Multinational corporations (MNCs) hire auditors to assess their business partners’ compliance with quality, working conditions, and environmental standards. Independent third-party auditors are widely assumed to outperform second-party auditors employed and thus controlled by MNCs. Synthesizing literatures on auditor independence and outsourcing decisions, we compare how independence and control can affect auditor performance. Using proprietary data from a global apparel brand, we find that second-party auditors outperform independent third-party auditors, and that third-party auditors’ performance improves when MNCs concurrent source audits, using both second- and third-party auditors. However, both second- and third-party auditors perform better with more independence from the entities they audit—specifically, when auditing factories most recently audited by a different firm. These findings yield important insights for more effective monitoring of business partners.
Tencent, one of the largest Internet conglomerates in China, had a vision to become a "Tech+Culture" firm. With dominant market shares in online games and social networking, it had built a vast Internet-based entertainment ecosystem, and was now focused on cultural asset development. Specifically, the company had an opportunity to develop a media franchise that was rich in Chinese cultural elements and had the potential to turn into a blockbuster franchise comparable with Disney’s Marvel Cinematic Universe. Edward Cheng, the company’s vice president, had to decide how to launch the franchise – whether it should start with a game, movie, a streamed series, or something more innovative. He also had to consider how to promote Chinese culture and project the country’s image to a foreign audience.
The “state capitalism” model, in which the state retains a dominant role as owner or investor-shareholder amidst the presence of markets and private firms, has received increasing attention, with China cited as the main exemplar. Yet as models evolve, so has China’s “state capitalism.” We argue that a resurgent party-state, motivated by a logic of political survival, has generated political-economic dynamics that better resemble “party-state capitalism” than familiar conceptualizations of state capitalism. We demonstrate this by examining three prominent manifestations of China’s unique model: party-state encroachment on markets; a blending of functions and interests of state and private ownership; and politicized interactions with foreign capital. Nevertheless, there remain deficits in the party-state’s hold over capital, some of which themselves result from Beijing’s logic of control. By probing the comparative and historical context of this evolution of China’s model, we suggest directions for further inquiry on the consequences of party-state capitalism.
See more research