Collective-owned Enterprises Research Articles

The Ownership, Innovation, and Sustainable Development of Micro and Small Enterprises: Evidence of China

This study aims to examine the impacts of ownership and innovation on the sustainable development of micro and small enterprises (MSEs). Using the dataset from the 2015 China Micro and Small Enterprise Survey, this study divides the ownership of MSEs into state ownership, collective ownership, private ownership, and foreign ownership. In this study, the sustainable development of MSEs is measured by four sets of variables, sustainable operation, sustainable profitability from operations, sustainable profit input, and sustainable production or operation input. The Result suggests negative associations between the ownership of state-owned enterprises as well as collective-owned enterprises and MSEs’ sustainable development. Furthermore, public ownership also negatively contributes to MSEs’ sustainable development. Concerning the ownership of non-public-owned enterprises, while private ownership enables MSEs to develop sustainably, foreign ownership is not conducive to MSEs’ sustainable development. Besides, the result also indicates that innovation positively contributes to the sustainable development of MSEs. Moreover, this study offers implications for policymakers to take measures in promoting reform of mixed ownership as well as innovation to enhance MSEs’ sustainable development.

Economic Transition and Wage Differentials Between Public and Private Sectors in China

Using the reduced wage function model and decomposition methods, this paper estimated changes in wage structure and determinants of wage differentials between the public and private sectors from 1995 to 2007 in China. The major conclusions are as follows: First, with the progress of the economic system transition, wage differentials between the public sector and collective owned enterprises (COEs) decreased, but wage differentials between the public sector and foreign invested enterprises (FEs)/private enterprises (PEs) increased; second, human capital affected wage level in both the public and private sectors in 1995 and 2007, but differentials of human capital influences between the public and private sectors became narrow from 1995 to 2007; and finally, when wage differentials are decomposed into endowment effect, explained by differences in labor productivity characteristics and price effect, partly caused by institutional factors, the author observed that the former increased, while the latter decreased from 1995 to 2007. These results reveal that with the progress of market-oriented economic reform, labor productivity characteristics based on individual human capital were more highly rewarded. Results demonstrate that market mechanisms began to function and correct the distortion of wage decisions in China during the economic transition period.

Environmental regulation and firm location choice in China

How may environmental regulation affect firm location choice? While this question has generated great research interest from high-standard, industrial economies, in this article we turn the spotlight to low-standard, developing countries and use China’s Census of Manufactures data during 2003–2008 to explore how firms with different ownership, during different policy regimes as well as from different industries may respond to environmental regulations in different ways. Results show environmental stringency has a positive effect on state-owned enterprises’ location choice during 2003–2005, but the effect becomes insignificant during 2006–2008. Private-owned enterprises, foreign-owned enterprises and collective-owned enterprises are more likely to enter areas with less stringent environmental regulations during 2003–2005. However, this pattern is reversed for the period of 2006–2008. Furthermore, the above relationships are more pronounced for firms in polluting industries.

Does Ownership Affect the Impact of Taxes on Firm Behavior? Evidence from China

Does ownership affect the way firms react to corporate taxation? This paper exploits key features of recent corporate tax reforms in China to shed light on the differential impact of taxation on firms under different ownership regimes including private, collectively owned and state owned companies. Employing a difference-in-difference estimation approach, we find that the increase in the deductibility of wage costs in 2006 has led to a sizable increase of wages per worker in private firms and an even larger increase in collective-owned enterprises. In contrast, there is no significant wage response in state owned enterprises. The decrease in the statutory tax rate for domestic firms since 2008 has induced collectivley owned enterprises and private firms to reduce debt while there is no significant response SOEs. Our results also suggest that the 2008 reform has reduced tax induced investment round tripping through Hong Kong, Macao and Taiwan.

Does Ownership Affect the Impact of Taxes on Firm Behavior? Evidence from China

Does ownership affect the way firms react to corporate taxation? This paper exploits key features of recent corporate tax reforms in China to shed light on the differential impact of taxation on firms under different ownership regimes including private, collectively owned and state owned companies. Employing a difference-in-difference estimation approach, we find that the increase in the deductibility of wage costs in 2006 has led to a sizable increase of wages per worker in private firms and an even larger increase in collective-owned enterprises. In contrast, there is no significant wage response in state owned enterprises. The decrease in the statutory tax rate for domestic firms since 2008 has induced collectively owned enterprises and private firms to reduce debt while there is no significant response SOEs. Our results also suggest that the 2008 reform has reduced tax induced investment round tripping through Hong Kong, Macao and Taiwan.

Organizational Forms and Multi-population Dynamics

To examine the transition from a planned to a market economy in China, this study uses census data from China’s National Bureau of Statistics from 1998–2006 to investigate multi-population dynamics across the three main organizational forms in China’s domestic sector: state-owned enterprises (SOEs), collectively owned enterprises (COEs), and privately owned enterprises (POEs). We conceptualize economic transition as a community-level change from an old, dominant organizational form (SOE), through a transitional form (COE), to a new form (POE). When the new organizational form conflicts with the prevailing identity codes represented by the old form, the transitional form—which has identity overlap with both the new and old forms—performs the critical tasks of transferring legitimacy to the new form and supporting its survival and proliferation. Our analysis showed that, though the existence of state-owned enterprises increased the exit rate of privately owned enterprises, collectively owned enterprises provided legitimation for privately owned enterprises. Meanwhile, privately owned enterprises crowded out both state-owned enterprises and collectively owned enterprises. We contribute to ecology theory by extending research that typically depicts a two-population scenario. Our framework accommodates cross-effects involving three organizational forms: old, transitional, and new.

Reform and competitive selection in China: An analysis of firm exits

This paper considers aspects of the competitive selection process in China – firm entry, survival, and exit – in an important sector of manufacturing, looking in particular for changes resulting from the process of reform. Using industry census data from a province in North-East China, we find substantial differences in the process between ownership types. By conducting decompositions of aggregate growth and exploring the determinants of firm's exit using a hazard rate model, we observe a substantial rate of churning of enterprises in the sector, finding that the competitive selection processes operate, for small and collectively owned enterprises (COEs), in a manner consistent with what is known about a private market economy. While the hazard for state owned enterprises (SOEs) is lower than for COEs, we find that the reforms introduced in 1992 were important in closing the gap for similarly situated firms.

Regional institutions, ownership transformation, and migration of industrial leadership in China: the case of the Chinese synthetic dye industry, 1978-2008

Scholars have emphasized the gradual ownership transformation of enterprises as a key driver of the Chinese economy's unprecedented growth. However, little work has been done on the issue of whether this transformation process takes place evenly across the various regions in China. This article describes the important role of regional institutions in shaping the ownership-based competitiveness of local enterprises and the migration of industries across regions. In the case of the Chinese synthetic dye industry, the passing of leadership from state-owned enterprises (SOEs) to collectively owned enterprises (COEs) and then to private enterprises (PEs) was accompanied by a concurrent leadership migration from one region to another. The article contends that this simultaneous occurrence was not accidental. Four institutional constraints—the degree of central supervision, the local labor arrangements, the local social welfare provision, and the degree of ambiguity in property rights—retarded the rise of new ownership forms in the previously dominant regions. This gave other regions the opening to take over leadership positions by providing a more favorable institutional context for new ownership forms. These findings are likely to apply to all of the Chinese manufacturing industries that existed prior to 1978 and that subsequently did not experience significant technological changes and were not highly protected by the government.

Regional Institutions, Ownership Transformation, and Migration of Industrial Leadership in China: The Case of the Chinese Synthetic Dye Industry, 1978-2008

Scholars have emphasized the gradual ownership transformation of enterprises as a key driver of the Chinese economy’s unprecedented growth. However, little work has been done on the issue of whether this transformation process takes place evenly across the various regions in China. This paper describes the important role of regional institutions in shaping the ownership-based competitiveness of local enterprises and the migration of industries across regions. In the case of the Chinese synthetic dye industry, the passing of leadership from state-owned enterprises (SOEs) to collectively owned enterprises (COEs) and then to private enterprises (PEs) was accompanied by a concurrent leadership migration from one region to another. The paper contends that this simultaneous occurrence was not accidental. Four institutional constraints - the degree of central supervision, the local labor arrangements, the local social welfare provision, and the degree of ambiguity in property rights - retarded the rise of new ownership forms in the previously dominant regions. This gave other regions the opening to take over leadership positions by providing a more favorable institutional context for new ownership forms. These findings are likely to apply to all of the Chinese manufacturing industries that existed prior to 1978 and that subsequently did not experience significant technological changes and were not highly protected by the government.

China's Urban Unemployment: Exposed 'Disguised Unemployment' or Insufficient Aggregate Demand?

China's enterprise reform has resulted in large-scale layoff of workers from state and collective owned enterprises. Mainstream Chinese economists argue that many of the workers in these enterprises are disguisedly unemployed and have to be laid off to achieve better economic performance. In this paper, I argue that the productivity of state and collective owned enterprises to a large extent depends on capacity utilization and the level of aggregated demand. If the government undertakes active aggregate demand policy, the performance of state and collective owned enterprises can be substantially improved without large number of workers being laid off.

The costs and benefits of government control: Evidence from China's collectively-owned enterprises

Abstract China's collectively-owned enterprises are unconventional, as they are nominally owned by those people residing in the areas where the enterprises are located but effectively controlled by the local governments. This study finds that collectively-owned enterprises, once being privatized, encounter an increase in the cost of goods sold to sales ratio but manage to lower down the managerial expenses to sales ratio. The findings imply that local government officials may help collectively-owned enterprises gain access to cheaper production inputs, but they may use those enterprises to pursue private benefits, thereby shedding lights on the costs and benefits of government control.

The Transformation of Collectively Owned Enterprises and its Outcomes in China, 2001–05

Summary Previous studies have primarily focused on the relative success of collectively owned enterprises (COEs) in China during the early years of reform, but they have ignored the agency problems inherent in this type of organizational form that may be an obstacle to further improving performance in a changing environment. Drawing on agency theory and the privatization literature, we argue that the transformed COEs in the ongoing organizational transformation process may achieve better performance by reducing agency costs. We examine a sample of COEs in Chinese manufacturing industries and track their ownership statuses from 2000 to 2005. Our findings reveal that the transformed firms achieved better performance than the traditional, untransformed COEs by mitigating agency problems.

Ownership Types and Strategic Groups in an Emerging Economy*

ABSTRACT Existing strategic group studies have rarely examined ownership type as a variable to classify firms in an industry. Using Chinese firms of different ownership types, we suggest that ownership type can be a parsimonious and important variable that managers use to cognitively classify firms into different strategic groups. While ownership itself is an objective variable, we contend that different ownership types lead to different managerial outlook and mentality due to a number of macro and micro foundations giving rise to various managerial cognitions. Employing the Miles and Snow typology, we find that state‐owned enterprises (SOEs) and privately‐owned enterprises (POEs) tend to adopt defender and prospector strategies, respectively, while collectively‐owned enterprises (COEs) and foreign‐invested enterprises (FIEs) exhibit an analyser orientation that falls between defenders and prospectors on the strategy continuum. Three statistical tests suggest that ownership types can be used to successfully predict strategic group memberships in China's emerging economy.

The Impact of Shareholding Reform on Chinese Enterprise, 1995-2001

During the 1980s and early half of the 1990s, the entry of new firms, the strengthening of managerial incentives, and the accumulation of non-state assets in the state sector set the stage for China's shareholding experiment, involving the formal conversion of thousands of state-owned enterprises to joint stock companies. Shareholding conversions have also been extensively employed in China's collective-owned enterprises. This paper examines the impact of the conversion of these state- and collective-owned enterprises on a range of measures relating to both equity and efficiency. The analysis distinguishes between the direct effects of conversion holding the asset structure fixed and the induced effect, which involves reductions in the proportion of state-owned assets. For SOEs and COEs, conversion contributes to overall increases in both current productivity and innovation. At least during 1995-2001, the period spanned by this study, by encouraging employment growth or slowing layoffs, conversion seems to have benefited incumbent workers. Among SOEs, the most robust impact of conversion is the reallocation of resources and effort to R&D and new product development, which suggests greater attention to deep restructuring. Conversion greatly enhances the ability of converted firms to attract new investment from outside the state sector. Within the sample used in this paper, the state typically retains its assets after conversion: an indication that state asset sales or stripping is not widespread. The shareholding experiment seems to be creating a channel, in addition to those served by new domestic private enterprise and foreign-owned firms, for the emergence of a domestic managerial and entrepreneurial class. Due to these efficiency effects, the greater concentration of conversion in wealthier coastal areas is likely to contribute to regional inequality in China.

A study of the R&D efficiency and productivity of Chinese firms

This paper investigates the influence of ownership on the research and development (R&D) efficiency of Chinese firms. In a sample of 8341 Chinese industrial firms, ownership is found to be a contributing factor in the cross-sectional variance of both R&D and productive efficiencies. The state sector has significantly lower R&D and productive efficiency than the non-state sector. Within the non-state sector, foreign firms have higher R&D and productive efficiency than domestic collective-owned enterprises and joint stock companies. The higher R&D efficiency of foreign firms appears to be due to a higher R&D intensity, which in turn leads to higher productivity.

S&T policies and technical progress in China's industry

This paper explores some aspects of China's strive for accelerating the rate of technical progress taking place in its economy. The first part analyses the evolution of the Chinese R&D system. On one hand there is a drive towards the commercialization and decentralization, and on the other hand increased emphasis is being put on a new generation of national research programmes. The efficiency of China's R&D had increased, but a major reorientation of resources towards research activities has yet to materialize. The second part focuses on the reform of public industrial enterprises. As a result of the boom of collective-owned enterprises and of the partial improvements in the state-owned sub-sector, in which property relations are undergoing major changes, the innovative capacity and the technological level of Chinese public industry have advanced markedly. The growth in total factor productivity and the evolution in the export structure suggest that substantial technical progress has been taking place. The paper concludes that China's experience so far shows that a radical improvement in a socialist economy's ability to achieve technical progress is not inconsistent with the reaffirmation, in a new and diversified form, of a fundamentally public framework of property relations.

Ownership and performance in Chinese manufacturing industry

The relation between various ownership types and performance measures for 1036 firms in China is examined. State owned enterprises (SOE) are consistently less profitable than mixed enterprises (ME), collective owned enterprises (COE), joint ventures (JV), and foreign owned enterprises (FOE). The SOEs and FOEs are also less productive than MEs, COEs and JVs. The surprisingly low productivity for FOEs may result from the learning curve for international investors doing business in China. Owned by local governments, COEs are more profitable and productive than the central government owned SOEs, possibly because of closer monitoring and harder budget constraints, and better employees and management. The performance of MEs, mostly newly privatized firms, is weaker when related to assets, possibly due to the anomaly that capital investments following their public offerings are not yet on line. The co-existence of economies of scale and over-employment is also evident among Chinese enterprises.

Impact of Ownership and Competition on the Productivity of Chinese Enterprises

Exploring a new, firm-level data set, this paper attempts to quantify the effect of ownership and market competition on the productive efficiency and efficiency growth of Chinese industrial firms. Empirical results reveal a strong ownership impact on efficiency, with foreign-owned enterprises exhibiting the highest efficiency scores and state-owned enterprises exhibiting the lowest. However, while the degree of competition in export markets is positively associated with enterprise efficiency, no such association is found between domestic competition and productive efficiency. The ownership effect is robust to market competition and industry factors. Finally, state-owned enterprises showed on average a higher growth in technical efficiency than collective-owned enterprises during 1996 to 1998. J. Comp. Econ., June 2001, 29(2), pp. 327–346. Department of Economics and Finance, City University of Hong Kong, Tat Chee Avenue, Kowloon, Hong Kong; and Department of Accountancy, City University of Hong Kong, Tat Chee Avenue, Kowloon, Hong Kong. Copyright 2001 Academic Press.Journal of Economic Literature Classification Numbers: L2, L3, P2.

The Analysis of Rural Regional Disparity in China

Rural regional disparity has now become one of the most concerning problems in China. This paper attempts to show that the inequality is mainly caused by the uneven development of rural collectively owned enterprises (COEs). In the early 1990s, COEs accounted for more than 70% of rural regional inequality. In order to evaluate the effectiveness of current government policies for lessening regional disparity, we use a data envelopment analysis to measure the efficiency of COEs in the rural areas. The analysis shows that COEs in the eastern region are relatively more efficient than those in the central and western regions. To explain this, the potential sources of the COEs’ production efficiency in different provinces are examined in detail. The production efficiency of Chinese COEs is found to be closely related to the employment of a shareholding cooperative system, foreign investment, skilled workers, and a bonus incentive scheme.

Incentives, allocation and labour-market reforms during transition: the case of urban China, 1986-1990

Has the reform process in China resulted in the introduction of incentives directed at a more efficient allocation of resources? Using data on individual earnings in urban Liaoning province for the period 1986–1990 and a wage-equation approach, we address this issue in the context of labour-market reforms, focusing specifically on returns to education. Our results indicate that failure to address the issue of endogenous selection of more ‘able’ individuals into state-owned enterprises (SOEs) can severely bias returns downwards. Unlike in SOEs, returns in collective-owned enterprises (COEs) increased, the latter having been allowed to ‘grow out of the plan’ more quickly and subject to more competition in factor and product markets. We conclude that decentralization without competition is unlikely to result in the introduction of an efficient incentive mechanism. The more administratively determined regular wages are one avenue for increased returns. We find evidence of ‘differentiated bonuses’ in COEs, but we cannot reject the hypothesis of ‘bonus sharing’ in SOEs. Reforms which face SOEs with more competitive markets (e.g. reform of in-kind benefits such as housing) should have substantial benefits in terms of a more efficient allocation of labour both within and across enterprises.