Industry strategic variety and performance The role of market and institutional forces in the Chinese industrial enterprises

Purpose - Market-based theories assume that firms' different strategic commitments to businesses lead to different strategic positions within the industry. While the institutional perspective from organization theory emphasizes the institutional pressures which lead to legitimacy and firm isomorphism, it is not clear yet how intra-industry organizations behave during institutional transitions. The purpose of this paper is to combine the insights of these theories by examining the role of market and institutional forces in affecting industry strategic variety and its impact on average industry performance in transitional China, based on the strategic view of neoinstitutional theory. Design/methodology/approach - Empirical tests are carried out using industrial enterprise data of China from 2000 to 2006. Findings - Empirical results using industrial enterprise data of China from 2000 to 2006 suggest that: industry competitiveness has a strong positive influence on strategic variety; the weakening relationship between government and market leads to increased strategic variety; and indicators of strategic variety have complicated effects on industry performance. Originality/value - The strategic view of neoinstitutional theory was used to gain a better understanding of intra-industry strategic variety during the institutional transition of China. Thus this paper combines seemingly contradictory theories in our understanding of how intra-industry organizations behave in response to institutional change.