The Influence of Top Management Team on Chinese Firms’ FDI Ambidexterity
Yi Li, Lin Cui
Abstract: Strategic ambidexterity has been under researched in the context of Chinese outward foreign direct investment (FDI). An ambidextrous FDI, balancing between exploratory and exploitive activities, is strategically desirable but managerially challenging. We examine the role of top management team (TMT) functional diversity in influencing Chinese firms’ degree of FDI ambidexterity, and its boundary conditions in relation to the informal and formal institutional environments within which the TMT operates. Based on a panel of Chinese outward-investing manufacturing firms, our empirical analyses show that a marginal positive effect of TMT functional diversity on a firm’s FDI ambidexterity is strengthened by the social faultline presence in the firm’s TMT, but is weakened by the development of formal institutions in the firm’s external environment.
How Domestic Firms Absorb Spillovers: A Routine-Based Model of Absorptive Capacity View
Abstract: Extant spillover literature explains domestic firms' productivity change mainly by the presence and attributes of foreign direct investment. In contrary, this paper, by adopting a routine-based model of absorptive capacity, intends to explore how domestic firms absorb spillovers over time. Based on a qualitative study of a domestic firm in China's silicone adhesive industry, the findings show that unbounded by geographical constraints, domestic firms enact their external absorptive capacity routines to actively search for spillovers from multinational enterprises (MNEs) at both national and international levels. Moreover, rather than searching for what is available, domestic firms are selective for spillovers that are coherent with their business strategies. The most unexpected finding is that domestic firms diligently acquire spillovers from MNEs and from local competitors in combination. Spillovers acquired from local competitors are used to increase the inferential accuracy of spillovers acquired from MNEs about strategic successes. Further, instead of absorbing spillovers from MNEs which pose moderate technology gaps, domestic firms target at MNEs which exhibit wider technology gaps, and undertake organizational learning and develop complementary assets to enhance their internal absorptive capacity routines. Socially enabling mechanisms are found to facilitate domestic firms' absorption of spillovers by employee turnover.
From Friendship to Family: Jiangyiqi and Strong Interpersonal Relationship Development in Chinese Organizations
Xin Liang, Sibin Wu, Shujuan Zhang
Abstract: Moral obligation, reciprocity, and affection contribute to the development of strong interpersonal relationships. An indigenous notion in Chinese culture, jiangyiqi, captures these three component principles of strong relationship development in one concept. Jiangyiqi has been held anecdotally as a common code of conduct for building strong, trustworthy relationships in China. We explore the possible integration of these three components of interpersonal relationships in Chinese society in our introduction of the construct of jiangyiqi, based upon Confucian ethics and the circles of relationships delineated in past literature on Chinese societies. Drawing from social exchange theory as well as the perspective of reciprocal altruism in evolutionary biology, we propose that jiangyiqi makes an individual a good candidate for developing strong non-kin relationships. We discuss the managerial implications of jiangyiqi for relationship building in a Chinese cultural context.
How Does Firm Life Cycle Affect Board Structure? Evidence from China’s Listed Privately Owned Enterprises
Yunhe Li, Xiaotian Tina Zhang
Abstract: Using data from China’s listed privately owned enterprises (POEs) during the period from 2002 to 2014, we explore the effects of firm life cycle on board structure. We find that the board size of China’s listed POEs declines over firm life cycle, and there is a trend of separation for board chair-CEO duality while board independence remains almost static. We further provide evidence that board size and independence are determined by the benefits of monitoring and advisory roles of the boards through all the stages of firms’ life cycle with different drivers. The impact of CEO power on board chair-CEO duality is determined by the benefits and costs of separation of board chair and CEO are supported at all stages of firms’ life cycle. This article sheds light on the dynamic board structure in an emerging economy where the external corporate governance is weaker than that of developed countries. Our findings suggest that the board structures of China’s listed POEs are adjusted at various stages of firms’ life cycle, and the adjustments are mostly based on the resources brought by the new board of directors.
Institutional Forces and Environmental Management Strategy: Moderating Effects of Environmental Orientation and Innovation Capability
Yuanfei Kang, Xinming He
Abstract: We examine the mechanisms through which firm capabilities moderate the impact of institutional forces upon firms’ adoption of environmental management strategy (EMS). Viewing the limitation of institutional perspective in explaining the heterogeneity in firms’ EMS, we suggest that an important source of variation is the idiosyncratic capabilities of the firm in acquiring and allocating resources. Based on the strategic response theme of institutional theory and resource-based view, we argue that the influence of institutional forces on EMS is contingent on the presence of environmental orientation and innovation capability. Using data collected from China, we test these notions. Our empirical results suggest that both environmental orientation and innovation capability positively moderate the effect of institutional forces on firm’s EMS. By demonstrating how institutional forces and firm capabilities interact with each other, we enhance understanding of how firms succeed in developing EMS.
The CEO Horizon Problem and Managerial Slack in China
Junxiong Fang, Lerong He, Martin J. Conyon
Abstract: This study investigates how CEO behavior and incentives change during the CEO’s final years in office, known as the horizon problem. We examine how the horizon problem alters managerial slack, a measure of operational inefficiency and managerial value diversion. Using data on Chinese publicly traded firms between 2003 and 2011, we find that managerial slack increases in the last two years of CEO tenure compared to earlier years. In addition, we find that the increase in managerial slack in CEO final years in office is smaller in privately controlled firms than in state-owned enterprises, smaller in firms with CEO equity ownership and more independent boards compared to those without. We conclude that higher quality corporate governance mechanisms ameliorate the perverse incentives associated with the CEO horizon problem, and reduce CEOs’ tendency to increase managerial slack during their final years in office.
The Structure of Labor Markets in the US and China: Social Capital and Guanxi
Nancy DiTomaso, Yanjie Bian
Abstract: Despite the major cultural and political differences between the United States and China, in both countries access to jobs is supposed to be guided by fair and equitable procedures. In the US, there is a presumption of an open labor market in which potential employees compete on the basis of their qualifications, where the fairness of decisions is guided by anti-discrimination laws and normative organizational policies. In China, although there is a history of close relationships that guide the exchange of favors, following the 1949 revolution, Communist Party leaders were given the authority to allocate positions in ways that were supposed to eliminate special privileges of class and background. Yet recent research has suggested that social connections are an important part of getting a job in both the US and China for two-thirds to three-quarters of job seekers. In the US context, such connections are described as social capital. In the Chinese context, connections are defined as guanxi. In this article, we review research on labor market processes in both the US and China to address three important questions: (a) How can we understand the similar functioning of labor markets in such distinct cultural and political systems as the US and China? (b) What are the mechanisms or processes by which people find jobs in the US and China, and how are people able to access these mechanisms or processes in the context of constraining social structures and legal environments? and (c) What are the theoretical implications of the ‘generalized particularism’ that seems to shape labor markets in both the US and China.