Capitalism from Below
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CAPITALISM FROM BELOW Angemeldet | [email protected] Heruntergeladen am | 22.05.13 14:32 Angemeldet | [email protected] Heruntergeladen am | 22.05.13 14:32 CAPITALISM FROM BELOW Markets and Institutional Change in China VICTOR NEE SONJA OPPER HARVARD UNIVERSITY PRESS Cambridge, Massachusetts, and London, England 2012 Angemeldet | [email protected] Heruntergeladen am | 22.05.13 14:32 Copyright © 2012 by the President and Fellows of Harvard College All rights reserved Printed in the United States of America Library of Congress Cataloging- in- Publication Data Nee, Victor Capitalism from below : markets and institutional change in China / Victor Nee, Sonja Opper. p. cm. Includes bibliographical references and index. ISBN 978- 0- 674- 05020-4 (alk. paper) 1. Capitalism— China. 2. Entrepreneurship— China. 3. Industrial policy— China. 4. China—Economic policy. 5. China— Politics and government. I. Opper, Sonja. II. Title. HC427.95.N44 2012 330.951—dc23 2011042367 Angemeldet | [email protected] Heruntergeladen am | 22.05.13 14:32 To Margaret Nee (1919– 2011) and Fanny de Bary (1922– 2009) Margret and Herbert Opper Angemeldet | [email protected] Heruntergeladen am | 22.05.13 14:32 Angemeldet | [email protected] Heruntergeladen am | 22.05.13 14:32 Contents List of Figures and Tables ix Acknowledgments xiii 1 Where Do Economic Institutions Come From? 1 2 Markets and Endogenous Institutional Change 12 3 Th e Epicenter of Bottom-Up Capitalism 41 4 Entrepreneurs and Institutional Innovation 72 5 Legitimacy and Or gan i za tion al Change 109 6 Industrial Clusters and Competitive Advantage 132 7 Th e Development of Labor Markets 161 8 Institutions of Innovation 195 9 Po liti cal Economy of Capitalism 226 10 Conclusion 259 Appendix 1: Firm Surveys 265 Appendix 2: List of Interviewees 351 Notes 355 References 401 Index 423 Angemeldet | [email protected] Heruntergeladen am | 22.05.13 14:33 Angemeldet | [email protected] Heruntergeladen am | 22.05.13 14:33 Figures and Tables Figures 2.1 A multilevel model of institutional change 20 2.2 Scenario I: Dominance of formal rules 27 2.3 Scenario II: Ineffi cient and nonenforced state-mandated rules 28 2.4 Scenario III: Institutional change from below 29 2.5 Private fi rm development, 1989– 2007 37 3.1 Interprovincial distribution of private- sector activities in 2004 47 3.2 Private fi rm registration in the Yangzi delta, 1980– 1993 51 3.3 Private fi rm registration in the Yangzi delta, 1993– 2008 51 3.4 Th e seven survey cities 53 6.1 Own ership type of largest input supplier 153 6.2 Spatial distribution of suppliers 154 6.3 Own ership structure of customers 156 6.4 Spatial distribution of sales structure 159 7.1 Average annual wages in manufacturing sector by own ership and city, 2005 179 7.2 Frequency of labor disputes, 2003 185 Angemeldet | [email protected] Heruntergeladen am | 22.05.13 14:34 x Figures and Tables 7.3 Cause of labor disputes, 2003 186 8.1 Provincial markets for technology and patenting, 1995–2006 217 8.2 Technology cooperation and fi rm innovativeness 219 9.1 Fiscal revenue and private fi rm employment in the Yangzi delta region 230 9.2 State- owned enterprise production and tax income, 1978– 2009 232 9.3 Party membership of founders 238 Tables 3.1 Socioeconomic conditions in the seven survey cities, 2006 63 3.2 Provincial contribution to national gross industrial output by sector, 2006 64 3.3 Firm sample by city, sector, and fi rm size, 2006 wave 67 5.1 Legal form of private companies 117 5.2 Implementation of legally required or gan i za tion al bodies 121 5.3 Shareholders in management positions, by corporate form 123 5.4 Authority index of shareholder meeting and board of directors, by corporate form 124 5.5 Decoupling and company per for mance 125 7.1 Recruitment channels, 2009 169 7.2 Formal recruitment and labor turnover, 2003– 2005 174 7.3 Average annual wage, 2005 180 7.4 Decision to off er employee insurance, 2005 183 7.5 Labor disputes, 1996– 2007 184 7.6 Contract type and job category 188 7.7 Timing of standardization of employment relations 192 Angemeldet | [email protected] Heruntergeladen am | 22.05.13 14:34 Figures and Tables xi 7.8 Market recruitment, governance, and turnover 193 8.1 Firm innovation from 2002 to 2009 198 8.2 Top sources of new ideas 202 8.3 Sample mean comparison tests for top sources of innovation ideas and diff erent types of innovation, 2009 205 8.4 Sample mean comparison tests for informal collaboration and diff erent types of innovation, 2009 208 8.5 Formal research agreements of innovating fi rms in 2009 210 8.6 Sample mean comparison tests for formal collaboration and diff erent types of innovation, 2009 216 8.7 Technical cooperation and innovativeness 218 8.8 Own ership, technology exchange, and innovation 223 9.1 Po liti cal capital, networking, and success in regulated markets 242 9.2 Po liti cal capital and fi rm size 250 9.3 Po liti cal capital and profi tability 252 9.4 Po liti cal capital, rent seeking, and company per for mance in China, 2002 256 Angemeldet | [email protected] Heruntergeladen am | 22.05.13 14:34 Angemeldet | [email protected] Heruntergeladen am | 22.05.13 14:34 Ac knowledg ments A quest to explain institutional change that gave rise to a new economic order is complex and challenging. Th is book reports the results of a six- year (2005– 2011) study that aims to do just that. Th e eff ort has had many moving parts, involving contributions of an international research team. Our intellectual debts are deep and extensive. Here we wish to thank the researchers, scholars, and staff who contributed to our study over the course of those years. David Su, Lu Hanlong, and researchers at the Institute of Sociology of the Shanghai Academy of Social Sciences shared with us their expertise and advice every step of the way. Without the dedication and eff orts of Sun Bocheng and his entire staff at the Market Survey Research Institute, our fi rm- level surveys in the Yangzi delta region could not have been carried out. Colleagues in China helped us signifi cantly: Shi Jinchuan, Justin Yifu Lin, Victor Yuan, Guo Li, and Lu Hanyin. Th e John Templeton Foundation provided major funding for the project. We thank especially Barnaby Marsh, who took an interest in the project’s aims from inception to completion. We are also appreciative of the support of the Swedish Research Council, the College of Arts and Sciences at Cor- nell University, Tetra Pak Corporation, and the Crafoord Foundation for funding the research. We thank Michael Aronson, our editor at Harvard University Press, for his support and editorial input at each stage. Rachel Davis provided outstand- ing editing of the manuscripts, which clarifi ed our arguments. Th anks also to Barbara Goodhouse, our production editor. Angemeldet | [email protected] Heruntergeladen am | 22.05.13 14:35 xiv Ac know ledg ments We gratefully acknowledge the help of graduate research assistants in the Department of Sociology at Cornell: Yujun Wang, Ningxi Zhang, and Zun Tang, as well as Christopher Yenkey, Li Ma, Mark Jacobs, and Paul Lee. Many colleagues read the entire manuscript and contributed detailed com- ments and criticism: William Parish, Michael Macy, Walter Powell, Benjamin Cornwell, Lisa Keister, and Frank Young. Other scholars who commented on parts of the manuscript include Howard Aldrich, Fredrik Andersson, Wm. Th eodore de Bary, Matthew Bothner, Susan Buck-Morss, Ronald Burt, Franco Cerase, Robert Ellickson, Joseph Galaskiewicz, Christer Gunnarsson, Ravi Ramamurti, Eric Siggia, Iván Szelényi, and Markus Taube. Glenn Carroll, Michael Hannan, Douglas Heckathorn, Håkan Holm, Jesper Sørensen, David Strang, Richard Swedberg, Anne Tsui, and Rafael Wittek contributed useful counsel at various stages. Sonja Opper acknowledges the generous support of the Department of Economics at Lund University, which granted a teaching-free year (2009) to support research and writing at a critical stage. She also appreciates the lively and valuable discussions at seminars or ga nized at Lund University (2010), Cornell University (2007, 2011), Fudan University (2007, 2010), the University of Duisburg- Essen (2008, 2010), Erasmus University of Rotterdam (2009), and the University of Trier (2008). Furthermore, she is grateful for valuable com- ments received from conference participants at the Annual Meeting of the In- ternational Society of New Institutional Economics (2011), the Conference on Endogenous Institutional Change at Lund University (2011), the Annual Meet- ing of the International Academy of Chinese Management Research (2010), the Annual Meeting of the Academy of Management (2008), and the Annual Meeting of the Eu ro pe an Economic Association (2008). Over the years, stu- dent feedback also provided a constant stream of ideas. Most importantly, par- ticipants in the graduate courses on “China’s Economy” at Lund University were among the fi rst to listen to our argument and to discuss some of the key ideas developed in this book. Finally, friends and family provided invaluable support. In par tic u lar, Sonja thanks Björn Meyer for many fruitful discussions, for in- sightful remarks on part of the manuscript, and for his steadfast support and encouragement. Victor Nee acknowledges Brett de Bary’s unfl agging interest and support and the feedback she has off ered throughout. She and the Egyptian fi lmmaker Safaa Fathy joined us in Zhejiang, Shanghai, and Jiangsu to fi lm and record onsite interviews and visits to fi rms.