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This video video is a detailed discussion about research on the institutional development of China's futures market, highlighting its unique characteristics compared to Western markets. The primary researchers, Kim and the narrator, aimed to uncover the complexities of this "secretive world," particularly focusing on how organizations in China navigate regulatory environments and their evolving relationship with state actors.

Key points include:
- The significant challenges faced by national regulated exchanges due to the rise of local exchanges, prompting a regulatory crackdown to maintain competition.
- The researchers note misconceptions about Chinese governance structures and emphasize the importance of building relationships (“connection for protection”) with state actors for organizational survival.
- They critique deterministic views in existing literature on bureaucracy and advocate for a nuanced understanding of organizational agency, using ethnographic methods and interviews to explore these dynamics.
- The concept of "equity for legitimacy" is introduced, where organizations align with state actors to legitimize themselves while employing voluntary cooperation strategies.
- Throughout the longitudinal study, the researchers found that institutions had to adapt significantly, often leading to unintended consequences, such as a loss of control over organizational direction despite having survived regulatory scrutiny.
- The study aims to provide Western scholars with insights into the Chinese market's intricacies, exploring themes of intellectual capital and the relationships between state and organizations.

Overall, the research emphasizes the need for a deeper understanding of the strategies employed by Chinese organizations within a complex institutional landscape.

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X-TIMESTAMP-MAP:LOCAL=00:00:00.000,MPEGTS=900000

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So we started with trying

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to understand the institutional development in

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China's futures market.

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So it was, it was a bit of a, it has a, a range

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of unique features when compared to the Western market.

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So that it was a journey bog to try to understand

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how these features being developed

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and why it looks

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so unique compared to the rest of the world.

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It was a sort of secretive world.

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We, we really wanted to uncover.

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And, I mean, Kim is the, the main researcher here,

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but I, I'd previously been a financial trader

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and also done research on state owned industries,

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and we were working in the same school at the time, so

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it was a natural thing,

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but I'm, as I say, I'm, I'm sort of the really,

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the second in command to, to Kim here.

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There were too many this kind of exchanges,

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so the national regulator funding

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that the trading volume in the national,

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regulated exchanges were dropping.

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So they faced strong competition for all this,

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mushroomed, regional local exchanges.

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And the, so then the started this crackdown.

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So because, they became too strong of fools

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and, the national Exchange probably are not happy,

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including their political patrons, mainly,

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corporate political strategy, and activities as well.

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And then, and something trying to understand, how

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to survive a regulatory crackdown, which, yeah,

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also sits into the corporate political strategy.

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So lots of myth or misunderstanding from my perspective

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about the Chinese GU

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and how the, how the organizations actually try

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to navigate it through these.

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So I think the, there were two, I think there were,

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there was something that previously been written about

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Chinese gu that, for example, the favor

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and then, nepotism, things like that.

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And in terms of, then it comes

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to a corporate political strategy.

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I think one concept,

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or one phrase we used in the paper was saying

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that connection for protection.

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So once you build the relationship with the state,

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state actors, then you have the protection

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being in the field for, for one year.

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And also also did follow the, the whole development

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of the event for like four or five years.

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I thought that it wasn't really that simple.

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So there were, there were things that actually we need

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to try to understand more in, in

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and in the depth in a way that how the,

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intellectual capital played a role in the enrollment

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of state actors, how they evaluate each other's potential

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to make the contribution.

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Not just people, you know, not just who you know,

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but also also what you know.

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And the, and something

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that they probably did not quite understand is that

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the in-house cultivation of intellectual capital.

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And that's, something quite standard

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as a very stark contrast, from the western practice.

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And also something very poorly

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understanding in Chinese context.

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We wanted to emphasize the degree

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of organizational agency as well.

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And, and a lot of the literature on bureaucracy,

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state relations, going back to the forties and cel

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and people like that, it tends to be a sort of deterministic

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sort of explanation.

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And we felt that it was a lot more nuanced and, and richer.

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And so through ethnographic work, that was the way

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to get sort of under the skin of an organization like that

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and, and explore it from the organization side

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of the state relationship.

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Ethnography was our, our main technique.

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Um, coupled with about almost 30 in depth,

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interviews, semi-structured with, with,

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with senior officials as well.

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Um, we felt that ethnography was useful

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and that it was, what we might call a very subjectivist,

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method.

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As I say, a way of getting inside the organization

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takes a lot of negotiation.

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I mean, Kim can talk about how she negotiated the position

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and, and how she got to be a strategy manager on the inside.

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A a lot of it's about gaining credibility within the

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organization and within the organization,

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and it's dealing with, with, in this case,

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state bureaucracy,

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foreign financial organizations, et cetera.

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So that was the, the, for a, for a range

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of philosophical reasons that I won't go,

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too deeply into, that's why we, we felt

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that ethnography was important and al and also

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because Western organizational

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and business scientists don't really understand this

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particular life, world of economics.

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And so we felt that, that that was a way of, of,

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of developing understanding in a very grounded way that,

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that might be interesting to, to,

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to western scholars

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As a participant observant.

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So in a way that I was, I was in the middle

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as John just mentioned,

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because, they're sort of roic, I,

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I started this research to do elite interviews.

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So one of the interviewees actually, he was the,

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he was the senior executive of this exchange I went to,

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which we call Dragon Exchange.

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So they were actually in that kind of precursor position,

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sensing that there might be a, a national that kind of,

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storm crack down something, was, was coming.

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So then, and also they were trying very harder

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to build relationships

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with the foreign financial organizations,

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especially in London and Chicago.

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So they needed, first of all, the research capacity,

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so then someone could actually do research in both languages

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and also, understand that specific circumstance

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of the, of the exchange that was facing.

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And also reach out,

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to the foreign financial organizations

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and being to be able to translate at the meetings

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and, not working with them.

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So being able to understand both cultures

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as well in these financial sectors.

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So then, yeah, I would say sort of also the piece of the,

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the whole whole jigsaw the puzzle.

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So in a way that I was enrolled to say that, yeah,

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can you just comment, work for us for one year,

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not just doing this interview

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because we need, you, need your language skills

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and your background as a former, quite reputable,

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business school in the uk.

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So things like that. So yeah, I supplied my, my,

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my expertise and my capacity to them, and they used me,

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and then I negotiated my position.

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Yeah. In our case, can I just do a participant

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observation now?

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Yes. I, India and all that. So yeah.

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So that's the, the process. I think they did two things.

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So first of all, they, I think that's what we call equity

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for legitimacy.

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So in a way that they strategically, tried their equity

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to the state owners.

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Uh, so they, they involved, they,

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so they invited state actors like,

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SOE state owned enterprises

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or the ministry, kind of investors to, to,

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to not really buy.

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So in a way that you just traded the equity to them.

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So to increase the, the legitimacy of the organization

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because then, I think

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that's possibly in the Chinese concept,

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when you have state ownership, then you supposed

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to be a credible organization.

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So in that case, that sort

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of fence them from the regulatory crackdown

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and also improve the reputation of the organization.

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So that's equity for legitimacy.

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And also I think in terms of corporate political activities,

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we also call it a voluntary cooperation.

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So in a way that, they become, they voluntary submit

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to the, state actors trying to become part of the,

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the state that kind of, scheme.

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So in a way that's, to,

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to improve legitimacy, that's part of it.

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And the other way with that, in order to actually

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for the state actors to, to recognize that, to be able to,

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to, to are happy to actually take them in.

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So that is a part of the development of development

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of intellectual capital.

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And that's also one of the myth we are trying

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to part about the, Chinese YG.

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So they were, the organization was evaluated against not

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just, some exchange of favor or banqueting,

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but then it's more complicated in a way

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that they're evaluating the capacity, the, the,

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the, the intellectual and, and,

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and the political capital the organization actually hold.

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And also the potential they are able to work

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with the stake actors to,

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to fund them from the regulatory record, correct them.

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'cause it's in a way that they have to,

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develop this argument.

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We're saying that theoretically this trading model is sound

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is not a rogue exchange.

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So this trading model, has been traded in the,

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in London, in New York for a long time.

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So it is legitimated in western world

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and we direct developing financial market.

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So in a way that this is not a rogue exchange

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and the trading model, it's established,

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We can, I, Kim,

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can I just jump in and ask a question?

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I'm so sorry. John. Jo, Kim, I forgot

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to ask you at the start, what is a rogue exchange?

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Do you mind answering that question

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so we can edit in at the beginning?

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I'm so sorry, guys.

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Yeah, yeah, yeah. Remember

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that this actually can be quite important.

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So this is the essential of the controversy.

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A rogue exchange is exchange actually, more

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of a supervised or managed by the, local government.

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So, regulated

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and legitimized exchange would be managed by the CS RC,

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the China Security Regulatory Committee.

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So that would count as a part of the infrastructure

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of the financial national financial market.

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But then rogue is changed in a way that is not recognized

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by the state, regulator,

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but then managed by the local, regional,

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provincial government,

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and sometimes has a political patron from a ministry like

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Ministry of Finance or Ministry of Commerce.

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So they don't have that kind of status

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as a national exchange.

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It's a story as much of, survival

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and co-optation, through networking

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with state authorities

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and progressive, state ownership in terms of equity,

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but also on the other side, it's of, of,

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of unintended consequences at the level of the organization.

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So with, with more ation in, as this study,

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unfolds, and we've done a longitudinal account here,

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basically starts in about 1998

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and continues up to a couple of years ago, you find the,

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the personnel

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and the strategic direction of the organization has

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to change consequently as well.

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And in this case, I think one of our,

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our subjects said that, the exchange by, by the end

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of this case study, had become more of a, not

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so much a road trader as a, a zombie trader.

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So, so that's the sort of,

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it's not simply a story of organizational survival

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and success as one of, of unintended consequences too. So

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This is an understooded area.

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So, the understandings about, regulatory correct

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and how to survive it.

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And the second I think it's, it's about the,

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the, in the Chinese context.

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So in a way that's how a Chinese organization,

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when they were facing this kind

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of hostile institutional environment,

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how they actually respond with the, in-house,

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intellectual cultivation, intellectual capital, cultivation.

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And then, the other thing I think it's quite important,

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as John just mentioned, the unintended consequences

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of these strategies of voluntary cooperation

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and equity for legitimacy.

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Because with this kind of action, you a, you bring in

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that kind of, institutional control,

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and then you actually as an organization,

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although you survived, but then, at the end,

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the key actors lose the control of the, of the organization

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and the trading model in the center, which is at the center

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of the whole, the center of the whole argument.

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So then the trading model at the end, I mean,

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I followed onto today that was,

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the trading model was totally, was totally changed.

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I lost all this, this, those, when we tried

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to argue was saying these were innovative features of,

12:26.465 --> 12:27.505
of a new trading model,

12:27.685 --> 12:30.145
but then it just went back to become a very,

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spot market trading.

12:34.405 --> 12:36.945
The contributions from the study were,

12:36.945 --> 12:41.185
looking at an area that is, very unfamiliar to Western,

12:41.685 --> 12:45.465
organizational scholars, using a methodology

12:45.775 --> 12:48.065
that again, was unusual for,

12:48.525 --> 12:51.705
for interpreting these organizational state relations.

12:52.285 --> 12:56.745
And then thirdly, developing a, a concept in voluntary ation

12:57.015 --> 12:59.785
that was almost the reverse of most,

13:00.065 --> 13:02.865
contemporary political activity thinking,

13:02.865 --> 13:04.265
in the literature so far.

13:04.525 --> 13:06.425
So that's what we've pretty much tried to do.

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