Hostname: page-component-cd9895bd7-jkksz Total loading time: 0 Render date: 2024-12-17T06:54:30.411Z Has data issue: false hasContentIssue false
  • English
  • Français

Employment and Market Innovation in Chinese Business Group Affiliated Firms: The Role of Group Control Systems

Published online by Cambridge University Press:  02 February 2015

Robert E. White ,
Robert E. Hoskisson ,
Daphne W. Yiu  and
Garry D. Bruton
Translated by
姚詠儀
Robert E. White
Affiliation:
Arizona State University, USA
Robert E. Hoskisson
Affiliation:
Arizona State University, USA
Daphne W. Yiu
Affiliation:
Chinese University of Hong Kong, China
Garry D. Bruton
Affiliation:
Texas Christian University, USA
Get access Rights & Permissions [Opens in a new window]

Abstract

Prior research has suggested a number of potential benefits to firm membership in business groups. These benefits include availability of capital and other resources not readily accessible in an open market, the facilitation of entrepreneurship, plus information and risk sharing advantages. We suggest that another important benefit is the assistance of group control systems in helping the firm to manage conflicting pressures in the institutional environment and facilitate coevolution of these conflicting pressures. To empirically demonstrate the relevance of this viewpoint, we examine the case of China where business groups facilitate institutional transition, actively balancing market pressures to increase levels of innovativeness in firms with institutional pressures emanating from the government to maintain high employment levels. Using data from a broad sample of more than 1,000 Chinese affiliate firms in more than 200 business groups, we find that government policy, ownership and managerial mindset influence the political goal of maintaining high employment levels, while interdependence among group affiliate firms is related to lower employment levels. However, while government ownership and the government managerial mindset were negatively related to market innovation activities, group financial and cultural control systems positively affected the tendency of affiliate firms to focus on market innovation.

Keywords

business groupsChinacontrol systemsinnovationinstitutional theory创新企业集团制度理论中国控制系统
Type
Articles
Information
Management and Organization Review , Volume 4 , Issue 2 , July 2008 , pp. 225 - 256
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.)

References

Amsden, A. H. 1989. Asia's next giant: South Korea and late industrialization. New York: Oxford University Press.Google Scholar
Balfour, F. 2004. Will China's bank bailout do the trick? Business Week (International ed.). January 26. [Cited 12 Mar. 2008.] Available from URL: http://www.businesswcck.com Google Scholar
Baum, J. A. C., & Singh, J. V. 1994. Organization-environment coevolution. In Baum, J. A. C. & Singh, J. V. (Eds.), Evolutionary dynamics of organizations: 379–402. New York: Oxford University Press.Google Scholar
Baysinger, B., & Hoskisson, R. E. 1990. The composition of board of directors and strategic control: Effects on corporate strategy. Academy of Management Review, 15: 72–87.CrossRefGoogle Scholar
Biggart, N. W., & Hamilton, G. G. 1992. On the limits of a firm-based theory to explain business networks: The Western bias of neoclassical economics. In Nohria, N. & Ecclcs, G. G. (Eds.), Networks and organizations: Structure, form, and action: 471–490. Boston, MA: Harvard Business School Press.Google Scholar
Blanchard, O., & Shleifer, A. 2001. Federalism with and without political centralization: China versus Russia. IMF Staff Papers, 48: 171–179.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.CrossRefGoogle Scholar
Boisot, M., & Child, J. 1999. Organizations as adaptive systems in complex environments: The case of China. Organization Science, 10: 237–252.CrossRefGoogle Scholar
Brandt, L., & Zhu, X. 2000. Redistribution in a decentralized economy: Growth and inflation in China under reform. Journal of Political Economy, 108: 422–439.CrossRefGoogle Scholar
Brush, T. H. 1996. Predicted change in operational synergy and post-acquisition performance of acquired businesses. Strategic Management Journal, 17: 1–24.3.0.CO;2-W>CrossRefGoogle Scholar
Bruton, G. D., & Rubanik, Y. 2002. Resources of the firm, Russian high-technology startups, and firm growth. Journal of Business Venturing, 17: 553–576.CrossRefGoogle Scholar
Buckley, P. J., Clegg, J., & Wang, C. 2002. The impact of inward FDI on the performance of Chinese manufacturing firms. Journal of International Business Studies, 33: 637–655.CrossRefGoogle Scholar
Cardinal, L. B., Sitkin, S. B., & Long, C. P. 2004. Balancing and rebalancing in the creation and evolution of organizational control. Organization Science, 15: 411–431.CrossRefGoogle Scholar
Carney, M., & Gedajlovic, E. 2002. The co-evolution of institutional environments and organizational strategics: The rise of family business gioups in the ASEAN region. Organization Studies, 23: 1–29.CrossRefGoogle Scholar
Chang, S.-J., Chung, C.-N., & Mahmood, I. P. 2006. When and how docs business group affiliation promote firm innovation? A tale of two emerging economies. Organization Science, 17: 637–656.CrossRefGoogle Scholar
Chatterjee, S. 1986. Type of synergy and economic value: The impact of acquisitions on merging and rival firms. Strategic Management Journal, 7: 119–139.CrossRefGoogle Scholar
Chatterjee, S. 1992. Sources of value in takeovers: Synergy or restructuring - Implications for target and bidder firms. Strategic Management Journal, 13: 267–286.CrossRefGoogle Scholar
Chen, K., Murphy, D., & Dolven, B. 2004. As conglomerate sinks, China steps in. Wall Street Journal, August 26: A11.Google Scholar
Child, J. 2000. Management and organizations in China: Key trends and issues. In Li, J. T., Tsui, A. S. & Weldon, E. (Eds.), Management and organizations in the Chinese context: 33–62. New York: Macmillan.CrossRefGoogle Scholar
Child, J., & Tse, D. K. 2001. China's transition and its implications for international business. Journal of International Business Studies, 32: 5–21.CrossRefGoogle Scholar
China Economic Yearbook (Zhongguo Jingji Nianjian). 1996. Beijing: Economic Yearbook Press.Google Scholar
China Industry Development Report. 1999. Beijing: Economics and Management Publishing.Google Scholar
Chu, W. 2001. Contingency organizations and shared values: Multiple logics in managing diversification. Asia Pacific Journal of Management, 18: 83–99.CrossRefGoogle Scholar
Clifford, M. L. 2003. Concrete lessons in reform: Hong Kong's Shui On is reviving cement plants across China. BusinessWeek Online. June 16. [Cited 12 Mar 2008.] Available from URL: http://www.businessweek.com Google Scholar
Cuervo, A., & Villalonga, B. 2000. Explaining the variance in the performance effects of privatization. Academy of Management Review, 25: 581–590.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: 319–343.CrossRefGoogle Scholar
Earley, P. C. 1993. East meets West meets Midwest: Further explorations of collcctivistic and individualistic work groups. Academy of Management Journal, 36: 319–348.Google Scholar
Eden, L., & Lenway, S. 2001. Introduction to the symposium multinationals: The Janus face of globalization. Journal of International Business Studies, 32: 383–400.CrossRefGoogle Scholar
Fan, J. P. H., Wong, T. J., & Zhang, T. 2007. Politically connected CEOs, corporate governance, and post-IPO firm performance of China's newly partially privatized firms. Journal of Financial Economics, 84: 330–357.CrossRefGoogle Scholar
Fisman, R. 2001. Estimating the value of political connections. American Economic Review, 91: 1095–1102.CrossRefGoogle Scholar
Franko, L. G. 1989. Global corporate competition: Who's winning, who's losing, and the R&D factor as one reason why. Strategic Management Journal, 10: 449–474.CrossRefGoogle Scholar
Ghemawat, P., & Khanna, T. 1998. The nature of diversified business groups: A research design and two case studies. Journal of Industrial Economics, 46: 35–61.CrossRefGoogle Scholar
Ghoshal, S., & Moran, P. 1996. Bad for practice: A critique of the transaction cost theory. Academy of Management Review, 21: 13–47.CrossRefGoogle Scholar
Goold, M., & Qiiinn, J. J. 1990. The paradox of strategic controls. Strategic Management Journal, 11: 43–57.CrossRefGoogle Scholar
Granovetter, M. 1994. Business groups. In Smelser, N.J. & Swedborg, R. (Eds.), The handbook of economic sociology: 453–475. Princeton, NJ: Princeton University Press.Google Scholar
Groves, T., Hong, Y., McMillan, J., & Naughton, B. 1994. Autonomy and incentives in Chinese state enterprises. Quarterly Journal of Economics, 109: 183–209.CrossRefGoogle Scholar
Guillen, M. F. 2000. Business gioups in emerging economies: A resource-based view. Academy of Management Journal, 43: 362–380.Google Scholar
Hambrick, D. C., & Snow, C. C. 1989. Strategic reward systems. In Snow, C. C. (Ed.), Strategy, organization design, and human resource management: 333–368. Greenwich, CT: JAI Press.Google Scholar
Haveman, H. A., & Rao, H. 2006. Hybrid forms and the evolution of thrifts. American Behavioral Scientist, 49: 974–986.CrossRefGoogle Scholar
Henisz, W. J., & Zelner, B. A. 2005. Legitimacy, interest group pressures, and change in emergent institutions: The case of foreign investors and host country governments. Academy of Management Review, 30: 361–382.CrossRefGoogle Scholar
Hill, C. W. L., Hitt, M. A., & Hoskisson, R. E. 1992. Cooperative versus competitive structures in related and unrelated diversified firms. Organization Science, 3: 501–521.CrossRefGoogle Scholar
Hitt, M. A., Hoskisson, R. E., Johnson, R. A., & Moescl, D. D. 1996. The market for coiporatc control and firm innovation. Academy of Management Journal, 39: 1084–1119.Google Scholar
Hoskisson, R. E., & Hitt, M. A. 1988. Strategic control systems and relative R&D investment in large multiproduct firms. Strategic Management Journal, 9: 605–621.CrossRefGoogle Scholar
Hoskisson, R. E., &Johnson, R. A. 1992. Corporate restructuring and strategic change: The effect on diversification and R&D intensity. Strategic Management Journal, 13: 625–634.CrossRefGoogle Scholar
Hoskisson, R. E., Hill, C. W. L., & Kim, H. 1993. The multidivisional structure: Organizational fossil or source of value? Journal of Management, 19: 269–298.CrossRefGoogle Scholar
Hoskisson, R. E., Eden, L., Lau, C. M., & Wright, M. 2000. Strategy in emerging economies. Academy of Management Journal, 43: 249–267.Google Scholar
Jacquemin, A. P., & Berry, C. H. 1979. Entropy measure of diversification and corporate growth. Journal of Industrial Economics, 27: 359–369.CrossRefGoogle Scholar
Jefferson, G. H., & Rawski, T. G. 1995. How industrial reform worked in China: The role of innovation, competition and property rights. In Bruno, M., & Plcskovic, B. (Eds.), Proceedings of the World Bank Annual Conference on Development Economics 1994: 129–156. Washington, DC: World Bank.Google Scholar
Jefferson, G. H., Rawski, T. G., & Zheng, Y. 1994. Institutional change and industrial innovation in transitional economics. Journal of Asian Economics, 5: 585–604.CrossRefGoogle Scholar
Jefferson, G. H., Rawski, T. G., & Zheng, Y. 1997. Innovation in Chinese manufacturing enterprises: A preliminary analysis of survey data. MOCT-MOST, 7(4): 101–120.CrossRefGoogle Scholar
Jones, G. R., & Hill, C. W. L. 1988. Transaction cost analysis of strategy-structure choice. Strategic Management Journal, 9: 159–172.CrossRefGoogle Scholar
Keister, L. A. 1998. Engineering growth: Business group structure and firm performance in China's transition economy. American Journal of Sociology, 104: 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. 2002. Adapting to radical change: Strategy and environment in piece-rate adoption during China's transition. Organization Science, 13: 459–474.CrossRefGoogle Scholar
Khanna, T., & Palepu, K. 1997. Why focused strategics may be wrong for emerging markets. Harvard Business Review, 75(4): 41–51 Google Scholar
Khanna, T., & Palepu, K. 2000a. The future of business groups in emerging economics: Long-run evidence from Chile. Academy of Management Journal, 43: 268–285.Google Scholar
Khanna, T., & Palepu, K. 2000b. Is group affiliation profitable in emerging markets? An analysis of diversified Indian business groups. Journal of Finance, 55: 867–891.CrossRefGoogle Scholar
Khanna, T., & Rivkin, J. W. 2001. Estimating the performance effects of business groups in emerging markets. Strategic Management Journal, 22: 45–74.3.0.CO;2-F>CrossRefGoogle Scholar
Kim, H., Hoskisson, R. E., Tihanyi, L., & Hong, J. 2004. The evolution and restructuring of diversified business groups in emerging markets: The lessons from chaebols in Korea. Asia Pacific Journal of Management, 21: 25–48.CrossRefGoogle Scholar
Klein, K. J., & Kozlowski, S. W. J. 2000. From micro to meso: Critical steps in conceptualizing and conducting multilevel research. Organizational Research Methods, 3: 211–236.CrossRefGoogle Scholar
Kornai, J. 1979. Resource-constrained versus demand-constrained systems. Economica, 47: 801–819.Google Scholar
Kornai, J., Maskin, E., & Roland, G. 2003. Understanding the soft budget constraint. Journal of Economic Literature, 41: 1095–1136.CrossRefGoogle Scholar
Krug, B., & Hcndrischke, H. 2008. Framing China: Transformation and institutional change through co-evolution. Management and Organization Review, 4: 81–108.CrossRefGoogle Scholar
Leff, N. 1978. Industrial organization and entreprencurship in the developing countries: The economic groups. Economic Development and Cultural Change, 26: 661–675.CrossRefGoogle Scholar
Leff, N. 1979. Entreprencurship and economic development: The problem revisited. Journal of Economic Literature, 17: 46–64.Google Scholar
Lenway, S. A., & Murtha, T. P. 1994. The state as strategist in international business research. Journal of International Business Studies, 25: 513–535.CrossRefGoogle Scholar
Lewin, A. Y., & Volberda, H. W. 1999. Prolegomena on cocvolution: A framework for research on strategy and new organizational forms. Organization Science, 10: 519–534.CrossRefGoogle Scholar
Mahmood, I. P., & Mitchell, W. 2004. Two faces: Effects of business groups on innovation in emerging economics. Management Science, 50: 1348–1365.CrossRefGoogle Scholar
Mahmood, I. P., & Rufin, C. 2005. Government's dilemma: The role of government in imitation and innovation. Academy of Management Review, 30: 338–360.CrossRefGoogle Scholar
Meyer, M. W., & Lu, X. 2005. Managing indefinite boundaries: The strategy and structure of a Chinese business firm. Management and Organization Review, 1: 57–86.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
Nohria, N., & Gulati, R. 1996. Is slack good or bad for innovation? Academy of Management Journal, 39: 1245–1264.CrossRefGoogle Scholar
Nolan, P., & Wang, X. 1999. Beyond privatization: Institutional innovation and growth in China's large state-owned enterprises. World Development, 27: 169–200.CrossRefGoogle Scholar
North, D. C. 1990. Institutions, institutional change and economic performance. New York: Cambridge University Press.CrossRefGoogle Scholar
Oi, J. C. 1992. Fiscal reform and the economic foundations of local state corporatism in China. World Politics, 45: 99–126.CrossRefGoogle Scholar
Oliver, C. 1991. Strategic responses to institutional processes. Academy of Management Review, 16: 145–179.CrossRefGoogle Scholar
O'Shaughncssy, K. C., & Flanagan, D. J. 1998. Determinants of layoff announcements following M&As: An empirical investigation. Strategic Management Journal, 19: 989–999.3.0.CO;2-3>CrossRefGoogle Scholar
Ouchi, W. G. 1980. Markets, bureaucracies, and clans. Administrative Science Quarterly, 25: 129–141.CrossRefGoogle Scholar
Palepu, K. 1985. Diversification strategy, profit performance and the entropy measure of diversification. Strategic Management Journal, 6: 239–255.CrossRefGoogle Scholar
Park, S. H., & Luo, Y. 2001. Guanxi and organizational dynamics: Organizational networking in Chinese firms. Strategic Management Journal, 22: 455–477.CrossRefGoogle Scholar
Peng, M. W. 2000. Business strategies in transition economies. Thousand Oaks, CA: Sage.CrossRefGoogle Scholar
Peng, M. W. 2003. Institutional transitions and strategic choices. Academy of Management Review, 28: 275–296.CrossRefGoogle Scholar
Prahalad, C. K., & Bettis, R. A. 1986. The dominant logic: A new linkage between diversity and performance. Strategic Management Journal, 7: 485–501.CrossRefGoogle Scholar
Qian, Y., & Xu, C. 1998. Innovation and bureaucracy under soft and hard budget constraints. Review of Economic Studies, 65: 151–164.CrossRefGoogle Scholar
Sarkar, M. B., Echambadi, R., & Harrison, J. S. 2001. Alliance cntrcprcneurship and firm market performance. Strategic Management Journal, 22: 701–711.CrossRefGoogle Scholar
Schumpeter, J. A. 1934. The theory of economic development: An inquiry into profits, capital, credit, interest, and the business cycle. Cambridge, MA: Harvard University Press.Google Scholar
Scott, W. R. 2002. The changing world of Chinese enteiprisc: An institutional perspective. In Tsui, A. S. & Lau, C.-M. (Eds.), The management of enterprises in the People's Republic of China: 59–78. Boston, MA: Kluwer Academic Publishers.CrossRefGoogle Scholar
Shaw, V. N. 1996. Social control in China: A study of Chinese work units. Westport, CT: Praeger.Google Scholar
Shleifer, A. 1998. State versus private ownership. Journal of Economic Perspectives, 12(4): 133–150.CrossRefGoogle Scholar
Shleifer, A., & Vishny, R. W. 1994. Politicians and firms. Quarterly Journal of Economics, 109: 995–1025.CrossRefGoogle Scholar
Steinfeld, E. S. 1998. Forging reform in China: The fate of state-owned industry. New York: Cambridge University Press.CrossRefGoogle Scholar
Subramaniam, M., & Youndt, M. A. 2005. The influence of intellectual capital on the types of innovative capabilities. Academy of Management Journal, 48: 450–463.CrossRefGoogle Scholar
Thompson, J. D. 1967. Organizations in action: Social science bases of administrative theory. New York: McGraw-Hill.Google Scholar
Tsui, A. S., & Lau, C.-M. 2002. Research on the management of enterprises in the People's Republic of China: Current status and future directions. In Tsui, A. S. & Lau, C.-M. (Eds.), The management of enterprises in the People's Republic of China: 1–27. Boston, MA: Kluwer Academic Publishers.CrossRefGoogle Scholar
Walder, A. G. 1995a. Local governments as industrial firms: An organizational analysis of China's transitional economy. American Journal of Sociology, 101: 263–301.CrossRefGoogle Scholar
Walder, A. G. 1995b. Career mobility and the communist political order. American Sociological Review, 60: 309–328.CrossRefGoogle Scholar
Walder, A. G., Li, B., & Treiman, D. J. 2000. Politics and life chances in a state socialist regime: Dual career paths into the urban Chinese elite, 1949 to 1996. American Sociological Review, 65: 191–209.CrossRefGoogle Scholar
Weick, K. E. 1998. Improvisation as a mindset for organizational analysis. Organization Science, 9: 543–555.CrossRefGoogle Scholar
Williamson, O. E. 1975. Markets and hierarchies: Analysis and antitrust implications. New York: Free Press.Google Scholar
Williamson, O. E. 1985. The economic institutions of capitalism: Firms, markets, relational contracting. New York: Free Press.Google Scholar
Wong, C. P. W. 1992. Fiscal reform and local industrialization: The problematic sequencing of reform in post-Mao China. Modern China, 18: 197–227.CrossRefGoogle Scholar
Zhang, S., & Zhang, A. 1987. The present management environment in China's industrial enterprises. In Reynolds, B. L. (Ed.), Reform in China: Challenges and choices: A summary and analysis of the CESRRI survey: 47–59. Armonk, NY: M. E. Sharpe.Google Scholar