The development of market orientation: a consideration of institutional influence in China

Purpose – China has followed an unique transition from central planning to a market economy. The purpose of this paper is to examine how China's unique blend of capitalism and socialism has influenced Chinese firms’ market orientation. Design/methodology/approach – Broadly speaking this paper's methodological approach can be described as a positivistic epistemology. Findings – The paper provides insights into how Chinese institutions facilitate or hinder firms’ market orientation practices through direct effect, externality effect and indirect causal chains. The central theme is that, compared with other countries, China's unaltered political institutions and newly created market institutions have led to unique roles of coercive, normative and mimetic pressures in the diffusion of market orientation among Chinese firms. Especially, regulative institutions’ influence on other institutions is more salient in China than in many other countries. Research limitations/implications – A lack of primary data and empirical documentation and a lack of in‐depth treatment of some of the key issues are major limitations here. Practical implications – The paper analyses institutional pressures facing firms operating in China and their variation across different types of firms. An understanding of these pressures is essential to devise market‐oriented approaches in the country. It also examines different institutional factors (e.g. Chinese professional associations) that influence a firm's capability to implement market‐oriented practices. Originality/value – This paper's greatest value stems from the fact that it employs institutional theory as a lens to understand firms’ market orientation. The institutions‐market orientation nexus is a very important but highly underexamined subject.