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Reform and Competitive Selection in China: An Analysis of Firm Exits

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  • Qing Gong Yang

    (New Zealand Commerce Commission)

  • Paul Temple

    (University of Surrey)

Abstract

This paper considers aspects of the competitive selection process in China - firm entry, survival, and exit - in an important sector of manufacturing, looking in particular for changes resulting from the latest stage of reforms. Using industry survey data from a province in North-East China, we find substantial differences in the process between ownership types. By conducting a simple decomposition of the aggregate productivity growth and exploring the determinants of firm’s exit using a hazard rate model, we observe a substantial rate of churning of enterprises in the sector, and find that the competitive selection processes operate, for small and collectively owned enterprises (COEs), in a manner consistent with a private market economy. In contrast, such processes appear not to be functioning for state owned enterprises (SOEs). We conclude that competitive selection in China is not providing a sufficiently strong substitute for corporate governance based on ownership.

Suggested Citation

  • Qing Gong Yang & Paul Temple, 2009. "Reform and Competitive Selection in China: An Analysis of Firm Exits," School of Economics Discussion Papers 0409, School of Economics, University of Surrey.
    • Handle: RePEc:sur:surrec:0409
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    Cited by:

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    2. Guimarães Barbosa, Evaldo, 2017. "Determinants of small business survival: The impacts of capital intensity and the collateral value of fixed assets," MPRA Paper 76434, University Library of Munich, Germany.
    3. Carla Daniela Calá & Miguel Manjón-Antolín & Josep-Maria Arauzo-Carod, 2017. "Regional Determinants of Exit Across Firms’ Size: Evidence from Argentina," Tijdschrift voor Economische en Sociale Geografie, Royal Dutch Geographical Society KNAG, vol. 108(6), pages 768-785, December.
    4. Calá, Carla Daniela & Manjón-Antolín, Miguel & Arauzo-Carod, Josep-Maria, 2017. "Regional determinants of exit across firms' size: evidence from a developing country," Nülan. Deposited Documents 2548, Universidad Nacional de Mar del Plata, Facultad de Ciencias Económicas y Sociales, Centro de Documentación.
    5. Spaliara, Marina-Eliza & Tsoukas, Serafeim, 2013. "What matters for corporate failures in Asia? Exploring the role of firm-specific characteristics during the Asian crisis," Structural Change and Economic Dynamics, Elsevier, vol. 26(C), pages 83-96.
    6. Calá, Carla Daniela & Arauzo Carod, Josep Maria & Manjón Antolín, Miguel C., 2015. "The Determinants of Entrepreneurship in Developing Countries," Working Papers 2072/246964, Universitat Rovira i Virgili, Department of Economics.
    7. Amankwah-Amoah, Joseph & Zhang, Hongxu, 2015. "Business failure research," MPRA Paper 67848, University Library of Munich, Germany.

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    More about this item

    Keywords

    Competition; Exit; Productivity; Hazard Models;
    All these keywords.

    JEL classification:

    • C5 - Mathematical and Quantitative Methods - - Econometric Modeling
    • D2 - Microeconomics - - Production and Organizations
    • L6 - Industrial Organization - - Industry Studies: Manufacturing
    • P5 - Political Economy and Comparative Economic Systems - - Comparative Economic Systems

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