Regional Institution Environment, Core Competence And Strategic Choice Of Private Enterprise’s Diversification

During transitional period, while the overall institutional environment China privateenterprises faced is transferring from informal-constrained to formal-constrained,informal-constrained institutional environment will still exist within a certain range for along time. And for institutional environment, big differences still exist in different regions.Nowadays, most private enterprises still chose to be bigger first, then stronger, rather thanstronger first then bigger, which is advocated by both academia and the government.Aiming at this situation, this paper put forward that institution may be a vital factor in thefunction process of making strategic choice by private enterprises.Based on the documentary study, this paper builds a theoretical model of the relation ofinstitutional environment, core competence and growth path of private enterprises in China,as well as proposes related propositions and inferences. In the environment mainlycontrolled by formal institution, private enterprises tend to develop core competence of“industry experts” type, therefore regional diversification is more probably to be chose;however, in where mainly controlled by informal institution, private enterprises are likely toenhance core competence of “social experts” type, then product diversification is moreprobably to be chose. So, based on the angle combined by IBV, RBV and MBV, this paperregard core competence as the result form the coaction of institutional legality mechanismand efficiency mechanism, then use large sample test to explore the mechanism and processfor private enterprises of how regional difference influence building core competence andmaking strategic choices.Based on the structure of institution, resource and strategy, this paper builds a multipleresearch system of institutional environment and strategic choices of private enterprises’diversification. This paper makes study on two key topic: How institutional environmentaffects private enterprises’ diversification? If institutional environment do have effect onprivate enterprises’diversification, then what’s the function mechanism and path?Through sensible discussion and empirical analysis, this paper get conclusions asbelow:Institutional environment has important effect on private enterprises’diversification. In the environment mainly controlled by formal institution, private enterprises tend to developcore competence of “industry experts” type, therefore regional diversification is moreprobably to be chose; however, in where mainly controlled by informal institution, privateenterprises are likely to enhance core competence of “social experts” type, then productdiversification is more probably to be chose. What’s more, in the region that nongovernmenteconomy develop better, private enterprises tend to choose regional diversificationobviously. Also, when regional product markets are gorgeous, private enterprises tend tochoose regional diversification.Therefore,“industry experts” type core competence act as partly mediation betweenformal institution and regional diversification. Because under formal institution, enterprisesare more likely to break barrier with technological innovation, which lead enterprises toforge professional type core competence. This professional type core competence thatrelated with one special industry, can be transferred from one place to another. In contrary,“social experts” type core competence as partly mediation between informal institution andproduct diversification.This paper is an attempt to theorize unique institution in China during transitionalperiod. So it is of some significance for unfolding mechanism between institutionalenvironment, core competence and diversification, showing reason that private enterprisesgrow in China, and discovering how to push private enterprises forward towardsworld-class-enterprise.