NATURE OF THE FIRM: A STUDY ON DEVELOPERS IN CHINA AND HONG KONG

In Hong Kong, dwellings are fitted with neat and tidy paintings, well decorated floor and wall tiles. Equipped with world�renowned kitchen and bathroom appliance, housing owners can move in with a bag of cloths. Builders in China, however, only provide fundamental elements such as windows, doors, ironmongery and grayish wall. By the time home purchasers receive their dwellings, they need to do a lot of shopping before they can move in. They need to buy water closet, tiles, towel rings and so on. Scope of services provided by Hong Kong developers is much wider than those in China�s. Ronald Coase, Nobel economist 1991 addresses two questions in his 1937 paper: why firms exist and what determines their scale and scope. What are the major determining factors which affect the size of the developers and their scope of services? Few or even no paper has studied this issue. This paper reviews that unpredictable rules and regulations couple with poor law drafting decrease firms� incentive in vertical integration.