When Do the Last Become First? Multi-dimensional Institutional Complexity and the Privatization and Marketization in China

• In Event: 3424 - Entrepreneurs, Managers, and Their Environments

Abstract

What type of individuals and private enterprises win out is a central question of transitology in studies of post-socialist market transition. Drawing on China’s education and training industry (ETI), this article shows a pattern of transitology that belies existing predictions: a particular model of prototypical private enterprises (underdog organizations) that was founded by marginal entrepreneurs and was most noncompliant with formal regulations and informal norms became dominant. I solve this puzzle by developing the idea of multi-dimensional institutional complexity. For an industry facing such complex environment, there are conflicts of institutional templates in ownership, organizational goal, structure and operation. The state plays an important role in underlying multi-dimensional institutional complexity. Since underdog organizations were least dependent upon the state education system and the state-led teaching profession, they became the pioneers in adopting noncompliant practices. I argue that underdog organizations benefited not only from their noncompliant practices but also from an interaction effect: under multi-dimensional institutional complexity, state regulations against noncompliant practices rarely succeeded and even made these practice more effective. I specify the mechanisms through which underdog organizations outcompeted other models. Consequently, underdog organizations as prototypical private enterprises became the rule-makers and pushed the privatization and marketization from below. My study has important implications for various institutional theories and studies of organizational ambiguity. It also proposes a novel bottom-up trajectory of China’s private economy and new understanding of the role of the state.

Author

• Le Lin, University of Hawaii-Manoa