Organizational Transformation

The social reforms and the advances of science and technology brought about new issues to business transformation. In China, businesses are confronted with the changes brought about by the social reforms and the advances of science and technology. Within the traditional framework, the usual ways of transformation focusing on centralization and decentralization, flattening of structures by cutting down on middle management or granting each unit more operating and self decision-making rights by empowerment won't work well for businesses to adapt to the changes. Therefore, a new way of thinking is required of and a new organizational structure model is to be established. Meanwhile, it has to be recognized that the establishment and functioning of such a model is based upon an effective corporate governance model. Otherwise, any organizational structure, however good, is not supposed to play its due role. On the other hand, as results of human behaviors, both of them are closely related to such factors as the setting and pursuing of organizational goals, people's needs and wants, the consequent motivation and constraint mechanism of businesses and the power relations and their application. To recognize and unravel all of these factors, it calls for the supplementation of management theories and economic vision.The present dissertation tries to approach the issues mentioned above from four perspectives. As a starting point, Chapter One attempts to introduce the motivation and significance of the present study as well as its bases and approaches. Emphasis is laid on the progress made at home and abroad in the fields being studied. The current study bases itself on these research achievements. This chapter tries to review the progress from three aspects. The first one is the study on business theories. It presents the neo-classic economists' interpretations of businesses based on knowledge and division of labor, theory of transaction cost by Coase, hypothesis made by Demsetz on team production and its measurement, and theory of incomplete contract. The key points of these theories are summarized as the following: First, business and market are both resource allocating mechanisms; Second, on the basis of specialization and collaboration, economy of scale and of scope will bring about benefits through team production; Third, the knowledge and information possessed by a business decides its scale, scope as well as competitive advantages; Fourth, the incompleteness of the contract, the exclusiveness of assets and the opportunist orientation lead to the issue of control over internal management; Fifth, opportunism can be reduced by vertical integration and long-term contract. The latter, however, blurs the relations between business and market. Therefore, business can be looked upon as a nexus of contract relations. The second aspect of review focuses on the study on the corporate governance. This question originates from principal-agent relationship based upon theseparation of ownership and operating rights. This part first touches upon the existing knowledge on human nature and on opportunist behaviors of agents. Larger space is then devoted to the research into the affiliation of the supreme power in corporate governance, external governance and the specific rules for operation. The third aspect turns to the study on organizational structure. The progress in the field is tracked in terms of the guideline for the design of the structure, the ways to transform the structure and forms of structure.On the basis of the review of the progress in the fields concerned, Chapter Two analyzes the forces that drive the organizational transformation. There are three sections in this chapter. In the first section, the definition of business and of organizational transformation and the significance of transformation are discussed. Different from non-social organizations and others, a business is defined as an artificial system, an economic organization for profits, an effective form for resource allocation and a platform to...