Firms’ Rhetorical Nationalism: Theory, Measurement, and Evidence from a Computational Analysis of Chinese Public Firms

Lori Yue, Jiexin Zheng, and Kaixian Mao

Abstract

In this article, we develop a computational measure of firm-level rhetorical nationalism. We first review the literature and develop a four-dimensional theoretical framework of nationalism relevant to firms: national pride, anti-foreign, dominant agenda (national revival), and corporate role. We then use machine-learning-based text analysis of over 41,000 annual reports of Chinese public firms from 2000 to 2020 and identify a dictionary of words for each dimension. Using a weighted ratio of nationalism-related words, we describe the overall picture of Chinese public firms’ rhetorical nationalism and provide the first empirical evidence regarding rising rhetorical nationalism among Chinese firms. Firms’ demonstration of rhetorical nationalism is related to both strategic and socialization factors; firms that are state-owned enterprises, older, larger, more profitable, consumer-facing, with more individual investors, and lower sales from overseas demonstrate a higher level of nationalism. Firms that demonstrate more rhetorical nationalism also have a better future financial return. Our study provides a theoretical framework for the organizational study of nationalism and a new measure for firms’ rhetorical nationalism, and demonstrates that rising rhetorical nationalism among Chinese firms is more strongly driven by firms’ motivations to appeal to domestic investors and consumers than to obtain government subsidies. Our dataset is publicly available at: https://sites.google.com/view/firms-rhetorical-nationalism

Comes the Southern Revolution: The Reframing of Chinese Shan-zhai Toward Identity Change

Shih-Chang Hung and Yu-Chun Chen

Abstract

Following the literature on entrepreneurial framing and identity change, we examined how Chinese shan-zhai phone entrepreneurs have drawn on their cultural resources to reframe their businesses to claim new identities and gain legitimacy over time. Through qualitative procedures, we found that a staged process of collective identity development underlies this entrepreneurial process, consisting of building (a) niche-market identity via pragmatic reframing, (b) socio-political identity via nationalistic reframing, and finally (c) professional identity via comprehensive reframing. There has also been a clear change in the sources of legitimacy from the indigenous market through the wider Chinese society to the more globally defined industry. Our central contribution is a processual model of identity change through cultural reframing specifically focused on how informal entrepreneurs grow into formalization and global competition.

Multiple Large Shareholders, Identity, and Corporate Tax Avoidance

Nancy Huyghebaert, Shaoqing Kang, Lihong Wang, and Wenfeng Wu

Abstract

In recent years, the variation in firms’ tax-avoidance behavior has attracted a lot of attention, both theoretically and empirically. This study investigates the governance role of multiple large shareholders in firms’ tax-avoidance behavior, using a sample of Chinese state-controlled listed firms over the period 2004–2016. We find that the ownership stake of a firm’s largest shareholder is negatively associated with tax avoidance among state-controlled firms. Second, other large non-state shareholders negatively affect tax avoidance of state-controlled firms. The former effect is particularly strong when the local government is the controlling shareholder. Finally, differences in institutional quality influence the largest shareholder’s tendency to engage in tax avoidance in state-controlled firms. For state-controlled firms, a better institutional environment elicits more tax avoidance and thus curtails minority-investor expropriation.

Religious Institutional Environment and Executive Pay Dispersion

Ying Zhang, Hongfei Ruan, and Li Tong

Abstract

This study extends the extant literature on executive pay dispersion by exploring the cultural-cognitive social determinants. We investigate how religious institutional environments, including Buddhism- and Confucianism-based institutions, shape vertical executive pay dispersion. We theorize that a Buddhism-based institutional environment is negatively related to vertical executive pay dispersion. In contrast, we propose competing hypotheses regarding how a Confucianism-based institutional environment affects vertical executive pay dispersion. With a sample of Chinese public firms, we find that both Buddhism- and Confucianism-based institutional environments are negatively associated with a firm’s vertical executive pay dispersion. Supplementary analyses show that the aforementioned main effects are attenuated when a firm is embedded by a communist party branch and has a younger CEO.

Influence of Underperformance Duration on Firms’ Responses to Performance Feedback: Evidence from the Chinese Manufacturing Industry

Xufeng Liu, Lanlan Song, Guowei Lai, and Yuying Xie

Abstract

The management literature has extensively explored how firms respond to underperformance through innovation, with prior studies based on the behavioral theory of the firm and the threat-rigidity thesis producing inconsistent results. The shifting focus of attention model provides crucial insights to reconcile this contradiction. We extend this model by highlighting the temporal dimension of performance shortfall. Specifically, we argue that underperformance duration flattens the inverted U-shaped relationship by attenuating both the problemistic search and threat rigidity mechanisms. The empirical results from a sample of Chinese listed manufacturing firms between 2010 and 2019 support our predicted inverted U-relationship between underperformance intensity and research and development (R&D) investment, and the moderating effect of underperformance duration. Interestingly, the inverted U-shape flips to a U-shape if underperformance extends into the long term. We contribute to the literature on performance feedback by considering both underperformance intensity and duration, which conceptualizes their interaction and reconciles extant contradictory findings from a new perspective. We also add new insights into innovation research by theorizing and examining the overlooked boundary condition for the curvilinear relationship between performance shortfalls and R&D investments, which calls for future research to explore the dynamics of the relationship and account for temporal effects.

Decomposing Firm Performance in Emerging Markets: The Difference Between Growth and Profit

Nan Zhou and Seung Ho Park

Abstract

This study adopts the resource-based view (RBV) to explain the difference in firm profit and growth determinants. We argue that profit is driven more by valuable, rare, inimitable, and non-substitutable (VRIN) resources, and growth is driven more by versatile resources. Since some versatile resources, such as cash, are less firm-specific, the firm effect is more critical in determining profit than growth. We also expect that emerging market firms are more capable of utilizing versatile resources than developed market firms, and developed market firms are more capable of utilizing VRIN resources than emerging market firms. As a result, the determinants of firm performance also differ between emerging and developed markets. The study employs multilevel mixed models to decompose firm performance in US, Chinese, and global samples. The findings confirm that the firm effect is more important in influencing profit than growth, persisting across all three samples. The firm effect is also more important in influencing performance in developed countries than in emerging markets.