Abstract
This paper examines the role various environmental factors play in shaping short-term management behaviour in the context of the business contract system in China. Seven government officials and ten senior firm managers were interviewed in the city of Chongqing. It was found that dysfunctional behaviour displays itself mainly in the form of inappropriate performance measures and widespread manipulation of data. The study also demonstrates that most management problems originated from the environment over which the firm had little control rather than derived from the internal organisation of the firm. Environmental factors like uncertainties, inflation, government systems and capability of government officials were regarded as major determinants of the short-term behaviour.
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