The Effect Factors Of Firm Performance And Strategic Choice In The Period Of Transition Economy

With the development of reform and openingup in 30 years,Chinese economy is confronted with double transformation.On the one hand,China is changing from a relatively backward agricultural country to a developing industrial country and from a rural dual economic structure to an urban industrial society,which is the transformation of development.On the other hand,China is changing from a planned economic system to a market economic system,which is the transformation of system.The main purpose of this paper is to study which factors affect firm performance and which factors are closely related to the strategic chioce of firms in the background of transition economy.So that we can find the methods of strategic analysis and help Chinese firms make strategies and improve performance.In the period of strategy management,there have been relatively systematic theories,but each theory has its own characteristic and shortcoming.There are also empirical studies on the determinants of firm performance abroad,but in China the empirical studies are at the initial stage.So there is still doubt whether the conclusions is applicable to Chinese transition economy.At the same time,there are great differences between China and foreign countries in the social and cultural environment.China is changing from planned economy to market economy and Chinese firms are facing new situations,such as the opening of market,the reform of monopoly industries and state-owned enterprises,and intemational financial crisis. Therefore,the exiting theories are not always fit for current situation in China and it is necessary to study the issues above.It is great significant to research the influencing factors of firm performance and explore the strategic analysis methods which are fit for the actual situations of Chinese firms.On the basis of transition economy theory and strategic management theory, this paper focuses on Chinese firms and adopts statistical analysis and case study method.The main content and innovation points are as follows:1.The specific environment of our firms in the period of transition economy. This paper studies the changes on the environment of Chinese firms during the transformation,such as the reform of monopoly industries,the reform and restructuring of state-owned enterprises,the overview of Chinese economy during the reform and opening up,the impact of international financial crisis on our macro-econolny and macro-control policies. It concludes that in China the external environment is complex and unique. There are a lot of monopoly industries in which the state-owned enterprises are dominant.The macro-control policies have great impacts on all kinds of economic entities.In dealing with the international financial crisis,the government plays an irreplaceable role.2.The industry effects on firm performance.In this paper,in order to research the industry effects on performance,we carry out an empirical research on 1163 Chinese listed firms' performance in 20 industries by one-way ANOVA and descriptive statistics.The results indicate that within our current economic development and market environment,the industry factors have notable effects on gross profit margin but no notbale effects on net profit ratio.It is very important for Chinese listed firms to choose an industry with higher payoff potential.However,in some industries with higher degree of marketization just as equipment and biopharmaceutical industry, firm's resources and capabilities are the crucial determinants of net profits.3.The industry effects and firm effects on firm performance.In this paper,we choose not only accounting-based measures but also value-based measures as the measurement of firm performance and carry out an empirical research on 1070 Chinese listed firms' performance in 20 industries by variance components analysis. We study the determinants of firm performance from three aspects:industry effects, time effects and industry/time interaction effects.Meanwhile,we distinguish performance leaders,performance losers and firms whose performance at the middle level in the industry and analysis industry effects,time effects and industry/time interaction effects on the performance of above three categories of firms.The results show that(1) the short-term payoff of the firm is largely caused by industry effects,(2) but for the long-term investment value and future development potential,firm's resources and capacities are the main determinants,(3) for a few performance leaders and losers in their industry,firm-specific resources and capacities seem to matter significantly more than industry factors.But for the firms in the middle of industry,i.e.,for those that are neither notable leaders nor losers in their industry,however,industry factors turn out to be more important for firm performance than firm-specific factors.It is indicated that Chinese firms must identify their advantages and disadvantages and get a clear understanding of self positions in the industry.Firms can not even guarantee their average revenue if it depends only on the potential of industrial payoff without self resources and capabilities which can bring sustaining competition advantage.For example,firms with ordinary resource and average managerial capabilities should select the industry with higher payoff,and improve self-specific resource and capabilities in the long term so as to enable enterprises to cope with various unexpected incidents and crises.4.The impact of government behavior on the strategy and performance of the enterprises.In this section,we use case study to analysis how the government behavior,especially how the policy factors affect the strategy and performance of the state-owned and private enterprises.The study shows that:during the transition economy,government behaviors, especially the policies have decisive significance on the strategy choice and performance of enterprises.For state-owned enterprises,the government influence is more direct,such as the policies,administrative order and transfer for free.For private enterprises,the government influence is indirect,such as making relative industrial policies,building market mechanism and improving the social service system etc.Any firms can not ignore the policy factors.They should seek actively for the policies which are useful to their developments and avoid the policy risks which inhibit their developments.5.On the basis of the analysis above,a concept model of strategic analysis is built from four aspects:macro-economic environments,government behavior, industrial development and the firm's own resources,then the different strategic choices between the state-owned and private enterprises are described.