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01-08-2013 | Research Article

Antecedents to Government Relationship Building and the Institutional Contingencies in a Transition Economy

Authors: Prof. Reuben Mondejar, PhD, Prof. Hongxin Zhao, PhD

Published in: Management International Review | Issue 4/2013

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Abstract

This study argues that the government-relationship building efforts by foreign invested enterprises (FIEs) depend on the perceived level of regulatory uncertainties, which, in turn, is conditioned by the institutional distances between their home and host countries.
The regulatory antecedents (regulatory complexity and enforcement uncertainty) to government-relationship building by foreign-invested enterprises and the moderating effects of institutional distance (regulative and cultural distances) in the context of the large transition economy of China are examined using a sample of 424 foreign-invested enterprises.
The results show that they tend to actively engage in government-relationship building when regulatory uncertainties (complexity and enforcement uncertainties) are high. The moderating analyses reveal the strengthening effects of regulative distances on the relationship between regulatory uncertainties and government-relationship building and the mixed effects of cultural distance.

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FIEs in China context include legal entities in the form of equity joint ventures (EJV), cooperative joint ventures (CJV), wholly-owned foreign enterprises (WFOE) and foreign-invested companies limited by shares (FCLS). Thanks for an anonymous reviewer for this suggestion.

For a detailed review of the corporate political strategy, please refer to Hillman et al. (2004).

We thank an anonymous reviewer for this two-sided view.

The final sample consists of 246 JVs (58 %) and 178 wholly-owned subsidiaries (42 %) from 21 countries (135 from Hong Kong, Taiwan, and Singapore, (32 %). The sample FIEs operate in 18 industries, showing a diverse set of industries covered. The average length of operation of FIEs is little over 9 years, with 50 % of them being present in China between 6–10 years. Among 424 FIEs, 248 spent 1–5 % of their sales on R&D (58 % of the sample), 267 FIEs (63 %) have over 500 employees and 157 (37 %) have between 100–500 employees, 122 (28.8 %) are located in industrial development zones. The 171 respondents are ethnic Chinese (40 %), representing a fairy balanced group. The average job tenure of the respondents is about 5 years, with 66 % of the respondents having worked in China between 6–9 years.

Kaufmann et al. (2009) computes these scores using 25 data sources covering 195 countries encompassing more than 50 items. The three scores used here range from −1.58 to 3; the larger the score, the higher the quality of regulatory environment.

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Title: Antecedents to Government Relationship Building and the Institutional Contingencies in a Transition Economy
Authors: Prof. Reuben Mondejar, PhD
Prof. Hongxin Zhao, PhD
Publication date: 01-08-2013
Publisher: Springer Berlin Heidelberg
Published in: Management International Review / Issue 4/2013
Print ISSN: 0938-8249
Electronic ISSN: 1861-8901
DOI: https://doi.org/10.1007/s11575-012-0167-7

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