Organizational non-conformity in an emerging economy: exploring the non-adoption of credit rating in China

Institutional scholarship tends to emphasize the tendency of organizations to conform to prevailing practices, but this study investigates Chinese firms’ non-conformity behavior in terms of not participating in credit rating. State ownership and firm status (in terms of age, size, and human capital) are all found to be useful predictors of this non-conformity. Building on institutional theory and resource dependence theory in an emerging market context, this study proposes that non-conformity would be high for state owned enterprises (SOEs) and for both low- and high-status firms, based on their evaluations of the legitimacy of credit rating and the relative power balance between the government and themselves. In contrast, middle-status firms would be less likely to show non-conformity behaviors. Moreover, the influence of state ownership and firm status on non-conformity would be further moderated by the degree of government intervention. The results from an empirical study of 2,708 manufacturing firms in China largely support these hypotheses.