Does Ownership Matter? Firm Ownership and Corporate Illegality in China

  • Yongqiang GaoEmail author
  • Haibin Yang
Original Paper


This study explores whether or not a firm’s ownership status, as state-owned enterprise (SOE) or private-owned enterprise (POE), will influence its likelihood of engaging in illegality in China. We build our arguments on the institution-based view, positing that firms rationally pursue their interests in the distinct institutional context of China. Compared to SOEs, POEs have limited access to institutional resources, the lack of which threatens their development or even survival, forcing them to “break rules” to overcome institutional barriers. We thus suggest that POEs demonstrate a higher propensity to engage in illegal actions than SOEs do. However, if POEs could gain access to more institutional resources, their motivation to engage in illegal actions is likely to decrease. Following this logic, we suggest that political connections and market development will mitigate the likelihood that POEs will engage in illegal actions. We find support for our predictions using evidence from Chinese listed manufacturers. Our research contributes to the literature by revealing the institutional aspects of corporate illegality in transitional economies.


Corporate illegality Private-owned enterprise State-owned enterprise Political connections 



The authors are grateful to the financial support from the Natural Science Foundation of China (NSFC) (No. 71772071).

Compliance with Ethical Standards

Ethical Approval

This article does not contain any studies with human participants or animals performed by any of the authors.


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Copyright information

© Springer Nature B.V. 2019

Authors and Affiliations

  1. 1.School of ManagementHuazhong University of Science and TechnologyWuhanPeople’s Republic of China
  2. 2.College of BusinessCity University of Hong KongKowloonHong Kong

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