Abstract Institutions determine transaction costs and are therefore essential to the economic development. Property rights are basic and the most important institutions defining the relationship among people in owning and using scarce resources. Governments play a nearly monopoly role in the supply of institutions and property rights,and among governments of different regions there exists institutional competition. One of the important characteristics of the institutional change is path dependence. The theoretic assumptions and judgments above are supported by the following comparative study on high-tech industries in Shanghai and Shenzhen. The findings show:1) different institutional and cultural backgrounds in Shanghai and Shenzhen lead to divergent institutional arrangements in the process of development of high-tech industries. The market orientation and private enterprises characterize the high-tech industries in Shenzhen, while in Shanghai the government and state-owned enterprises play an active role; 2) the institutional arrangements in both regions are the results of governmental choice; the advantage of governments in the supply of institutions is revealed here. 3) divergent institutional arrangements result in the discrepancy of economic performance of high-tech industries between Shanghai and Shenzhen; 4) Shanghai begins to emphasize the role of private enterprises in the development, and the institutions which hinder the development of private property rights are abolished gradually. The policy implications are put forward at last. Regional governments should lay more value on the institutional arrangements and property rights in the regional economic development. Since market orientation has higher economic efficiency, it is therefore the advocated institutional choice.
2009, Vol. 24 
