IDEAS home Printed from https://ideas.repec.org/p/ems/eureri/7577.html
   My bibliography  Save this paper

Rational Entrepreneurship in Local China: Exit Plus Voice for Preferential Tax Treatments

Author

Listed:
  • Zhu, Z.
  • Hendrikse, G.W.J.
  • Krug, B.

Abstract

Bearing the legacy from central-planned system, the tax system in local China still lacks transparency and, in many cases, the liabilities of firms, especially those with extensive influences, are subject to negotiation despite the new tax-reform 1994. Applying Hirschman’s Exit-Voice theory, we construct a game model of interplay between firm and local government, in terms of exit and voice for preferential tax treatments, thereby revealing dynamics of these two options under rational entrepreneurship of economizing transaction cost. Suggested by the model, exit not only induces firm to opt for voice, it also underpins firm’s voice that forces local government to compromise. Particularly, when holding private information of exit cost, firm is able to mimic behaviors of those with high mobility so as to boost the effectiveness of voice. The empirical cases fully illustrate such rational entrepreneurship of exit plus voice to profit from local preferential policy.

Suggested Citation

  • Zhu, Z. & Hendrikse, G.W.J. & Krug, B., 2006. "Rational Entrepreneurship in Local China: Exit Plus Voice for Preferential Tax Treatments," ERIM Report Series Research in Management ERS-2006-010-ORG, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus University Rotterdam.
    • Handle: RePEc:ems:eureri:7577
    as

    Download full text from publisher

    File URL: https://repub.eur.nl/pub/7577/ERS%202006%20010%20ORG.pdf
    Download Restriction: no
    ---><---

    More about this item

    Keywords

    China; Exit; Preferential Tax Treatments; Tax Competition; Voice;
    All these keywords.

    JEL classification:

    • H32 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Firm
    • M - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics
    • M13 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - New Firms; Startups
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D
    • P25 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies - - - Urban, Rural, and Regional Economics
    • P35 - Political Economy and Comparative Economic Systems - - Socialist Institutions and Their Transitions - - - Public Finance
    • R38 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Government Policy
    • R59 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Other

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    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:ems:eureri:7577. 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: RePub (email available below). General contact details of provider: https://edirc.repec.org/data/erimanl.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.