The partial shock mode in reforms of local state‐owned SMEs

Purpose – The paper aims to examine the sufficient and necessary conditions upon which the innovative “partial shock model” was implemented in China. Design/methodology/approach – The study employs a multi‐method approach, involving a case study of Wuhan city in 2004. Findings – Evidence suggests that implementation of the partial shock model in state‐owned small and medium‐sized enterprises (SOSMEs) is not only essential, but also feasible. More than 1,000 enterprises in Wuhan have restructured properties, and hundreds of thousands of workers have changed their state‐owned identity, which has resulted in positive social and economic outcomes in SOSMEs. Practical implications – The paper suggests that there is a need to combine business reorganisation with government's timely intervention so as to overcome potential problems such as unjust occupation of state assets and unfair distribution among different enterprises in the same city. Originality/value – The paper explores the distinct Chinese experiences in reforms of SOSMEs, which is a relatively under‐researched area of entrepreneurship.