Study on Management Advantage and Innovation Strategy in Chinese Private SMEs

This paper analyzes the common nature of all kinds of enterprises using the theories of the new institutional economics, studies management advantage and development prospect in Chinese private SMEs, discusses management innovation and change trend. The main advantage of Chinese private SMEs is lower management cost because of relatively simple organizational structure, and the disadvantage is that market could take a great impact on the operational benefit of these enterprises. According to the characteristics and the stage of enterprises development, the managers of Chinese private SMEs should rationally choose to use proper management tools so as to reduce management costs and achieve the maximizing goals. Along with the market development and enterprises' expansion, the boundary of the enterprises and the market will become blurry for the future, and this trend might help Chinese private SMEs to reduce transaction costs.