Meeting the competition with a market-oriented organisation: A case of China’s state-owned enterprises

The past two decades have witnessed significant changes in China as it has moved from a centrally planned economy to a more market-oriented one. As a socialist nation, state owned enterprises (SOEs) continue to comprise a dominant part of economic activity in China. While many SOEs are inefficient and incur losses, economic reforms since the late 1970s have brought about irrevocable changes in the manner in which Chinese SOEs conduct their business. The important agenda for the Chinese government now is how to ‘vitalize’ state sectors and ensure that SOEs are able to strive for their own survival. SOEs therefore are exploring ways to improve the productivity of their current operation and to enhance innovativeness in their business development, including seeking financial and technological resources overseas. The varying levels of market-orientation in SOEs present diverse outcomes for the SOEs. This study attempts to evaluate the extent to which the SOEs have adopted market-based organizational learning (Sinkula, Baker, and Noordewier 1997), market orientation (Deshpande and Farley 1998), entrepreneurial orientation (Smart and Conant 1994), and learning and innovativeness (Hurley and Hult 1998). THE DEVELOPMENT OF STATE-OWNED ENTERPRISES State owned enterprises (SOEs) have been the backbone of the Chinese economy since the communist take-over in 1949. Given that government policy now encourages the development of non-state sectors, the share of SOEs in the industrial output of China has declined from 77.6 percent in 1978 to 28.2 percent in 1998 (National Statistics Bureau of China, 1999). Exhibit One depicts the contribution of these SOEs to the Gross Value of Industrial Output in China. Whilst SOEs have become less important to the Chinese economy, they do continue to play a sizeable role in the economy. In 1998, they employed more than half of the industrial workforce and