Big business with Chinese characteristics: two paths to growth of the firm in China under reform

This paper presents a case study of two large firms which emerged from among the ranks of traditional state-owned enterprises and new entrants: Shougang (steel) and Sanjiu (pharmaceuticals). Rather than being irreconcilable with the market economy, the experience of these two firms suggests that the Chinese Communist Party and the People's Liberation Army possessed a rich legacy of organisational and motivational skills. Moreover, Shougang and Sanjiu both grew rapidly through mergers and acquisitions in the absence of privatisation and a developed stock market. Furthermore, the main reason for Shougang and Sanjiu's success is not special help from the government or the army, but rather the fact that its leadership used their autonomy to construct a highly effective business organisation

Large firms and catch-up in a transitional economy: the case of Shougang Group in China

This study examines the possibility of catch-up of the Chinese steel industry, in particular the Shougang Group, with the leading global steel giants. Shougang is one of the four steel companies that have been selected by the Chinese government to constitute the core of the future Chinese steel industry. The contract system at Shougang, which operated from 1979 to 1995, unleashed an extraordinary entrepreneurial energy in the formerly traditional state-run steel plant. In the post-contract system, Shougang's range of decision-making independence in respect to the purchase of inputs, its production structure and product marketing has increased substantially compared to the contract system, when the government still controlled many of the key decisions. As a result of institutional constraint, the low value-added steel products dominate Shougang's portfolio. To challenge the established giants in the steel industry, Shougang has to divest the loss-making non-core businesses, slowly downsize employment in the core business, raise capital on the stock market and generates the resources for continued upgrading of its steel technology and diversifying its product portfolio