Institutional gap and enterprise behavior: Evidence from China.

Area of Science:

• Economics
• Business Studies
• Institutional Theory

Background:

• Alternative institutions significantly impact private enterprise development.
• Understanding the interplay between formal and alternative institutions is key.
• The concept of 'institutional gap' addresses overlaps between these institutional states.

Purpose of the Study:

• Investigate the relationship between institutional gap and enterprise behavior.
• Analyze the impact of state-owned equity introduction on Chinese private enterprises.
• Compare state-owned equity introduction with entrepreneurs' political participation.

Main Methods:

• Empirical analysis using data from 306 listed companies (January 2012 - December 2022).
• Identification, classification, and explanation of formal and alternative institutions.
• Proposal and application of the 'institutional gap' concept.

Main Results:

• Chinese private enterprises introducing state-owned equity show outperformance in management, financing, and market entry.
• State-owned equity introduction is a significant channel, though less emphasized than political participation in some contexts.
• Empirical evidence supports the positive impact of state-owned equity on enterprise performance.

Conclusions:

• Formal institutions and legal systems require improvement for efficient resource allocation.
• Private enterprises should rely more on market mechanisms than government connections.
• Strengthening shareholder supervision is vital for maintaining state-owned asset value and preventing misuse for political gain.