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It is well known in economics, law, and sociology that reputation costs in a closed network give insiders a feeling of being protected from bad behavior in their relations with one another. A person accustomed to doing business within a closed network is, therefore, likely to feel at unusual risk when asked to cooperate beyond the network because of absent reputation-cost security. It follows that business leaders in more closed networks should be less likely to cooperate beyond their network (Hypothesis 1 ). Success reinforces the status quo. Business leaders successful with a closed network associate their success with the safety of their network, so they should be even less likely to cooperate with a stranger (Hypothesis 2 ). We combine network data from a heterogeneous area probability survey of Chinese CEOs with a behavioral measure of cooperation to show strong empirical support for the two hypotheses. CEOs in more closed networks are less likely to cooperate beyond their network, especially those running successful businesses: successful CEOs in closed networks are particularly likely to defect against people beyond their network. The work contributes to a growing literature linking network structure with behavior: here, the closure that facilitates trust and cooperation within a network simultaneously erodes the probability of cooperation beyond the network, thereby reinforcing a social boundary around the network. Taking our results as a baseline, we close sketching new research on personality, homophily, network dynamics, and variation in the meaning of “beyond the network.”

Almost two decades ago, Asia Pacific Journal of Management, 19(2/3): 251–267 Peng (2002) called attention to the promise of institution-based strategy research. The puzzle was to explain differences in strategies around the globe. Building on the work accomplished so far, I ask: Can institution-based strategy succeed when embedded in inappropriate social networks? Institutions and networks are usually studied as separate phenomena, yet each also defines the capabilities of the other. Institutions shape social network contacts and structures because institutions define opportunities for affiliation and the relative value of distinct contacts and network structures. At the same time, social networks shape institutions and organizations’ capabilities for institutional innovation. Thus, the social network in which a manager or organization is embedded can either amplify or counteract success in implementing institution-based strategy. After I review the co-constitutional nature of institutions and networks and discuss a number of sample studies using China as a productive research site, I sketch questions that need to be answered to more tightly integrate network behavior into institutional strategy research, and discuss four emerging areas of research into how network-strategy fit affects performance: (1) network fit to adaptive strategy, (2) network fit to change strategy, (3) institutional dynamics and network-strategy fit, and (4) institutional distance and network-strategy fit.

This paper examines the link between the social networks surrounding business leaders and temporal myopia in strategic planning. Specifically, we hypothesize that processes characteristic of being ...

We study whether CEOs of private firms differ from other people with regard to their strategic decisions and beliefs about others’ strategy choices. Such differences are interesting since CEOs make decisions that are economically more relevant, because they affect not only their own utility or the well-being of household members, but the utility of many stakeholders inside and outside of the organization. They also play a central role in shaping values and norms in society. We expect differences between both groups, because CEOs are more experienced with strategic decision making than comparable people in other professional roles. Yet, due to the difficulties in recruiting this high-profile group for academic research, few studies have explored how CEOs make incentivized decisions in strategic games under strict controls and how their choices in such games differ from those made by others. Our study combines a stratified random sample of 200 CEOs of medium-sized firms with a carefully selected control group of 200 comparable people. All subjects participated in three incentivized games—Prisoner’s Dilemma, Chicken, Battle-of-the-Sexes. Beliefs were elicited for each game. We report substantial and robust differences in both behavior and beliefs between the CEOs and the control group. The most striking results are that CEOs do not best respond to beliefs; they cooperate more, play less hawkish and thereby earn much more than the control group.

China has since the 1980s emerged as one of the world’s largest economies and the main emitter of carbon dioxide. Any attempt to combat global warming at the global level is therefore dependent on the future trajectory of Chinese emissions. In this paper we consider the effect of firm ownership on provincial emissions. The hypothesis is that private firms are economically more efficient than non-private firms. Our results support this hypothesis and offer two policy implications to reduce emission growth: First, industrial policies need to focus on productivity enhancing reforms of the non-private sector. Second, continuing structural reforms lifting remaining barriers of private firm production will be crucial to contain or even reduce national emissions. (Less)

We hypothesize that informal bank networks influence corporate credit access in China. Our sample comprises a panel of 515 corporations listed on China's stock exchanges with a total of 1,052 firm-year observations, holding a total of 7,009 major bank loans from 183 distinct banks between 2007 and 2012. Results support the hypothesis that closure in bank networks facilitates credit access. We further show that the positive closure-performance association offers fewer advantages if financial markets and the legal infrastructure are relatively well developed. Our findings contribute to an emergent literature examining how informal networks can productively substitute weak formal institutions, and how the interplay between informal networks and network embeddedness shapes individual and corporate strategies.

Are entrepreneurial cultures stable over time? In this paper, we use historical measures of the outgrowth of entrepreneurial culture in China and test whether these correlate with entrepreneurial activities today. We employ provincial panel data from China documenting the regional distribution of entrepreneurial activities during the Ming Dynasty (1368–1644) and the Qing Dynasty (1644–1912) and private firm activities in post-reform China (1992–2012). Our study finds a significant association between the regional distribution of historical and current measures of entrepreneurship, supporting (1) the long-term stability of underlying regional cultural differences; and (2) the adaptability of entrepreneurial activities to changing institutional arrangements and relative payoff structures. These results are robust to numerous alternative explanations, including geography, agglomeration advantages, education, and technology. Our findings suggest that government efforts to encourage new business ventures—if they are to have more than short-term effects—will need to take into account local cultural norms.

In China, the strategic use of personal relationships is pervasive in transactions with government authorities as well as in interfirm relations. Explanations as to when and why firms rely on guanx...

The rapid rise of an innovative private manufacturing economy in China challenges standard economic explanations of growth, which typically assume the existence of well-defined formal institutions such as property rights and company laws safeguarding investor and creditor interests. We highlight the social structure of cooperation that enables innovative activity in private manufacturing firms when formal property rights protection remains weak. We show how network effects linked to inter-firm cooperation in industrial clusters allowed private entrepreneurs to quickly develop reliable business norms to reduce the inherent risk of malfeasance and contract breach in formal and informal collaborative efforts. Survey data from a sample of 700 manufacturing firms located in China’s Yangzi Delta region confirms that both formal and informal types of inter-firm collaboration are effective, though in different areas of innovative activity.

Staphylococcus is a prevalent and versatile bacterium found in many different settings, from numerous animal hosts in the environment to healthcare facilities in the community. It has become very successful in establishing itself as a commensal in various humans and animals. Concern over this bacterium has increased due to the transfer of antibiotic resistance genes between strains. This study specifically investigated the prevalence of Staph from the nasal passages of white tailed deer, Odocoileus virginianus, in Western New York. This source of bacteria is unique in that it should not be under direct influence of antibiotic use. DNA was isolated from strains of Staph from the deer, and PCR was performed to amplify a region of the 16s rRNA gene and a number of genetic markers used for multi-locus sequence typing (MLST) for DNA sequence analysis. Tentative phylogenetic relationships of these bacterial strains were made to previously characterized type strains of Staphylococcus. The use of MLST and 16s rRNA gene sequence deserve analysis with respect to their broad applicability beyond the strains typically found associated with humans and agriculture.

We trace the social networks around Chinese entrepreneurs back to their firm's founding to learn about the role early events play in the later success of a business. We use name generator questions paired with career history questions to identify ‘event contacts’ missed by the usual focus on current business. We draw four conclusions from interviews with a large, stratified random sample of entrepreneurs: (1) Relations with event contacts stand out forguanxiqualities of high trust relatively independent of the surrounding network structure, and are critical to distinguishing more successful entrepreneurs from the less successful. (2) The substance of a significant event matters less than the fact that the entrepreneur deems it significant. (3) When family is turned to for support it is most likely at founding, but family is not the usual source of support at founding. Rather, entrepreneurs turn to people they have known for many years, typically people beyond the entrepreneur's family. (4) The transition from founding to first significant event stands out as distinctly consequential for later success. Entrepreneurs who turn for help on their first significant event to a person separate from, but especially close to, the founding contact are more successful in their business development. That early move is not visible in the later network around the entrepreneur.

This research applies a transaction-focused institutional analysis to compare the value of political capital in different institutional domains of China's market economy. Our results show that the value of political capital is associated with institutional domains of the economy in which agents can use political connections to secure advantages. Political capital is most fungible in institutional domains where government restricts economic activity. In this sense, the value of political connections in China does not differ fundamentally from patterns observable in established market economies. We interpret this as evidence suggesting China may have experienced a tipping point in its transition to a market economy around the turn of the new century.

State-centered theory asserts that political institutions and credible commitment by political elite to formal rules securing property rights provides the necessary and sufficient conditions for economic growth to take place. In this approach, the evolution of institutions favorable to economic performance is a top-down process led by politicians who control the state. Hence, in less developed and poor countries, the counterfactual is that if formal institutions secure property rights and check predatory action by the political elite, then sustained economic growth would follow. The limitation of state-centered theory stems from the problem that behavioral prescriptions - formal rules and regulations - that reflect what politicians prefer can be ignored. In contrast, we lay out the bottomup construction of economic institutions that gave rise to capitalist economic development in China. Entrepreneurship in the economically developed regions of the coastal provinces was not fueled by exogenous institutional changes. When the first entrepreneurs decided to decouple from the traditional socialist production system, the government had neither initiated financial reforms inviting a broader societal participation, nor had it provided property rights protection or transparent rules specifying company registration and liabilities. Instead, it was the development and use of innovative informal arrangements within close-knit groups of like-minded actors that provided the necessary funding and reliable business norms. This allowed the first wave of entrepreneurs to survive outside of the state-owned manufacturing system. This bottom-up process resembles earlier accounts of the rise of capitalism in the West. Secondo la teoria stato-centrica, sono le istituzioni politiche e un impegno credibile dell’elite politica per regole formali che garantiscano i diritti di proprieta a costituire la condizione necessaria e sufficiente perche si produca crescita economica. Secondo tale approccio lo sviluppo di istituzioni che favoriscano il successo economico e un processo che si sviluppa dall’alto, guidato dai politici che controllano lo stato. Pertanto, nei paesi meno sviluppati e poveri basterebbe ci fossero istituzioni formali a garantire i diritti di proprieta e tener sotto controllo le pratiche predatorie dell’elite politica per ottenere crescita economica sostenuta. Il limite della teoria stato-centrica sta nel fatto che le prescrizioni operative - regole e regolamenti formali - che riflettono le preferenze dei politici possono essere ignorate. Al contrario, noi descriviamo come si siano costruite dal basso le istituzioni economiche che hanno dato vita allo sviluppo capitalistico in Cina. Lo sviluppo dell’impresa privata nelle regioni economicamente sviluppate delle province costiere non e stato alimentato da cambiamenti istituzionali esogeni. Quando i primi imprenditori decisero di staccarsi dal tradizionale sistema di produzione socialista, il governo non aveva ne avviato riforme finanziarie volte a favorire una piu ampia partecipazione societaria, ne fornito protezione dei diritti di proprieta o regole trasparenti sulla registrazione e la responsabilita delle imprese. Invece, fu lo sviluppo e l’utilizzo di intese informali innovative tra gruppi coesi di attori con orientamenti comuni a far emergere i finanziamenti necessari e norme commerciali affidabili. Questo permise alla prima ondata di imprenditori di sopravvivere al di fuori del sistema manifatturiero dello stato. Questo processo di mutamento dal basso somiglia a precedenti descrizioni della nascita del capitalismo in Occidente.

This study examines the determinants behind the restructuring of China's SOEs in the late 1990s. We have reached two major findings. First, we find that the degree of labor retrenchment is negatively related to enterprise performance, suggesting that poor performance is a major force driving labor restructuring. Second, we offer evidence that decisions on labor retrenchment in traditional SOEs are related to the local government's fiscal position and to local reemployment conditions for laid-off workers. In contrast, labor decisions in corporatized SOEs are not related to these two variables. Our results suggest that corporatized SOEs with partial private ownership may enjoy higher autonomy in labor decisions. (c) 2006 Elsevier Inc. All rights reserved.

Contains fulltext : 158903.pdf (Publisher’s version ) (Open Access) China’s banking sector is dominated by four distinct organizational forms: policy banks (PBs), state-owned commercial banks (SOCBs), joint stock commercial banks (JSCBs), and rural credit cooperatives (RCCs). Economic analyses have especially focused on the development of bank efficiency and profitability over time. The equally important question, which of China’s banking institutions promote economic growth, has not been explored using macroeconomic data. Our study uses a novel data set covering the period 1997–2008 and employs Granger causality tests to estimate the finance–growth nexus of each of these bank types. Our results show that SOCBs and RCCs do not Granger-cause GDP growth and that SOCBs even have a negative effect on manufacturing growth. By contrast, PBs and JSCBs promote economic growth. 12 januari 2016

The USA regularly stresses that it is in favour of China's admission to the World Trade Organization, given the country's growing network of international relations and its increasing political and economic significance. China's own political leadership has been driving home its demand to be readmitted to the GATT (WTO) since as long ago as July 1986. Yet in spite of the apparent concurrence of interests the two countries convey to the outside world, China's entry negotiations have not yielded any evidence of a positive outcome.

This study reports findings from the first large-scale experiment investigating whether entrepreneurs differ from other people in their willingness to expose themselves to various forms of uncertainty. A stratified random sample of 700 chief executive officers from the Yangzi delta region in China is compared to 200 control group members. Our findings suggest that in economic decisions, entrepreneurs are more willing to accept strategic uncertainty related to multilateral competition and trust. However, entrepreneurs do not differ from ordinary people when it comes to nonstrategic forms of uncertainty, such as risk and ambiguity. This paper was accepted by John List, behavioral economics.

This study examines the determinants of the restructuring of China's SOEs in the late 1990s. Our study yields four major findings. First, we find that the degree of labor retrenchment is negatively related to enterprise performance, suggesting that poor performance is a major force driving labor restructuring. Second, we find that market competition is related to both traditional and corporatized SOEs, suggesting that market competition gradually becomes an effective disciplinary force for managers of China's SOEs. Furthermore, we offer evidence that decisions about labor retrenchment in traditional SOEs are related to the local government's fiscal position and to local reemployment conditions for laid-off workers. In contrast, labor decisions in corporatized SOEs are not related to these two variables. This suggests that corporatized SOEs with partial private ownership seem to enjoy higher autonomy in labor decisions.

The aim of this paper is to specify a theory to explain why transitions to a market economy cause a shift to a higher level of innovation. Marketization increases the power of economic actors relative to political actors, increases inter-firm competition, creates new opportunities for entrepreneurship, and subsequently motivates innovative activity. For our empirical application, we focus on China's transition economy, which offers a broad range of institutional environments to examine the relation between market transition and increasing innovative activity by entrepreneurs and firms. (JEL: O 31, P 31, P 3)