Understanding business group governance in China

Despite the rapid development of business groups in China and their ability to compete in the world market, little is known about their governance structures in comparison to their Asian counterparts. This paper examines one of the key features of business group governance, namely inter-firm relationship, in one of China?s major automobile groups, Tianjin Automotive Group (TAG). Compared to the established practices of Japanese automobile groups, we found that TAG?s inter-firm relationship is characterized by top-down hierarchical administration rather than a truly quasi-market, quasi-hierarchy network structure typically found in Japan. The paper shows that the emerging Chinese business groups are in essence administratively-driven rather than economically-driven industrial organizations, which explains why their governance structures are fundamentally different from the common features of business groups in Japan and the rest of the world.