In fact, this problem depends on many factors, so that we tend to analyze the scale of enterprises as a "result" like "GDP", rather than putting it forward as a "problem".
Roughly classified, the external factors that determine the scale of enterprises are:
(1) The "market types" of goods provided by enterprises can be roughly divided into three categories:
The first category is infrastructure, such as Lucent or Nortel. The price of each equipment they sell is often millions of dollars, and the "economic scale" required by their technology is almost infinite (relative to the scale of market demand), so they are almost always in the stage of increasing returns to scale;
The second category is mass consumption. Because the products are saturated or outdated quickly, and because of the low barriers to market entry, the initial investment of "settlement" capital is small, so the income increasing stage caused by settlement cost is very short, which is the most likely market type to enter the stage of decreasing scale income;
The third category is emerging fields, and the main risk is that "standards" (or customers' "tastes") have not yet been established. On the one hand, enterprise scale means high risk, on the other hand, it means the right (or "taste") to participate in standard setting, so "scale" is one of the strategies of enterprise game, which only affects the efficiency of resource allocation in a dynamic sense.
(2) The stages of market development can be roughly divided into three stages: early stage, rapid expansion stage and late stage. These three stages constitute the "S" growth curve of products and markets. At different stages of this curve, enterprises can have very different optimal scales.
(3) There are two ways to update technology: the first is continuous evolution technology. For this kind of technological progress, enterprise scale seems to contribute to knowledge accumulation and risk sharing of technological progress, so large enterprises have greater technological advantages than small enterprises on average; Then there is mutant technology. For this kind of technological progress, as Professor Christensen of Harvard Business School said, large enterprises are often locked in the success of existing technologies by bureaucratic tendencies and vested interests, unwilling to enter new technological fields, thus missing the valuable "window of technological progress" and being eliminated in the next round of competition.
After considering such complicated "external factors", we can enter the more important discussion of "internal factors" that determine the scale of enterprises. When an entrepreneur sees clearly the external factors that determine the scale of an enterprise, the problem he faces is: based on the given external factors, how can he achieve the optimal scale of the enterprise? In other words, it is how to combine various production factors (labor, capital, natural resources) to achieve the best output scale. In this problem field, all kinds of strategies for enterprise development can be expressed as property rights transaction contracts signed by entrepreneurs and owners of various factors, which is the perspective of institutional economics, thus "what scale can enterprises develop?" This question can be transformed into an institutional economics question: "What kind of output scale should and can be supported by various contracts signed by entrepreneurs and factor owners?" In this sense, we should explore the relationship between entrepreneur's ability and enterprise scale, and further point out that entrepreneur's institutional innovation ability may be the most critical factor to limit the enterprise scale in China in the coming decades.
From the perspective of institutional analysis, the ability of entrepreneurs to limit the scale of enterprises is actually the ability of entrepreneurs to participate in the division of labor through contract coordination. Modern institutional analysis emphasizes that contract mode (and thus enterprise scale) is the result of social game. In view of the ability of entrepreneurs and the quality of different people, it can lead to different contract modes and cooperation scales. This leads our discussion to the four aspects involved in Zhang Wenzhang.
To sum up, these four problems are: it is the supervision cost of contract that determines the efficiency of cooperation between people, and the supervision cost of contract consists of the sum of the costs of three supervision methods of contract. These three ways of supervision are: "first party supervision", that is, moral self-discipline mentioned by Zhang Wen; "Second-party supervision", that is, the internal incentive system discussed by Zhang Wen, is also called the "self-enforcement mechanism" of the contract; And "third party supervision", that is, the government's protection of private property rights discussed by Zhang Wen. The problem of "development speed" discussed by Zhang Wen is actually the relationship between corporate culture and enterprise scale.
As far as China is concerned, I think the biggest challenge for Chinese enterprises in the next few decades is the "institutional advantage" enjoyed by multinational companies based on long-term experience. Because the rules of the game are basically formulated by other people's society and have "developed" into our society. Even if our enterprises enjoy local advantages (market, resources and culture), they must also participate in the competition in the international market. The more important institutional advantage of western enterprises lies not in the enterprise system, but in the enterprise culture (such as HP culture, IBM culture and Microsoft culture). The essence of this corporate culture is to stimulate employees' innovative spirit to the maximum extent. Under the influence of this cultural essence, the income distribution mechanism within enterprises can basically be summarized as "all profits belong to innovators", because innovators are exactly what Schumpeter said. Of course, among all innovations (technological innovation and institutional innovation), the institutional innovation of entrepreneurs has the most significant impact on the scale of enterprises.
The essence of entrepreneur system innovation is that entrepreneurs seek a contractual way to minimize the sum of production coordination cost and technology cost based on their deep understanding of the quality of people involved in cooperation. Paternalistic enterprise management (even simple "family-owned" enterprises) may save the coordination cost of division of labor, but it often greatly increases the cost of technological innovation (such as family enterprises in South Korea). Too decentralized management may greatly stimulate the creativity of employees, but it often leads to excessive coordination costs (for example, "Apple" computer company).
The reality of China society is that there is a crisis of "trust" in interpersonal relationships and the transformation of government functions is lagging behind. The former leads to the almost complete failure of the "first party supervision" mode of the contract, while the latter leads to the high cost of the "third party supervision" of the contract. Therefore, entrepreneurs can only carry out institutional innovation aimed at reducing the cost of "second-party supervision" within enterprises, and it is difficult to achieve "second-party supervision" alone without the support of the other two supervision methods. In my opinion, this situation itself constitutes the most severe challenge to entrepreneurs in China.
Finally, I would like to point out that the scale of enterprises in China is too small compared with the international level, or the scale of enterprises in Hongkong is too small compared with the Japanese average, or the scale of enterprises in Taiwan Province Province is too small compared with the American average, which does not mean that the efficiency of enterprises is necessarily low. The scale of an enterprise may be directly proportional to the scale of the risks it undertakes. For example, statistics show that the "mortality rate" of enterprises is inversely proportional to the size of enterprises (Glenn Carroll and Michael Hannan, Demography of Enterprises and Industries, Princeton University Press, 2000). Large enterprises can survive by shrinking their scale in the long-term "recession" stage, while small enterprises have no such shrinking space. On the other hand, statistics show that the recession stage is easier to stimulate the technological progress of enterprises than the boom stage. Taken together, these two aspects show the positive correlation between enterprise scale and long-term technological innovation probability.
Therefore, the key question is: how do our entrepreneurs shape their own corporate culture and incentive mechanism, so as to stimulate people's innovative spirit to the maximum extent.