From over-integration to asset specificity: The organizational change of a state-owned machinery enterprise in Guangzhou (China, Chinese text)

The twenty-year economic reform in China has witnessed frequent changes in the titles and structures of China's economic organizations. This case study investigates the internal organizational form of a state-owned enterprise in Guangzhou, China. It depicts the history of its organizational form from 1949 to 2000. Under the planned economy, the said enterprise, The Southern Heavy Machinery Corporation, had an over-integrated organizational structure. From 1994 to 2000, the enterprise has set up a system consisting of an enterprise group corporation and dozens of subsidiary companies, moving toward a market system for its internal transactions among the production units. The subsidiary companies were set up on the basis of the earlier production plants established before 1984. As profits decreased year by year, the new general manager who started his tenure in September 2000 made the decision to bring some of its crucial subsidiary companies back into the form of production plants to render stronger continuities in production.; Why then, after 16 years of internal market practice that has begun in 1984, did the enterprise restructure itself to adopt the unitary form (U form) in some crucial production units? This study aims to explain the following questions: what was the cause of adopting the certain organizational form, why it used the internal market system and why the internal market system failed.; In the institutional approach, the studies of organizational forms have long been influenced by two theories: efficiency theory and power theory. The general theoretical concern of this study is: Is efficiency theory adequate to explain the internal organizational form? Which of these two theories is more appropriate to explain the internal organizational form of the state-owned enterprises in China?; I propose an integrative approach to address the above questions. My findings suggest that certain kinds of the organizational form were always interwoven with the social situation at the time and could not be simplistically explained in terms of efficiency alone. It was the state and the development of the market that determined the dynamics of the organizational form. In my opinion, efficiency theory, specifically the concept of asset specificity, could explain why the internal market system failed. On the other hand, power theory, specifically the phenomenon of isomorphism, could shed light on why the enterprise adopted the internal market system in 1994. The study suggests that the perspective of power has more strength to explain the social process of the organizational form framing. Furthermore, it explores the source of the internal transaction costs, which was underdeveloped in neo-institutional economic theory. It is my argument that there is a missing link between asset specificity and the internal transaction costs.