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Heterogeneity among corporate governance practices in emerging economies presents new challenges to researchers and business practitioners. Prior research in international business and comparative corporate governance has considered this practice heterogeneity in emerging markets as an outcome of institutional voids or deficiencies to be addressed. In contrast, we propose viewing the variety of governance practices as the outcome of an innovation process that aims to better align the prototypical best practices and the idiosyncratic institutional or industry contexts. We argue that companies in emerging countries innovate their governance practices by combining different elements of external and internal governance systems using local embeddedness and global agency. Our examples of governance innovations in the emerging markets of China and Korea illustrate that this focus on embeddedness and agency offers insights into the salience and applicability of different types of governance innovations, from decoupling of local practices from global rules to experimentations with governance practices by change agents. [ABSTRACT FROM AUTHOR]

The proliferation of transition economies provides a unique opportunity to study the formation and behavior of social and economic structures, and literature exploring these issues has grown dramatically in recent years. Sociologists have made important contributions to the study of transition, particularly to theories of organizations and organizational change in China. In this article, I provide a critical assessment of the state of sociological literature on the transition process. I take stock of research that studies the emergence of new organizational forms, the growth of entrepreneurship, and the development of markets in China. I conclude with suggestions for resolving central debates and otherwise extending the literature. [ABSTRACT FROM AUTHOR]

Innovation is critical to organizational survival, competitive advantage, and economic development. Yet the process by which innovative strategic behavior occurs is not well understood. This paper takes advantage of rapidly changing corporate governance structures and environmental conditions during China's economic transition to explore the role of corporate ownership in shaping firm innovation. We argue that managers draw on internal strengths within external constraints to develop strategies and that the nature of corporate ownership determines the degree to which internal or external factors are salient. We capitalize on differences between Chinese state-owned enterprises (SOEs) and collective enterprises and other non-state firms (CNFs) in the adoption of firm strategies during transition. Analyzing data from 1994 to 1999 on 800 Chinese firms, we study the effect of owners/zip type on the adoption of four key organizational innovations and identify major strategic groups that developed during reform. The findings provide important insight into the role of corporate governance in influencing strategy formation and adaptation, outcomes that are increasingly important in all economies. [ABSTRACT FROM AUTHOR]

The networks of interfirm relations that developed in business groups during China's economic transition have been an important part of the country's economic transition. This article examines the process by which interfirm lending and trade ties emerged and evolved in the business groups in the early stages of reform. It studies the effect of business group structure on firm financial performance in the early stages of reform (1988-1990) and later in development (1994-1999). Initially, firms resorted to external resources (e.g., prior connections) to develop alliances. With time, they began to draw on internal resources (e.g., experience) to identify partners. Some business group structures improve member firm performance early in reform, but group membership reduces performance as markets stabilize. The findings underscore the changing significance of interfirm alliances at various stages of economic development. The findings are relevant for both developing countries and countries that developed in previous eras. [ABSTRACT FROM AUTHOR]

China's economic transition and its integration into the global economy have been widely recognized as among the most important social changes in the past three decades. This transformation has attracted scholarly attention from multiple disciplines, and sociologists have made particularly important contributions to literature emphasizing theories of organizations, organizational change, and management practice. In this article, we present a critical review of the state of sociological literature on organization and management issues in the transition process. We focus on studies that explore how organizations shaped the trajectory of China's economic transition, how organizations affect important social and economic outcomes during transition, and the unique challenges that managers face in China's transition context. We conclude with suggestions for resolving central debates and future research directions. [ABSTRACT FROM AUTHOR]

During an economic transition from socialism, market exchange replaces redistribution. We study firm decisions to enter product markets to understand the factors that influence this process. Managers in Chinese State Owned Enterprises operated within institutional constraints to make strategic decisions, and state intervention shaped which factors were salient. Firms financed through central government and bond issues relied less on markets. Firms funded through local government moved into markets faster; firms funded by banks were initially faster to markets but slower to markets after bank reform shifted lending policies. Thus, the accessibility, flexibility, and stability of financing shaped decisions about market entrance. [ABSTRACT FROM AUTHOR]

During economic transition, firms must dramatically reduce their financial dependence on the state and begin to borrow from nonstate capital sources. This paper draws on institutional and resource dependence theories to examine this fundamental transformation of firm capital structure during China's transition. I propose that managers borrowed from external sources even when internal funds were available because retained earnings were considered state assets. Firms used retained earnings to signal financial health but borrowed externally to reduce dependence on the state. Uncertainty during transformation produced interfirm imitation of borrowing strategies, particularly imitation of local and high status others. I argue that the dynamics of market development shaped firm borrowing strategies and that these strategies are best viewed as trajectories over time. Analysis of survey data on the 1980--1989 capital structure of formerly state-owned firms provides support for these arguments and highlights the importance of institutional context in understanding corporate borrowing and strategic decision making. [ABSTRACT FROM AUTHOR]

Adaptation to radical change is central to research in organization theory, and some of the most dramatic examples of environmental change have occurred recently in transition economies such as China. I take advantage of change during China's economic reform to study the relative importance of organizational and environmental factors in producing innovative managerial response. I find that strategic choice predicted innovation in the early stages of reform, but environmental factors increased in salience over time. Intrafirm support, Communist Party connections, and a market orientation produced innovation early in reform. Simple imitation of others was also salient in early years. As reform progressed, managers increasingly imitated other profitable firms and drew on their own experience. My results inform an understanding of both the process by which innovation occurs and firm behavior in transition economies. [ABSTRACT FROM AUTHOR]

The article presents information on changes in firm labor practices and policies and discuss how these are likely to impact the nature of social stratification in China. The study emphasizes differences between state-owned enterprises (SOE) and non-SOEs in order to highlight the role that firm ownership structure is likely to play in defining future stratification systems. The article further draws on recently-collected longitudinal (1994-1999) quantitative survey data on 800 Chinese SOEs and non-SOEs, including 433 SOEs and 367 firms with other ownership structures. In the next section, I provide a brief synopsis of the nature of enterprises prior to reform and describe the way labor reform affected firms. An overview of the survey is then presented by discussing how information from this survey informs understanding of the relationship between changing labor practices and stratification. The article also explores current labor conditions in Chinese firms, characteristics of workers, and the nature of current hiring and termination practices. The objective of the author is to provide a snapshot of the nature of labor conditions in China at the turn of the millennium and to discuss the potential for these conditions to shape the future of social stratification in that country.

The networks of interfirm relations that developed in business groups during economic transition are central to China's reform and are becoming an important part of the country's emergent economic structure. Using a recent and original data set that includes direct observations of economic choices made by firms, the process by which these interfirm lending and trade ties emerged and evolved in the early stages of reform is explored. Initially, information from sources external to the network dominated the formation and direction of exchange relations. Firms turned to their prior connections, took advantage of market position, and drew on bureaucratic power to develop alliances. Over time, internal influences gained importance, and managers increasingly drew on internal nontrade relations and other indicators inside the business group to identify lending and trade partners. The results demonstrate the central but changing role that social relations and environmental cues played in the creation of economic structure during China's transition. This study also contributes to an understanding of the processes of organizational adaptation to a major economic transition and interfirm alliance formation more generally. The findings reveal that firms select exchange partners of known reputation and solicit relations that reduce uncertainty, even when there is a cost involved. [ABSTRACT FROM AUTHOR]

A central component of economic development is the reallocation of household labor, typically from subsistence agriculture to non-farm employment. This occurred in the advanced market economies, during the Industrial Revolution, contributing to increases in agrarian and industrial productivity and raising standards of living dramatically. A similar process began in China in the first decade of economic reform and has been central to the development of China's rural and urban economies. Despite its broad social implications, the process by which rural households allocate labor is not well understood. In this paper, we examine the strategies rural households used in the early stages of China's economic reform as they adapted to fundamental changes in the institutional structures of the nation's agrarian economy. Using a large, national sample, we explore the degree to which households diversified labor efforts across types of non-farm work. We find that peasant households allocated labor to non-farm work only after subsistence needs were met. We also observe that peasants generally responded to local and regional opportunities but that political capital, human capital, and cohort effects accounted for differences in household responses. [ABSTRACT FROM AUTHOR]