Interorganizational Exchanges in China: Organizational Forms and Governance Mechanisms

Abstract This article discusses how organizations exchange with one another in China, focusing on the type of organizational ownership and the form of governance mechanism. The theoretical foundation builds on institutional theory, resource dependence theory, agency theory, and evolutionary theory. Given the three main forms of organizations in China – state-owned enterprises, privately owned enterprises, and foreign-invested enterprises - we show how these organizations choose between two types of governance mechanisms, contracts and guanxi, to manage interorganizational exchanges. We then analyze the possible modes of interaction between organizational forms. We argue that the relative importance of guanxi is likely to decline or that guanxi will shift from being primary in some organizations to complementary in all organizations with the progress of market transition. This conceptual framework is expected to help provide the momentum for further theoretical exploration and empirical study in this area.

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