above, Din Tai Fung was established as a cooking oil store in XinjiRoad, Taipei by Bingyi Yang in 1958. His son, Jihwa Yang, managed and

transformed the family business into a renowned restaurant with 50 branches

around the globe. Din Tai Fung created XiaolongbaoMiracle and became a

food giant in Taiwan. According to Business Today (Liu, 2008), at least 100

millionXiaolongbaowere sold all over the world each year. In 2007, branches in

10 For a discussion on economics as an interpretative science, see Yu & Shiu (2011: 150).11 For storytelling as an economic methodology, see McCloskey (1990).12 Unlike Yin who used case studies to test a priori theory, Eisenhardt (1989; 1991) used them

for theory building, and argues that that propositions can be developed (and tested) during data

collection, rather than prior to it. Since the aim of case studies is to obtain a rich understanding

of the cases in all their complexity, insights gained during data collection can be used toinform the theory (Crosthwaite et al., 1997). For a further discussion of this issue, see Dyer &

Wilkins (1991).


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Taiwan including Xinyi, Zhongxiao and Fuxing had a business turnover of over

NT$800 million, with overseas annual revenue of NT$6 billion (Liu, 2008).

4.1 Grasping the Opportunity at the Right Time

Entrepreneurs act today in order to achieve goals tomorrow. Things change in the

passage of time and entrepreneurs need to make decision under uncertainty.

Hence, economic problems arise always and only in consequence of change

(Hayek, 1945). It would be a blessing if an entrepreneur encounters a good

chance at a favorable timing. Otherwise, entrepreneurs will have to tackle

unfavorable timing.

4.1.1 Turning Crisis into Opportunity

At the beginning, Bingyi Yang sold cooking oil in Din Tai Fung. After traditional

peanut oil was found to be contaminated by a chemical toxic called Aflatoxin in

1968, people were concerned of food safety. They chose a substitute of cooking

oil. Din Tai Fung suffered a major setback on selling cooking oil. As

entrepreneurs quick to respond, Yang and his wife revised their business plan for

survival. They transformed half of the shop floor into a Shanghai steamed

dumpling business. With their good business connections and reputation,

dumpling sales took off. Yang decided to replace oil business with dumplings.

The legend of Din Tai Fung began.

4.1.2 Creating Wants by Trial and Error

Bingyi Yang was fully aware that a nearby Shanghai eatery called Kao-chi also

sold traditional dumplings as Din Tai Fung did. However, Kao-chi was notorious

for big and greasy dumplings. Yang spent a lot of time and effort on reducing oil

content in dumplings by experimenting new combination of meat, fat and soup

(Chang, 2006). He modified and improved traditional recipes. When consumer

taste changed, Yang was able to meet consumer needs at the right time. Din Tai

Fung outperformed its competitors. Yang improved his dumpling business before

the opportunity was noticed by rivals.

4.1.3 Entering the Mainland at the Right Time

Jihwa Yang, the son of Bingyi Yang, believed that the year 2001 was a right time


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to expand Din Tai Fung business in mainland of China where people had a strong

purchasing power. He improved the eatery with an airy modern and elegant

decoration and service quality (Wong, 2007: 283284). However, the move did

not result in immediate success. At the early days of business expansion in the

mainland, Yang and his partners were inexperienced in managing inventories and

human resources. They encountered difficulties and frustration. Financial loss

was recorded. However, they did not give up. By continuous reviews and

revisions in operational strategy, the quality of food and service, human

resources management and operational efficiency significantly improved. In four

years, Din Tai Fung opened a second branch in the mainland in May 2005 (Wong,

2007: 286287). It was rated as one of the best dumpling houses in Shanghai

(The New York Times, 9 October,2005):

(In Shanghai, Din Tai Fung) is just a branch of a Taiwan dumpling house,

but who cares? The dumplings and other dishes are first-rate, and the openkitchen puts on quite a show. Din Tai Fung had become one of the best

dumpling houses in Shanghai.

4.2 The Right Place: Cultural Transplantation from Place to Place

Favorable location refers not only geographical advantages, but also cultural and

ways of living in the region. The founder and current owner of Din Tai Fung

have made enormous achievements by capturing and transplanting good ways

of living from one place to another.

4.2.1 Regenerating Shanghai Cuisine in Taiwan

Bingyi Yang was born in Shanxi in 1927. In 1948, at the age of 21, he moved

from the mainland to Taiwan. Before starting the business, he worked in Heng

Tai Fung in Taiwan for ten years. As the owner and shareholders of Heng Tai

Fung were from Shanghai, Yang learned Shanghainese and built up a good

relationship with them. Furthermore, he got familiar with Shanghai food and

culture (Wong, 2007: 36). Many Shanghainese migrated to Taiwan during

19271949. They yearned for old ways of life and food in the mainland, such as

traditional Chinese dumplings. The demand for dumplings in Taiwan increased.

Using his talents and knowledge, Yang regenerated Shanghai culture anddumplings in Taiwan and established Din Tai Fung dumpling house in Taipei


17/24


city.

4.2.2 Integrating Japanese Culture: Kaizen

Since Taiwan was occupied by the Japanese between 1895 and 1945, Japaneseculture, including Kaizen and perfectionist spirit, was blended into Taiwan

culture. Bingyi Yang and Jihwa Yang were too influenced by the Japanese culture.

They were successful in integrating Japanese perfectionist spirit in their business.

They pursued high quality goods and services. Japanese tourists were attracted

by Yangs perfectionism. They believed that they should try dumplings in Din Tai

Fung whenever they visited Taiwan (Wong, 2007: 52).

4.2.3 Expanding Dumpling Business in Japan

As Xialongbaoand Shanghai foods were well received by Japanese tourists in

Taiwan, Jihwa Yang then opened branches in Japan. He introducedXialongbaoto

the Japanese and created a new impulse to Japanese dining culture. As he was

familiar with Japanese taste and business customs, it was easy for Yang to

operate a restaurant in Japan. Since the first branch opened in Tokyo in 1996, Din

Tai Fung has created its brand as a top dumpling house in Tokyo. Yang

subsequently established twelve branches with Japanese partners all over Japan

in twelve years.

4.2.4 Further Assimilation with Japanese Culture

Learning and cooperating with the Japanese, Jihwa Yang improved accountingand computer systems in the business. He learnt that continuous enhancement

and pursuit of perfection are Japanese traditions. When working with the

Japanese, Yang understood the importance of consistent high standard of food

quality. He standardized food ingredients and processes in all branches around

the globe. Din Tai Fung exhibits standardized high-quality products.

Yang also learnt from Japanese partners that hygiene and efficiency are

significant in catering industry. Rents are expensive in Japan and floor areas must

be effectively used. In 1998, a central kitchen was built to save production area.

The central kitchen was responsible to fill flavoring stuffing in dumplings and

prepare soups. Vacuum-packaged products were frozen and delivered to therestaurants. Hygiene and food quality could then be supervised and under control.


18/24


The duration of production process was also shortened (Wong, 2007: 280).

After improving operation process and management in Japan, Yang attempted

to do the same in Taiwan. In 2000, Yang established a central kitchen in Din Tai

Fung in Taiwan. It minimized production time, maximized customers turnover

and shortened queuing time for a seat. In 1997, Yang spent NT$1.2 million on

developing computerized systems on customer service. The system enhanced

efficiency and accuracy in ordering, serving and payment (CommonWealth,

2005). Customer place orders to the kitchen by pressing buttons. According to

Money (2001), the computer system shortened food preparation time, eliminated

the chance of wrong orders and shortened queuing time. Din Tai Fung also

introduced special meals, e.g., dumplings without green onion, without pepper

and without spicy. In summary, Yang transplanted Shanghai food to Japan by

utilizing knowledge of Japanese culture and ways of doing things. Furthermore,

he used same knowledge to improve businesses in Taiwan and branches all over

the world.

4.2.5 Becoming an International Entrepreneur

Chinese immigrants around the world provided opportunities for Ding Tai Fung.

Yang expanded the business in the mainland of China, East Asia and North

America where there were large concentrations of Chinese residents and

immigrants. Yang understood Chinese customs, etiquette, working attitudes and

business modes. He established businesses in the areas where the Chinese settled

and shared similar culture and Confucianism. Din Tai Fung has become a

Taiwan-based global franchise with fifty branches in nine countries. A strongprofit growth from Din Tai Fung in Singapore was recorded to have SGD$78

million revenue in 2005 (Bread Talk, 2006). Din Tai Fung in Los Angeles was

awarded as the best dumpling house by the Los Angeles Times newspaper in

2006 (Din Tai Fung Los Angeles, 2008).

4.3 The Right People: Promoting Harmonious Work Environment and Social

Networks

To enhance coordination and relationship, entrepreneurs promote mutual benefits

to workers, business partners, customers and suppliers in a harmonious working

environment.


19/24


4.3.1 Well-Established Social Network

Bingyi Yang did not operate his business in isolation. He cooperated with many

people in the business operation. He built up a good reputation and social

networks with partners and customers. Social networks proved to be useful intransforming Din Tai Fung. For example, when Din Tai Fung was threatened by

safety of cooking oil in 1958, Tang, a former partner of Yang, suggested

transforming the store into a small Shanghai eatery. Meanwhile, Bingyi Yang

formed a bandi (core team)13

to facilitate his business operation. Mr Lo, a

member of bandi, came from the same village as Yangs wife and a senior noodle

chef in Din Tai Fung, made significant contributions to the success of the

restaurant (Wong, 2007: 4245).

4.3.2 Being a Role-Model and Maintaining a Harmonious Environment in the

Workplace

Although Jihwa Yang did not seriously study the Confucian Analectsat school,

Confucian teachings influenced his life and work attitudes. Yang took a

benevolent approach to all people in his workplace. He gave a priority to

benevolence and righteousness over self-interest and personal wealth. He

believed that if profits were brought by unethical practice, without taking account

of customers feeling, complaints would follow. Being a leader, Yang encouraged

his staff members to provide quality and honest service to customers. He always

reminded the staff to be considerate of the customers. The staff was told not to

suggest expensive dishes to customers at the beginning. They should also remind

customers if they ordered excessive food. In case customers changed their mind,

the staff should do their best to meet their needs (Wong, 2007: 75, 83).

4.3.3 Applying Ethics of Reciprocity to All People

Job dissatisfaction and frustration often affect hardworking staff. Yang

considered himself as a parental leader and treated the staff as his relatives. He

was willing to share the profit with them. Salary and fringe benefits were

regularly reviewed. Staff-customer ratio remained at six to fifty. The staff was

13

Bandi refers to a working team of employees which is based on personal solidarity andtacit consensus. It strengthens organizational capabilities and competitive advantages of a firm

(Chen, 2007: 90, 97, 117).


20/24


assigned equitable and reasonable workload. Yang paid higher wages to his staff

than other catering industries (Ng, 2008: 7779). He also provided quarters for

his staff to take a rest during lunch and shift. In this way, fatigue, bad customer

service, and confusion were then avoided.

The term the right people also means serving customers in the right way.

Din Tai Fung has strictly followed the Confucian teaching of more haste, less

speed and obtaining wealth in the correct way. It pays attention to the quality

of food and less on profit margins because Yang knows that a good reputation

does not come easy. Din Tai Fung always put customers on the priority.

According toBusiness Today (Liu, 2008),a Taiwan magazine, Din Tai Fung was

recommended to expand businesses in Switzerland, England, Spanish, Canada,

Italy, Germany, South Africa and Mongolia. Although the profit was expected to

reach US$500,000, Yang refused to expand franchise in these countries. He

believed that building up a trained competent team took a long time before the

business received profit (Liu, 2008). Expanding business in haste without properpreparation will bring devastating effects. Yang would not open new outlet unless

high standards of food and service were ensured.

In summary, Jihwa Yang succeeded in creating a harmonious work

environment. Internal and external conflicts were avoided. He applied Confucian

teaching to Din Tai Fung. He emphasized benevolence, acted as a role model to

subordinates and applied the ethics of reciprocity to those who helped Din Tai

Fung build up core team and customer loyalty.

5 Conclusion

This paper has synthesized the Kirznerian theory of entrepreneurship with the

ideologies and wisdom of Chinese business practices and establishes an Austrian

theory of Chinese business enterprising. This theory has been used to reinterpret

the international success of a best-known catering firm in Taiwan, namely, Din

Tai Fung Dumpling House, and its Chinese recipe of achieving a successful

project, namely the right time, right place and right people. Regarding the

notion of the right time, the owners of Din Tai Fung has been able to identify

and exploit unnoticed opportunities. Encountering difficulties, they proactively

turned crises into a profit opportunity at the right timing. Hence, the right time

means entrepreneurial alertness to opportunity when the chance comes. In

terms of favorable location, using their experience in the mainland and Taiwan,they successfully transplanted cultures from one place (the mainland of China) to


21/24


another place (Taiwan). Hence, the right place in our entrepreneurial

perspective refers to regional arbitrageurship. Finally, they performed excellent

coordination in interpersonal relationship. They fully understood the Chinese

saying that a good personal relationship and harmonious social network generate

wealth. Therefore, the right people implies entrepreneurial capabilities in

handling internal and external affairs. As a result, Din Tai Fung and other

successful business enterprises in Taiwan have created one of the East Asian

miracles.

Acknowledgments The paper was presented at a seminar organized by the Department of

Economics, Feng Chia University in Taiwan on March 8, 2010 and the 6 thAnnual Meeting of

the Chinese Hayek Society held at Hong Kong Shue Yan University, 67 August, 2010. My

sincere thanks go to conference participants and Antonio Yan for their useful comments. I am

grateful to the referee of this journal for his/her constructive comment. Dian Kwan is also

thanked for her proofreading in this essay.

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