The Arrangement Of Property Rights System And China Private-Managed Enterprises

In this paper, we found out that the private-managed enterprises in China, especially the early ones, were started up in a blurred property right structure as we examined the histories of their foundation and development. But in the mid and later 1990s, many enterprises encountered difficulties during their growth, such as splitting, blindly diversifying, drastically struggling for power within the firm, high liquidity of whole shows. In this paper, we try to find a theoretic solution for those phenomena.Why the private-managed enterprises in China were started up in a blurred property right structure, since the property rights were regarded as the most important long-term incentive by orthodox economics? In our opinion, the reason lies in that institutional information was so poor in quality in a rapidly changed situation that the property rights played an insignificant role in the decision space. More important incentive was provided by the high short-term rents in a broadly regulated economic system. Furthermore, the political capital brought by a blurred structure and the political risk caused by a clear structure made a blurred structure more reasonable for the initiators. As the institutions become stable, institutional information will go into decision space, and we can suppose that the property right structure will become more and more clearer.We take the view that enterprise is a depositary of accumulated knowledge. The growth of enterprise depends on the continual accumulation of complementary impersonal knowledge. Unfortunately, the tremendous cost caused by path dependency made it impossible to delimit the blurred property right structure. Under the blurred property right structure, the power of de facto control, which was impossible to be exchanged or compensated for its loss, became the main return for the participators. So each participator would do his best to accumulate universal experience to hold the power of control and reduce the loss of being bereaved control, which would limit the growth possibility of the enterprises. Moreover, little limitation from intellectual property right, compete-prohibited clause and occupational moral cost the participators little to expropriate. Not only can the new enterprises cheaply use knowledge and other critical sources the old enterprises accumulated, but also can be more efficient in accumulating new complementary impersonal knowledge because of its clearer property right structure.All those provide irresistible lure for the participators who have higher ability in accumulating knowledge. Only those old enterprises, which have enough long-term incentive from property rights and smaller cost in clarifying the blurred structure, can re-delimit the property right and enjoy sustainable growth.Our observation of the private-managed enterprises in China indicates that property right of enterprise is a dynamic structure correlative to real statuses. As a result of re-exchange of initial rights, it depends on the bargaining power of each participator. It is a proper combination of contractual claim, contractual control, residual claim and residual control, which try to satisfy the participation constraint and efficient principle. Efficient property right structure results from market trade and will evolve into a more efficient one.