The state matters: management models of Singaporean Chinese and Korean business groups

Organization Studies, May, 2003 by Lai Si Tsui-Auch, Yong-Joo Lee

In what ways and to what extent have these family businesses changed their management structures? What are the underlying forces of such change? The extant literature reveals the roles of the market, cultural values, and social organization in both change and continuity within management structures.

Theoretical Perspectives: Market, Culture, and Institution

Chandler (1962) argued for the inevitability of the managerial enterprise substituting the family enterprise. He explained that changes in the market environment of the firm bring about changes in its strategy that in turn lead to the changes in the internal structure of the firm. According to Chandler (1995), the more extensive the market, the more complex the technology and the bigger the firm size, the more crucial will be the professional skills that are needed to sustain the profitability and growth of the enterprise. Hence, the reliance on professional managers to run businesses will be greater, and the role of family members will be lessened.

The cultural perspective of organization and management, however, rejects the rationalistic assumptions of the market perspective. Such authors claim that organizations are not just products of the pursuit of economic benefits, but symbolic expressions of the cultural values of a society. Culture provides values and rewards through which organizations can be maintained (for a summary, see Child 2000). The persistence of family control, rule, and management in Chinese businesses is attributed to Confucian values (Silin 1976; Redding 1990). Confucianism defines an ethical order in which people are born not with rights, but with obligations to hierarchically arranged authorities, starting with the family and extending to the state. Concern with lineage survival and honour is of paramount concern to the Confucian family (Redding and Hsiao 1995). Wong (1988) stated that a Chinese father is just a trustee of the family estate that ultimately belongs to his children. A good trustee must create an endowment to ensure that there are valuable assets to pass down to future generations. The more successful he is in enriching his family, the greater the social recognition and esteem that will accrue to him. Retirement from the family firm will remove the very basis on which the entrepreneur's social status and prestige in the wider community are built.

Institutionalist authors are critical of the market perspective for its 'undersocialized' view, and the cultural perspective for its 'oversocialized' view of economic action (Biggart 1991; Hamilton and Biggart 1988; Whitley 1996). They regard economic action not as an atomistic, individual decision, but as an action that is embedded in the ongoing patterns of social relations and inter-actor ties. Whereas the market perspective presupposes that actors pursue efficiency alone, the institutional perspective argues that actors often aim at legitimacy by seeking the understanding of other actors. While acknowledging the role of cultural values, the institutional perspective rejects a deterministic, oversocialized view that actors are culturally conditioned to comply with cultural values. Rather, it assumes that actors, though acting under institutional constraints, make choices to fit their purposes. They apply institutionalized norms with the intention of gaining legitimacy. Biggart (1991) further argued that ac tion in conformity with institutional norms yields not only legitimacy, but also efficiency. In her view, actors who disregard institutional norms encounter social friction that renders their actions inefficient, whereas actors who apply those norms are easily accepted by the other actors, thus rendering their actions more legitimate, conflict-free, and efficient. As Asian businesses are embedded in closely knit business networks that are forged by family and personal ties, in which insiders (family and friends) are trusted and outsiders are distrusted, a reliance on kin and friends in running family businesses yields not only legitimacy, but also efficiency.