How does ownership influence business growth? A competitive dynamics perspective |
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Authors: | Wei Yang Klaus E Meyer |
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Institution: | 1. Adam Smith Business School, University of Glasgow, University Avenue, Glasgow, G12 8QQ, UK;2. Ivey Business School, Western University, 1255 Western Road, London, Ontario, N6G 0N1, Canada |
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Abstract: | Firms engage in competitive actions to gain market share and hence to grow their revenues. However, not all firms are equally able to use competitive actions to drive growth. We argue that the ability to translate competitive actions to revenue growth depends on the ownership of the firm. Drawing on principal-agent and principal-principal perspectives, we argue that: (1) private owners (both foreign and local) are better able to employ aggressive actions to grow their business than state owners; (2) firms with multiple owners (especially international joint ventures) are less able to implement actions that drive business growth than full ownership. We find support for these arguments in empirical tests on survey-based data of 106 firms in China. Results show that in an emerging market the principal-principal perspective can better explain governance and competition than the principal-agent perspective. |
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Keywords: | Corresponding author Competitive dynamics Principal-agent conflict Principal-principal conflict Ownership type Business growth |
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