Kiel Working Papers, Kiel Institute for World Economics
No 1589:
The Role of Personal Relationships for Doing Business in the GPRD, China – Evidence from Hong Kong Electronics SMEs
Frank Bickenbach and Wan-Hsin LIU
Abstract: This paper investigates the role of personal relationships
for doing business in the Greater Pearl River Delta, China. First, it
discusses the interplay of formal and informal (relationship-based)
institutions from the point of view of institutional economics, with a
focus on economies with weak formal contracting and property rights
institutions. Second, it describes the institutional environment for doing
business in China, and in the PRD in particular. Third, it uses data
obtained from a survey among executives of Hong Kong electronics SMEs with
business operations in the PRD to gain insights into their perceptions on
the importance and the motives of using personal relationships for business
in PRD in general, and on the impact of personal relationships on different
strategic business decisions (on location, partner, and formal governance
structures) for companies’ production as well as innovation activities. The
results confirm the importance of personal relationships for doing business
in the PRD, in general. There is evidence of substantial differences as to
the role of personal relationships between production and innovation
activities
Keywords: personal relationships, formal and informal institutions, production, innovation, China, company survey; (follow links to similar papers)
JEL-Codes: L20,; L63,; P0; (follow links to similar papers)
60 pages, January 2010
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