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AM Lecture 2Western governance reformsDuring the 1990s SOEs moved to marketization and corporatization, however many SOEs still had the State as the main shareholder. In Western firms, managers are answerable to the shareholders, who want the company to be profitable and efficient so that they can gain dividends on their shares. SOEs were in this position, as the firms had been corporatized, not privatized. Based on their view on the definition of an efficient firm, Zhang et al. (2004) argue that it is no longer sufficient for SOEs to have the traditional organisational structure with the government as the major shareholder. They state that enterprises must continuously re-examine employees' skills, knowledge and cognitive abilities to guarantee they keep up with the competitive environment. Is it possible to have market socialisation? Many say that it can't work, as the two concepts are in opposition to each other. In particular, employees are used to being workers of the State and even though foreign managers might appear, the workers are still aware that the State is still in control.
Adaptation failureSOEs can fail at the management level and the worker level. Studies suggest that the Chinese workforce were indeed not ready to function in a market environment. Some of the reasons included a high risk aversion culture, meaning that they don't like change. This posed a problem, as an efficient business needs to constantly work with the changing environment and SOEs were not designed to cope with change. Joint ventures are an interesting subject in this context, as external managers bring in new practices, which the workers don't like and so ensure that the venture doesn't work by not co-operating. A new management practice can be forced upon workers, or a more subtle approach can be taken with HRM, such as being more sensitive to what Chinese workers want.
Chinese management and tradition Other studies and remarks on Chinese management
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