Of particular concern in the literature on business is the importance of trust and the disabling consequences of broken trust on business partnerships. Chapter 3 draws on extensive interviews in exploring the issue of trust, and reports novel findings which lead to new theoretical formulations. It has been central in sociological understanding that embeddedness in social and business exchanges generates and maintains interpersonal trust. Should opportunistic behaviour or violation of trust occur it is routinely assumed that such breaches would be exposed or punished, including reputation loss and exclusion from future exchange opportunities. What is less explored is that breaches of trust in many instances may not lead to disclosure of such a behaviour or termination of exchange relationships. Chapter 3 expands our understanding of broken trust. It identifies and explores mechanisms which operate in avoidance of confrontation, exposure and retaliation in instances of breaches of trust and also strategies employed by entrepreneurs in continuation of exchange relationships with violators of trust. The chapter examines underexplored aspects of the complexity and dynamics of business exchange relations and points to a rethinking of trust and social exchange.

The Conclusion highlights how an examination of entrepreneurs in contemporary China, including a careful and empirically grounded account of business and social relations in China, challenges many conventional approaches to research and research findings regarding such core concepts as trust, social networks, crisis, gender, family business, and e-commerce, and shows how standard conventions that are widely accepted in the scholarly and research literatures are in need of revision. It is shown how this book provides a clarification and extension of the conceptualization of a number of core theoretical notions by drawing on the details of the many cases that are explored in the six chapters of this monograph. It is shown how the research findings reported in this book will serve the purpose of stimulating and encouraging further research on erstwhile neglected aspects of business relations as well as the development of new theoretical frameworks for understanding social exchange dynamics in business, not only in China but more generally.

Chapter 1 unpacks the traditional framework that shapes how scholars and policymakers think of corporate governance and its role in financial development and market growth. It reviews the main strands of literature that have nourished legal scholarship in the field of economic development law and development studies and the new institutional economics tradition. It describes how these strands connect with the main theories underlying scholarship on corporate governance and financial market development and explains that the literature highlight the importance of investor protection for the growth and development of markets.

This book examines the role of law through four decades of market reforms in China. It employs two layers of analysis: a market development macro layer and a corporate governance and capital market micro layer. The macro layer, Part II, establishes the analytical framework. It shows how the law translates and secures political–economic power dynamics within the Party-state system. Examining the evolving functions of law through the eras of market reform, the analysis shows how the law supports the Party-state’s efforts to strike a delicate balance between its needs and desires for macro control, the interests of hierarchies within the Party-state system, and the market, thereby configuring China’s unique socialist market economy. The micro layer, Part III, implements the framework. It digs deep into corporate governance and the Chinese capital market and considers how law and political economic determinants entwine in shaping the business environment in which public firms operate.

Drawing on a chronological study of an extensive archive of governance documents issued by organs of the Chinese Party-state since economic reforms began in 1978 until the present, the book sheds a new light on a long-standing debate about the role of law in China’s economic development and about the possible varieties of growth-supporting governance institutions.