Coupling of legitimacy mechanism and efficiency mechanism in enterprise group governance during China's economic transformation: A microanalysis perspective of subsidiary initiative

Chinese enterprise groups, which are under the transitional economy, are facing to both the institutional pressures from the environment and the pressure of competition of the competitors who have advanced technology. In this condition, an analysis based on efficiency is not enough anymore. Therefore, this paper sets out from a micro-analysis view of subsidiary initiative, applies social capital theory, network theory and the new institution theory to build a theoretical model, which couples legality mechanism and efficiency mechanism, and studies the listed firms among Shanghai and Shenzhen 300 Index from 2003 to 2009. We find that, (1)the intrinsic driving power of the enterprise groups growth is their subsidiaries' initiatives; (2)subsidiaries construct or eliminate their inner network based on efficiency mechanism; and (3)the informal network among a group can help its subsidiaries buffer their institutional pressures. Data evidence supports our argument, that is, during the evolution of Chinese enterprise group, legality mechanism and efficiency mechanism are coupled together. Relative to the standpoint of normal system and efficiency system are separate, our conclusion makes the new institution theory more abundant, and it's significant to enterprise group governance practice.