Organizational Dynamics of Market Transition: Hybrid Forms, Property Rights, and Mixed Economy in China

Victor Nee Cornell University This paper underscores the importance of hybrid forms in the current market transitions in state socialism through an examination of the emergence of marketized firms and cadre-entrepreneurs in China. The paper develops a new-institutionalist analysis of the organizational dynamics that propel market transition in reforming state socialism. Under conditions of partial reform, marketized firms enjoy a transaction cost advantage over alternative governance structures. Changes in the institutional environment stemming from the spread of markets and the changing structure of property rights, however, increasingly favor private firms. Nonetheless, a mixed economy characterized by a diversity of organizational forms and a plurality of property rights will be a persistent feature of transitions from state socialism. Analysis of the interaction between government, enterprise, and market forces illustrates how the new-institutionalist perspective is applied to a dynamic model of market transition in China.'