复旦大学：《发展经济学》阅读材料与文献_Why is China di!erent from Eastern Europe? Perspectives from organization theory.pdf

Y. Qian et al./ European Economic Review 43(1999)1085-1094 Europe. Why do we observe such differences? It is often claimed that the former Soviet system was too rigid while the Chinese system was more flexible. But wh are some institutions more fexible than others and how does this relate to differences in reform strategies? In this paper, we draw on our recent work in organization theory(Qian et al, 1997)to shed light on these questions The two former centrally planned economies of the Soviet Union and China were organized differently (Qian and Xu, 1993). The Soviet economy was rganized in specialized or functional ministries(e.g, mini tile etc. ) each controlling gigantic factories. This is known as 'branch organization Nove, 1980). In contrast, the Chinese economy has been organized since 1958 mainly on a geographical principle, known as regional organization(Granick, 1990). The Soviet organization resembled closely the U-form organization of business firms while the Chinese organization resembled that of the M-form organization( Chandler, 1962, Williamson, 1975 This paper focuses on the comparison of M-form and U-form organizations in coordinating changes in a team-theoretic framework. Using Milgrom and Roberts(1992)concept of 'design attributes, we analyze coordination as at tribute matching. In the context of business organizations, any product or n be viewed as the result of the assembling of complementary parts: assembling of the parts of a car or of a computer; synchronizing travel, accom- modation and logistics for a conference or a business meeting; assembling subroutines for a software packages; etc. Each part is characterized by its attributes: time, location, technical specifications such as size, weight and bits, etc. These complementary parts must be made to fit together. A product or a service is completed successfully only if the characteristics of each attribute of the various parts are matched successfully. For instance, the diameter of a screw must match that of a bolt; they must both meet certain standards of material resistance. They must be transported to a given location at a given time in order to be matched. Failure in the matching of attributes implies most often a drastic production failure. We assume that ex ante a program is well designed in the sense that all the attributes are matched in the blueprint. However, some of the attributes may not suit the local conditions ex post and adjusting these at tributes may lead to mismatches with the attributes of other tasks, which will then require further adjustments e use this framework to analyze the transition where complementary reforms must be implemented. Take a simple example with two reforms: enter- rise restructuring(laying off excess workers)and creation of a social safety net he attributes of enterprise restructuring are the number and individual charac- teristics of the laid off workers, such as age, seniority, family composition, length of residence, sex, type of contract, current wage, history of employment, etc. The Maskin et al. (1997) analyze incentive issues in M-form and U-form organizations

Europe. Why do we observe such di!erences? It is often claimed that the former Soviet system was too rigid while the Chinese system was more #exible. But why are some institutions more #exible than others and how does this relate to di!erences in reform strategies? In this paper, we draw on our recent work in organization theory (Qian et al., 1997) to shed light on these questions. The two former centrally planned economies of the Soviet Union and China were organized di!erently (Qian and Xu, 1993). The Soviet economy was organized in specialized or functional ministries (e.g., mining, machinery, textile, etc.), each controlling gigantic factories. This is known as &branch organization' (Nove, 1980). In contrast, the Chinese economy has been organized since 1958 mainly on a geographical principle, known as &regional organization' (Granick, 1990). The Soviet organization resembled closely the U-form organization of business "rms while the Chinese organization resembled that of the M-form organization (Chandler, 1962; Williamson, 1975). This paper focuses on the comparison of M-form and U-form organizations in coordinating changes in a team-theoretic framework.1 Using Milgrom and Roberts' (1992) concept of &design attributes', we analyze coordination as &attribute matching'. In the context of business organizations, any product or service can be viewed as the result of the assembling of complementary parts: assembling of the parts of a car or of a computer; synchronizing travel, accommodation and logistics for a conference or a business meeting; assembling subroutines for a software packages; etc. Each part is characterized by its attributes: time, location, technical speci"cations such as size, weight and bits, etc. These complementary parts must be made to "t together. A product or a service is completed successfully only if the characteristics of each attribute of the various parts are matched successfully. For instance, the diameter of a screw must match that of a bolt; they must both meet certain standards of material resistance. They must be transported to a given location at a given time in order to be matched. Failure in the matching of attributes implies most often a drastic production failure. We assume that ex ante a program is well designed in the sense that all the attributes are matched in the blueprint. However, some of the attributes may not suit the local conditions ex post and adjusting these attributes may lead to mismatches with the attributes of other tasks, which will then require further adjustments. We use this framework to analyze the transition where complementary reforms must be implemented. Take a simple example with two reforms: enterprise restructuring (laying o! excess workers) and creation of a social safety net. The attributes of enterprise restructuring are the number and individual characteristics of the laid o! workers, such as age, seniority, family composition, length of residence, sex, type of contract, current wage, history of employment, etc. The 1Maskin et al. (1997) analyze incentive issues in M-form and U-form organizations. 1086 Y. Qian et al. / European Economic Review 43 (1999) 1085}1094

Y. Qian et al./ European Economic Review 43(1999)1085-1094 attributes of compensation from the social safety net are rules of eligibility such as length of employment, special circumstances(veteran or not), status of enterprises, rules of benefits such as size and length, types of benefits(monetary r not), technical support of computers, administration, budget, etc. If some attributes of the two tasks are not matched laid off workers may not be compensated appropriately, so they may riot In our framework, a successful reform requires both a good reform blueprint and correct implementation. Thus, there is first an uncertainty about the quality of a reform blueprint. If it is flawed it can never lead to a satisfactory result, however well coordinated the implementation is On the other hand, a good reform blueprint needs to be implemented correctly, which requires good oordination. The quality of coordination depends on the quality of the in formation available to decision-makers in the organization. We assume that only local managers are able to observe local information, and communication is necessary for others to use that information. However, communication is imperfect and there is a probability that the transmitted message is wrong. An M-form organization is an organization that is decomposed into more-or-less self-contained units where the attribute matching can be do one oca contrast, a U-form organization is decomposed into specialized units which are not self-contained, and thus attribute matching cannot be carried out locally nd is done by the top manager. Our main findings can be summarized as follows. A first basic tradeoff between the M-form and u-form is that the former allows for better local coordination but lacks economies of scale. Most importantly, the M-form enjoys an important flexibility advantage: it can experiment locally with reforms because the structure of self-contained units makes attribute matching achiev ible locally without disrupting the organization as a whole. This is not possible under the U-form due to the higher specialization of tasks. The latter result can explain why the 'big-bang approach was followed in Eastern Europe and the former Soviet Union, which had U-form economies. whereas China followed an experimental approach to reform(McMillan and Naughton, 1992; Sachs and Woo, 1997). The argument is embedded in a framework where coordination in he implementation of reforms is explicitly modeled and where different organ izational forms do not have the same degree of flexibility in coordination. Our model is consistent with the view that coordination failure is an important reason for the output collapse in the former Soviet block (Roland and verdier, 1996: Blanchard and Kremer, 1997) 2 We present the results only in a qualitative way and refer the reader to Qian et al.(1997)for a complete analysis of the results

attributes of compensation from the social safety net are rules of eligibility such as length of employment, special circumstances (veteran or not), status of enterprises, rules of bene"ts such as size and length, types of bene"ts (monetary or not), technical support of computers, administration, budget, etc. If some attributes of the two tasks are not matched, laid o! workers may not be compensated appropriately, so they may riot. In our framework, a successful reform requires both a good reform blueprint and correct implementation. Thus, there is "rst an uncertainty about the quality of a reform blueprint. If it is #awed it can never lead to a satisfactory result, however well coordinated the implementation is. On the other hand, a good reform blueprint needs to be implemented correctly, which requires good coordination. The quality of coordination depends on the quality of the information available to decision-makers in the organization. We assume that only local managers are able to observe local information, and communication is necessary for others to use that information. However, communication is imperfect and there is a probability that the transmitted message is wrong. An M-form organization is an organization that is decomposed into more-or-less self-contained units where the attribute matching can be done locally. In contrast, a U-form organization is decomposed into specialized units which are not self-contained, and thus attribute matching cannot be carried out locally and is done by the top manager. Our main "ndings can be summarized as follows.2 A "rst basic tradeo! between the M-form and U-form is that the former allows for better local coordination but lacks economies of scale. Most importantly, the M-form enjoys an important #exibility advantage: it can experiment locally with reforms because the structure of self-contained units makes attribute matching achievable locally without disrupting the organization as a whole. This is not possible under the U-form due to the higher specialization of tasks. The latter result can explain why the &big-bang' approach was followed in Eastern Europe and the former Soviet Union, which had U-form economies, whereas China followed an &experimental' approach to reform (McMillan and Naughton, 1992; Sachs and Woo, 1997). The argument is embedded in a framework where coordination in the implementation of reforms is explicitly modeled and where di!erent organizational forms do not have the same degree of #exibility in coordination. Our model is consistent with the view that coordination failure is an important reason for the output collapse in the former Soviet block (Roland and Verdier, 1996; Blanchard and Kremer, 1997). 2We present the results only in a qualitative way and refer the reader to Qian et al. (1997) for a complete analysis of the results. Y. Qian et al. / European Economic Review 43 (1999) 1085}1094 1087

Y. Qian et al./ European Economic Review 43(1999)1085-1094 2. The model We consider an economy with two regions 'A' andB, and two functions, '1 and 2. There are four tasks: 14, 24, 1B, and 2B, where task ir involves process for region r. Each of the four tasks has many different attributes. A reform program is characterized by its new attributes. At the implementation stage of a reform program, unexpected contingencies appear which we call attribute shocks. Attributes between tasks Ir and 2r(r= A, B)must be matched in order to implement a reform program successfully e consider an infinite horizon with discount factor 8. One(and only one blueprint of the reform program is made available each period. With probability p the blueprint is a good one and with probability 1-p it is bad. Blueprints available over time are stochastically independent. We assume that if a blueprint is good, it will remain good in any region in the future; however, good coordina tion (i.e, attribute matching) in one region cannot be ' copied in another region because of differences in local conditions. If a blueprint tried in one region is good and coordination is successful, then the same blueprint can be used successfully elsewhere, but coordination in another region is still necessary in order to adjust to local conditions. In each period, a manager collects information about the attribute shocks and sends a message to another manager. Each message contains information about all the attributes in one task. We assume that information transmission between any two managers is imperfect so that the probability of each message being correct is i and the probability of being wrong is 1-, where0<i<1 e assume that the noises in information transmission are independent across tasks and over time. Based on the information received, the manager carries out his main job: attribute matching Consider the payoffs for unit A (payoffs for unit B are defined symmetrically) Let the status quo(without change)payoff in tasks 1A and 2A be i, respectively. The benefits from change are defined as follows. Suppose the program is good, then(i)with a change in task 1A but not in task 2A or vice-versa, the payoff is (A +1)/4 if the attributes between 1A and 2A are matched, 0 otherwise; and i with a change in both tasks 1A and 24, the payoff is A/2 if the attributes between 1A and 2A are matched, 0 otherwise. If the program is bad, then the payoff is always 0 when change is implemented. We assume that PA>l, i.e. the expected per period benefit from change, as compared to the status quo, is positive Ve assume that all blueprints are made available for free, but for each manager there is a setup cost associated with coordinating changes. This cost can be interpreted as a training cost: to implement a reform, the managers need to be trained on how to match the attributes of the reform. Because blueprints are free and the setup costs for coordination are not, when a failure occurs in the previous period (either due to a bad program or bad coordination), the

2. The model We consider an economy with two regions &A' and &B', and two functions, &1' and &2'. There are four tasks: 1A, 2A, 1B, and 2B, where task ir involves process i for region r. Each of the four tasks has many di!erent attributes. A reform program is characterized by its new attributes. At the implementation stage of a reform program, unexpected contingencies appear which we call &attribute shocks'. Attributes between tasks 1r and 2r (r"A, B) must be matched in order to implement a reform program successfully. We consider an in"nite horizon with discount factor d. One (and only one) blueprint of the reform program is made available each period. With probability p the blueprint is a good one and with probability 1!p it is bad. Blueprints available over time are stochastically independent. We assume that if a blueprint is good, it will remain good in any region in the future; however, good coordination (i.e., attribute matching) in one region cannot be &copied' in another region because of di!erences in local conditions. If a blueprint tried in one region is good and coordination is successful, then the same blueprint can be used successfully elsewhere, but coordination in another region is still necessary in order to adjust to local conditions. In each period, a manager collects information about the &attribute shocks' and sends a message to another manager. Each message contains information about all the attributes in one task. We assume that information transmission between any two managers is imperfect so that the probability of each message being correct is j and the probability of being wrong is 1!j, where 04j41. We assume that the noises in information transmission are independent across tasks and over time. Based on the information received, the manager carries out his main job: attribute matching. Consider the payo!s for unit A (payo!s for unit B are de"ned symmetrically). Let the status quo (without change) payo! in tasks 1A and 2A be 1 2 , respectively. The bene"ts from change are de"ned as follows. Suppose the program is good, then (i) with a change in task 1A but not in task 2A or vice-versa, the payo! is (A#1)/4 if the attributes between 1A and 2A are matched, 0 otherwise; and (ii) with a change in both tasks 1A and 2A, the payo! is A/2 if the attributes between 1A and 2A are matched, 0 otherwise. If the program is bad, then the payo! is always 0 when change is implemented. We assume that pA'1, i.e. the expected per period bene"t from change, as compared to the status quo, is positive. We assume that all blueprints are made available for free, but for each manager there is a setup cost associated with coordinating changes. This cost can be interpreted as a training cost: to implement a reform, the managers need to be trained on how to match the attributes of the reform. Because blueprints are free and the setup costs for coordination are not, when a failure occurs in the previous period (either due to a bad program or bad coordination), the 1088 Y. Qian et al. / European Economic Review 43 (1999) 1085}1094