The Sino-Japanese War and the Formation of the State Enterprise System in China: A Case Study of the Dadukou Iron and Steel Works, 1938-1945

This article examines the formation of China's state enterprisesystem, using the case of the Dadukou Iron and Steel Works (DISW).I argue that the basic institutional arrangement of the DISW,and by extension other state-owned enterprises, consisted ofa bureaucratic governance structure, distinctive managementand incentive mechanisms, and the provision of social servicesand welfare. This arrangement took shape during the Sino-JapaneseWar, with the sustained systemic crisis and the nature and characterof the institutional endowments leading to the formation ofChina's state enterprise system. In considering implicationsfor understanding institutional change, I suggest that crisisshapes radical institutional change and that both path dependenceand path independence characterize such change.