Dragon in a Three-Piece Suit: The Emergence of Capitalism in China

Dragon in a Three-Piece Suit: The Emergence of Capitalism in China

Dragon in a Three-Piece Suit: The Emergence of Capitalism in China

Dragon in a Three-Piece Suit: The Emergence of Capitalism in China


Dragon in a Three-Piece Suit is an innovative sociological examination of what is perhaps the main engine of economic reform in China, the large industrial firm. Doug Guthrie, who spent more than a year in Shanghai studying firms, interviewing managers, and gathering data on firms' performance and practices, provides the first detailed account of how these firms have been radically transformed since the mid-1980s. Guthrie shows that Chinese firms are increasingly imitating foreign firms in response both to growing contact with international investors and to being cut adrift from state support. Many firms, for example, are now less likely to use informal hiring practices, more likely to have formal grievance filing procedures, and more likely to respect international institutions, such as the Chinese International Arbitration Commission. Guthrie argues that these findings support the de-linking of Western trade policy from human rights, since it is clear that economic engagement leads to constructive reform. Yet Guthrie also warns that reform in China is not a process of inevitable Westernization or of managers behaving as rational, profit-maximizing agents. Old habits, China's powerful state administration, and the hierarchy of the former command economy will continue to have profound effects on how firms act and how they adjust to change. With its combination of rigorous argument and uniquely rich detail, this book gives us the most complete picture yet of Chinese economic reform at the crucial level of the industrial firm.


Market actors live in murky worlds where it is never clear which actions will have which consequences. Yet, actors must construct an account of the world that interprets the murkiness, motivates and determines courses of action, and justifies the action decided upon. in markets, the goal of action is to ensure the survival of the firm. No actor can determine which behaviors will maximize profits (either a priori or post hoc), and action is therefore directed toward the creation of stable worlds.

(Neil Fligstein 1996a)

Structural change in organizations seems less and less driven by competition or by the need for efficiency. Instead … bureaucratization and other forms of organizational change occur as the result of processes that make organizations more similar without necessarily making them more efficient.

(Paul DiMaggio and Walter Powell 1983)


This study begins with a simple observation and question. Since the late 1980s Chinese firms have been adopting a number of economic strategies and practices that resemble the rational bureaucratic systems found in firms from many advanced market societies. What are the forces and processes driving this trend? the collection of findings I present throughout these chapters provides an answer to this question. I argue that it is not the drive toward efficiency that guides organizational decisions in China's transforming economy. Rather, the decisions and practices of Chinese firms are shaped by a combination of the social networks and political institutions in which they are embedded and the economic uncertainty they experience. As they struggle to survive in the increasingly uncertain and turbulent markets of China's transition economy, Chinese firms mimic the examples of market actors that they view as being the most market-savvy, namely, foreign investors.

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