Culture and network institutions in Hong Kong: a hierarchy of perspectives. A response to Wilkinson: 'Culture, institutions and business in East Asia.'

Organization Studies, Spring, 1998 by Sid Lowe

Wilkinson's final complaint of culturalists, which he also directs at institutionalists is their tendency to gloss over differences between different Confucian societies. There is a general misconception that 'East Asian' cultures are a homogenous 'Confucian' entity best represented by Japan. It is not clear that culturalists and institutionalists are more culpable than anyone else in promoting this misconception. Confucianism may be a significant dimension in the region, but recent studies indicate 'emics' and 'etics' both between these countries (Chen 1995) and within them (Huo and Randall 1991). As a result, Confucianism can be expected to have differential influence in the region because it will interrelate in different ways with different cultural configurations and situational contexts in each society. Hofstede's results also differentiate between East Asian societies on his 'eric' dimensions with, for example, Japan showing a unique cultural profile, predicting differences in structure and behaviour with its immediate 'Confucian' neighbours. The differences in structure may be reliably attributed to differing institutional environments, but what all these Confucian societies do appear to have structurally in common is a reliance upon 'networks' which are co-ordinated through the mechanism of trust, and this common structure can be more reliably attributed to common cultural influences.

Wilkinson's Critique of Institutional Approaches: Problems and Responses

Williamson (1975) was one of the first to reinvigorate the study of institutions in the face of the increasing dominance of the social sciences by behaviourist models. Williamson's model is based upon three human attributes: 'bounded rationality', opportunism and dignity (McGuinness 1991: 67), which result in sub-optimal utility maximization because of the existence of 'cognitive limits, incomplete information, and difficulties in monitoring and enforcing agreements" (DiMaggio and Powell 1991: 3). The transaction costs associated with these uncertain 'externalities' will determine the boundary conditions affecting institutions and whether exchanges are internalized into a bureaucratic institution or left to market institutions. Williamson partially departs from the neo-classical model in the replacement of the assumption of rationality by 'bounded rationality'. In terms of the conceptualization of forms of governance and co-ordination, however, Williamson suffers from the same ethnocentric cultural myopia as the neo-classicists in that only two forms of economic organization are conceived, and networks, the most appropriate form for the cultural conditions in Chinese societies, are overlooked. It is left to Ouchi (1980) to remedy the deficiency in Williamson's model by adding the class of 'clans' to markets and bureaucracies and to Aoki et al. (1990) to describe the context of coordination for Japanese firms as characterized by 'treaties' rather than prices or administrative orders.

Another problem with Williamson's model is that it is an 'efficiency explanation' of organizational design (McGuinness 1991: 71) which relegates issues of power, culture and social interaction to epiphenomena. Within neo-institutionalism there are 'differences in treatments of transaction costs, contention over the optimality of institutions, and differential explanatory weight given to the state and ideology' (DiMaggio and Powell 1991: 4) and so some neo-institutionalists appear to agree that 'a comparative evaluation of the alternative approaches should be based not on ideological issues, but on their ability to make sense of empirical observations' (McGuinness 1991:71). Cazal reports a crystallization of the criticisms of Williamson's transaction cost approach in the work of Granovetter, in establishing foundations of 'economic sociology' (Cazal 1996: 78). Granovetter (1992) regards Williamson as making the critical errors of failing to recognize the co-existence of social and economic goals in economic action and overlooking the embeddedness of economic action in ongoing networks of social relationships and the consequent social construction of economic institutions. These criticisms are particularly resonant in the networked economies of Southeast Asia such as Hong Kong.