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The Making of the State Enterprise
System in Modern China: The Dynamics of Institutional Change (Cambridge,
Mass.: Harvard University Press,
2005) When, how, and why did the state enterprise
system of modern China take shape? The widespread belief is that China’s
economic system and its development strategy were borrowed “wholesale” from
the Soviet Union during the 1950s. I disagree. I argue that the
basic institutional arrangement of state-owned enterprise—the bureaucratic
governance structure, the distinctive management and incentive mechanisms,
and the provision of social services and welfare—took shape in China during
the Sino-Japanese War (1937-1945). In addition, the origins of the
Chinese danwei (unit) system, the prevailing administrative system
encompassing government, business, and educational institutions in urban
China during the post-1949 period, can also be traced to the period of the
Sino-Japanese War. I show how wartime Nationalist institutional
rationalization resulted in the use of the term danwei to designate
political, economic, and administrative organizations. Finally, the
Nationalist ideology of the developmental state took its final form during
the war, an ideology that served as the underpinnings for the state
enterprise system. I conclude that institutional and ideological
evolution, not revolution, explains the basic structure of state-owned
enterprise and its ideology in post-1949 China. I present a new theory of institutional change, one that incorporates insights of New Institutional Economics and cognitive science. This theory explains the formation of China’s state enterprise system as the outcome of the sustained systemic crisis triggered by the Sino-Japanese War. The crisis underscored the necessity of institutional change by exposing the inadequacy of existing institutions and the absence of needed institutions. Crisis forced the Nationalist elite to respond by transforming their existing mental models of institutional environments and by developing new ones. Their transformed and new mental models led them to reorder and restructure the institutional environments through endogenous resource utilization and exogenous resource appropriation, an endeavor that gave rise to a new state enterprise system. Based on extensive use of heretofore unavailable archival materials, this study breaks new empirical, methodological, and theoretical ground. It contributes to our understanding of the origins of the Chinese state enterprise system and danwei system, to discussions of change and continuity in modern Chinese history, and to the development of theories of institutional change. |