Firm-State: An Economic Rendition of the China Model of Development

In this paper, a Firm-State Model of development is proposed in an attempt to explain China´s development success in the past thirty years. Globalization has brought states into direct contact and competition with one another. Because the basis of this competition is mainly economic performance, the state to some extent has to behave like a firm. Therefore in an era of globalization states can best be regarded as hybrid firm-states, with their total governance comprising both firm and state governance components. The leadership of the state needs to alternate between firm governance (economic development) and state governance (political development) in order to maximize its utility of governance as perceived by its member-citizens, thereby maximizing its mandate to lead. This Firm-State Model of development has important theoretical and practical implications.