A Dynamic View of Organizational Transformation: The Changing Face of Chinese SOEs Under Transition

Abstract

The controlled process of economic reform in China has attracted growing attention from around the world due to its significance for theory and practice. What has been missing in the literature is the temporal dimension, i.e., the changes over time in key variables such as organizational environment, firm strategic adaptations, and the performance implications, since Chinese reform officially began in 1978. Taking a dynamic systems perspective, and drawing literature from organizational study and thermodynamics, we follow the "staged model" of economic transition to study the changes in organizational environment and firm strategies over the last two decades. We suggest that as the result of more than two decades of well-controlled transitional process characterized by incrementalism, institutional environment has become more conducive to entrepreneurial activities, and consequently, firms responded with more willingness to take risk and innovate. Furthermore, we suggest such process has been escalated by an influx of newly founded firms that bring in added energy and complexity. Finally, we examine the changes leadership profile during transition. Implications for research and practice are discussed.