BETWEEN MARKETS AND POLITICS - ORGANIZATIONAL RESPONSES TO REFORM IN CHINA

In China's economic transition, firms diversify assets through investm ents in the rapidly expanding service sector in response to organizati onal uncertainty. Using data from a random sample of firms in Shanghai , the author shows that there are two situations that cause this uncer tainty: economic instability, where weak firms struggle to survive in the rapidly changing market system, and administrative instability, wh ere large firms that were the most protected are now being forced to h andle the responsibilities that were previously handled by the state. The result is that both types of firm seek stability by spreading out risk through investment in low-risk, fast-return markets, revealing mu ch about the economic reforms.