Success in China's Industrial Market: An Institutional and Environmental Approach

Abstract

During China's rapid transition from a planned to a market economy, a major issue that has not been adequately addressed is “What determines a firm's performance?” This study proposes an institutional and environmental approach to evaluate how a firm performs in this dynamic transitional economy. Using a data set containing China's entire industrial market, this study finds that a firm's performance is shaped by its institutional characteristics and its environment, along with other strategic factors such as its market share. A surprising and yet important finding is the superior performance of the so-called “collectively owned” enterprises. The article not only explores the theoretical relationship between firm performance and institutional and environmental factors in transitional economies, but also is helpful for managers in developing such marketing strategies as market assessment, entry strategy, or partner selection.

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