Purpose – This study enquires into the relationships among the allocation of control rights, compensation for control rights, organizational capabilities, and performance of state-owned enterprises.
Design/methodology/approach – Based on data from 318 state-owned enterprises in China, this study conducts an empirical research.
Findings – (1) Decision control rights, implementation control rights, supervision control rights, and information control rights have a significant positive impact on organizational capabilities; (2) short-term compensation, long-term compensation, and self-actualization have a significant positive impact on organizational capabilities; (3) organizational capabilities have a significant positive impact on the performance of state-owned enterprises; (4) implementation control rights and supervision control rights have a significant positive impact on the performance of state-owned enterprises, but the impacts of decision control rights and information control rights are not significant; and (5) short-term compensation and self-actualization have a significant positive impact on the performance of state-owned enterprises, but the impact of long-term compensation is not significant.
Research limitations/implications – The findings place emphasis on the importance of the allocation of control rights and compensation for control rights to the organizational capabilities and performance of state-owned enterprises. The limitations are: cross-sectional data may cause the cause-and-effect relationship between variables to be unclear; subjective evaluation may bring with it cognitive errors; collecting data from only one manager in each firm may result in the respondent’s subjective evaluation of the variables not fully reflecting the reality of the firm; the mediating effect and moderating effect are not considered.
Practical implications – We should promote the reform of the “top leader responsibility system” and optimize the allocation of control rights in state-owned enterprises; perfect the incentive mechanism for managers in state-owned enterprises while putting equal emphasis on the long-term and short-term compensation for control rights; shift from relying on individual entrepreneurs to relying on management teams, and foster the organizational capabilities of state-owned enterprises by way of institutionalized management.
Originality/value – This study tests the classical corporate governance theory through an empirical research and expands the theoretical and empirical studies on the allocation of control rights and the compensation for control rights.Keywords: allocation of control rights, compensation for control rights, organizational capabilities, firm performance, state-owned enterprises in China