Toward an institutional ecology of establishment of foreign firms in the Chinese construction industry

In the current study, an integration of insights from institutional theory and organization ecology is used to explain the relationship between industry-level ownership structure and the establishment of foreign invested firms in the Chinese construction industry. It is argued that in a stated-owned enterprises dominated environment, where the market forces are weak, legitimation is the major driving force harming the proliferation of foreign firms, whereas in a private-enterprise dominated environment, where the market forces are strong, competition is the major driving force inhibiting the viability of foreign firms. Thus, concentration of either state ownership, implying lower legitimation of the foreign firm form, or concentration of private ownership, triggering tough competition from domestic private firms, is hypothesized to have a negative impact on the number of foreign firms. Using a regional data set from 1994 to 2007, estimation of a cross-section-time series model largely confirms our theoretical claims.