Organizational Boundaries And Market Access Mechanism Of Industry Associations

With the deepening of a new round of governmental economic reform and social system reform, the role of Social Organizations is becoming more and more important accompanied with the transformation of government functions and the innovation of social management system. However, due to some historical and institutional reasons, according to China’s Regulations Governing Registration of Social Organizations, the establishment of Social Organizations shall be approved by the competent authorities and there is no need to set up "one more Social Organizations which have the same or similar functions" in the same administrative region, resulting in such a situation as Industry Associations which affiliated to Social Groups are restrained by "dual management system "and" one regime, one industry for only one Social Organization ". Those rules which lead to exclusive monopoly of Industry Associations weaken the functions of Industry Association serving the economic development. In March 2013, our government issued a "Notification of the Office of the State Council for the Implementation of<the Reform of the Institution and the Transformation of the Functions of the State Council> about the Division of Tasks" (hereinafter referred to as the Notice). It clearly states that "Industry Associations should be separated from the competent authorities step by step" and "there can be several Industry Associations in one industry". This indicates the end of old rules about Industry Association. After the Notice issued, more cities have launched the latest regulations about Industry Association, actively exploring the management of Industry Association. However, it is easy to find the huge difference of the number of Industry Associations that could be founded, when comprehensively compared with these cities’the latest rules of Industry Association, while there are still some cities performing the rules of the "Regulations Registration of Social Organizations".To decide whether there should be "One Industry, One Association" or "One Industry, More Associations", the author suggests that the definition of the optimal organizational boundaries of Industry Association should be clearly clarified, which means the companies joining Industry Association could get the biggest profit when the number of member companies should reach to a certain degree. Specific to different market structures, since the number, the size and others factors of companies could affect the decision to participate or withdraw from Industry Associations, it is necessary to apply the best organizational boundaries to specific market structure. The third chapter of this study firstly demonstrates the necessity of Industry Associations reducing transaction costs. Then it classifies the products provided by the Industry Associations in accordance with exclusiveness and competitive use. Based on the types of products supplied by Industry Associations, the author divides Industry Associations into three different types, including Public Products of Industry Associations, Club Products of Industry Associations and Mix Products Industry Association. On the basis of previous research, this study illustrates the optimal organizational boundaries of these three types of Industry Associations; namely, the member companies could achieve the maximum benefits when the certain number of companies existed in one Industry Association. In the fourth chapter, the author combines the characteristics of a perfect competitive market structures at first, gives the quantitative relation of the number of firms in one industry and that of Industry Associations based on the number of firms and optimal organizational boundaries, and draws the conclusion that how many Industry Associations should exist in one industry. Considering the homogeneity of firms in perfect competitive structure, companies have the motivation to get profit from Industry Association and are willing to do free-riding behaviors. Therefore, the author suggests that the government should guide the establishment of Industry Associations in a perfect competitive structure. The factors that determine the number of Industry Associations are that of firms in monopolistic competition market; however, the heterogeneity leads to the situation that Industry Associations are controlled by large enterprises, so that the establishment of Industry Associations represents the interests of small and medium enterprises becomes inevitable.According to the study of organization boundaries of three Industry Associations and the market entry of Industry Associations in two different market structures, the conclusions are as follows:firstly, the standards of market entry of Industry Associations should be varied in different market structures which cannot be generalized. Secondly, in view of the effects of reducing transaction costs of Industry Associations, this study proposes that the government should set up Industry Associations actively especially in the perfect competitive market made up of the homogeneous firms. Thirdly, in the monopolistic competition consisting of heterogeneous enterprises, the solution is to set up industry associations representing the interests of the small businesses as for existing large enterprises’ controlling problems. Shortcomings of this study are:firstly, by studying the rules of Industry Association and the reference results of previous studies, this research defines the products supplied by Industry Associations restricted to public goods and club goods, so the study pays less attention to private goods which occupied a small proportion of products supplied by Industry Associations. Secondly, in order to overcome the problems of "free rider" in perfect competitive market, this study presents that the government should set up an alternative Industry Associations. However the prerequisite that comes to the conclusion doesn’t be tested which is another deficiency of this study. Thirdly, this study only analyzes the market entry of Industry Associations in perfect competitive market and monopolistic competition market, but the author doesn’t study it in monopoly and oligopoly market.