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No Proper Name, No Proper Conduct: Company Affiliation and Product Quality in Wenzhou

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  • Liao Zhimin

    (International School of Financial Law, East China University of Political Science and Law, 1575 Wanhangdu Rd, Changning, Shanghai, China)

Abstract

This case study demonstrates the far-reaching impact on product quality when private firms were legally recognized and allowed to operate with their own brand names. Previously, when the private firms were forced to affiliate themselves with a governmental organization to get around the entry barrier, they had little incentive to improve the product quality, because too many enterprises were using a same brand name with no effective supervision on each other. Price competition was the only means to survive. This explains the persistent notorious waves of inferior goods through the 1980s to early 1990s. The legalization of private firms in 1992 brought about dramatic improvement in product quality, when the entry barrier against private firms was abolished and private firms began to operate under their own names, and competition through quality improvement began to prevail.

Suggested Citation

  • Liao Zhimin, 2015. "No Proper Name, No Proper Conduct: Company Affiliation and Product Quality in Wenzhou," Man and the Economy, De Gruyter, vol. 2(1), pages 45-67, June.
    • Handle: RePEc:bpj:maneco:v:2:y:2015:i:1:p:45-67:n:5
    DOI: 10.1515/me-2015-0004
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    References listed on IDEAS

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    1. Richard A. Posner, 1971. "Taxation by Regulation," Bell Journal of Economics, The RAND Corporation, vol. 2(1), pages 22-50, Spring.
    2. Zhimin Liao & Xiaofang Chen, 2011. "Why the Entry Regulation of Mobile Phone Manufacturing in China Collapsed: The Impact of Technological Innovation," Journal of Law and Economics, University of Chicago Press, vol. 54(S4), pages 207-228.
    3. Gary S. Becker, 1983. "A Theory of Competition Among Pressure Groups for Political Influence," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 98(3), pages 371-400.
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