Structural replacement or structural inducement ... - Wiley Online Library

Canadian Journal of Administrative Sciences Revue canadienne des sciences de l’administration 26: 54–70 (2009) Published online in Wiley Interscience (www.interscience.wiley.com). DOI: 10.1002/CJAS.88

Structural Replacement or Structural Inducement: Government Ties of Chinese Business Executives Xiaotao Yao Xi’an Jiaotong University

Stan Xiao Li York University

Christina Sue-Chan* City University of Hong Kong

Youmin Xi Xi’an Jiaotong University Résumé Dans cet article, nous montrons que la thèse du remplacement structurel selon laquelle les gestionnaires des entreprises non-étatiques chinoises (NSOEs) ont plus d’entrées au gouvernement que les gestionnaires d’entreprises étatiques (SOEs) est théoriquement incomplète parce qu’elle prend en compte uniquement la motivation des gestionnaires des NSOEs. L’ampleur des liens sociaux est aussi influencée par la capacité des acteurs à les cultiver et par l’opportunité qui s’offre à eux. Nous proposons, en lieu et place de la thèse du remplacement structurel, la thèse de l’incitation structurelle selon laquelle les gestionnaires des SOEs ont plus d’entrées au gouvernement que les gestionnaires des NSEOs. Cette nouvelle thèse est étayée par l’analyse des liens de 250 gestionnaires chinois. L’article se termine par une présentation des implications théoriques et pratiques de l’étude. Copyright © 2009 ASAC. Published by John Wiley & Sons, Ltd.

Abstract We suggest that the structural replacement thesis, which proposes that managers in Chinese nonstate-owned enterprises (NSOEs) possess more government ties than managers in Chinese state-owned enterprises (SOEs), is theoretically incomplete because it considers only the motivation of managers of NSOEs. The extensiveness of social ties is influenced also by the capability and opportunity for social actors to cultivate these social ties. We introduce the structural inducement thesis, which holds that SOE managers have more government ties than do NSOE managers, as an alternative to the structural replacement thesis. Our analysis of 250 Chinese managers’ ties supports this structural inducement thesis. The theoretical and applied implications of these findings are discussed. Copyright © 2009 ASAC. Published by John Wiley & Sons, Ltd. JEL classification: L14 Keywords: social tie extensiveness, structural replacement, structural inducement, government ties, Chinese business managers

Mots-clés : ampleur des liens sociaux, remplacement structurel, incitation structurelle, entrées au gouvernement, gestionnaires d’entreprises chinoises

Acknowledgement: The first two authors contributed equally to the paper. This research is supported by a research grant (No. 410-2004-0364) awarded to Stan X. Li from the Social Sciences and Humanities Research Council of Canada, three grants (70772108, 70472035 and 70121001) awarded to Xiaotao Yao and Youmin Xi from the National Natural Science Foundation of China, and a Strategic Research Grant (7001626) awarded to Christina Sue-Chan by the City University of Hong Kong. Stan X. Li acknowledges the additional financial support from the Canadian Utilities Fellowship awarded by the School of Management at the University of Alberta and the Dean’s Research Fund awarded by the Schulich School of Business at York University, Canada. *Please address correspondence to: Christina Sue-Chan, Department of Management, City University of Hong Kong, 83 Tat Chee Avenue, Kowloon, Hong Kong S.A.R. Email: [email protected]

Copyright © 2009 ASAC. Published by John Wiley & Sons, Ltd.

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Research in social networks centers on the premise that a web of social ties has a vital impact on social actors embedded in the web (Powell, 1990). Managing social ties, in contrast to administering a formal structure and/or hierarchy, can enable firms to reduce costs (Li & Rowley, 2002) and to achieve high-quality production (Uzzi, 1997) and increased market performance (Li & Berta, 2002; Shipilov & Li, 2008). Social actors, however, do not all possess the same number (i.e., size) of social ties. For example, male and female managers differ in the range of their social ties (Ibarra, 1992, 1993; Moore, 1990). Disparities in social tie size are also found across different foreign minority groups (Portes & Sensenbrenner, 1993), business managers with different demographic backgrounds (Westphal & Milton, 2000), and social groups with dissimilar social statuses (Lin, 1999). We refer to the disparate social tie sizes of different social groups as the tie distribution issue. Research on this issue is overwhelmingly concentrated in the US. Given that social connections are consequential in all economies, social network scholars are increasingly directing their attention to developing countries such as China (the nation with the largest developing economy; Chen, Chen, & Xin, 2004; Guthrie, 1998). Xin and Pearce (1996) proposed that Chinese business managers employed by state-owned enterprises (SOEs) have less of a need to establish social connections with government officials compared to Chinese business managers of nonstate-owned enterprises (NSOEs). They reasoned that Chinese NSOEs lack formal institutionalized connections with, or structural support from, different levels of Chinese governments, and that therefore these managers are particularly in need of establishing such contacts. Consequently, in comparison to their SOE counterparts, NSOE managers encounter more difficulties garnering resources, political support, or protection and legitimacy provided mostly from the central and local Chinese governments (Nee, 1992; Redding, 1990). Based on such “lack of structural support,” Xin and Pearce (p. 1642) proposed that Chinese NSOE managers “cultivate personal connections to substitute for reliable government and an established rule of law.” This we refer to as the structural replacement thesis. The structural replacement thesis proposes that institutionalized government backing and judicial channels are replaceable by social connections, reflecting the major theoretical thrust of social network research: informal social ties are interchangeable with, or can be replaced by, formal organizational structure. The implication of the structural replacement thesis, however, exceeds this major premise of social network research because it necessitates the notion that the interchange-


ability of hierarchy and social connections is more fluid for NSOEs than for SOEs. This provocative notion is of interest not only to scholars of social networks, but also to researchers in other branches of social sciences, such as institutional economics (North, 1990) and organization theory (Ouchi, 1980; Williamson, 1985). Furthermore, for industry practitioners in general, and for foreign investors in China (a country that is among the largest recipients of foreign direct investment from Organization for Economic Co-operation and Development countries; Christiansen & Bertrand, 2005), the veracity of the structural replacement thesis is important as it suggests that different strategies are required by companies of different ownership structures for securing government resources. For example, NSOE managers may cultivate social ties with government officials in their efforts to redress the lack of institutionalized structural assistance. Given the theoretical and practical importance of the structural replacement thesis, further research is warranted. As we later explain in detail, the extensiveness of a particular type of social tie (e.g., government ties) held by different social actors depends on three factors: the motivation of the social actors as well as their capability and opportunities to cultivate particular types of social ties. Accordingly, in order to evaluate more completely the social tie size of two social actors, one should investigate and compare their motivation, capability, and opportunity for developing such social ties. The typical analysis of the structural replacement thesis focuses on one factor—motivation—and neglects the capabilities and opportunities of social actors to develop social ties. In addition, while the structural replacement thesis underscores the motivation of NSOE managers to develop social ties, it is mute on the motivation of their SOE counterparts. To address this, we collected our data from China, and specifically compare SOE and NSOE managers with respect to their motivation, capability, and opportunity to cultivate social ties with government officials.

Theory Interpersonal relations provide avenues for the flow of information and resources (Adler & Kwon, 2002). The establishment of certain social connections does not require active cultivation by social actors. For example, people obtain kinship ties because of their lineage, rather than their purposive actions. However, the formation of many types of social connections does demand human agency. This demand is particularly acute when social actors, deprived of certain resources, strive to establish

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social contacts with other social actors in control of the resources (Bian, 1997), or when social actors with low social status attempt to form connections with high-status social actors (Podolny, 1993). Whenever resources are not evenly distributed in a society and social actors are divided by status hierarchy into different groups, social actors have incentives to cultivate social connections so as to obtain resources and compensate for their own status disadvantages (Lin, 2001; McPherson, SmithLovin, & Cook, 2001). Therefore, motivation to establish connections is one common antecedent of social tie size. However, the motivation to form social ties by itself is usually not adequate. In their review of the social capital literature, Adler and Kwon (2002) summarized the sources of social capital. Some scholars refer to social capital as a type of social relationship (Loury, 1992) or social tie (Pennar, 1997). A social tie could reflect a friendship, but it could also entail relationships that are instrumental to achieving specific resources, such as work or nonwork support and advice (Adler & Kwon). Moreover, Adler and Kwon suggested that social capital arises not only from the motivation of social actors to draw benefits from their social connections, but also from their capability and opportunity to capitalize on these connections. Stated alternatively, completing any task successfully (e.g., in this case, developing and nurturing social ties for securing desired resources) is dependent upon contextual conditions and the capabilities or skills of the person performing the task, over and above their motivational state (Latham & Pinder, 2005). For example, an important contextual condition is the base rate of successfully cultivating and sustaining a social tie, which will be influenced, beyond motivation, by the opportunities available to social actors to meet people with whom social ties are desired (Bian, 1997) and the ability to cultivate and sustain these ties (Lin, 2001).

economic entity, as is the case with China, impersonal business transactions are not widespread because drafting and executing comprehensive business contracts are bound to extract high transaction costs, such as the lengthy time it takes to negotiate a commercial contract (North, 1990). Business managers are compelled to cultivate a network of interpersonal connections in order to reduce unpredictability in new business deals and to avoid the high costs of arbitration associated with unsuccessful transactions (Ouchi, 1980; Pye, 1968). In these types of economies, social ties provide a wealth of information (Li & Rowley, 2002). They become a conduit for the dissemination of business opportunities and resources (Luo, 2000), and a means of circumventing bureaucratic rules (e.g., formal legal procedures and government regulations) (Yang, 1994). Social ties, as a surrogate for a stable property rights-based legal system, reduce transaction costs by diminishing the need for detailed business contracts and arbitration (Redding, 1990). They form the basis of trust in economic transactions (Smart, 1993) and counter the arbitrary or discretionary use of power by authorities (Dittmer, 2000). Xin and Pearce (1996) supported and extended these arguments by suggesting that ties with government officials can be instrumental to achieving desired resources and that managers in NSOEs use government connections as substitutes for formal institutionalized governmental protections and favours. Xin and Pearce thus introduced the following argument, which we refer to as the structural replacement thesis: Chinese private-company managers operating without the structural protection of governmental support, which is more available to state-owned and collective-hybrid organisations, will not passively await their fate. Rather, by developing guanxi as a substitute for the formal institutional protection government ownership offers their counterparts, they will cultivate close personal relationships with people useful to business. Certainly, all Chinese managers will use guanxi, but these connections will be seen as even more important by those with less structural support—that is, by private-sector managers (Xin & Pearce, 1996, p. 1643).

Motivation of Managers in Nonstate-Owned Enterprises Specific to the context of China, business managers cultivate interpersonal relationships, referred to as guanxi in China (for recent reviews of guanxi, see Bian, 2001; Gold, Guthrie, & Wank, 2002), for a variety of instrumental purposes. These range from managing new ventures (Luo, 1997), and circumventing bureaucracy (Yang, 1994), to conducting relationship-based marketing (Wong & Leung, 2001). When the stable legal and regulatory regime that clearly define and protect property rights is absent in an


Specific to the context of China, managers in NSOEs counter their lack of legitimacy and political backing by forming ties with government officials because it is these officials who distribute throughout China a large portion of financial capital, bank loans, land, and other natural resources. Recasting Xin and Pearce’s (1996) structural replacement logic, we accordingly propose: Hypothesis 1: NSOE mangers will report more government ties than will SOE managers.

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and regulatory regime in China—one that clearly defines and protects property rights—affects not only NSOE managers (as suggested by the structural replacement thesis); it also adversely affects managers of SOEs. A higher proportion of SOEs relative to NSOEs are not profitable (e.g., Shenkar, 2005). There is no legislated regulation clarifying the criteria for obtaining corporate subsidies. Consequently, governmental subsidies for money-losing SOEs vary substantially across years and regions, and are at the discretion of local governments. SOEs must continue to operate, despite their lack of profitability, because they are commonly tasked with notfor-profit aims, such as reducing unemployment in local communities. The “safety net” role of SOEs compels their managers to establish numerous ties with government agencies in order to secure resources via a variety of direct or indirect government “handouts” that are not readily available to the public. Managers of different SOEs must compete with one another for government handouts. Consequently, lobbying for additional resources from governmental channels is a prime responsibility of SOE managers, particularly for those that rely on “corporate welfare” from the government. SOE managers must maintain an extensive social network of government officials so as to quickly identify sympathetic ears in the government to voice their requests. By having many potential ties to whom they can turn for resources, SOE managers can reduce costs associated with bargaining with officialdom in the long-run. In light of the above, we posit that both SOE and NSOE managers are subject to similar constraints of the absence of a stable legal and regulatory regime in China. Under such circumstances, both types of managers will be motivated to cultivate government ties, though perhaps for different reasons. There is no compelling reason to expect SOE managers to be any less motivated to cultivate government ties than their NSOE counterparts.

Motivation to Form Government Ties Before comparing the extensiveness of social ties of managers of SOEs with managers of NSOEs, the multidimensionality of social connections (e.g., kinship ties, friendship ties, etc.) requires a specification of the types of social connections to be assessed. We reviewed the social capital literature (e.g., Adler & Kwon, 2002; Nahapiet & Ghoshal, 1998) to identify social tie types and drew on those that were most likely to assist managers in garnering resources for themselves and their firms (consistent with the structural replacement thesis). As Xin and Pearce (1996) had done, we evaluated government ties that managers deemed critical for their firms’ development and survival, referred to here as a “crucial government ties.” Xin and Pearce also argued that the development of government ties can improve career advancement opportunities for managers. Accordingly, we examined government friendship ties (i.e., friendship connections between managers and government officials) and government advisory ties (i.e., connections through which managers solicit advice from government officials). Friendship ties and advisory ties were chosen because they are widely recognized as helpful to the career advancement of managers (e.g., Ibarra, 1992; Lin, 2001). The structural replacement thesis suggests that government ties shield firms from the disadvantages of lacking formal institutional connections with the government. This suggests that SOE managers may pursue social ties with Chinese governmental officials for reasons different from those of NSOE managers. Specifically, while there is a large overlap in the for-profit goals pursued by managers in both SOEs and NSOEs, such as securing a stable source of resources for their firms (Pfeffer & Salancik, 1978), SOE managers are likely to have ambitions unrelated to improving the profitability of their employers (i.e., advancing their ranks within the government; securing desirable placements within the government system or the SOE for their children and relatives; Bian, 1997; Yang, 1994). Such objectives of SOE managers are likely unrealistic and/or irrelevant for NSOE managers of firms having no formal institutionalized links with the Chinese government. Furthermore, SOE managers encounter perils (not experienced by their NSOE counterparts) that they must “fend off,” often by establishing government ties. For example, they must avoid demotions resulting from the in-fighting among factions of government officials, and confront, on a daily basis, a wealth of bureaucracies and nepotism stemming from the governmental system (Fewsmith, 2000). Managers in NSOEs do not face these government-related challenges. Most importantly, the lack of a stable legal


Capability of Forming Government Ties Another antecedent for government tie size is managers’ capability of forming such ties. There are several reasons to suggest that managers of SOEs are more capable of forming government ties than managers of NSOEs. Firstly, SOE managers share more with government officials than NSOE managers in terms of ideology and identity with the Chinese government. Secondly, after establishing government ties, SOE managers have a cost advantage over NSOE managers in maintaining these ties because access to government communication channels are more readily available to them.

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Although NSOEs and SOEs are independent organizations, SOEs are owned, and therefore greatly influenced by, the Chinese government. Social ties are different from the formal chain of command. These ties are informal (e.g., friendship ties), and social agents have the discretion to establish or terminate them. Ownership of a firm by another entity facilitates the formation of informal social ties between the firm’s managers and the owner’s representatives (e.g., directors of the board). Classical organization theories generally suggest that ownership leads to the emergence of a common identity. This can happen through a variety of recurring or routinized activities, such as communication exchanges (Shannon & Weaver, 1949), integration and coordination (Katz & Kahn, 1978; Lawrence & Lorsch, 1967), and changes demanded by the owner (Chandler, 1962). A shared identity between the owner and the firm it owns is engendered by members’ understanding of the codes of conduct (Glynn, 2000), the symbolic construction of meanings (e.g., government propaganda) (Peterson & Anand, 2004), and the rules of coordinating activities (Dyer & Nobeoka, 2000). A shared identity, as described above, facilitates the formation of ties among social actors. From this common identity emerges a sense of “common fate” (Peteraf & Shanley, 1997), resulting in individuals behaving in similar ways (Elsbach, 1994) and paying more attention to one another, while discounting the views of outsiders (Ashforth & Kreiner, 1999). Accordingly, ownership facilitates conditions that foster the development of social ties (cf. Ibarra, 1992; Krackhardt, 1990; Tsai, 2002; Tsai & Ghoshal, 1998). The second reason that SOE managers will have an advantage over NSOE managers in the ease of establishing ties with government officials is that entities associated through ownership (e.g., managers and board members) have cost advantages in managing their social ties with one another. Specifically, they share a code or paradigm embodying the culture of the owner and an understanding of the owner’s rituals, vision, and values. Scholars of social networks refer to this shared code as reflecting the cognitive dimension of social capital (Tsai & Ghoshal, 1998). It reinforces common collective goals in addition to a shared understanding of appropriate conduct. Given the same opportunity to gain access to government officials, managers who have already developed perceptions of mutual trustworthiness with government officials, in comparison to those who have not, are more likely to develop “cliquey friendships” with those government officials. Together, these reduce the costs of maintaining social ties (Krackhardt, 1992; McPherson et al., 2001; Nelson, 1989).


Opportunity to Form Government Ties There are more opportunities for two parties associated through ownership to establish a social tie than there are for parties without such an association. In the former case, the costs associated with finding a partner with whom to establish a social tie is lower, simply because ownership structure provides the vehicle and context for mutual meetings (through social events, rituals, internal communications, socialization, and coordination; Homans, 1950). Accordingly, SOE managers will have more opportunities to access government officials than will NSOE managers. A general theme permeates our analysis of the capability and opportunity of managers to cultivate government ties: Government ownership of firms creates conditions that enhance the opportunities and capabilities of managers of these firms to establish and sustain social ties with government officials. This advantage over NSOE managers we refer to as the structural inducement thesis, which sets up the following competing hypothesis to H1. Hypothesis 2: NSOE managers will report fewer government ties (i.e. friendship, advisory, “crucial”) than will SOE managers.

Method Sample and Data Collection Our survey took place between late 2003 and mid2004 in a city with 7 million permanent residents in the Middle Western region of the People’s Republic of China. A professor in a local university designed the questionnaire in a way that closely followed two prior empirical studies that examined the structural replacement thesis (Park & Luo, 2001; Xin & Pearce, 1996). Whenever possible, the translation-and-back-translation procedure was used to safeguard consistency (Brislin, Lonner, & Thorndike, 1973). Our pilot interviews with business managers in 11 companies confirmed the face validity of our items (see the Appendix for the list of questions posed to these managers). In particular, during these interviews we explained to our interviewees our definition of social ties and listened to their feedback about our definition. Our interviewees’ own interpretation of social ties matched closely with ours. They concurred that there were three types of interpersonal social ties (i.e., advisory ties, friendship ties, and crucial ties) most relevant to their firms and their daily managerial activities (see our explanation of the dependent variables). We primed

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our interviewees that we were only interested in informal social connections, which they had discretion to create, maintain, and terminate, rather than formal links dictated by the command chain (e.g., government hierarchy) with which they could not simply opt into, or out of. None of our interviewees had problems in making the distinction. We explained to them that we were interested in their social ties between themselves and persons outside of their firms. None of our interviewees had problems in understanding the boundary of his/her firm, because each firm was a legal entity in China and was clearly defined by the firm’s registration with the Department of Business Registry. We found no incident of a manager misclassifying a government organ as part of his/her firm. Approximately 13,000 companies with more than 10 employees were registered with the city’s Department of Business Registry. These firms became our firm population. With the assistance of the city’s Bureau of Statistics, we used the proportional allocation method to randomly draw 250 firms from this firm population: The industry distribution of our 250 firms matched the industry distribution in this population (Lehtonen & Pahkinen, 2004). For example, if 10% of the firms in the population are in the retail industry, then 10% of the firms in our sample are also in the retail industry. These 250 firms, denoted from A1 to A250, became our first sample (Sample A). For a given firm in the first sample (denoted as Ax, 0 < x ≤ 250), all of the firms in the firm population that belonged to the same industry as firm Ax were identified and ranked from the largest to the smallest according to the number of employees in them. The firm immediately before Ax in this ranking, denoted as Bx, was chosen as a firm in the second sample (denoted as sample B), and the firm immediately after Ax in this ranking, denoted as Cx, was included as a firm in the third sample (denoted as sample C). Using this method, we had samples A, B, and C, each of which was comprised of 250 firms, and each of which had the same industry distribution that matched the firm population. We interviewed the head of each of the firms in sample A. The head was defined as either the CEO or the chairperson who took charge of daily operations of the firm (i.e., the COO). The anonymity of the interview participants was guaranteed. When our efforts to interview the head in firm Ax failed, we interviewed the head in firm Bx. If we also failed to complete the interview with the head of firm Bx, we interviewed the head of firm Cx. In total, we successfully interviewed 104 managers in sample A, 76 managers in sample B, and 65 managers in sample C. At this stage, our sample size reached 245 managers (=104 + 76 + 65). In comparison to our target sample size of 250, we were short five managers from


five firms (denoted from M1 to M5), respectively. For firm My, (1 ≤ y ≤ 5), the Bureau of Statistics assisted us in drawing another firm (denoted as Ny 1 ≤ y ≤ 5) that matched My in number of employees and industry as closely as possible. Our interviews with managers in firms N1 to N5 were all successful. Therefore, our final sample size, which totalled 250 (=245 + 5), is significantly larger than Xin and Pearce (1996, N = 32) and Park and Luo (2000, N = 128).

Dependent Variables and Analysis. We collected three dependent variables. For the first dependent variable, denoted as No. of government advisory ties, we asked our subjects to think carefully about the past three years and use pseudonyms to list people outside of their firms with whom they often chatted or discussed their firms’ managerial problems, or from whom they sought advice for their firm’s development. We primed them that these people could be their relatives, friends, acquaintances, former classmates, neighbours, business partners, or any other person who did not work for their firms. They were asked to list as many as 10 people that they deemed most important in this regard (the dependent variable is operationalized here as the number of ties generated). After they had written down the pseudonyms, we asked them to inform us whether these people worked for (a) the government, (b) academia or related institutions, (c) Chinese firms other than their own firm, (d) firms from foreign countries, Hong Kong, Taiwan, or Macau, and (f) other types of institutions or institutions that they could not identify. No. of government advisory Ties measured the number of people in the first category. The second dependent variable was denoted as No. of government crucial ties. This time we asked our subjects to think about the people most critical for their firms’ development in the past three years. The list of people could overlap partially, completely, or be entirely separate from the first list of people. We also primed them that these people could be their relatives, friends, acquaintances, former classmates, neighbours, business partners, or any other person who did not work for their firms. They were also asked to list as many as 10 people that they deemed most important in this regard and to classify these people into the same set of categories. No. of government crucial ties measured the number of people in this list who worked for the Chinese government. The third dependent variable was denoted as No. of government friendship ties. This time we asked our subjects to list people with whom, over the past three years,

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they spent time after work in social activities, ranging from getting together for casual chats, dinners, mutual family visits, social functions, to pursuing common hobbies and interests (e.g., golfing and attending the same night school). The list of people could overlap partially, completely, or be entirely separate from the first and second lists of people. We also primed them similarly and asked them to classify these people accordingly. No. of government friendship ties measured the number of people in this list who worked for the Chinese government. We chose friendship ties and advisory ties as two of the dependent variables for two reasons. Firstly, these variables were among the most-researched type of ties in several fields of research, including human resource management (Sue-Chan & Dasborough, 2006), organization theory (e.g., Gibbon, 2004), strategic management studies (e.g., Ingram & Roberts, 2000), and social network studies (e.g., Carley & Krackhardt, 1996). Secondly, when we explained the meaning of these two types of ties to our subjects in our pilot interviews, we found that they were widely used by our interviewees to advance their personal or their firm’s goals. We examined crucial ties because scholars who specialize in China studies routinely argue that the resources sanctioned by the Chinese government are not only useful for organizations but also critical for their survival (Krug, 2004; Spence, 1990; Yang, 1994). Moreover, our definition of government crucial ties closely matches Xin and Pearce’s (1996) definition of government ties. Because the three lists of people identified by our subjects were allowed to overlap, we performed a principal component factor analysis with varimax rotation to explore the discriminant validity so as to explore whether these variables were loaded on one or more factors. It showed that the three dependent variables loaded on only one component with an eigenvalue larger than 1, and this common component explained 68.29% of the variance. Analysis results for all three dependent variables are reported separately so as to provide information for researchers interested only in one specific type of relationship or who are short of resources to explore all three types of ties. We derived the factor score (principal component method without rotation) from the factor analysis and used the score as the fourth dependent variable. Because our first three dependent variables are the number of ties, we used negative binomial regression (NBR). This is a method for the analysis of count numbers with over-dispersed individual observations (Cameron & Trivedi, 1998). For the fourth dependent variable, we applied OLS analysis (Nunnally & Bernstein, 1994).


Independent Variables We used a dummy variable, denoted as Ownership type, to test Hypotheses 1 and 2. Consistent with Xin and Pearce (1996), the variable was coded as 1 when the focal firm was a SOE or a collective-hybrid, and 0 when the firm was private. Control Variables We used three firm level controls. Consistent with Park and Luo (2001), Firm size was the logarithm of the focal firm’s total assets. The control variable of Firm age indicated the age of the focal firm since its registration with the Department of Business Registry. The last firm level control was denoted as Firm industry. The Chinese government classifies industries into three broad sectors: (a) agriculture, (b) manufacturing, mining, infrastructure, and building construction, and (c) services. Because no firm in our sample belonged to the first sector, Firm industry was coded as one when the focal firm belonged to the second sector, and zero when the firm belonged to the third sector. We created three individual level controls. Social connections ultimately are carried out by social actors; hence, several individual characteristics, including gender, social status, and educational level, have been commonly used in prior social network studies to explain the extensiveness of the social ties of social actors (Bian, 1997; Ibarra, 1997; Lin, 1982; Lin & Bian, 1991). Neither of the two empirical studies that have examined the structural replacement thesis (Park & Luo, 2001; Xin & Pearce, 1996) included these individual level factors that may influence the establishment of our focal variable— government ties. Because managers were reluctant to report their exact age, Manager age was used to indicate the approximate age of the manager (25–30 = 1; 31–35 = 2; 36– 40 = 3; 41– 45 = 4; 46 –50 = 5; 51–55 = 6; 56–60 = 7; and 60 and above = 8). Manager gender equalled one for male managers, and zero for female managers. We created a set of dummy variables, denoted as Manager education level, to control for the highest education attainment of the focal manager because social network research routinely argues that educational level is positively related to the extensiveness of social ties (Lin, Cook, & Burt, 2001) (primary school, junior high, senior high, college, university, master’s degree, and doctoral degree). The excluded category in our analysis was primary school. The structural replacement thesis (Xin & Pearce, 1996) emphasizes the role of institutional connections between the employer of the focal manager and the government. Although Xin and Pearce (1996) implied that

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the manager can establish institutional connections with the government via several routes other than being hired by the government or by an SOE, they do not operationalize these institutional connections. To clarify Xin and Pearce’s arguments, it is critical to control for the effects of these institutional connections. A manager’s prior experience working for the government is an important factor. We created a dummy variable, denoted as Prior government experience. It was coded as one if the manager worked in the government before he/she joined the current firm, and zero otherwise. Managers can apply to join the Chinese Communist Party (CCP) regardless of whether they are employed in the public or the private sectors. The control variable, denoted as Manager CCP Membership, was coded as one if the manager was a CCP member and zero otherwise. The People’s Congress (PC) at different levels (i.e., national, provincial, and municipal) and the Chinese People’s Political Consultation Conference (CPPCC) are high-profile political institutions in the current Chinese regime: the PC is the legislative arm in China, while the CPPCC is a consultative organization that advises, monitors, and criticizes the Chinese government. We used two dummy control variables, Manager PC and CPPCC Membership to indicate the manager’s participation in the PC and the CPPCC, respectively. We also created a set of dummy variables, denoted as Manager administrative rank, to indicate the rank of the manager in the Chinese government hierarchy. A person in China can gain a “rank” by affiliating with the Chinese government or a government-related institution (e.g., public universities, hospitals, the People’s Liberation Army, SOEs, state-funded art organizations, etc.). For example, an undergraduate holding a degree from a government-funded university, is granted the lowest rank of officer (in Chinese, gu). A person’s rank is used widely in the Chinese government hierarchy to gauge the person’s social standing. Manager administrative rank in our sample included gu, vice ke, ke, vice chu, chu, vice ting, ting, and vice sheng, denoting sequentially higher levels of status. We excluded the gu category in our analysis, following the recommended methodology for performing a regression with dummy coding (e.g., Cohen & Cohen, 1983). One of the categories must be excluded; otherwise the analysis will not converge because the vector of X cannot be inverted. The last control variable, denoted as Prior experience in SOE, was coded as one if the manager worked in SOEs before he/she joined the current firm, and coded as zero otherwise.

2 of Table 1, which provides t-test statistics of each type of government ties by SOE and NSOE managers, indicates that SOE managers possessed significantly larger numbers of ties across all types of government ties (at least p < 0.05). Table 2 includes the NBR and OLS results of government ties. Models 1a and 1b report the number of a managers’ government advisory ties, Models 2a and 2b report the number of the manager’s government friendship ties, Models 3a and 3b report the number of the manager’s government crucial ties, and Models 4a and 4b report the factor score of the manager’s government ties. For Models 1–3 in Table 2, the likelihood-ratio test was used to test the hypothesis that the observations of our sample conform to a Poisson distribution. This hypothesis was rejected for each model (all p < 0.001), and these test results support our choice of NBR over Poisson regression (Cameron & Trivedi, 1998). Models 1a, 2a, 3a, and 4a include all the control variables. Firm Size has a positive and significant coefficient in all of these models (at least p < 0.05), indicating that managers in larger firms are associated with a higher level of government ties. In all of these models, the variable of Manager PC or CPPCC Membership is positive and significant (at least p < 0.10), showing that managers who are members of the PC and the CPPCC have more advisory ties with the government. In all of these models, Manager Prior Government Experience is positively and significantly related to all three types of government ties (at least p < 0.05). These results show that managers with prior government experience report more government ties. Models 1b, 2b, 3b, and 4b add the independent variable, Ownership Type, which has a positive and significant coefficient (at least p < 0.05). This result, inconsistent with the structural replacement thesis as proposed in Hypothesis 1, provides support for the structural inducement thesis as proposed in Hypothesis 2—managers in SOEs have more government advisory, crucial, and friendship ties than managers in NSOEs. The likelihoodratio tests show that Models 1b, 2b, and 3b are a significant improvement (at least p < 0.05) over Models 1a, 2a, and 3a, respectively.

Discussion Summary This paper assessed tie extensiveness possessed by SOE managers and NSOE managers. Previous studies (Xin & Pearce, 1996; Park & Luo, 2001) have focused mainly on the motivation of NSOE managers, but such a focus is one-sided. Firstly, while the motivation of

Results Panel 1 of Table 1 shows the means, standard deviations, and Pearson’s correlations of our variables. Panel


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1 No. of government advisory ties 2 No. of government friendship ties 3 No. of government crucial ties 4 Factor score of government ties 5 Firm size 6 Firm industry 7 Firm age 8 Manager gender 9 Manager age 10 Manager education junior high 11 Manager education senior high 12 Manager education college 13 Manager education university 14 Manager education graduate master 15 Manager education graduate Ph.D. 16 Manager CCP membership 17 Manager admin. rank Vice Ke 18 Manager admin. rank Ke 19 Manager admin. rank Vice Chu 20 Manager admin. rank Chu 21 Manager admin. rank Vice Ting 22 Manager admin. rank Ting 23 Manager admin. rank Vice Sheng 24 Manager PC or CPPCC membership 25 Manager prior experience in state-owned firm 26 Manager prior government experience 27 Ownership type

1.266 1.233 1.020 1.000 2.006 0.829 12.276 0.321 1.585 0.295 0.418 0.469 0.437 0.278 0.109 0.488 0.063 0.140 0.343 0.230 0.395 0.206 0.140 0.321 0.496 0.284 0.487

1.100 0.672 0.000 5.781 0.576 11.446 0.884 4.872 0.096 0.224 0.324 0.256 0.084 0.012 0.612 0.004 0.020 0.136 0.056 0.192 0.044 0.020 0.116 0.432 0.088 0.616

s.d.

1.104

Mean


62

.14

.23

.08

.29

.11

.22

.02

.13

.00 −.01

−.03 .10

−.05 .06 .07 .12

.10 −.12

.06 −.02

.11 .10

−.10

−.10 .14 .10

.07

.10 .00

.02

.06 .06

−.04

−.06

.83

.58

.22 .04 .05 .00 .02 −.15

.80

.52

.47

2

.25 .04 .02 .04 .07 −.09

1

.85

.14

.20

.06

.18

.01 −.01

−.02 .09

.07 −.02

.13 .21

−.07

.00

.11 .01

−.03

.22 .02 .07 −.04 .00 −.12

3

Table 1 Panel One: Means, Standard Deviations, and Correlations of Variables

.16

.26

.06

.24

.03 .04

−.04 .10

.09 −.07

.16 .16

−.11

.04

.11 .03

−.05

.28 .04 .06 .00 .03 −.15

4

.19

.11

.24

.18

.26 .14

.03 .14

.00 .10

.27 .04

.12

.17

.04 .22

−.23

.02 .19 .13 −.01 −.25

5

−.06 .02

−.14 −.01 .39

.07 −.02

.09

.05

−.15

−.01

.07

.08 .05

−.08 −.05

−.01 .00

.03 .11

.05 −.07

.10 −.17

.04

.13

.15

.09

.07

.17 .12

−.08

−.01

−.23

.05

−.07 −.05

−.08 −.09

−.05 −.09

−.08 .01 −.09 .15

−.12 −.03

−.07 −.02 .24 .17

−.05

−.07

−.16

−.04

−.12 −.08

−.09 −.12

.06 −.02

−.06

−.16

−.37 −.32

11

−.04 .06

−.10

−.12 .02

−.23 −.19

−.04 .08

−.18 −.04 −.05

.02

10

.01

9

.01

−.01 .08

8

.07 .08

.13 .16

.22 −.05

−.03

.00

.04 −.07

.14

.04 −.01 −.14

7

.04 .08

.04 −.01

.14 .03

−.03

.05

.08 −.03

.01

−.07 −.11 .00 −.13

6

.00

−.06

.05

−.01

−.07 −.10

.05 .01

.08 .02

.06 −.04

−.08

−.21

−.41

12

MENTAL ILLNESS AT WORK YAO ET AL.

Can J Adm Sci 26(1), 54–70 (2009)


63

Manager education graduate master Manager education graduate Ph.D. Manager CCP membership Manager admin rank Vice Ke Manager admin rank Ke Manager admin rank Vice Chu Manager admin rank Chu Manager admin rank Vice Ting Manager admin rank Ting Manager admin rank Vice Sheng Manager PC or CPPCC membership Manager prior experience in state-owned firm Manager prior government experience Ownership type −.03 .06 .21 −.04 .05 .11 −.04 .08 .06 .07 .06 .06 .06

−.18 −.06 .11 −.04 −.08 .03 .02 .20 .10 .18 −.07 .21 .11 .09 −.14 −.01 −.02 −.04 −.03 −.05 .33 −.02 .19 −.02 −.03 −.06

15

.05 .00 .20 .16 .33 .09 .11 .01 .06 .19 .47

16

−.01 −.03 −.02 −.03 −.01 −.01 −.02 .07 .20 −.08

17

−.06 −.03 −.07 −.03 −.02 −.05 −.01 .06 .11

18

−.10 −.19 −.09 −.06 .04 .03 .12 .24

19

−.12 −.05 −.03 −.03 .07 −.08 .19

20

−.10 −.07 −.11 .09 .10 .24

21

−.03 .23 .13 .07 .05

22

−.05 .05 .06 .05

23

−.06 .15 −.02

24

.01 .02

25

1.24 (.10) 1.21 (.11) .79 (.09)

.89 (.12) .93 (.11) .49 (.08)

Mean (s.d) for NSOE manager

Note: The null hypothesis of the t-test is that SOE managers and NSOE managers have the same means of government ties.

No. of government advisory ties No. of government friendship ties No. of government crucial ties

Mean (s.d.) for SOE manager

Panel Two: Means and Standard Deviations—Numbers of Government Ties of SOE Managers and NSOE Managers

.01

26

Rejected at 0.05 level Rejected at 0.05 level Rejected at 0.01 level

T-Test

Notes: 1. N = 250. 2. Correlations larger than 0.12 are significant at the 0.05 level, larger than 0.16 are significant at the 0.01 level, and larger than 0.21 are significant at the 0.001 level.

14 15 16 17 18 19 20 21 22 23 24 25 26 27

14

13


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64

Manager education junior high Manager education senior high Manager education college Manager education university Manager education graduate master Manager education graduate Ph.D. Manager CCP membership

Manager age

Manager gender

Firm age

Firm industry

Firm size

Intercept

0.315 (0.888) 0.086 (0.039)* 0.014 (0.086) 0.005 (0.006) 0.005 (0.233) −0.009 (0.047) −1.316 (0.836) −1.038 (0.807) −0.913 (0.803) −0.992 (0.809) −1.161 (0.835) −19.647 (4507) 0.069 (0.178)

Model 1a beta (s.e.) 0.341 (0.881) 0.091 (0.039)* 0.033 (0.088) 0.001 (0.006) −0.009 (0.231) −0.017 (0.047) −1.450 (0.83)† −1.158 (0.801) −1.015 (0.797) −1.105 (0.803) −1.305 (0.829) −19.931 (5087) −0.046 (0.184)

Model 1b beta (s.e.) 0.903 (0.805) 0.123 (0.04)** −0.029 (0.098) 0.000 (0.006) −0.189 (0.223) 0.001 (0.047) −2.073 (0.761)** −1.429 (0.714)* −1.297 (0.71)† −1.450 (0.717)* −1.245 (0.742)† −20.669 (7725) 0.163 (0.177)

Model 2a beta (s.e.) 0.948 (0.783) 0.127 (0.04)** −0.011 (0.099) −0.003 (0.006) −0.202 (0.22) −0.006 (0.046) −2.227 (0.741)** −1.556 (0.693)* −1.409 (0.689)* −1.565 (0.696)* −1.397 (0.721)† −20.727 (7747) 0.036 (0.182)

Model 2b beta (s.e.)

Negative binomial analysis

Table 2 Negative Binomial Maximum-Likelihood and OLS Regression of Government Ties

0.343 (1.342) 0.124 (0.056)* −0.144 (0.18) 0.006 (0.008) −0.288 (0.303) −0.085 (0.065) −1.850 (1.293) −1.159 (1.235) −0.946 (1.226) −1.217 (1.238) −1.628 (1.279) −21.280 (13996) 0.174 (0.248)

Model 3a beta (s.e.) 0.448 (1.318) 0.127 (0.055)* −0.121 (0.183) 0.001 (0.008) −0.334 (0.299) −0.100 (0.065) −2.087 (1.269)† −1.392 (1.212) −1.143 (1.202) −1.411 (1.214) −1.864 (1.256) −19.482 (5419) 0.005 (0.252)


0.856 (0.974) 0.108 (0.036)** −0.027 (0.072) 0.003 (0.005) −0.114 (0.19) −0.026 (0.04) −1.788 (0.932)† −1.435 (0.918) −1.304 (0.917) −1.489 (0.921) −1.606 (0.94)† −2.817 (1.077)** 0.165 (0.151)

Model 4a beta (s.e.)

0.896 (0.96) 0.110 (0.035)** −0.015 (0.071) −0.001 (0.005) −0.107 (0.187) −0.035 (0.04) −1.918 (0.92)* −1.537 (0.906)† −1.396 (0.905) −1.597 (0.909)† −1.739 (0.928)† −2.846 (1.062)** 0.066 (0.153)


OLS analysis


Can J Adm Sci 26(1), 54–70 (2009)


65

62.92 (23)***

−2.265 57.33 (22)***

/ln(a) Adjusted R2 LR c2 (d.f.)

Notes: 1. † p < 0.10; * p < 0.05; ** p < 0.01; *** p < 0.001. 2. Sample size = 250.

1.042 (0.808) 0.153 (0.417) −0.406 (0.236)† −0.389 (0.341) −0.048 (0.214) −0.022 (0.343) 0.508 (0.407) 0.795 (0.183)*** 0.045 (0.147) 0.513 (0.203)* 0.423 (0.18)* −2.391

0.885 (0.814) 0.345 (0.416) −0.246 (0.227) −0.224 (0.338) 0.093 (0.207) 0.075 (0.345) 0.580 (0.413) 0.822 (0.185)*** 0.033 (0.148) 0.420 (0.202)*

Manager administrative rank Vice Ke Manager administrative rank Ke Manager administrative rank Vice Chu Manager administrative Rank Chu Manager administrative rank Vice Ting Manager administrative rank Ting Manager administrative rank Vice Sheng Manager PC or CPPCC membership Manager prior experience in state-owned firm Manager prior government experience Ownership type

52.90 (22)***

−2.054

−0.062 (0.825) 0.361 (0.396) −0.804 (0.252)*** −0.322 (0.33) −0.069 (0.204) −0.412 (0.378) −0.553 (0.533) 0.386 (0.202)† −0.110 (0.148) 0.618 (0.211)**

58.69 (23)***

0.125 (0.805) 0.186 (0.389) −0.959 (0.258)*** −0.483 (0.33) −0.200 (0.208) −0.490 (0.372) −0.627 (0.523) 0.353 (0.199)† −0.120 (0.145) 0.701 (0.209)*** 0.429 (0.178)* −2.334 42.96 (22)**

−0.867

1.849 (1.068)† 0.346 (0.563) −0.342 (0.317) −0.116 (0.455) 0.196 (0.294) −0.136 (0.53) −0.184 (0.753) 0.809 (0.273)** 0.058 (0.203) 0.633 (0.296)*

49.72 (23)***

2.101 (1.035)* 0.078 (0.552) −0.589 (0.328)† −0.379 (0.455) −0.015 (0.300) −0.272 (0.521) −0.256 (0.733) 0.784 (0.269)** 0.072 (0.2) 0.768 (0.296)** 0.662 (0.255)** −1.038

(22)***

0.189

2.007 (0.995)* 0.472 (0.423) −0.453 (0.196)* −0.274 (0.276) 0.047 (0.186) −0.214 (0.338) 0.060 (0.447) 0.763 (0.197)*** 0.010 (0.128) 0.644 (0.218)**

(23)***

0.212

2.188 (0.983)* 0.268 (0.424) −0.600 (0.2)** −0.449 (0.28) −0.080 (0.189) −0.325 (0.336) −0.057 (0.443) 0.737 (0.194)*** 0.009 (0.127) 0.712 (0.217)*** 0.412 (0.151)**


Can J Adm Sci 26(1), 54–70 (2009)


YAO ET AL.

NSOE managers to cultivate government ties is emphasized, the motivation of SOE managers is not accounted for by the structural replacement thesis. We posited that in order to assess two social actors’ social ties, we had to consider both actors’ motivation. Our comparison of the motivation of NSOE managers and of SOE managers shows that there is no compelling reason to suggest NSOE managers are more motivated to cultivate government ties. Secondly, we further proposed that the capability and opportunity of social actors to cultivate social ties are two important antecedents for the extensiveness of ties. Our assessment shows that SOE managers are more capable and have more opportunity for the cultivation of government ties. We thus proposed our structural inducement thesis, which suggests that SOE managers have more government ties than NSOE managers. So what have we learned about the relationship between ownership type and the extensiveness of government ties? We contribute to the social network literature by formally elaborating the structural inducement thesis. Consistent with the research settings used by Xin and Pearce (1996) and Park and Luo (2001), we tested the effect of ownership type on three types of government ties. Our analyses show that managers in NSOEs reported fewer government advisory ties, fewer government friendship ties, and fewer government crucial ties than comparable peers in SOEs. All of these results, contradictory to the structural replacement thesis, provided support for the structural inducement thesis.

these two perspectives in stark contrast, but their clarification also have important practical implications for foreign investors in general, and expatriates in China in particular. Our re-analysis of the structural replacement thesis has theoretical implications. We do not dispute the argument that NSOE managers are eager to alleviate their disadvantage stemming from the absence of formal backing by the government by forming social ties with government officials. We acknowledge Xin and Pearce’s (1996) insight that one possible route to change this deficiency is to establish and maintain social ties to the people in institutions who distribute the resources. However, our intention is to provide a richer description of the multifaceted nature of managers’ need to access government officialdom. Managers are compelled by a range of for-profit drives, as well as a variety of not-forprofit goals. For example, we proposed that SOE managers are eager to cultivate government support in the interest of their employees’ social welfare, their families, and themselves. We suggested that the structural replacement thesis is incomplete because, without considering the struggles of SOE managers, any conclusion based solely on the analysis of NSOE managers is premature. We exposed the root cause of the deficiency in the structural replacement thesis: It implicitly assumes that people cultivate social ties, more or less, for the same reasons. We have formally introduced a new thesis, which we refer to as the structural inducement thesis. This thesis stems from our analyses of managers’ capability and opportunity of cultivating government ties. We posited that a structural arrangement, such as ownership, provides a fertile ground that encourages the emergence of common identity, rituals, and routines that ultimately lead to social ties. Furthermore, such a command chain provides more opportunities for social connections to take place. In appearance, the structural inducement thesis discloses one major factor contributing to government ties: the structural connection with the government. At a deeper level, we pinpointed the difference between the structural replacement thesis and the structural inducement thesis in answering one of the major queries in social network studies: Whether the gulf separating social ties and hierarchy can be fully bridged. The structural replacement thesis provides a positive answer to this query, while the inducement thesis hints at the possibility that the gulf may be enlarged.

Contributions to Scholarship The structural replacement thesis contradicts a major theme permeating classical organization theories and recent social network studies: A structural arrangement, such as government ownership, is conducive rather than detrimental to the proliferation of ties associated with the structure. We summarized this theme under the rubric of the “structural inducement thesis,” which proposes that social actors who are connected by structural arrangements report more social ties than social actors who lack these arrangements. This paper is the first to propose the notion that SOE managers are facilitated by governmentrelated communication channels to cultivate government ties, in comparison to NSOE managers. It is surprising that, although the above notion is a straightforward proposition intuitively derived from classical organization theories and recent social network studies, few prior studies have elaborated arguments associated with this notion, let alone disputed the structural replacement thesis. It is thus important that the structural inducement thesis be further tested vis-à-vis the structural replacement thesis, because not only are the predictions from


Applied Implications Our re-analysis of the structural replacement thesis has important practical implications. First, our analysis suggests that for expatriates working in China, the

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conclusion that social ties with the Chinese government can be used to fully compensate for the lack of institutionalized connection with the Chinese government is premature. Expatriates in China must recognize that their social networks are most likely to be deficient in terms of extensiveness in comparison to the social network of managers in SOEs. We suggest that managers in NSOEs may have to consider other avenues to address their structural disadvantage, such as formal joint ventures with SOEs, or inviting government officials to sit on their boards.

of managers possess more weak ties and which posses more strong ones. We call for future researchers to assess tie strengths among business managers. Thirdly, our study shows that two categories of managers—SOE and NSOE managers—possess different numbers of government ties. An interesting extension of our study is to examine whether there exists a withincategory differentiation of tie distribution. Specifically, future research is warranted to examine whether and how government ties differ among SOE (or NSOE) managers. It is likely that managers from large SOEs or NSOEs whose economic impact are deemed crucial by the Chinese government receive favourable attention from the government and thus have an upper hand in establishing more government ties with high ranking government officials. It is also possible that an SOE affiliated with a municipal government has a different number and/or density of government ties as compared to one affiliated with the central government.

Limitations and Future Research Directions Our paper contributes to the issue of the interchangeability of social ties and hierarchy. We suggest several lines of future research. One caveat of our current study is that we did not measure the process of establishing government ties since our focus was on comparing the government tie sizes of NSOEs and SOEs managers. This caveat is similar to Ibarra’s (1992), since she did not measure the process leading to the establishment of women’s and men’s networks. Future research could explicitly measure motivation, capability, and opportunity, that is, the process of establishing government ties. For future scholars, it is also a challenging task to tease out the effects of the following two social processes: (a) Managers in NSOEs use social ties to substitute for formal support, and (b) the formal structure in the government hierarchy facilitates the propagation of social ties. They are required not only to gauge the multifaceted motivation of managers directly, but also to measure directly their capability and opportunities for the formation of government ties. Secondly, we acknowledge that guanxi, social ties in China, is an umbrella term whose rubrics encompass a variety of meanings ranging from strong personal loyalties to ceremonial bribery. Although our study classifies government ties into three categories, we might have failed to exhaust the dimensionality of guanxi in general and government ties in particular. The illumination and operationalization of all of the dimensions of guanxi exceed the scope of our study. Further studies can examine the dimensionality of government ties and assess the extensiveness of government ties on these dimensions. Another issue is tie strength. We recognize Xin and Pearce’s (1996) contribution, because they disclosed one significant difference between SOE mangers and NSOE managers: The latter can secure government protection structurally via government ownership. The utility of government ties may be more closely related to strength of government ties rather than the number of these ties. Our study has yet to shed light on which type


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Appendix Questions Posed to Managers in Pilot Interviews 1.1. Would you please think back over the last three years? Please list people, using pseudonyms, outside of your firm with whom you often chatted or discussed your firm’s managerial problems, or from whom you sought advice for your firm’s development. These people could be your relatives, friends, acquaintances, former classmates, neighbours, business partners or any other person who did not work for your firm. Please list as many as 10 people that you deem most important in this regard. 1.2. In the above list of people, please let us know whether these people worked for (a) the government, (b) academia or related institutions, (c) Chinese firms other than your own firm, (d) firms from

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3.1. Would you please think back over the last three years? Please list people, using pseudonyms, outside of your firm with whom you spent after-work time in social activities in the past three years, ranging from getting together for casual chats, dinners, mutual family visits, social functions, to pursuing common hobbies and interests (e.g., golfing and attending the same night school). The list of people can partially overlap with, completely overlap with, or be completely different from, the list of people in 1.1 or 2.1. These people could be your relatives, friends, acquaintances, former classmates, neighbours, business partners or any other person who did not work for your firm. Please list as many as 10 people that you deem most important in this regard. 3.2. In the list of people of Question 3.1, please let us know whether these people worked for (a) the government, (b) academia or related institutions, (c) Chinese firms other than your own firm, (d) firms from foreign countries, Hong Kong, Taiwan or Macau, and (f) other types of institutions or institutions which you cannot identify.

foreign countries, Hong Kong, Taiwan or Macau, and (f) other types of institutions or institutions which you cannot identify. 2.1. Would you please think back over the last three years? Please list people, using pseudonyms, outside of your firm that you deem most critical for your firm’s development in the past three years. The list of people can partially overlap with, completely overlap with, or be completely different from, the first list of people in 1.1. These people could be your relatives, friends, acquaintances, former classmates, neighbours, business partners or any other person who did not work for your firm. Please list as many as 10 people that you deem most important in this regard. 2.2. In the list of people of Question 2.1, please let us know whether these people worked for (a) the government, (b) academia or related institutions, (c) Chinese firms other than your own firm, (d) firms from foreign countries, Hong Kong, Taiwan or Macau, and (f) other types of institutions or institutions which you cannot identify.


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