Government expropriation and Chinese-style firm diversification

In China, government expropriation leads to business diversification. * Private entrepreneurs have to nurture close relationships and win trust from bureaucrats. * Private entrepreneurs acquire the relationship-specific rights to do business. * Private entrepreneurs can leverage their privileges into new business lines. * This often involves over-diversification with efficiency losses. Firm diversification across unrelated businesses is prevalent in many emerging economies, in contrast to the practices in developed economies. A fundamental difference between these two types of economies concer... Mehr ...