Kiel Working Papers, Kiel Institute for World Economics
No 1728:
Firm Characteristics and Informal Governance of Business Operations in the PRD, China
Frank Bickenbach and Wan-Hsin LIU
Abstract: This paper describes the Chinese economic and
institutional reform process as a gradual transition of an informal,
relation-based governance system into a more formal and rule-based
governance system. The consequences of macro-level institutional reforms on
the importance of personal relationships for the firm-level governance of
business operations are discussed. Theoretical considerations based on the
New Institutional Economics suggest that, in a transition economy such as
China, companies’ incentives to reduce the reliance on personal
relationships should depend on firm characteristics such as the age, size
and the internationalization of the firm. We confront these suppositions
with empirical data obtained from a company survey performed among 222
(electronics industry) companies operating in the PRD, China. From this we
obtain some, though often weak, evidence in favor of the suppositions
Keywords: formal and informal institutions, relation-based governance, firm characteristics, China, company survey; (follow links to similar papers)
JEL-Codes: L20,; L63,; P0; (follow links to similar papers)
34 pages, August 2011
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