Why China shall not completely transit from a relation based to a rule based governance regime: A Chinese perspective

K L Alex LAU, Angus YOUNG*

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

23 Citations (Scopus)

Abstract

Manuscript Type: Perspective Research Question/Issue: This paper argues that China shall not completely transit from a relation-based into a rule-based governance regime because the Chinese system of governance is the product of its rich heritage and entrenched value system. Research Findings/Insights: Relation-based governance has two dimensions. This first is apparent from the emphasis on reciprocity and mutual obligations fostered between individuals and groups. The second is evident from inside an organization, where governance is hierarchical and paternalistic. This system of governance was influenced by Confucian doctrines that are moral centered precepts used to regulate human behavior and relationships. Given that this governance regime is interlinked to the Chinese culture, it is doubtful that China would completely abandon it in favor of a rule-based system from the West. Theoretical/Academic Implications: There are two key implications drawn from this article. First, in the absence of the moral underpinnings of relation-based governance, this system is susceptible to exploitation. Individuals could take advantage of relationships and relational networks to commit mischief or achieve personal gains through tunneling or expropriation of company assets. Therefore, it is imperative to reinforce the ethical ideals of relation-based governance in China. Second, since relationalism from China's past and the laws transplanted from the West are key features of China's governance regime, it is important to explore hybrid solutions to lessen the possibility of bottlenecks and incongruities emerging. Practitioner/Policy Implications: Any proposed hybrid governance solution ought to be able to deal with potential differences between the Chinese and the Western value systems as well as combine both regimes into an integrated framework.

Original languageEnglish
Pages (from-to)577-585
Number of pages9
JournalCorporate Governance: An International Review
Volume21
Issue number6
DOIs
Publication statusPublished - Nov 2013

Scopus Subject Areas

  • Business, Management and Accounting(all)
  • Strategy and Management
  • Management of Technology and Innovation

User-Defined Keywords

  • China
  • Corporate governance
  • CSR mechanisms
  • Governance environments
  • National economies

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