Strategy and structure in Chinese firms: Organizational theory and institutional change in industrial Shanghai

This study is about two aspects of institutions in China's economic transition. First, I study the micro-level aspects of how economic actors deal with the broad sweeping institutional changes that are defined by the state in periods of economic reform. Economic actors (organizations in this study) respond to broad institutional change in a variety of ways; how they respond to these changes depends upon their relation to the state, their relations to other organizations close to them, and the economic constraints they experience in the reform era; how they respond to state-level institutions also reveals a great deal about the reform in real terms. Second, I focus specifically on one institutional structure that has a profound effect on the path of China's reforms. The administrative hierarchy of China's former command economy is an institutional structure that shapes firms' experiences in the economic transition. Where firms are positioned in this hierarchy has a profound effect on how they experience the economic transition. The strategies and practices they adopt in the reform-era reflect this fact. Thus, from a political viewpoint, the institutional structure of state administration and where firms are positioned in this administrative hierarchy are critical factors in the path of which were at comparable organizations randomly sampled across four industrial sectors in Shanghai in 1995, I show that (1) in line with theories of path dependency, China's economic transition is highly contingent on the institutional structures that preceded the reforms. Specifically, the institutional structure of the former command economy and a firm's position in that hierarchical structure has a profound effect on that firm's experience of the reforms. (2) Contrary to views that reforms are not being enacted in the upper levels of China's administrative hierarchy, evidence shows that these firms are experiencing the reforms, but they are struggling to survive in the economic transition. However, this evidence is hidden from studies that rely on typical economic indicators. (3) Where authority relations in pre-reform Chinese firms were based on particularistic relations, formal rational bureaucratic structures are emerging at the firm level, and there is evidence that a rational-legal system more generally is also beginning to emerge. Foreign investment and, specifically, joint venture relationships with foreign firms have significant effects in this area. (4) Despite the institutional and cultural particularities of the China experience, the practices of Chinese organizations fit well with general organizational theory.