We develop a resource security theory by examining the intent of acquisitions of scarce resources by multinational firms. Results suggest that owners of firms can shape the intent of resource ...acquisitions. Specifically, state-owned enterprises (SOEs) tend to acquire and pay more for resources for exploration rather than exploitation. This is because SOEs' owners-governments-are most concerned with securing their country's future. We contribute to the literature by suggesting that ownership influences resource acquisitions, that resource security is of importance to multinational enterprises, and that SOEs invest abroad to safeguard both their own and their home countries' future.
Both theory and empirical evidence suggest that managers’ career concerns can serve as an important source of implicit economic incentives. We examine how incentives for political promotion are ...related to compensation policy and firm performance in Chinese state-owned enterprises. We find that the likelihood that the CEO receives a political promotion is positively related to firm performance. We also find that CEOs with a higher likelihood of political promotion have lower pay levels and lower pay–performance sensitivity. Overall, the evidence suggests that competition in the political job market helps mitigate weak monetary incentives for CEOs in China.
Data are available at
https://doi.org/10.1287/mnsc.2017.2966
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This paper was accepted by Lauren Cohen, finance.
We study environmental regulation and its role for trade in China. Specifically, we assess the effectiveness of an environmental policy in China that introduced stricter regulations on sulfur dioxide ...(SO2) emissions in targeted cities. To identify the causal effect of this policy on exports, we use sectoral export data for a panel of Chinese cities and exploit variations in exports between cities and sectors, over time, and, in a second step, between firm types. We find a relative fall in sectoral exports in targeted cities after the implementation of the policy, which is sharper the more polluting the industry. Further, we find that the observed effect is mainly driven by privately owned firms, whereas exports of state-owned firms seem to be unaffected by the new policy. This finding is consistent with the preferential political treatment of state-owned firms in China.
Multinational enterprises (MNEs) sometimes pursue opportunities in largely uncharted, distinctive institutional environments. How do these firms sustain operations in such settings? We explore how ...MNEs tailor and maintain operations in institutionally weak, precarious, and challenging host-country environments, such as those devastated by conflicts. We draw on the business ecosystem framework and analyze a qualitative longitudinal case study of a Chinese state-owned MNE that entered and developed its operations in the Democratic Republic of Congo (DRC) in Central Africa. Our findings indicate that after entry, the MNE sustained its operations in the DRC by engaging in collective actions and coevolving with key stakeholders within its business ecosystem. These stakeholders included the home and host governments, state-owned enterprises, privately owned enterprises, and local communities. Our qualitative data further suggest that the MNE’s business ecosystem evolved through three stages—exploring, establishing, and embedding—and that within this ecosystem, the key stakeholders also coevolved with the MNE by adopting new roles over time.
In many countries governments not only regulate business activities, but also become involved in the corporate governance of individual firms through ownership and board ties. While existing studies ...usually focus either on benefits of political connections or on costs of government influence, a political embeddedness perspective helps us consider both advantages and constraints associated with ties to the government. In particular, firms with direct ties to the government will experience significant costs associated with government officials' involvement in the corporate governance process. In contrast, firms with ties to state‐owned enterprises (SOEs) are connected to the government indirectly and thus, while getting access to state‐owned resources, avoid costs associated with the government's interventions. This study compares the performance consequences of board and ownership ties to the government with the consequences of board and ownership ties to SOEs. I find that ties to SOEs are associated with higher profitability, while no significant differences are discovered for firms with direct ties to the government.
We examine the association between borrower (firm) and lender (bank) state ownership and accounting conservatism for a sample of Chinese firms. We hypothesize that state-owned enterprises (SOEs) ...adopt less conservative accounting than non-state-owned enterprises (NSOEs) because lenders are less concerned with downside risk for SOEs than for NSOEs. We also hypothesize a negative relation between conservatism and the fraction of total loans a firm borrows from state-owned banks (SBs) because SBs have weaker demand for assurance of sufficient net assets to cover loan repayments than non-state-owned banks (NSBs). We find support for both hypotheses. Further analyses reveal that: (1) firms that borrow from commercial SBs exhibit more conservative accounting than firms that borrow from policy SBs and (2) firms adopt more conservative accounting as they get more loans from banks with foreign ownership or exclusively foreign banks. However, the results of these additional analyses are to some extent sensitive to alternative measures of accounting conservatism.
This article sheds light on how the internationalization of state-owned enterprises is influenced by the state involvement in ownership and by the home country’s institutional settings. Integrating ...international business literature with the debate on the varieties of capitalism, we contend that state-dominated enterprises internationalize more (less) than privately owned enterprises in coordinated (liberal) market economies, whereas they exhibit an inconstant behavior in state-influenced market economies. Our analysis on a sample of enterprises pertaining to 20 OECD countries supports our hypotheses. This article adds to studies on the influence of institutions on firms’ internationalization and has implications for both managers and policymakers.
This paper investigates why Chinese state-owned enterprises (SOEs) with strong political connections (i.e., politically connected firms) are more likely to list overseas than non-politically ...connected firms. We find that connected firms' post-overseas listing performance is worse than that of non-connected firms. This evidence suggests that connected firms' managers list their firms overseas for private (political) benefits. Consistent with this private benefits explanation, we further find that connected firms' managers are more likely to receive political media coverage or a promotion to a senior government position subsequent to overseas listing than domestic listing.
► Chinese SOEs with strong political connections are more likely to list overseas. ► Politically connected firms perform worse after overseas listing. ► Connected managers receive more private political benefits after overseas listing.
Based on the stakeholder theory, this study develops “7+2” dimensions for CSR practices measurement among Chinese national state-owned enterprises (CNSOEs), and examines if their CSR practices bring ...financial and social performance improvements. By analyzing the 2011 CSR reports that cover 100 CNSOEs, we identify that these CNSOEs highlight CSR practices related to the environment, labor practices, political responsibility, and human rights in their reports. However, three CSR practices related to managing the supply chains, fair operating practices and community development need more of their attention. We evaluate the social performance of CNSOEs by using the two performance ranking systems developed by the Chinese Academy of Social Sciences. Regression results obtained through Structural Equation Model (SEM) using the partial least square (PLS) method indicate that CSR practices pertinent to organizational governance, human rights, and the environment are beneficial for their social performance. With secondary data inputs from the annual operating performance evaluation conducted by the State-owned Assets Supervision and Administration, we identify that four CSR practices can bring financial performance, but two of the four concerning communities and managing the supply chains are implemented at the lowest level among the others. Our “7+2” CSR practices dimensions together with their underlying measurement items extend the use of stakeholder theory for studying CSR practices, which can also serve as a checklist for evaluating how well CSR practices are implemented at CNSOEs. Our study results identify the need for CNSOEs to highlight community-related CSR practices in their operations and expand CSR efforts to the management of their supply chains.
•We develop “7+2” dimensions to evaluate corporate social responsibility (CSR) practices.•Chinese national state-owned enterprises (CNSOEs) highlight environmental-related CSR.•CNSOEs implement political CSR practices which bring them financial performance.•CNSOEs should extend their CSR practices to supply chains for financial performance.•CNSOEs should highlight community-related CSR practices for financial performance.
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