IDEAS home Printed from https://ideas.repec.org/a/inm/ororsc/v7y1996i1p60-77.html
   My bibliography  Save this article

Institutional Constraints on Economic Reform: The Case of Investment Decisions in China

Author

Listed:
  • John Child

    (Judge Institute of Management Studies, University of Cambridge, Fitzwilliam House, 32 Trumpington Street, Cambridge CB2 1 QY United Kingdom)

  • Lu Yuan

    (Judge Institute of Management Studies, University of Cambridge, Fitzwilliam House, 32 Trumpington Street, Cambridge CB2 1 QY United Kingdom)

Abstract

The paper examines the process of investment decision making in six Chinese state enterprises during the economic reform which combined moves towards a market system with a continuing role for the state in industrial governance. This placed investment at the boundary between bureaucratic control and market forces, the theory being that enterprise managers would advance investment proposals in response to the market while government authorities retained the right of final approval in the light of broader-based priorities.This mixed “market socialism” model has been treated with considerable scepticism by the so-called “reform economists” in Eastern Europe who doubt that enterprises can pursue policies which are rational in terms of market forces so long as they remain subject to significant administrative influence. Resource dependence and institutional perspectives, in drawing attention to higher administrative agencies as providers respectively of critical resources and of legitimacy for the state enterprises under their purview, also predict that institutional constraints will continue to operate on enterprise decision making. North's discussion of informal institutional arrangements and incremental change gives rise to similar expectations.Detailed examination of the investment decision process at the three major stages of initiation, design and detailing, and final authorization does in fact indicate that it remains heavily dependent upon higher authorities. The reasons for this continuing dependence are discussed and comparisons are drawn with the investment decision process in western countries.

Suggested Citation

  • John Child & Lu Yuan, 1996. "Institutional Constraints on Economic Reform: The Case of Investment Decisions in China," Organization Science, INFORMS, vol. 7(1), pages 60-77, February.
    • Handle: RePEc:inm:ororsc:v:7:y:1996:i:1:p:60-77
    DOI: 10.1287/orsc.7.1.60
    as

    Download full text from publisher

    File URL: http://dx.doi.org/10.1287/orsc.7.1.60
    Download Restriction: no
    File URL: https://libkey.io/10.1287/orsc.7.1.60?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Elmassri, Moataz Moamen & Harris, Elaine Pamela & Carter, David Bernard, 2016. "Accounting for strategic investment decision-making under extreme uncertainty," The British Accounting Review, Elsevier, vol. 48(2), pages 151-168.
    2. Augustine A. Lado & George S. Vozikis, 1997. "Transfer of Technology to Promote Entrepreneurship in Developing Countries: An Integration and Proposed Framework," Entrepreneurship Theory and Practice, , vol. 21(2), pages 55-72, January.
    3. Cardoza, Guillermo & Fornes, Gaston & Farber, Vanina & Gonzalez Duarte, Roberto & Ruiz Gutierrez, Jaime, 2016. "Barriers and public policies affecting the international expansion of Latin American SMEs: Evidence from Brazil, Colombia, and Peru," Journal of Business Research, Elsevier, vol. 69(6), pages 2030-2039.
    4. Wang, Kun Tracy & Wu, Yue & Sun, Aonan, 2021. "Acquisitions and the cost of debt: Evidence from China," International Review of Financial Analysis, Elsevier, vol. 78(C).
    5. Choi, Suk Bong & Lee, Soo Hee & Williams, Christopher, 2011. "Ownership and firm innovation in a transition economy: Evidence from China," Research Policy, Elsevier, vol. 40(3), pages 441-452, April.
    6. Ma, Xufei & Yao, Xiaotao & Xi, Youmin, 2009. "How do interorganizational and interpersonal networks affect a firm's strategic adaptive capability in a transition economy?," Journal of Business Research, Elsevier, vol. 62(11), pages 1087-1095, November.
    7. Karan Sonpar & Federica Pazzaglia & Jurgita Kornijenko, 2010. "The Paradox and Constraints of Legitimacy," Journal of Business Ethics, Springer, vol. 95(1), pages 1-21, August.
    8. Mike W. Peng & Garry D. Bruton & Ciprian V. Stan & Yuanyuan Huang, 2016. "Theories of the (state-owned) firm," Asia Pacific Journal of Management, Springer, vol. 33(2), pages 293-317, June.
    9. Gustafsson, Robin & Autio, Erkko, 2011. "A failure trichotomy in knowledge exploration and exploitation," Research Policy, Elsevier, vol. 40(6), pages 819-831, July.
    10. Jing Yang & Jiatao Li, 2008. "The development of entrepreneurship in China," Asia Pacific Journal of Management, Springer, vol. 25(2), pages 335-359, June.
    11. Li, Shaomin & Ouyang, Ming & Zhou, Dongsheng, 2005. "Modeling privatization as a firm strategy in transition economies," Journal of Business Research, Elsevier, vol. 58(1), pages 37-44, January.
    12. Kang, Byeongwoo, 2015. "The innovation process of Huawei and ZTE: Patent data analysis," China Economic Review, Elsevier, vol. 36(C), pages 378-393.
    13. Peng, Mike W. & Lu, Yuan & Shenkar, Oded & Wang, Denis Y. L., 2001. "Treasures in the China house: a review of management and organizational research on Greater China," Journal of Business Research, Elsevier, vol. 52(2), pages 95-110, May.
    14. Jinyang Hua & Paul Miesing & Mingfang Li, 2006. "An Empirical Taxonomy of SOE Governance in Transitional China," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 10(4), pages 401-433, November.
    15. Kang, Byeongwoo, 2014. "The innovation process of a privately-owned enterprise and a state-owned enterprise in China," IDE Discussion Papers 470, Institute of Developing Economies, Japan External Trade Organization(JETRO).
    16. Mike Peng & Jessie Zhou, 2005. "How Network Strategies and Institutional Transitions Evolve in Asia," Asia Pacific Journal of Management, Springer, vol. 22(4), pages 321-336, December.
    17. Buck, Trevor & Liu, Xiaohui & Ott, Ursula, 2010. "Long-term orientation and international joint venture strategies in modern China," International Business Review, Elsevier, vol. 19(3), pages 223-234, June.
    18. Erming Xu & Hui Yang & J. Quan & Yuan Lu, 2015. "Organizational slack and corporate social performance: Empirical evidence from China’s public firms," Asia Pacific Journal of Management, Springer, vol. 32(1), pages 181-198, March.
    19. Reuben Mondejar & Hongxin Zhao, 2013. "Antecedents to Government Relationship Building and the Institutional Contingencies in a Transition Economy," Management International Review, Springer, vol. 53(4), pages 579-605, August.
    20. Han, Wei & Luo, Yong (Eddie) & Huang, Qihai & Yang, Jun, 2022. "The role of opportunity feasibility beliefs and bribery on resource acquisition speed and new venture emergence," Journal of Business Research, Elsevier, vol. 149(C), pages 518-527.
    21. Zhou, Wubiao, 2017. "Institutional environment, public-private hybrid forms, and entrepreneurial reinvestment in a transition economy," Journal of Business Venturing, Elsevier, vol. 32(2), pages 197-214.
    22. Xuhong Su & Kelan Lu & Xiangming Hu & Yuqiong Xiang, 2019. "Reforms on county-level fiscal governance in China: impact on urban-rural income inequality," International Review of Public Administration, Taylor & Francis Journals, vol. 24(2), pages 81-100, April.
    23. Dau, Luis Alfonso & Moore, Elizabeth M. & Kostova, Tatiana, 2020. "The impact of market based institutional reforms on firm strategy and performance: Review and extension," Journal of World Business, Elsevier, vol. 55(4).
    24. Chittoor, Raveendra & Ray, Sougata & Aulakh, Preet S. & Sarkar, M.B., 2008. "Strategic responses to institutional changes: 'Indigenous growth' model of the Indian pharmaceutical industry," Journal of International Management, Elsevier, vol. 14(3), pages 252-269, September.
    25. GUAN, Jian Cheng & YAM, Richard C.M. & Tang, Esther P.Y. & Lau, Antonio K.W., 2009. "Innovation strategy and performance during economic transition: Evidences in Beijing, China," Research Policy, Elsevier, vol. 38(5), pages 802-812, June.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:inm:ororsc:v:7:y:1996:i:1:p:60-77. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Asher (email available below). General contact details of provider: https://edirc.repec.org/data/inforea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.