ORGANIZATIONAL DYNAMICS OF INSTITUTIONAL CHANGE: CHINA’S MARKET ECONOMY

Transitions from state socialism offer rich natural experiments allowing for a better understanding of the dynamics of large-scale institutional change in newly emerging capitalist economies. Market transitions entail the shift from one distinct institutional form to another. In a state socialist redistributive economy, goods and services are allocated through central direction by nonmarket means. By contrast, in a market society, decentralized market exchange serves as the main mechanism that allocates goods and services. There are of course ideal types, which economies in the real world may combine to some degree. In this essay I examine real world institutional transformation in an economy undergoing a rapid shift from central planning to reliance on markets. Through the theoretical lens of new institutional economics and economic sociology, I examine the ongoing organizational dynamics in China’s industrial economy shaped by the rapid emergence of hybrid ownership forms and private enterprises and persistent displacement of the market share of state-owned firms. I show that Douglass North’s (1990) theory of institutional change encounters difficulty in accounting for the organizational dynamics of large-scale institutional change because it assumes that organizational actors respon