Social Sciences in China (Chinese Edition)

No.3, 2017

Scale Distribution in the Growth of Chinese Enterprises: A Study Based on Large Enterprises

(Abstract)

Wang Yongjin, Sheng Dan and Li Kunwang

A striking phenomenon in the growth of Chinese enterprises is that after reaching a certain size they suffer abrupt negative growth, resulting in fewer large enterprises, or “the riddle of the absence of large enterprises in China.” With reference to the approach of Shimomura and Thisse, and based on a large-sample data of industrial enterprises in China from 1998 to 2007, we use Deloecker and Warzynski’s methods and the Boone index for a theoretical and empirical study. As the results show, scarcity of competition and discriminatory policies have significantly restrained technical innovation and growth in large enterprises. The monopoly status of the products and factor markets of government-supported enterprises and their subsidiaries helps such enterprises gain higher market shares and monopoly profits within a short period, but at the same times deprives them of adequate incentives for technological innovation and hinders their growth. If we are to optimize and strengthen SOEs, we urgently need to focus on mechanisms for innovative systems.