Institutional Environment, Firms’ Resources And Capabilities, And Divestiture Of Local State-owned Enterprises Of China: A Legitimacy Perspective

Research on divestments，most academics and scholars focused on the motivation andperformance of divestiture，but it seems to ignore another important part of divestiture：thebehavior．Current research on the different behavior of divestments and the underlyingmechanism of divestitures process is not seriously．The choices of divestitures behavior reallyare still being present in the black box．Due to the lack of implementation of research，itcannot explain clearly why companies face a similar situation，such as poor performance, butthey will choose different divestitures behavior．Our study is focus on the local state-ownedenterprises， so we have to consider changes in the institutional environment andsystems．Local state-owned enterprises with obvious local color，there is a close connectionbetween its strategic choice and institutional environment and institutional change，includingthe selection of its growth strategy and restructuring strategy，largely controlled by the changeof state-owned assets management system and local government intervention．In this paper，under the background of China’s economic transformation，the object ofour study is the local state-owned enterprises．Through domestic and international researchliterature on divestments，we comprehensive research on the resource characteristics andfeatures of the institutional environment in which our local state-owned enterprises has．Onthe basis of the integration of systems theory and resource theory，the mechanism will beintroduced to study the legality of divestitures behavior，especially highlighting the localgovernment plays a role in the corporate divestiture behavioral choices，and thus thelegitimacy of the local state-owned enterprises to obtain sources and divestitures conduct anin-depth exploration．The conclusions in this article include：In the area of informal institutional constraints，the local state-owned enterprises whichhave lower degree of internal legitimacy are generally not easily choose divestitures，exceptonly at the risk of operating losses or debt situation；Then，which have a high degree ofinternal legitimacy，will get rid of their burden，or reduce management costs．In contrast，In the area of informal institutional constraints，the local state-owned enterprises which havehigher the degree of internal legitimacy，will actively cooperate with the relevant policies of local state-owned enterprises，and divest non-core businesses initiatively，enhance corecompetitiveness by Sell-offs or Spin-off．The lower degree of internal legitimacy of theenterprise，their willingness to be motivated divestitures external institutional environment，with the local government intervention，they tend to be associated with behavioral territorialjurisdiction of the transaction．...