Resource-based theories of the firm argue that the success of one firm over another is largely due to its resource endowments. Large enterprises have long been recognised as leading sources of learning innovation and growth. This is not just restricted to large firms in developed economies, but also applies to firms in developing economies such as China, where large firms have long and complex histories in the state bureaucracy. Focusing on the case of China's petrochemical sector, this paper argues that even if a sector has a long history in central planning, the critical resources of a firm matter. It shows how existing organisational resources inherited from the pre-reform era, when provided with the correct incentive structures, can survive economic transition and be successfully applied under market conditions. In the petrochemical sector a key inducement was the commitment of the state to expose the sector to international developments where possible. The paper describes how this commitment has resulted in a mostly positive adjustment, but has also created ambiguities over how resources should be developed in future in a rapidly changing global industry.
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