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Employment and Market Innovation in Chinese Business Group Affiliated Firms: The Role of Group Control Systems

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  • White, Robert E.
  • Hoskisson, Robert E.
  • Yiu, Daphne W.
  • Bruton, Garry D.

Abstract

Prior research has suggested a number of potential benefits to firm membership in business groups. These benefits include availability of capital and other resources not readily accessible in an open market, the facilitation of entrepreneurship, plus information and risk sharing advantages. We suggest that another important benefit is the assistance of group control systems in helping the firm to manage conflicting pressures in the institutional environment and facilitate coevolution of these conflicting pressures. To empirically demonstrate the relevance of this viewpoint, we examine the case of China where business groups facilitate institutional transition, actively balancing market pressures to increase levels of innovativeness in firms with institutional pressures emanating from the government to maintain high employment levels. Using data from a broad sample of more than 1,000 Chinese affiliate firms in more than 200 business groups, we find that government policy, ownership and managerial mindset influence the political goal of maintaining high employment levels, while interdependence among group affiliate firms is related to lower employment levels. However, while government ownership and the government managerial mindset were negatively related to market innovation activities, group financial and cultural control systems positively affected the tendency of affiliate firms to focus on market innovation.

Suggested Citation

  • White, Robert E. & Hoskisson, Robert E. & Yiu, Daphne W. & Bruton, Garry D., 2008. "Employment and Market Innovation in Chinese Business Group Affiliated Firms: The Role of Group Control Systems," Management and Organization Review, Cambridge University Press, vol. 4(2), pages 225-256, July.
    • Handle: RePEc:cup:maorev:v:4:y:2008:i:02:p:225-256_00
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    Cited by:

    1. Douglas A. Schuler & Wei Shi & Robert E. Hoskisson & Tao Chen, 2017. "Windfalls of emperors' sojourns: Stock market reactions to Chinese firms hosting high-ranking government officials," Strategic Management Journal, Wiley Blackwell, vol. 38(8), pages 1668-1687, August.
    2. Wu, Lichao & Wei, Yingqi & Wang, Chengang, 2021. "Disentangling the effects of business groups in the innovation-export relationship," Research Policy, Elsevier, vol. 50(1).
    3. Nan Jia & Jing Shi & Yongxiang Wang, 2013. "Coinsurance Within Business Groups: Evidence from Related Party Transactions in an Emerging Market," Management Science, INFORMS, vol. 59(10), pages 2295-2313, October.
    4. Kim, Youngok & Lui, Steven S., 2015. "The impacts of external network and business group on innovation: Do the types of innovation matter?," Journal of Business Research, Elsevier, vol. 68(9), pages 1964-1973.
    5. Michaela Kotkova Striteska & Viktor Prokop, 2020. "Dynamic Innovation Strategy Model in Practice of Innovation Leaders and Followers in CEE Countries—A Prerequisite for Building Innovative Ecosystems," Sustainability, MDPI, vol. 12(9), pages 1-20, May.
    6. Popli, Manish & Ladkani, Radha M. & Gaur, Ajai S., 2017. "Business group affiliation and post-acquisition performance: An extended resource-based view," Journal of Business Research, Elsevier, vol. 81(C), pages 21-30.
    7. Aggarwal, Raj & Jindal, Varun & Seth, Rama, 2019. "Board diversity and firm performance: The role of business group affiliation," International Business Review, Elsevier, vol. 28(6), pages 1-1.
    8. Wu, Lichao & Wei, Yingqi & Wang, Chengang & McDonald, Frank & Han, Xia, 2022. "The importance of institutional and financial resources for export performance associated with technological innovation," Technological Forecasting and Social Change, Elsevier, vol. 185(C).
    9. Lou, Zhukun & Zhu, Mingyang, 2021. "Decision rights allocation and innovation: Evidence from China's listed business groups," Finance Research Letters, Elsevier, vol. 39(C).
    10. Yu Wang & Jie Ma & Tienan Wang, 2023. "Do all female directors have the same impact on corporate social responsibility? The role of their political connection," Asia Pacific Journal of Management, Springer, vol. 40(3), pages 1047-1074, September.
    11. Xing, Fei & Hai, Mengdie & Cai, Jiayao, 2023. "Network centrality and technology acquisitions: Evidence from China's listed business groups," Economic Modelling, Elsevier, vol. 120(C).
    12. Cheng, Liubing & Chen, Yanyan & Zhang, Yan, 2022. "Business groups and corporate bond costs: Evidence from China," Pacific-Basin Finance Journal, Elsevier, vol. 75(C).

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