Game Of The Change Of Ownership Of Township And Village Enterprises

For the past 20-plus years, China has achieved an outstandingperformance in economic transformation, which has always been a topconcern to economists both at home and abroad. The economists havereached a common understanding in it: China's township-village enterprise(TVE) ---- an organization with ambiguous ownership from the view-point ofwestern economics, has played an extremely critical role in fuelling afast-track economic growth in China. As a result, a saying comes out, "SeeChina miracles in the countryside, and see countryside miracles in TVEs." While contributing to Chinese economic development, TVEs have alsoexperienced constant changes in themselves, and have, to some extent,altered advantages, positions and mutual interest relations amongstakeholders, which contributed to policy changes and the creation of newpolicy environment and efficiencies. As a matter of fact, the birth, theevolution and the change of China's TVEs took place in the transitionaleconomy, which inevitably have a close relationship with contemporarypolitical and economic systems, as well as historical customs and culturalbackground. The TVE's development in different stages is in fact a result ofthe interaction with the contemporary political, economic and social pollicies.It is because that TVEs are deeply rooted in the economic environment wherethey are belong to, unable to survive independently from this environment, norcan it dominate other factors in the environment. A TVE should interact withmany other economic and non-economic forces inherently imposed on thebusiness system. In this dissertation, the author proposes an assumption, which comesfrom the Theory of the Firm, otherwise known as'the contractual theory of thefirm', put forward by Coase. This theory can be best described by thefollowing three sentences: (1) The contractual nature of the firm; (2) The incompleteness of contracts; (3) Relevance of ownership therefrom.The author defines the ownership of a TVE as residual claims andresidual control rights, and it is usually regarded as a state-contingentownership. A contract is incomplete, which means it is of great importance asto who owns the firm, because a reasonable allocation method can ensure thevalue maximization of a firm, so that Pareto's Optimum of each party can beultimately realized. However, the final ownership allocation on a certaincontractual party is decided by the negotiating abilities of each party under thegiven conditions. Meanwhile, the result of each game decides the gamestatus of bargaining among contractual parties for the next time. That is to say,the game around firm ownership is a dynamic and continuous process. Therefore, the birth and evolution of TVE is, in fact, mainly a process inwhich all stakeholders (i.e. community government and business operators)compete against one other for the ownership of the firm during the institutionaltransformation. The result of such competition is finally decided by the level ofnegotiating ability possessed respectively by the community government andbusiness operators under different external environments. The ownershipallocation for township enterprises at each phase of the development, e.g.contracting and leasing system and joint stock and cooperation system, etc.,is a product of mutual compromise of interest conflicts among them. In orderto give a more vivid illustration, The author applies the Nash NegotiationModel to simulate the bargaining process. The main contents of this paper are arranged in the following order: Chapter 1: Introduction, which brings up the issue for discussion, explainsits practical significance, and introduces the major method of study and therelative time spectrum, so that the readers may quickly understand what isunder discussion in this paper. Chapter 2: The theoretical foundation and literature evidence. It mainlyintroduces the evolution of business theories, and that the...