Unstable Conditions May Allow New Types of Organizations to Be Created: A Case from China

What is it about?

It's hard to create a new type of organization, but unstable social conditions may provide an opportunity to do so. This article examines the case of four-profit ventures started by Chinese state organizations in the 1990s, when the country was in the throes of transition from Marxist-Leninist socialism to market socialism. Because of the transition, existing organizational models all had liabilities in terms of legitimacy. In response, entrepreneurs created new organizational forms by adopting (and adapting) organizational characteristics that could be seen as contradictory – and then masking those contradictions by deliberately increasing confusion about their organization.

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Why is it important?

It's rare for new organizational forms to arise. Under normal circumstances, new organizations follow existing organizational models, adopting the characteristics of successful organizations that precede them. However, there are certain conditions when genuinely new and innovative types of organizations can emerge. Widescale institutional change, such as that which China experienced in the 1980s and 90s, is one of those circumstances. This gives us an unprecedented opportunity to see how genuinely innovative organizational models come to be.