What sustains larger firms? Evidence from Chinese manufacturing industries

This study investigates what sustains large firms in China and identifies the determinants of firm sustaining. With the understanding of the triple process of economic transition, this study explores the influence of global-local interaction and regional factors on business sustaining. Based on the Annual Survey of Industrial Firms in China during 1998-2005, this paper employs the Cox proportional hazard model to confirm that global, provincial and local forces are critical for the sustaining of large firms. Particularly, the presence of foreign firms shows strong competition effect at the prefecture city level but no spillover effect at the provincial level. Provincial market-oriented institutions and market potential however are crucial to sustain businesses in China. Non-state-owned enterprises such as private and foreign firms are more dependent on market-oriented institutions than state own enterprises. Firms which are able to reap from agglomeration economies and local governmental supports are more likely to sustain. In addition, local factors show different impacts on business sustaining in different regions. The findings indicate that both market and state can play a substantial role in sustaining businesses in transitional economies.