Hostname: page-component-cb9f654ff-fg9bn Total loading time: 0 Render date: 2025-08-28T21:29:20.237Z Has data issue: false hasContentIssue false
  • English
  • Français

Framing China: Transformation and Institutional Change through Co-evolution

Published online by Cambridge University Press:  02 February 2015

Barbara Krug  and
Hans Hendrischke
Barbara Krug
Affiliation:
RSM Erasmus University, The, Netherlands
Hans Hendrischke
Affiliation:
The University of New South Wales, Australia
Get access Rights & Permissions [Opens in a new window]

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.

Keywords

China's business systemco-evolutiondecentralizationinstitutional changelocal autonomynetworks共同演化中国商业体制制度变化分权制网络地方自治

Information

Type
Articles
Information
Management and Organization Review , Volume 4 , Issue 1 , March 2008 , pp. 81 - 108
Copyright
Copyright © International Association for Chinese Management Research 2008

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

Article purchase

Temporarily unavailable

References

Aoki, M. 2001. Toward a comparative institutional analysis. Cambridge, Mass.: The MIT Press.Google Scholar
Baron, J. N., & Hannan, M. T. 2002. The economic sociology of organizational entrepreneurship: Lessons from the Stanford project on emerging companies. In Nee, V. & Swedberg, R. (Eds.), The economic sociology of capitalism: 168–203. Princeton, N.J.: Princeton University Press.Google Scholar
Barley, S. R., & Tolbert, P. S. 1997. Institutionalization and structuration: Studying the links between action and institution. Organization Studies, 18: 93–117.CrossRefGoogle Scholar
Bates, R. H., Greif, A., Levi, H., Rosenthal, J. L., & Weingast, B. 1998. Analytic narratives. Princeton, N.J.: Princeton University Press.Google Scholar
Batjargal, B. 2007. Comparative social capital: Networks of entrepreneurs and investors in China and Russia. Management and Organization Review, 3: 397–419.CrossRefGoogle Scholar
Belleflamme, P., & Hindriks, J. 2005. Yardstick competition and political agency problems. Social Choice and Welfare, 24: 155–169.Google Scholar
Besley, T., & Case, A. 1995. Incumbent behaviour: Vote seeking, tax setting and yardstick competition. American Economic Review, 85: 25–45.Google Scholar
Bian, Y. 2001. Guanxi capital and social eating in Chinese cities: Theoretical models and empirical analyses. In Lin, N., Cook, K., & Burt, R. (Eds.), Social Capital: Theory and Research: 275–295. New York: Aldine De Gruyter. Google Scholar
Blair, M. M. 1995. Ownership and control: Rethinking corporate governance for the twenty-first century. Washington, D.C.: Brookings Institute.Google Scholar
Boisot, M., & Child, J. 1988. The iron law of fiefs: Bureaucratic failure and the problem of governance in the Chinese economic reforms. Administrative Science Quarterly, 33: 507–527.Google Scholar
Boisot, M., & Child, J. 1996. From fiefs to clans and Network Capitalism: Explaining China's emerging economic order. Administration Science Quarterly, 41: 600–628.Google Scholar
Brean, D. J. S. (Ed.). 1998. Taxation in modern China. London: Routledge.Google Scholar
Chen, W. 2007. Does the colour of the cat matter? The Red Hat Strategy in China's private enterprises. Management and Organization Review, 3: 55–79.Google Scholar
Cheung, S. N. S. 1969. Transaction costs, risk aversion, and the choice of contractual arrangements. Journal of Law and Economics, 12: 23–42.Google Scholar
Cheung, S. N. S. 1996. A simplistic general equilibrium theory of corruption. Contemporary Economic Policy, 14(3): 1–5.Google Scholar
Coleman, J. S. 1987. Norms as social capital. In Radnitzky, G. & Bernholz, P. (Eds.), Economic imperialism: The economic approach applied outside the field of economics: 133–156. New York: Paragon House.Google Scholar
Dong, X., Bowles, P., & Ho, S. P. 2002. The determinants of employee ownership in China's privatized rural industry: Evidence fromjiangsu and Shandong. Journal of Comparative Economics, 30:415–437.Google Scholar
Duckett, J. 1998. The entrepreneurial state in China: Real estate and commerce departments in reform era Tianjin. London: Routledge.Google Scholar
Faccio, M. 2006. Politically connected firms. American Economic Review, 96(1): 369–386.CrossRefGoogle Scholar
Faure, D. 2006. China and capitalism: A history of business enterprise in modern China. Hong Kong: Hong Kong University Press.Google Scholar
Fisman, R. 2001. Estimating the value of political connections. American Economic Review, 91:1095–1102.Google Scholar
Fitzgerald, J. (Ed.). 2002. Rethinking China's provinces. London: Routledge.Google Scholar
Garnaut, R., Song, L., Tenev, S.,& Yao, Y. 2005. China's ownership transformation: Process, outcomes, prospects. Washington, D.C.: The International Finance Corporation and The International Bank for Reconstruction and Development/The World Bank.Google Scholar
Gold, T., Guthrie, D., & Wank, D. (Eds.). 2002. Social connections in China. Institutions, culture and the changing nature of Guanxi. Cambridge, UK.: Cambridge University Press.Google Scholar
Gong, T., & Feng, C. 1994. Institutional reorganization and its impact on decentralization. In Hao, J. & Lin, Z. H. (Eds.), Changing central-local relations in China: 67–89. Boulder, Colo.: Westview Press.Google Scholar
Goodman, D. S. G. (Ed.). 1997. China's provinces in reform: Class, community and political culture. London: Routledge.Google Scholar
Goodman, D. S. G. 2007. Narratives of change: Culture and local economic development. In Krug, B. & Hendrischke, H. (Eds.), The Chinese Economy in the 21st century: 175–201. Cheltenham: Edward Elgar.CrossRefGoogle Scholar
Grabher, G., & Stark, D. 1997. Organizing diversity: Evolutionary theory, network analysis, and post-socialism. Regional Studies, 31: 533–544.CrossRefGoogle Scholar
Granovetter, M. 1983. The strength of weak ties: A network theory revisited. Sociological Theory, 1: 201–233.CrossRefGoogle Scholar
Granovetter, M. 1985. Economic action and social structure: The problem of embeddedness. American Journal of Sociology, 91: 481–510.Google Scholar
Greeven, M. J. 2007. The new great leap: The rise of China's ICT industry. In Krug, B. & Hendrischke, H. (Eds.), The Chinese Economy in the 21st century: 71–112. Cheltenham: Edward Elgar.Google Scholar
Greif, A. 1993. Contract enforceability and economic institutions in early trade: The Maghribi traders coalition. American Economic Review, 83: 525–548.Google Scholar
Greif, A. 2006. Institutions and the path to the modern economy: Lessons from medieval trade. Cambridge: Cambridge University Press.Google Scholar
Guthrie, D. 1999. Dragon in a three-piece suit: The emergence of capitalism in China. Princeton, N.J.: Princeton University Press.Google Scholar
Hamilton, G. G. (Ed.) 1996. Asian business networks. Berlin: de Gruyter.CrossRefGoogle Scholar
Hamilton, G. G. 2006. Commerce and capitalism in Chinese societies. London: Routledge.Google Scholar
Hannan, M., & Carroll, G. 1992. The dynamics of organisational populations. Oxford: Oxford University Press.CrossRefGoogle Scholar
Hendrischke, H. 2004. The role of social capital, networks and property rights in China's privatization process. In Krug, B. (Ed.), China's rational entrepreneurs: The development of the new private business sector: 97–118. London: Routledge.Google Scholar
Hendrischke, H. 2007. Networks as business networks. In Krug, B. & Hendrischke, H. (Eds.), The Chinese Economy in the 21st century: 202–222. Cheltenham: Edward Elgar.Google Scholar
Hendrischke, H., & Feng, C. (Eds.). 1999. The political economy of China's provinces: Comparative and competitive advantage. London: Routledge.Google Scholar
Hensmans, M. 2003. Social movement organizations: A metaphor for strategic actors in institutional fields. Organization Studies, 24(3): 355–381.CrossRefGoogle Scholar
Huang, Y. 2003. Selling China. Foreign direct investment during the reform era. Cambridge: Cambridge University Press.Google Scholar
Krug, B. 1997. Privatisation in China: Something to learn from? In Giersch, H. (Ed,), Privatisation at the turn of the century: 269–293. Berlin: Springer.Google Scholar
Krug, B. 2007. Enterprise ground zero in China. In Krug, B. & Hendrischke, H. (Eds.), The Chinese Economy in the 21st century: 223-244. Cheltenham: Edward Elgar.Google Scholar
Krug, B., & Hendrischke, H. 2003. China incorporated: Property rights, privatisation, and the emergence of a private business sector in China. Managerial Finance, 29(12): 32–44.CrossRefGoogle Scholar
Krug, B., & Mehta, J. 2004. Entrepreneurship by alliance. In Krug, B. (Ed.), China's rational entrepreneurs. The development of the new private business sector: 50–71. London: Routledge.Google Scholar
Krug, B., & Polos, L. 2004. Emerging markets, entrepreneurship and uncertainty: The emergence of a private sector in China. In Krug, B. (Ed.), China's rational entrepreneurs. The development of the new private business sector: 72–96. London: Routledge.Google Scholar
Kuilman, J., & Li, J. T. 2006. The organizers’ ecology: An empirical study of foreign banks in Shanghai. Organization Science, 17: 385–401 Google Scholar
Lawrence, T. B., Hardy, C., & Phillips, N. 2002. Institutional effects of interorganizational collaboration: The emergence of proto-institutions. Academy of Management Journal, 45(1): 281–290.Google Scholar
Lewin, A. Y., Long, C. P., & Carroll, T. N. 1999. The co-evolution of new organizational forms. Organization Science, 10:535–550 Google Scholar
Li, D. D., Feng, J., & Jiang, H. 2006. Institutional entrepreneurs. American Economic Review, 96(2): 358–362.CrossRefGoogle Scholar
Li, H., & Rozelle, S. 2003. Privatizing rural China: Insider privatization, innovative contracts, and the performance of township enterprises. The China Quarterly, 176: 981–1005.CrossRefGoogle Scholar
Li, P. P. 2005. The puzzle of China's township-village enterprises: The paradox of local corporatism in a dual track economic transition. Management and Organization Review, 1:197–224.Google Scholar
Litwack, J. M. 2002. Central control of regional budgets: Theory with applications to Russia. Journal of Comparative Economics, 30: 51–75.Google Scholar
McKelvey, B. 1997. Quasi-natural organization science. Organization Science, 8: 352–380.Google Scholar
McKelvey, B. 1999. Complexity theory in organization science: Seizing the promise or becoming a fad. Emergence: A Journal of Complexity Issues in Organization and Management, 1(1): 5–32.Google Scholar
Mäki, U. 1993. Social theories of science and the fate of institutionalism in economics. In Mäki, U., Gustafsson, B. & Knudsen, C. (Eds.), Rationality, institutions and economic methodology: 76–109. London: Routledge.Google Scholar
Mäki, U. 1999. Science as a free market: A refiexivity test in an economics of economics. Perspectives on Science, 7: 486–509.Google Scholar
Meyer, K. E., & Peng, M. W. 2005. Probing theoretically into Central and Eastern Europe: Transactions, resources, and institutions. Journal of International Business Studies, 36: 600–621.Google Scholar
Nee, V., & Cao, Y. 2004. Market transition and the firm: Institutional change and income inequality in urban China. Management and Organization Review, 1: 23–56.Google Scholar
Nee, V., & Lian, P. 1994. Sleeping with the enemy: A dynamic model of declining political commitment in state socialism. Theory and Society, 23: 253–296.CrossRefGoogle Scholar
Nee, V., Opper, S., & Wong, S. 2007. Developmental state and corporate governance in China. Management and Organization Review, 3: 19–53.CrossRefGoogle Scholar
Nelson, R. R. (Ed.). 1993. National innovation systems. A comparative analysis. Oxford: Oxford University Press.Google Scholar
Nelson, R. R., & Winter, S. G. 1994, Evolutionary theorizing in economics. Journal of Economic Perspective, 16(2): 23–46.CrossRefGoogle Scholar
Nolan, P. 2001. China and the global economy. Basingstroke: Palgrave.Google Scholar
North, D. C. 2005. Understanding the process of economic change. Princeton, N.J.: Princeton University Press.Google Scholar
Oakes, T., & Schein, L. (Eds.). 2006. Translocal China: Linkages, identities and the re-imagining of space. London: Routledge.Google Scholar
Oates, W. E. 1972. Fiscal federalism. London: Harcourt Brace.Google Scholar
OECD (Organisation for Economic Co-operation and Development). 2005. Economic surveys: China. Paris: OECD Publishing.Google Scholar
Oi, J. C. 1995. The role of the local state in China's transitional economy. The China Quarterly, 144: 1132–1149.Google Scholar
Ostrom, E. 1990. Governing the commons. Cambridge: Cambridge University Press.Google Scholar
Park, S. H., & Luo, Y. D. 2001. Guanxi and organizational dynamics: Organizational networking in Chinese firms. Strategic Management Journal, 22: 455–477.Google Scholar
Peng, M. 2003. Institutional transitions and strategic choices. Academy of Management Review, 28: 275–296.Google Scholar
Peng, M., & Luo, Y. 2000. Managerial ties and firm performance in a transition economy: The nature of a micro-macro link. Academy of Management Journal, 43: 486–501.CrossRefGoogle Scholar
Peng, M., & Zhou, J. Q. 2005. How network strategies and institutional transitions evolve in Asia. Asia Pacific Journal of Management, 22: 321–336.Google Scholar
Powell, W. W. 1990. Neither market nor hierarchy: Network forms of organizations. In Staw, B., & Cummings, L. L. (Eds.), Research in Organizational Behaviour: 295–313. Greenwich, CT: JAI Press.Google Scholar
Qian, Y. 2000. The process of China's market transition (1978–98): The evolutionary, historical, and comparative perspectives. Journal of Institutional and Theoretical Economics, 156: 151–171.Google Scholar
Qian, Y., & Weingast, B. R. 1997. Federalism as a commitment to preserving market incentives. Journal of Economic Perspectives, 11(4): 83–92.Google Scholar
Redding, S. G. 1990. The spirit of Chinese capitalism. Berlin: de Gruyter.Google Scholar
Rona-Tas, A. 1994. The first shall be last? Entrepreneurship and communist cadres in the transition from socialism. American Journal of Sociology, 100(1): 40–69.Google Scholar
Schmitter, P. C. 1974. Still the century of corporatism? The new corporatism: Social-political structures in the Iberian world. The Review of Politics, 36: 85–131.CrossRefGoogle Scholar
Shleifer, A., & Vishny, R. W. 1993. Corruption. NBER Working Paper No. 4372. National Bureau of Economic Research, Washington, D.C. Google Scholar
Shleifer, A., & Vishny, R. W. 1994. Politicians and firms. Quarterly Journal of Economics, 109: 995–1025.Google Scholar
Stark, D. 1996. Recombinant property in East European Capitalism. American Journal of Sociology, 101: 993–1027.Google Scholar
Stark, D., & Laszlo, B. 1998. Post-socialist pathways: Transforming political and property in Eastern Europe. New York: Cambridge University Press.Google Scholar
Teece, D. J., & Pisano, G. 1994. The dynamic capabilities of risk: An introduction. Industrial and Corporate Change, 3: 537–556.Google Scholar
Tsang, E. W. K. 1998. Can Guanxi be a source of sustained competitive advantage for doing business in China? Academy of Management Executive, 12: 64–73.Google Scholar
Unger, J., & Chan, A. 1995. China, corporatism, and the East-Asian mode. The Australian Journal of Chinese Affair, 33: 29–53.Google Scholar
Walder, A. G. 1995. Local governments as industrial firms: An organizational analysis of China's transitional economy. American Journal of Sociology, 101: 263–301.Google Scholar
Wank, D. L. 1996. The institutional process of market clientelism: Guanxi and private business in a South China city. The China Quarterly, 147: 820–838.Google Scholar
Williamson, O. E. 1985. The economic institutions of capitalism: Firms, markets, relational contracting. New York: Macmillan.Google Scholar
Wong, C. P. 1992. Fiscal reform and local industrialization: The problematic sequencing of reform in post-Mao China. Modern China, 18: 197–227.Google Scholar
Wong, C. P. 2002. China: National development and sub-national finance. World Bank Report No. 22951. Washington, D.C. Google Scholar
World Bank. 1994. China: country economic memorandum, macroeconomic stability in a decentralised economy. Washington, D.C: World Bank.Google Scholar
Wu, Z. 2006. How regionalism is holding back China. Asia Times. Available from URL: http://www.atimes.com, 25.07.2006.Google Scholar
Xin, K. R., & Pearce, J. L. 1996. Guanxi: Connections as substitutes for formal institutional support. Academy of Management Journal, 39: 1641–1658.Google Scholar
Yang, M. M. 1994. Gifts, favors, and banquets: The art of social relationships in China. Ithaca, N. Y.: Cornell University Press.Google Scholar
Yang, M. M. 2002. The resilience of Guanxi and its new developments: A critique of some new Guanxi scholarship. The China Quarterly, 170: 459–476.Google Scholar
Zhu, Z., & Krug, B. 2007. China's emerging tax regime: Local tax farming and central tax bureaucracy. In Krug, B. & Hendrischke, H. (Eds.), The Chinese Economy in the 21st century: 145–174. Cheltenham: Edward Elgar.Google Scholar