A Double-dimensional Behavioural Model of State-owned Enterprises’ Investment: Evidence from China

Abstract

State-owned enterprises (SOEs)’ active investment is a remarkable phenomenon in the business world, whereas the motivations behind this behaviour are relatively less explored. Drawing on the multiple-goal model in the behavioural theory of the firm (BTOF) and the hybrid nature of SOEs, we developed a double-dimensional behavioural model to investigate how SOEs’ investment is driven separately and interactively by performance feedback in both commercial and socio-political dimensions. Using longitudinal data on Chinese SOEs in the manufacturing industry, we found that SOEs’ investment is significantly influenced by performance feedback in the socio-political dimension. Moreover, although performance feedback in the commercial dimension does not impact SOEs’ investment directly, it can weaken SOEs’ sensitivity to the socio- political feedback. This study provides a behavioural explanation for SOEs’ active investment by articulating their motivations in two dimensions. Additionally, our model enriches the multiple- goal behavioural perspective by conceptualizing two dimensions of goals which are distinctively developed, and by further demonstrating how SOEs’ decision-making/investment responds to them differently.