Wharton-SMU Research Center

In-House Seminar

Guest Speaker:

Marshall W. Meyer
Richard A. Sapp Professor; Professor of Management and Sociology, The Wharton School, University of Pennsylvania

Topic:

The Structure of a Chinese Firm

Venue:

Business Block, Level 2, Seminar Room 6
Singapore Management University
469 Bukit Timah Road, Singapore 259756

Date:

Friday, 17 January 2003, at 4.00pm

Reservation:

This seminar is free. Places are limited. Please confirm your attendance by Thursday, 16 January 2003, 12 noon with Ms. Lim Lih Yeng at lylim@smu.edu.sg or telephone: 6822-0197.

About the Seminar:

Note: Audience are advised that all contents and discussions relating to this seminar are not to be reproduced or cited without the prior consent of the author.

This article informs and extends organizational theory by describing the structure of an unusual Chinese corporation. In the West the firm is at once a legal entity incorporated in and subject to the laws of a jurisdiction, a listed entity whose shares are publicly traded, and an operating entity internalizing and coordinating many different activities. Western theories of governance and management depend crucially on the correspondence the legal entity, the listed entity, and the operating entity. Thus, agency theory seeks to align the incentives of managers (who administer the operating entity) with interests of shareholders (who own the listed entity). Conversely, in China, the legal entity, the listed entity, and the operating entity do not normally correspond, hence the boundaries of the firm are indefinite and its governance and management are complicated. The Chinese corporation described here is unusual because it has been able to align the listed and operating entities without changing the independent legal status of its subsidiaries, has developed the capacity to turn around newly acquired subsidiaries, and has grown rapidly as a consequence. The corporation has been able to develop these capabilities partly because it enjoys substantial autonomy from its state owners, one of whom tried but failed to turn it into a captive supplier. The analysis suggests that a large state presence renders the principal problem-the problem of state owners expropriating corporate assets-as significant as the agency problem-the problem of managers expropriating corporate assets for private use.