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Government control, transaction costs, and commitment between the Hongkong and Shanghai Banking Corporation (HSBC) and the Chinese government

Lu, Qing

Authors

Abstract

We use the tools of transaction cost politics (TCP) developed from transaction cost economics and economic analysis, to analyze the business relationship building between the Hongkong and Shanghai Banking Corporation (HSBC), the largest and most successful foreign bank in China, and the Chinese government between 1949 and 1978. We demonstrate the value of the TCP-based approach to evaluating the specialized governance structure of commitment built on mutual dependency. In particular, we identify several transaction attributes that give rise to hazards: transaction uncertainty, the role of the government in the economy, and the strength of the supporting coalition. Our analysis also confirms that commitment built on the mutual dependency between the international company and the local authorities and between the international company's home country authorities and the local authorities did reduce the company's transaction costs by guarding agai nst the local authorities' opportunism.

Journal Article Type Article
Publication Date Mar 1, 2008
Print ISSN 1467-2227
Electronic ISSN 1467-2235
Publisher Oxford University Press (OUP)
Peer Reviewed Peer Reviewed
Volume 9
Issue 1
Pages 44-69
Institution Citation Lu, Q. (2008). Government control, transaction costs, and commitment between the Hongkong and Shanghai Banking Corporation (HSBC) and the Chinese government. Enterprise & society, 9(1), 44-69. doi:10.1093/es/khm106
DOI https://doi.org/10.1093/es/khm106
Keywords Business, Management and Accounting (miscellaneous); History