This Editors' Forum – ‘Made in China: Implications of Chinese Product Recalls’ – presents four perspectives on Chinese product recalls: supply chain management, moral degradation or the decline of traditional business ethics, evidence based management and free riding on the ‘Made in China’ brand. Extended supply chains and uncertain ethical standards almost certainly contribute to lapses in product quality as do cost pressures facing most Chinese firms. Product quality issues, moreover, will be most significant for goods posing hidden risks to health and safety, such as food and toys, and less significant for goods like computers and consumer electronics whose conformity to specifications can be readily monitored.

This editorial essay addresses the importance of independent thinking in the process of developing outstanding scholarship. Through analysing the difficulties of maintaining independent thinking in the Chinese culture, the paper proposes four approaches: understanding the power of the minority; transforming outside pressure into intrinsic motivation; listening with an open mind; and developing a passion for research.

Our paper conceptualizes and highlights the role of the supply chains in China's product recall problems. We raise questions about the interrelationships of the focal manufacturer and the supplier firms and the consequences of these relationships. We address some of the causes of the current situation, including a discussion of deep supply chains, the importance of relationships, the role of trust and the impact of cultural misunderstandings. We suggest many future research questions to further understand how the supply chain can cause or deter product recalls.

By examining the level of ownership concentration across firms, we determine how principal–principal conflict, defined as the incongruence of ownership goals among shareholder groups in a corporation, impacts agency costs of Chinese boards of directors. Based on data from Chinese companies listed on the Shanghai and Shenzhen stock exchanges during 1999-2003, we found that ownership concentration had a U-shaped relationship with board compensation, board size and the presence of independent directors. These results provide corroborating evidence that principal-principal conflict can lead to high agency costs.

Although product recalls are neither new nor unique to China, China bears much of the bitter criticism from the media and negative reactions from the public. This essay discusses the reasons behind recalls from a moral degradation perspective, grounded in the larger framework of anomie theory. While making remarkable economic progress, China is also moving toward a society with degraded moral standards. This moral degradation propels illicit and immoral business practices. This essay further presents an analysis of recall from the organizational control perspective, tackling the issue of how safety and quality problems damage a firm's long-term corporate credibility, legitimacy, trust and governance in a competitive environment. Strategic repercussions of recalls include impairing capability building, organizational learning and resource allocation. The essay ends with a call for action by the Chinese government, firms and management researchers to address and further understand this complex issue.

Received internationalization theory argues that firms occupy domestic space before going abroad; in other words, large, oligopolistic firms are most likely to internationalize. The experience of China, whose economy is fragmented and whose firms are small by global standards, suggests otherwise. We construct a model of small firm internationalization driven by the relative transaction costs of crossing domestic (in the case of China, provincial) and international borders. When the costs of crossing domestic borders exceed the costs of crossing international borders, firms will internationalize at a relatively early stage of development. In the case of China, local protectionism and inefficient domestic logistics increase the costs of doing business domestically; moreover, protection of property rights in the West and the advantages afforded Chinese owned firms reconstituted as foreign entities operating in China decrease the costs of ‘going out’. We coin the term ‘institutional arbitrage’ to capture Chinese firms' pursuit of efficient institutions outside of China. We argue that strategic exit from the home country rather than strategic entry into foreign markets may explain the internationalization of many Chinese firms.

Product recalls in 2007 raised serious questions about the safety of products made in China and resulted in widespread outrage. Our analysis of toy recalls in the USA between 1988 and 2007 revealed that the vast majority of recalls were due to flaws in product designs, conducted in the corporate headquarters of toy companies, rather than to poor manufacturing by factories in Asian countries. We also found that the recalls have increased over the years, due both to design and manufacturing flaws. Our findings generated widespread interest and influenced the course of debate on import product safety. Our findings and experiences have significant implications for the research on product quality in international operations and the role that systematic research evidence can play in shaping management practice and public debate.

This study offers empirical evidence about how the structure of government and private ownership affected productivity in Chinese firms. It uses the microdata of China's last decennial industrial census, covering all of the 23,000 large and medium-sized industrial firms operating in China during 1995. The results show that government decentralization – ‘federalism’ – played an important role in improving the performance of not just collective firms, but also state-owned and mixed public/private ownership firms. This result is strongly confirmatory of much of the recent theoretical work on transition economies that posits a key role for government in the efficient operation of markets.

This study proposes an initial and a revised model of government-oriented public relation (PR) strategies based on the results of two content analyses of website news regarding the PR activities of 76 firms in general and six well-known firms in China in more depth. With the perspective of resource dependence theory, this model reveals that firms in China employ six types of formal PR strategies, including visitation, philanthropy, participation, publicity, party involvement and political propaganda, to manage their dependence on government for resources. Further, the implementation of such strategies involves a four-step process: organizing PR activities with economic, social and political significance; obtaining the involvement and recognition of the government; building firms' resource, moral and cultural legitimacy in the government's eyes; and interacting with the government on the issues of firms' dependence to influence government policies relative to firms. We also explore the differences that exist among firms with different ownership structures in the use of these PR strategies, the level of government involved and the issues pursued.

Adopting a dynamic view of guanxi, we investigated how the closeness in Chinese coworker relationship changes as a function of interpersonal incidents, exploring factors such as the prior closeness level as well as the valence and job relevance of the incident. Two studies of PRC managers probed the content and dynamics of their coworker relationships. Results indicate that such relationships mix affective and instrumental ties. A key finding about changes is that the increase in closeness created by positive incidents was greater when the prior relationship was distant, and the decrease created by negative incidents was greater when the prior relationship was close. The implications of these findings for theory development and future guanxi research are discussed.

This study examined the processes linking abusive supervision to employee contextual performance by focusing on the mediating influence of emotional exhaustion and the moderating influence of work unit structure. Data were obtained from 285 subordinate–supervisor dyads from three manufacturing companies in north-eastern China. The results revealed that: (i) emotional exhaustion mediated the relationships between abusive supervision and the contextual performance dimensions of interpersonal facilitation and job dedication; and (ii) work unit structure moderated these relationships such that the relationships were stronger in mechanistic than in organic work unit structures.

Company brands signify a message to consumers about the quality and value of a product. Countries can also be branded. However, unlike the brands of individual firms, country brands are collective goods. The nature of country brands creates the possibility of free riding, where individual firms benefit – in terms of price or access – from the promise made by a country brand but deliver at a level lower than what is promised by the brand. Such free riding threatens the stability of what the country brand represents unless legal, governmental, or other institutions engage in activities to reduce these adverse effects. In this paper, we investigate the Chinese brand – once standing for average quality at a low price – in the light of recent recalls. We examine how country brands emerge and the incentives that firms operating in a country have to either support or not support a country brand. We also explore the implications of diese incentives for the role of various institutions, including the government, in developing, maintaining and changing a country brand and in developing and enforcing the policies, such as protection of intellectual property, necessary to support firms' efforts toward reinforcing a trusted country brand.

Prior research has suggested a number of potential benefits to firm membership in business groups. These benefits include availability of capital and other resources not readily accessible in an open market, the facilitation of entrepreneurship, plus information and risk sharing advantages. We suggest that another important benefit is the assistance of group control systems in helping the firm to manage conflicting pressures in the institutional environment and facilitate coevolution of these conflicting pressures. To empirically demonstrate the relevance of this viewpoint, we examine the case of China where business groups facilitate institutional transition, actively balancing market pressures to increase levels of innovativeness in firms with institutional pressures emanating from the government to maintain high employment levels. Using data from a broad sample of more than 1,000 Chinese affiliate firms in more than 200 business groups, we find that government policy, ownership and managerial mindset influence the political goal of maintaining high employment levels, while interdependence among group affiliate firms is related to lower employment levels. However, while government ownership and the government managerial mindset were negatively related to market innovation activities, group financial and cultural control systems positively affected the tendency of affiliate firms to focus on market innovation.

This paper proposes a new institutional perspective to explain not only the diversity of local business systems in China but also how this diversity results from the integration of major institutional forces. We model the emergence of China's business systems as a co-evolutionary process unfolding along a business–government and a micro–macro-level dimension structured by intergovernmental institutional competition, business to business and business to government networking and public-private corporate governance. We find that: (i) China's emerging business system is the result of local institutional competition at the micro level that reduces the need for national (macro) institutions and impacts on the local implementation of national (including supranational) policies; (ii) the interaction between government and business is structured through networks which operate according to an economic rationale while drawing on cultural norms and traditions; and (iii) local businesses interact with local governments to recombine productive factors and reorganise firms and industries in line with local institutions. We conclude that the astonishing adaptability of Chinese businesses as well as the risk of corruption and lack of formal control at local government level are elements of locally differentiated business systems which are held together by an overarching institutional architecture.

Integrating the typologies of trust dimensions and trust ideal-types with the new typologies of trust forms and trust bases, I propose a geocentric framework of trust in general and of organizational trust in particular. The typology of trust forms is built on the dimension of spatial strength to address the content of trust building from weak trust to strong trust and on the dimension of temporal stage to address the process of trust building from initial trust to mature trust. The typology of trust bases is built on the dimension of trust sources to address the bases of trust building from depersonalized sources to personalized sources and on the dimension of trust domains to address the bases of trust building from dyad domains to network domains. Together with its three pillars (trust-building mechanisms, leadership and trust-as-choice), the central theme of trust building connects all four trust typologies toward a geocentric framework that integrates and transcends the cultural values of the East and the West. This framework bears a special implication for theorizing about transaction cost and transaction value as a duality for interorganizational alliance.

The analysis of societies, and of systems of business within them, has tended to be heavily influenced by institutionalist perspectives. Many scholars using this approach include culture as a subset of institutions, but often without specifying the logics of doing so. Others remove culture from the account, or acknowledge its significance without placing it clearly in their models. Culturalists, however, tend not to venture into the details of economic coordination and action. To resolve the theoretical challenges posed by this set of contrasting views, it is necessary to specify how culture works and how it is different from institutions. As ‘the societal effect’ is the influence of culture on institutions, it may thus be easier to study its workings. Here culture is seen, following Sorge, as meaning relevant within a series of semantic spaces, each related to a field of action, the total integrated coherently by social axioms binding the spaces and the meanings within them into a total societal fabric of meaning. The private sector of the Chinese economy is analysed, drawing from recent extensive empirical reports as to its functioning. Theory development is in line with business systems theory.