ABSTRACT
This chapter attempts to explain the institutional restructuring involved in the transformation of the R&D institutes in the Chinese machinery industry. Having observed the dramatic changes in the external and internal contractual relations of the group of R&D institutes as described in Chapters 15 and 16, it is necessary to ask whether there is some explanatory coherence underpinning the changes. Are these changes simply a mass of individually specific events? The chapter begins by outlining some basic assumptions developed in transaction cost theory, which are then applied first in relation to changes in the external contractual relations of the sample institutes and then to their internal organization, which can be considered as a set of internal contractual relations. The chapter ends with some remarks elaborating the argument for the importance of getting the institutions right.
