ABSTRACT
This chapter elucidates the process by which new Chinese firms forming the 'private' and 'nonstate' sectors have achieved dynamic strategic fit and, as a group, come to represent the most dynamic and growing sector of the Chinese economy. It uses the case of Lenovo Group, a research institute spin-off that has grown into one of the world's largest producers of personal computers, to explore the process by which managers outside the state-owned sector with harder budget constraints, pressure to generate revenues, and broader strategic choice not burdened by organizational legacies of central planning have maintained dynamic strategic fit. The chapter integrates the central constructs of March's exploitation-exploration framework with those from the strategy-structure-performance paradigm to propose a framework for analyzing the process by which new firms in a transition environment achieve dynamic strategic fit. It discusses the implications of this process for the development of new firms in dramatically changing environments such as that of China.
