Industrial Land Development Efficiency in China: From the Perspective of Bilateral Dependency

Limited land resources and large demand calls for intensive use of industrial land in China. However, delay in land development and idle land greatly deteriorate land use efficiency. This research focuses on the land development performance of industrial land in Guangdong, China. Land transactions of 4 cities from 2010-2016 have been investigated, among which more than two thirds have different degrees of delay in project completion. Influencing factors of land development efficiency are tested and analyzed from perspectives such as bilateral dependency. Bilateral dependency has been exemplified in Williamson’s transaction cost economics. It is often caused by asset specificity, which affects ex post contractual behaviors because lower values are implied for the re-arrangement of the assets. With motives to achieve optimal uses of industrial land, local governments in China often intervene the land market, for instance, designate areas to specific industries, or require the buyers to fulfill certain qualifications during land sales. Industrial clusters based on one or several core enterprises are common patterns in industrial land planning. Considering the long contract period and the uncertainty during contract enforcement, even if the achievement date of land development is dealed in land contract, it’s possible for both enterprises or governments to hold up the other party and cause delay. According to the empirical results, high-tech enterprises show worse performance than low-tech enterprises in land development efficiency. Nature of firm also has significant influence. State-owned firm delay the most while foreign developers perform the best. Besides, location of land, floor area ratio, investment scale etc. have influence on the land development efficiency. Different cities show different patterns under different industrial structures and land policies. The research findings are used for policy recommendations on land contract governance.