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Evolving Ownership Structures in Private Enterprises in China: the Case of Ningbo

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Listed:
  • Zhong Qin
  • Wenli Cheng

Abstract

This paper develops a theoretical model to study features of the spontaneous growth of private enterprises in China’s Zhejiang province. The model predicts that in a developing economy where the market environment is immature or unstable, the ownership structure of a typical private enterprise involves a cooperative arrangement between a party with management skills and another party with Guanxi (connections). As the market environment becomes more stable, the ownership share of the party with management skills increases. This result is confirmed by empirical evidence. Observations of the pattern of private sector growth suggest that ownership structures of private enterprises were strongly influenced by the market environment. Empirical analysis based on a survey of 296 firms in Ningbo city of China shows that the perceived importance of both government and family Guanxi declined with perceived improvements in market stability.

Suggested Citation

  • Zhong Qin & Wenli Cheng, 2012. "Evolving Ownership Structures in Private Enterprises in China: the Case of Ningbo," Monash Economics Working Papers 12-13, Monash University, Department of Economics.
    • Handle: RePEc:mos:moswps:2012-13
    as

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    File URL: http://www.buseco.monash.edu.au/eco/research/papers/2012/1312evolvingownershipqincheng.pdf
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    References listed on IDEAS

    as
    1. Tian, Guoqiang, 2000. "Property Rights and the Nature of Chinese Collective Enterprises," Journal of Comparative Economics, Elsevier, vol. 28(2), pages 247-268, June.
    2. Shaomin Li, 2002. "Does east love guanxi more than west? The evolution of relation-based governance: Contemporary and historical evidences," Global Economic Review, Taylor & Francis Journals, vol. 31(1), pages 1-11.
    3. Laixiang Sun, 2000. "Anticipatory Ownership Reform Driven by Competition: China' Township-Village and Private Enterprises in the 1990s," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 42(3), pages 49-75, September.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Guanxi; ownership structure; quality of economic environment; private enterprises in China;
    All these keywords.

    JEL classification:

    • L20 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - General

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    This paper has been announced in the following NEP Reports:

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