Institutions And Performance Differences

Enterprises are important participants in the economic activity, every behavior of enterprises influences social economic aggregate directly or indirectly, improving business performance of enterprises is significant to promote economic development. Therefore, the research of behavioral motivation and constraints of enterprises are prerequisite for knowing how economic institution move and studying the relationship between institution and economic growth. At the moment, the research of institution focuses on macro level. First, researchers discuss the relationship between institution and economic growth in the Neoclassical Growth Theory framework. Second, researchers study the specific mechanism. Recent years, some institutions which are easy to quantize such as political institution, property right institution, financial and legal institutions, attracting extensive attention of economists, but in terms of the quantification of institutions, the marketization index which is made by Gang Fan and Xiaolu Wang is widely used in the existing research, hardly anyone study the influence of institution in the micro level via the specific micro data, let alone from multiple levels. In addition, an enormous difficulty in the quantification of institution is the endogeneity problem, which leads to different conclusions of the same research topic. Employing more specific data on micro level to quantify institution, this paper aims to explore the impact that institution has on the enterprises. We come to more reasonable and credible conclusion by solving endogeneity problem and robustness test.This thesis empirically examine the impacts that institution has on the operating performance of enterprises with a 2012 survey data sample conducted by world bank which covers 2700 China enterprises in 25 cities. Because of the advantages, state-owned enterprise can obtain strong policy support in terms of government intervention, credit opportunity etc, so the influence of institution on state-owned enterprises lack objectivity. So we focus on the impact which institution has on private enterprises. Specifically, we analyses the impacts that three dimensions of institution, i.e. government intervention, property-right institution, contracting institution have on private enterprises. In terms of government intervention, we find that more time that managers of enterprises spend on working with government means more government intervention level, leads to less business performance. We study property-right institution from the point of infringement enterprises suffered from predators except government, this is one of the innovation points of this paper about institution quantification. We find that more money enterprises spend on protecting private property means lower property-right protection level, leads to impeding the development of enterprises. Regarding to contracting institution, existing literatures have proved that contracting institution can promote the development of financial intermediaries. So, more capitals enterprises obtain from financial intermediaries such as banks, credit sales and other financial organizations means better development of financial intermediaries, as well as better contracting institution, which leads to better business performance. We prove this empirically in this paper, this is another innovation point. In order to solve the endogeneity problem, we employ the average value of sample enterprises in every city by 2SLS and make more reasonable choice between the result of OLS and 2SLS. Furthermore, we analyses both the positive and negative impacts that government intervention has on business performance. The conclusion provide guidance for the existing different research results about government intervention. Meanwhile, we give a better explanation in terms of property-right institution and contracting institution.