In this article, we explore different behavioural assumptions in the training of managers. We show that training emphasizing rationality and self-interest, the standard assumptions used in economics, benefits those working in technical posts but may lead future managers to rely excessively on rational and explicit safeguarding, crowding out instinctive relational heuristics and signalling a deficient human type to potential partners. In contrast, the diverse, implicit, and even contradictory nature of behavioural assumptions in management theories avoids conflict with innate cooperative tools and may provide a good training ground for using such tools. Tentative confirmatory evidence shows that the weight placed on behavioural assumptions in the core courses of the top 100 business schools influences the average salaries of their MBA graduates. Controlling for the self-selected average quality of students and some other school characteristics, average salaries are seen to be significantly greater for MBA programs that include a larger proportion of management courses in their core curriculum.

Prior research and the articles included in this special issue demonstrate that in emerging markets in general and in China in particular, knowledge spillovers exist between foreign firms and domestic firms. As domestic markets become more sophisticated, and competition between domestic firms and foreign firms becomes stronger, knowledge is flowing to and being sourced in many different directions: from overseas head offices to foreign firms then on to domestic firms; from domestic firms to domestic firms; and from domestic firms to foreign firms, and back to the multinational corporations' head offices in the form of reverse spillovers and reverse innovation. We propose that knowledge spillovers, search, and creation in an emerging market are a dynamic and reciprocal process with knowledge flowing between and among foreign and domestic firms. This represents a fertile field for future research and we have identified a number of areas ripe for study.

Publicly traded Chinese firms recently reformed their ownership structuresby converting non-tradable shares, which constituted two-thirds of sharesoutstanding and were held largely by the state, into shares that could tradeon domestic exchanges. To facilitate this reform, tradable shareholders werecompensated with stock grants from non-tradable shareholders. Our analysisfocuses on the level of compensation, the compensation ratio, the ratio of new tradable shares granted to tradableshares outstanding before the reform. Contrary to the predictions ofasset-pricing models, most firms set the compensation ratio around 0.3. Weexplain this surprising convergence using institutional theory. In doing so,we analyze the power and interests of all relevant actors – not just owners,but also state regulators, executives, and other agents — and draw oninsights from resource-dependence and agency theories. We find strongevidence of coercive and mimetic isomorphism, but no evidence of normativeisomorphism. Because our dependent variable is continuous (a ratio), we areable to show that the mimetic effects we observe cannot be attributed tocoercion or norms. Thus, we not only explain an empirical puzzle, we alsoadvance institutional analysis of isomorphism by clearly distinguishingthree isomorphic forces that have been conflated in much previousresearch.

Time pacing, which refers to the regulation of intensity and direction of people's attention and effort, is central to innovation management. However, in a study of complex product innovation in pharmaceuticals, we find that time pacing is a major source of conflict between managers and scientists over innovation management. Our analysis of this tension reveals that two very different forms of time pacing operate in this complex innovation. Clock-time pacing, which gauges progress by the predictable passage of clock time, is used by strategic managers to reduce unnecessary exploration, focus on necessary questions, and speed up the execution of steps. Event-time pacing, which gauges progress by the unpredictable achievement of learning events, is used by the scientists to develop a deep understanding of how a drug might behave in the body against a disease, to focus on learning by asking many questions, and to integrate emergent results into plausible patterns. We identify four dimensions that differentiate clock-time pacing from event-time pacing, which drive the tension between the two. We summarize negative effects that this tension can have on innovation if left unaddressed, and then suggest ways to integrate clock-time pacing with event-time pacing. We also discuss implications for Chinese management.

We investigate the degree to which the presence of inward foreign direct investments (FDI) influences product innovation by emerging market firms. We begin with FDI spillover effects at the national level, the common approach in the literature. We further examine spillover effects at the subnational level because knowledge spillovers have been found to be localized. We study both intra-industry and inter-industry FDI spillovers in a subnational location, based on the distinction in the cluster literature between Marshall–Arrow–Romer specialization externalities and Jacobian diversification externalities. Using information from more than 346,000 Chinese manufacturing firms from 2000 to 2006, we find that Chinese firms improve product innovation when they are located in cities with concentrated foreign innovative activities in the same industry. These intra-industry spillover benefits decrease quickly, however, as foreign presence increases and, at high levels of foreign concentration, are dominated by the crowding-out effect. We also find evidence of inter-industry spillover benefits in a city; diversity of industries with a foreign presence contributes to product innovation by Chinese firms.

Drawing on the threat-rigidity hypothesis, we examine how managerial opportunity and threat interpretations of external environments affect a technology venture's choice of external knowledge search strategies in an emerging market. Results from a sample of 141 technology ventures in China reveal that opportunity interpretation directly and positively influences both the breadth and depth of external search, whereas threat interpretation directly and negatively influences only external search depth. Furthermore, managerial ties strengthen the positive relationship between opportunity interpretation and external search breadth but weaken the positive relationship on external search depth. Managerial ties weaken the negative relationship between threat interpretation and external search breadth but strengthen the negative relationship on external search depth. Implications for both research and practice are offered.

Transformation is a vital challenge for Chinese state-owned enterprises(SOEs) and their top managers. To explore this increasingly important topic,we first summarize the institutional context of SOE transformation and theconflicting interests and interdependent relationships of six major actorsas inside/outside stakeholders. Based on the strategic action view ofinstitutional analysis, we emphasize the role of the change agent's level ofaspiration and political skills in transforming an SOE. Then, throughinductive case studies on the transformation of three SOEs, we address howtop managers, acting as change agents, can initiate and engage ininstitutional change through strategic actions such as negotiation,manipulation, and coercion; we also illustrate how they adopt differentactions to influence different actors. Based on the inductive results, wedevelop a theoretical model, which we refer to as the ‘strategic actionmodel’ that shows how the aspiration level, political skills, strategicactions, and change outcomes interrelate and offer insights into thestrategic action of top managers as change agents. Our most importantcontribution is revealing the interplay between the proactive role of insideactors as change agents and the enabling condition of institutionalcontext.

The principal–principal (PP) perspective of corporate governance shows that multiple large shareholder (MLS) structure has competing monitoring and entrenchment governance effects. We argue that the dominant effect depends on contest for control among large shareholders and the number of large shareholders involved. Using data from Chinese family listed companies from 2004 to 2007, this study shows inverse U-shaped relationships between contest for control and corporate market value, as measured by Tobin's Q, and between the number of large shareholders and corporate market value. Findings indicate that at low to medium levels of contest for control or number of large shareholders, formal institutions can strengthen MLS structure's monitoring effect and can help this effect last longer. As a whole, the findings extend the institution-based view in the context of family corporate governance by showing that formal institutions can shape the ability of MLS structure to exert governance.

Integrating theories of psychological ownership and stewardship, and taking a relational perspective, we examine key antecedents and outcomes of professional managers' psychological ownership in Chinese owner-managed family businesses. We tested the model using a survey of 166 Chinese professional managers (one from each of 166 family businesses). We find that owner–manager relationship closeness at work mediates the effect of both the owner's benevolent leadership and owner–manager friendship ties on the manager's psychological ownership. Psychological ownership, in turn, is positively related to the manager's intention to stay and to stewardship behaviour. Theoretical and practical implications are discussed.

This study seeks to explain why firms respond in different ways to similarexternal administrative pressures, such as government demands for charitablegiving, particularly in a transitional economy such as China's. Taking theperspective of the CEO's representation on external demands, the studyexplores the relationship between political affiliation and corporategiving, stimulated by powerful and politically affiliated CEOs, who are thegovernment's natural constituency and who comply with governmental demandsfor donation. The study introduces contingent factors that influence theCEO's perception of how to satisfy government demands, and that moderate therelationship between political affiliation and corporate giving. Usingfirm-level data of corporate contributions following the Sichuan earthquakeof May 12, 2008, we find that corporations with CEOs who hold politicalaffiliations have a significantly higher probability of donation and alsomore cash giving. This relationship is moderated by contingent factors suchas government ownership, financial condition, and concentration of votingrights.

This study contributes to an emic understanding of how different types of social obligations may help or hinder the formation of initial organizational trust within collectivist cultures. We extend prior social categorization insights by challenging the expectation that in-group favouritism automatically facilitates higher levels of initial trust among collectivists. We theorize and test the asymmetric effects of two different types of social obligations toward members of distinct social categories (kinship and friendship in-groups) on the formation of initial organizational trust. Using a quasi-experimental research design in a collectivist culture (Japan), we hypothesize and show that in ambivalent situations, voluntary social obligations toward members of friendship in-groups encourage early trust in trustees' organizations; however, involuntary social obligations toward members of kinship in-groups discourage early trust development toward the organization these trustees represent. The effects of (in)voluntary social obligations on initial organizational trust are contingent on how collectivists perceive each encounter: voluntary social obligations are more conducive to trust-building at lower levels of perceived opportunity; involuntary social obligations have stronger effects on initial organizational trust at higher levels of perceived risk.

The literature suggests that cluster firms may undertake both local and nonlocal geographic searches for knowledge that contributes to their product innovation, and that cluster firms must balance their local and nonlocal searches for product innovation. Yet, previous research has seen local and nonlocal searches as one-dimensional, rather than two-dimensional, activities involving search breadth and depth. In this study, we show that local search and nonlocal search are balanced by jointly considering the breadth and depth of geographic search, and that the optimal balance depends on industry dynamism. Using a sample from two industry clusters in China, we find positive relationships between relative local search depth, relative nonlocal search breadth, and the product innovation of cluster firms. Relative local search depth and relative nonlocal search breadth contribute more to product innovation in stable industries than in dynamic industries.