Economic reform, institutional transition, and firm contractual form innovation: An empirical study on China's township and village enterprises.

摘要

Since China launched economic reform in 1978, its economy has been growing at a remarkable rate. Its institutional transition toward a free market system is significant as well. However, China's reform has followed a distinctive strategy from other reforming former centrally planning economies, i.e., it takes a bottom-up endogenous rather than top-down exogenous reform path.; This empirical study on China's township and village enterprises shows that the community public ownership of rural enterprises has effectively combined the comparative advantage of local government leaders in external management and of firm managers in internal management--two unmarketed inputs in firm's operation--to overcome the imperfection in both market and government during the transition. It has also led to a swift expansion of this sector. In response to the transitional environment, the managerial contractual form applied to collective TVEs has been innovated continuously. Such innovation entitles firm managers more control and residual claim rights over the firms in the purpose of motivating them to take more responsibilities and risks toward firms' financial performance, and reducing contract enforcement costs. The contractual structure in this sector has evolved from a government-leader dominant fixed-wage form to partnership style profit-sharing form, then to privatization-oriented fixed-payment form in the past fifteen years.; This dissertation explicates how the central government's partial reform efforts in market liberalization have become the driving force to induce the contractual form innovation in the TVE sector, and how heterogeneity in firms' technical structure and in the local economic setting may affect community government's decisions regarding contractual form innovation. The labor-intensive firms, especially those in richer areas, are among the first group to be granted fixed-payment contracts, while the capital-intensive firms, or those in relatively backward areas, have notably lagged in such movement. However, development in the whole market system may result in the diffusion of contractual form innovation and lead to an "induced privatization" in this sector, because such innovation stimulates the formation of effectively functioning markets for rural labor and managers and demands further reform on legal and political dimensions.