The paper offers a frame for investigating the extent to which decentralisation, and subsequent locally chosen institutions shape private organisational and institutional innovation. To include the numerous locally based "economic regimes" matters as the resulting business system reflects political institution setting and private organisational innovation. Such a frame is a necessary first step for empirical studies attempting to explain the heterogeneity of China's business systems, the emergence of hybrid organisations, and last but none the least, the different growth rates that can be observed across China.
We advance a conceptual frame for explaining economic transformation in China that combines a dynamic and a comparative perspective by taking the analysis of Fiscal Federalism one step further. Using insights from the comparative business systems literature we show that devolution of power at the beginning of the reform process introduced local autonomy, which stimulated a diversity of local regulatory regimes. As the central political leadership is no longer the sole supplier of institutional change, local governments become equal contributors to the formation of local business systems. Yet, local governments only partially define emerging local business systems. Local governance at the enterprise level is defined by the interaction between political and economic entrepreneurship, or, phrased in institutional terms, local business systems emerge from the interplay between the formal architecture of local autonomy and the informal institution of networking. In a comparative perspective this interaction, and its underlying driving forces for co-operation, namely: procedural uncertainty, relational risk and institutional change, will lead to diversity in outcomes. In a dynamic perspective both market competition and networking will ensure further competition between business systems, while political unification, imitation or scale economies will ask for convergence of local business systems beyond the local nexus.
The development of entrepreneurship and a private business sector in China pose various challenges to analysis. On the one hand, neo-classically based New Institutional Economics aims to find evidence that long-term investment and long-term commitment in and around firms can not be expected without deeply entrenched and state guaranteed private property rights. On the other hand, empirical studies within the China field concentrate on the political processes, in particular the interaction between the central state and local governments, at the danger of neglecting market forces, economic interests, and economic problems at stake. The empirical study on which the following is based took a different path by using a set of framing assumptions.
Moral outrage was the response of the Chinese press, when Cheng Kejie, one of the country's highest officials, Vice-Chairman of the Standing Committee of the National People's Congress (NPC) and former Governor of the Guangxi Zhuang Autonomous Region, was arrested on grounds of corruption on 25 April 2000. Cheng's arrest came amidst a spate of serious corruption cases that reached into the top echelons of China's state leadership (China Aktuell 2000). His case attracted wide public attention in national and international Chinese media because of his high office, the number of officials implicated, and the involvement of his lover Li Ping (dubbed the 'Jiang Qing of Guangxi' by the Hong Kong and overseas Chinese press) (Ming Pao 2000), daughter-in-law of his predecessor in the position of Governor of Guangxi, and for years the most influential woman in Guangxi. This was not just a case of a local official embezzling public funds, but a story of love and greed of a popular political leader, who had achieved much for his province. This was also not the story of an anonymous mistress, but of an ambitious, intelligent and attractive woman using the position of first her father-in-law then her lover to systematically and on a long-term basis exploit the powers vested in the office of provincial governor. The accusation against them focused on three crimes: appropriation and sale of real estate development and construction rights, sale of publicly subsidized goods at market prices and promotion of trusted allies into official positions of power. While the personal details of his deeds and his final execution in September 2000 fascinated the Chinese and Hong Kong press, his case also demonstrates how corruption works in China today (Hendrischke 2001).
This article contributes to our understanding of Chinese corporate expansion into developed economies by using Australia as a case study of how, in the 2010s, Chinese firms began transiting from government-driven resource investment to entrepreneurial expansion in new industries and markets. We contextualize this process by demonstrating how changing market demand and institutional evolutions at home and in the host country created new motivations for Chinese investors. In particular, the decline of active government control in China over the overseas operations of Chinese firms and the more business-oriented regulatory regime in Australia empowered local subsidiaries of Chinese firms to become more entrepreneurial and explorative in their attempts to compensate for their lack of competitiveness and weak organizational capabilities. Consequently, Chinese firms brought their domestic experience and modus operandi to the Australian host market and collectively adapted and deployed dynamic capabilities such as the use of network linkages, experiential learning and corporate reconfiguration. We find that this transfer of capabilities was facilitated by the co-evolution of the Chinese and Australian institutional and market environments and has maintained Australia's position as one of the major recipient countries of Chinese outbound investment, opening the Australian economy to ongoing expansion and disruption. (China Q/GIGA)
China like other transition economies needs to establish a tax regime compatible with a market economy. The paper singles out the general and China-specific features by which national legislation attempts to accompany economic transformation. Based on an empirical study in two provinces this paper shows that without including local government agencies and their budgets, China's fiscal federalism cannot be analysed. This paper argues that China's emerging tax regime depends on the institutional design that shapes the interaction between firms (as major tax payers at the local level), local government agencies, and the national tax administration.
China's long-term economic success is driven by new firms, new sectors and new business practices. This book explores the establishment of new private firms and listed companies, the development of knowledge industries, in particular the IT and banking sectors and the co-evolution of public governance and business institutions. The contributors discuss the role of local institutions in coordinating business activities and unleashing entrepreneurship, arguing that the sudden growth of new firms and industries is facilitated by changes in business behaviour and institutions. Initial private exchange and investment in an environment of ill-functioning markets are shown to depend on local networks and local business culture which, in turn, rely on local tax regimes setting incentives for inherited bureaucracies to engage in economic transformation. Finally, the book establishes local institutions and local governance as crucial dimensions of China's emerging business system. Contributing to the theory of endogenous institutional change, The Chinese Economy in the 21st Century will be of great appeal to academics and students interested in management, comparative business systems, transition economics, evolutionary economics, Chinese studies and Asian studies
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