Management in South Korea Revisited

Chris Rowley, Malcolm Warner

• Publisher: Routledge
• Year: 2016
• Topic: Business
• eBook ISBN:
  9781317689409
• Subtopic: Business General
• Index: Business

This edited collection examines the changing contours of Korean management and business, presenting recent scholarly research into this important Asian economic player. As one of the original 'Little Dragon' or 'Tiger' economies, South Korea has grown and prospered since the early years of the 1960s, and is now home to several major word-class multinational companies, such as Hyundai and LG, Samsung. In turn, it has developed a distinctive style of management, which derives from a shared Asian heritage but is nonetheless unique to South Korea. The collection covers a variety of themes, topics and issues from a range of perspectives and fields in management and business studies.

This book was originally published as a special issue of Asia Pacific Business Review.

The changing contours of Korean management and business

Chris Rowley^a and Malcolm Warner^b

^aCass Business School, City University, London, UK and HEAD Foundation, Singapore; ^bJudge Business School, University of Cambridge, Cambridge, UK

Introduction

In this introduction, on the changing contours of Korean management and business, we look at recent research on this important Asian economic player and set it in its background and context. As one of the original ‘Little Dragon’ or ‘Little Tiger’ economies, which expanded at spectacular rates of growth post-1960s, the Republic of Korea, more widely known as South Korea (‘Korea’ from now on here), has expanded and prospered (see Rowley 2013). However, there has been less academic interest in its development than in its Japanese and more recently in its Chinese equivalent (see Warner 2013).

Korea has made great progress in recent decades. It has, for instance, moved from military authoritarianism to democracy in the late 1980s and weathered the 1997 Asian Financial Crisis as well as 2008 Global Financial Crisis (see Rowley and Bae 1998; Rowley, Sohn, and Bae 2002; Rowley and Jun 2013; Warner 2013). It now has several major world-class multinational companies (MNCs), known generically as chaebols. Today, such diversified conglomerates as Hyundai, LG, Samsung and others are internationally known. In turn, Korea has developed a distinctive style of management (see Chen 2004), which derives from a shared Asian heritage (see Warner 2003; Woodside 2006) but remains nonetheless sui generis (Rowley 2013). It has also developed its own human resource management (HRM) policies and practices (Zhu, Rowley, and Warner 2007; Rowley and Bae 2013a).

Political background and context

Korea has changed greatly over the last few decades (see Rowley 2013). The country held its first free presidential election under a revised democratic constitution in 1987, with former army general Roh Tae-woo winning a close race. In 1993, Kim Young-sam (1993–1998) became Korea’s first civilian president. Lee Myung-bak (2008–2013) pursued a policy of global engagement, highlighted by hosting the G-20 (2010) and Nuclear Security (2012) summits. Korea also secured a non-permanent seat (2013–2014) on the UN Security Council and will host the 2018 Winter Olympic Games. Park Geun-hye, its first female President, took office in 2013. The Korean peninsula still remains divided after over 60 years of strife, with a communist North still at odds with the capitalist South.

Economic background and context

Korea has demonstrated incredible growth and global integration to become a high-tech industrialized economy, while the North stagnates both economically as well as politically and socially (Kwon 2010). In the 1960s, Korea’s gross domestic product (GDP) per capita was comparable with levels in the poorer countries of Africa and Asia, yet it is now the world’s 12th largest economy. GDP (official exchange rate) was US$1.146 trillion, GDP per capita (PPP) was US$32,800 and GDP composition by sector of origin was services 57.5%, industry 39.8% and agriculture 2.7%. The labour force was 25.5 million, by occupation being 70% in services, 23.8% in industry and 6.2% in agriculture.

A system of close government–business ties, including directed credit and import restrictions, helped this success. The government promoted the import of raw materials and technology at the expense of consumer goods and encouraged savings and investment over consumption. However, the Asian Financial Crisis of 1997 dramatically exposed long-standing weaknesses in Korea’s development model, including high debt/equity ratios and massive short-term foreign borrowing. GDP collapsed in 1998, although it quickly recovered in 1999, and numerous economic and labour market reforms, including greater openness to foreign direct investment (FDI) and imports, were adopted. Growth moderated to about 4% annually between 2003 and 2007. The export-focused economy was hit hard by the 2008 global economic downturn, but again quickly rebounded, reaching 6.3% growth in 2010. In 2012, however, the economy experienced sluggish growth at around 2.3% due to market slowdowns in the USA, China and the EU. It faces the key challenges of balancing heavy reliance on exports with developing domestic-oriented sectors, such as services and a rapidly aging population and labour market.

Management and business background and context

The above systemic management evolution has been well described in earlier work (Rowley and Bae 1998; Rowley, Sohn, and Bae 2002) and more recent accounts (Rowley 2013, 122), which describe its ‘rollercoaster ride of development, management and culture’ as being changed from ‘being eulogised to being castigated’. The responses to the crisis that hit Asia in 1997 helped to bring its intrinsic problems to the boil. The drivers of state-led development, the chaebols, were accused of ‘crony capitalism’ and were under great pressure to mend their ways. Some, such as Daewoo, collapsed, although others, such as Samsung, continued. The latter is now the world’s biggest technology company by sales. Nevertheless, chaebol domination continues, as seen in the shares of company assets as a percentage of Korea’s GDP. For example, Samsung Group accounted for 28%, Hyundai Automotive Group 11%, SK Group 8%, Hanwha 7%, LG Group 6%, Lotte 5%, Kumbo Asiana Group 4%, Hyundai Heavy Industries GP 4%, GS Group 3%, Doosan 3% and other companies 21% (Song 2013). Such domination gives Korean business its distinctive character.

Also, many see continuing chaebol abuses such as domination and stifling entrepreneurship and small firms, especially in the domestic constrained retail sector (as manufacturing can look to export; see our later study on machine tool exporters). Retailers have tried to boost sales by forcing vendors to take more goods, but sluggish domestic consumption, combined with draining education expenditure (see Mundy 2013), limits this and unfortunate cases, such as with Namyan Dairy Products, Posco Energy, Baesangmyun Brewery and others, have hit the media (Song 2013).

Management and business are seen as underpinned by Korea’s historical evolution and national culture, creating distinctive corporate cultures. A recent study (Rowley 2013) clearly brings out the interaction between social values and corporate culture, which is ‘differentially viewed as more collectivist by Westerners versus more than individualistic by Japanese’ under the rubric of ‘Dynamic Collectivism’ (134). In spite of growing internationalization, informal networks (see the later study on these) and Confucian values such as harmony, solidarity, work and the like are indeed still important but are now being reshaped. Corporate culture still retains its influence in Korean business, although it is now evolving into a new stage of development (see the later study on corporate culture change). Management education and training are also being geared to better cope with globalization (see Warner 2013). This change can also be seen in the evolution of Korean workforce development and skills (Rowley and Yoo 2013), labour markets (Rowley, Yoo, and Kim 2011) and trade unions (Rowley and Yoo 2008; Rowley and Bae 2013b).

Content and themes

We cover a range of subject and topic areas in this collection on Korean management and business, from HRM and international HRM (IHRM) to organizational behaviour (OB) to international business (IB) and international management (IM). These cover, respectively, corporate culture, discrimination and gender, HRM practices, commitment and informal networks to international collaborative formations, exports and overseas location decisions and divestment strategies. With this, we progress from the more micro to the macro, from the domestic to the international. The studies often develop theoretical implications and propose useful practical and managerial insights and future research avenues. An overview of our content by theme, subject, organizational types, sectors and methods is presented in Table I.

The contributions in this collection not only cover important broad conventional areas of management and business studies, but also bring in other outlier fields, such as sports science and geography. The structure of the contributions follows the logic of moving from HRM to OB to IB, IM, and so on, and from a focus on the internal to the external, from home to overseas. Such a progression we believe adds ‘value-added’ to this collection.

We start with a study covering a topic that underpins many of the rest of the contributions, namely corporate culture. The study, ‘Changing corporate culture over time in South Korea’, argues that corporate cultures are often seen as deeply ingrained and slow moving. Using a survey from 1995 and 2006, this work uses examples between and within the chaebol. This is partly because of their strong corporate cultures, importance in economic development and growth, and the rising public and political backlash against what are seen as overly powerful and secretive institutions. This research examines changes in the values and attitudes of employees that characterized traditional chaebol dynamism: collectivism and positive-oriented attitudes.

Building on corporate culture ideas, we move onto the next study, a more micro- and practice-based focus. An area where we might a priori expect change with wider cultural and societal shifts is discrimination and gender relations. The study, ‘Explanations for Continued Gender Discrimination in South Korean Workplaces’, investigates potential explanations for continued gender discrimination despite decades of policy reforms and improved education for females. It uses both primary and secondary data sources. Institutional theory, voluntary compliance regulatory enforcement strategy and a typology of regulatory non-compliance provide the framework from which four explanations regarding the origin and nature of company equal opportunity compliance issues are derived.

Given this study, what else might be happening in HRM? Our next study covers this and IHRM. The contribution, ‘International human resource management policies and practices of South Korean MNEs: a review of the literature’, examines recent work on the IHRM of Korean MNCs. This work covers the broad HRM policy and practice areas of resourcing, rewards and development. This includes those HR policies and practices towards home-country nationals and expatriates.

Another area of HRM and linked to corporate culture concerns staff commitment and this is the topic of our next contribution. ‘Turnover intentions and organisational citizenship behaviours in Korean firms: the interactional effects of organisational and occupational commitment’ investigates the effects of the organizational and occupational commitment of employees on turnover intentions and citizenship behaviours. It covers the sports sector, relatively under-researched despite its annual average 13% growth rate since 1994.

Moving from the more micro to the more macro, a further link to culture and management in organizations concerns informal networks, which our next study covers. The contribution, ‘Antecedents and characteristics of informal relation-based networks in Korea: Yongo, Yonjul and Inmaek’, notes that although much has been written about Chinese Guanxi networks, Korean informal relation-based networks are less commonly researched. Three forms are distinguished. Inmaek describes a social network in general, while Yongo networks draw primarily on existing kinship-, university/school- and regional origin-based ties and Yonjul ties exist for a purpose, often to secure personal gains and benefits. For the formation of these networks, the three core elements hakyon (education-based ties), hyulyon (family or blood ties) and jiyon (regional origin-based ties) play major roles and provide the common ground.

We continue to broaden our focus and spread our analytical breadth, now to IB, as covered in the next study. ‘Realised absorptive capacity, technology acquisition and performance in international collaborative formations: an empirical examination in the Korean context’ identifies and compares critical factors facilitating the technology acquisition from foreign partner firms and performance enhancement in ‘international collaborative formations’. This uses examples of local Korean firms and European, the USA and Japanese MNCs. A new concept, ‘realised absorptive capacity’, is utilized.

A key area of IB concerns internationalization, especially what might encourage it (see Rowley, Maqsoom, and Charoennam, forthcoming). A fascinating example of this is provided next. ‘Go big or stay home? Korean machinery firms, trade fair dynamics and export performance’ notes that many manufacturers export increase sales and expand into new markets. Korean manufacturers export in order to expand outside of small domestic markets, but then confront the common constraints, including access to market intelligence and geographically distant prospective customers. This study examines efforts by machine tool manufacturers to minimize the so-called ‘friction of distance’ involved with exporting through the use of international trade fairs. Emphasis is placed on the influence of individual export destinations and on the role of firm size vis-à-vis firm export intensities and overall export strategies and motivations.

A part of the internationalization process that is often more hidden in the mainstream literature is the external and internal competition and negotiations between MNCs and not only competing host countries, but also other potential host locales within countries. An example of this fasci...

Table of contents

• Cover
• Half Title
• Title Page
• Copyright
• Contents
• Citation Information
• Notes on Contributors
• 1. The changing contours of Korean management and business
• 2. Changing corporate culture over time in South Korea
• 3. Explanations for continued gender discrimination in South Korean workplaces
• 4. International human resource management policies and practices of South Korean MNEs: a review of the literature
• 5. Turnover intentions and organizational citizenship behaviours in Korean firms: the interactional effects of organizational and occupational commitment
• 6. Antecedents and characteristics of informal relation-based networks in Korea: Yongo, Yonjul and Inmaek
• 7. Realised absorptive capacity, technology acquisition and performance in international collaborative formations: an empirical examination in the Korean context
• 8. Go big or stay home? Korean machinery firms, trade fair dynamics and export performance
• 9. Interstate competition in the US South for South Korean auto investments: a US perspective
• 10. Distance and divestment of Korean MNC affiliates: the moderating role of entry mode and experience
• 11. Context and implications for Korean management and business
• Index