Political Connection and Financial Performance: Evidence from Chinese Small-and-Medium Enterprises
AbstractSince 1978, China gradually adopted a series of reform policies aiming to transform its former central planned economy to a socialist market economy. For the past three decades, the economic reform has brought China a flourishing private sector: it has grown at an annual rate of twenty percent, far above the economy's eight percent average growth for the same period (Tsai, 2002). Moreover, the non-state sector in China has accounted for two-thirds of total productivity and GDP (Welborn, 2003). The high-speed development of the private sector has been achieved primarily by decentralization of decision making power from the government to enterprises (McMillan & Woodruff, 2002; Siu & Liu, 2005). This decentralization process led to transformation of those large state-owned enterprises and spur of private small-and-medium enterprise (SMEs), such as the flourishing of township-and-village enterprises (TVEs). While most attention has been paid on how the transformation of large SOEs accelerated the development of private sectors, the creation and development of SMEs has had a significant influence on the development of the private economy, a fact that has been noted recently by sociologists. The rise of those small businesses raises several questions about the way in which China's SMEs has developed. One of these is whether there is a Chinese style of the development of SMEs which differs from that in capitalist economies. According to 3 resource-based theory, in capitalist economies the basis for a firm's competitive advantage lies primarily in its application of the valuable resources that are at the firm's disposal (Rumelt, 1984, p557-558; Wernerfelt, 1995, p172). However, developing in a transitional economy where the market is not the dominant mechanism for the allocation of resources, China's SMEs have developed different strategies to gain better financial performance. This paper, therefore, tries to explain both theoretically and empirically what is the China's style of development of SMEs, particularly focusing on the political connectivity and the financial performance of SMEs. For the rest sections of this paper we firstly deal with the theoretical debate on the development of firms in China's traditional economy.. Secondly, the methodology of this paper will be discussed. A multi-level modelling is used to describe the political connectivity and the financial performance of China's publically listed SMEs. Finally, research results will be presented and further discussed.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by HAL in its series Post-Print with number hal-00496839.
Date of creation: 19 Nov 2009
Date of revision:
Publication status: Published - Presented, Political Connection and Financial Performance: Evidence from Chinese Small-and-Medium Enterprises, 2009, Antewerp, Belgium
Note: View the original document on HAL open archive server: http://hal.archives-ouvertes.fr/hal-00496839/en/
Contact details of provider:
Web page: http://hal.archives-ouvertes.fr/
You can help add them by filling out this form.
reading list or among the top items on IDEAS.Access and download statisticsgeneral information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (CCSD).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.