This thesis first evaluates the formation and recent development of the theory of New Institutionalism, and then examines the process and dilemma of China's reform in its state-owned enterprise in terms of this new framework. Through an analysis of new institutionalism in the state-owned enterprise, the thesis provides the obstacle of institutional change-including of the institutional, ideological and financial obstacles. This article also contends that China's state-owned enterprises are not only facing the problem of low-efficient performance but also the predicament of costly reform under these obstacles of institutional innovation.