Purpose: – The purpose of this paper is to convey how the transition to market-based orientations by state-owned enterprises (SOEs), particularly the military sector, represents a coevolutionary process between business and regulatory institutions that has an impact on both the military and civilian markets. Design/methodology/approach: – The authors conducted a longitudinal case study of a military SOE, the Aosheng Group, between 1951 and 2012 to understand the dynamics between institutions and organizations. A comparative analysis between the main stages of evolution was completed, and conclusions about the main patterns of organizational and institutional change were reached. Findings: – The study reports evidence on the coevolutionary nature of change in big SOEs in China, demonstrating how institutional changes are bigger drivers in promoting reorientations than are market pressures. Within the framework of punctuated equilibrium theory, the determining role that managers may play in leading and implementing organizational reorientations is emphasized. Research limitations/implications: – A triangulated methodology was employed to analyse a long period; however, its application to just a single case might be questioned in terms of generalizing any of the findings. Originality/value: – The longitudinal perspective applied in this case study contributes to critical questioning as to how Chinese agencies define forms of control and the goals for SOEs under their jurisdiction and the importance of allowing managerial discretion to the assigned managers.

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Institutional change,Punctuated equilibrium,Managerial discretion,Organizational inertia,State-owned enterprises

• Economics and Business - Social Sciences