No Proper Name, No Proper Conduct: Company Affiliation and Product Quality in Wenzhou
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Zhimin Liao
Abstract
This case study demonstrates the far-reaching impact on product quality when private firms were legally recognized and allowed to operate with their own brand names. Previously, when the private firms were forced to affiliate themselves with a governmental organization to get around the entry barrier, they had little incentive to improve the product quality, because too many enterprises were using a same brand name with no effective supervision on each other. Price competition was the only means to survive. This explains the persistent notorious waves of inferior goods through the 1980s to early 1990s. The legalization of private firms in 1992 brought about dramatic improvement in product quality, when the entry barrier against private firms was abolished and private firms began to operate under their own names, and competition through quality improvement began to prevail.
Acknowledgments
The earlier versions of this paper were presented at the Conference on China’s Economic Explanation (2007, Shenzhen) organized by Steven Cheung; the Conference on China’s Economic Reform (2008,Chicago) organized by R.H. Coase; the Workshop on Institutional Analysis (2008, Beijing) organized by the Ronald Coase Institute; the faculty workshop at Peking University Law School (2009); Center of Law and Economics at Zhejiang University (2014); Workshop at the School of Public Administration at the Zhejiang Gongshang University (2014). I thank R.H. Coase, Zhipan Wu, Steven Cheung, Ning Wang, Lee Benham, Alexandra Benham, Mary Shirley, Richard Esptein, J. Mark Ramseyer, Janet Landa, and Xiang Zhang for their valuable comments and feedbacks. Kangdui Zhu, Xu Xu, and Zhengping Sun kindly provided assistance for my field work. Xuedong Wang and Liwei Liao helped improve the manuscript technically. This research was supported by the China National Social Science Fund project The Effects of Entry Discrimination on Enterprises’ Reputation (No. 11CFX020).
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©2015 by De Gruyter
Articles in the same Issue
- Frontmatter
- Original Articles
- Testimony to the Federal Communications Commission
- Ideas, Not Interests or Institutions, Caused the Great Enrichment
- Geography, Writing System and History of Ancient Civilizations
- No Proper Name, No Proper Conduct: Company Affiliation and Product Quality in Wenzhou
- Evaluating the Rice-Pledging Scheme in Thailand from a Free Market Perspective
- Voices from the Field
- Railways Restructuring and Ukrainian Economic Reform
- Wisdom of the Past
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Articles in the same Issue
- Frontmatter
- Original Articles
- Testimony to the Federal Communications Commission
- Ideas, Not Interests or Institutions, Caused the Great Enrichment
- Geography, Writing System and History of Ancient Civilizations
- No Proper Name, No Proper Conduct: Company Affiliation and Product Quality in Wenzhou
- Evaluating the Rice-Pledging Scheme in Thailand from a Free Market Perspective
- Voices from the Field
- Railways Restructuring and Ukrainian Economic Reform
- Wisdom of the Past
- Hume on the Science of Man
