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The Management of Enterprises in the People's Republic of China aims to contribute to the knowledge base of management within the Chinese context. The book begins with a mapping of research on management in PRC, and offers theoretical insights for cross-context, institutional, and behavioral studies. It then reports the results of fourteen empirical studies of management issues in the PRC firms. The issues studied include SOE transformation, globalization, governance, employment relationships, managerial networks, corporate culture and leadership. Also included are studies on the knowledge management process and management team characteristics of high technology firms. The methods of study include large-scale surveys, case studies, and interviews. The contributors are international experts in Chinese management research. Finally, we offer executive perspectives on several successful firms operating in China through interviews with their CEOs.



Mapping Research on Management in the People’s Republic of China

1. Research on the Management of Enterprises in the People’s Republic of China: Current Status and Future Directions

The opening of the People’s Republic of China (PRC) to the external world has changed the economic landscape around the world. With China’s entry into the World Trade Organization (WTO), past speculations about China as a world economic power in the 21st century has become a reality few would dispute anymore. With more than 25 percent of the world’s population, China is a market that promises exciting opportunities for all multinational corporations. In the past 20 years, its GDP has increased more than tenfold (Ahlstrom, Bruton, & Lui, 2000), and its economic growth has been sustained at 8 percent every year (The Economist, 2001). The Economist forecasts that if China continues on the path of a market-based economy and adheres to its commitment to the World Trade Organization, by 2020, it will have grown to the size of the United States economy today. Most forecasts put China as the secondlargest economy in less than 15 years.
Anne S. Tsui, Chung-Ming Lau

2. Constructing Cross-Context Scholarly Conversations

The title of this chapter reflects my interest in embedding this commentary in a broader discussion about the objectives of scholarship. My involvement in this project stems not from my relevant content expertise (Chinese business and economic reform), but from the authors’ interest in contributing to the established organizational studies literature. My role has been to facilitate connections between the results of the seven ‘macro’ studies of business enterprises in China presented in this volume and extant scholarly conversations about organizational evolution, corporate governance, and management practices.
David A. Whetten

3. The Management of People in Chinese Enterprises

My charter is to comment on the seven micro-oriented chapters in this book. It is a pleasure to take this opportunity to go beyond my professional and scholarly interests in Western organizational behavior and human resource management to address this work on its Chinese counterparts.
Thomas W. Lee

4. The Changing World of Chinese Enterprise: An Institutional Perspective

Recent developments in institutional theory are reviewed in order to provide a conceptual framework within which to locate and consider studies of changes in Chinese enterprise. Institutional theory emphasizes the role played by regulative, normative, and cultural-cognitive processes in shaping social behavior and social structure. Changes in Chinese organizations are described and evaluated at three levels: societal, organizational field (state-owned enterprises), and individual organizations. Western models of organizing are introduced via numerous mechanisms, but must be adapted to fit the distinctive institutional characteristics of China.
W. Richard Scott

Macro Perspectives

5. Reforming State-Owned Enterprises: Diversifying Ownership Versus Improving Management

One line of thought on reforming state-owned enterprises (SOEs), the ownership school, stresses diversifying ownership to eliminate government control. A second line of thought, the management school, emphasizes the need to improve government’s management of SOEs by, for example, granting SOE employees the autonomy and profit incentives. Utilizing data on 680 SOEs in China, over 1980-94, we tested the relative effectiveness of two kinds of reform measures. Our results yield strong support for the ownership school and very mixed evidence for the management school. Moreover, we found that the impact of ownership diversification on SOEs’ economic performance was as strong as that of enhancing product-market competition.
David D. Li, Changqi Wu

6. Internal Capital Market Misallocation and Inefficient External Capital Market: The Guangdong Enterprises Group

This chapter is a case study on the efficiency of internal and external capital markets in a representative “red chip” group--Guangdong Enterprises (Holdings) (GDE). Acting as a government fund-raising and investment vehicle, GDE has run the “government business” with little regard to economic logic and rules. We demonstrate that internal capital misallocation and external capital market inefficiency in this case are the outcomes of the contradictions between a government business and business economics in a market economy.
Jia He, Lan Lu

7. Networks and Incentives in Transition: A Multilevel Analysis of the Pharmaceutical Industry

This chapter investigates the institutional and organizational sources of persistence and change in the product innovation system characterizing China’s pharmaceutical industry, focusing on networks and incentives. Even if research institutes, manufacturers, and wholesalers have not moved significantly beyond functional boundaries established decades ago under the command economy, the dynamics underlying this structure have changed dramatically with reforms. Further, organizations are pursuing alternative strategies for creating and acquiring complementary assets, although these are not always in line with policymakers’ overall reform objectives. Suggestions for further research are meant to extend our first steps towards applying network concepts to the analysis of transitional contexts like China.
Steven White, Xielin Liu

8. From Politics to Markets: A Case Study of Chinese Firms’ Strategic Adaptation

With this study, we contribute to the literature by investigating how institutional, market, and firm factors affect an incumbent firm’s strategic adaptation in China’s transitional economy. Drawing on results from a case study of China’s telecommunications industry, we develop an integrative framework suggesting that institutional, market, and firm factors will have direct impact on strategic adaptation. More importantly, we propose that institutional and market factors will also indirectly affect firms’ strategic adaptation through changing their operational autonomy and resource contingencies. Research implications are discussed.
Yan Xu, Haiyang Li

9. Knowledge Management of High-Tech Firms

Based on an analysis of six high-tech firms in mainland China, this chapter examines knowledge management issues by focusing on its acquisition, dissemination, and commercialization. We found that most firms emphasized knowledge acquisition. SOE-based firms relied more on their parents for early key technologies, confirming that institutional support and social capital are influential in knowledge acquisition. Social capital also help firms to overcome barriers to organizational knowledge dissemination. Its role in knowledge commercialization is also identified. Absorptive capacity is important for knowledge dissemination, since appropriate organizational arrangements have not been purposely designed.
Chung-Ming Lau, Yuan Lu, Shige Makino, Xiaohong Chen, Ryh-Song Yeh

10. Corporate Governance Mechanisms

This chapter examines empirically the effectiveness of the ownership structure, board structure, and compensation of a sample of Chinese firms over the period from 1997 to 1999. We find that ownership concentration and percentage of employees’ shareholding have positive impacts on firm performance, but the percentage of major officers ’ shareholding does not. The ratio of insider directors is not related to firm performance either. CEO duality has an impact on chairmen’s salaries. However, managerial compensation is, in general, not related to firm performance. Overall, there is only weak evidence supporting the effectiveness of Chinese firms’ internal governance mechanisms.
Dennis K. K. Fan, Chung-Ming Lau, Shukun Wu

11. Decentralized Enterprise Reform: Notes on the Transformation of State-Owned Enterprises

This chapter compares three models of enterprise reform: shock therapy, incrementalism, and decentralized reform, whereby local governments and enterprises themselves largely control the reform process. Decentralized reform leads to abrupt and inconsistent changes in enterprise management since the reform process is largely unguided—it is reform without a rule book. We argue that China is illustrative of decentralized enterprise reform and that the decentralized nature of China’s reform process has resulted in vast differences in forms of state ownership structure and capabilities among Chinese state-owned enterprises.
Marshall W. Meyer, Yuan Lu, Hailin Lan, Xiaohui Lu

Micro Perspectives

12. Social Capital of the Firm and its Impact on Performance: A Social Network Analysis

A firm’s ability to seek and secure scarce resources through its CEO’s hierarchical, interorganizational, and social connections is the firm’s social capital. A 1998 survey of 188 firms in Guangzhou city shows that these firms vary tremendously in level of social capital. Private and semiprivate firms in the tertiary sector have a higher level of social capital than state-owned firms or firms in the manufacturing sector, and firms whose CEO’s education or civil service rank is higher also tend to have a higher level of social capital. Finally, social capital increases a firm’s productive capacity, net of its structural and leadership characteristics.
Yanjie Bian

13. Sources and Moderators of Employee Stress in State-Owned Enterprises

This study examined the linear and curvilinear relationships between job and situational stressors and stress using questionnaire data provided by 1, 100 employees in China. Results show that job demands had a U-shaped, curvilinear relationship with stress and an inverted U-shaped relationship with job satisfaction. Job complexity had a U-shaped, curvilinear relationship with stress and a positive relationship with job satisfaction. Economic, interpersonal, and family stressors had a linear, positive relationship with stress. Perceived ability-job fit moderated the relationships between the job stressors and stress. The situational stressors enhanced the relationship between job demands and stress.
Jia Lin Xie

14. Leader Behaviors and Employee Turnover

Adopting the theoretical framework of transactional and transformational leadership, I examined if and how leaders’ contingent reward/punishments and noncontingent reward/punishments influence employees’ turnover decision making and how relationship-oriented and task-oriented transformational behaviors influence the likelihood of employee turnover. Data from a sample of 175 employees of four organizations in the People’s Republic of China suggest that relationship-oriented transformational behaviors reduce the likelihood of employee turnover. On the other hand, noncontingent punishment facilitates employee turnover.
Xiao-Ping Chen

15. Employment Relationships with Chinese Middle Managers: Exploring Differences Between State-Owned and Non-State-Owned Firms

Economic reform in the People’s Republic of China and the opening of the country to foreign investment have given rise to a private sector comprising foreign-owned and private domestic firms alongside a shrinking state sector. These changes have spawned a variety of employment practices and a corresponding variation in employment relationships. Our empirical study showed that foreign-owned and private domestic firms are similar in their strong emphases on professional managerial tasks and use of development rewards with middle managers, in contrast to firms in the state sector.
Anne S. Tsui, Duanxu Wang, Yichi Zhang

16. Characteristics and Processes of Top Management Teams in High-Tech Firms

This chapter reports the results of two exploratory, interview-based studies of the top management teams (TMTs) of entrepreneurial firms in Chinese high-tech industries. Results indicated that the formal team leaders (firm presidents) were typically young and had versatile backgrounds and many of the major characteristics previously identified for effective leaders. Members of the TMTs that had been successful tended to share the leader’s values and goals, hold complementary skills, and have compatible personality traits. Leader quality and team capacity to make decisions independently were decisive for team effectiveness. We present a revised model with additional antecedents that were not in the preliminary model based on the existing literature.
Ping Ping Fu, James L. Farr, Siqing Peng, Yuan Chen, Xuehuang Yan, Erping Wang, Fengying Luo, Yongjuan Li, Shouqing Fu, Qinghong Peng

17. Corporate Culture in State-Owned Enterprises: An Inductive Analysis of Dimensions and Influences

We collected qualitative data from 120 senior managers in state-owned enterprises in the People’s Republic of China. Ten organizational culture dimensions that relate to an organization’s capability in internal integration and external adaptation and organizational culture’s effects on three organizational and three employee outcomes were identified. Two focus group discussions were conducted to verify the dimensions and explore causal relationships. We compare the Chinese organizational cultural dimensions with Western dimensions and note some unique organizational cultural dimensions in Chinese state-owned enterprises.
Katherine R. Xin, Anne S. Tsui, Hui Wang, Zhi-Xue Zhang, Wei-Zheng Chen

18. An Inductive Analysis of the Construct Domain of Organizational Citizenship Behavior

Using an inductive approach, we examined the construct domain of organizational citizenship behavior (OCB) in the People’s Republic of China (PRC). From a diverse sample of 99 employees and managers in 40 state-owned, collective, joint venture, and private enterprises in the PRC, we collected 480 OCB incidents. Results of content analysis of these incidents revealed 11 dimensions of OCB, six of which are not evident in the Western literature. The type of organization influenced the forms of OCB reported. Results suggested that the Chinese formulation of OCB differs from its Western counterparts and is embedded in the PRC’s unique social and cultural context.
Jiing-Lih Farh, Chen-Bo Zhong, Dennis W. Organ

Executive Perspectives

19. Speaking for Themselves: Conversations with Four Chinese CEOs

In this chapter, we reprint four interviews conducted by staff of the Hang Lung Center for Organizational Research (HLCOR) at the Hong Kong University of Science and Technology between the years 1998 and 2001. These interviews were reported in the HLCOR newsletters. Each executive spoke about one specific issue that was most important for the company at the time of his leadership. From their comments, we gain some insight into the unique circumstances in which they operate, the challenges they face, and their unique actions and perspectives.
Anne S. Tsui


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