Hybrid Enterprises in a Hybrid Economy

Abstract

A large number of multinational enterprises have formed equity joint ventures with a Chinese government agent or a Chinese state-owned enterprise as their entry strategy into the dynamic Chinese market. These state-private equity joint ventures, which are usually called hybrid enterprises, are widely believed to be the best business model in countries like China, where the economy is hybrid too, with an extensively liberalized market economy operating within an autocratic political and legal system. So far, these hybrid enterprises, which meld government support with private sector efficiency, have generally outperformed wholly state-owned or wholly private counterparts. However, the pressures on Beijing to maintain economic performance – rather than any concerns for greater political freedom – will likely lead to progressive liberalization of China’s legal system and greater openness in decision making. As this occurs, the advantages of the hybrid business model will inevitably fade.

Forum

See also Asian Business Cases, Vol. 1, Issue 1.