Framing China: Transformation and Institutional Change through Co-evolution

Abstract

This paper proposes a new institutional perspective to explain not only the diversity of local business systems in China but also how this diversity results from the integration of major institutional forces. We model the emergence of China's business systems as a co‐evolutionary process unfolding along a business–government and a micro–macro‐level dimension structured by intergovernmental institutional competition, business to business and business to government networking and public–private corporate governance. We find that: (i) China's emerging business system is the result of local institutional competition at the micro level that reduces the need for national (macro) institutions and impacts on the local implementation of national (including supranational) policies; (ii) the interaction between government and business is structured through networks which operate according to an economic rationale while drawing on cultural norms and traditions; and (iii) local businesses interact with local governments to recombine productive factors and reorganise firms and industries in line with local institutions. We conclude that the astonishing adaptability of Chinese businesses as well as the risk of corruption and lack of formal control at local government level are elements of locally differentiated business systems which are held together by an overarching institutional architecture.

Wary managers: Unfavorable environments, perceived vulnerability, and the development of trust in foreign enterprises in China

“…First, it contributes to a theory of international management within the institutional perspective that envisages a broader range of recursive linkages between purposive action and the unfavorable environments in which multinational enterprises are operating. Without denying the possibility that managerial agency may enact (Boisot & Child, 1999;Henisz, 2003) or partially construct (Krug & Hendrischke, 2008;Kostova et al, 2008) the institutional environment in many other contexts, we notice that foreign managers in our cases are either not in a position to or do not seek to change the institutional environment. As Child, Lu, and Tsai (2007) highlight, institutional entrepreneurship in China tends to be driven by the state rather than by other actors.…”

“…Key opportunities for further research are indicated by dashed arrows in our model (Figure 1), which express possible feedback loops between variables in our model that are not directly evident in our data but may become relevant when much longer time horizons or different types of enterprise are studied (Krug & Hendrischke, 2008). The dependence of some (large) foreign firms on the local context may well shape the local conditions over time, for example through investment in local education, political lobbying, technology development, and marketing, and through interaction with and pressures on the legal enforcement agencies.…”

“…On the other hand, a typical institutional entrepreneurship stance tends to inflate the role of managerial agency in changing the environment (Lawrence & Suddaby, 2006). Although research has shown that some multinationals are able to exert a certain influence on Chinese national and local governments (Child & Tsai, 2005;Krug & Hendrischke, 2008), most foreign managers in China might not be in a position to exercise strong agency in changing institutions in the short and medium terms (Boisot & Child, 1999;Economist, 2003aEconomist, , b, 2007. In this study we investigate the ways in which foreign managers can exercise managerial agency to deal with the macro-institutional impact within the enterprise, even if they are not in a position to change their environment.…”

Empirical Research on Corporate Governance in China: A Review and New Directions for the Future

“…However, little research directly examines the causes of the variation in internal governance within each sector. An exception is the qualitative study by Krug and Hendrischke (2008), which suggests that owners, managers, and other stakeholders in the private sector negotiate the appropriate forms of corporate governance in their local context to cope with political and market uncertainty while inducing investment and commitment. More research is needed to understand the antecedents and consequences of the variation in internal corporate governance within the state sector and the private sector, respectively.…”

Technology progress in the Chinese construction industry under the iron-fist of government

“…Krug and Hendrischke (2008) observed that the diversity of Chinese business systems reflects the co-evolution of institutional change in local governments and in business sectors. Although many empirical studies of transition economies, for example China, found the level of government ties is related positively to firm performance (Tan et.…”