Management Style in "Chinese Capitalism"

by

Fang Lee Cooke

• LAST REVIEWED: 22 April 2013
• LAST MODIFIED: 22 April 2013
• DOI: 10.1093/obo/9780199920082-0042

Introduction

Interest in the study of Chinese management began in the 1980s, after China adopted its Open Door economic policy in 1978. Since the 1980s, the country has entered a period of dramatic economic growth and profound social change that has seen the drastic shrinkage of the state sector and the rapid expansion of the private sector on both the domestic and foreign investment fronts. Whereas the Chinese government describes this transformation as “marketization with socialist characteristics,” Western business commentators and academics have increasingly dubbed it “Chinese capitalism” or “state capitalism.” The marketization of the economy requires managers in state-owned enterprises to adopt a new mind-set in managing their businesses within the loosening grip of state control, on the one hand, and reduced state protection, on the other. Marketization also creates opportunities for millions of entrepreneurs, large and small, to fill the marketplace in various parts of the country. In the 21st century, both state and private entrepreneurship are expanding into the global arena, in part pushed by the Chinese government’s Go Global policy and in part lured by new market opportunities, especially in less developed economies. The internationalization of Chinese firms presents further challenges to Chinese managers because of their limited international expertise. Analysis of management style in Chinese capitalism needs to be situated in this evolving business context.

General Overviews

Studies on leadership and management in the Chinese context have been conducted from different perspectives. As the business and management discipline was extremely weak in the early years of the economic and social reform period in China, most of the earlier studies of Chinese management style were conducted by Western scholars, such as John Child and Andrew Walder (Child 1994, Walder 1995). Many were engaged in the delivery of management education and executive training in top-ranking universities in China, in response to the Chinese government’s drive to turn members of its vast army of state cadres into modern managers with business knowledge. Studies on Chinese managers in the late 1980s and early 1990s focused primarily on the nature of managerial work and the management development (MD) system carried out under the strong influence of the state, as most of these studies were conducted within the state sector (Boisot and Xing 1991, Borgonjon and Vanhonacker 1994, Branine 1996). Although interest in MD continues, albeit often in the form of macrolevel- or nonempirical-based reviews (see Management Development), studies on Chinese managers, from the mid-1990s onward, have broadened to the investigation of leadership style. These studies have frequently been conducted using a comparative lens to compare and contrast the cross-country differences resulting from institutional and cultural variations (Ralston, et al. 1993; Smith, et al. 1997; Tsui, et al. 2006; see also Chinese Management in the Global Context). Managers in private firms, Sino-foreign joint ventures, and foreign-owned subsidiaries in China have become the targets of analysis. This progression not only reflects the changing political economy landscape in China, but also suggests that studies on management and leadership in China are becoming international and more closely in line with developments in strategic human resource management theory. In China an important feature in the management of business relationships, and in the management of social relationships more broadly, is the notion of guanxi (关系). At its most basic, guanxi means “personal relationship,” though this English translation does not capture the term’s dynamics and nuance in practice. Given that the old formal institutions have been dismantled or radically changed and that the new formal institutions are weak in the contemporary Chinese economy, having good guanxi is arguably crucial for getting business done. Cultivating good guanxi also forms a main part of managers’ work for reciprocal benefits, which are necessary for fulfilling their managerial tasks.

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  A pioneering study of enterprise directors in Beijing in 1987. Observes that managers in state-owned enterprises had to respond to their superiors’ demands promptly and positively, no matter what. Highlights the autocratic and hierarchical nature of Chinese management.

• Borgonjon, Jan, and Wilfried Vanhonacker. “Management Training and Education in the People’s Republic of China.” International Journal of Human Resource Management 5.2 (1994): 327–356.

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  Documents the historical development of management education and training (MET) in China. Analyzes the MET system by examining political, structural, policy, and attitude issues. Reveals a number of problems, including narrow interpretation of modern management, absence of a consistent national policy on MET, and lack of qualified educators. Available online for purchase or by subscription.

• Branine, Mohamed. “Observations on Training and Management Development in the People’s Republic of China.” Personnel Review 25.1 (1996): 25–39.

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  An observation of how training and MD policies are perceived and implemented in Chinese state-owned enterprises in a period of rapid economic change. Reveals the tension between the process of developing Chinese managers and their abilities and what is required of them for exploiting economic reform. Available online for purchase or by subscription.

• Child, John. Management in China during the Age of Reform. Cambridge Studies in Management 23. Cambridge, UK, and New York: Cambridge University Press, 1994.

  A pioneering monograph that shows the world outside China how Chinese firms are being run during the period of economic reform, including leadership, decision making, management of marketing and purchasing transactions, work roles of senior managers, personnel practices, reward systems, and management of international joint ventures.

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• Smith, Peter B., Zhong-Ming Wang, and Kwok Leung. “Leadership, Decision-Making and Cultural Context: Event Management within Chinese Joint Ventures.” Leadership Quarterly 8.4 (1997): 413–431.

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  Contains two studies of the ways in which middle managers in enterprises in mainland China handle work events. Finds that Chinese managers do not change the way they handle work events when working with partners of different nationalities but are aware of the varying effects resulting from nationality differences. Available online for purchase or by subscription.

• Tsui, Anne S., Zhi-Xue Zhang, Hui Wang, Katherine R. Xin, and Joshua B. Wu. “Unpacking the Relationship between CEO Leadership Behavior and Organizational Culture.” Leadership Quarterly 17.2 (2006): 113–137.

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  An in-depth and informative study on leadership in China, where there is large variance in leader discretion in different types of firms. Investigates when and why decoupling between CEO leadership behavior and organizational culture may occur. Unpacks the nature of the relationship through two survey studies and an interview study. Available online for purchase or by subscription.

• Walder, Andrew G. “Career Mobility and the Communist Political Order.” American Sociological Review 60.3 (1995): 309–328.

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  A scholarly paper by one of the most influential authors on contemporary Chinese management. Demonstrates the existence of two distinct career paths in the re-forming urban China: political elites with high prestige, authority, and material privileges versus professional elites with high prestige but no authority or material privileges. Available online by subscription.