An Empirical Study of Business Practices in China
Author: Kai-Alexander Schlevogt
Category: Business & Economics
An empirical study was undertaken (a) to examine the characteristics, influencing factors, and effectiveness of a distinctive Chinese management model adopted by the newly founded private enterprises in mainland China, as well as (b) to test the "fit" notion in contingency theory. The study was based on a random sample of 124 standardized personal interviews with CEOs of Chinese industrial and service companies in Beijing and Shanghai. The standardized questionnaire mainly contained the Aston structure scales (Pugh and Hickson 1976) and Khandwalla's (1977) management schedules. Besides, three case examples were studied including one state-owned bank and two private enterprises. Using AMOS structural equation modeling, size, mass-technology and uncertainty, as well as CEO need for achievement, environmental constraints and selected Chinese characteristics, were specified as influencing factors of "bureaucracy" and managerial practices, which included strategic orientation, leadership style, decision-making, communication and subcontracting. Another model analyzed the influence of various key success factors on organizational effectiveness. The findings provided support for the re-adoption of a distinctive Chinese management model in private companies, characterized by autocratic leadership, low formalization, "Chinese entrepreneurship" and network-based "webs". Private enterprises also tended to readopt and emphasize traditional Chinese family-related values. The distinctiveness of this model was, ceteris paribus, due to this emphasis on familism, which had a direct impact on organizational design and an indirect influence through its negative association with company size, which in turn significantly covaried with organizational design. This family-based ownership model was positively associated with organizational effectiveness. As regards contingency theory, the "traditional" fit hypotheses could not be rejected. In addition, less effective companies were not necessarily in "misfit". "Appropriate" structure, together with an optimizing planning style and firm age, were positively associated with performance. Managerial recommendations were codified in a CHINA© strategy framework for high effectiveness.