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We explore how Chinese firms vary in the extent to which they use illegal overtime (working hours beyond the statutory limit) in the face of emerging institutional pressure against such practices. Over the past three decades, local as well as foreign-owned firms in China have extensively exploited the practice of illegal overtime. This is now being challenged by a changing environment that emphasizes the rule of law. Yet, not all Chinese companies are equally responsive to this emerging reality. While some companies are cautious about violating overtime regulations, others still ignore the law, relying heavily on illegal overtime. We explain such variances by drawing on recent developments in institutional theory literature that highlight the institutionalization process as a mechanism to elicit varied, rather than unified, organizational reactions. Using data from 182 electronic parts firms in China, we found that firms’ use of illegal overtime is affected both by organizations’ inner constituents who generate internal institutional pressures (HR personnel, labor unions and migrant workers), and organizational characteristics that magnify external institutional pressures (geographic location, company size and foreign ownership).
