Rethinking the Theories on Network Organizations

For large and medium-sized firms, their production networks mostly are center- satellite systems. The relationship between hi-tech firms and their subcontractors is primarily for the sake of trust generated by rational calculation and repeated transactions, rather than being based on the concept of traditional quanxi.

In controlling subcontracting networks, it is common to allocate orders among several subcontractors depending on the price, quality control and services that they offer. This is very different from the small firm network characteristic of the textile industry, where " family" firms, in the broad sense, build their subcontracting systems based on the trust generated by social and geographical ties, which enables them to manage networks by means of social control, rather than relying on institutionalized mechanisms.