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By Dic Lo (auth.)

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Extra info for Market and Institutional Regulation in Chinese Industrialization, 1978-94

Sample text

Second, the development of the labour process in manufacturing activities has led to the decomposition of the production process into elementary units and the de-skilling of workers. This, in turn, ensures labour productivity in 'world factories' of the underdeveloped world being equal to or in excess of that in advanced capitalist economies. Third, the development of the means of transportation and communication has made industry less tied to specific locations. Taken together, these conditions explain the trend of growing relocation of manufacturing activities, in the form of subcontracting or foreign direct investment, to the underdeveloped world.

With respect to firm organization, the implication then is that incremental change needs more integrated co-ordination among different links of the same production chain (the notion of 'networks'), or different divisions within the firm, whilst abrupt change requires the division of labour to be structured in a more specialized manner. This implication is captured by Aoki's (1990) model of the Japanese firm. The model emphasizes horizontal co-ordination, as opposed to the vertical co-ordination that characterized the (stylized) American firm.

The premise of the idea is familiar: incumbent workers from learning-by-doing possess idiosyncratic knowledge of their work environment, which can be a significant source of productivity for the firm. It is thus beneficial for the firm to encourage workers establishing long-term commitment, rather than to emphasize linking short-run reward and performance for individual workers. It follows that the reward system is better structured in such a way as to tie pay to well-defined jobs, rather than to individuals, A Perspective on Systemic Transformation 35 and filling higher slots through internal promotion.

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