When Iron Fist, Visible Hand, and Invisible Hand Meet: Firm-Level Effects of Varying Institutional Environments in China

9 Pages Posted: 16 Feb 2010

See all articles by Justin Tan

Justin Tan

York University - Schulich School of Business

Shaomin Li

Old Dominion University

Jun Xia

Montclair State University - School of Business

Date Written: 2007

Abstract

Traditionally, the Chinese government used an “iron fist” to control the economy and firms under central planning. However, the economic reforms since 1978 have substantially changed the institutional landscape. After more than two decades of dramatic economic transition, the economy is now neither planned nor market-based. Drawing from institutional theory, we examine the relationship between the government and firms and propose a number of hypotheses regarding how this relationship affects firm performance in China. We then test our hypotheses based on so far the largest and most authoritative industrial census data ever available to organizational research, which represents more than 90% of China's total industrial output. We find that government control at different levels, type of ownership, degree of privatization, and the government–firm bargaining relationship significantly affect firm performance. Our examination into the lishu relationship sheds light on an important heretofore unknown issue in firm performance during China's transitional economy. Implications for research, policy, and strategy are discussed.

Suggested Citation

Tan, Justin and Li, Shaomin and Xia, Jun, When Iron Fist, Visible Hand, and Invisible Hand Meet: Firm-Level Effects of Varying Institutional Environments in China (2007). Journal of Business Research, Vol. 60, 2007, Available at SSRN: https://ssrn.com/abstract=1552268 or http://dx.doi.org/10.2139/ssrn.1552268

Justin Tan (Contact Author)

York University - Schulich School of Business ( email )

4700 Keele Street
Toronto, Ontario M3J 1P3
Canada

HOME PAGE: http://www.schulich.yorku.ca/SSB-Extra/Faculty.nsf/faculty/Tan%20Justin

Shaomin Li

Old Dominion University ( email )

Norfolk, VA 23529-0222
United States

Jun Xia

Montclair State University - School of Business ( email )

Upper Montclair, NJ 07043
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
80
Abstract Views
865
rank
405,739
PlumX Metrics