To examine the transition from a planned to a market economy in China, this study uses census data from China’s National Bureau of Statistics from 1998–2006 to investigate multi-population dynamics across the three main organizational forms in China’s domestic sector: state-owned enterprises (SOEs), collectively owned enterprises (COEs), and privately owned enterprises (POEs). We conceptualize economic transition as a community-level change from an old, dominant organizational form (SOE), through a transitional form (COE), to a new form (POE). When the new organizational form conflicts with the prevailing identity codes represented by the old form, the transitional form—which has identity overlap with both the new and old forms—performs the critical tasks of transferring legitimacy to the new form and supporting its survival and proliferation. Our analysis showed that, though the existence of state-owned enterprises increased the exit rate of privately owned enterprises, collectively owned enterprises provided legitimation for privately owned enterprises. Meanwhile, privately owned enterprises crowded out both state-owned enterprises and collectively owned enterprises. We contribute to ecology theory by extending research that typically depicts a two-population scenario. Our framework accommodates cross-effects involving three organizational forms: old, transitional, and new.
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