Asian Business and Management - Harukiyo Hasegawa &Michael A Witt

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CONTENTS

List of Figures and Tables

vii

Preface viii Acknowledgements ix Editors x Notes on the Contributors

xi

Introduction xvi

Part 1 Asian Business Systems: Major Issues

1

1. The Idea of a Business System (Gordon Redding)

3

2. Asian Cultures and Business Systems (Gordon Redding)

17

3. Corporate Governance in Asia (Richard W. Carney and Krislert Samphantharak) 34 4. Human Resource Management in Asia (Rosalie L. Tung)

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5. Technology Development in Asia (Leonard Lynn)

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6. Family Business Groups in Asia (Marleen Dieleman and Chi-Nien Chung)

83

7. MNEs in Asia (Axèle Giroud)

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8. Regionalism and Production Networks in Asia (Andrew Staples and Chie Iguchi)

115

9. ESG Policies and Practices in Asia: Toward Contingent Convergence (Philippe Debroux)

131

Part 2 Varieties of Business Systems in Asia

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10. The Business System of China (Michael A. Witt)

149

11. The Business System of India (Zaad Mahmood and Lawrence Saez)

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CONTENTS

12. The Business System of Indonesia (Edo Buckingham)

179

13. The Business System of Japan (Michael A. Witt)

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14. The Business System of Korea (Martin Hemmert)

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15. The Business System of Malaysia (Axèle Giroud)

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16. The Business System of Singapore (Tony Garrett)

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17. The Business System of Vietnam (Nguyen Thi Tuyet Mai and Mai The Cuong)

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Index 265

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PART

1

ASIAN BUSINESS SYSTEMS: MAJOR ISSUES

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THE IDEA OF A BUSINESS SYSTEM

1

Gordon Redding

Chapter Outline

4. The contributions of history 5. The realm of order

1. Foundations 2. How business systems work 3. The realm of meaning

6. The realm of coordination 7. Using the business system model 8. Conclusion

Chapter Objectives After reading this chapter, you should have an understanding of: 1. The general notion of a business system 2. How business systems consist of elements of meaning, order, and coordination, and how historical and other forces shape them 3. How to apply the business system model

Foundations This chapter presents a framework into which much of the content of the rest of the book can be placed. It is based in a general field of study known as comparative institutional analysis, and uses the idea of complex adaptive systems that evolve and adapt to a changing business world. It is designed to break down the analysis of something highly complex into components that fit together and make sense as a total. Understanding business systems in this way helps to understand complex environments and lets us avoid the use of simplistic responses to complex issues.

International business is by definition conducted across the boundaries of societies. Such boundaries are significant in shaping what “goes on” inside countries, including culture, history, politics, and traditions. What “goes on” includes the way business is done, and this is not the same everywhere except on the surface. Although there are many aspects of doing business that stretch across such boundaries, like bills of lading, trading regulations, or some accounting standards, many aspects do not travel. It is the job of anyone doing international business to come to terms with these local ways of doing things in the countries involved in any transaction. This is especially important for anyone responsible for managing business internationally.

The matter is not simple. Societies are complex, and coming to terms with the differences encountered so that operations and collaboration can run smoothly requires both study and practical experience.

Such study can be done in two ways. The simple way is to learn a set of “how-to-do-it” guidelines and follow them. The more effective way is to learn why the differences exist. This then allows a better understanding of whether the 3

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systems are changeable, in what way, how to negotiate with the contrasts in mind, and what other differences might be in the background and could possibly emerge to make things more complicated. An important general rule in securing good relations is to try to understand the other person, and see things from that alternative perspective as well as your own. This is how fertile collaboration is built.

The idea of a business system is a means of accessing the complexities attached to international business, and of opening up the question of why things are different elsewhere, in preparation for deciding what to do.

To understand such an idea, we begin with its origin in the branch of social science that looks at societies comparatively and studies their complexity. This involves taking ideas from different disciplines, among which the main ones are sociology, anthropology, geography, political science, organization theory, and international business. The main way in which I draw from these disciplines, and integrate aspects of them, is through the comparative study of “business systems, alternatively known as “varieties of capitalism.” This allows for concentration on how any society tends to foster within it a certain formula – or sometimes, several formulas – for organizing its economic behavior. It also allows for the study of what that implies for the conduct of business by that form of organization or by outside organizations dealing with it.

In studying such matters, it is useful to draw on a central idea – in other words, a general theory. This general theory is built around the idea of a complex adaptive system. Out of this grow a number of important general principles that help understand how all such systems work, which are as follows:

1. A society may be seen as a complex adaptive system within which parts can be identified and described in ways that allow for comparison with their equivalents in other similar systems, that is, other societies.

2. The system works as a total set of forces in constant interaction so that explaining one activity or structure will need to take account of multiple elements that help to explain that component.

3. The interaction between the elements in the system runs both ways, so that component A will affect component B and vice versa, leading to coevolution. For example, historically novel ways of accessing capital coevolved with new ways of using capital to produce the joint stock company as organizational form. Such new forms can then act as catalysts for further change.

4. Because of this coevolving, there is an overall process of usually slow change as the total system adjusts its processes and structures.

5. The evolution of the total system is also affected by influences from outside the society, which co-determine what is happening.

6. Influences that may change the system can be of two main kinds, material and ideational. Material influences are such things as a change in price levels, or a newly invented technology, or a rise in the cost of labor. Ideational influences are such things as changes in values (egalitarianism, democracy, pop culture, or – negatively – totalitarianism, corruption). Influences such as these can be internal or imported. So too are the basic “laws” of politics, economics, and competition always at work in shaping business action.

7. The facts of history that are distinct to each society will usually include periods of crucial re-thinking that have shaped the society at critical stages, such as the

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Meiji Restoration in Japan, the Cultural Revolution in China, or the Lutheran Reformation in Europe. We call these critical junctures “key historical events.”

8. It is possible to separate the components of the business system into layers of influence, so as to provide a framework for explaining the evolution of its current form. This will be explained in more detail shortly.

9. Comparing business systems requires observing them as totals. Extracting individual components for comparison with their equivalents elsewhere without acknowledging the influences on any component of its own societal context means missing a crucial part of the picture.

10. W hen explaining a total business system, it is valuable to bring into account all the sources of influence on its present nature, both internal and external.

It is then possible to make a properly informed judgment about how it might evolve and why. Such an explanation may be detailed, but will realistically pay respect to the complexity of what is being analyzed. At the same time, it is often possible to identify a limited set of primary influences and trends.

How business systems work Because business systems are constantly adaptive but usually remain intact and coherent within their societal boundaries, it makes sense to see them as living objects, evolving through time. To understand this historical process – whether short or long term – it is useful to think in terms of a process of evolution inside that brings together a given set of forces. In simple terms, all societies are forms of social togetherness that intend to allow people to live in a degree of harmony, comfort, and safety. Some societies evolve in ways that produce greater average comfort for their members, and other societies may then want to emulate that. So the world is full of contrasts in levels of “development.” Awareness of the differences means that “progress” becomes a matter of interest for many people and of motivation for many governments.

There are many philosophical debating points surrounding the question of societal development in the wider literatures, a few examples of which are listed as references. For the purposes of this chapter, we present a simplified view of progress. Societies will – subject to their ideals – normally attempt to improve the lives of their people. This means that they will seek means of ensuring enough food, safety, and comfort to stay viable as societies, and will normally do so in improved ways if they can. As societies continue to grow, they tend to encounter certain stages in progress, and most will adjust to move past those stages into a new mode. Each stage involves new ways of putting together the components needed for collective living. This leads to changes in how living is organized. The names given to the main historical phases in social development are the Agricultural Revolution, Urbanization, the Industrial Revolution, and today the ongoing Information Revolution.

In these adjustments two large influences shape the responses. One is how Cooperativeness comes to be shaped and possibly re-shaped. The other is how Innovativeness comes to be handled. The responses vary greatly, as does the level of success. Affecting the attendant experimentation (which might last for thousands of years) are the ideals within a society that influence the rules of conduct. The processes of such evolution do not need to be orchestrated by a central authority but may simply accumulate from the sense-making of people at large. The point here

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is that societies are usually evolving to make people’s lives better, and that leads us to see most (but not all) societal systems as containing a logic of progression as well as a basic structure of simple existence.

So what is this logic of progression? It has three main features, all coevolving:

1. A base layer of “meaning” that contains the society’s ideas about how life should be lived. These often have an origin in religion.

2. A layer of “order” that contains the forms adopted by the society to interpret the meanings and have them acted out in ways that become predictable and stable. These are known as “institutions” or “rules of the game.”

The most obvious one is a system of law.

3. A set of ways for “coordination” in the economy that permits people to come together in structures such as firms that are stable ways of combining resources, workers, and users.

Over time the system of meanings helps to shape the system of order. Together they help to shape the system of coordination. And as earlier noted, the system of order and the system of meaning may themselves adjust in response to how things are evolving as a total. It is a living total system.

Figure 1.1 illustrates the business system workings just suggested. Table 1.1 expands the contents of each box to show the main elements in each. More detailed analysis of its workings is available from sources in the chapter references, especially Whitley (1992) and Redding (2005). Because of the inner logics just suggested, I will proceed in terms of an upward flow of influences from the realm of meaning to the realm of order to the realm of coordination.

The total entity – a societal business system – will normally exist within the boundaries of a society. Note that I say “society” rather than “state” even though in most instances they have the same boundary. This is to allow for the possibility that in some cases a business system may exist across several states but still be analyzable as one society because of its cultural cohesion. An example is that of the ethnic Chinese of Pacific Asia, whose highly consistent business system can be found all round the borders of the South China Sea, with a powerful presence in at least ten states.

Even so, the normal pattern is for a business system to exist within a given state and to reflect the culture and history of that state’s distinct societal nature. A final point on categories of business system is that a society may also contain more than one system. This occurs when economic growth is fostered by more than one significant source of influence, as for instance in China with the division between the state and the private sectors of the economy. Such separation into sub-systems can also occur when a set of very large corporations (often with government support) use different structures from those adopted by small and medium enterprises, as is visible, for instance, in South Korea (hereafter: Korea). As each society has its own distinct pattern of growth, any analysis needs to allow for some flexibility in defining the system or systems of interest.

The realm of meaning Early societies founded ways of stabilizing their social structures based on inherited instincts. For much of prehistory, humans lived in groups of around 150, surviving by hunting and gathering, and keeping social life stable by knowing whom to trust inside a limited group. They maintained that reliability using the basic

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Source: Witt and Redding, 2009

MANAGEMENT

HUMAN CAPITAL

O R D E R SOCIAL CAPITAL

Evolution and growth of forms of order

IDENTITY

AUTHORITY

Adjustment of values and norms by experience

KEY HISTORICAL EVENTS

Culture: values, norms and socially constructed realities which act as the bases for the society’s forms of order

RATIONALE

M E A N I N G

Conditioning by values and norms

STATE

Institutions: the humanly devised constraints that shape social interaction, and provide a hospitable environment for cooperative solutions to complex exchange. Forms of order

CAPITAL

Shaping of patterns of economic exchange behavior

Figure 1.1 The elements of a societal business system

Impact of costs and technology on features and the interaction of features

MATERIAL LOGICS

NETWORKS

Structures and systems for coordinating economic behavior and exchange. Firms and managing

OWNERSHIP

C O O R D I N AT I O N

Impact of external ideas, norms, values, on features and the interaction of features

IDEATIONAL LOGICS (EXTERNAL)

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Table 1.1 Constructing the analysis of a business system: what questions to ask BUSINESS SYSTEM: Structures and systems for coordinating economic behaviour and exchange. Firms and managing.

OWNERSHIP

NETWORKS

MANAGEMENT

Nature of control via ownership (direct, market, alliance)

Alliance coordination of production chains

Employee-employee interdependence

Integration of production chains under ownership

Collaboration between competitors

Delegation to employees

Integration of units in different sectors under ownership

Alliance coordination across sectors

INSTITUTIONS: Forms of order. Organized ways of doing things become predictable and stable, constrain social interaction, and give a hospitable environment for cooperative solutions to complex exchange.

CAPITAL

HUMAN CAPITAL

SOCIAL CAPITAL

Sources of funding

Education and training

Institutionalised trust

Conditions of access

Interest groups: work-related social groupings

– law

How is capital market behaviour monitored?

Labour markets/structures

– established societal fabric

Forces affecting use of capital

(a) active labour market policy programs

Interpersonal trust

Key actors

(b) employment protection legislation

– pattern (who is trusted)

Key tensions

(c) welfare benefits system

– moral base

(d) centralization of wage bargaining ROLE OF THE STATE

ROLE OF CIVIL SOCIETY

1. E xtent of state dominance and risk sharing

4. R esponsibility for order (e.g., professions)

2. S tate antagonism to intermediaries

5. Ethics of trustworthiness to foster exchange

3. D egree of formal regulation of markets

6. E mpowerment, decentralization, bourgeoisie

CULTURE: Values, norms, and socially constructed realities which act as the bases for the society’s forms of order. The meaning of things is perceived locally.

RATIONALE

IDENTITY

AUTHORITY

Formal – instinctive use of maths, scientific method, economic logic, accounting Substantive (ends) – What is the firm for?

– What is wealth for?

– Who is the economy serving?

Substantive (means) – primary carriers – secondary carriers

To whom does the person instinctively owe allegiance?

Patterns of support and dependence (looking sideways, not up and down) Options: self, family, ­working-group, clan, profession, community, society at large

On what basis is authority seen as legitimate?

How sensitive is the society to hierarchy?

Related moral norms The conception of control: how do bosses justify their power in the economy?

Source: Redding, 2005

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instinct of “reciprocal altruism,” in other words doing favors for each other, and together defending their communal territory against outsiders. The basic instincts of conditional reciprocity and defensive aggression remain deep in human nature, but become covered up by additional responses learned later to deal with larger and more complex social structures such as gathering places in which to trade. These more complex demands were met by the evolution (with growing brain size) of two further instincts that permitted bigger and more complex living units. These additions were innovativeness and cooperativeness with strangers. They were both made possible by the evolution of language. The four instincts together made it possible for humans to become highly adaptive and so over time to dominate the planet.

They still apply and explain much.

As humans spread over the planet, they ended up in different environments and learned to work out interpretations of their instincts that were adapted to those different conditions. It is enough to say here that this led to variation in how humans interpreted the basic instincts to suit these different conditions. In each case there was also a need to find a way of making sense of the place of humans in the natural world that would foster stable social structures. It would need also to make sense of the mysteries of nature such as thunderstorms, the seasons, birth and death, and the heavens. Almost all societies facing these questions adopted a similar basic approach. They invented in their minds a “sacred canopy” to protect them from the forces and mysteries that seemed to threaten from above. There is an immense variety of these imaginatively conceived protective explanations. Over time as the societies grew, the sacred stories evolved into the world’s religions. These provide the same psychological protection today by defining the place of humans in nature, encouraging the instincts of cooperativeness that will keep societies stable, and promoting systems of morality that will shape conformity and social stability and provide purpose. Although there is much overlap in their features (an ideal of heaven, the centrality of love, reciprocal altruism, and subordination) there is not surprisingly a great variety in the detail and in the forms of application.

Any society’s system of meaning begins with this ancient heritage, and much else comes to be built upon it and is shaped by it. What is built on it are the society’s institutions of order, and they will be considered shortly. Before that, we examine what is inside such a societal system of meanings.

The process of building a society’s coherent meaning system is “the social construction of reality.” Explained by Peter Berger and Thomas Luckmann (1966), this defines its outcome as the society’s culture. A language is used to identify what matters, and to capture how a society sees the connections between things and the obligations people have to preserve the agreed structure of meanings. Such realities vary by society in subtle but significant ways, along with the languages used to make sense of them. The raising of children to membership of a society consists of long socialization into understanding the structure of meanings and their implications for behavior.

Figure 1.1 uses a simple set of three categories into which to place the key aspects of such meaning systems that are relevant for economic life. These are Rationale, Identity, and Authority. In reality they are interconnected as a complex web so the categories are for convenience in tracing influences.

Rationale Rationale is the set of reasons that people have in mind for motivating their behavior. Such reasoning may not always be openly sensed. But it is likely to have been built up in patterns over time as individuals come to terms with the complexities of

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making a living and getting along with others. They tend to learn such patterns of response in social spaces, inside each of which is a set of definitions of that space’s reality as its members see it, and where conformity to those definitions offers the security of membership. An example may be seen among students in the meaning space they share while acquiring a university degree. In this context people learn all the vocabulary they need to connect with the university – coursework, lectures, tutorials, examinations, etc. They also learn attitudes to studying, probably shared with other students. They adopt approaches to leisure, to work preparation, to living conditions, to eating, to travel, etc. And they share attitudes towards performance and achievement. They become capable of fitting in to that meaning space so as to benefit from time within it, and the relationships built may define the later extension of the same frame of reference into wider society.

Similar meaning spaces accumulate to permit individuals to find specific structures of meaning that are needed for social life. Accountants have their professional bodies, blue-collar workers friends at the pub, board members Institutes of Directors, managers firms, and related industrial sectors where common understandings about priorities and principles are the currency of much interchange. In addition, and over longer time and wider exposure, the society’s basic norms and values are being absorbed, often through shared cultural influences such as theater or sport, and years of reading the press.

The end result is an overall collection of shared mental universes, linked by ultimate societal ideals, out of which come certain patterns of response to what is termed here “rationale:” the reasons for behavior. To illustrate from the world of big business, if you ask senior executives “Why does your firm exist?” you find different priorities society by society. For Japanese, it is principally to employ people.

For Koreans, to balance conflicting stakeholder demands. For the regional ethnic Chinese, it is for the wealth of an owning family. For Germans, it is for the benefit of the community. For Anglo-Saxons, it is to serve shareholders. Here are five different interpretations of priority, illustrating five different systems of meaning. But remember also that the shaping of these responses is not just done by the culture, but also responds to the institutions and systems of coordination in a total interacting complex. However, these differences remain important as shapers of action in boardrooms, shop floors, and markets.

When analyzing something as “soft” as “meaning,” it is useful to adopt categories, and here probably the most sophisticated treatment remains that of Max Weber (see Schluchter, 1981) whose account separates three main features: formal rationality such as logics, value rationality which expresses intended ends (objectives), and instrumental rationality, which denotes how the ends are going to be achieved.

Identity Identity is one of the two most fundamental cultural variables in the cross-cultural literature, the other being Authority, discussed next. These two instinctive societal design principles work together to explain most of the variation in cultural influences worldwide. Another commonly used way of referring to the Identity factor is Individualism-Collectivism. This is the answer to the question: Where do you psychologically belong? What is the basis for your identity? Whom do you rely on?

You might for instance say that you are essentially part of a family or any other group and that is “who you are.” You might equally say you exist in society as a free-standing individual first and foremost. In general, Western societies tend to

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give the latter answer, while other societies – and thus the majority of people in the world – emphasize their group membership.

Identity in Asia is consistently collectivist, in clear contrast with the individualism reported from much of the West. What this signifies is the strength of felt identity with some collectivity, and so a society of strong specific personal ties and obligations. At the same time, Asian societies vary by what kinds of collectivities matter, as I will discuss further in the next chapter.

An important outcome of this primary sense of identity is what it does for the sense of belonging and obligation to a community, and to the ideal of common good that such obligation brings with it. Paradoxically, what happens is that collectivist societies sponsor collectivist identities, but the essential loyalties are defined not by the society as a whole but within the smaller unit of identity, such as the family. In those cases, the wider idea of societal good cannot compete with the specific idea of sub-unit good. So collectivist societies are separated into small units of identity, each unit looking after itself. It is then difficult to call upon a sense of wider public duty when a smaller scale duty has priority, not just in practice but within the system of morality. It might be possible to appeal to people’s sense of nationhood, or culture, but that is not the same as community. Under these conditions, it often becomes difficult to trust strangers because they are likely to be seeking their own benefits.

Authority Authority is about why people accept the dominance of others. The world divides into societies where (a) dominance has always been part of the traditions that make the society work, or (b) dominance has to be earned and is not a given element in the nature of society. These issues divide the world into societies that are high in power-distance and those that are low in it. In the former, societies are built as if life were always lived on a ladder, while in the latter, there is no ladder, except the one on which to put people who deserve to be up there. All Asian societies see hierarchy as natural, while Western societies tend to be more egalitarian. It does not mean that they cannot both produce organizations with clear vertical structures. It means that such structures are erected, and function, on different principles. The principles reflect the society’s system of morality, and so its definition of what any particular behavior means.

The contributions of history Any society will have come to its present condition via the events of a unique history. It is not necessary to know an entire history, but it is necessary to understand two aspects that normally have a strong influence on how an economy works.

One is the role of the state in the economy. It is obvious that the Chinese economy is heavily influenced by the Party-State, whereas it was historically the exact opposite in Hong Kong. Other states work with varying degrees of intervention, a feature that also changes from time to time. There may be key “intermediaries,” such as the coalitions of big business leaders that worked fruitfully together with government planning bodies during the building of both the Japanese and Korean economic miracles. Such structures play a big part in shaping economies.

The second historical question is, how has “civil society” become shaped? Included here are two important influences on how economies work today. Order can grow from the base, perhaps with encouragement from the top but so as to leave specialists to get on with building their own form of making exchange reliable. Examples of such encouraged order are the membership regulations of the professions, policed by

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the membership and delivering reliability to the society; so too, a ­self-governing stock exchange, or banking system. In a looser sense, it is possible to see other forms of valuable self-regulation, as occurs with a bourgeoisie when it learns to contribute to society by bearing the risks of innovation without abusing the trust assigned to ownership. This feature is seen by economic historians such as Deidre McCloskey (2016) as especially potent, and by China specialists as underlying the “Deng revolution” of 1990–2015.

The realm of order The realm of order in a society usually takes some centuries to reach its current condition. Three forces flow together to make a society’s institutions: the cultural legacy of distinct meanings and ideals; the significant experiences of history; and the lessons imported – willingly or not – from outside.

In a business system, there are three components of order to understand, all of them forms of “capital.” Because capital is something of value for use in an economy, the word signifies that they represent what is available to work with, in a particular society when organizing business. What is of value for use is finance, human skills and knowledge, and trust – financial capital, human capital and social capital.

Financial capital Financial capital, stated simply, is assets for use, primarily money. It also includes facilities that have been invested in, such as buildings and machinery seen as “capital assets” with a value that can be expressed in money terms, as in a company’s accounts. Understanding financial capital in a given business system is a matter of knowing (a) where capital comes from, (b) on what conditions, (c) with what scrutiny, (d) under what influences, and (e) affected by which key players? It is also valuable to know what the key tensions are in the financial system. A tension can be positive if it fosters efficiency, as for instance that between shareholders interested in returns and other owners interested in stability rather than risk. But many tensions have negative effects on economic performance, as for instance when government control takes priority over market competitiveness, or conversely when the maintaining of private control restricts innovation. Although many instances of tension are specific to single enterprises, there is a tendency in many business systems for the same pattern to become widespread and thus to be “typical” of at least a subset of the organizational types found within any business system.

Human capital Human capital is the sum of the skills, knowledge, and positive motivation available to an economy from those doing the work. Its nature starts with education and training, a feature of wide variation in what it provides. A second significant feature is how this human capital is “delivered” into the business system.

There is a tendency for societies to progress by adjusting the connection between labor and work, so requiring organizations to adapt as people protect their bargaining power, acquire skills that need to be competed for, and apply limits to the authority they submit to as workers. The long-term global trend is for more empowerment of workers, but business systems vary greatly on where they stand on this continuum. It makes a great difference to how companies are managed in a society.

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Social capital Social capital is in simple terms the amount and nature of trust in a society. This trust influences what can be achieved by way of cooperation, both how much and in what way, and so it shapes many of the structures that evolve to carry business dealings, exchanges, and agreements. A gross contrast is that between societies that rely heavily on networks of reciprocal obligation, as with guanxi (personal networking) in Chinese culture, and societies that rely on trust stemming from institutions of order, such as functioning legal systems, reliable accounting and disclosure, easily available information, and a belief in rationally calculated decision-making rather than interpersonal dependence.

The realm of coordination A business system is essentially a system for coordinating economic action. The action can be thought of as (1) getting inputs such as work skills, materials, and know-how, (2) a set of conversion processes turning the inputs into outputs, and (3) a means of capturing the value of the outputs. For all of these processes to run smoothly, it is necessary to establish routines and structures with which to manage the coordination of everything needed.

This happens in three managerial responses: bringing together an organization inside which to manage much of the coordination; connecting such an organization with other units in the society that it needs to have connections with, so as to flourish; and managing the day-to-day processes within the organization so as to allow it to contribute to agreed purposes. In each of these aspects there are key issues to know about if you are trying to understand an unfamiliar business system.

Ownership Ownership varies essentially by virtue of the kind of control that is attached to it.

In most organizations involved in business this influence is defined by the percentage of equity held. A broad division exists between companies still owned by a founding individual or social group such as a family, and companies with much wider ownership of shares and influence. The control over how an organization is managed then varies and this will affect an organization’s trajectory for growth. It will for instance affect how units of the organization are tied together under stable ownership, especially when under family control where expansion might stretch the organization’s capacity to raise new capital if personal control is threatened.

A great variety of responses exist to deal with this dilemma and, although often complex and opaque, they remain especially crucial to understand in many Asian industries.

Networks Networks are the ways in which organizations collaborate across a business system. In many Western societies, some such alliances are supervised by authorities concerned to prevent cartels that reduce market competition, and a trend is for such controls to be widened to cover regions as well as nations. They nevertheless serve a valuable purpose in reducing the problem of uncertainty met in markets with weak information. Networks can reduce risk and foster alliances that contribute to prosperity.

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Management Management is the work of coordinating all the contributions to an organization’s workings, and it tends within a society to take on a certain style, this being a response to the ideals of the culture about how authority can be exercised and seen as legitimate. Its results can be seen as the degree of interdependence achieved between employer and employee, that is, their degree of cooperativeness towards common purposes. This in turn will influence the willingness, or the ability, of bosses to delegate responsibility to workers and achieve efficient and effective results. There is much variation in this, as for instance between the Japanese tradition of much delegated responsibility and consensus seeking, and the Chinese tradition of tight downwards control. Each response comes out of very different social histories, as the overall model is intended to show.

Using the business system model The first stage of using the model is to get used to the total picture once the component parts are understood. To bring alive analysis of this total, it is helpful to search for the connections between components so as to see any one feature in terms of what it causes, and then how its nature results from other influences.

Much of this causation will be flowing upwards and across, but some will be flowing downwards and bringing change to primary influences.

After tracing such flows of cause and effect, patterns begin to appear. It is then possible to move to the next stage. This entails finding themes, so that if someone asked you to define the primary features of, say, the business system of China, it becomes possible to say the following, for example: there are two major systems within the total, one private sector and one state; they have different forms of ownership; they tend to operate in different kinds of industry; and their performance suggests that they exist for fundamentally different purposes. Each has features that are traceable to distinct historical experiences. Each has different capabilities.

The organizational types defined by these patterns are themselves complex adaptive systems, each with its own history, embedded in a shared ultimate set of societal forces, and each with distinct strengths and weaknesses. There are things they would be good at, and things they would not be good at. So their future development paths might then be speculated on, using the logics of the circumstances. They may also be seen alongside the others as part of the judging of the future options for the total societal system. In making this analysis it becomes necessary to identify their main characteristics. As an example if analyzing the Chinese private sector, it would be useful to identify the roles of family control, strong entrepreneurial tendencies, networking instincts backed up by ethical ideals of interpersonal trust, inventive sourcing of capital, paternalism as legitimate leadership style, global openness, network secretiveness, and a powerful work ethic. This then sets the stage for saying what industries or activities such features are most naturally suited to – such as OEM and the “workshop of the world” – and what not (yet) suited to – such as beating the Japanese and Koreans on global consumer brands. And most crucially for an analyst, understanding why this is the case.

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Conclusion It is possible to make sense of a complex object such as a societal business system.

In doing so, one can gain an appreciation of how the system evolved and where it might be heading in the future. There are direct practical implications for managing in such a context because firms tend to succeed or fail depending on the capabilities they can accumulate so as to compete effectively. These capabilities will be useful or otherwise depending quite heavily on the local environment. For a foreign firm, that local context may also affect the ways in which they are able to use the capabilities they bring into the host society from their home country.

Chapter summary yyManagers in international business need to understand how business works differently in different societies. yyThe business systems framework introduced in this chapter is a tool to enable such understanding. yyThe framework involves analysis mostly on three levels: culture (meaning), institutions (order), and coordination at the business level. yyThe components of a business system tend to be interdependent and often coevolve over time. yyKey influences in the evolution of a business system include material and ideational forces, history, and the influence of government and civil society.

Key concepts Business system. Rules of the game, cultural and institutional, for doing business in a society.

Culture (meaning). Social construction of reality, i.e., how people make sense of the world.

Institutions (order). Formal and informal rules.

Managerial coordination. Systems of agreement about what each person does in a company.

Review questions 1. What are the components of a business system?

2. Why is it useful to international managers to think of an entire societal business system?

3. What are the main forms of cultural influence?

4. How do institutions work to influence a business system?

5. Give an example of an external influence that has affected a societal business system.

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ASIAN BUSINESS AND MANAGEMENT

Learning activities and discussions 1. Take a country you know something about and (with others to help) divide up the analysis of its business system using the categories in the business systems framework. Then consider you are asked to make a presentation to the board of a company in an industry of your choice. The company wants to know whether it is worth setting up operations in that country. Advise the board, providing them with an explanation.

2. Take a country you know very little about and find out from global sources of ­information how to complete (as far as possible) the information needed in the nine-box analysis.

3. Take a successful society and a society struggling to develop, and compare their characteristics using the framework. What advice would you offer to the less successful country after first considering how practical such advice needs to be?

References and further reading Berger, P. L. and T. Luckmann (1966) The Social Construction of Reality: A Treatise in the Sociology of Knowledge (Garden City, NY: Doubleday).

Hofstede, G. H. (2001) Culture‘s Consequences: Comparing Values, Behaviors, Institutions and Organizations across Nations (Thousand Oaks, CA: Sage).

McCloskey, D. N. (2016) Bourgeois Equality: How Ideas, not Capital or Institutions Enriched the World (Chicago: University of Chicago Press).

Ragin, C. C. (1987) The Comparative Method: Moving Beyond Qualitative and Quantitative Strategies (Berkeley, CA: University of California Press).

Redding, G. (2005) “The Thick Description and Comparison of Societal Systems of Capitalism,” Journal of International Business Studies 36(2): 123–55.

Redding, G. and M. A. Witt (2007) The Future of Chinese Capitalism: Choices and Chances (Oxford, UK: Oxford University Press).

Redding, G. and M. A. Witt (2015) “Advancing Indigenous Management Theory: Executive Rationale as an Institutional Logic,” Management and Organization Review 11(2): 179–203.

Schluchter, W. (1981) The Rise of Western Rationalism: Max Weber‘s Developmental History Transl.G. Roth (Berkeley, CA: University of California Press).

Welzel, C. (2013) Freedom Rising: Human Empowerment and the Quest for Emancipation (Cambridge, UK: Cambridge University Press).

Whitley, R. (1992) Business Systems in East Asia: Firms, Markets and Societies (London: Sage Publications).

Witt, M. A. (2017) Business Systems Analysis for International Business (Fontainebleau, France: INSEAD case study).

Witt, M. A., Luiz Ricardo Kabbach de Castro, A. Kenneth, M. Sami, B. Dorothee and S. Lawrence (2018) “Mapping the Business Systems of 61 Major Economies: A Taxonomy and Implications for Varieties of Capitalism and Business Systems Research,” Socio-Economic Review 16(1): 5–38.

Witt, M. A. and G. Redding (2009) “Culture, Meaning, and Institutions: Executive Rationale in Germany and Japan,” Journal of International Business Studies 40(5): 859–95.

Witt, M. A. and G. Redding (eds) (2014) The Oxford Handbook of Asian Business Systems.

(Oxford, UK: Oxford University Press).

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INDEX

absorptive capacity, definition, 78 Acer, 110 All-China Federation of Trade Unions (ACFTU), 59, 154–55 altruism, 172–73 see also philanthropy ASEAN Free Trade Agreement (AFTA), 121–22 see also Association of Southeast Asian Nations Asian Development Bank (ADB) position on SDGs and human rights, 132, 135 projection of Asian percentage of world GDP, 131 Asian economies, cultural origins (see also cultural origins of Asian economies), 17–23 Asian financial crisis and corporate governance issues, 40, 47 ESG policy and, 138 impact: in India, 163; in Indonesia 181, 185, 189; in Japan 52; in Korea 55, 86, 209, 211, 215; in Thailand 47 Asian MNEs transformation of corporate culture through FDI activities, 135 see also MNEs in Asia Asia Pulp and Paper, 92 asset-seeking investment, 106 definition, 107 Association of Southeast Asian Nations (ASEAN) emerging countries, societal values, 29 establishment and membership, 231 pillars, 122 promotion of SDG principles, 132 Astra International, 135, 137, 182 Australia, 44, 122, 139, 184, 229 authority and business systems, 11 China, 151–52 India, 165 Indonesia, 183–84 Japan, 197 Korea, 209–11 Malaysia, 222–23 Singapore, 236–37 Vietnam, 252–53 autocracy, variations on, 23–24 automotive industry, 108, 122, 137

India, 169 Japan, 200 Ayala Group, 84 bamboo network, 87, 231 Bangkok Bank of Commerce (BBC), 47 bapakism, 29 Belgium, 116 biodiversity, impact of the palm oil industry, 142 boundaryless careers, 60, 62 bounded convergence, 50, 61–62 brain circulation, 64 British rule, 41, 221, 223 see also colonialism Brunei, 35, 40–41, 179 GDP growth rate, 121 GDP per capita, 41 Buddhism, 17, 29, 221 Bumiputera, 221–22, 224–26, 230 definition, 230 business groups the Asian model, 39–40 clustering of family firms into, 83 comparative overview, 91 definition, 46, 94, 204 Japan, 200, 204 Korea, 208, 210–11, 214 political ties, 87–88 usual structure, 155 business systems, 3 analysis questions, 8 authority and, 11 China, 149–61 components of order, 12 contributions of history, 11–12 coordination components, 13 elements, 7 financial capital, 12 functioning of, 5–6 human capital, 12 identity and, 10 India, 162–78 Indonesia, 149–93 Japan, 194–206 Korea, 179–219 Malaysia, 220–33

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INDEX management, 14 networks, 13 ownership patterns, 13 and rationale, 9 Singapore, 234–49 social capital, 13 societal, 6, 7, 23 using the model, 14 Vietnam, 250–64 business systems approach, benefits of, 115 business systems in Asia, influence of MNEs on, 108–9 Cambodia, 30, 38, 40, 107, 109, 139, 250 EIA system, 138 ESG policy, 138 GDP growth rate, 121 minimum salary, 128 new environmental code, 138 per capita income, 30 careers, boundaryless, 60, 62 case studies China, 63–64, 79–81, 160 India, 176 Indonesia, 141, 192 Japan, 205 Korea, 218 Malaysia, 31–32, 113–14, 232 Singapore, 247 Taiwan, 94 Thailand, 47, 126–29 Vietnam, 262 caste, 164–65, 172, 175 definition, 175 chaebols, 39, 54–55, 84, 105, 134, 138, 208–11, 214–16 cross-holding structures, 90 definition, 217 Chang Yung-Fa, 94 Cheung Kong Holdings, 84 child labour, 135, 142, 259 China, 5–6, 19–20, 22–23, 27–30, 36–37, 43–44, 49, 63–64, 67–72, 75–81, 98, 100, 102, 107–10, 116, 118, 126, 134–35, 202–3, 235 business system, 149–61; authority 151–52; case studies 160; comparative advantage 156–57; cultural and historical perspectives 149–52; financial capital 153; government and the CCP 152–55; human capital 153– 54; identity 151; international activities of Chinese firms 157–58; key concepts 159; management 155; and the middle income trap 156; networking 155; ownership patterns 154–55; rationale 149–50; social capital 154; working conditions 158

‘Catalogue of Priority Industries in the Central and Western Regions,’ 109 corruption in, 29–30 corruption ranking, 132 Cultural Revolution, 19, 29 economic performance, 149 economic resurgence, 20 electronics industry, 157 EPI ranking, 132 ESG guidance provision, 139 ESG policy, 134, 138 GDP growth rate, 30 governance structure, 152 historical context of family business groups, 88 human resource management (HRM), 56–59; compensation and performance appraisal 57, 59; industrial relations 57–59; “iron rice bowl” (cradle to grave) system 56; phases 56; redness vs competence 57; staffing and employment security 56, 58; training and development 57–58; war for talent case study 63–64; wide variation in practices 58 income inequality, 59 institutional quality, 156 joins WTO, 57 OFDI status, 60 one-child policy, 59, 88 open door policy, 57 per capita GDP, 156 redness vs competence concept, 62 share of world GDP, 157 shift of production to, 55 Social Credit Index, 22 stock market, 41 war for talent case study, 63–64 China COSCO Shipping Corporation Limited, 102 Chinese Communist Party (CCP), 56–57, 150, 152, 154–56 Christianity, 17, 22, 221 civic consciousness, 22 civil society Singapore, 237–40 Vietnam, 253–54 civil society organizations (CSOs), definition, 261 CK Hutchison Holdings Limited, 102 clothing industry, 126, 139 clusters, MNEs and, 110 collectivism, definition, 191 colonialism, 26, 41, 89, 150, 162–64, 181, 221, 223, 235 Communism, 28 company unions, definition, 204

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Copyrighted material – 9781352007428 INDEX comparative advantage China, 156–57 India, 171 Japan, 201 Malaysia, 227–28 Vietnam, 257–58 compensation and performance appraisal China, 57, 59 Japan, 52, 53 Korea, 54, 56 Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), 116 concentrated ownership, definition, 46 Confucian Asia the countries of, 49 definition, 62 Confucianism absence of Confucian dynamism in indigenous societies, 29 characteristics, 252 characteristics shared with Protestantism, 22–23 the Confucian approach, 246 the Confucian approach to education, 153, 241 Confucian dynamism, 19–20 and HRM, 50 influence: on business families, 86; China 30, 151–53; Hong Kong 27; Japan 27–28, 195, 197, 199; Korea and Taiwan 28; Singapore 27, 235, 246; Vietnam 252 Korean, 209, 217 and lifetime employment, 50 principal tenets, 50 social caste system, 195 treatment of women, 210 continuity and change India, 171–72 Japan, 201–2 Malaysia, 228 convergence, bounded, 50, 61–62 cooperativeness, 5, 9, 14, 24–25, 28 corporate governance, 34–48 Asian financial crisis and, 40, 47 Bangkok Bank of Commerce case study, 47 broadly defined, 34 implications of separation of ownership and control for, 40 indicators, 40–41 key concepts, 45 organizational structure and, 39–40 ownership and, 35–39; implications by country and political regime 42 political regimes and, 41–44

scores by country, 38 stakeholder perspective, 35 corporate ownership by country and political regime, 36 family ownership, 36–37 foreign state ownership, 39 implications for corporate governance, 35–39 state ownership, 37–38 corporate social responsibility (CSR) India, 172–73 Indonesia, 138, 182 legal position in Asian countries, 138 Singapore, 244–45 Vietnam, 259–60 corruption, 132, 142 CCP campaign against, 150 Singapore, 242 Vietnam, 253 Corus Steel, 85 CP Group, 84 crony capitalism, 23, 40, 87, 166 cronyism, in SOEs, 38 cross-vergence, 50, 62 cultural and historical perspectives China, 149–52 India, 163–65 Indonesia, 181–84 Japan, 195 Korea, 208, 210 Malaysia, 221–24 Singapore, 235–37 Vietnam, 251–53 cultural origins of Asian economies, 17–23 Confucian dynamism, 19–20 post-socialist economies, 29–30 role of traumatic experiences, 19–20 societal change towards development (see also societal transition), 23–26 societal values, 20–23 cultural values advanced city-states, 26–27 advanced Northeast, 28 of emerging ASEAN countries, 29 Japan, 27–28 Malaysian Motorola plant case study, 31–32 post-socialist economies, 29–30 of principal economic cultures, 26–30 secular-rational vs traditional, 22–23 survival vs self-expression, 20–23 World Values Surveys Cultural Map, 21 culture childhood beginnings, 19 dimensions of, 19

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INDEX Daewoo Motors, 85 Danone, 134 democracies, corporate governance and, 43–44 democracy, definition, 46 Deng Xiaoping, 29 developmental state, definition, 159 Dewey, A. G., 183 dictatorship, counteracting the potential for, 20 diffuse ownership, 39 definition, 46 diversity in employment, impact on financial performance, 60 Doha, development round, 116 doi moi policy (Vietnam), 30, 250–53, 259 definition, 261 dominant party authoritarian regimes (DPARs) corporate governance and, 43–44 definition, 46 examples of, 43 downsizing, 52–53, 55, 58, 256 Duan Yibing, 64 Dunning, John, 119 East Asia regionalism and production networks (see also regional production networks), 115–30 share of FDI outflows, 100 East Asian economies, comparative data, 18 eclectic paradigm definition, 125 hypothesis, 119 economic cultures, principal, 26–30 economic dualism, 180 definition, 190 economic dynamism, definition, 217 education access to, 131 Chinese system, 153 India, 167–68 Japan, 198–99 Korea, 212 Malaysia, 225 Singapore, 238, 241, 245 Vietnam, 253, 254 efficiency-seeking investment, 106–7 definition, 112 Egypt, 126 elections, 23, 26, 43, 152, 237 electrical sector, 74, 226–28, 231 electronics sector, 69, 74, 88–90, 102, 108, 207, 210, 222, 224, 226–28, 231 elite dominance, and the development of institutional infrastructure, 25 empire building, 35

employment, 37, 51, 55, 60, 63, 164–65, 180, 198–99, 239, 251, 253 employment contracts, corporate governance and, 35 empowerment, 12, 21–22, 25, 27–28, 136 entrepreneurial business strategies, definition, 217 entrepreneurial capitalism, 169 environmental, social and governance (ESG), policies and practices (see also ESG policy), 131–46 environmental investment assessment (EIA), web-based information systems, 138 environmental performance indicators (EPI), 132 selected countries, 132 environmental practices, scrutiny from NGOs on, 92–93 equitization, 251, 256–57 definition, 261 ESG policy and the Asian financial crisis, 138 ‘Better Work’ multi-stakeholders-based initiative, 139 confluence of principles, 132–34 consumer interest, 135–36 of developed countries and institutions, 139 as driver in the choice of employer, 136 external review panels, 139 external stakeholders’ input, 139 key concepts, 140 legislative initiatives, 132 market pressures, 134, 136 measuring environmental and social performance, 134–35 philanthropic shift, 136–37 regulatory environment: assessment, 137–38; strengthening 138 right to know and public participation, 134 RSPO case study, 141 ethical trading initiative (ETI), 134–35 ethnic Chinese, economic power, 29 Eva Air, 94 Evergreen Group, succession case study, 94 factor-driven growth strategy, 246 family, Confucian emphasis, 50 family business the concept, 94 importance across Asia, 84 family business groups in Asia, 83–96 business strategies, 90 business transitions, 92–93 common features, 84–88

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Copyrighted material – 9781352007428 INDEX concentration of wealth, 84 cross-country differences, 88–90; comparative overview 91; external networks 89; ownership structures 90 demerger process, 89, 92 diversification, 85 Evergreen Group case study, 94 family networks, 89 family transitions, 92 focus on control, 86 historical context, 88–89 key concepts, 94 multinationals, 90 names for in different areas, 84 networks, 86–88 R&D and technology investments, 93 trading roots, 84–85 family-controlled business, definition, 175 family firms contribution to private sector economy globally, 83 definition, 83 prevalence in Asia, 83 family ownership definition, 45 dominance in Asian economies, 35 implications for corporate governance, 36–37 Far Eastern Group, 85 FDI inflows/outflows, definition, 112 FDI inward/outward stocks, definition, 112 financial capital business systems, 12 China, 153 India, 166–67 Japan, 198 Korea, 211–12 Malaysia, 224–25 Singapore, 241 Vietnam, 254 flying geese paradigm, of FDI, 120 foreign direct investment (FDI) China as destination for, 58 China’s role, 157–58 classical roots of contemporary approaches, 119 the concept, 119 definition, 111, 125 firm-based theories, 120 Malaysia, 222, 228–29 policy influencing trends across Asia, 105 and the transformation of corporate culture in Asian MNEs, 135 Foxconn, 110 fragmentation, 120–21 definition, 125

free-riding, 34 free trade agreements (FTAs) global expansion, 116 by status, 117 FTSE4Good, 137 fuzzy boundaries, 180 definition, 191 Geertz, Clifford, 183 gender equality China, 58–59, 158 Vietnam, 260 gender role differentiation and definitions of sexual harassment, 61 Singapore, 236 as tenet of Confucianism, 50 generational differences implications for HRM, 50 PWC survey, 49 Gereffi, Gary, 121 Germany, share of world GDP, 157 Gini coefficient, 59 girls, access to education, 131 globalization, 17, 26–27, 50, 61, 64, 68, 76–77, 116, 120, 181, 202 influence on production, 256 of Korean firms, 216 global value chains (GVCs) definition, 112 governance types, 121 government India, 165–66 Japan, 197–98 Korea, 210–11 Malaysia, 223–24 Singapore, 237–40 Vietnam, 253–54 Government-Linked Companies (GLCs), 229, 238–39, 242, 244, 246 and Singapore Inc, 246 green jobs, 137 gross enrolment ratio (GER), definition, 175 guanxi, 13, 22, 58, 155, 231, 243 definition, 62, 159 guanxiqiye, 84 Haier, 135 Harman, 93 hegemony, 116 definition, 191 Hiap Hoe, 89 hierarchy, 22–23, 28, 151–52, 165, 170, 174, 180, 182–83, 197, 209, 227 comparison of Asian and Western views, 11 Hinduism, 17, 163–64, 221

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INDEX Hofstede studies, 19–20, 151 dimensions, 19 Hong Kong, 26–27, 84, 89–90, 92, 98, 100, 102, 105–9, 150, 157, 202–3 horizontal FDI, 120 definition, 125 host economies, MNEs’ impact, 109 Hsu Yu Hsiang, 85 HTC Corporation, 92 Huang, Y. J., 23 human capital in business systems, 12 China, 153–54 India, 167–68 Indonesia, 186–87 Japan, 198–99 Korea, 212–13 Malaysia, 225 Singapore, 241–42 Vietnam, 254–55 human resource management (HRM) in Asia, 49–66 challenges, 59–61 China, 56–59 Confucianism and, 50 diversity of practices, 49 Japan, 51–53 key concepts, 62 Korea, 54–56 OFDI challenges, 60–61 robotics and AI challenges, 61 talent recruitment challenges, 60 war for talent case study, 63–64 workforce aging challenges, 59–60 hybrid capitalism, 166 hysteria, as cultural response to anxiety, 32 Hyundai, 54, 92, 135, 211, 216 Iceland, policy on palm oil, 142 ICICI Bank, 168 identity and business systems, 10 China, 151 India, 164–65 Indonesia, 182–83 Japan, 196–97 Korea, 209 Malaysia, 222 Singapore, 236 Vietnam, 252 immigration, 59–60 Malaysia, 221, 223 import substitution industrialization (ISI), 163 definition, 175

India, 29–30, 35, 60, 67–70, 72, 76–78, 81, 84–85, 88–90, 92, 98, 102, 108–9, 116, 118, 122 business houses, 84 business system, 162–78; authority 165; case studies 176; comparative advantage 171; continuity and change 171–72; corporate social responsibility (CSR) 172–73; cultural and historical perspectives 163–65; financial capital 166–67; government and 165–66; human capital 167–68; identity 164–65; international activities of Indian firms 172; key concepts 175–76; management 170; networking 169–70; ownership patterns 168–69; rationale 163–64; social capital 168; working and living conditions 173–74 corporate social responsibility, 172 economic status, 162 GDP growth rate, 30 global diaspora, 171 historical context of family business groups, 89 independence, 163–64 literacy rate, 167 living conditions, 174 prominent family-owned businesses, 169 structure of family business groups, 90 individualism, definition, 191 Individualism-Collectivism, 10, 19 Indonesia, 20, 22, 27, 29, 36, 77, 84–85, 87–90, 92, 100, 105, 107–8, 135–37, 139, 142 business system, 149–93; authority 183–84; case studies 192; cultural and historical perspectives 181–84; formal sector immaturity 186; human capital 186–87; identity 182–83; impact of society on management practices 184–88; Java’s role 180–82; key concepts 190–91; management 189; networks 188–89; ownership patterns 188; plantation structure 183–84; rationale 181–82; significance 179; social capital 187–88; working conditions 190 conglomerates, 84 demographic perspective, 179 economic status, 179 EIA system, 138 ESG assessment and certification, 139 ESG policy, 138 external EIA review panel, 139 literacy rate, 186 mass displacement of ethnic Chinese from, 20 and the palm oil industry, 142 Salim Group, 85 Sinar Mas Group, 90 Toyota production in, 122 industrialization, 22, 164, 196 definition, 261

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Copyrighted material – 9781352007428 INDEX Malaysia, 221 MNEs and, 109 Singapore, 239 Vietnam, 250 industrial policy, definition, 159, 204 industrial relations China, 57–59 Japan, 52–53 Korea, 55, 56 Singapore, 241–42 Vietnam, 255, 260 see also unions informal sector definition, 175 India, 163, 173 Indonesia, 180, 184, 188–90 Infosys, 168 infrastructure elite dominance and the development of, 25 India, 173 Indonesia, 179 Korea, 208, 210 Malaysia, 220, 224, 231 MNEs and, 109 Singapore, 238–39 Vietnam, 260 institutional voids, definition, 94 integrated international production (IIP), 106 definition, 112 intellectual property rights, definition, 78 international activities of firms China, 157–58 India, 172 Japan, 202–3 Singapore, 244 Vietnam, 259 international business, the meaning of, 115 international integration, 256 definition, 261 internet India and the Philippines, 109 Korea, 210, 216 Vietnam, 258 intervention, 11, 166, 221, 223 intra-industry loops, definition, 204 “iron rice bowl” (cradle-to-grave system), definition, 62 Islam, 17, 22, 29, 179, 221, 223 cultural adaptation to poverty, 22 “deliberation and consensus” tradition, 183 egalitarian nature, 182 Japan annexation of Korea, 208

business system, 194–206; authority 197; case studies 205; comparative advantage 201; continuity and change 201–2; cultural and historical influences 195; financial capital 198; government and 197–98; human capital 198–99; identity 196–97; international activities of Japanese firms 202–3; key concepts 204; management 201; networking 200; ownership patterns 200; rationale 195–96; social capital 199; working conditions 203 caste system, 195 corruption ranking, 132 cultural differences, 27 EPI ranking, 132 Equal Employment Opportunity Law, 53 ESG policy, 134–39 GVC participation rate, 102 human resource management (HRM), 51–53; characteristics 51; compensation and performance appraisal 52, 53; industrial relations 52–53; staffing and employment security 51, 52–53; training and development 51–53 impact of WWII, 20 influence on Asia and the world economy, 194 “miracle” growth, 20 network economy description, 121 organizational structures, 39 philanthropic initiatives, 136 population, 194 pre-war pattern of development, 120 regional differences in dialect and business culture, 49 share of global FDI outflows, 100 share of world GDP, 157 societal values, 27–28 Japanese production rationality, spread of, 17 job security, family businesses and, 37 Jobs Lost and Jobs Gained (McKinsey 2017), 61 joint-stock companies, 37, 256 Jollibee, 135–36 keiretsu, 39, 120, 200–201, 204 knowledge-based economy, definition, 246 Kojima, Kiyoshi, 120 Korea advancement to OECD ranks, 55 Asian financial crisis: and employment, 55; impact 138; and tunnelling behaviour in 86 business system, 179–219; authority 209– 11; case studies 218; cultural and historical perspectives 208, 210; financial capital 211–12; globalization of Korean firms 216; government and 210–11; human capital 212–13; identity 209; key concepts 217; management 214–15; networks 214;

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INDEX ownership patterns 214; rationale 208–9; social capital 213; working conditions 216 chaebols, 84 colonisation and war, 19 Confucian influence, 54 corruption ranking, 132 Declaration of Democratization, 55 economic status, 207 EIA system, 138 elects first woman President, 60 EPI ranking, 132 Equal Employment Act, 55 external EIA review panel, 139 gender equality in, 210 historical context of family business groups, 89 human resource management (HRM), 54–56; compensation and performance appraisal 54, 56; ethos 217; industrial relations 55, 56; regular vs non-regular employees 212; similarities to Japanese system 54; staffing and employment security 54–55; training and development 54, 56 Japan’s annexation, 208 organizational structures, 39 philanthropic initiatives, 136 population, 207 regional differences in economic development and political attitudes, 49 Korean War, 20, 54, 71, 208, 215 Kuok, Robert, 85 laissez-faire, 223 Laos, 38, 40, 43, 109, 139, 250 EIA system, 138–39 GDP growth rate, 121 per capita income, 30 Lau, S. K., 27 legal system China, 154 Indonesia, 181 Malaysia, 223, 228 Singapore, 242 Vietnam, 258 Lenovo, 134–35 LG Electronics, 216 Li, Richard, 92 Li, Victor, 92 liberalization, 71, 164, 167, 169–72, 196, 220, 223 definition, 175 lifetime employment (LTE) the concept, 62, 204 Confucian values and, 50

financial crisis and, 55, 209 gendered perspective, 53 role of in Japanese economic life, 51, 197 Li Ka-Shing, 92 literacy rates China, 153 India, 167 Indonesia, 186 Japan, 198 Malaysia, 225 Vietnam, 254 local institutions, MNEs’ influence on, 108 long-termism, in family businesses, 37 loyalty, 11, 37, 87, 133, 170, 184, 209 Mahathir Bin Mohamad, 224, 231 Malaysia, 179 business system, 220–33; authority 222–23; case studies 232; comparative advantage 227–28; continuity and change 228; cultural and historical perspectives 221–24; financial capital 224–25; government and 223–24; human capital 225; identity 222; key concepts 230; management 227; MNEs in and from Malaysia 228–29; networking 227; ownership patterns 226–27; rationale 221–22; social capital 226; working conditions 229 changing composition of GDP, 222 economic development path, 224 economic status, 220 independence (Federation of Malaya), 223 legal system, 223 Motorola plant, 31–32 National Key Economic Areas, 231 New Economic Policy (NEP), 221, 224, 231 official language, 221 Petronas case study, 113–14 population, 220 state religion, 223 sustainability promotion, 138 Malaysia Master Plan, the policy, 231 Malaysian Industrial Development Authority (MIDA), 231 management in business systems, 14 China, 155 India, 170 Japan, 201 Korea, 214–15 Malaysia, 227 Singapore, 243 Vietnam, 256–57 Mao Zedong, 56

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Copyrighted material – 9781352007428 INDEX market-in-state, Zheng and Huang’s term, 23 Marxism, 24, 119 Masculinity/Femininity, 19 masses, sedation of, 24 #MeToo movement, 61 definition, 63 middle income trap, 25, 28, 156 definition, 159 millennials, 49–50, 60 aspirations and expectations, 50 definition, 62 value placed on training and work-life balance, 53 minority shareholders, protection role of corporate governance, 35 MNEs in Asia, 97, 114 and Asian business systems, 108–9 FDI inflows, 98, 99, 100 FDI outward flows and stock, 98, 101 and foreign direct investment, 98–102 global and regional strategies, 106–7 government policies on FDI and GVC participation, 102, 105 historical perspective, 98–105 impact on host economies, 109 influence on local institutions, 108–9 integrated regional activities and subsidiaries’ roles, 107–8 key concepts, 111 Petronas case study, 113–14 regional and global value chains, 102 strategies, 105–8 Moldova, 126 money laundering, 157 Motorola, 22, 31, 267, 272 multiculturalism definition, 231 Malaysia, 221, 226 multinational enterprises (MNEs) definition, 111 Malaysian perspective, 231 Myanmar EIA system, 138 ESG policy, 138 stock market, 41 narrow authoritarian regimes (NARs), 41, 43–44 corporate governance and, 44 definition, 46 national innovation system (NIS), definition, 78 natural disasters, Vietnam, 259–60 natural resources, depletion, 131 neo-liberal ideology, 116 nepotism, spillover effects, 37

Netherlands, 139, 180, 203, 221 networking China, 155 India, 169–70 Indonesia, 188–89 Japan, 200 Korea, 214 Malaysia, 227 Singapore, 243 Vietnam, 256 networks, in business systems, 13 New Zealand, 122 Nieng Yan, 63 North Korea, per capita GDP, 17 oligarchy, 180–81, 188–89 definition, 191 oligopoly, 23 orangutans, impact of the palm oil industry, 142 organizational structure, and corporate governance, 39–40 outsourcing, 169, 242 in the fashion industry, 126 outward foreign direct investment (OFDI) challenges for HRM, 60–61 China, 58 Indian companies, 172 Japanese multinationals, 51 Korea, 216 Malaysia, 229 Singapore, 244 Vietnam, 259 Western multinationals, 102 Overseas Chinese Business (OCB), Malaysian perspective, 231 overseas foreign direct investment, from Asia in 2015, 85 ownership patterns in business systems, 13 China, 154–55 India, 168–69 Indonesia, 188 Japan, 200 Korea, 214 Malaysia, 226–27 Singapore, 242 Vietnam, 255–56 ownership structures, of family business groups, 90 Ozawa, Terutomo, 120 palm oil sector alternatives, potential impact, 142 Indonesia, 189 orangutans, impact on, 142

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INDEX RSPO case study, 141 Park Geun-hye, 60 patriarchy, 87, 165, 253 definition, 175 Penrose, Edith, 191 per capita GDP, comparisons, 17 philanthropy, 132–33, 135 Philippines, 29, 41, 77, 84, 87, 90, 100, 105, 107, 109, 135–36 compadre tradition, 29 ESG policy, 138 philanthropic initiatives, 136 stock market, 41 political correctness, 62 political regimes, and corporate governance, 41–44 poverty cultural adaptations to, 22, 29 historical perspective, 19 India, 162, 174 Malaysian reduction, 222, 224, 226, 231 and the RSPO, 142 social challenges, 24, 29 Vietnamese reduction, 251 power distance, 19–20, 183, 209, 237 predatory state, definition, 159 principal-agent problem, 34–36, 44 definition, 45 principal-principal problem, 35–36, 44 definition, 45 production networks, definition, 125 productivity China, 156 impact of an aging workforce on, 59 Indonesia, 188–89 Korea, 216 in the palm oil industry, 141 spillovers of foreign firms, 110 product life cycles, 119, 121 promoter, definition, 175 property rights, Indonesia, 182 public sector, definition, 176 pyramid ownership structures definition, 94 function and consequences, 86 in Southeast Asia, 90 pyramid structure of businesses, 39–40 quality management, definition, 204 rationale business systems and, 9 China, 149–50 India, 163–64 Indonesia, 181–82

Japan, 195–96 Korea, 208–9 Malaysia, 221–22 Singapore, 236 Vietnam, 251 reciprocity, 172, 180, 182 definition, 191 Redding, G., 115 redness vs competence, definition, 62 Regional Comprehensive Economic Partnership (RCEP), 116, 122 regionalism, definition, 125 regionalization, definition, 125 regional production networks (RPNs), 115–30 ASEAN and ASEAN Economic Community (AEC), 121–22 clothing MNEs’ sourcing locations, 127 definition, 117 FDI and international production theories, 119 and global economic activity, 116–18 Japanese automotive makers in East Asia, 122–24 key concepts, 125 reasons for emergence of, 120–24 regional economic integration in Asia, 117–18 Thai textile and clothing industry case study, 126–29 theories and perspectives, 119–20 Toyota’s subsidiaries and factories, 123 religion, 6, 20, 22, 163–65, 179, 181, 184, 221, 227 religious affiliation, importance of, 168 religious/philosophical systems, impact on business systems, 17 rent-seeking, 94, 166, 181, 224 research and development (R&D) role in Japanese industrial policy, 198 Singaporean investment, 240 resource distribution, 181–82 rice paper ceiling, 60 definition, 62 robotics and AI, as challenges for HRM, 61 Romania, 126 Rothschild, Nathaniel, 188 round-tripping, definition, 157 Salim Group, 84–85 Samsung, 84, 93, 135, 216 self-dealing, 34 self-expression, survival vs, 20–23 seniority principle, definition, 204 Seoul Olympics, 55 separation of ownership and control, 34–35, 39–40 in Asian corporations, 37

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Copyrighted material – 9781352007428 INDEX definition, 45 implications for corporate governance, 40 types, 34–35 sexual assault/harassment, attitudes towards in Asian countries, 60–61 sexual discrimination, high-profile suits, 60 Shambaugh, D. L., 22 shareholders, 10, 12, 34–36, 39–40, 45–47, 74, 86, 94, 173, 195, 200 shareholder value, 195, 209 shukko, 52, 63 dual purpose, 51 shunto, 52, 63 Silicon Valley, 28 Sinar Mas Group, 90 Singapore, 17, 19, 26–27, 29, 36–37, 39, 43–44, 76–77, 89–90, 98, 100, 102, 105–9, 136, 138, 221 benefits of geographic location, 234 business system, 234–49; authority 236–37; case studies 247; corporate social responsibility 244–45; cultural and historical perspectives 235–37; financial capital 241; government and civil society 237–40; human capital 241–42; identity and 236; international activities of Singapore firms 244; key concepts 246; management 243; networking 243; ownership patterns 242; phases of economic development 239–40; rationale 236; ‘Singapore Inc’ 238–39; social capital 242; working conditions 245 Confucian principles, 236 corruption ranking, 132 economic status, 234 EPI ranking, 132 ESG policy, 138 GDP growth rate, 234 GDP per capita, 41 Gini coefficient, 237 human resource management, 243 impact of the palm oil industry, 142 Japanese occupation, 235 outward FDI, 244 per capita GDP, 17 philanthropic initiatives, 136 population, 234 primary cultural influence, 27 stock market, 41 single party authoritarian regimes (SPARs) definition, 46 examples of, 43 slum, definition, 176 small and medium enterprises (SMEs), common definition, 242 social capital in business systems, 13

China, 154 India, 168 Indonesia, 187–88 Japan, 199 Korea, 213 Malaysia, 226 Singapore, 242 Vietnam, 255 social unit of primary identity, variations, 19 societal business systems, 6, 7, 23 societal coordination, definition, 205 societal transition modern society, 25–26 pre-modern society, 23–25 tendencies, 24 society, contributions of history, 11–12 Southeast Asia, rise in outward FDI stocks, 100 South Korea, see Korea sovereign wealth funds (SWFs), 39 foreign state ownership and, 39 special economic zones (SEZs), 105, 109, 171 spillovers, 109 definition, 112 staffing and employment security China, 56, 58 Japan, 51, 52–53 Korea, 54–55 stakeholder theory, Freeman’s, 133 state-owned enterprises (SOEs), 37–38 definition, 45, 159 efficiency, 38 prominence in countries with authoritarian regimes, 37–38 state ownership, 45 stock markets in Asian economies, 41 in selected Asian economies, 35 strategic asset-seeking investment, definition, 112 strong work ethic, as principal tenet of Confucianism, 50 subsidiaries of MNEs, role in integrated regional activities, 107–8 Suharto, 181, 183–84 Sukarno, 183 surplus, extraction of, 24 sustainability, 90, 92, 138, 142 sustainable development drivers of change, 134, 136 impact assessment on the Asian business system, 132–34 regional promotion of principles, 132 see also ESC policy Sweden, 139

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INDEX Taiwan, 28, 35, 67, 69, 76, 84–85, 87–90, 92, 94, 98, 100, 102, 105–6, 108–10 colonisation of, 20 corruption ranking, 132 cultural affinity with China, 28 ESG policy, 138 Evergreen Group, 94 Far Eastern Group, 85 guanxiqiye, 84 historical context of family business groups, 89 talent, global mobility of, 64 Tata Group, 84–85, 164, 168 taxation, 38, 102, 157, 186, 227–28, 240 technology development, 67–82 electric cars in China case study, 79–81 historical perspective, 69–71 key concepts, 78 national innovation systems, 72–77 post-war revival of Asian technology, 71–72 technology transfer, 26, 105, 110, 155 techno-nationalism, 74 definition, 78 Temasek, 39, 239, 242, 244 textile and clothing industry, 108 Thai case study, 126–29 Thailand, 27, 29, 41, 44, 47, 67, 77, 84, 88, 90, 105–8, 122, 126, 128, 136, 139 EIA system, 138 ESG policy, 138 external EIA review panel, 139 family ownership case study, 47 hosting of Japanese firms, 122, 124 investment promotion strategy, 105 minimum salary, 128 philanthropic initiatives, 136 regime change, 44 textile and clothing industry case study, 126–29 tourism Korea, 216 Malaysia, 227–28 Vietnam, 260 Toyota, 90 global ranking, 102 integrated regional activities, 107 regional management of global operations, 116 regional production networks, 122–24 subsidiaries and factories, 123 trade and location, 119 trade liberalization, Doha round, 116 trade unions, see industrial relations; unions training and development

China, 57–58 Japan, 51–53 Korea, 54, 56 transaction cost economics, 119, 180 transitional economy, 254 definition, 261 tunnelling, 35, 40, 44, 46–47, 86, 90, 94 protection of minority shareholders against, 90 Turkey, 126 ncertainty avoidance, 19, 170, 236 u unemployment, 186, 197, 225 Unilever, 134 unions Japan, 199 Korea, 213 Malaysia, 229 role of in Indonesia, 187 Singapore, 241–42 see also industrial relations United Nations, promotion of SDG principles, 132 United States (US) investment and influence from, 28 post-war global trading system, 85 share of world GDP, 157 utilitarianistic familism, 27 value-added services hub, Singapore, 246 value chain, definition, 125 venture philanthropy, 134 Vernon, Raymond, 119 vertical FDI, 120–21 definition, 125 Vietnam, 19–20, 29–30, 38, 41, 43, 108–9, 113, 121–22, 126, 138–39, 157–58 business system, 250–64; authority 252–53; case studies 262; changing trend 258; comparative advantage 257–58; corporate social responsibility 259–60; cultural and historical perspectives 251–53; financial capital 254; government and civil society 253–54; human capital 254–55; identity 252; international activities of Vietnamese firms 259; key concepts 261; management 256–57; networking 256; ownership patterns 255–56; rationale 251; social capital 255; working and living conditions 260 economic status, 250 EIA system, 138 French and American wars, 20 GDP growth rate, 121 GDP per capita, 250 geographic location, 250

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Copyrighted material – 9781352007428 INDEX joins the WTO, 250 opening-up policy, 30 per capita income, 30 population, 29 stock markets, 40 Vision2020, Malaysia, 231 Wahaha, 88 Wang, Cher, 92 war for talent, 59–60, 63 Welzel, C., 21–22 Western multinationals, 69, 102 Widjaja, Eka Tjipta, 90 Wipro Technologies, 168 women access to education, 131 changing social attitudes towards employment of, 60 Chinese attitudes, 58 employment situation in Japan, 51, 199, 203 employment situation in Malaysia, 229 employment situation in Vietnam, 255 empowerment programmes, 136 Korean anti-discrimination legislation, 55

perceived discrimination in the workplace, 60 situation in Vietnam, 253 underrepresentation in managerial ranks in Japan and Korea, 60 working conditions in India, 174 work ethic, 19 working conditions China, 158 India, 173–74 Indonesia, 190 Japan, 203 Korea, 216 Malaysia, 229 Singapore, 245 Vietnam, 260 World Trade Organization (WTO), 17, 57, 75–76, 116, 250, 255, 258 World Values Survey, 20, 165, 168 Xi Jinping, 150–53, 156 zaibatsu, 39 Zong, Kelly, 88 Zong Qinghou, 88

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