Establishment of Identity – Explanations from Social Psychology

After a small group is formed, people in this group will have a feeling of identity. Finding a ―flag‖ to identify with can justify the cohesion and exclusionism of people in this group while strengthening the ties among them.

Social psychologists have made much analysis of why people get together, before identifying two primary reasons: Identity and trust. Identity can be established upon numerous factors such as class, religion, region, status and team. And it can also be built upon non-inherent factors. Users of Apple computers, for example, may identify with each other because of the brand's effects – they feel themselves superior to ordinary PC users. Factors like this are created by a group of people.

When researching consumption in the cultural sector, Pierre Bourdieu noted in his book La Distinction (1984) that both education and culture are instruments for distinguish the inside from the outside and generating identity. Taste indeed comes from a complex social process and includes the exclusive occupation of particular social resources and knowledge. A person shows his/her temperament, education level and lifestyle through his/her cultural taste; and a group of people also differentiate themselves from others trough their unique taste. Since a social group conveys its cultural symbol – taste – to its members through socialization, taste will serve as a flag that marks the members' identity with each other when different groups are competing for social resources and even the dominant position. People can identify ―friends‖ and ―foes‖ rapidly with information revealed by consumer behavior. And taste can also be passed on to the next generation as an instrument for the class's self-reproduction.

Another important mental factor is trust. Karen Cook (Cook, 2004) found out, after studying the phenomenon of underground economy in the early stages of the Eastern Europe reform, that trust was an important condition for the operation of organizations involved in the underground economy. There was a high level of trust within these organizations, where a person could receive trust from the others and carry out transactions only after he/she became a member of the group. And that is often how regional business groups come into being in China. In the meantime, a group will use a complete set of internal tacit rules to resist pressure from the outside. The study made by Cook indicates that economic activities of a particular type will lead to a lot of small groups if they are illegal and can be carried out only when a high level of trust exists.

Identity and trust may appear before a small group is formed. Loose groups of Wenzhou-based businesses are built upon the regional factor; and there may be alma mater-based groups of industry professionals who graduated from Peking University and Tsinghua University respectively, for example. But a small group may also appear before its members seek a flag to identify with, such as a school, a corporate vision, a created myth or an ideology. In reality, Chinese are good at creating identity spontaneously organized group. Even clans in China are not necessarily based on blood relationship. As Sociology Professor Zhang Xiaojun notices, a lot of clans are spontaneously organized – a group of people with no blood relationship toward each other may also co-build an ancestral temple and self-organize into a kin.

A small group of people with strong interrelationships will take collective actions as soon as it sets a common goal. And a set of governance mechanisms is necessary for these collective actions to last and be well organized so as to realize the long-term goal. Self-organization leads to a third governance mode beyond market and hierarchy. And the last stage of building a self-organized unit is to establish a self-governance mechanism.

Behavioral Logic of Self-organization

The aforementioned three governance modes differ from each other not only in rules but also in internal membership, operating logic, and the nature of powers.

Hierarchy relies mainly on bureaucratic control, obedience and instruction system. Its members have a collective identity in it; the logic of power is followed; and powers are top-down. Hierarchy requires the building of a complete set of top-down bureaucratic systems, leading to higher managerial costs.

Self-organization relies mainly on voluntary cooperation among the members, whose in-group sense is based on expressive ties, common identity and shared memory; the logic of relations is followed; and powers are organized in a bottom-up manner. Relationships and trust are important factors for self-organization, so governance will generate guanxi costs for building and maintaining relationships.

Market relies on free competition. Players can freely choose trade partners in the market; the logic of contracts and transactions is followed; and powers are decentralized to every transaction participant. Market will generate transaction costs.

A lot of successful practices have emerged since self-organization as a governance mode appeared in the field of management. Peter Drucker took the lead by putting forward the concept of ―cost center‖, before those of ―self-directed team‖ and ―internal startup‖ emerged, and was followed by other concepts such as authorization, empowerment and accountability.

For the part of Chinese, they are especially good at self-organization since it is a millennia-old tradition of the Chinese culture. They have thus developed a lot of good models, such as the

―Little John Wayne‖ of the Fung Group and the managerial idea of ―To make the dragon (i.e. the leader) dream come true, there should first be a group of dragons with no head (i.e. many small leaders who are independent from the leader)‖ created by Stan Shih, the founder of the Acer Group.

In China, the ancient managerial concept of ―do-nothing leadership‖ is intended to create a good environment the governance of self-organization; and we have now seen a great deal of successful ―experiments‖ in modern society. Why is self-organization-based governance ideal for the Chinese culture? How can it become successful? I will explain them in the next two chapters.

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