Hostname: page-component-cd9895bd7-jkksz Total loading time: 0 Render date: 2024-12-26T00:42:43.592Z Has data issue: false hasContentIssue false
  • English
  • Français

Business Group Performance in China: Ownership and Temporal Considerations

Published online by Cambridge University Press:  02 February 2015

Michael Carney ,
Daniel Shapiro  and
Yao Tang
Translated by
唐遥
Michael Carney
Affiliation:
Concordia University, Canada
Daniel Shapiro
Affiliation:
Simon Fraser University, Canada
Yao Tang
Affiliation:
University of British Columbia, Canada
Get access Rights & Permissions [Opens in a new window]

Abstract

We address the institutional voids hypothesis, which suggests affiliation with a business group will improve a firm's performance in circumstances of poor-quality institutions and extensive market failures. We hypothesize that initial positive effects of group affiliation should decline as the quality of market institutions improves. Further, we hypothesize that differences in state and private ownership will influence the value and persistence of firm affiliation. Using data on 476 publicly listed firms in 1999 and 467 matched firms in 2004, we find support for a temporal hypothesis that affiliation with a business group improves performance, but the value of group affiliation declines over time. We also find support for a state ‘helping hand’ hypothesis that suggests firms with high levels of state ownership initially experienced an amplified value effect from their group affiliation, which disappeared by 2004. The results suggest that China's policy makers are beginning to establish an institutional and market infrastructure that is conducive to entry by unaffiliated, freestanding firms.

Keywords

business groupsChinainstitutional voidsownershipperformance企业集团中国制度空隙所有权绩效
Type
Articles
Information
Management and Organization Review , Volume 5 , Issue 2 , July 2009 , pp. 167 - 193
Copyright
Copyright © International Association for Chinese Management Research 2009

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.)

References

Almeida, H. V., & Wolfenzon, D. 2006. A theory of pyramidal ownership and family business groups. Journal of Finance, 61(6): 2637–2680.CrossRefGoogle Scholar
Amsden, A. 1989. Asia's next giant: South Korea and late industrialization. New York: Oxford University Press.Google Scholar
Bertrand, M., Mehta, P., & Mullainathan, S. 2002. Ferreting out tunneling: An application to Indian business groups. Quarterly Journal of Economics, 117(1): 121–148.CrossRefGoogle Scholar
Campbell, J. L. 2004. Institutional change and globalization. Princeton: Princeton University Press.CrossRefGoogle Scholar
Chang, S.J. 2003. Ownership structure, expropriation, and performance of group-affiliated companies in Korea. Academy of Management Journal, 46(2): 238–253.Google Scholar
Chang, S. J., & Choi, U. 1988. Strategy structure and performance of Korean business groups. The Journal of Industrial Economics, 37(2): 141–158.CrossRefGoogle Scholar
Clarke, D. 2003. Corporate governance in China: An overview. China Economic Review, 14(4): 494–507.CrossRefGoogle Scholar
Delios, A., Wu, Z. J., & Zhou, N. 2006. A new perspective on ownership identities in China's listed companies. Management and Organization Review, 2(3): 319–343.CrossRefGoogle Scholar
Demsetz, H. 1983. The structure of ownership and the theory of the firm. Journal of Law and Economics, 26(2): 375–390.CrossRefGoogle Scholar
Fisman, R. 2001. Estimating the value of political connections. American Economic Review, 91(4): 1095–1102.CrossRefGoogle Scholar
Fisman, R., & Khanna, T. 2004. Facilitating development: The role of business groups. World Development, 32(4): 609–628.CrossRefGoogle Scholar
Fu, Y. (Ed.) 2000. Stock market updated data and analysis: Annual performance reports of listed companies and selection guide. Zhengzhou, China: Henan People's Publishing.Google Scholar
Gedajlovic, E., & Shapiro, D. 1998. Management and ownership effects: Evidence from five countries. Strategic Management Journal, 19(6): 533–553.3.0.CO;2-#>CrossRefGoogle Scholar
Gedajlovic, E., & Shapiro, D. 2002. Ownership structure and firm profitability in Japan. Academy of Management Journal, 45(3): 565–575.Google Scholar
Granovettcr, M. 2005. Business groups and social organization. In Smelser, N. J. & Swedburg, R. (Eds.), The handbook of economic sociology (2nd ed.): 429–450. Princeton: Princeton University Press. Google Scholar
Guillen, M. F. 2000. Business groups in emerging economies: A resource based view. Academy of Management Journal, 43(3): 362–380.Google Scholar
Guthrie, D. 2005. Organizational learning and productivity: State structure and foreign investment in the rise of the Chinese corporation. Management and Organization Review, 1(2): 165–195.CrossRefGoogle Scholar
Hahn, D., & Lee, K. 2006. Chinese business groups: Their origins and development. In Chang, S. J. (Ed.), Business groups in East Asia: Financial crisis, restructuring, and new growth: 207–231. Oxford: Oxford University Press.CrossRefGoogle Scholar
Hoskisson, R. E., Johnson, R. A., Tihanyi, L., & White, R. 2005. Diversified business groups and corporate refocusing in emerging economics. Journal of Management, 31(6): 941–965.CrossRefGoogle Scholar
Keister, L. A. 1998. Engineering growth: Business groups structure and firm performance in China's transition economy. American Journal of Sociology, 104(3): 404–440.CrossRefGoogle Scholar
Keister, L. A. 2000. Chinese business groups: The structure and impact of interfirm relations during economic development. New York: Oxford University Press.Google Scholar
Keister, L. A. 2001. Exchange structures in transition: Lending and trade relations in Chinese business groups. American Sociological Review, 66(3): 336–360.CrossRefGoogle Scholar
Khanna, T., & Palepu, K. 1997. Why focused strategies may be wrong for emerging markets. Harvard Business Review, 75(4): 41–51.Google Scholar
Khanna, T., & Palepu, K. 2000. Is group affiliation profitable in emerging markets? An analysis of diversified Indian business groups. The Journal of Finance, 55(2): 867–891.CrossRefGoogle Scholar
Khanna, T., & Rivkin, J. 2001. Estimating the performance effects of business groups in emerging markets. Strategic Management Journal, 22(1): 45–74.3.0.CO;2-F>CrossRefGoogle Scholar
Khanna, T., & Rivkin, J. 2006. Intcrorganizational tics and business group boundaries: Evidence from an emerging economy. Organization Science, 17(3): 333–352.CrossRefGoogle Scholar
Khanna, T., & Yafch, Y. 2005. Business groups and risk sharing around the world. Journal of Business, 78(1): 301–340.CrossRefGoogle Scholar
Khanna, T., & Yafeh, Y. 2007. Business groups in emerging markets: Paragons or parasites? Journal of Economic Literature, 45(2): 331–372.CrossRefGoogle Scholar
Kim, H., Hoskisson, R., & Wan, W. P. 2004. Power dependence, diversification strategy, and performance in kcirctsu member firms. Strategic Management Journal, 25(7): 613–636.CrossRefGoogle Scholar
Krug, B., & Hcndrishkc, H. 2008. Framing China: Transformation and institutional change through co-evolution. Management and Organization Review, 4(1): 81–108.CrossRefGoogle Scholar
Lin, C. 2001. Corporatisation and corporate governance in China's economic transition. Economics of Planning, 34(1-2): 5–35.CrossRefGoogle Scholar
Lu, Y., & Yao, J. 2006. Impact of state ownership and control mechanisms on the performance of group affiliated companies in China. Asia Pacific Journal of Management, 23(4): 485–503.CrossRefGoogle Scholar
Ma, X., & Lu, J. 2005. The critical role of business groups in China. Ivey Business Journal, 69(5): 1–12.Google Scholar
Ma, X., Yao, X., & Xi, Y. 2006. Business group affiliation and performance in the transition economy: A focus on the ownership voids. Asia-Pacific Journal of Management, 23(4): 467–484.CrossRefGoogle Scholar
Mako, W. P., & Zhang, C. 2003. Management of China's state-owned enterprises portfolio: Lessons from international experience. Beijing: World Bank. [Cited 1 December 2008.] Available from URL: http://www.worldbank.org.cn/cnglish/contcnt/owncrship_cn.pdf Google Scholar
Morck, R. K., Wolfenzon, D., & Yeung, B. 2005. Corporate governance, economic entrenchment, and growth. Journal of Economic Literature, 43(3): 655–720.CrossRefGoogle Scholar
Naughton, B. 1995. Growing out of the plan: Chinese economic reform, 1978-1993. New York: Cambridge University Press.CrossRefGoogle Scholar
NBS (National Bureau of Statistics of China). 2004. Annual statistics of business groups (‘Qiye Jituan Tongji Nianbao’). Beijing: National Bureau of Statistics of China.Google Scholar
Nee, V. 1992. Organizational dynamics of market transition: Hybrid forms of property rights and mixed economy in China. Administrative Science Quarterly, 37(1): 1–27.CrossRefGoogle Scholar
Nec, V., Oppcr, S., & Wong, S. 2007. Developmental state and corporate governance in China. Management and Organization Review, 3(1): 19–53.Google Scholar
Niskanen, W. 1991. The soft infrastructure of a market economy. Cato Journal, 11(2): 233–237.Google Scholar
Nolan, P. 2001. China and the global economy. Basingstoke, UK: Palgrave.CrossRefGoogle Scholar
North, D. C. 1990. Institutions, institutional change and economic performance. Cambridge: Cambridge University Press.CrossRefGoogle Scholar
Palepu, K., Khanna, T., & Vargas, I. 2006. Haier: Taking a Chinese company global. Harvard Business School Case Study. Cambridge, MA: Harvard Business Publishing.Google Scholar
Peng, M. 2003. Institutional transitions and strategic choices. Academy of Management Review, 28(2): 275–285.CrossRefGoogle Scholar
Ralston, D., Terpstra-Tong, J., Terpstra, R. H., Wang, X., & Egri, C. 2006. Today's statc-owned-entcrprises of China: Arc they dying dinosaurs or dynamic dynamos? Strategic Management Journal, 27(9): 825–843.CrossRefGoogle Scholar
Scharfstcin, D. S., & Stein, J. C. 2000. The dark side of internal capital markets: Divisional rent-seeking and inefficient investment. The Journal of Finance, 55(6): 2537–2564.CrossRefGoogle Scholar
Shanghai Vsat. 2005. F10 Chinese Stock Market Information Database. [Cited 23 October 2008.] Available from URL: http://www.vsatsh.com.cn/qucst_flO.html Google Scholar
Shlcifer, A., & Vishny, R. W. 1998. The grabbing hand: Government pathologies and their cures. Cambridge, MA: Harvard University Press.Google Scholar
Staiger, D., & Stock, J. H. 1997. Instrumental variables regression with weak instruments. Econometrica, 65(3): 557–586.CrossRefGoogle Scholar
Tan, J. 2005. Venturing in turbulent water: A historical perspective of economic reform and entrepreneurial transformation. Journal of Business Venturing, 20(5): 689–704.CrossRefGoogle Scholar
Wade, R. 1990. Governing the market: Economic theory and the role of government in East Asian industrialisation. Princeton, NJ: Princeton University Press.CrossRefGoogle Scholar
White, R. E., Hoskisson, R. E., Yiu, D., & Bruton, G. D. 2008. Employment and market innovation in Chinese business group affiliated firms: The role of group control systems. Management and Organization Review, 4(2): 225–256.CrossRefGoogle Scholar
Williamson, O. E. 1985. The economic institutions of capitalism: Firms, markets, relational contracting. New York: Free Press.Google Scholar
Wu, C. 1990. Enterprise groups in China's industry. Asia Pacific Journal of Management, 7(2): 123–136.CrossRefGoogle Scholar
Yiu, D., Bruton, G. D., & Lu, Y. 2005. Understanding business group performance in an emerging economy: Acquiring resources and capabilities in order to prosper. Journal of Management Studies, 42(1): 183–206.CrossRefGoogle Scholar