BOOK REVIEWS

Sherman Cochran, Encountering Chinese Networks-Western, Japanese and Chinese Corporations in China, 1880-1937

Readers of Sherman Cochran will already be familiar with several of China’s major corporations from the first half of the twentieth century. His works in business history, having provided a detailed study of the fate of firms as different as the British American Tobacco Company (BAT), the Japanese sogo shosha, Mitsui, and the Chinese manufacturer of matches, China Match (1). In his latest work, Sherman Cochran returns to this subject, in part in an attempt to answer a new question, that of the interaction between Chinese networks and corporate hierarchies. His demonstration is based upon a comparative analysis of six companies—two from the US (Standard Oil, British American Tobacco), two Japanese (Mitsui, the textile firm Nagai) and two Chinese (the China Match Company, the milling company Shenxin).

The author does not define his terms in any precise way, which is unfortunate. Nonetheless, what is clearly under consideration here are two modes of organisation that are usually presented as being in competition with each other. What is of interest is how these firms, with tens of thousands of employees, set up hierarchical and impersonal power structures and/or relate to personalised social networks.

The writer’s ambition is to go beyond the typically ideal presentation that identifies three “genres” of capitalism: Anglo-Saxon (whose model was elaborated by Alfred Chandler), Japanese (Mark Fruin) and Chinese (Wong Siulun, Gary Hamilton and Gordon Redding). As a historian, Cochran contextualises the question and studies Anglo-Saxon, Japanese and Chinese companies in the specific context of China in the first half of the twentieth century. That is, the writer takes us on a tour through the economic, social and political reality of such firms so as to see how these models drawn up by historians or sociologists work empirically. In addition, Cochran wishes to respond to China’s historians who have taken sides, either stressing the implementation of impersonal power systems throughout the nineteenth and twentieth centuries, or the continuity of social networks, without ever reconciling these two dimensions of Chinese reality. As usual, the writer expresses himself with great clarity, and indeed, one takes a keen pleasure in reading these pages in which the social mechanisms of companies are patiently analysed and presented, virtually in their day-to-day operation.

In each of the cases studied, the question of the interaction between Chinese personalised networks and the impersonal hierarchy of the corporation is tried out against three sets of facts—the modalities of product distribution, workforce management (including recruitment and training) and, finally, company administration.

The writer concludes with an interaction between Chinese networks and company hierarchies and with a process of hybridisation of the practices developed in other contexts in contact with Chinese reality. The analysis shows that just as foreign companies adapted to local conditions, so too did Chinese firms learn new procedures and practices. Foreign companies had recourse to Chinese merchant networks for distributing their goods, as they relied upon Chinese foremen to recruit, remunerate, supervise and train their workers. Similarly, the major Chinese firms set up hierarchical mechanisms of management.

Above all, these two modes of organisation appear neither contradictory nor having necessarily to follow each other. Cochran shows that there was no typical path and that companies could either simultaneously or successively, depending on the particular context, call upon these two types of organisation. There is neither any clear border between networks and hierarchies, nor linear evolution of the former towards the latter (or vice-versa). What we are witnessing are dynamic interactions. In the case of Standard Oil, the Chinese networks to which the firm had recourse (in particular for the distribution of its goods) were gradually replaced by a hierarchical organisation of sales, but in that of the BAT, the converse situation was obtained. In the mid-1920s, the textile manufacturer Nagai tried to replace the system of Chinese Number Ones (2) by a system that would have been completely under its control, but the former resisted (one of the factors behind the great strikes of 1925-27) and the management was forced to back down.

Sherman Cochran’s work constitutes a substantial contribution to a recurrent problem, that of studying the Chinese world with categories (derived from business history) developed and tested on another reality (a discipline born in the US in response to the shock of industrialisation). One of the difficulties in applying the Chandlerian model to Chinese firms lies in the fact that Alfred D. Chandler paid little heed to the role of government and individuals. Sherman Cochran here invites us to elaborate specific modes of investigation on the ground in China. He tells us that it is only for the sake of convenience that in his exposition he divides up the various practices of companies in relation to the nationality of the owners (Westerners, Japanese, Chinese). To better understand such practices, one must study the interactions of the companies with Chinese society, and reconstitute them historically.

This rich and brilliant work is a must for anyone interested in the modernisation of Chinese firms currently in progress and in the way that foreign firms adapt to China. Even if Sherman Cochran is careful not to make any recommendations, we are very much tempted, from the assertion about the durability of networks, to infer conclusions that would also hold for today’s companies.