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

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

With a relatively active view of human actors, some institutionalists of Asian economic organization note their adaptation to institutional changes. Tong and Yong (1998) argued that Singaporean Chinese business owners reduced their dependence on personal (including family) relationships in conducting businesses as they dealt with international customers and faced the rise of legal rationalism enforced by the modern state. Whitley (1996) suggested that researchers should examine how economic globalization has implications for national business contexts and how this, in turn, has led to changes in corporate actions and business systems.

The three perspectives illuminate the roles of the market, cultural values, and social ties in shaping the management structures of family businesses. None of them regards the role of the state as central to their analyses. An extensive literature in political economy, development and planning, and institutional economics, however, indicates that the policies and institutional mechanisms of the 'developmental state' (Johnson 1982) in Asian countries have shaped the industrial and business strategies of firms (Amsden 1989; Hill and Fujita 1996; Hill and Kim 2001; Hill and Lee 1994; Tsui-Auch 1998, 1999; Wade 1990). Institutionalists studying Asian economic organization generally accredit the role of economic and industrial policies in shaping the organization of business systems, but rarely identify the role of the state in influencing the management models of firms. It is this lacuna in the knowledge base that this article is intended to fill.

DiMaggio and Powell (1983), who are neo-institutionalists in organization studies, identified three categories of institutional isomorphism, of which the concept of coercive isomorphism appears to be the most relevant in the analysis of the role of the state in fostering organizational imitation. Coercive isomorphism is the process whereby organizational patterns are imposed by a powerful authority, usually the state. The other two concepts are mimetic isomorphism, whereby organizations respond to environmental uncertainties by imitating those organizations that are perceived as 'successful' in that kind of environment, and normative isomorphism, whereby 'appropriate' organizational patterns or the 'best practice' are championed by professional organizations. Whether governments exert coercive isomorphism, and whether mimetic and normative isomorphism toward particular management models prevail in both economies are analysed in this article.

II. Family-Controlled Business Groups Before the Asian Currency Crisis

The role of the Singaporean State

After independence in 1965, the Singaporean state was compelled to steer the country away from a sole dependence on entrep6t trade toward industrialization (Chiu et al. 1997). The ruling elite regarded the Chinese traders as rentiers who did not engage in real production activities (Low 2001). Consequently, it was not interested in assisting Chinese businesses in industrialization, and did not identify the local private sector as a central object of either policy or patronage (Chalmers 1992; Rodan 1989). To speed up economic modernization and to deal with unemployment at the time of independence, the state nurtured large state-owned enterprises (statutory boards and government-linked corporations) and enticed multinational corporations to invest in Singapore. There were about 5,000 multinational corporations operating in Singapore in 1997 (Hall and Petzall 2000). The total number of government-linked corporations increased almost twofold from 361 in 1985 to 720 in 1994 (Low 1995). State-owned enterprises 'con trolled between 44% and 69% of the assets and 75% of the profits of all Singapore controlled companies at the end of the 1980s' (Singh and Ang 1998: 9).