Dose Administrative Monopoly Aggravate the Survival Risk of Chinese Enterprises

Abstract

In June 2016, the publication of the 'Opinions of the State Council on Establishing a Fair Competition Review System during the Development of Market-oriented Review System', (hereinafter referred to as 'Fair Competition Review System'), marks a new stage of the anti-monopoly cause in China. The determination and strength of this economic restructuring is unprecedented. At the critical stage of transformation and upgrading, administrative monopoly may lead to short-term business dilemma of enterprises with high efficiency that are just found but have no growth, and the survival of enterprises with low efficiency in a market environment with distorted entry and exit mechanisms. The quantitative evaluation of the relationship between administrative monopoly and enterprise strategy choice is of great importance to the promotion of the theory and practice exploration of 'Fair Competition Review System' and the improvement of institutional environment concerning enterprise survival. But the analysis of policy effect of administrative monopoly rarely goes deep into micro-firm level, especially in the view of enterprise survival. This paper uses PSM-Cox proportional hazard model to examine the effect of administrative monopoly on enterprise survival risk and its mechanism at micro-firm level. Our results indicate that in general, administrative monopoly has positive policy impact on the survival risk of manufacturing enterprises, i.e. government intervention represented by administrative monopoly aggravates the survival risk of enterprises. Furthermore, the effects of administrative monopoly on the survival risk of heterogeneous enterprises differ somewhat:firstly, administrative monopoly does not have significant effect on the survival risk of state-owned enterprises, but has significant effect on non-state-owned enterprises; secondly, administrative monopoly has significant positive effect on the survival risk of enterprises in mid-west China, but does not have significant effect in East China; administrative monopoly is positively correlated with the survival risk of labor-intensive enterprises, but does not have significant effect on capital-intensive and technology-intensive industries. Administrative monopoly raises the survival risk of enterprises by reducing survival rate and innovation, and really results in rent-seeking activities which weaken the effect of administrative monopoly on the survival risk of enterprises to some extent. And the joint effect of these three above provides an important explanation for the foregoing study. As for supply-side structural reform, the elimination of administrative monopoly through the competition policy, can improve the resource allocation efficiency in Chinese market, thereby creating a favorable supply-side institutional environment for enterprise survival and economic development. As for the development of small and medium-sized enterprises, the construction of a sound competition policy system, can strengthen the viability of non-state-owned enterprises, enterprises in mid-west China and labor-intensive enterprises, and offers systematic and mechanism support for the 'mass entrepreneurship'. The competition policy system focusing on 'Fair Competition Review System' is gradually being completed, and the development of socialist market economic system is bound to enter a new stage.