Phase transitions and emergence of entrepreneurship: The transformation of Chinese SOEs over time

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Abstract

Configurational theory has been a key building block of organizational research. An understanding of how certain configurations evolve over time, especially during discontinuous changes such as economic transition, has been largely a missing link in the literature. Considering economic transition as a process rather than an outcome, this study examined strategic adaptations among Chinese SOEs in two phases, 1990 and 2002. Findings from two surveys and from interviews revealed that environmental characteristics changed significantly over time and that firms responded with more entrepreneurial strategies aimed at firm growth rather than at satisfying state planners. Such changes were related to improved performance. The study closes by offering implications for research and practice.

Section snippets

Executive summary

Configurational theory has been a key building block of organizational research and holds profound implications for research and practice. Configurations between features in a firm's environment and its strategic responses evolve over time. However, academic and practical understanding of this process is limited, especially in cases of discontinuous change such as the transition towards market economies. Since firms in these transitional economies have emerged to be suppliers, customers,

Transition as a dynamic process: theory and hypotheses

To start, we may consider economic transition and entrepreneurial transformation as complex adaptive systems; they are dynamic, bounded networks of diverse agents interacting nonlinearly. Dynamic refers to the continual interactions of multiple agents and resulting uncertainties, turbulence, and surprises. Bounded refers to the defining purpose or intent of the system. The “network” metaphor characterizes the multiple interconnections of the system. The multiple agents include various

Research methodology

Since large-sample firm-level data are difficult to collect in China, most existing studies have relied on case based methods. Although highly insightful for theory development, case studies are less useful when the objective of the research is theory testing. This study joins the handful of studies in China that rely on quantitative analysis of data from a relatively large sample to test theories.

Statistical analyses and results

Following the multidimensional approach of measuring environment and strategy, I generated three composite environmental variables and five strategic orientation variables. The three environmental variables are hostility, turbulence, and complexity. For strategic orientations, I included futurity, proactiveness, risk affinity, analysis, and defensiveness. These constructs were grounded in theory and have been validated.

In addition, I included a control variable, firm size. I used a 5-point

Discussion and conclusion

Following a staged perspective of transition, this study examines changes in organizational environment and strategic decision characteristics in China. The study reveals some profound transformations in environment–strategy configuration brought about by the economic transition. The study finds that different phases of the transition process call for firms' ability to switch from one strategy to another in order to align with environmental changes. Specifically, the results suggest that,

Acknowledgements

This paper was completed while the author was a Fulbright Distinguished Professor at Nankai University in China, which provided institutional support. Research assistance from David Tan is much appreciated.

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