The Research Of The Escalating Commitment Error Of Chinese State-owned Enterprises

The theory of Escalating Commitment Error was first proposed by Staw in 1976, which will lead to the failure of the investment projects of the enterprises, waste the corporate resources severely, and trap the enterprises by capital shortage and, as a result, it will influence the competitive advantages to a great extent.Public ownership is dominant and diverse forms of ownership coexist in China's ownership structure. State-owned economy controls the lifeline of nation's economy, and the state-owned enterprises play the irreplaceable role in providing the public goods and fiscal revenue, accelerate the social stability and economical development, and preserve the dominant place of the public ownership. The escalating commitment error in the state-owned enterprises is inefficient investment action, which will cause the losses of the state-owned assets and do harm to the quality increase of the state-owned economy. Especially, under the environment of the current economic crisis, if the state-owned enterprises do not make use of the state-owned resources to their greatest utility but invest them in the projects with little return, it will affect the efficiency of resource use and the investment rate of return ,so that it will constrain the state-owned economy to play its role. Therefore, it is necessary to do profound research on the escalating commitment error of the state-owned enterprises in order to find out the root of it and resolve it through a series of effective measures. Because of the specialty of the state-owned enterprises and the complication of the reasons of the escalating commitment error as well as the factors of the property right, principal-agent, systems and the personal qualities of the operators involved, we need to analyze the problem from more than one angles. This paper is divided into six chapters.The first chapter is the introductions. Firstly, it explains the purpose and significance of the paper from the perspectives of the negative effects of the escalating commitment error to enterprises and market economy and the role of the state-owned enterprises. Secondly, it is literature review. This chapter describes the domestic and abroad research achievement on the escalating commitment error and gives a simple assessment, which forms the theoretical basis of the research. Then, it illustrates the contents, ideas and the possible innovations and shortcomings of the paper.The second chapter describes the relevant theories of the escalating commitment error generally. Firstly, this article adopts the literal narrative and related graphics to illustrate escalating commitment error, pointing out the essence of the escalating commitment error is the irrational allocation of limited resources. Secondly, it analyzes the characteristics of the escalating commitment error, and generalizes the characteristics into universality, irrationality and the complication of the escalating commitment error. Finally, it illustrates the negative effects of the escalating commitment error from perspectives of the difficulty of access to capital increase of the enterprises, the rest of the relevant economic entities and the market economy.The third chapter explains the current situations of the escalating commitment error of the state-owned enterprises and its characteristics. Firstly, with the relevant cases and datas, up from the depth and breadth of Chinese state-owned enterprises,it shows the current status of the escalating commitment error and points out the severity of the escalating commitment error and the necessity and urgency of finding the resolutions to it. Secondly, the escalating commitment error of the state-owned enterprises has its specialties besides the common characteristics. Here, the paper analyzes the features of the escalating commitment error of the state-owned enterprises from the perspectives of the difficulty in replenishment, influences and government factors.The fourth chapter studies the contributing factors to the escalating commitment error of the state-owned enterprises. This paper analyzes the root that causes he escalating commitment error of state-owned enterprises from the property right, principal-agent, the personal qualities of the operators and the supply of systems, and tries to find out the countermeasures to the escalating commitment error. There are problems like unclear property rights, unclear relationship between the government and the enterprises, the severe principal-agent,the inefficiency of the supply of systems (including inefficient intern regulatory system, inefficient encouragement system to the operators, incomplete external regulatory system and the incomplete information market system of the state-owned enterprises), and the personal reasons of the operators. It is they that cause the escalating commitment error of the state-owned enterprises.The fifth chapter is to put forward with the policy implications to solve the escalating commitment error of state-owned enterprises. According to the problems put up in the last chapter, this paper gives its countermeasures to the escalating commitment error of the state-owned enterprises from the perspectives of market system, government and enterprises. It proposes three methods of improving further the product market and capital market, cultivating a unified ,competitive market of managers and establishing a sound intermediary service system to serve the enterprise investment from the perspective of market system. From the aspect of enterprise, this thesis gives three measures to enhance the regulatory mechanism to operators'investment actions, enhance the incentives mechanism to operators'investment actions and establish the early-warning mechanism to the escalating commitment error. This paper also puts up with four measures of enforcing and further perfecting the"National Assets Law", clarifing the rights, responsibilities and bonuses of the state-owned assets management, reducing the unsound administrative intervention to the enterprises, and enforcing the budget system of state- owned capital from the aspect of government.The sixth is the conclusions. It is the generalization of the escalating commitment error of state-owned enterprises, pointing out the shortcomings of the paper and the directions of the further research. Through the analysis to the escalating commitment error of state-owned enterprises, it can draw conclusions as follows: Firstly, the escalating commitment error is the irrational allocation to the corporate resources, which has great negative influences on the enterprises themselves, relevant economic entities and the market economy. Because of the special role of the state-owned economy, the escalating commitment error of state-owned enterprises has a greater negative effect on the socialist market economy, which makes the study on the escalating commitment error very essential. Secondly, the root of the the escalating commitment error of state-owned enterprises is complex ,so that it is necessary that an effective institutional framework for enterprise managers which can avoid the"moral hazard"and"adverse selection", improve their own quality and the rational extent of the investment to protect against the escalating commitment error. Thirdly, it needs the cooperation of government and the enterprises while dealing with the escalation problem error. Government solves the problem of external constraints and incentives to the operators of the state-owned enterprises while the enterprises solve the internal constraints and incentives problem. Especially, more attentions should be paid to the laws and regulations construction of the state-owned assets management in the future.Foreign scholars have achieved a lot on the escalating commitment error and have formed comparatively complete systems. However, there is little domestic research on this problem. This thesis, on the basis of the previous analysis on t the escalating commitment error, expands the application of this theory, and with the considerations of the characteristics of the state-owned enterprises, analyzes the escalating commitment error of the state-owned enterprises in the framework of economy and management so as to give the countermeasures to the problem from perspectives of economy and management. Because of the limitation of the author's knowledge, there may be shortcomings to the escalating commitment error. In addition, the conclusion is not perfect due to the limitation of the resources and capability of material collection, and without corresponding data support, it lacks the empirical study of the current situation and root of the escalating commitment error of the state-owned enterprises, which also shows the directions of the further amendment and future research.