Unlocking the Marketization of Transition Economies: The "Deferred" Institutionalization of Market Conventions in China’s Film Industry, 1993-2012.

The transition of socialist economies to capitalism gave rise to a variety of post-socialist market economies, involving a mix of elements from capitalist and socialist economic systems that were contingent on the institutional contexts and historical background of the country concerned. This transition is, however, hardly natural and historically inevitable but entails a dynamic process that is more complicated than just “getting the institutions right”. Although market reforms had commenced and market institutions were in place, this study shows that marketization remained partial and incomplete if market players did not espouse the market logic in economic exchange – a situation where firms decoupled from the institutional prescriptions in their environment by responding symbolically to formal institutional mandates. If this happened, how were the informal norms, such as market conventions and etiquettes informed by market logics, developed and legitimized in keeping with the formal institutional mandates in marketization?
To fill this lacuna, the Chinese film industry offers a rich context to examine the process by which marketization took place and was accomplished in a transition economy. The industry underwent a series of market reforms since 1993. Its reform was ostensibly similar to other economic sectors in China and other post-socialist societies. However, the industry was bound by a state-centred logic despite the restoration of market institutions and private ownership. Most private-entity cinemas followed the Party-state’s recommendations of movie screening although they were allowed to show movies according to market demand. This market convention remained unchanged until 2012 by which time the industry etiquettes guided by market logics (understood as the “marketized” conventions) were institutionalized, and that resulted in the Party-state losing its control over movie screening and thus the value chain. In this regard, unlike other sectors, the “China model” of economic reform seems to have a “delayed” effect on the film industry, resulting in its “deferred” marketization in the transition to a market economy. This points to an empirical puzzle about economic transition, in particular why most market players in the Chinese film industry discarded the market logic during the 1990s and the 2000s whilst private ownership and formal institutional mandates were already established, and why the “marketized” conventions were institutionalized circa 2012.

This study addresses this inquiry by developing an analytical framework based on insights from institutional theory and economic sociology. The analysis draws on box-office data (n=1316) from the period 2007-2013 and 157 interviews with government officials and executives of the state-owned enterprises and private firms in key sectors of the Chinese film industry. The findings contribute to the discussion on the process and consequences of market transition in three ways. First, this study highlights the socio-cognitive aspect of institutional work that explicates the relations between power and ideology in the marketization of post-socialist economy. Second, it provides insights into the interplay between state authoritarianism and market resistance that shaped industrial relations and market transformations in transition economy. Third, it contributes to the sociological literature on development with a multilevel analysis of the global-local nexus underpinning economic transition.