State ownership and market orientation in China's public firms: An agency theory perspective

• The dual-principal issue is a key to evaluating market orientation in China's partially privatized public firms.
• State-controlled public firms in China exhibit lower market orientation compared to their non-state-controlled counterparts.
• Market orientation in China's partially privatized public firms is relatively high when firm ownership is concentrated in the hands of individual shareholders.

In China, an increasing number of state-owned firms have gone public, which suggests a dual-principal phenomenon such that firms are owned by both the government and non-state shareholders. Non-state shareholders tend to focus on the firm's market orientation and performance, while state shareholders seek political goals over profit-maximization. This manuscript attempts to investigate this issue based on agency theory with both qualitative and quantitative studies. Our findings suggest that state-controlled public firms indeed exhibit a lower degree of market orientation than privately controlled public firms in China, and that the firm's market orientation is relatively high when firm ownership is concentrated in the hands of non-state shareholders.