When China Reformed State-Owned Enterprises,it Tried a New Approach to Choosing

question 45

Essay

When China reformed state-owned enterprises,it tried a new approach to choosing managers: it put managerial jobs up for auction.The bids for the jobs consisted of promises of future profit streams that the managers would generate and then deliver to the state.A simple regression analysis showed that in cases where the incumbent manager was the winning bidder,firm productivity tended to increase dramatically.When outside bidders won,there was little productivity improvement.How can we explain this surprising result?
[The above question is inspired by McMillan,J.(1996).Games,Strategies,and Managers: How Managers Can Use Game Theory to Make Better Business Decisions.New York: Oxford University Press,USA]

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Definitions:

Social Custom

Refers to traditional practices and norms that dictate expected behaviors within a society.

Deaf Culture

The set of social beliefs, behaviors, art, literary traditions, history, values, and shared institutions of communities that are influenced by deafness and which use sign languages as the main means of communication.

Ethnic Culture

Ethnic culture pertains to the customs, social practices, languages, and shared heritage of an ethnic group, distinguishing it from other cultural groups.

Cross-Cultural Service

The provision of services that are sensitive to and respectful of the cultural differences and similarities of the people who are being served.