ABSTRACT
China’s reform of its large state-owned enterprises (SOEs) has followed an
evolutionary path. After the early 1980s, China’s SOEs adopted the ‘director
responsibility system’ and the ‘contract management responsibility system’.
They also experimented with lease, merger, bankruptcy, joint stock holdings,
joint ventures with foreign partners, as well as domestic and international
listings. In the 1990s, the strategy for further reforming the state-owned sector
was to ‘grasp the big and let go the small’ (zhua da fang xiao), which was
initiated in the ninth five-year plan (1996-2000) and remained the strategy for
continuous reform in the state-owned enterprises in the tenth five-year plan
(2001-5). With these institutional innovations, China has been experimentally
changing the SOEs through a combination of central policy, local initiative, and
interaction with international investment (Nolan and Wang, 1999). Throughout
the course of reform, a consistent stated goal of China’s industrial policy has
been to construct globally powerful companies that can compete on the global
level playing field (Nolan and Zhang, 2002). From the late 1990s, for those
SOEs which evolved from former government ministries, the strategy has been
to restructure and float in the international market (chongzu shangshi). The
restructuring aims to establish the modern enterprise system (xiandai qiye
zhidu). The productive assets of the large enterprises were reorganised into a
joint stock company with a multidivisional structure and a system of boards
and supervisory boards. The process involves large-scale asset reorganisation
and massive workforce ‘splitting off’ (fen liu). As the large Chinese firms
began operating under the new organisational structure, they faced critical
issues in building up both business and organisational capabilities. The role of
corporate headquarters is central in the process of establishing the modern
enterprise system. This chapter examines some of the theoretical and empirical
issues with regard to the function of corporate headquarters within large
corporations.
