Despite the prominence of the competitive strategy perspective, it remains unclear whether foreign firms entering China can still adopt a differentiation or low-cost position to achieve superior performance, given the unique market and institutional environments in China. Alternatively, should foreign firms follow conventional wisdom and actively build managerial ties with government officials and business community to enhance their performance? This study develops and tests an interactive perspective that highlights the moderating effects of managerial ties on competitive position–performance relationships. The results indicate that though both differentiation and low-cost positions foster foreign firm profitability, the benefit of a differentiation position is conditional on political and business ties in different directions: political ties impede and business ties strengthen the positive effect of a differentiation position on foreign firms' profitability. Moreover, foreign firms benefit from their use of business ties, but their profitability suffers when they rely increasingly on the heavy use of political ties.

Organizational change in emerging economies, although difficult, is inevitable. The authors study the drivers and consequences of organizational changes in an emerging economy, China. The results of a firm-level survey show that organizational changes in technical vs administrative areas are differentially driven by firms' motivation to change (past performance), opportunity to change (firm location and market orientation), and capability to change (firm ownership, managers' change attitude, and leader charisma). Furthermore, technical and administrative changes affect firm performance through distinct paths. Technical changes have a direct, positive impact on performance, whereas administrative changes enhance firm performance indirectly through technical changes, and the effect of administrative changes on performance is strengthened by the presence of a participative culture.