INTER-ORGANIZATIONAL RELATIONSHIPS IN CHINA: CHANGES IN GOVERNANCE STRUCTURES FOR RAW MATERIAL PROCUREMENT, 1988-1993

Laura L. Whitcomb and Cheng Li
Additional contact information
Cheng Li: Department of Management

No 96-01, Working Papers from California State University, Los Angeles, School of Business and Economics

Abstract: This paper examines the evolving modes of organization used by Chinese enterprises to ensure reliable supplies of raw materials during a period when China's economic system was undergoing a transformation from centrally planned to market allocation of resources. Due to the lack of reliable legal constraints on opportunistic behavior, personal connections (guanxi) were cultivated as a means to reduce transaction costs in inter- enterprise relationships during the late 1980s. In transactions characterized by extreme uncertainty and asset specificity, these informal safeguards were supplemented with new forms of governance, including compensation trade and minority ownership, in order to more formally cement buyer-supplier relationships. As continued economic reforms in the 1990s decreased the level of uncertainty associated with raw materials transactions, some of these new modes of governance began to be phased out. This longitudinal case study illustrates how various informal and structural safeguards may be used to reinforce inter-organizational relationships under uncertainty and provides support for the universality of transaction cost sensitive development of inter-organizational relationships.

Date: 1996-07-18
References: Add references at CitEc
Citations:

Downloads: (external link)
http://web.calstatela.edu/academic/business/rawmat.pdf (application/pdf)
Our link check indicates that this URL is bad, the error code is: 500 Can't connect to web.calstatela.edu:443 (Bad file descriptor) (http://web.calstatela.edu/academic/business/rawmat.pdf [301 Moved Permanently]--> https://web.calstatela.edu//academic/business/rawmat.pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:wop:calsec:9601

Access Statistics for this paper

More papers in Working Papers from California State University, Los Angeles, School of Business and Economics
Bibliographic data for series maintained by Thomas Krichel ().