Publication Type: Conference Paper/Unpublished Manuscript
Review Method: Peer Reviewed
Abstract: The literature on economic behavior and institutions has identified three coordinating mechanisms in firms: market, hierarchy, and network. However, quantitative research on the relative significance of the three mechanisms is lacking. Based on a study of 859 Chinese rural firms in 1996, this paper examines their relative effects. It has found that: 1) network, market, hierarchy and their combinations all are used in Chinese rural firms; 2) their relative effects differ from firms to firms and from operation to operation, depending on the conditions an organization or an operation has or faces. Hierarchy and market play a crucial role in collective firms while informal network plays a pivotal role in private firms. Information collection is primarily coordinated by market while other four business operations - finance, lease or purchase of equipment and workplace, and recruitment- are coordinated by informal network in private firms and by hierarchy and market in collective firms.