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Firm characteristics and informal governance of business operations in the PRD, China

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  • Bickenbach, Frank
  • Liu, Wan-Hsin

Abstract

This paper describes the Chinese economic and institutional reform process as a gradual transition of an informal, relation-based governance system into a more formal and rule-based governance system. The consequences of macro-level institutional reforms on the importance of personal relationships for the firm-level governance of business operations are discussed. Theoretical considerations based on the New Institutional Economics suggest that, in a transition economy such as China, companies' incentives to reduce the reliance on personal relationships should depend on firm characteristics such as the age, size and the internationalization of the firm. We confront these suppositions with empirical data obtained from a company survey performed among 222 (electronics industry) companies operating in the PRD, China. From this we obtain some, though often weak, evidence in favor of the suppositions.

Suggested Citation

  • Bickenbach, Frank & Liu, Wan-Hsin, 2011. "Firm characteristics and informal governance of business operations in the PRD, China," Kiel Working Papers 1728, Kiel Institute for the World Economy (IfW Kiel).
    • Handle: RePEc:zbw:ifwkwp:1728
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    References listed on IDEAS

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    Cited by:

    1. Bickenbach, Frank & Dohse, Dirk & Liu, Wan-Hsin, 2014. "An inquiry into the determinants of graduate entrepreneurship in Hong Kong and Guangzhou (Mainland China)," Kiel Working Papers 1940, Kiel Institute for the World Economy (IfW Kiel).

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    More about this item

    Keywords

    Formal and informal institutions; relation-based governance; firm characteristics; China; company survey;
    All these keywords.

    JEL classification:

    • L20 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - General
    • L63 - Industrial Organization - - Industry Studies: Manufacturing - - - Microelectronics; Computers; Communications Equipment
    • P0 - Political Economy and Comparative Economic Systems - - General

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