Towards a Theory of Large Scale Institutional Change

Using the Chinese electricity industry transformation as an example, we propose a broad theory of large-scale institutional change, and suggest its implications for managers in charge of complex organizational change. Early in the 1980s, pushed by obvious functional difficulties in the form of electricity shortages and a crumbling production system, the Chinese government introduced new ideas, laws and regulations, which gave initiative and power to new actors, such as local governments and production firms. Their change initiatives brought both more new actors and new pressures for additional change, which led in turn to more comprehensive ideas, laws and regulations. This cycle repeated itself three times. The leading actors and the change emphasis changed in each cycle, while the increased performance reduced the need for system-wide changes. We suggest that this three-cycle process, and the related specialization of managerial work, make up an effective framework which can both explain and guide large-scale transformations. The article describes the various cycles, giving examples from the Chinese electricity transformation, and uses change and institutional theories to specify the three-cycle framework in proposition format. The framework is then used as a guide to discuss specific issues related to the management of large scale change. Some practical implications are derived for managers involved in the strategic management of complex organizations.