The rise of Korean chaebols from the perspective of organization theory.

Abstract

This study has sought to probe the origin of Korean chaebols by employing theories that have been developed to account for the rise of American business organizations. By examining the top four chaebols qualitatively through detailed case analyses and 143 business groups quantitatively through statistical analyses, this study tests hypotheses raised by the three theoretical perspectives. The major findings of this study indicate that the political economy has been the dominant factor that contributed to transforming mediocre business groups into large chaebol groups. In particular, an organization's relationship with the state was of utmost significance. This study also indicates that the institutional isomorphism approach can complement politically motivated or efficiency-oriented theories. One of the major findings of this study is that Chandler's theory accounting for the rise of Korean chaebols is weak. However, its weakness does not stem from its main proposition that strategy calls for structural reform, but from its premise that growth strategy and structure presuppose economic and technological development. Williamson's transaction cost economics has a limited capability to account for the rise of the Korean chaebol. It is argued that the relative weakness of this theory may be inherent in its "universal" nature, which makes little provision for societal and cultural differences between the United States and Korea.