The Price of Success

Abstract

Once Jiuda breached the barriers of entry and reaped the profits of institutional innovation, other refineries soon appeared. Although not every attempt was successful, the industry grew. But while Fan Xudong and his colleagues celebrated the development as an encouraging sign of the country’s improving hygiene and free salt trade, they soon found Jiuda paying the price of success. As the country continued its descent into political disintegration—even the once powerful Revenue Inspectorate often rendered helpless by provincial militarists — Jiuda, the largest of the refineries and therefore the most conspicuous target for rent seekers, was forced to shut down several times. Even worse, the dark side of network strategy began to haunt the company. Should Jiuda continue the creative destruction of the revenue farming system and promote the growth of competing modern refineries? This chapter reconstructs how, in the face of mounting competition from other refineries, Fan and his colleagues recalibrated their strategy of creative destruction to collaborate with select revenue farmers and worked against competing refineries to preserve Jiuda’s share of the refined salt market. ¹ It was a small price to pay for its patriotic mission to developing the country’s chemical industry as a “Chinese” elder brother.