Exchange Structures in Transition: Lending and Trade Relations in Chinese Business Groups

By Lisa A. Keister. American Sociological Review, 2001

173 citations recorded by the source corpus.

The networks of interfirm relations that developed in business groups during economic transition are central to China's reform and are becoming an important part of the country's emergent economic structure. Using a recent and original data set that includes direct observations of economic choices made by firms, the process by which these interfirm lending and trade ties emerged and evolved in the early stages of reform is explored. Initially, information from sources external to the network dominated the formation and direction of exchange relations. Firms turned to their prior connections, took advantage of market position, and drew on bureaucratic power to develop alliances. Over time, internal influences gained importance, and managers increasingly drew on internal nontrade relations and other indicators inside the business group to identify lending and trade partners. The results demonstrate the central but changing role that social relations and environmental cues played in the creation of economic structure during China's transition. This study also contributes to an understanding of the processes of organizational adaptation to a major economic transition and interfirm alliance formation more generally. The findings reveal that firms select exchange partners of known reputation and solicit relations that reduce uncertainty, even when there is a cost involved.

Subfields: Accounting, Demography, Sociology and Political Science

View Paper: https://www.semanticscholar.org/paper/31a033bc2d5b19b4b8aba2aadae3a44415cb4d78

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Citations in the corpus

A Matching Theory of Alliance Formation and Organizational Success: Complementarity and Compatibility (2009, background): “In support of an effect of prior ties (Gulati, 1999; Gulati & Gargiulo, 1999; Keister, 2001; Podolny, 1994), we found that firms repeated past alliances, and especially when they had multiple ties with another firm.”
Filling institutional voids in emerging economies: The impact of capital market development and business groups on M&A deal abandonment (2016, background): “Business groups take advantage of their prominent roles in national economies and their relationships with other firms, organizations, and government agencies (Keister, 2001).”
Exchange hazards, relational reliability, and contracts in China: The contingent role of legal enforceability (2010, methodology): “Following Keister (2001), we code it as a dummy variable, equal to 1 when the buyer and supplier belong to the same business group, and 0 otherwise.”
Impact of state ownership and control mechanisms on the performance of group affiliated companies in China (2007, background): “Furthermore, as Keister (1998, 2000, 2001) noted, affiliated companies in diversification could enhance performance by cross-subsidization among others within the same group.”
The Prevalence and the Increasing Significance of Guanxi (2018, unknown): “25 Keister 2001.”
The Conditional Nature of Embeddedness: A Study of Borrowing by Large U.S. Firms, 1973–1994 (2006, background): “At the individual level, researchers have shown that the structure of an actor’s personal network can affect his or her ability to achieve rapid promotion (Burt 1992) as well as success in task performance (Mizruchi and Stearns 2001).”
Outward foreign direct investment by emerging market firms: A resource dependence logic (2014, methodology): “Taking a multidimensional approach (e.g., Keister, 2001), we considered four measures: (1) revenue of foreign-owned enterprises (FOEs) divided by the total revenue of all enterprises in the province; (2) assets of FOEs divided by the total assets of all enterprises in the province; (3) number of…”
Business group affiliation and firm performance in a transition economy: A focus on ownership voids (2007, background): “Recent work in the business group literature has begun to highlight how institutional characteristics and the environment of transition economies intersect ( Keister, 1998; 2000, 2001; Lee, Peng, & Lee, 2007; Yiu et al., 2005).”
Business group affiliation, performance, context, and strategy: a meta-analysis (2011, background): “(Keister, 2001), transaction cost analysis (Luo & Chung, 2005; Mahmood & Mitchell, 2004), and the resource-based view (RBV) of the firm (Guillén, 2000) find that affiliation enhances”