Dragon in a Three-Piece Suit

Dragon in a Three-Piece Suit: The Emergence of Capitalism in China

Doug Guthrie
Copyright Date: 1999
Pages: 320
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  • Book Info
    Dragon in a Three-Piece Suit
    Book Description:

    Dragon in a Three-Piece Suitis an innovative sociological examination of what is perhaps the main engine of economic reform in China, the large industrial firm. Doug Guthrie, who spent more than a year in Shanghai studying firms, interviewing managers, and gathering data on firms' performance and practices, provides the first detailed account of how these firms have been radically transformed since the mid-1980s.

    Guthrie shows that Chinese firms are increasingly imitating foreign firms in response both to growing contact with international investors and to being cut adrift from state support. Many firms, for example, are now less likely to use informal hiring practices, more likely to have formal grievance filing procedures, and more likely to respect international institutions, such as the Chinese International Arbitration Commission. Guthrie argues that these findings support the de-linking of Western trade policy from human rights, since it is clear that economic engagement leads to constructive reform. Yet Guthrie also warns that reform in China is not a process of inevitable Westernization or of managers behaving as rational, profit-maximizing agents. Old habits, China's powerful state administration, and the hierarchy of the former command economy will continue to have profound effects on how firms act and how they adjust to change.

    With its combination of rigorous argument and uniquely rich detail, this book gives us the most complete picture yet of Chinese economic reform at the crucial level of the industrial firm.

    eISBN: 978-1-4008-2338-3
    Subjects: Economics

Table of Contents

  1. Front Matter
    (pp. i-iv)
  2. Table of Contents
    (pp. v-vi)
  3. List of Figures
    (pp. vii-viii)
  4. List of Tables
    (pp. ix-x)
  5. Preface and Acknowledgments
    (pp. xi-2)
  6. One Firm Practices in China’s Transforming Economy: Efficiency or Mimicry?
    (pp. 3-23)

    This study begins with a simple observation and question. Since the late 1980s Chinese firms have been adopting a number of economic strategies and practices that resemble the rational bureaucratic systems found in firms from many advanced market societies. What are the forces and processes driving this trend? The collection of findings I present throughout these chapters provides an answer to this question. I argue that it is not the drive toward efficiency that guides organizational decisions in China’s transforming economy. Rather, the decisions and practices of Chinese firms are shaped by a combination of the social networks and political...

  7. Two Path Dependence in China’s Economic Transition
    (pp. 24-41)

    In the study of economic transitions, focus on the effect that preexisting structures and systems have on the course and trajectory of economic transitions has given rise to a perspective some scholars have referred to as “path dependence.”¹ The central message of this view is that preexisting structures and conditions give rise to different paths through reforms. It makes little sense to think about universal blueprints for economic reforms or transcendental economic principles that exist independent of the culture and history of a given society. New institutions are built on the legacies—“the ruins,” as David Stark puts it—of...

  8. Three Formal Rational Bureaucracies in Chinese Firms: Causes and Implications
    (pp. 42-74)

    Since the late 1980s, firms in China’s industrial economy have been rushing to establish formal rational bureaucracies. In this chapter I explore the economic, political, and institutional factors that influence firms’ decisions to adopt several different practices that can be defined as formalized organizational structures.¹ My central concern is the rationalization of Chinese firms and the movement away from a top-down, particularistic model of authority relations in the workplace.² I argue that Chinese firms are adopting rational structures not for reasons of efficiency but because they perceive these systems as the types of structures that market-savvy organizations adopt.

    Specifically, in...

  9. Four Changing Labor Relations in the Period of Market Reform
    (pp. 75-100)

    In chapter 3 I showed that a combination of economic and institutional factors matter for the adoption of various organizational structures. In this chapter I extend that argument to an analysis of changing labor relationships in the transition era. I focus on two central issues of the economic transition with respect to labor relations: remuneration and the redefinition of the labor relationship through emergence of the labor contract [laodong hetong], an institution that, in effect, marks the end of the socialist institution of lifetime employment.

    In the first case, benefits and pay are central to labor arrangements and organizational survival...

  10. Five The Politics of Price Setting in China’s Transition Economy
    (pp. 101-120)

    The notion that, in a free market, prices will gravitate toward a natural or equilibrium state is a central tenet in classical economic theories of markets. Price mechanisms efficiently organize economic activity by transmitting information and pushing producers to adopt the most cost-effective methods of production.¹ An economic sociology of markets, beginning with White (1981), contends that price-setting practices are fundamentally social, as economic actors make decisions according to the social networks and institutional environments in which they are embedded. The case of China supports the notion that emerging price-setting practices in China’s economic transition are both political and social....

  11. Six Economic Strategies in the Face of Market Reforms
    (pp. 121-149)

    Market decisions and strategies of organizations in transition economies illuminate important, often hidden facts about the nature and meaning of broader institutional changes of economic reforms. In this chapter I examine two specific strategies adopted by firms in the emerging markets of China’s industrial economy. Like in the preceding chapters, my focus here is on the decisions firms are making in China’s emerging markets and the implications those decisions have for understanding China’s reforms and for theories of economic transition more generally. As I have argued in previous chapters, individual-level data on changing mechanisms of stratification do not tell us...

  12. Seven Institutional Pressure, Rational Choice, and Contractual Relations: Chinese-Foreign Negotiations in the Economic Transition
    (pp. 150-174)

    Throughout this study, I have modeled the effects of formal relationships with foreign investors on various organizational outcomes. In this chapter I take that analysis one step further, focusing on the structure and dynamics of Chinese-foreign relationships and negotiations. My aim is to look beyond the individualized decisions organizations are making in terms of internal structure or market strategies, focusing instead on the inter-organizational negotiations that are an integral part of the reforms. The question I seek to answer is this: What are the dynamics of inter-firm negotiations between Chinese firms and foreign investors, and how do these investment negotiations...

  13. Eight The Declining Significance of Connections in China’s Economic Transition
    (pp. 175-197)

    A study of institutional structures and economic practices in China’s transforming society must not eschew a discussion ofguanxi(connections/social relationships) and the social structures and arrangements that system implies. Like systems of rational-legal institutions or formal rational bureaucracies,guanxiis itself an institutional system that shapes the decisions and practices of economic, political, and social action. And the extent to which this system is being transformed in the reform era has many implications for the present and future of China’s transition. In chapter 3 I argued that the emergence of formal rational bureaucracies at the firm level in China...

  14. Nine Conclusions and Implications
    (pp. 198-218)

    Walking through the grounds of an old state-owned industrial firm in Shanghai, one gets an almost eerie sense of the social life that used to thrive within these gates. A basketball court is covered with weeds; the rusted old rim gives the sense that no one has played basketball there in years. The on-site work unit housing is still there, but it is no longer the hub of social and political activity that it was in the prereform era. Many workers have moved elsewhere, perhaps to the new suburbs, which can now be reached by Shanghai’s fledgling subway system. As...

  15. Appendix One Methodology and Sampling
    (pp. 219-227)
  16. Appendix Two Interviews and Informants
    (pp. 228-234)
  17. Appendix Three Complete Interview Schedule
    (pp. 235-239)
  18. Appendix Four Sample Characteristics and Variables
    (pp. 240-248)
  19. Notes
    (pp. 249-280)
  20. References
    (pp. 281-298)
  21. Index
    (pp. 299-302)