Shifts in governance in China

Sub-projects

1. Culture, by David Goodman
Twenty years of reform in the People’s Republic of China have seen massive changes in the structures of local politics despite the maintenance of a communist party-state. Reform has been characterised by decentralisation, the withdrawal of the Chinese Communist Party from government functions, and the reduction of government’s role on social and economic development. One result of these shifts in governance has been an increased salience for the county; the party-state’s lowest level in the territorial-administrative hierarchy. This project examines the impact of reform on county governance in the People’s Republic of China through a series of case studies across a number of different counties in a number of different provinces. Rather than assuming a homogenous cultural, social and economic ecology across China, the project starts from accepting an inherent variability before proceeding to a description and explanation of the political consequences, in particular the institutions and structures of governance.

2. Networks, by Hans Hendrischke
Traditionally, social networks in China, also known as guanxi, have been explained as cultural phenomena, often seen as stemming from a Confucian emphasis on the family. However, this project emphasises the economic dimension of social networks. In this explorative research, the focus is on networks as business networks, the players in these networks, what interactions within these networks look like and how these networks can function as resource mobilising mechanisms. The research draws upon detailed case study material based upon in-depth interviews with economic and political entrepreneurs.

3. Multinationals, by Patrick Reinmoeller
This project focuses on foreign multinationals (MNCs) in China, especially the dynamic interaction between firm strategy and the country context. Seeking to better understand this interaction, four perspectives have been taken. First, using a theory-led review of foreign direct investment (FDI) in China, macro-level shifts and longitudinal changes are analysed. Second, institutional theory allows analysis of constraining factors that increase homogeneity within populations. An analysis of changing institutional factors in China’s most recent phase of increasing FDI shows liberalisation as antecedent of increasing heterogeneity, i.e. this project presents a case illustrating a counter theme to institutional theory. Third, multiple case studies of foreign MNCs’ entry and post-entry moves allows for the development of a model for the decision to enter China and increasing engagement and commitment over time. Integrating the complementary perspectives of TCE, capabilities and institutional theory a dialectic model of post-entry strategies is developed. Fourth, firm-level analysis of competitive strategies within China’s dynamic environment allows better understanding of the business policies behind MNCs successful adaptation amidst shifting institutional constraints and increasing competitive pressures from peers and local champions.

4. Taxation, by Ze Zhu, Barbara Krug and Hans Hendrischke
The tax system is an interesting point of departure for investigating a society in transition. This sub project aims to explain the changes in the tax system of the largest and most successful transition economy: that of China. Detailed empirical research shows that the transformation course of this tax system is shaped by interactions between central and local government agencies and private entrepreneurs. As such, the system is heading towards more democratic forms of governance. The research has a broad methodology, using game theory, econometric analysis, and in-depth case studies.

5. Organisational diversity, by Jeroen Kuilman and Barbara Krug
In the 1980s there was only one type of organisation, the state-owned enterprise. But in the process of China’s economic transition has witnessed the additional emergence of private enterprises and foreign enterprises. This increase in organisational diversity is incredibly important, because it gives an economy a set of solutions to anticipate future changes. In this sub project, we take a closer look at this organisational diversity. The question, for example, is whether the old state-owned enterprises can compete with foreign enterprises; whether the state-owned enterprises will, at one point, be more or less removed from the market; or whether the small private enterprises will take over. To help understand changes in organisational diversity, quantitative, econometric analyses from the field of organisational ecology are applied.

6. Entrepreneurship by Barbara Krug
This project focuses on the emergence of private entrepreneurs in the context of institutional change. How do the new entrepreneurs deal with the uncertainties, in which way do they use their networks, how do they deal with opportunities and challenges stemming from China’s economic transition? This project reveals that for the establishment of new, privately owned companies in an environment previously exclusively dominated by state-owned enterprises, the interaction between companies and institutions, entrepreneurs and local party cadres, is salient. Thus local processes of endogenous institutional change stemming from the dynamics between economic and political entrepreneurs are identified, conducive to the rise of private enterprises. The research draws upon a database of 200 companies, compiled from interview data in several provinces as well as interviews with political entrepreneurs.

7. Innovation, by Mark Greeven
The emergence of knowledge industries in China in an adverse economic environment with changing institutions asks for an explanation. The project deals with the development of innovative competences of entrepreneurial firms in China’s emerging knowledge industries. Considering the variety of business systems in China we take a local perspective and deal with innovative firms in the software industry of Hangzhou’s local business system in order to analyze how the institutional environment impacts on the development of innovative competences. Aside from comparative business approaches, an extended version of the resource-based theory of the firm, insights from industrial demography and social network perspectives are employed to explain the behavior of firms and individuals.

Conferences and workshops

For detailed information about the progress of the various sub-projects, please visit the 2006 Hangzhou Conference website. There, you will find the papers under discussion, photos, information on the participants and a short summary of the conference proceedings.

Products

Information about publications following from this project, including the forthcoming book, The Chinese Economy in the 21st Century: Enterprise and Business Behaviour, can be found at the Publications section.