1,721,065 research outputs found
Endogenous institutional change and dynamic capitalism
No full textState-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
Bureaucracy and financial markets
No full textRecent research on financial market development has focused on the nature of the legal system. The law and finance literature, however, exclusively focuses on the abuse of management power as a major cause of shareholder expropriation. We examine the role of the administrative capability of the state in providing and guaranteeing the institutional foundations for financial market development. The characteristic feature of bureaucracy is predictable, calculable and methodical performance. Our analysis of the linkage between bureaucratic quality and financial market development confirms our hypothesis that arm's length finance not only needs a reliable legal environment, but also bureaucratic effectiveness (1) We provide evidence that state bureaucratic performance plays a crucial role in determining financial market development; (2) We find that legal origin plays an indirect role, as it affects the financial market development through the channel of the quality of state bureaucratic performance, but it does not exert a direct and independent effect. © 2009 Blackwell Publishing Ltd
Strategic decisions : behavioral differences between CEOs and others
No full textWe 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
Political Capital in a Market Economy
Full text linkThis 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 conomic 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. © The University of North Carolina Press
Homophily in the Career mobility of China's Political Elite
No full textWe argue that leadership promotion in China’s political elite relies on homophily for signals of trustworthiness and future cooperative behavior more than on economic performance. We first point to the limitation of the economic performance argument from within the framework of China’s specific M-form state structure, and then we proffer a sociological explanation for why higher-level elites in China rely on homophilous associations in recruiting middle-level elites to the top positions of state. Using a unique dataset covering China’s provincial leaders from 1979 to 2009, we develop a homophily index focusing on joint origin, joint education and joint work experience. We trace personal similarities in these respects between provincial leaders and members of China’s supreme decision-making body, the Politbureau’s Standing Committee. We then provide robust evidence confirming the persisting impact of homophilous associations on promotion patterns in post-reform China
Network Effects, Cooperation and Entrepreneurial Innovation in China
Full text linkThe 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
Entrepreneurs Under Uncertainty: An Economic Experiment in China
Full text linkThis study reports findings from the first large-scale experiment investigating whether entrepreneurs differ 1 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
Sociology and the New Institutionalism
No full textIn sociology, new institutionalists led the revival in interest in institutions in organizational theory and economic sociology by shifting the focus of causal reasoning from agent-centric studies of economic and organizational actors to the relationship connecting the firm with its institutional environment. We suggest a multilevel causal model incorporating the connection between the subinstitutional domain of social action and concrete social relationships, and the meso- and macroinstitutional environment of customs, conventions, law, organizations, ideology, and the state as the key elements explaining the rise and demise of institutions. In this model, norms bridge the microworld of individual actors and social groups, and the broader institutional environment
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