Managing Across Diverse Cultures in East Asia€¦ · 2011-11-07 · 17 Managing across diverse cultures in East Asia: conclusions MALCOLM WARNER (UK) Glossary Index. Figures and

ManagingAcrossDiverseCulturesinEastAsia

Why‘ManagingacrossdiverseculturesinEastAsia’?Inthisbookwere-examinethelinkbetweencultureandmanagementacrosstheregionvis-à-vistheneweconomic,politicalandsociallandscapethathasappearedover the last decade.We accordingly present a set of chapters on EastAsian cultures, economies, societies and their management across theboard, focusing on countries such asChina, Japan and SouthKorea, aswell as theOverseasChinese enclaves ofHongKongSAR,Macau andTaiwan. The contributors to this edited book are all specialists in theirrespective fields; they hail from a variety of universities and businessschoolsacrosstheworld,locatedinawiderangeofcountriesintheEastandintheWest.Thechapters,webelieve,reflectabalancebetweenthepast and present, theory and practice, as well as the general and theparticular.

MalcolmWarner is Professor and Fellow Emeritus, Wolfson Collegeand Judge Business School, University of Cambridge, UK. He haspublishedextensivelyinthefieldofAsianmanagement.

ManagingAcrossDiverseCulturesinEastAsiaIssuesandchallengesinachangingglobalizedworld

EditedbyMalcolmWarner

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p.cm.Includesbibliographicalreferencesandindex.1.Management—EastAsia.2.Management—Cross-culturalstudies.3.EastAsia—Economicconditions.I.Warner,Malcolm.HD70.E22M362013658.3008’095—dc23

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Contents

FiguresandgraphsTablesAbouttheeditorListofcontributorsPrefaceAbbreviations

PARTIIntroduction

1ManagingacrossdiverseculturesinEastAsia:introductionMALCOLMWARNER(UK)

PARTIIThemes

2EastAsianeconomy:anoverviewDILIPK.DAS(SOUTHKOREA)

3EastAsianculture:anoverviewMISHOMINKOV(BULGARIA)

4EastAsianmanagement:anoverviewKEITHJACKSON(UK)

PARTIIISocietalcasestudies

5ThechangingnatureofmanagementandcultureinChinaSHUMINGZHAOANDJUANDU(PRC)

6ThechangingnatureofmanagementandcultureinHongKong,MacauandTaiwanOLIVIAIP(HONGKONGSAR)ANDSEK-HONGNG(HONGKONGSAR)

7ThechangingnatureofmanagementandcultureinJapanJOHNBENSON(AUSTRALIA)ANDPHILIPPEDEBROUX(JAPAN)

8ThechangingnatureofmanagementandcultureinSouthKoreaCHRISROWLEY(UK)

PARTIVIssuesandchallengesinEastAsianmanagement

9GenderandmanagementinEastAsiaFANGLEECOOKE(AUSTRALIA)

10ContinuityandchangeinguanxinetworksinEastAsiaJANENOLAN(UK)

11EastAsianbusinesssystemsintransitionMICHAELA.WITT(FRANCE/SINGAPORE)

12SMEsinselectedeconomiesinEastAsiaLIXUECUNNINGHAM(UK)

13HRMstrategies,informalityandre-regulationinEastAsianemploymentrelationsSAROSHKURUVILLA(USA)ANDSUN-WOOKCHUNG(USA)

14ManagementandcultureinEast,SoutheastandSouthAsia:comparisonsandcontrastsSHAISTAE.KHILJI(USA)

15ManagementeducationandtraininginEastAsia:China,Japan

andSouthKoreaMALCOLMWARNER(UK)

PARTVThefutureandconclusions

16ThefutureofEastAsianmanagementROSALIEL.TUNG(CANADA)

17ManagingacrossdiverseculturesinEastAsia:conclusionsMALCOLMWARNER(UK)

GlossaryIndex

Figuresandgraphs

Figures12.1GDPgrowth(1999–2010)12.2Populationgrowthrate(2000–2011)12.3Lifeexpectancyatbirth(2000–2011)12.4Unemploymentrates(2005–2010)15.1InfluencesonmanagementeducationandtraininginEastAsia

Graphs3.1PositionsofninebasicvaluesforchildrenfromtheWorldValues

Surveyinatwo-dimensionalspace3.2Positionsof56countriesinatwo-dimensionalspacedefinedby

ninebasicvaluesforchildren

Tables

1.1Keyeconomicindicators,China,JapanandSouthKorea,20102.1RealGDPgrowthrates:Asiaspearheadingtheglobalgrowth2.2GDPasaproportionofworldGDP(%)2.3ChinaisgrowingfasterthanJapanandtheNICs(inbillionsof$)7.1AveragerealGDPgrowth,unemploymentrateandindustrialoutput

growth,Japan,1961–2010(%)8.1Trendsinpopulationandagestructure,1960–2010(%)8.2TrendsinGDPpost-19978.3Trendsinlabourforce,employmentandunemploymentpost-19978.4Trendsineducationparticipation(%)andexpenditureonprivate

education8.5Changingvalues1995–20068.6Impactsoftraditionalsocialvaluesoncorporatecultural

characteristics8.7Culturetypesandcharacteristics8.8CulturalinfluencesandparadoxesinKorea8.9KeycharacteristicsoftraditionalandnewermanagementinKorea8.10Trendsintradeuniondensity(%),membership(’000s)anddisputes

post-19979.1AsummaryofgenderprofileofChina,JapanandRepublicofKorea12.1SomedifferingdefinitionsofSMEsinmostAsianeconomies12.2NationalstandardsonSMEsinChina12.3TheroleofSMEsinselectedEastAsianeconomies12.4Comparisonsamongselectedeconomies,EastAsia13.1UnemploymentanduniondensityinJapan13.2UnemploymentanduniondensityinKorea

13.3Unemployment,labourunionsandlabourdisputesinChina13.4Growthofnon-standardWorkersinJapan(1988–2010)13.5Ratioofregularworkersandnon-standardworkersacrossjobs

(2007)13.6Percentageoffemaleworkersbyemploymentarrangementsin

Japan(2007)13.7Non-standardemploymentinKorea(2002–2010)13.8Wages,tenure,benefitsdifferencesbetweenregularandnon-

standardworkersinKorea(2002–2010)13.9UrbanemploymentbyemployertypeinChina13.10Unioncentralizationandunionizationratefornon-standard

workersinKorea(2003–2009)16.12011Fortune’sGlobal500CompaniesfromBRICS,AsianTigers

andG-716.2Comparativeproportionofglobalpublicationauthorshipbycountry

Abouttheeditor

Malcolm Warner is Professor and Fellow Emeritus, Wolfson College,CambridgeandtheJudgeBusinessSchool,UniversityofCambridge.HehasbeenaResearchFellowatStanfordUniversity,aswellasColumbiaUniversity,intheUSAandhasheldappointmentsattheLondonBusinessSchool and the Brunel University-Henley Management College in theUK, before joining Cambridge. He was also a past Halevy VisitingProfessorat‘SciencesPo’(L’Institutd’EtudesPolitiques(IEP))inParis,as well as being a Visiting Associate at the Wissenschaftszentrum inBerlin.Hehas, inaddition,beena frequentVisitingAcademicatmanyChinese campuses and business schools, including the China-EuropeInternational Business School (CEIBS) in Shanghai, and at Nanjing,TsinghuaandZhejiangUniversities,aswellasattheUniversityofHongKongandtheCityUniversityofHongKong.ProfessorWarnerhasalsobeen Editor-in-Chief of theInternationalEncyclopedia of Business andManagement (London: Thomson, 2002, 8 volumes). He has publishedmanybooksandarticlesovertheyearsinthefieldofAsianmanagementandHRM.Hismostrecentpublication isaneditedbookonSocietyandHRMinChina(LondonandNewYork:Routledge,2012).Heiscurrentlyco-editoroftheAsiaPacificBusinessReview,aSSCI-ratedjournal.

Listofcontributors

Benson,John.ProfessorandDean,SchoolofManagement,UniversityofSouthAustralia,Adelaide,Australia.

Chung, Sun-wook. Doctoral Candidate, Department of International &ComparativeLabor,CornellUniversity,IthacaNY,USA.

Cooke, Fang Lee. Professor, Faculty of Business and Economics,MonashUniversity,Melbourne,Australia.

Cunningham, Li Xue. Lecturer, Centre for Research in AsianManagement,CassBusinessSchool,CityUniversity,London,UK.

Das, Dilip, K. Professor, Sol-Bridge International School of Business,WoosongUniversity,Daejeon,RepublicofKorea.

Debroux, Philippe. Professor, Doshisha Business School, SokaUniversity,Kyoto,Japan.

Du,Juan.Lecturer,ShanghaiInternationalStudiesUniversity,Shanghai,PRC.

Ip, Olivia. Associate Professor, Management Department, CityUniversityofHongKong,HongKongSAR.

Jackson, Keith. Tutor, School of African and Asian Studies, SOAS,UniversityofLondon,UK.

Khilji,Shaista,E.AssociateProfessor,GeorgeWashingtonUniversity,Washington,DC,USA.

Kuruvilla, Sarosh. Professor, Department of International &ComparativeLabor,CornellUniversity,Ithaca,NY,USA.

Minkov,Misho.Associate Professor, International University College,Sofia,Bulgaria.

Ng,Sek-Hong.Reader,HKUBusinessSchool,UniversityofHongKong,HongKongSAR.

Nolan,Jane.Lecturer,CentreforLabourStudies,UniversityofLeicesterUniversityofLeicester,Leicester,UK.

Rowley, Chris. Professor, Centre for Research inAsian Management,Cass Business School, City University, London, UK and ResearchDirector,‘HEAD’Foundation,Singapore.

Tung, Rosalie L. Professor, Beedie School of Business, Simon FraserUniversity,Barnaby,BC,Canada.

Warner,Malcolm.ProfessorandFellowEmeritus,WolfsonCollegeandJudgeBusinessSchool,UniversityofCambridge,Cambridge,UK.

Witt, Michael, A. Professor, INSEAD Business School, France andSingapore.

Zhao, Shuming. Professor and Dean, NJU Business School, NanjingUniversity,Nanjing,PRC.

Preface

Howmanagerscopewithculturaldiversityhasbeenaninterestofminefor many years now. I have produced a number of works comparingmanagement in different cultures in the last few decades or so,notwithstanding the multi-volume editedRegional Encyclopedia ofBusiness andManagement – IEBMHandbook Series (London andNewYork,NY:Thomson,1999)andaneditedbook,CultureandManagementinAsia(LondonandNewYork,NY:Routledge,2003).This new volume attempts to both update and deepen knowledge of

thatregion,specificallyfocusingonEastAsia,thenew‘powerhouse’oftheglobalisedworldeconomy. In this edited tome,wewill accordinglypresentasetofchaptersonEastAsiancultures,economies,societiesandtheirmanagementacrosstheboard,butwithaparticularfocusonthekeyplayers in the region,China, Japan andSouthKorea.Theworkmaybeused as a text, or a reference resource, for those at both undergraduateand postgraduate levels in business studies, economics, management,sociologyandsoon,particularlyforMBAstudentsandDBAs,aswellasforacademicsandpractitionersalikeinterestedintheregion.Iwould likehere to offermy thanks to all of the contributors to the

volumewhohavebeensocommittedtothisendeavourandhavegivenoftheir talent and time. Some hail originally from East Asia itself; anumberofthesenowliveandworkabroad;yetothersareWestern-bornandbased.They are all specialists in their respective fields; they comefrom a variety of universities and business schools across the world,locatedinawiderangeofcountriesintheEastandintheWest,suchasAustralia,Bulgaria,Canada,France,HongKong,Japan,PRC,Singapore,SouthKorea,theUKandtheUSA,amongstothers.

Acknowledgementsmust be given to the past and present PresidentsandFellowsofWolfsonCollege,Cambridge,aswellasthepreviousandcurrentDirectorsandFacultyoftheJudgeBusinessSchool,UniversityofCambridgefortheirinvaluablesupportovertheyears.MyspecialthankstomyEditorofmanyyears’standingatRoutledge,

PeterSowden,whosesupporthasbeenunflinchingandallthoseothersatthispublishing-housewhohavehelpedtomakethisbookpossible.

MalcolmWarner,Cambridge,

January,2012

Abbreviations

AACSB,International,TheAssociationtoAdvanceCollegiateSchoolsofBusiness.ACFTU,All-ChinaFederationofTradeUnions.ACWF,All-ChinaWomen’sFederation.ADB,AsianDevelopmentBank.AOM,AcademyofManagement.APEC,AsiaPacificEconomicCommunity.ASEAN,AssociationofSouthEastAsianStates.BRIC,Brazil,Russia,IndiaandChina.CASS,ChineseAcademyofSocialSciences.CCAC, Comissariado Contra a Corrupção (Commission AgainstCorruption).CCP,ChineseCommunistParty.CD,ConfucianDynamism.CEMA,ChineseEnterpriseManagementAssociation.CEMI,ChinaEuropeManagementInstitute.CEO,ChiefExecutiveOfficer.CLB,ChinaLabourBulletin.CLSY,ChinaLabourStatisticalYearbook.COE,Collectively-OwnedEnterprise.DOE,Domestically-OwnedEnterprise.DPE,DomesticPrivateEnterprise.DPRK,DemocraticPeople’sRepublicofKorea.EFMD,EuropeanFoundationforManagementDevelopment.EMBA,ExecutiveMastersofBusinessAdministration.EME,EmergingMarketEconomies.

EPZ,ExportprocessingZone.ER,EmploymentRelations.EU,EuropeanUnion.FDI,ForeignDirectInvestment.FIE,Foreign-InvestedEnterprise.FYP,Five-YearPlan.GDP,GrossDomesticProduct.HKFTU,HongKongFederationofTradeUnions.HKSAR,HongKongSpecialAdministrativeRegion.HKSB,HongKongandShanghaiBank.HKU,UniversityofHongKong.HKUST,HongKongUniversityofScienceandTechnology.HPMS,HighPerformanceManagementSystem.HPWS,HighPerformanceWorkSystems.HR,HumanResources.HRM,HumanResourceManagement.ICAC,IndependentCommissionAgainstCorruption.ILC,InternationalLabourConventions.ILO,InternationalLabourOrganization.ILR,IndustrialandLabourRelations.IMF,InternationalMonetaryFund.IR,IndustrialRelations.JDP,JapaneseDemocraticParty.JETRO,JapaneseExternalTradeOrganizationJIT,JustinTime.JMA,JapaneseManagementAssociation.JR,JapanRailways.JV,JointVenture.KAIST,KoreaAdvancedInstituteofScienceandTechnology.KCTU,KoreanConfederationofTradeUnions.KMA,KoreanManagementAssociation.KMT,Kuomintang.LDP,LiberalDemocraticPartyofJapan.M&A,MergersandAcquisitions.

MBA,MastersofBusinessAdministration.MNC,MultinationalCorporation.MOHR,MinistryofHumanResources.MOLSS,MinistryofLabourandSocialSecurity.NIE,NewlyIndustrialisedEconomy.NPC,NationalPeople’sCongress.NUDM, Nueva Unión para el Desarrollo del Macao (New Union forMacao’sDevelopment).OEM,OriginalEquipmentManufacturer.PA,PersonnelAdministration.PM,PersonnelManagement.PRC,People’sRepublicofChina.QC,QualityCircle.R&D,ResearchandDevelopment.RENGO,JapaneseTradeUnionFederation.RMB,Renminbi.ROK,RepublicofKorea.SAR,SpecialAdministrativeRegion.SEZ,SpecialEconomicZone.SFC,SecuritiesandFutureCommission.SME,SmallandMedium-sizedEnterprise.SNU,SeoulNationalUniversity.SOE,State-OwnedEnterprise.SSB,StateStatisticalBureau.SWC,StaffandWorkers’Congress.TQC,TotalQualityCircle.TNC,TransnationalCorporation.TQM,TotalQualityManagement.TVE,TownandVillageEnterprise.USSR,UnionofSovietSocialistRepublics.WOFE,Wholly-OwnedForeignEnterprise.WRC,Workers’RepresentativeCongress.WTO,WorldTradeOrganization.ZD,Zero-Defectspolicy.

PartIIntroduction

Isitnotpleasanttolearnwithaconstantperseveranceandapplication?(Confucius:Analects,I,i)

1ManagingacrossdiverseculturesinEastAsiaIntroduction

MalcolmWarner

Introduction

Why ‘Managing acrossdiverse cultures inEastAsia’?Wehope in thischapter to re-examine the link between culture andmanagement acrossthe region. A new economic, political and social landscape has beenemerging inAsia over the last decade (see earlier work, includingmyown, Warner, 2003) given the increasing influence of the People’sRepublic of China (Zhonghua renmin gongheguo) (hereafter China orPRC)vis-à-visitsneighbours–JapanandSouthKorea,aswellasHongKongSAR,MacauandTaiwan(seechapters5,6,7 and8 in thisbook).The recent global financial criseshave, in their turn, led to speculationabouta ‘reordering’of theworldeconomicsystem,both internationallyand regionally. An alternative economic order may indeed be in themaking, with the ‘Beijing Consensus’ becoming a rival to theWashingtonversion.The inter-relationshipsbetween theplayers inEastAsia itself have additionally become more complex – given theincreasingeconomic integrationbetween thePRCand itsneighbours inEastAsiainthecontextofthewidergrowthintheregion.AsLeeandHong(2010:1)putit:

DevelopingAsianeconomieshavegrownimpressivelyoveraperiodofnearly30years.Theregion’srealGDPinpurchasingpowerparity(PPP)termsclimbedfromabout$3.3trillionin1980toanestimated$24.5trillionin2009.Thatisanincreaseof7.5times,comparedwithjustthreetimesfortheworldeconomyduringthesameperiod.RealpercapitaGDPexpandedinexcessoffourtimesduringtheperiod,whileaverageglobalincomeregisteredlessthanatwo-foldincrease.Suchrobust,prolongedgrowthhasclearlyraisedincomes,liftedmillionsoutofpoverty,andexpandeddevelopingAsia’sglobaleconomicinfluence.

The‘Twenty-firstCentury’isthuslikelytobethecenturyofAsia.Inthisvolume,wewillaccordinglypresentasetofchaptersonAsiancultures,economies,societiesand theirmanagementacross theboard,butwithaparticular focusonEastAsiaas this is increasingly, itwouldbe true tosay, the emerging fulcrum of economic power. We have decided toconcentrateonthispartofthewiderAsia-Pacific,asitishometomanyof the fastest growing economies in our increasingly globalised world.Leading the pack isChina, now seen as the ‘powerhouse’ of theworldeconomy, with a fifth of the world’s population (seechapter 5). Itseconomy has been growing at unprecedented pace for the last threedecades,sinceDengXiaopingintroducedhiseconomicreformsattheendofthe1970s.ManyoftheseAsiancountrieswereformerlycalledthe‘LittleTigers’

or‘Dragons’(seeVogel,1991)trackingwhatwasthenthe‘bigger’one,which was Japan, now a significant economic power but increasinglyovershadowed by what had become known as the ‘Middle Kingdom’(Chongghuo) over the centuries, in terms of aggregate levels ofpopulation, resources andwealth. The so-called ‘Asianmiracle’,whichled to their growth, it is said, mainly came about through the ‘workethic’, through perhaps what one economist has seen as ‘perspiration’rather than ‘inspiration’ (see Krugman, 1994). The contributionspresented in this volume are all intended to explore this perceptiveobservationingreaterdetailandtoupdateourknowledgeoftheregion’sachievements,deepenourunderstandingofitswaysandenhancewhatwecanlearnfromit.Aseconomicpowerisnowseenasmovingfrom‘West’to‘East’(see

chapter 2) with nations like China even being seen as potential globalbankers of last resort, there is an increasing degree of interest in howthese Eastern economies have come to the forefront of internationalattention and how their management and managers contribute to theirsuccess. China is now recovering the economic hegemony it formerlyenjoyedforcenturiesuntiltheIndustrialRevolutiontookrootinWesternEurope(seeMaddison,2007).Itwasoncethe‘WorkshopoftheWorld’andisnowonceagaintakingoverthisniche.InthetenthcenturyAD,it

hadbeentheworld’sleadingeconomyintermsofpercapitaincome.TheWest once imported most of its manufactured products from the East,many at bargain-basement prices. But a new ‘Silk Road’, whethermaterialordigital,willprobablybepassingongoodsandservicestotheWest,higherandhigherupthe‘value-chain’,infutureyears.Wearewellawarethat there isnosingleentitycalled‘Asia’oreven

‘EastAsia’.Theconstituentpartshavehada longanddifficulthistory,going back millennia (see Fairbanket al., 1973). There is a complextapestryofcultures,manyofthemoriginatingfromthedeepanddistantpast(seeGoody,1996).Wewillbelookingatwherethereareoverlays,given that for example China had already conquered and/or influencedmanyofitsneighboursoverthecenturies.Itsculturalinfluencehasbeenextensive in countries like Japan,KoreaandVietnam, to citebut a few(see Holcombe, 2011). The Confucian inheritance has in its turn beennoteworthy (seechapter 3). In later centuries, imperial expansion bypowers in the region,whether from theEast or theWest, hadprofoundimpacts.Istherea‘winning’,‘killer-app’Asianmanagementmodeltocopy?At

one stage, the Japanese were held up as an example and theirmanagementwas said to be de rigueur. But there are no easy answers.Managementhasoftenhadbothanexogenous,aswellasanindigenous,origin.Wefindthat therewassometimesevena two-wayflowbetweendifferentnationalwaysofmanaging.Western,Tayloristmanagementwasmainly imported into Japanafter theFirstWorldWar (as indeed itwasinto China) and then again after the Second World War (as a USgovernment-ledScientificManagementtrainingprogrammeforJapanesemanagers,forinstance)andwasthenreimportedbacktoNorthAmericaand Western Europe in the form, amongst others, of total qualitymanagement practices (TQM), such as ‘Zero-Defects’ (ZD) policies,amongstothers(seeWarner,1994).Whatwasoncejust‘Western’,nowbecame‘Eastern’.Foralongtime,managementtheoryandpracticehadalreadydiffused

from theWest to the East (seeWestney, 1987). In the early phases ofmodernisation, exogenous influenceswere dominant. These entered the

new environments through foreign invested firms, joint ventures,management consultants and the like. In the later phases ofmodernisation,thesemaywellbeintegratedintolocalpracticesandthenmodifiedandre-exportedbacktotheirsource.ThisphenomenonhasbeenseenintheJapanesecasebuthasnotyetoccurredintheChineseone.AsJapanhasbeeninastateofeconomicstasisinrecentyears(seechapter7),therehasbeenlessemphasisonpromotingitsmanagementmodelsasonestoemulate.AlthoughChinaisnowintheascendant,itsmanagementhasnotasyetbeenpromotedexternallyasanexemplar.Ofcourse, thismaychangewith time,as the lattercountryisbuildinganumberof topglobalMNCs, such asHaier,Huawei andLenovo (seeNankerviset al.,2013,inpress).TheheterogeneityofAsiarepresentsanissuebutthenthediversityof

localenvironmentsmayalsobeaprobleminmostpartsoftheworld.Butwewilllookforcommoncharacteristicswhichwillhelptoexplainwhythey look different from their Western counterparts. Even within EastAsia,thereare,additionally,specificmanagementpracticesaccordingtothe location studied. It is perfectly permissible to talk about ‘Chinese’,‘Japanese’or‘SouthKorean’management,forexampleandmanydo(seechapters4,5,6,7 and8).HongKong,Macau and Taiwanmay in turnpresent difficulties, because they have generic Chinese characteristics(seechapter6),aswellastheirownlocalones.Someevenbundlethemtogetheras ‘Overseas (Nanyang)Chinese’management,which is alsoaphenomenon found outside EastAsia, as in the case of Singapore andindeedelsewherewhereverChinesedobusiness.AlthoughtheAsiansocietiesusedtohaveconsiderabledifferences in

nationalwealth and income between each other,with Japan having thelead over the others, the gap is narrowing (seeTable 1.1). All thecountries of EastAsia have, however, seen a relative increase in theirstandardof living in recent years,with the possible exceptionofNorthKorea.China,forexample,hasnowamuchimprovedlevelofGDPpercapita in purchasing power parity (PPP) terms comparedwith the past,althoughthis is less thecase inmoneyterms. It is,however, likely thattherewillbeaweakerdifferentialinfutureyears.TheChineseeconomy

grewoverthelastthreedecadesataround10percentperannumbutthegrowthratesofHongKong,Singapore,SouthKoreaandTaiwan,allwithrelativelyhigher levels of initial incomeper capita, somewhatdeclinedrelativelyovertheperiod.Itissaidthatascountriesgetrichertheydosolessrapidlyovertimeandtheirgrowthratesslowdown(LeeandHong,2010:2).Table1.1showstheirkeyeconomicindicatorsfor2010.

Table1.1Keyeconomicindicators,China,JapanandSouthKorea,2010.

Source:WorldBank(2011)Availableathttp://web.worldbank.org/WBSITE/EXTERNAL/EXTABOUTUS/0,pagePK:50004410˜piPK:36602˜theSitePK:29708,00.html(accessed11.11.11).

There isanother,widerdebatewhichdealswithwhathasbeencalled‘convergence’,ontheonehandand‘divergence’ontheother(seeWarner2002,2011).Asfarastheformerisconcerned,theargumentcentresonindustrialsocietiesandtheireconomies,asaresultofthemodernisationprocess, becoming more like each other and consequently theirenterprises appearing to be increasingly similar as the modernisationprocess proceeds (seechapter 11). Managerial ideas are transmittedacross frontiers very quickly these days and are adopted by indigenousfirms and then spread as new forms of enterprise structure are clonedthroughaprocessof institutionalandorganisational isomorphism.Byaprocess of copycat ‘convergence’ behaviour, new organisationaltemplatesbecomeestablished.Thecounter-argument,relatingto‘divergence’,wouldpresentthecase

for societies and their enterprises retaining their distinctly nationalcharacteristics, plus orminus (seechapter3). The ‘societal effect’ (seeMauriceetal.,1980)wouldensurenationaldifferencesremaininplace.

http://web.worldbank.org/WBSITE/EXTERNAL/EXTABOUTUS/0,pagePK:50004410˜piPK:36602˜theSitePK:29708,00.html

Unlikewhere societiesandconstituententerpriseswerebecomingmoreandmorelikeeachother,theyandtheirfirmsmightevenbecomemoreand more distinct. Thereductio ad absurdum would be where allcountriesandinstitutionsweretotallydifferentfromeachother,whichisanunlikelyscenario.Thereare,ofcourse,refinementsofthesestatesofplay, such that there can be either ‘hard’ (absolute) or ‘soft’ (relative)versionsofeach.Theremightbe,forexample,‘softconvergence’whereenterprisesmaylookincreasinglylikethosefoundelsewhereintheworldbut retaining many local characteristics (see Rowleyet al., 2005). Thetruth probably lies somewhere in the middle of the ‘convergence–divergence’ spectrum. In spite of the degree of possible ‘convergence’,however,whenyouareinTokyoforexample,thewayofdoingbusinessovertherestillremainsverymuchJapanese,asitdoesinBeijingintermsofits‘Chinesecharacteristics’.Somewriters, nonetheless, point to a common cultural legacy across

Asia(seechapters3,10and16)butthisisanargumentdifferentfromtheconvergence one. In recent years, there has been a debate about theimportance of ‘Asian values’ (seechapter16) themotivation forwhichmay have been political in part. Even so, there is little doubt thatConfucianism has played amajor role in influencing howmanyAsiansocietieswork,overthelongueduréeandinrecenttimes.The philosopher,Confucius, (551–479BC) (KongFuzi)maywell be

regardedastheuncrownedemperorofChina(Ronan,1978:79).ThereareothermajorstreamsofthoughtinChinesethinking,suchastheLegalistsandtheDaoistsbuttheConfuciansmaystillretaintheirniche(seeBell,2008).ThecurrentChineseleadershiphasevenrecentlypromotedwhatisineffectasynthesisofConfucianism,CapitalismandMarxismasapathtowhattheycallthe‘HarmoniousSociety’,anideologicalvariationthatwas first officially proclaimed by [the former President] Hu Jintou in2006andisnowwidelyusedinChina(seeWarner,2011).TheChinesegovernment had even set up Confucius Institutes around the world toteach Chinese culture and language (seechapter 15).Another co-optedfigure has been Sun Tzu (seeThe Economist, 2011) as the CCP hasattemptedtoproject‘softpower’.

However,somecautionmustbeusedhere,asitwasnotthatlongagothat Confucianism was seen as a backward philosophy and a negativefactor as far as modernisation and economic growth were concerned.Confucius is problematic in another way: ‘Mao and his colleaguesregarded Confucius’s philosophy as the ideological glue of the feudalsystemtheydestroyed;andsoattemptstopromotehimarevulnerabletothegrowingsplit in theCommunistParty’(TheEconomist,2011).Thereare alsomany kinds of belief-systems, let alone varieties ofConfucianthought in Asia, so there may be no simple ‘cause-and-effect’relationships between values and economic variables. Again,Confucianism is only one amongst several other competing belief-systems in the region, (such as Buddhism, Christianity, Islam andShintoism,forinstance).Ithas,however,morerecentlybeenrecognisedas having a positive influence compared with earlier opinion. Thisadvantagemaybeduetoanemphasisonthe‘interdependentself’intheEast,ratherthe‘independent’onedominantinWesternthought(seeLuo,2000:8).Earlier,individualismwasseenaslinkedtotheProtestantworkethicandthiswasregardedasapotentialmotorofmodernisation.Today,wearelesssureaboutthis;collectivismisnowseenashavingitsvirtuesand interdependence ismorehighlyregarded.More thana fewchapterswillreflectthisdebate,whichisstillongoing.Anumberoffundamentalquestionsmaynowbeposedatthisjuncture:

Whataretheunderpinninginfluencesatthemacro(-economy)level,as well as at the micro (-firm) level, which are related to theeconomy,cultureandmanagementintheseeconomies?Howdoeseachsocietalcaseprovideauniquestoryandexperienceregarding the global challenges and the pressures vis-à-visreformingitsmanagementsystems?Howfararedysfunctions ineach rooted in systemicproblems (forexample, widespread executive corruption in Japan, corporate badbehaviourinSouthKorea,orcronyfavouritisminChina)?Towhatdegreearesuchissues linkedtochangingvalues,businessethics and related issues such as ‘face culture’ in their respective

societies?Howmaywe evaluate positive and negative aspects of traditionalvalue-systems,aswellastheirimpactonmanagementthinkingandbehaviourinEastAsia?

Whilstwewouldnotwishtoover-generalisefromtheevidencepresentedin this volume, specific Chinese, Japanese, South Korean and othermanagerialexamplesinEastAsiamayenablereaderstoacquireinsightsintowhatwasgoingoninthepast,stillcontinuestoexistandmaypersistinthefuture.Wewould,however,recommendcriticalcautionatalltimesin coming to terms with and interpreting possible general trends inmanagementintheregion,aswellasmorewidely.

Structureofthebook

Theworkisdividedintothreesections,establishingthestructureofthebook,eachwithanumberofrelevantchapterscoveringdifferentaspectsof international business in the region under their respective headings.Wehavetriedtobeascomprehensiveaspossible incoveringthemanydimensionsofAsianmanagementwhichweseeasofpotentialinteresttoboth teachers and students of this subject, as well as interestedpractitioners.The first part of the bookwill dealwith general themes common to

specificterrainsinEastAsia,suchaseconomy,cultureandmanagement(seechapters2 to4); the second,with specific locally-focused studies,looksatChina,HongKong,Japan,SouthKoreaandothers(chapters5to8); the third examines a range of issues such as business networks,employment relations, gender barriers, human resource management,SMEsandsoon(chapters9to15).Attheendofthevolume,weattemptto summarise the findings of these contributions and present someconclusions regarding thepossiblemodels ofAsianmanagementwhichareappropriate,whattheyhaveincommonandwheretheyaredifferent(chapters16and17).

Thechapters in thevolumeare largelyqualitative innature,althoughsome quantitative data is included. The general themes dealt with aremainly cross-national and cross-cultural in nature. Those relating tospecific localities aremainly centred on this or that geographical area.The chapters dealingwithwider issues are, in turn, where appropriate,comparative.ManyofthesewillpresenttheircaseinthecontextofAsiaasawhole;somewillonlycoverEastAsia;whilstothersmayalsoreferinpassingtospecificregionsfurtherafieldsuchasinSouthEastAsiaoreveninSouthAsia.In conceiving this volume, we approached a set of authors with the

necessaryexpertisetocovertheissuesandtopicswethoughtrelevanttothestudyofAsianmanagement.Wedecided tochooseanumberof thelatterwhichwethoughtinterestingandrelevant.Thelistisnotabsolutelycomprehensiveintermsofcoveringallpossiblefieldsbutwebelievewehavechosenwisely.Allof theauthorsarespecialists in theirrespectivefields;theyhailfromavarietyofuniversitiesandbusinessschoolsacrossthe world, located in a wide range of countries in the East and in theWest, such asAustralia, Bulgaria, Canada, China, France, Hong Kong,Japan, Singapore, South Korea, the UK and the USA, amongst others.Giventheirbackgrounds,andexpertiseonAsia,theyofferagoodcross-nationalandinterdisciplinarymixofscholars.The authorswere asked towrite their contributionson thebasis of a

prescribed,ifrelativelyflexible,brief;inthissense,thebookwasdevisedtofollowapreviouslyworked-outplandesignedtoexamine thepresentrealities of the economic, political and social achievements of thespecific geographical locations in EastAsia included, as well as theirhistorical and cultural backgrounds, but at the same time to allow thecontributorsadegreeoffreedominapproachingtheirsubject.Theyhaveall,webelieve, acquitted themselveswell in this respect.The chapters,webelieve,reflectafairbalancebetweenthepastandthepresent,theoryandpractice,aswellasthegeneralandtheparticular.

Contributionstothisvolume

We will now present a short summary of each of the chapters in thisvolume.Chapter2byDassuggests that theAsianeconomieswere struck late

by the crisis and recession (2007–9) and that they spearheaded therecovery from the crisis. Since the second quarter of 2009 Asianeconomiesbeganto leadtheglobalrecovery. In theadvancedindustrialeconomiesrecoverywasnotonlytepidbuttheyalsocontinuedtosufferfrom serious economic and financial setbacks. Asia’s post-recessionrapid growth took place at the expense of the EU-15 and the USeconomies.An important development is China’s unremitting rise andoverwhelming dominance of the regional economy in the post-crisisperiod.Itemergedasamoreimportanttradepartnerofseveralregionaleconomies and stimulated intra-regional trade substantially.Also, traderesultingfromtheverticalfragmentationofproductioninAsiaexpandedmuchfasterthanintheotherregionsoftheglobaleconomy.Chinaalsoplayed a decisive role in the operations and spread of productionnetworks in theregion.In thepost-crisisperiod,both intra-regionalandextra-regional FDI flows spurted inAsia. FDI flows toChina began tostructurally transform. They shifted to high-technology and servicessectors.Asianeconomies,particularlyChina,becameoutward investorsof reasonable proportion. It became amply clear that in the post-crisisperiod the impact of the advanced industrial economies over the fastglobalising Asian EMEs has declined. With rapid global integration,someAsian EMEs have become important global players in their ownright. In the materialisation of this new trend, once again the Chineseeconomyplayedauniquerole. In thepre-Asiancrisisperiod, itbecameconventionaltothinkoftheAsianEMEsasdecoupledfromtheadvancedindustrial economies. This scenario altered during both the crisis andpost-crisis periods. Business cyclical co-movements betweenAsia andtheG-3becamesomewhatmoresynchronised.Inchapter3byMinkov,henotesthatthestudyofculturehasenjoyed

unprecedentedinterestrecently,astheintensifyingglobalisationprocesshas revealed important cultural differences across the globe, includingthemanagement field. The chapter dwells on some of themost salient

cultural characteristics that distinguish the East Asian societies fromthose of the rest of the world and examines some of their internaldifferences as well. It presents the results of large-scale cross-culturalstudies that situate the East Asian countries on measures ofvalues,beliefs, personality traits (the ‘Big Five’), cognitive patterns,communicationpatterns,socialbehaviourindicators(suchasroaddeath-tolls, corruption, murder rates, educational achievement and sexualbehaviour) and work-related cultural characteristics. The East Asiancountries are often found to have extreme positions on many of theseindicators, theotherextremebeingtypicallyoccupiedbyAfrican,Arab,orLatinAmericansocieties.Chapter 4 by Jackson profiles, in turn, East Asian management in

terms of its distinct systems and styles. Brief illustrations frommanagement practice are developed in order to trace the patterns ofsimilarity anddifference that emergewhen scholars attempt todiscern,attributeandcomparethemanagementsystemsandstylesofChina,HongKong, Japan, SouthKorea, Taiwan and so on. The terms ‘managementsystems’and‘managementstyles’aredefinedbeforeexploringtheextenttowhichsystematicreferencetotheseterms–alongwiththeculturesandsubculturesthatgivecontexttothem–cantellussomethingmeaningfulabouthowmanagersoperatingwithinandacrossthesediverseEastAsianeconomies appear to be responding to the pressures driving changeglobally and/or regionally. Here, change is discussed in terms of howEastAsianmanagers in particular appear to respond to the shifts theyperceive as relevant in the political, economic, technological andsociocultural macro-environments within which they and theirorganisations compete and do international business: specific examplesare highlighted. The discussion draws on a range of established andcurrent literature relevant to the field, balancing bothAsian and non-Asianperspectives.Overall,thischapterisdesignedtogivedirectionandencouragementtocurrentandfuturestudentsofEastAsianmanagement.Simultaneously, itoffersabroad-brush foundation to themore in-depthdiscussionspresentedelsewhereinthisbook.Inchapter5,ZhaoandDusetouttodescribetherelationshipbetween

cultureandmanagementinthePeople’sRepublicofChina.Thiscountryisnowplayinganincreasinglyimportantglobalroleasoneofthebiggestmarketsintheworld,sincetheeconomicreformsandopening-uptotheoutside world that started in 1978. As China transforms its economy,understandingcultureisseenasoneofthemainvariablespropellingthisadvancement and accounting more specifically for the distinctmanagementdevelopmentsthathaveevolvedinChinaoverthelastfewdecades.Inarapidlychangingandvariedcontext,suchascontemporaryChina,itisverydifficulttoassessthedegreetowhichtraditionalculturecontinuestoexertaninfluenceonmanagementvaluesandbehaviour.Weneedtobearanumberof issuesandquestions inmindwhenaddressingthissubject.First,wemustrecogniseChina’sgreatdiversityandstartbyasking ‘to which China are we referring?Which sector, which region,whichgeneration?’Second,whatistakingplaceinChina–keentolearnfromtheoutsideworldyetalsoconsciousofitshistory–mayforceustoabandonthenotionthatpeoplenecessarilyconformtoasimplenotionof‘culture’.Inthesecircumstances,theymaynotnecessarilyfitneatlywiththe cultural dimensions chosen, but instead may display apparentparadoxes.Thesocial identityofmodernChinesemanagersmayindeedbemorecomplexthanappreciated.Inchapter6by IpandNg,HongKong,MacauandTaiwan, the three

Overseas Chinese (Nanyang) societies on the fringe of the Mainland,whichhaveeachexperiencedspectaculareconomicgrowthover the lastfewdecades,areexaminedasnewly industrialisedeconomies(NIEs)ofEast Asia. In spite of their common Confucian heritage and signs ofmutualinstitutionalconvergence,theauthorsarguethattherearevisiblediversitieswhichmakeeachdistinctive in theircultural, socio-political,economic and management systems – which are in the final analysis,according to the authors, historical. Both Hong Kong andMacau wereformerlyundercolonialrule,untilthePRCintroducedthenovelpoliticalformula of ‘one country, two systems’ in the 1980s prior to theirreunification in 1997 and 1999. Important differences do howeverremain. The legacies left behind by the British on Hong Kong areevidently different from the Portuguese influences in Macau. On the

otherhand,thesuccessiveregimesoftheDutch,JapaneseandAmericansinTaiwanhavemadeitahybridsociety.Inchapter7byBensonandDebroux,Japanesemanagementpractices

areseenasundergoingchangeas theyrespond toavarietyofpressuresoccurring over the past two decades. The seemingly increasing pace ofthesechangesraisesanumberofimportantquestionssuchaswhatarethekey underpinning factors influencing Japanese management now; howhasmanagement responded to thecurrentchallengespresentedover thepast two decades; what are the constraints operating in Japan tosystematic change; and what conclusions can we draw in terms of thestructure and form of present-day Japanese management? This chapterwilladdresssuchissues,althoughitmustbestressedthatchangein themanagement practices of Japanese companies is not uniform or clearlytransparent.Thefocus throughoutwillbeon themanagementofhumanresources, as this iswhere significant change is takingplaceandwherethe environmental contexts are dynamic and fluid. The chaptercommenceswithabriefoutlineof thehistoricalandculturalcontextofJapan which is then followed by a discussion of the development ofJapanese business and management and recent economic development.This discussion provides the backdrop for the following section whichdiscusses why change has been necessary and the difficulties oftransitioningtoa‘new’managementsystem.Theslowandvariedrateoftransition in Japan demonstrates how corporate and societal culturemodifies and reinforces managerial values and behaviour. The chapterconcludeswithadiscussiononhowfar thedysfunctionalaspectsof thecurrentJapanesemanagementsystemarerootedinsystemicproblems.Inchapter8,Rowleyexaminesthechangingnatureofmanagementand

culture in South Korea. Post-1960s South Korea (hereafter Korea)developed rapidly from a poor agricultural society into a rich,industrialised‘AsianTiger’economyaftertheendoftheKoreanWarinthe early 1950s but began to have problems after theAsian FinancialCrisis in the early 1990s. Here, the development and influence ofmanagementandcultureinKoreais importantforanumberofreasons.First,management plays a key role in business, economic development

and society but it does not exist in a vacuum. Key works in the fieldindicate management variations may arise as stemming from culture.Second, even forsome non-culturalists, the concept of culture isrecognised (seechapter 3). Cultural underpinnings have majorconsequences for institutional environments. So, institutionalperspectives need to be based in cultural contexts.Third, in contrast tothe implications of universalism and convergence-related concepts,cultureremainsnotonlyimportantanddiverse,butmaybeportrayedasingrained,deepandslowmoving.Chapter9byCookecomparesthepatternsofwomen’sparticipationin

employmentandmanagementinChina,Japan,SouthKoreaandTaiwan.It examines the political environment and institutional context withinwhichwomeninthesecountries/regionshavebeenfacilitatedaswellashindered in pursuing their managerial careers. The chapter shows thatwhile significant progress has been made in the last three decades inwomen’s education in all four societies,which in somecases surpassesthat of men of the same age groups, this achievement has not beenmatched by the same level of earnings and organisational/corporatepositions.AlthoughaffirmativeactionprogrammesinvariousformshavebeenintroducedbytheStateineachlocation,whichareaimedtoenhancegender equality, the implementation of these policy interventions ishamperedbyanumberofsocietal,organisationalandindividualfactors.The comparison reveals a common historical trend of women’sdisadvantages, although progress has been made in each location tovarying degrees. Institutional structures, persistent patriarchal gendernorms and stereotypes and ineffective representation limit women’sbargaining power in the labour market and hold down their financialrewardsaswellascareerprogression.However,thevariousinstitutionaland cultural factors are not played out to the same strength and eachemploymentsystemcontainsuniquefeatures.Inchapter10byNolan,theauthorreviewstheacademicliteratureon

the use ofguanxi networks in China and on business networks in EastAsia more generally. The review has three core aims. The first is todevelopacriticalunderstandingoftheinfluencethataConfuciancultural

heritage has had on EastAsian business networks in China, Japan andSouth Korea. Here, the chapter demonstrates that while ‘maintainingharmoniousrelations’isakeyunitingthemeacrossallnations,therearevaryingdegreesofemphasiswhichguidesocialnetworkingbehaviourindifferent ways in different countries. For example,guanxi in Chinesecommunities emphasises the development of long-term personalrelationshipsbasedonkinshipandregionalconnections,whereasinJapanbusiness networking places more emphasis on corporate connectionsrather than those based on individual associations. In South Korea theemphasis is on maintaining harmony, orinhwa, through kin-basedhierarchiesandauthorityrelationships,apatternwhichisreflectedinthe‘clan-like’natureofthenation’slargestorganisations.Thesecondaimofthe chapter is to consider the interaction between national culture andinstitutional structures with a particular focus on the case of Chineseguanxi.Herethekeyquestioniswhetherornottheregionisexperiencinga decline in the importance ofguanxi networks in the light of far-reachingreformsandashifttowardsamorerational-bureaucraticmarketeconomy.Thethirdsectionwilloffersomeevaluationof thisdebatebyarguingthat,inglobalbusinessatleast,thecontinuingneedofMNCstoestablishlinkswithgovernmentofficialsisaformofguanxinetworkingthat needs to be maintained, but that is also one that can proveparticularlyhazardousfortheforeignmanager.Inconclusion,thechapterevaluates continuity and change inguanxi in the post-reform period inChinaexaminingbothwhatitisnowusedforandwhoitisusedby.Chapter 11 by Witt draws on business systems analysis to offer a

comparative overview of business and its cultural and institutionalunderpinnings in EastAsia and particularly in China, Japan and SouthKorea.Theoverallpicturethatemergesisoneofconsiderablevarietyinsuch economies. China presents itself as a mixed economy combiningseveraldistinctbusinesssystems,includingastrongprivatesectorandapossiblyresurgentstate-controlledsector,bothoperatingbydifferentsetsofrules.Despiteminorinstitutionalchangesinrecentyears,theJapanesebusinesssystemremainshighlycoordinatedandemployee-centric.SouthKorea retains a business-group-led form of capitalism. The futuremay

seeChina evolve some resemblancewith thepresent-daySouthKoreansystem. Little change is likely in Japan and SouthKoreamay possiblydevelop structural similarities with continental European businesssystems.InCunningham’s chapter 12, the author argues thatwith a sustained

high-single todouble-digit economicgrowthanddevelopment in recentdecades, East Asian economies are increasingly playing the role of aglobal growth-pole, and are fast emerging as a manufacturing andinformation technology hub of the world economy. One of the keycharacteristicsoftheEastAsiaregionisthepresenceandimportanceofalarge small andmedium-sized enterprises (SME) sector comprising themajority of enterprises in all of the region’s economies.Although it isimportant to recognise that the challenges SMEs face, and thecorresponding policies aimed at strengthening their competitiveperformance, may vary due to a great diversity of economies anddevelopment experiences among the countries in the region, the broadcontextsfacedbyEastAsianSMEsaresimilar.Thus,thepaperexaminestheissuesandchallengestoEastAsianSMEsinarenewedglobalmarketenvironment,withspecialfocusonfoureconomiesintheregion–China,HongKong,SouthKoreaandTaiwan.The importanceofSMEsin theirnation’s economy is demonstrated. The difficulties, challenges andopportunitiesforSMEsintheneweconomicenvironmentafterthe2008global financial crisis are discussed. In order to enhance SMEs’competitivenessinthechangingbusinessenvironment,itarguesthatnotonlytheindustrialstructurebutalsothelabourmarketandmanagementsystemsinwhichSMEsoperateneedtobereshapedandtransformed.Inso doing, a transitionary and evolutionary change in SMEs across EastAsian economies should occur, and simultaneously, distinctivemanagement systems, institutional structures and businessmodelsmayemerge.Chapter 13 by Kuruvilla and Chung argues that firm-level human

resourcestrategiesinEastAsiawhichemphasiseworkplaceflexibilityinresponse to increasedglobalcompetition,coupledwith institutionalandlegalchangesthatencourageandfacilitatesuchstrategies,haveresulted

inadramaticincreaseintheuseofinformalemploymentstrategies(theuseofcasual,temporaryandcontractworkers)inChina,JapanandSouthKorea. In all three countries, such informal employment accounts forover35percentoftheworkforce.Thisexternalisationoftheemploymentrelationship represents thedominanceof the ‘logicofcompetition’ thatunderliesemploymentrelationssystemsinEastAsia.Giventheinabilityoftraditionallabourunionstoprovideincreasedprotection(mostunionsdonot represent temporary, casual and contractworkers) andgiven theabsence of ‘high road’ employment relations strategies of firms thatpromote stable employment, governments have taken the lead toalleviate,ifnotimprove,theworkingconditionsofthislarge‘informal’workforce through new regulations that seek to control the growth ofinformal labour thatolder regulations facilitated.Although this attemptat ‘re-regulation’denotes agrowing ‘logicof laborprotection’ in thesecountries,wearescepticalaboutitssuccessincontrollingthegrowthofflexibilitystrategiesthatrelyon‘informal’labour.Chapter 14 by Khilji focuses upon contemporary management

behaviour and culture in South Asia and compares it with severalcountriesinEastAsiaandSoutheastAsia.Itpresentsadetailedoverviewof the socio-economic and cultural environment in many SouthAsianeconomiesandshowsthatfollowingaperiodofderegulation,theregionhaswitnessed impressive economic growth. It is reflected in increasedmultinational activity, a growing private sector and a spree ofinternationalacquisitionsinitiatedbySouthAsian(inparticular,Indian)companies. The recent fascination of theWestwith the ‘IndiaWay’, amanagement philosophy that caters to social mission, investment inhuman capital and developing innovative new products in the face ofcompetition and lack of resources, is described, whereby Indiancompanies are being labelled as offering a compelling new businessmodelthatfalteringcompaniesintheWestshouldemulate.However,itis also argued in this chapter that despitemuch economicprogress andbusinessdevelopmentinSouthAsia,notallcompaniespursueexemplarymanagement practices. The majority struggle with balancing traditionandmodernity.Theirchallengesintermsofrapidlychangingindividual

values,populationexplosion, talentshortages, inadequate infrastructure,slowandbureaucraticpoliticalgovernanceandextremisminsocietyarehighlighted.A comparisonwithEastAsia andSoutheastAsia indicatesthat management and culture throughout Asia is being constantlyreshapedbyglobalisationthatisreflectedinnewpracticesandchangingemployee expectations, attitudes and behaviours. It is concluded thatmanagers need to learn from each other and embrace an ambiculturalmodel that incorporates the best of Eastern and Western values. ThechapterconcludesthatsuchamodelislikelytohelpAsianorganisationssucceed and position them as rolemodels for the future generations ofglobalmanagers.Inchapter15,Warnerlooksatmanagementeducationandtrainingin

Asia,focusinginparticularonthreecountries,namelyChina,JapanandSouth Korea. All are core economies in East Asia and all are majorplayersintheexpandingtradeandgrowingwell-beingofthatpartoftheworld.He also refers to a number ofOverseasChinese domains in theregion, such as Hong Kong, Macau and Taiwan, if only in passing.Business schools and similar institutions inAsia are now to be foundalmosteverywhere.Thefastestexpansionofmanagementeducationandtrainingintheworldisnowtobefoundinthatregion.Thereareindeedprecedentsforcontemporarydevelopmentsinmanagementeducationandtraining,intermsofthenotionofhighlyselectiveeliteschoolsstemmingfrom the Confucian tradition but with varying degrees of continuitylinkingpastandpresent.Theremayofcoursebe‘familyresemblances’from one country to another. But ‘convergence’ theory does fully notresolve the issue in thiscontext.Modernisationand industrialisationdonot have the same impact on these countries’ systems of managementeducationandtraining.NeitherdoestheculturalandhistoricallegacyofConfucianismpointtooverlycommonoutcomes.Theculturalresilienceof the Japanese system seems to protect it more from exogenousinfluences compared with the Chinese or South Korean systems. OneironyisthatAmerican-stylebusinessschoolshavediffusedmorewidelyincommunistChinathaninanti-communistJapan.If‘soft’convergencedoesoccur,theauthorargues,itmightbelikelytodosowithincultural

parametersbutpossiblyinunanticipatedways.Inchapter16byTung,weseeaviewofthefutureofmanagementin

EastAsia. Since the Industrial Revolution,Western industrial/businesspracticeshavebeenemulatedworldwide.ThissituationbegantochangeaftertheSecondWorldWar.The2008–9globalfinancialcrisesandthesovereign debt debacle in the European Union have accelerated thetransitionfrom‘WestleadsEast’to‘WestmeetsEast’.Thischapterfirstexamines the factors that have contributed to this changed calculus ofglobalcompetition.Theseinclude:

thewideningdisparityineconomicgrowthrates;therisingcompetitivenessofnon-Westernmultinationals;the growing share of research and publications from emergingmarkets,particularlyChina.

The chapter then speculates on the future of EastAsian management.WhileWesternmanagement theories andpracticeswillmost likely notbe totally eclipsed and replaced by EastAsianmanagement paradigmsandstyles,thelatter(particularlyChinesemanagement)willmostlikelyexhibitthefollowingcharacteristics:

more intense scrutiny of Western management practices,particularly their pitfalls, and as they apply to the context of theinstitutionalenvironmentspecifictoagivensociety;morebidirectional flowofknowledge fromEast toWestandvice-versaasdistinguished from themoreunilateral flow fromWest toEastprevalentinthepast;diversityofstylesandpracticescharacterisedbyeclecticism.

Chapter17by theEditor attempts to sumupwhathasbeen said in thebook, why it was important and where it is leading to. The ‘devil’ itconcludesisalways‘inthedetails’.

Conclusions

In thiseditedvolume,wehave tried topresent themanydimensionsofAsian management relevant to the region’s growing economic power,particularlyfocusingonEastAsia.Wehavealsoseenhowtheregionisrapidlychangingwithrespecttoitseconomies,culturesandmanagementandhow theseaffect theway itdoesbusiness.Tobettercome to termswith these developments, we have throughout emphasised an eclecticinterdisciplinary approach, bringing together approaches derived fromeconomics, management studies, politics, sociology and so on, to shedlight onmanagerial behaviour across the region. The debate on ‘Asianvalues’ has also been noted, as well as the long-standing influence ofConfucianism.ThecontributorsaimtoshedlightonthediverseaspectsofAsianmanagement inwhich theyspecialise.The resultwehopewillenablethereadertohavearicherunderstandingofthe‘whole’aswellasthe‘parts’!

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AsianDevelopmentBank.Luo,Y.(2000)GuanxiandBusiness.Singapore:WorldScientific.Maddison, A. (2007)Chinese Economic Performance in the Long Run,960–2030AD,DevelopmentCentreStudies.Paris:OECD.

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Rowley,C.,Benson,J.andWarner,M.(2005)‘TowardsanAsianmodelof human resource management?A comparative analysis of China,Japan and South Korea’, in Warner, M. (ed.)Human ResourceManagementinChinaRevisited.London:Routledge,pp.301–18.

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PartIIThemes

Toruleacountryofathousandchariots,theremustbereverentattentiontobusiness,andsincerity,economyinexpenditure,andloveformen;andtheemploymentofpeopleattheproperseasons.

(Confucius:Analects,I,v)

2EastAsianeconomyAnoverview

DilipK.Das

Introduction

Amomentous economic event of historic significance is that theAsianeconomies, particularly those of East and Southeast Asia, grew at avertiginous rateover the last fourdecades.TheWest took300years toindustrialise and innovate and Japan 100, but the newly-industrialisedeconomies(NIEs)ofAsia1 tookonly40years,whileChinatookmerely30 (Lin, 2011). The Asian economies went through an unprecedentedprocess of economic development, industrialisation and urbanisation.They wereinter alia driven by the forces of regionalisation andglobalisation. One indicator of their rapid growth is the trend in percapita income in Asia, which surpassed the world average per capitaincomeintheearly1980sandhasmaintainedahighergrowthratesince(Bai,etal.,2009).Bythedawnofthetwenty-firstcentury,theyhadbeentransformed manifestly, which in turn had a decisive impact over theglobal economy. ThatAsia has begun to play a pivotal role in globalsustainabilityisdemonstratedbyitsroleduringtheglobalfinancialcrisisof2007–9,theGreatRecessionandtherecovery.Theobjectiveofthischapteristofocusontheeconomiclandscapein

Asia thathasalteredover the recentpast,particularlyduring theglobalfinancial crisis and the newly emergedAsian economic scenario of thepost-global-financial-crisisperiod.TheAsianeconomiclandscapeofthepost-global-financial-crisisperiodhasmarkedlydifferentcharacteristicsfromthatofthepreviousperiod.

GlobalfinancialcrisisandAsianeconomy

Theglobalfinancialcrisisof2007–9wasthefirstveritableandfull-sizedfinancial and economic crisis of this century. It was ignited in thefinancialsectorandspiltintotherealeconomy.Itwasperhapsthemostvirulentcrisisofthelastsevendecades.PaulA.Samuelson(2010;p.xvi)termed it a state of ‘terrible meltdown’. Ben Bernanke called it, ‘theworst financial crisis inglobal history, including theGreatDepression’(Chan, 2011).2A crisis of this magnitude naturally has a massive all-roundimpact.Inaglobalisedeconomythecrisispropagatedrapidly,albeitAsiawas

well positioned to weather the financial and economic storm. Asianfinancial institutionswerenotexposedtotheso-called‘toxicassets’andmacroeconomic reforms and financial restructuring initiated after theAsian crisis (1997–8) had structurally fortified Asian economies andfinancialmarkets.Additionally,duetoattractiveeconomicfundamentalsalargeinflowofportfoliocapitalhadtakenplaceintheAsianeconomies–before theonsetof theglobal financialcrisis.Thesefinancial inflowsalso reflected the demand conditions in the prominent internationalfinancialcentres.Forthemostpart,theregionaleconomywasresilienttotheglobalfinancialcrisis.Duringtheinitialphase,though,thecrisisdidnotaffectAsiaandsomeevenbelievedthatitwouldpassAsiabywithoutbeingexcessivelydetrimentaltotheregion.Somewhatbelatedly,thecrisisandrecessionaffectedtherealeconomy

andfinancialmarketsinAsia.Theregionaleconomieswerehitextremelyhard in the lastquarterof2008, after the collapseofLehmanBrothers.Thecrisishadamassive impactovercontoursof theAsianeconomies.Governments and central banks in Asia responded promptly andpersuasively. Although the Asian economy contracted during the firstquarterof2009,towardstheendofthefirstquarterandbeginningofthesecondsignsoftheso-calledgreen-shootsofrecoverybecamevisibleinseveralAsianeconomies.Thiseventapplieda fortiori to theemerging-marketeconomies(EMEs)of theregion.Theybegangivingfaintalbeit

distinct indications of a recovery. The two indicators that began toabstemiouslylookupwereexportsandindustrialproduction.The slow recovery picked up gradual momentum. It became more

distinctandexplicitinthemoreopeneconomiesofAsiathatwerelargeexporters of electronics and other high-technology manufacturedproducts. Those that had a large domestic demand base were alsorelativelyswiftinrecovering.China,IndonesiaandtheRepublicofKorea(hereinafter Korea) recorded the briskest recovery in industrialproduction.WhentheseandotherAsianeconomiesbegantheirrebound,theglobal economywas stillmired in recession.Anearly indicationofrebound inAsia seemed tovalidate the so-calleddecouplinghypothesisfor the region. That is, Asia wasnot in synch but leading the globaleconomiccycle.

Asiaspearheadstheresurgenceoftheglobaleconomy

From thesecondquarterof2009,AsianEMEsbegan to lead theglobalrecovery.AtthispointtheEuropeanUnion(EU),theUnitedStates(US)and the rest of the global economywere not out of recession. In 2009,AsiawastheonlyregionthatpostedpositiverealGDPgrowthof3.6percent(Table2.1).Itoutperformedtheotherregionsoftheglobaleconomy(Das, 2011). For an outward-oriented regional economy, whose growthwaslargelyexport-based,thiswasindeedunusual.Sincethefirstquarterof2010,tradeinAsiawasrecoveringatastrong

pace,albeitmultilateral trade recoverywasnotsostrong.At thispoint,monthly trade statistics forAsia had returned to their pre-crisis level.Merchandise trade in the region recorded a 30 per cent leap in 2010,higherthantheaverageglobalmerchandisetradeincreaseof21percent(ESCAP,2011).Thus,Asiaworkedasa

Table2.1RealGDPgrowthrates:Asiaspearheadingtheglobalgrowth

stabilisingforceintheglobaleconomy.Itprovideda‘pull-force’totheglobalrecovery.Exportgrowthrates in theregionbegantaperingoff inearly2011.The global economywas no longer in recession in 2010 (Table 2.1).

However, the recovery was highly uneven or, as it began to be called,multi-speed.Differentregionsoftheglobaleconomywererecoveringatdifferent paces.Asia continued to lead the global economy forward. In2010, itgrewat the rateof8.3percent.Comparablegrowth rate in theEUwas1.7percentandintheUS2.8percent.AccordingtotheestimatesmadebytheConferenceBoard(CB),Asia

accounted for 47 per cent of global GDP growth in 2010 (ConferenceBoard,2011).TheperformanceoftheChineseeconomywasparticularlynoteworthyinthisregard.Itscontributiontotherecoveryendeavourswasmaximal(seechapter5).Itnotonlydidnotsufferarecessionin2009butalsogrewby9.3percent.In2010,itturnedinastellardouble-digit(10.3percent)growthperformance(IMF,2011a).Theglobal financialcrisis,recession and recovery set in motion forces that are reshaping thestructure of the Asian and global economies and policy-making

framework. For instance, wise men acknowledged that unregulatedcapitalismcannot runmodern economies efficiently.Errorson theLeftandRightbothmandatedwhatSamuelson(2010)called‘centrism’.Theglobal financial crisis rendered the Group-of-Seven (G-7)unrepresentativeoftheglobaleconomyandirrelevant.Itwassupplantedby theG-20.Thisshiftwasahighlyconsequentialchange in theglobalstrategiclandscape.

NewAsianeconomiclandscape

Over theprecedinghalfcentury,percapita incomes increased inall thedevelopingregions,butonlyAsiacouldachievetheuniquedistinctionofachieving income convergence towards the high-income industrialcountries (seechapters 5, 6, 7 and8). This applies particularly to theAsianNIEs and the EMEs.As seen inTable2.2, the heft of theAsianeconomyintheglobaleconomyisrising.Overthe

Table2.2GDPasaproportionofworldGDP(%)

Sources:(TheWorldBank,2011)DataforTaiwancomesfrom(EconomyWatch,2011)

1990–2009 period, Asia’s GDP as a proportion of the global GDPincreased,withAsianowaccountingforclosetoaquarterof theglobalGDP.ItneedstobereiteratedherethatAsiaisdefinedtoincludeonlythedynamiceconomiesofEastandSoutheastAsia.Conversely,theGDPoftheEU-15and theUSas aproportionofglobalGDPdeclinedover thesameperiod.Theincreasingimportanceof thedevelopingeconomiesinthe global economy is almost totally driven by the robust growth

performanceofAsia,notablythatofChina.Considerable reorienting of global and regional systems occurred

duringthelastdecade,alsoduringthepost-globalfinancialcrisisperiod.The inter-relationship between the principal economic players inAsiabecame more complex. As China continued on its brisk growth-path,economic and financial integration between the Asian economiesintensified.Regionalcooperationamongthethreelargeplayers,namely,China,JapanandKorea,isontherise(seechapters5,7and8).

China’sincreasingrole

Oneof themostconspicuousdevelopmentswasChina’s inexorable riseandoverwhelmingdominanceoftheregionaleconomy.3AcomparisonofGDP growth rates, trade and other indicators of the important regionaleconomiestestifiestothisfact(Table2.3).Judged inanabsolutesense,China’seconomicperformance

Table2.3ChinaisgrowingfasterthanJapanandtheNICs(inbillionsof$)

wasnothing shortofphenomenal.WhenChinabegan its transition toa

market-oriented economy in 1978 its per capita income was a paltryUS$182andtradedependence(trade-to-GDPratio)was11.2percent.Ithasrecorded9.9percentannualGDPgrowthoverthelastthreedecadesand 16.3 per cent growth rate in international trade.According to theWorld Development Indicator 2011 (The World Bank, 2011), China’s2009GDPat currentpricesandexchange ratewas$4.98 trillionand intermsofpurchasingpowerparity(PPP)$9.22trillion.ItspercapitaGDPatcurrentpricesandexchangerateswas$3,744in2009andintermsofPPP$6,828. Its trade dependence ratio crossed 65 per cent, the highestamongtheworld’slargesystemicallysignificanteconomies.Itsucceededinlifting600millionpeopleoutofpoverty.China’sregionalimportancestartedgrowinglongbeforeitedgedpast

Japan to become the second largest economy in the world at marketprices and exchange rates inmid-2010.This featwas, and continues tobe,aneventofenormouseconomicandgeopoliticalsignificance.China’sebullient growth performance is continuously influencing andtransforming the regional economy. In the near future it will createexceptional growth opportunities for the other Asian economies toupgradetheirpatternofgrowthandmoveupthevaluechain.Chinamaywellhaveasimilarimpactontheglobaleconomy.

Opennessandrapidtradegrowth

Asianeconomies,particularlytheEMEsandtheNIEs,arewellknownforbeing successful traders aswell as for beingopen economies.Over thelast quarter century, the share ofAsia, excluding Japan, in total worldtrade increasedmuch faster than thatofNorthAmerica and theEU-15.Opennessisdefinedastrade(exports+imports)asapercentageofGDP.According toInternational Trade Statistics 2010, Asia was not aparticularlystrongtradingregionuntiltheearly1970s.However,in2009itwasthesecondlargesttradingregionaftertheEU,accountingfor29.4percentof totalmultilateralexportsand27.4percentof total imports.Thelargesttradingregionaleconomy,Chinaaloneaccountedfor9.9percentofmultilateral exports and8.1per centof imports in2009 (WTO,

2010).AninterestingfactinthisregardisthattheincreasingimportanceofAsia as a trading region is partially due to the rising trade in parts,componentsandintermediategoods(Aminianetal.,2007).DuetorapidtradegrowthrelativetoGDPgrowth,theopennessofthe

Asian economies went on increasing. It was 74.65 per cent of GDP in1985,138.16per cent in2005and129.48per cent in2009 (TheWorldBank,2011).Theretreatin2009canbeexplainedbythefactthatitwasthe global financial crisis year, and multilateral trade recorded awrenching contraction. The fast expansion ofChina’s trade, both intra-regional and multilateral, favourably influenced the openness of theAsian economies.The increasing trend in regional trade has intensifiedtheregionalandglobalintegrationoftheAsianeconomy.

Escalatingregionalisationoftrade

According toInternationalTradeStatistics2010,Asiaisitsownlargesttrading partner; 51.6 per cent of its exports are intra-regional. In 2000intra-regional exports were 49 per cent. As trading partners, thesignificanceoftheEU(17.9percent)andNorthAmerica(17.5percent)forAsiawasmuchlessin2009thanitsintra-trade(WTO,2010).Overthe2000–9period,thegrowthofintra-regionaltradeinAsiawas

faster thanAsia’s tradewith the restof theworld.WhileAsianexportsalmost doubled over this period, intra-regional exports increased threetimes(IMF,2011b).4China’s role in intra-regional tradeexpansionwasvital.Itwastheprincipalplayerinintra-regionaltradeduringthisperiod,accounting for more than half of total trade within the region. Theincreaseinintra-regionaltradewastheresultofanincreaseintradewiththe developingAsian economies. Over 2000–9, the share of exports todevelopingAsian economies increased to one quarter of total regionalexports.Chinaaccountedfor12percentofregionalexportsin2009and50percentofexportstoregionaldevelopingeconomies.Conversely,therole of Japan and theNIEs as amajor export destination for theAsianexportersdeclined(ESCAP,2011).

Verticallyintegratedproductionnetworks

Productionfragmentation-basedtradeinAsiaexpandedmuchfasterthanintheotherregionsoftheglobaleconomy,namelytheEUandtheNorthAmerican Free TradeArea (NAFTA).Over the preceding two decades,Asiahascometodominatenetworkproductionandthetradeemanatingfromit.ThistrendiscontrarytoearlierexpectationswhenAsia’srelativepositionwastoerodevis-à-visMexicoandthecountriesattheperipheryof Europe. Global and regional production networks became strong inAsiaandwereresponsiblefortheemergenceof‘FactoryAsia’.China has played a decisive role in the operation and spread of

production networks. Although China was to participate in them late,production networks spread over southern and eastern China, and thesurroundingAsianeconomieshavereorganisedtheindustrialproductionstructure of Asia. They have turned China into a manufacturing andexportingpowerhouse.(IMF,2011b;Gaulieretal.,2007).Essentiallyduetotheoperationsofthesenetworks,AsiantradeincreasinglygrewChina-centred. China relies on inputs from theAsian economies, particularlyJapanandtheNIEs.Thereverserelationshipholdsequallywell.Thatis,thesurroundingAsianeconomiesrelyincreasinglyoninputsfromChina.It acts as a base or hub for firms located in technologically moreadvanced Asian economies like Japan and the NIEs. As the finishedproductsareexportedtotheadvancedindustrialeconomiesfromChina,thevalueandvolumeofexportsfromChinahasskyrocketed.The tradesurplusoftheregionvis-à-vistherestoftheworldhasgrownlarge.Thesame applies to the trade surplus of China vis-à-vis the advancedindustrialeconomies,inparticulartheUS.Theprincipalreasonsbehindtherapidevolutionin thefragmentation

ofvaluechainswere, first,Asiahasdiverse laboursupplyconditions inthe region (seechapter 13). They range from high-wage Japan and theNIEstothelow-wageSoutheastAsianeconomies.ManufacturingwagesinChinaandmanyotherAsianeconomiesarelowerthanthoseinMexicoandthecountriesattheperipheryofEurope.Second,havingafavourabletrade and investment policy regime, better ports and a better

communications infrastructure gave an edge to the Asian economies.They provided Asian economies with a decisive cost advantage.Therefore transnationalcorporations(TNCs)preferredAsiaasasitefortheir production bases over the other regions of the global economy.Third, several Asian economies got started early in the networkproductionoperation.JapanandtheNIEswerethepioneersinthisregard.Therefore, they can now offer agglomeration advantages to the largeforeigncompaniesandTNCs.Fourth,althoughChinawasalatecomertoverticallyintegratedproduction,ithasnowevolvedasthecentreoflow-costassemblyoperations. Its large labourendowmentinteraliagives itan advantageof steady factorprices (Athrukorala, 2011).Also,China’sstrategyofdevisingandsuccessfullyrunningthespecialeconomiczones(SEZs)sawrichpay-offsinthisarea.The increase and spread of fragmentation of value chains has

materially influenced trade flows. Parts, components and intermediategoodshaveevolvedasalargetradingsector.In2009,thiswasthemostdynamicsectorinmultilateraltrade.Itrepresentedmorethanhalfofthenon-fuel merchandise trade (WTO, 2011). Growing trade in parts,components and intermediate goods intensified specialisation ininternational trade and added value along the production chain. It alsostimulatedintra-regionalforeigndirectinvestment(FDI).

Surgeinforeigndirectinvestment

Both regionally and globally FDI suffered a sharp decline during theglobal financial crisis.FDI inflowsmadea spurt in2010 inAsia.Theyincreasedby24percent,to$300billion,in2010.TheseFDIflowswerebothintra-regionalandextra-regional.IntermsofFDIreceipts,themajorAsian economies performed in a dissimilar manner. FDI flows to theAssociationofSoutheastAsianNations(ASEAN)5economiesmorethandoubledin2010.Also,ChinaandHongKongSARenjoyedlargedouble-digitgrowth,butKoreaandTaiwan recordedamarkeddecline.SeveralASEAN economies made proactive endeavours to liberalise several

industrialsectorstoattractmoreFDI.Indonesia,MalaysiaandSingaporewere particularly successful in this regard. Therefore, the ASEANeconomies received $79.4 billion in 2010, which was higher than theprevious record receipt of $76 billion in 2007. The Philippines alsoliberalisedmoreindustriesandstrengthenedsupportivepolicymeasures.FDIflowstoASEANincreasedbecauseproductioncostsandwagesin

China have been rising and Indonesia and Vietnam have been gainingground as low-cost production centres, particularly in low-endmanufactures.Low-incomecountriesinASEAN,likeLaoPDR,receiveda lot of investment from China and Thailand.Offshoring of low-costmanufacturing activities to China has been decelerating. Evendisinvestment took place in the coastal provinces. FDI flows to Chinahave been structurally transforming. They have been shifting to high-technologyandservicessectors.Singaporereceived$39billionin2010,almosthalf of the total receipt by theASEANgroup.The reasons suchlargeFDIflowswenttoSingaporeare,first, inthepost-globalfinancialcrisis period financial flows to the EMEs in general rose and secondSingapore has the reputation of being an important global financialcentre, as well as the regional headquarters of numerous TNCs. Chinareceived$105.7billionin2010andHongKongSAR$69billion.Inbothcases,thestatisticswereatahistorichigh.Asian economies have now become outward investors of reasonable

proportion. Outward foreign direct investment (OFDI) from Asiaincreased from$193.2billion in 2009 to $231.6billion in 2010, a 19.9per cent increase. The principal outward investment-making AsianeconomiesareChina,HongKongSAR,Malaysia,Korea,SingaporeandTaiwan.Chinainvested$68billionasOFDIin2010andHongKong$76billion. Asian business firms have been acquiring overseas assets innumerous industries in geographicallywidespread countries.Chinawasthe largest outward investor. For the first time, China’s OFDI in 2010exceededthatofJapan.Cross-borderM&ApurchasesbyAsianbusinessfirmssurged tonearly$94billion in2010, thehighest level reachedbyAsianfirms.Accountingforover30percentofthetotal,Chinamadethe

largestamountofM&Apurchases.6

Decouplingandre-couplingAsia

Panel regression framework analysis reveals that the impact of theadvanced industrial economies over the fast globalising EMEs hasdeclinedduring thepresentphaseofglobalisation,which is believed tohave begun in the first half of the 1980s. Driven by their brisk GDPgrowth rates, the EMEs have developed their own momentum andvitality. Some of them have become important players in the globaleconomyintheirownright.Therefore,theoldrelationshipofonegroupof economies depending upon the other has changed into multifacetedinterdependencebetweenthesetwogroups(AkinandKose,2008).Inthemate-rialisationofthisnewtrend,Chinahasplayedauniqueroleandhasdevelopedaspecialniche in theglobaleconomy. Inpart, this trendhasdeveloped because China has expanded its exports into the advancedindustrial economies and has received a large investment from them.OtherAsian EMEs may follow China in this endeavour (Fidrmuc andKorhonen,2010).In the pre-Asian crisis period, it became conventional to think that

economic activity in theAsian economy, particularly theAsian EMEs,was not dependent on the advanced industrial economies. That is, theyhaddecoupledfromthethreeadvancedindustrialeconomies,namelytheEU,JapanandtheUS,ortheso-calledG-3.Asianeconomies,particularlytheEMEs,seemedtobeadvancingundertheirownmomentum,withoutneeding a locomotive for their growth. They appeared to be a self-containedeconomicentity.Accordingtothishypothesis,rapidgrowth inthe region could work as a growth impetus for theAsian EMEs. Thisbecameknownasthedecouplinghypothesis.Thisscenarioalteredinthepost-Asiancrisisperiodwhencyclicalco-

movements betweenAsia and theG-3 initially became somewhatmoresynchronised and then this trend strengthened. Calculations of decadalcorrelationsbetweenGDPgrowthinAsiaandthatintheG-3bytheAsian

DevelopmentBank(2007)confirmedthistrend.Afterremainingnegativein the 1990s, the correlation became positive (0.64) for the 2000–7period.Thecorrelationwashigherat1.0 for2008.Theglobal financialcrisisof2007–9furtherdiscreditedtheso-calleddecouplinghypothesis.After becoming independent of the G-3 economies in the 1900s,synchronisation of the business cycle in Asia with those of the G-3economiesincreased.ComputationsofGrangercausalityalsoconfirmedthatmovementsintheG-3businesscycleaffectedAsianbusinesscyclesafteralagoftwotothreeyears(BrooksandHua,2009).

Post-globalcrisisAsia

Aselaboratedearlier,Asianrecoveryfromtheglobalfinancialcrisisandthe Great Recession was swift. By the last quarter of 2010, the GDPgrowthratehadpickedupintheASEAN-57economiesandtheNIEsofAsia. TheChinese economy grew at a double-digit rate in 2010 (Table2.1).Economicperformancein theregionwassupportedbybothstrongdomestic demand and flourishing exports. However, this pick-up wasdelayed in Japan; it didnotoccuruntil early2011.The earthquake andtsunami of March 2011 caused enormous loss of life and property inJapan.Theysubstantiallydisruptedtheeconomicactivityintheregionaswell; in particular, the supply-chain operations were seriouslyinterrupted.That said, thedisturbance in the regional economywasnotunmanageable.CommodityexportersofAsiabenefitedfromhighpricesin theglobal commoditymarkets.TheAsian economybegan2011 in ahealthystate,butby2012,lessso.Unevennessintheglobalrecoverycontinued.Theadvancedindustrial

economies,particularlytheEUandtheUS,notonlyrecoveredslowlybutalso continued having additional economic difficulties of ominousproportions.Theformerwasplaguedbysovereigndebtcrisesinseveraleconomies. Notwithstanding the listlessness of the recovery andsovereign debt-related disturbances, investment in machinery andequipment in the advanced industrial economies recovered. It began to

riseduetotheonsetoftheglobalinvestmentcycle.TheAsianeconomieswereableto takefulladvantageof thisrecoveryin investmentbecause,first, they have become large exporters of machinery and transportequipment. Approximately 60 per cent of their total exports fall intothese two categories. Second, import elasticity of investments in theadvancedindustrialeconomyishigh.Third,forseveralAsianeconomies,electronicsgoodsareanimportantexportsector.Thiscategoryofexportbenefitedfromthe long-termtrendof largeandincreasingconsumptionbyconsumersintheadvancedindustrialeconomies,particularlytheUS.Fourth, Asian export performance was also strengthened by a strongdemand for final goods from the Asian EMEs.Several extra-regionalEMEs also contributed to this demand.Fifth, theChinese economyhasbecomeprogressivelywell-integratedwiththerestoftheAsianeconomy.Its increasing demand for both final and intermediate goods has begunplaying a material role in stimulating the export performance of theAsianeconomies.AsAsianexportspickedupmomentum,theirindustrialproductionbeganrisingaswell.Duetomoderatelyaccommodativefinancialconditionsandfavourable

fiscalpolicies,privatedemand in theAsianeconomieswashigh.Chinaand the ASEAN-5 economies recorded particularly strong retail sales.Theywereencouragedbystrengtheningconsumerconfidenceandgrowthinrealwages.Due tosharp increases incapacityutilisation, investmentin capital spending byAsian business firms was on the rise.Also, thetrend in infrastructure spending continued. This trait appliedmostly toChinaandHongKongSAR.In comparison to the pre-global financial crisis period, the cost of

capitalremainedlowerin2011inAsia.Banks’creditexpandedatarapidrate in the region. Equity and debt issuance in theASEAN-5 countriesincreased in2010and2011.Thesametrendwasobserved inChinaandKorea.Thisshiftalsooccurredinbothlocalandforeignmarkets.Foreigninvestors feltcomfortable in investing inAsia.Currencies in the regionwere under pressure to appreciate in the final quarter of 2010. Theyenappreciated after the Japanese earthquake in March 2011 to anexceedingly high level, but the synchronised Group-of-Seven (G-7)

interventiondepreciateditsomewhat.TherealeffectiveexchangeratesinChina andASEAN-5 economiesweakened in the final quarter of 2010.However,due to thehigh inflation rate inmanyof theseeconomies thereal currencydepreciationwasnotmuch. In contrast, nominal effectiveexchangeratesstrengthenedintheNIEs.Duetoastrongcurrentaccountsurplus,HongKongSARwasanexceptioninthisregard(seechapter6).Althoughtheunemploymentsituationhadimprovedsincetherecovery

from the Great Recession, vulnerable groups still suffered highunemployment rates in many subregions. Indonesia and Thailand weretwo prime examples. High unemployment rates among youth did notshow much improvement. It remained close to twice the averageunemploymentrateintheeconomies.Otherworriesofthepolicy-makerswereincomeinequalityandsocialexclusion,whichremainedobstinatelyhigh. Asian economies have benefited a great deal from economicglobalisation,which in turn has promoted thewell-being ofworkers ingeneral. However, globalisation failed to benefit all workers. It passedcertain categories ofworkers inAsia and has not benefited them at all(seechapter13).The medium-term growth projection of the EMEs of Asia by the

InternationalMonetaryFund(IMF)is8percent(IMF,2011a).Theyareprojected togrowat this rate inboth2011and2012.Thisprojection isclosetothepotentialoutputgrowthfortheAsianEMEsbutatriflebelowthe8.5percentgrowth rateachievedduring2002–7, thequinquenniumbeforetheglobalfinancialcrisis.AlthoughChina’sgrowthisexpectedtobemoderateduetothetighteningofinvestment,itisexpectedtobetheleadeconomyinAsiaduringthemediumterm.ConverselyinIndonesiagrowthrateisprojectedtoaccelerate.8

Conclusions

Tosumup,theemergenceoftheAsianeconomyasadynamiceconomicgrowth-pole over the preceding four decades is an event of historicsignificance. The global financial crisis of 2007–9 was exceedingly

severeandittransformedthescenariofurther.TheAsianeconomieswerestrucklatebythecrisisandrecessionandtheyspearheadedtherecoveryfrom the crisis. Since the secondquarter of 2009, theAsian economiesbeganto leadtheglobalrecovery. In theadvancedindustrialeconomiesrecoverywasnotonlytepidbuttheyalsocontinuedtosufferfromseriouseconomic and financial setbacks. China, Indonesia and Korea recordedthe briskest recovery in industrial production. The Asian economiesbegan to play a role in global economic sustainability. This factfavourably influenced their heft in the global economy. The economiclandscapeofAsiahassignificantlyandcomprehensivelyalteredovertherecent past. In the post-crisis period, Asia contributed a great deal toglobal economic growth. The global financial crisis, recession andrecoverysetinmotionforcesthatarereshapingthestructureoftheAsianand global economies and policy-making frameworks, but China’sgrowth-ratemaybenowslowingdown.SeveralAsianeconomiesbegan toconverge towards thehigh-income

industrial countries.Asia now accounts for almost a quarter of globalGDP.ItsglobaleconomicexpansionistakingplaceattheexpenseoftheEU-15 and the US. An important development is China’s unremittingrise, leading to overwhelming dominance of the regional economy.China’s regional importance started growing long before it edged pastJapan to become the second largest economy in the world at marketprices and exchange rates in mid-2010. The Chinese economy becamemore prominent both regionally and globally than Japan and theNIEs.The Asian economies, particularly the EMEs and the NIEs, are wellknownforbeingsuccessfultraders,aswellasforbeingopeneconomies.Overthelastquarterofacentury,theshareofAsiaexcludingJapanin

totalworld tradehas increasedmuch faster than that ofNorthAmericaandtheEU-15.Chinaemergedasasuccessfultradingeconomy.Thefastexpansion of China’s trade, both intra-regional and multilateral, hasfavourablyinfluencedtheopennessoftheAsianeconomies.Intra-regional trade inAsia has expanded briskly, particularly since

2000.Asiaisitsownmostimportanttradingpartner.Chinahasemergedas an important trade partner of several regional economies and has

stimulated intra-regional trade substantially. Production fragmentation-basedtradeinAsiahasexpandedmuchfasterthanintheotherregionsoftheglobaleconomy.Overtheprecedingtwodecades,Asiahasthuscometodominatenetworkproductionandthetradeemanatingfromit.Globaland regional production networks became strong in Asia and wereresponsiblefortheemergenceof‘FactoryAsia’.Chinaplayedadecisiveroleintheoperationsandspreadofproduction

networks (seechapters 5, 11 and12). Production networks spread oversouthernandeasternChinaand the surroundingAsianeconomies.Theyhave reorganised the industrial production structure ofAsia as well asturning China into a manufacturing andexporting powerhouse.Considerablereorientingofglobalandregionalsystemsoccurredduringthe post-global financial crisis period. Inter-relationship between theprincipal economic players inAsia becamemore complex (seechapter16).After theglobal financial crisis, theFDI flows spurted inAsia.They

were both intra-regional and extra-regional FDI flows. No doubt therewas awidediversity inFDI receipt in theAsian economies.GrowthofFDItoChinahasbeendecelerating.Evendisinvestmenttookplaceinthecoastal provinces. FDI flows to China have been structurallytransforming. They have been shifting to high-technology and servicessectors.Asian economies have becomeoutward investors of reasonableproportion.Chinaisthelargestoutwardinvestor.In2010,China’sOFDIexceededthatfromJapan.Thiswasa‘first’fortheMiddleKingdom.The impact of the advanced industrial economies over the fast

globalisingEMEshasdeclinedduringthepresentphaseofglobalisationandsomeEMEshavebecomeimportantglobalplayersintheirownright.Inthematerialisationofthisnewtrend,Chinaplayedauniquerole.Inthepre-Asian crisis period, it became conventional to think of the AsianEMEs as decoupled from the advanced industrial economies. Thisscenario altered in the post-Asian crisis period and cyclical co-movements between Asia and the G-3 initially became somewhatsynchronisedandthenthistrendstrengthened.

Notes1TheNIEscompriseHongKongSAR,theRepublicofKorea,SingaporeandTaiwan.2AsquotedbyChan(2011)inTheNewYorkTimes,January27.3Severalscholarlyaccountsofitareavailable.Forinstance,seeDas(2008),Lardy(2002and

2003),Lauetal.(2000),Naughton(2007)andSongetal.(2011).4Seechapter3,IMF(2011b).5TheAssociationofSoutheastAsianNations(ASEAN)wasfoundedbyfiveSoutheastAsian

economies,namely,Indonesia,Malaysia,thePhilippines,SingaporeandThailandinAugust1967.SincethenitsmembershiphasexpandedtoincludeBrunei,Myanmar,Cambodia,LaosandVietnam.

6ThesourceofstatisticaldatarelatingtoFDIandOFDIistheWorldInvestmentReport2011,chapter2(UNCTAD,2011).

7 The ASEAN-5 economies comprise Indonesia, Malaysia, the Philippines, Thailand andVietnam.

8ThissectiondrawsonIMF(2011b),chapter1.

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3EastAsiancultureAnoverview

MishoMinkov

Introduction

The expansion of globalisation has led to increased contacts betweenmembersofdifferentsocieties,particularlyintheworldofbusinessandpolitics. As a result, the study of culture has enjoyed unprecedentedinterest and development in the past few decades and much has beenlearnedabouttheculturesoftheEastAsiansocietiesthroughresearchbylocal and foreign scholars. While some findings about the culturaldifferencesbetweenEastAsiaandtherestoftheworldseemintuitivelylogical, as they partly confirm popularly held impressions andstereotypes (examples of these are available in Boster and Maltseva,2006),othershavecomeasstrikingrevelationstoWesternersandAsiansalike. This chapter dwells on some of the most salient culturalcharacteristicsthatdistinguishEastAsiansocietiesfromthoseoftherestoftheworldandexaminessomeoftheirinternaldifferencesaswell.

Historicalbackground

Forthousandsofyears,EastAsiansocietieshavesharedacombinationoffeatures that is not found as a whole in any other cultural region: aneconomybasedonwet-ricecultivation,centralisedimperialgovernment,officialendorsementofConfucianismasanethicalcode, theprominentrole of Buddhism, cohabitation of diverse philosophies and religionsratherthanasingleofficialdogmaandtheuseoftheChinesescript(seeWarner,2011).Othercommonalitiescanalsobeaddedto this list,such

as shared architectural styles and diets, the most conspicuous of theseprobably being the absence of dairy products and bread. It is thereforenatural toexpect that thesesharedEastAsianexperienceshaveresultedinsimilarculturalvalues,beliefsandnorms.Indeed, a number of large-scale cross-cultural studies, such as the

ChineseCultureConnection(1987),ProjectGLOBE(Houseetal.,2004)andtheWorldValuesSurvey(InglehartandBaker,2000)haveidentifiedaConfucianorEastAsianculturalcluster.Thecountriesinthatgroupareoften found near the extremes of a number of important cultural andsocietalindicators.Thebestknownofthesearetheregion’sspectaculareconomic growth and the unrivalled educationalachievement of itsschoolchildren, especially in mathematics. These indicators areassociated with various cultural measures on which East Asia alsogravitates toward extreme positions. Although these characteristics ofChinese,Korean and Japanese culture (seechapters5,7 and8) are lesswidely known, they are crucially important for understanding the EastAsianphenomenon.

Culturalvalues

TheWorldValuesSurvey (WVS) is the largest studyofhumanvalues,beliefs and norms, carried out longitudinally since 1980 in nearly 100countries. It is also the most reliable cross-cultural project since itssamplesarenationally representative.1Thequestionnairecontainsa listoftenbasicvalues;therespondentsareaskedtoselectthoseofthemthattheyconsiderimportantforchildren.Graph3.1showshownineofthesevaluesrelatetoeachotherinthelatestWVSround,carriedoutfrom2005to 2008 in 57 countries. Items that are close together are highly andpositively correlated:when people in a particular country select one ofthosevalues, they also tend to choose the adjacent ones. Items that aresituatedacrossfromeachotherareopposites:ifoneisdeemedimportantinaparticularsociety,theoppositeisnot.2

Graph3.1PositionsofninebasicvaluesforchildrenfromtheWorldValuesSurveyinatwo-dimensionalspace

Graph3.2Positionsof56countriesinatwo-dimensionalspacedefinedbyninebasicvaluesforchildren

Note:SeeAppendix,pp.47–8,foralistofcountryabbreviationsused.

Graph3.2representsaculturalmapof the56most recentlysurveyedWVScountriesonthebasisofthesameninevaluesforchildren:countrypositions essentiallymatch those of themost important values in theirsocieties.ThemapsinthetwographssuggestthattheculturesofChinaandSouthKorea,aswellasVietnam,whichisculturallycloseto them,emphasisehardworkand thriftmore thananyothergroupofcountries.

TaiwanandJapanalsovaluethesetraitsinchildren,yetnottothesameextent.Theirpositionsindicatethatthekeyvaluesthatareinstilledinthechildrenofthosecountriesareindependenceandperseverance.ThegraphsalsoshowthattheEastAsiancountriesdonotattachmuch

importance to values that Inglehart and Baker (2000) defined astraditional:religiousfaithandobedience.Childrenmaybeexpectedtobewell-behavedbuttheyarealsotaughtself-reliance.Ontheotherhand,thedevelopingpartsofAsia, just like thoseofEasternEuropeandperhapsmore so, are characterised by low tolerance of others, especially whentheybreak the laws.Singapore,whichhas not been studied recently bytheWVS,has retained thischaracteristicdespite itswealth: it isknownfor its harsh punishments of what Western Europeans would considerminor infractions. Japan appears to have shifted somewhat closer toNorthernEuropeon this indicator: it values tolerance to a considerablygreater extent but is still far from the positions of the Scandinaviancountries.The graphs demonstrate that Vietnam is culturally very close to

mainlandChinaandSouthKorea,atleastintermsofitsvaluesystemandvalue structure. Hard work and thrift are key Vietnamese values,tolerance is not.AlthoughVietnam is not traditionally classified as anEast Asian country, it probably should be. It has experienced diversecultural influences from the Middle Kingdom and today shares manyculturalcharacteristicswithitsgiantneighbour.HongKong’s raw scores on theWVS values for childrenmake that

country an outlier with an improbable position by any standards;thereforeitisabsentfromGraph3.2.Yet,acompletelydifferentpictureemerges when the scores are ipsatized (standardised by case). Theresultingscoresrevealnotonlyinter-culturalcomparisonsbutalsointra-cultural value structures, reflecting the way in which values areprioritised within a particular society. That statistical transformationwould placeHongKong next toTaiwan on themap inGraph3.2. ThatmeansthatalthoughHongKongrespondentsindicatethattheyattachanimprobablylowimportancetoallninevaluesforchildren,theyprioritisethem much like the other EastAsian countries, placing responsibility,

independence,andhardworkatthetopandreligiousfaithatthebottomoftheirprioritylist(cf.,chapters10,12and14).ThesefindingsfromtheWVSareconfirmedbyvariousothersources.

TheChineseCultureConnection(1987)studiedthevaluesofover2,000universitystudentsfrom23nations.ItfoundthatmainlandChina,HongKong, Taiwan, Japan and South Korea had the highest scores of allcountriesonaculturaldimensiondefinedbyahighimportanceofthriftand perseverance and a low importance of traditional values such aspersonalstability(atendencytoadheretoimmutablevaluesandbeliefsas advocated by the Middle Eastern religions) and, notably, tradition.‘Reciprocationoffavours’wasalsoanegativevalueon thisdimension;consequently,itisconsideredfarlessimportantinEastAsiathaninthecountries that appeared at the opposite end of this cultural continuum:Pakistan, Nigeria, and the Philippines. This dimension was called‘Confucian work dynamism’, subsequently renamed ‘long-termorientation’ by Hofstede (2001). It is strongly correlated with thedimension defined by the North versus South (or Northwest versusSoutheast)diagonalinGraphs3.1and3.2.Gr e e net al. (2005) studied the values and beliefs of 2,546

undergraduate students in 20 countries. They obtained a psychologicaldimensioncalled‘self-reliance’andprovidedaveragenationalscoresforit.High-scoringcountrieswere thosewhoserespondentsendorseditemssuch as ‘Only thosewho depend on themselves get ahead in life’. ThedimensionindexcreatedacontrastbetweenChina,Lebanon,RussiaandSingapore, where self-reliance was most strongly embraced, and LatinAmerica, where it received the weakest support. ‘Self-reliance’ isstronglycorrelatedwiththeNorthversusSouthdimensioninGraphs3.1and3.2.The earlier versions of theWVS administered a crucially important

item,askingtherespondents toassesstheimportancethat theyattachedto ‘service toothers’asapersonalvalue (discontinued in2005–8).Thesignificance of this item cannot be overstated.At the national level, ityields a high negative correlation with thrift as a value and would befoundrightacrossfromitifitwereplacedonthemapinGraph3.1.This

demonstrates that ‘thrift’ is associated with a concern for self-relianceratherthandependingontheservicesofothers,andexplainswhy‘thrift’is negatively correlated with ‘unselfishness’ (thus, positively withselfishness)acrosstheWVSrespondentsofsomesub-Saharancountries.TheseassociationsconfirmthatEastAsiancultureemphasisesindividualself-reliance in economicmatters rather than dependence on help fromothers. In LatinAmerica, but also in the Middle East and throughoutAfrica,thereversesituationisobserved:itisimportanttohelpothersand–consequently–toreceiveassistance.Wemustnote that thisoperationalisationofself-reliancehasnothing

to do with individualism in the sense of Hofstede’s (2001) culturaldimension, subsequently replicated by Project GLOBE (Gelfandet al.,2004). The latter dimension stands, among other things, for individualliberationfromthebondsofsocialconformism;it isnotaboutgivingahighpriority to individualachievementofeconomicgoals throughhardwork,thriftandperseverance,whichiswhatself-relianceisabout.Onthemaps inGraphs 3.1 and3.2, the individualism dimension wouldcorrespondtotheEastversusWestdiagonal;thusthemostindividualistandleastconformistsocietieswouldbethoseoftherichestcountriesoftheworld.TheAfricannations,foundattheoppositeendofthemap,areevidentlythemostcollectivistandsociallyconservative.EmergingAsiaisinbetween,whereasJapanisobviouslynolongercharacterisedbytheconformism and collectivism that it used to be associated with somegenerations ago. Nowadays, Japan leans strongly towards theindividualistvaluesintheeasternpartofthemaponGraph3.1,suchaspersonalresponsibility.Thisisoneofthepredictableeffectsofthestrongeconomicdevelopment that tookplace in Japanafter theSecondWorldWar.Theseculturalcharacteristics thatdistinguishEastAsia from the rest

oftheworldhavetremendoussocietalimplications.Afterthefindingsofthe Chinese Culture Connection, Hofstede and Bond (1988) saw a linkbetween the values that defined Confucian work dynamism and fasteconomicgrowth (seechapter11).Noteverybodywasconvincedbythestatisticalcorrelationthough:ifthereissomethingspecialinEastAsian

culturethatcanfuelmiraculouseconomicgrowth,andifcultureisaverystablephenomenon,whydidthismiraclefailtooccurearlier?Development economists have pointed out thatwhat is an advantage

foreconomicgrowthinagivenhistoricalperiodmaybecomeirrelevantinanotherperiod(GallupandSachs,1998).Thereisstrongevidencethateconomic growth is positively correlated with savings rates acrossdeveloping countries but not across rich countries (Dornbuschet al.,2004). Thus, a culture of thrift may be an advantage for China, SouthKorea,Vietnam,EasternEurope and Indiabut not for Japanwhere thisfactor has exhausted its potential (seechapter 7).Also, fast economicgrowthrequiresnon-culturalfactorsaswell,suchasfreemarkets,whichweremissing inChina,VietnamandEasternEuropefora long time,aswell as the adoption of new technology. The EastAsian countries areexcellent adopters but not great radical innovators.Aswe see from themapsinGraph3.1andGraph3.2,imaginationisnotatypicalEastAsianvalue; it ismostlycherished in the richWesternworld.TheEastAsiancountrieshadtowait for theWest toproduce the technologies that theyneededtocatalysetheircultureofhardwork,savingandperseverance.TheChineseCultureConnection(1987)providedculturalindicesfora

very limited number of countries. Subsequently,Hofstedeetal. (2010),HofstedeandMinkov(2010),Minkov(2011),andMinkovandHofstede(2012)analysedWVSdataandprovidedindicesforculturaldimensionsthat essentially replicated Confucian work dynamism or long-termorientationandweregoodpredictorsofeconomicgrowthacrossover40countries.Hofstede (2001) noted that the long-term orientation dimension

predicted not only economic growth but also educational achievement,especially in mathematics. Although it is clear that East Asianschoolchildren always top the rankings of the Trends in InternationalMathematics and Science (TIMSS) project, especially in mathematics(latest data from Mulliset al., 2007), this hypothesis was hard tosubstantiatefor thepreviouslymentionedreason: the limitednumberofcountries for which long-term orientation scores were available. AsolutiontothisproblemwasprovidedbyMinkov(2008)whoshowedthat

educational achievement, as measured by TIMSS, is strongly andnegatively correlated with WVS items that measure religiousness,nationalprideandparentalprideandformasingledimensionofnationalculturecalled‘monumentalism’.3Itappearsthatsocietiesthatemphasiseprideandstablevaluesandbeliefs,asadvocatedby theMiddleEasternreligions, are characterised by a self-complacency that does notencourage self-improvement through modern education; in fact sucheducationmayevenbeviewedasathreattotheexistingsocialsystemofvalues andbeliefs (Minkov, 2011).Vice-versa, theEastAsian societiesemphasise modesty, humility, adaptability and a willingness to learnfromothers.Thisgivesthemastrongadvantageineducation.If themonumentalismdimensionwereplottedon themaps inGraphs

3.1 and3.2, itwouldrunexactly fromtheSouthwest (theMiddleEast),where pride and adherence to immutable values and beliefs is stronglyemphasised,totheNortheast(EastAsia)where–apartfromthefocusonthrift and perseverance – humility looms large and individualpolymorphism and adaptability to shifting circumstances are viewed asdesirable.RatherthanseeWesterninfluenceasathreattotheiridentity,EastAsiansavidlyabsorbitandincorporateitintotheircultures.ItisafirmlyestablishedfashionamongtheoverseasChinesetoadoptEnglishpersonal names.ThisWesternisation trend has reachedmainlandChinaaswellwheremanypeoplehavetwonames:aChineseonefordomesticuseandanEnglishoneforinteractionwithWesterners.ConsumptionofWesternartandfashionisalsogrowingstronglyinEastAsiaasopposedto the Middle East and North Africa where it is seen by many asincompatiblewiththelocalcustoms.Themonumentalismdimensionprovidesasophisticated,albeitpartial,

explanation of national differences in educational achievement. Itssophistication stems from its complex theoretical basis: a series oftreatisesbyCanadianpsychologistStevenHeinewhoseesalinkbetweenself-enhancement(afeelingofpersonalsuperiority,suchaspride),self-stability (a focus on an invariant self) and a lack of interest in self-improvement through education. Grasping these conceptsand their

associations may not be easy; yet there is direct evidence of culturaldifferences in the way that different societies view the importance ofeducation.NoorderhavenandTidjani (2001)askedAfricanscholarsandstudents to draw up a list of values and administered it to 1,100respondents: students in Cameroon, Ghana, Senegal, Tanzania andZimbabwe, South Africa (white), Belgium, Germany, the UnitedKingdom,Guyana,HongKong,Malaysia,theNetherlandsandtheUnitedStates.ThestudyrevealedaculturaldimensionthatopposedtheAfricancountries to Hong Kong and Malaysia. Africans were most likely toemphasise hospitality (which is similar to service to others andreciprocation of favours) and traditional wisdom; they attached a lowimportancetoacquisitionofwisdomthroughmoderneducation.InHongKongandMalaysia,thesituationwaspreciselytheopposite.EastAsianvalueswerealsostudiedbySchwartz(1994)aspartofhis

large cross-cultural project, using data from 38 nations. Unlike thepreviouslydiscussedanalyses,Schwartz’sfindingsdidnothighlightanyconspicuous East Asian characteristics that give the region a distinctculturalidentity.It did provide some additional glimpses into the EastAsian cultures

though.Asawhole, they,andespeciallymainlandChina,werefoundtobestronglyhierarchicalandlowonegalitarianism.Thisseemstoreflectacceptance of differences in social status rather than support for socio-economic inequality – relatively low in East Asia despite its recentgrowthinChina.SchwartzalsofoundlowintellectualautonomyinEastAsia;adimensionthatismostlyaboutcreativityandbroad-mindedness.This confirms the lowemphasis on individual imaginationknown fromthe WVS. East Asia also scored low on harmony which stands forprotectionoftheenvironment.Schwartz also highlighted some differences between the East Asian

countries. Japan did not share the low interest in intellectual autonomythatwas reported forHongKong,China, Taiwan and Singapore.ChinaandJapanhadhighscoresonmasterybutSingaporescoredlow.

Personalitytraits

MeanBig-Fivepersonalitytraitsfornationsandethnicgroupshavebeenreported in three large cross-cultural studies: McCrae (2002), McCraeandTerracciano(2005),andSchmittetal.(2007).Someoftheresultsarestronglydiscordant,which raises thequestionofwhichstudyshouldbebelieved and what the reported group-level measures actually mean.4Nevertheless,thefirstandthirdstudiesconcuronsomeoftheirfindingsaboutEastAsians:Japanese,SouthKoreans,mainlandChinese(missinginthethirdstudy),HongKongChineseandTaiwanese.Respondentsfromthesesocietiesdescribe themselvesasstronglyneuroticandintroverted.Thus, East Asians are prone to experience anxiety, stress and worry.Relativetootherethnicgroups,theyarelesslikelytobecharacterisedbywarmth, gregariousness, excitement-seeking tendencies and positiveemotions.Additionally,EastAsiansdescribe themselvesasvery lowonBig-Fiveconscientiousness.Thisfindingmaycomeasasurprise.Yet,itis perfectly logical.At the national and ethnic level, theconscientiousness dimension correlates with religiosity and reflects arespect for thepastand its traditions; itdoesnotmeasureanything likereliabilityorpersonal responsibility.Theevidenceconcerning theotherBig-FivetraitsinEastAsiaislessclear.5

Emotionalandcognitivepatterns

A number of authors have discussed an important cultural contrast inemotion and cognition (seechapter16):dialecticismversusanalyticismor absolutism (Choi and Choi, 2002; Heine, 2001; Hofstede, 2001;Minkov, 2011; Nisbettet al., 2001; Peng and Nisbett, 1999; Peng andNisbett, 2000; Penget al., 2006). EastAsians have been described aspossessingdialecticalfeelingsandthoughts:aninclinationtoexperienceemotionsofoppositevalence(‘Iamsadandhappy’)atthesametimeorwithinshortperiods,topresentambivalentself-descriptions(‘Iamstrictandlenient’),andtoreconcileapparentcontradictions(‘Thisisbothgood

andbad’).TheNorthAmericans towhomtheyhavebeencomparedaretypically less likely to exhibit such forms of dialecticism.Whilemoststudiesofthistypecompareonlyafewculturalgroups,Schimmacketal.(2002) studied the frequency of pleasant and unpleasant emotions in5,866 university students from 38 nations and found that East Asians(HongKongChinese,Japanese,mainlandChineseandSouthKoreans)aswellasThaisandNepalese,wereleastlikelytodissociatethetwotypesof emotions, whereas Arabs, Latin Americans and Anglos were mostlikelytoexperienceeitherofthetwobutnotbothwithinashortperiod.The studyprovided strongevidence for a cultural contrast in emotionalpatternsacrossmanyethnicgroups,rangingfromEastAsiandialecticism(atleastinrelativeterms)toArab,AngloandLatinabsolutism.Minkov (2009) surmised that East Asian dialecticism would have

societal implications. It would be associated with a tendency to avoidextreme statements concerning socially important issues, such as ‘Thegovernment of this country is very good’ or ‘Our government is verybad’. If one starts from such an extreme position, dialecticalreconciliation of opposites becomes more difficult than if the initialposition is ‘The government is somewhat good’, which is easy toreconcilewithanopponent’sstance:‘Thegovernmentissomewhatbad’.Minkov (2009) analysed nationally representative cross-cultural datafrom the Pew Research Center and found strong support for thishypothesis. South Korea, China, Japan and Indonesia had the lowestsocial polarisation index, expressed as low percentages of respondentswhoadoptextremepositions in judgementsonsociallysensitive issues.The Middle Eastern countries, Tanzania and Pakistan had the highestsocial polarisation, expressed as a high percentage of respondentsadopting extreme positive positions and high percentages adoptingextreme negative positions on the same items. The United Statesexhibited the same trend. The social polarisation indexwas highly andnegatively correlated with the emotional dialecticism index ofSchimmacket al. (2002), cross-validating both measures and showingthat dialecticism is a multifaceted phenomenon. Minkov (2009)concluded that the East Asian societies have a tendency to seek

dialectical reconciliation of conflictingopinions so as to avoid socialtension,whereastheMiddleEast,sub-SaharanAfrica,Pakistanandothernationsarecharacterisedbyanabsolutismthatcaneasilybreedinternalconflict,especiallyifitiscoupledwithsocialfactorssuchaspoverty(seechapter14).These findingsmayhelp explain somedifferences in communication

andexpressionstylebetweenAngloandotherWesterncountrieson theonehandandEastAsiaontheother.IntheWest,EastAsiansareoftenperceivedashavingafrustrating tendencytoavoidansweringquestionswithacategorical‘yes’or‘no’.InEastAsia,suchcategoricalstatements,andespeciallyaflat‘no’,maybeviewedasimpoliteandaninvitationtoaconfrontation.

Socialbehaviourindicators

Using data from theUNOffice onDrugs and Crime (2010), includingofficial police records and estimates by public health organisations,Minkov(2011)compiledanationalmurder index for173countriesandstudied the structure of the relationships between that variable and itsmain correlates. He obtained two factors. The first was called‘exclusionismversusuniversalism’.The exclusionismpolewasdefinedmainlybyhighcorruption,highroaddeathtollsandhighpercentagesofadults living with parents.6 As this dimension was strongly andnegatively correlated with national wealth, it highlighted importantdifferences between the East Asian societies, reflecting their unequalwealth: relatively high road death tolls and corruption in China versuscarefuldrivingandrelativetransparencyinSingaporeandJapan.The second factor that emerged in this analysis was called

‘hypometropiaversusprudence’.Thehypometropiapolewasdefinedbyhighmurder rates and highHIV rates.Adolescent fertility and low IQ(thus,lowgeneraleducationandespeciallylowmathematicalskills)werealsostronglyassociatedwiththisfactor,7butalsowiththefirst.Minkovassociated this dimension with mating competition theory which

discusses a link between free and intense competition for womenwithintra-societal violence and risk acceptance. The highest scores on thisdimension were obtained for the sub-Saharan and Central Americancountries, the lowestwere those ofChina,Korea, Japan andSingapore.Thisanalysisexplainedawell-knowncombinationofEastAsiansocietalcharacteristics:highperformanceonIQtests,lowintra-societalviolence,lowadolescentfertility,infrequentsexualnetworkingandlowHIVrates.A large cross-cultural study by Schmittet al. (2004) confirmed thatsexualcompetitionandnetworkingareatypicalofEastAsia.Thatregionhadthelowestscoresonmate-poaching:attemptingtoattractsomebodywhoisalreadyinvolvedinaromanticrelationshipwithsomeoneelse.

Work-relatedculturalcharacteristics

Countless studieshave investigatedvariouswork-relatedvalues, beliefsand ideologies inEastAsia but relatively few of these are large cross-culturalcomparisonsthatcanbeusedtoplacetheEastAsiansocietiesona world cultural map. Still, a few studies provide precisely thatinformation.Unlikethepreviouslydiscussedresearchonvalues,abilitiesand behavioural indicators, comparisons ofwork-related traits have notrevealed any strong peculiarities or extremes that set East Asia apartfromtherestoftheworld.Nevertheless,thefindingsmaybeofinteresttointernationalmanagersandconsultants.Smithetal.(1996)analysedquestionnaireanswersfrom8,841manual,

clerical,managerialandprofessionalworkersfrom43countries.Oneofthe dimensions that they extractedwas called ‘egalitarian commitmentversus conservatism’. It highlighted various contrastswhich essentiallydistinguishedtheWestEuropeanandAnglocountries,whereegalitariancommitment was found to be the strongest, from the developingcountries,whereconservatismloomedlarge.Interestingly,alloftheEastAsian countries in the sample gravitated toward the conservatismpole;thiswasmostly trueofChinaandSouthKorea,but tosomeextentalsotrueofwealthySingapore,HongKongandJapan.

In thedeveloping countries (highon conservatism), aswell as in therichEastAsiannations,respondentsexpressedastrongeragreementthatthecompanyshouldbeinvolvedintheemployees’privatelivesandtakeintoaccountthesizeoftheirfamilieswhendeterminingtheirsalaries.Inthe rich Western countries (high on egalitarian commitment), theprevalent opinion was that jobs and private lives should be strictlyseparated.Respondentsindevelopingcountries,aswellasinwealthyEastAsia,

were more likely to agree to work overtime hours without financialcompensation,expressingtheviewthattheboss’sappreciationwouldbea sufficient reward. The ideal manager was described as a benevolentfatherfigure.Hewasexpectedtoknowtheanswerstomostproblemsandwasallowedtoadoptanauthoritarianstyle.RespondentsintheWesterncountries did not share these views. They expected a participativemanagementstyle.TheseconddimensiondiscussedbySmithetal.wascalled‘utilitarian

involvement versus loyal involvement’. It created a clear geographiccontrast.The formerSovietblocandmainlandChinawere foundat theutilitarian involvement extreme. All Asian countries (except China),some African countries and the Middle East were at the loyalinvolvement pole. The respondents from countries at the utilitarianinvolvementextremeperceivedorganisationsaslooseamalgamationsofindividuals coming together to pursue individual interests rather thancommit to group goals. The respondents from countries at the loyalinvolvement extreme viewed organisations as organic entities wherepeoplesharetheconsequencesofcollectivefortuneandsetbacks.Project GLOBE (Dorfmanet al., 2004) studied the views of 17,370

middlemanagersin951organisations,operatingin59countries.Amongother things, the respondentswereasked todescribe the ideal leaderbyansweringaquestionnaire.Relativetotheirpeersinothercountries,andespecially inNorthwesternEurope and theAngloworld, respondents inEast Asia (China, Hong Kong, Japan, Singapore, South Korea andTaiwan),SoutheastAsiaandtheMiddleEastwerefoundtoattachalowimportancetoaparticipativeleadershipstyleandtobemoretolerantof

anevasive,self-protectivestyle.Also,therewasnostrongappreciationofcharismatic leadership in East Asia, although the Middle East scoredevenlowerinthatrespect.Smithet al. (2002) studied middle managers in 53 countries, the

averagesamplesizebeingabout100percountry.Therespondentswereaskedhowdifferenttypesofmanagerialdecisionsweremadeindifferentcircumstancesintheirorganisations.EastandSoutheastAsia(aswellasIran, Bulgaria and Romania) had the highest scores in the world onrelianceonwidelyacceptedbeliefsastowhatisright.Also,SouthKorea,Hong Kong, Macau and Singapore were among the countries with thestrongest relianceonunwrittenrules. InJapanandChina this trendwasconsiderably weaker, whereas Taiwan had the lowest score on thatmeasureofallinthesample(seechapters5,6,7 and8).Relative to therest of the world, reliance on superiors was also found to be highthroughouttheEastAsianregion,exceptinSingapore.Alsoinarelativeperspective,theEastAsiancountriesshowedalowrelianceonguidancefrom subordinates, specialists, co-workers and the managers’ ownexperience.Thus, compared to theprevalentmanagement style inotherregions, East Asian management can be summarised as authoritarianratherthanconsultative.

Conclusions

Tosumup,thischapterprovidesanoverviewofcultureandmanagementinEastAsia.Itprovidesadefinitiveintroductiontotheliteratureonthesubjectwhichisnowvoluminousrelatingtothecomparativeresearchinthe field. Amongst other subjects, it looks at ‘Confucian Dynamism’whichhasbeeninvokedtoexplaineconomicsuccessintheregionanditsimpactonbusiness. It also covers the tensionbetween ‘traditional’ and‘modern’ culturalvalues and their impactonmanagement.While somefindingsabouttheculturaldifferencesbetweenEastAsiaandtherestoftheworldseemintuitivelylogical,astheypartlyconfirmpopularlyheldimpressionsandstereotypes,othershavecomeasstrikingrevelationsto

Westerners andAsians alike. The chapter examines some of the mostsalientculturalcharacteristicsthatdistinguishEastAsiansocietiesfromthoseoftherestoftheworld,aswellasatthesametimealsoexaminingsomeoftheirinternaldifferences.

Notes1ThedataarefreelyavailableintheofficialWVSwebsite:http://www.worldvaluessurvey.org2 Graph 3.1 represents a two-dimensional plot of nine values for children from theWVS.

‘Unselfishness’wasnotincludedintheanalysisasitdoesnotcorrelatesignificantlywithanyoftheotherninevaluesandrepresentsanoddvariable.Theplotwasproducedafterz-scorestandardisation by variable. The plot can be obtained in nearly identical forms throughmultidimensionalscalingorfactoranalysis.Graph3.2plotsthe56WVScountriesonthetwodimensional spacedefinedby theninevalues.BecauseHongKong isa strongoutlierwithunusuallylowscoresonallvariables,itwasdroppedfromthisanalysis.

3 The term ‘monumentalism’ reflects the fact that the human self in societies with strongreligionandprideislikeaproudandstablemonolithicmonument.

4 The first and secondof these studies are similar in that theyused self-reports,whereas thesecondreliedonpeer-reports;thismayexplainsomeofthediscrepancies.

5 It is also interesting to note that a Chinese personality inventory revealed a somewhatdifferentstructurefromtheBigFive,aswellasanindigenousChinesedimensionwithoutanequivalent in theAmericanmodel(CheungandLeung,1998;Cheungetal., 1996;Cheungetal.,2001).

6Minkovinterpretedexclusionismversusuniversalismasacontrastbetweenconcernforone’sin-group coupled with exclusion and neglect of out-groups versus in-group disintegrationanduniversalruleoflaw.

7 Minkov explained hypometropia (meaning ‘near-sightedness’) as a short-term vision inreproductive matters: a focus on risky and potentially violent mating competition for thepurpose of early and abundant procreation, ensuring the survival of society, often at theexpenseofanindividual’slife.Prudencewasdefinedasalong-termstrategythatbetsonriskavoidanceandindividuallongevity.

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Appendix

ExpansionsofthecountrynameabbreviationsinGraph3.2.

ANDR AndorraARGN ArgentinaAUST AustraliaBRAZ BrazilBULG BulgariaBURK BurkinaFasoCANA CanadaCHIL ChileCHIN ChinaCOLO ColombiaCYPR CyprusEGPT Egypt

ETHI EthiopiaFINL FinlandFRAN FranceGEOR GeorgiaGERM GermanyGHAN GhanaGUAT GuatemalaINDI IndiaINDN IndonesiaIRAN IranIRAQ IraqITAL ItalyJAPN JapanJORD JordanKORE KoreaMALS MalaysiaMALI MaliMEXC MexicoMOLD MoldovaMORC MoroccoNETH NetherlandsNEWZ NewZealandNORW NorwayPERU PeruPOLN PolandROMN RomaniaRUSS RussiaRWAN RwandaSAFR SouthAfrica

SERB Serbia

SLVN SloveniaSPAI SpainSWED SwedenSWIT SwitzerlandTAIW TaiwanTRIN TrinidadandTobagoTHAI ThailandTURK TurkeyBRIT UnitedKingdomUKRN UkraineURUG UruguayUSA USVIET VietnamZAMB Zambia

4EastAsianmanagementAnoverview

KeithJackson

Introduction

ThediscussioninthischapterprofilesEastAsianmanagementbothasanentityand in termsof itsdistinct systemsand styles. It is structured inpursuitofthefollowingthreemainsetsofquestions:

To what extent do East Asian management systems and stylescontinuetodifferamongthemselves?TowhatextentdoEastAsianmanagementsystemsandstylesappeartoinfluenceeachother?WhatspecificchallengesarelikelytoshapethedevelopmentofEastAsianmanagementsystemsandstyles?

Addressingthesequestionsoffersreadersabroad-brushfoundationtothemorein-depthdiscussionspresentedelsewhereinthisbook.

Managementsystems

ReferencetodistinctnationalorregionalmanagementsystemsrelevanttoEast Asia is established in the relevant literature (cf. Whitely, 1990;Koike, 1995;Warner and Joynt, 2002; Child andWarner, 2003; Chen,2004). In etymological terms, the English word ‘system’ denotessomething that is ‘brought together’ with the result that many diversepartsor‘subsystems’areperceivedtoformacoherentwhole.Werefertosystems when we attempt to describe, explain, compare and (albeitspeculatively) predict patterns of change; or, from a management

perspective, perceived or discernedneeds to change. The underlyingtheory is that each system develops towards a dynamic state ofequilibriumasitrespondstopressuresthatemergebothfromwithinandfrom outside the system (cf. Von Bertalanffy, 1968). Themanagementsystem of any one industry or economy is under constant pressure torespond and adapt to changes emerging from its macro-businessenvironment. In strategic terms, this environment might be describedusing aPESTEL analysis of the Political, Economic, Socio-cultural,Technological, Ecological and Legal factors that – singly and incombination – appear to act and interact as forces prompting changewithinandacrossnationalmanagementsystems.Thedynamicofhowmanagementsystemsevolvemightbevisualised

as a basic ‘I > P > O’ pattern, whereby Inputs influence discernibleProcessesofchangewhich,whenmanaged,generateOutputsthatbecomeinputs to future change processes. To illustrate, Japan’s ‘nationalinnovationsystem’(NIS)iscurrentlychallengedtodevelopnewformsofpolitical, economic, technological and legal partnering arrangementsbetween government, university research centres, venture capitalproviders and new technology-based start-ups in order to remaincompetitivewith itsEastAsianneighboursacrossa rangeofwhatwerepreviously regarded in Japan as highly successful business sectors: e.g.themanufactureofsemiconductorsandconsumerelectronics(cf.JacksonandDebroux,2009;Taplin,2007).

Comparingmanagementsystems

Onebasicconceptualapproachtowardscomparingsystemsistoidentifythosethatappearrelativelyclosedtoinputsdrivingchangeandthosethatappear relatively open or permeable (Córdoba-Pachón, 2010). Eachnationalorindustrialsystem–and,byextension,eachorganisationasasubsystemsupportingthatsuperordinatesystem(Morgan,1989)–mightbe interpreted as a distinct social, economic and technological entitycompelled to respond to ‘globalisation’ (however defined) and to the

rapid expansion and extension of cross-border business interests andactivities. To illustrate, East Asian societies are characterised by ademographic trendwhereby a dwindling number of employees is taxed(literally)tosubsidisethewelfareofrapidlyageingpopulations.Anothersignificant trend in the People’s Republic of China (PRC) or hitherto‘China’,isthemigrationofanythingupto200millionworkersfromtheprovincestowardsnewurbanandindustrialdevelopments(cf.Liu,2010).GiventhatEastAsiansocietiesareperceivedtoremain–inculturalandethnicterms–relativelytraditionalorimpermeablecomparedtoWesternsocieties, thesedemographicshiftsactas‘inputs’ towards theevolutionofestablishedsystemsandstylesofmanagement.In his comprehensive comparison of ‘Asian management systems’

Chen(2004)drawsonParsons(1956)toemphasisethe‘P’elementoftheaforementionedI>P>Odynamic.Chendefinesamanagementsystemstructurally as a process of interaction across ‘three distinctive layers’(2004: 18). These include managing technical core activities such asplanning and supervising, influenced by variables such as fluctuatingmarket conditions, size and history of organisation along with currentmanagement policy or philosophy. The second ‘layer’ is shaped byattempts tomanage thesocial-culturalsystemswithinanorganisation–an endeavour influenced by national, regional and industry-specificcultures(cf.Hofstede,1980,2001;Hofstedeetal.,2010).Thethirdlayercomprises the typesofexternal relationships thatallorganisationsneedin order to survive, including relationships to stakeholders such ascustomers, competitors, suppliers, distributors, local and nationalgovernments along with regulatory bodies such as the World TradeOrganization(WTO).Inhisintroduction,Chen(2004)presentsanumberofmodelsdesigned

to describe and compare national and regional systems ofmanagementbefore settling on one that links management philosophy andenvironmentalfactorsasinputfactorstothedevelopmentandexpressionof distinct processes of competitive strategy development supported byoperationalmanagementpractices–processesemphasisedinthiscurrentdiscussionasdistinctmanagementstyles.Theperformanceoutcomesof

these interdependent processes become evident inmeasures standard tobusinesspractice:Chen (2004:18)definesperformancedually in termsof operational management effectiveness and more strategic enterpriseeffectiveness – a distinction adopted in this current discussion. Insummary Chen distinguishes between national and regional systems ofmanagementby themanner inwhicheach systemappears to respond–uniquely – over time to the challenges generated across the globalbusinessenvironment:e.g.thePESTELfactorshighlightedabove.

Managementstylesandcultures

Thenotionof‘culture’relevanttoEastAsianmanagementisdiscussedinchapter3.Here, it is salient to recognisehowreference tomanagement‘philosophies’ (Chen, 2004) or the beliefs and values that inform‘management practices’ (Warner, 2003a;Warner, 2011) specific to oneor other Asian culture might inform our discussion of distinctmanagementstyles.Wemight reflect on how the English word ‘style’originatesfromLatinforawritinginstrument(stilus)andcametosignifyapatternor ‘style’ofhandwriting thatcouldbeobserved todistinguishthe behaviour and (speculatively) attitudes of one individual or social-culturalgroupfromanother(Ayto,1990).Amanagement‘style’canthusbe understood as a ‘subsystem’ to a management system in that itexpresses a patterned ‘coming together’ of behavioural choices that(whenobserved)distinguishonegroupofmanagersfromanother.ThesediversestylesbecomeevidentasgroupsofEastAsianmanagersseektorespondtotheforcesforchangegeneratedfromacrosstheirstrategicandtheiroperationalworkingenvironments(Warner,2003b).

Comparingmanagementstyles

Embedded in cultures, management systems evolve over time (seechapter11)andnotablyinresponsetoeconomicpolicychangesinitiatedby governments and/or as a system-wide response to changing market

opportunities. To illustrate, Cooke (2012: 180) traces the evolution of‘Chinese leadership and management styles’ relevant to State-OwnedEnterprises (SOEs) from the ‘state-planned economyperiod (1947–78)’to the ensuing ‘marketisation period’ initiated in the PRC by DengXiaoping. Observing how both Chinese and non-Chinese managersrespond to the opportunities that these political and economic changescreatedshouldgivesomeindicationof theirrelativeorpreferredstyles.Specific to post-marketisation China, Siet al. (2009) offer a strikingillustrationofhowmanagementstylesmightbeidentifiedandcompared.Buildingonprevious researchbyTurnley andFeldman (1999) focusingon the ‘psychological contracts’ negotiated by USAmerican managerswith their employers, Si and his colleagues in Shanghai elicited thebehavioursandvaluesexpressedbyChinesemanagerswho,liketheirUSAmericancounterparts,perceivedtheirindividualcareerdevelopmenttobe dependent on the attentiveness and competence of senior line-managers.IntheUSAmericancase,themid-careerrespondentsadmittedto reducing their commitment to current tasks after deciding to seekanother job. In contrast, the Chinese managers in the Siet al. surveyclaimed tocommitmoreovertly tocurrent tasks in theexpectation thatthiswouldmeritamorepositivecharacterreferenceastheytoolookedtoexit their current employer. In both cases, the managers involvedexpected more recognition, reward and (not least) ‘voice’ (cf.Marchingtonet al., 2001). Echoing Child and Warner (2003), it isrelevantheretoexploretheextenttowhichtheseniormanagersinvolvedmight respond to this emergent challenge of professional expectation:e.g.whether the embedded culture-specific values and social structuresassociatedwithConfucian traditionmighthinder these seniormanagerstowardsallowingmorevoicetosubordinates(cf.Warner,2003b).

HowEastAsianmanagementsystemsandstylesdiffer

In the1980s, theco-founderofHondaMotorCorporation(T.Fujisawa)observed how US American and Japanese management systems were

‘ninety-five per cent the same’, and yet ‘different in all importantrespects’ (Adler,1986;op.cit.Chen,2004:265).This typeofellipticalcomment promptedWestern management researchers to work out howJapanese multinational corporations (MNCs) had begun competing soeffectively and globally in business sectors as diverse as consumerelectronics, white goods and automobile manufacturing: these largeJapaneseorganisations(kaisha)hadbegunpenetratingmarketsformerlydominatedbyUSAmericanandotherWesternMNCs (cf.Abeglen andStalk,1985;Whitehill,1991).Howwas this possible?One answer to this question is to invoke the

systems and styles of management considered by scholars to bedistinctiveand,indeed,‘unique’toJapan(cf.Haghirian,2010;Bebenrothand Kanai, 2011). This claim to uniqueness might be illustrated inreference to Japan’s Toyota Motor Corporation. Founded in 1937, itdirectly employs over 260,000 people worldwide. Members of thefounding Toyoda family continue to hold positions on the executiveboard. In terms of system outputs Toyota is an organisation with areputationfordrivinginnovation(cf.NonakaandTakeuchi,1995;Liker,2004; Takeuchi and Nonaka, 2004).As a legacy to manufacturing andinnovation management systems worldwide, Toyota has given us newstandardconceptssuchaskanban-style‘just-in-time’(JIT)inventoryandsupply chain management, and ‘quality circles’ whereby mid-levelmanagersandsupervisorsareallowedspacetoidentifyandcommunicateupwardsopportunities forprocessandproduct improvement,andkaizenwhich (even without translation) has become widely interpreted as amanagement philosophy relentlessly seeking process and productimprovement, not least in the reduction of product defect rates and theprocessesofresourcewastemanagement(Rose,2002).ThesedistinctiveelementsbecamerecognisedastheformidableToyotaProductionSystem(TPS) and subsequently underpinnedwhat became heralded inWesternmanagementcirclesasTQM(cf.Burman,1995;Trott,2004).Morerecently,asimilaranalysisofmanagementsystemsandstylesin

Japan(seechapter7)mightindicateovertimehowsystemstrengthscanbecomeweaknesses,especiallyiftheyremaintooclosed.Oneresultwas

theso-called‘lostdecade’of the1990s,extendingnowintoaperiodofslow-burning economic recession (cf. Porteret al., 2000; Jackson andDebroux, 2009). However, a number of new entrants to global marketprominence includeNintendo,Uniqlo andSanrio – creators of the nowubiquitous ‘HelloKitty’ brand. Their emergencemight be attributed tothe‘coolJapan’effect(cf.Storz,2009)evidentalsointheglobalspread(note:withlittledirectpromotionalsupport)ofsushi,bento,mangaandother ‘Asian fusion’ lifestyle choices readily associated with a cross-nationally mobile and cross-culturally aware cadre of youngprofessionals (cf. Ohmae, 2001; Jackson, 2010). However, anotherinterpretationemphasisesasetofmanagementpracticesthatmightbeginto explain the distinctive ‘five per cent’ alluded to by Fujisawa andsubsequently highlighted by Chen (2004). These involve emphasisingtrusting as opposed to controlling (i.e. over-supervising) employees incoreoperationalroles(cf.Ouchi,1981;JacksonandTomioka,2004).Toillustrate,withinTPSateamofassemblyworkerscould(intheory)

stopanentireproductionlineif theybelievedthecomponents inputdidnotmatch the required quality standards. This social-cultural emphasison trusting in the competence and commitment of operational levelemployeestogenerateandassessprocessoutcomesrelevanttomeasuresofenterpriseeffectivenessisdevelopedbyTakeuchiandNonaka(2004)intotheintriguingconceptofbawhichtheydescribeasaphysicalandorvirtual ‘place’ designed bymanagers or innovation leaders for creatingandsharingknowledge. Itprovidesa forumfor ‘enhancingmutual trustamongparticipants’(2004:56).TheycitethedevelopmentoftheToyotaPriusasaproductofba.Itwasintroducedtomarketin1997andatatimewhen the innovation systems supporting manufacturing giants such asFord and GM were visibly crumbling. Unusually for a traditionalJapanesekaisha, the project team behind the Prius were instructed byproject leaders to ‘evaluate the new technology’, regardless ofprofessionalbackgroundor‘speciality’andto‘thinkwhatisbestfortheproduct, instead of representing one’s department’s interests’ and, indoing this, ‘not care about one’s age or rank’ (Takeuchi and Nonaka,2004: 109). Here, as elsewhere, the organisation’s key resources are

human, and both management and enterprise effectiveness might bemeasuredbytheextenttowhichteamsofToyotaemployeesareabletocreate and share the knowledge that feeds processes of product andproductioninnovation–aspacemadeavailablealsotoSMEsentrustedastheorganisation’skeystrategicsuppliers (cf.Sako,1992)Asastrengththis style of innovation management appears effective. However, itsrelativeimpermeability(i.e.itsessentialJapanese-ness)mightovertimeprove tobeaweaknessaspatternsandpracticesbecomeembeddedandunresponsive to key environmental changes (cf. Jackson and Debroux,2009).Consequently, the pattern of innovation management in Japancontinues to emphasise intra-preneurial (i.e. closed subsystem) stylesrather than themore open entrepreneurial styles currently attributed toChinesemanagementsystems(cf.StorzandSchäfer,2011).Withtrustcomesspace‘tomakemistakes’(Handy,1993),andinEast

Asiancontextsparticularly thepotential to ‘loseface’ (cf.Trompenaarsand Hampden-Turner, 1998; Ambleret al., 2009). We can imagine anintensepressuretoperformtopreordainedexpectations–apressurethatboth competent and less competent senior managers might exploit. Toillustrate, as Toyota Motor Corporation sought to become the world’sleading automobile manufacturer (by volume) it was (like itscompetitors) working to absorb rising commodity prices for oil andaluminium.Thepressureonsomemid-levelmanagersbecameevidentinanunprecedentedlevelofmediareportinginJapanaboutkaroshior theprocesswhereby aspiring and committedmanagerswork themselves toan untimely death (Takeda, 2002). This type of gritty, life-threateningcommitment toworkmight reflectan indigenousJapanesemanagementphilosophy such as the ‘community or fate’ (unmei kyodotai) notioncommonly attributed by scholars to a people inhabiting an islandcontinually formed and re-formedby a hostile natural environment (cf.Koike,1995;Debroux,2003).Othersmightinvokesamuraitraditionsandvalues ofbushido or ‘the way of warriors’.Against the background ofcurrentpolitical andeconomicdevelopments in Japan,both invocationsappearsimplistic.

HowEastAsianmanagementsystemsandstylescompete

Against this background,we can also consider the typeofmanagementsystems and styles that support the long-termmanagement of strategicbusinessrisk.Similartothekeiretsu-typeorganisationsinJapansuchasToyota and Mitsubishi, South Korean Hyundai is achaebol-typeorganisation that over time has engaged in chemicals, steel andaluminium manufacture, shipbuilding, marketing, construction andfinancial services (Lansburyet al., 2007). The Japanese termkeiretsutranslatesroughlyasa‘linkedtogether’systemoforganisation(cf.Chen,2004) whilechaebol has been interpreted as a system of businessorganisation ‘held together by cross-shareholdings, subsidies and loanguarantees in an opaque fashion’ (Rowley and Bae, 2003: 189) –‘opaque’, that is, tonon-Koreansandorganisationaloutsiders, includingnon-Koreancompetitors.Theintegratedstructureofbothsystemsservestosupport long-termplanningwhilesimultaneouslyofferingabasis forrespondingtorisksgeneratedinthestrategicbusinessenvironment–thatis, for as long as these risks appear relatively predictable. In the late1990s,SouthKoreabecamesweptupinthethen‘Asianeconomiccrisis’andthefragilityofthe‘opaque’financialandcommercialcreditsystemsbecameexposedbyglobalfinancialmarkets,aschapter8spellsout.Fora short period, the South Korean economy effectively came under theadministrationoftheInternationalMonetaryFund(IMF)–ahumiliatingexperience for a people who had achieved an unprecedented rate ofnational economic and technological progress since the ceasefire thatinterrupted(butdidnotformallyend)theKoreanWarin1953.However,inordertoemergefromthecrisisandrebalancethenationalcurrencythefinancial system was both rethought and reformed, and the capitalsupportingthecontinuingexportdrivesofchaebolsuchasHyundai,LGand Samsung became more ‘real’ and sustainable in global economicterms(cf.CoeandKim,2002).LikeToyota,theHyundaichaebolisamajoremployerandthusapillar

of a national social economy. Senior management systems tend tooverlap with national political systems, thus supporting comparatively

assuredaccesstocommercialcreditsand(potentially)tosourcesofhigh-levelcorruption.Theseniormanagersofkeiretsu andchaebolare likelytobemale:however,and,quiteunliketheirJapanesecounterparts,seniorKorean managers are likely to have experienced commandresponsibilitiesinthenationalarmy–anexperiencethatinformstheirin-group style of management communication (cf. Merkin, 2005).Consequently, when comparing Japanese and Korean managementsystems and styles some understanding of the historical context isrelevant. First, there is the legacy of Japanese colonialism and culturaloppression on the Korean peninsula between 1910 and 1945. Second,there was the aforementioned Korean War and the observation thatJapanesekaisha–supportedbytheUnitedStatesofAmerica–benefitedinbusinessandtechnologicaltermsfromboththewarandthesubsequentpeace dividends generated by that conflict (cf. Allinson, 1997). Since1953 industrial development in the South Koreanchaebol retraced apatternofexport-orientationsetbyrivalJapanesekeiretsu,albeitdelayedby events for around fifteen years (Chen, 2004). Correspondingly,Western observers of South Korean management styles identify anationalistic ‘catch up’ mentality and a ‘can do’ entrepreneurial spiritalmost fatalistically prepared for adversity (cf. Rowley and Bae, 2003;RowleyandPaik,2009;RowleyandJackson,2011).Thehumiliationofthe‘IMFperiod’promptedafreshlycapitalisedburstofcreativeexportenergy(cf.CoeandKim,2002).SouthKoreanchaebolsuchasSamsungElectronics andLG excel in themarketing and export of, for example,memorychips,mobilephone technologyandconsumerelectronicssuchas flat-screen televisions. In global terms both producers currentlyoutperform their nearest Japanese rivals.As a vivid illustration of thistrend, the rolling neon advertisement for Sanyo, a Japanese consumerelectronicsmanufacturer, had (since 1984) been an iconic feature overPiccadillyCircusinLondon–similartoNewYork’sTimesSquareasaprime location for global advertising. In September 2011, the iconicSanyobannerwasreplacedbyanadvertisementforHyundai.

HowEastAsianmanagementsystemsandstylesinfluenceeachother

OneprimarysourceofinfluenceshapingtheexpressionanddevelopmentofmanagementstylesacrossEastAsiacanbefoundinasharedlegacyofConfucianphilosophy (seechapters1,5,6andothers).EchoingWarner(2003b), this enduring legacy accounts for the ‘family resemblances’evidentacrossEastAsianmanagement.Theextent towhich this legacymight influencethedevelopmentofdiversemanagementsystemsmightbe traced by following recent flows andpatterns of ‘foreign directinvestment’(FDI)acrosstheregion.AlongwithFDI,comesthetransferof newknowledge and technologies: i.e. assuming the systems targetedfor FDI are open to such inputs. Here it is relevant to highlight thecontribution made in East Asia (as elsewhere in the world) by themanagers of small andmedium-sized enterprises (SMEs).OfparticularrelevancetotheaforementionedConfucianlegacyisthe‘ChineseFamilyBusiness’(CFB)type(Chen,2004)ofSME(seechapter12).TheCFBisacceptedasoneofthemostsuccessfulmodelsforbusinessorganisationin the history of global commerce (Redding, 1990). Consequently, theCFB continues to form the bedrock of successful economies such asSingapore, Taiwan and Hong Kong SAR (seechapters 6 and12) (cf.Ambler and Witzel, 2000, Selmer and de Leon, 2003; Chou, 2003;Ambleretal.,2009;MeadandAndrews,2009).Asasystemfordoingbusiness,theCFBemulatesthesocialeconomic

unit that is the family and, beyond this, the extended network ofrelationshipscommonly referred to inChineseasguanxiorasystemofsocialandbusinessrelationshipsthatextendacrossChinesesocieties(aschapter 10 clearly shows) and as perhaps unspoken obligations acrossgenerations of family members (cf. Pye, 1992; Dunfee and Warren,2001).Thisconcept isdiscussed inmoredetail inchapter10.Fornow,we can refer toguanxi in order to highlight some of the systemicconsequences of the ‘family resemblances’ that characterise Asian asopposed to non-Asian contexts for the development of management

philosophiesandpractices.Here,wecanciteTianwhodefinesguanxiasa‘favourseekingpragmaticsocialpractice’(2007:51).Whileadmittingthat thepractice isnotunique toChinesesocietalcultures– inWesterncultureswemightreferto‘connections’–Tianrecognisesitssaliencetobusiness across Chinese cultures, and in Mainland China particularlysince the economic reforms of the late 1970s.A management style tocomplementtheeffectiveworkingof theguanxi system ismianzior thetype of social and business behaviour designed to avoid causing orexperiencinglossof‘face’(cf.ChildandWarner,2003).Combiningself-perceptions and social attributions as complex as integrity, dignity,respect and social reputation, themianzi concept is fundamental toConfuciannotionsofsocialharmonyandisacorestrategicasset in thedevelopmentandmaintenanceofbusiness relationshipsbothwithinandbeyond the economic, social-cultural, technological and legal spacesdefinedbytheCFB(cf.Chen,2004;Tian,2007).During the late 1970s, CFBs along with MNCs headquartered in

‘Chinese Circle’ economies such as Taiwan, Hong Kong and MacaubeganinvestingheavilyinthesouthernandcoastalregionsofMainlandChina (Naughton, 2007).With the PRC now ‘open for business’,manyCFBssoughttoreinvestintheMainlandareasfromwhichtheirfamilieshad originated (Peterson, 2012). The strategic focus initially was onexploitinggovernmentsubsidiestomanufacturelow-valuegoodssuchasshoes and textiles for export (Hsing, 1998).The government inBeijinghad long sought to protect the established State-Owned Enterprises(SOEs)fromdirectforeigncompetitionasSOEswere(andremain)majoremployers across China and, in the absence of an adequate welfaresystem, remain majorpillars in the enduring ‘iron rice bowl’ ( tie fanwan)contractbetweenthestateanditspeopletoprovidethemwithworkandabasic incomefor life.Asaresultof theirenmeshment insociallyand historically anchoredguanxi systems, FDI from neighbouringChinese/Confucianeconomiescouldberegardedinsocioculturaltermsas‘non-foreign’ – a process almost of ‘repatriating’ family fortunes (cf.GrahamandWada,2001;Naughton,2007).ThepreciseformandimpactofSMEssuchastheCFBarediscussedin

moredetailinchapter12.Here,wecanobservehowtheflowofFDIfromwithin the China Circle economies soon served (in Western terms) to‘professionalise’thepreferredstylesandexpectationsofmanagersacrosstheChineseMainland.Toillustrate,‘expatriate’managersfromTaiwan-based CFBs could pass on a competitively honed perspective oninternationalmarketingand logistics formanufacturedgoods (cf.Chou,2003). Similarly, their counterparts from Hong Kong could offerinternationally benchmarked services in commercial financing and law(cf.SelmeranddeLeon,2003), aprocessof cross-border collaborationthatsupportstherapidandspectacularinfrastructuredevelopmentaroundthePearlRiverDeltaregionandassuresHongKongaroleatthemouthofoneoftheworld’sbusiestconduitsformanufacturingandinternationaltrade.AstheinstitutionalcontextfortradeandbusinessacrossChinahasbecome more differentiated, managers based in the Chinese Mainlandhavebecomemoreadeptatpositioningtheirgoodsinkeyglobalmarkets,notablyintheUSAandEurope.ThelikesofLenovo,Haier,HuaweiandTsingtao have become global brands in both developed and emergingmarkets, while global players such as GeelyAutomobile have becomeactive in the acquisition of established brands such as Volvo. Swedishmanagersarenowchallengedtoadapt toChinesestylesofmanagementandofdoingbusiness(cf.Isaksson,2009),allowingustolookforwardtotheemergenceoffurtherhybridstylesandsystemsofmanagement.By achieving and successfullymaintaining these positions,Mainland

Chinese managers have developed distinct styles of cross-culturalbusiness negotiations (cf. Pye, 1992; Child and Warner, 2003; Chen,2004;Tian,2007).Their recentachievementsmightbeattributed to theoutcomes of investment at national, regional, organisational andindividuallevelsofmanagementtraininganddevelopmentinChina(cf.Warner and Goodall, 2009; Warner, in this current collection). Toillustrate, ‘Shanghai-China’ tops the OECD (2010a) rankings forsecondary school educational outputs, with ‘Korea’ second and ‘HongKong-China’fourth.Finland,ahardyperennialinsuchrankings,holdsontothirdplace.Thisrepresentsanaccumulationofevidencedescribinga‘knowledge premium’ that the criss-cross flows of FDI within and

between EastAsian social economies serve to generate (cf. Naughton,2007).However,asasystemicoutputofChineseFDIthesedevelopmentsin education and professionalisation might be understood – during theformative stages, at least – as a result of the ‘expatriate’ Chinesemanagers involvedbeingmoreculturallyattuned toobservingpracticesemphasisingmianzi, unlike initially (and perhaps inevitably) their non-Chineserivals.Onthebasisoffamilyresemblance–and,indeed,rivalry– both parties might be willing to learn effectively from each other.Throughmianziandrelatedindigenousvaluesystems,partiestobusinessnegotiationsmightinfluenceeachothers’managementstylessufficientlyto support choices in practice where establishing long-term businessrelationships become prioritised over measures of short-term gain (cf.Tian, 2007). This ‘family resemblance’ became acknowledgedsubsequentlyinmanagersofSouthKoreanandJapaneseMNCs,notablyaroundthenorth-easterncityofDalian(Chen,2004;Naughton,2007).The economic crises currently challenging the management systems

and styles distinct to so-called ‘developed’ (e.g. Western) economiesserve to spotlight how global flows and sources of FDI have shifteddramatically as China invests increasingly heavily in other developingeconomiesinSoutheastAsia,AfricaandLatinAmerica,therebysecuringcompetitive access to valuable and rare commodities and to lower costlabourmarketsthanthoseavailableathome.OnthewaveofsuchtrendsChinese management systems and styles, whether in their culturallyembeddedoremerginghybridforms,looksettocommandourattentionformanyyearstocome.

Conclusions

ApplyingaPESTELanalysisallowsusbriefly tohighlight issues likelytochallengethecurrentstateofmanagementsystemsandstylesinEastAsia.Forexample,politicaldecisionsmadebyPRCleadersincreasinglyshapewhatpoliticiansworldwideterm‘theglobaleconomy’.Meanwhile,Japanesemanagerswitnessprimeministerswhocomeandgoandintheir

wakeleavearegionaldiplomaticframeworkthatappearsincoherentandlacking clear identity or direction. Strategic planners in South Koreaawait the implications of the North Korean leadership succession. Thepolitical climate generally is one of heightened and prolongeduncertainty.In contrast, the economic outlook is (if anything)more certain. The

engineforglobaleconomicgrowthremainsinAsia(OECD,2010b).TheJapaneseyenremainsstrongasglobal investorsseekareservecurrencyalternative to the US dollar: the euro meanwhile falters. Japaneseexportersstruggle tomanagecosts,whileSouthKorearemainsexposedtotheturbulenceofexternalfinancialmarkets,notleastintheUSAandEurope(cf.Cho,2009).OrganisationssuchasHyundaiincreasinglyrelyon markets in China (including Hong Kong) for exports: a share nowrisen to 30per cent from10 in 1997 (OECD,2010c: 46).AsMainlandChineseFDIbecomestargetedevermoreglobally,similarchallengesofperformancedependencyarise:e.g.inrelationtomanagingcommoditiessourced in Africa (cf. Raine, 2009). In Mainland China itself, socialinequality is set to grow, even though average wages are moving up.Leveraging theadvantageof agovernment controlledexchange rate forthe yuan, the central government will likely continue their policy ofimposingpricecontrolswhilepassingonthecostofhigherimports(e.g.fuel)toconsumers,possiblyleadingtosocialunrest.Wherepoliticalandeconomicfactorsinteract,thelong-termconsequencesareuncertain,andboth business and ethical questions arise about the sustainability ofcurrenteconomicgrowthrates.Ecological systems across the region are in a precarious state. For

example,whileprojects inChinasuchasthecontroversialThreeRiversDam attract global headlines, less reported attention is given to thedramaticfallingroundwatertablelevelsacrossChina(Naughton,2007),the critical challenges of managing industrial waste safely (Suttmeier,2012)andtheimpactlocallyandgloballyofthecasino-basedeconomyofMacau SAR, the business turnover of which now exceeds Las Vegas(UKHK,2008).Afterthe2011Tohokutsunamiandnuclearplantdisasterin Japan, the Japanesekaisha faces challenges to source energy;

simultaneously,majorconurbationsacrossKoreaareexperiencingformsofenergyrationing.Nonetheless,nationalinnovationsystemsacrossEastAsiaarelikelyto

remainvibrant:creativityinadversity.GiventhecommonWesternviewthatEastAsianeconomies(aboveallChinese)areroutinelyassumedtobe‘sinners’inrelationtoIntellectualPropertyRights(IPR),itmaycomeasasurprisetosomethatthenumberofgloballyenforceabletechnologypatents registered by Chinese-owned enterprises is soon to outstrippatents registered byUSAmerican competitors (Zhou and Stembridge,2008): thesinnersmaysoonbecomethesinnedagainst.Meanwhile, thepredominant language of the Internet is soon to become MandarinChinese(OECD,2010d).Thislatterobservationremindsusthatthefocusfordiscussioninthis

bookispeople.Intermsofnumberstheglobalbusinessfocusinevitablyis on China and the challenges and opportunities generated by massmigration and unprecedented urbanisation (cf. Devanet al., 2008).Establishedfamilytiesarebeingstretched;anewexpressionof‘culturalidentity’ amongmanagers is emerging acrossEastAsia, at once globaland professional (cf. Jackson and Tomioka, 2004; Debroux, 2011) andlocalandpersonal(cf.Chen,2006).CFBsalongwithSOEs,keiretsuandchaebol now compete in an increasingly global and socially mobilemarket formanagersdesignatedas ‘talent’ (cf.Sunetal., 2007;Ngoetal.,2008;Cooke,2012;Jackson–forthcoming).Andindoingthisthereis an opportunity to find and include themissing piece from the talentjigsaw relevant to future developments in East Asian managementsystemsandstyles:women.Womencontinuetobeunder-representedinEastAsianmanagement systems and styles (seechapter9) and notablythose defined by reference toConfucian values (cf.Warner, 2011). Fornowwe can conclude that, whether frommale or female perspectives,therearemanyfinestoriesaboutEastAsianmanagementstilltobetold–storiesdevelopedinthechaptersthatfollow.

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PartIIISocietalcasestudies

Togovernmeanstorectify.Ifyouleadonthepeoplewithcorrectness,whowilldarenottobecorrect?

(Confucius:Analects,XII,xvii)

5ThechangingnatureofmanagementandcultureinChina1

ShumingZhaoandJuanDu

Introduction

This chapter sets out to describe the relationship between culture andmanagement in thePeople’sRepublic ofChina (seeChild andWarner,2003).Withahistoryofmorethan5,000yearsandacurrentpopulationofmorethan1.3billionpeople,Chinaistodayconsidereda‘transitionaleconomy’ (see Warner et al., 2005), moving from a highly centrallyplanned economic system towards a market-oriented economy withunique Chinese characteristics. China is now playing an increasinglyimportantglobalroleasoneofthebiggestmarketsintheworld,sincetheeconomic reforms and opening-up to the outside world that started in1978.AsChinatransformsitseconomy,understandingitscultureiskeyas it is one of the main variables propelling this advancement andaccountingmorespecifically for thedistinctmanagementdevelopmentsthat have evolved in China over the last few decades (Warner, 2005,2008,2009,2011).Since China became a member of the World Trade Organization

(WTO) in December 2001, Chinese firms have been facing morecompetition and challenges from foreign countries, as more overseascompanies are investing and doing business in China. Many Chinesecompanies have taken measures to meet the new challenges, such asattracting talent internationally and implementing foreign advancedmanagement techniques and technologies. For any organisation, cultureand management are interdependent elements which influence theorganisation’s success. ‘Culture’ plays a significant part in creating asupportiveenvironmentforaccomplishingthegoalsoftheenterprises.Ifculture and management can be aligned, it will be helpful for setting

strategicgoalsandachievingsuccess(seechapter3)Although much attention is given in the management literature to

societal aswell asorganisationalcultureandmanagement (seeWarner,2011), it is recognised that cultural implications are sometimesoverlookedbyorganisations.Managementworkswithinanorganisationalculture, even in a diverse global environment.As many scholars haveindicated, the impact of societal and organisational culture onorganisations around the globe has become a more importantconsideration for cross-cultural andmultinationalbusinessmanagement(Hofstede,1980,Hofstedeetal.,2010;Warner,2011).‘Culture’isamoregeneraltermthatreferstothesetofsharedvalues

withinanorganisation.Managementreferstotheorganisationalactivitiesand infrastructure,and thevariousmethodsandpracticeswithin it, thathelpanorganisationalculturerunwiththeefficiencyandconsistencythatshouldbethehallmarkofanyhealthyentity,whetheritisacorporation,agovernment,auniversityoranyotherorganisation.Attention to culture also has important meaning for practising

internationalmanagers,forwhomitservesasaconvenientandeffectivetool for understanding the many obstacles they may experience whenworking with people from different countries. Management practiceshave derived from different institutional foundations in differentsocietiesandcultures.Andculturewillplaydifferentrolesinallkindsofinstitutions which constitute the distinctive social organisation of acountry and its economy. The norms and habits that these institutionsformwill in turn affect organisational performance and theymay alsoimpactsignificantlyoncorporateandmanagerialbehaviour.For a country, history is embedded in its social structure andvalues.

This implies that nations have their own logic of social and economicorganisation(seeHofstede,1980,Hofstedeetal.,2010;ChineseCultureConnection,1987;HofstedeandBond,1988).InChina,forexample,thefoundation of the Chinese respect for hierarchy and the family socialcollective is based on the relational norms expounded by philosopherssuchasConfucius,aswellaslegalcodessuchasthosedevelopedduringtheTangDynasty.Meanwhile,cultureand institutions tend to influence

differentaspectsofmanagementandorganisation.Culturealso impactsprimarily on individual attitudes andbehaviour, including interpersonalbehaviour.Institutions,bycontrast,impactdirectlyonfeaturesthatareshapedor

constrained by formal norms and rules. These include systems ofcorporate ownership, accountability and governance, conditions ofemployment and collective bargaining and the reliance on formalcontractsforintra-andinter-organisationaltransactions.In addition to managerial behaviour, history, societal culture and

institutions also influence organisational cultures. They make thestructure an integral part of organisational culture. Organisationalstructuredealsprimarilywiththeset-upoftheculture.Howmanagementworks,whichspecificresponsibilitiessupervisorshave,howacomplaintispassedthroughtheranks–theseareallissueswithintheorganisationalculture that are directly tied to how an organisational structure works.Anothercommonwaytodescribehowcultureworksinanorganisationisto say that organisational culture is the way in which the interrelatedgroups within an organisation are set up to allow them to functionsmoothly.The relationship between organisational culture and management is

always important for these two functions and behaviours. This chapterintroduces China’s historical background, economic background, socialculturebackground,corporateculture,managerialbehaviour,managerialvalues,labour–managementconflictresolution;andtheirimplicationsformanagers. Through these descriptions, we hope readers will betterunderstandChinesecultureandmanagementstyle.


Chinaishometotheoldestandmostcontinuouscivilisationoftheworld.OneoftheearliestandthemostcomplicatedStatestructureshasevolved,as well as social and personal management philosophies (see Goody,1996).BeforetheOpiumWarin1840,despiteincursionsandinvasions,

thecoreculturalvaluesofChinesesocietyhadbeenverystableandintactfor over 2,000 years. However, after 1840 Western ideas started toinfluencetheChinese,andmeanwhiletheChinesebeganare-evaluationoftheirowntraditionandwereeagertolearnfromtheoutsideworld.Intoday’s China, people’s lifestyles have become quite Westernised inmany ways. Even so, traditional ideas are still deeply embedded inmanagerial,socialandworkvalues(seeLamondandLeung,2010).

Confucianism

Developed from the teachingsofConfucius,Confucianismhas stronglyinfluenced thecultureandhistoryofChina, aswell asmanyotherEastAsian countries (seechapters 6, 7, 8), and it remains influential eventoday (seeLin andHo, 2009).Whereas someWesternersmay considerConfucianism as a religion similar to Christianity and Buddhism, theChinese view Confucianism as an ethical and philosophical system.PeopledonotworshipConfucius; instead they followhis teachingsandthoughtsintheirpersonalbehaviourandsocialactivity(seeBell,2008).

Statemanagement

The first accountable kingdom in China was the Xia dynasty foundedaround2,000BC,neartheHuangRiver(theYellowRiver)region.Duringtheperiodfrom770BCto256BC(theSpringandAutumnperiodandtheWarKingdomsperiod)Chinesecultureentereditsfirstgoldenage.Itwasin that time that many of the most important philosophies, includingConfucianism,emerged.ScholarsstartedtostudytheartofStatecraftandmanagement; different schools began to develop and spread. The threemostimportantschoolsfromthetimeperiodwereLegalism,TaoismandConfucianism.Legalism claims that only strict laws and a centralised government

could lead to a State becoming a powerful country. TheQin kingdom,whichadaptedLegalism,conqueredtherestofthekingdomsandfoundedthe first united empire in China’s history. Although Legalism was

abandoned and never adopted again after Qin collapsed, the idea of astrongcentralgovernmentandunificationhasbeendeeplyembeddedinChinesecultureuntilthepresentday.Taoism claims that government should interfere as little as possible,

according to the notion ofwu-wei, to let nature’s laws happen. AfterreunitingChinaagain,thesecondempire(theHan)adaptedthissmaller-scalegovernmentnotionandnon-interferenceapproach,torecoverfromthewar.Confucianism claims that moral education will lead the people to

honour and the country to harmony. In 140 BC the emperor of Hanannounced thatConfucianismwouldbecome theofficialState ideologyand that the government would only employ scholars who studiedConfucianism. Since then Confucianism has become the dominantideology in China. Moral norms replaced laws, becoming the primarymeansofgoverning.ThishelpstoexplainwhytheChineseheavilyrelyonguanxi(relationship)andmingsheng(reputation)ratherthancontractsandlaws(seechapter10).

Socialandpersonalmanagement

Theideasandphilosophyofsocialandpersonalmanagementaremainlyinfluenced by Confucianism (Rarick, 2009). The early widely acceptedsocialnormscamefromtheideasofThreeBondsofLoyalty(loyaltytotheruler, filialobedienceand thefidelityofawife toherhusband)andThreeBasicGuides(therulerguidesthesubject,thefatherguidesthesonandthehusbandguidesthewife)fromConfucianism.Thisdémarcheledto a hierarchical structure in Chinese society. By moral standards, thesubordinate has to follow the instruction of the superior, instead ofchallengingit;however,thisisneitherabsolutenorenforcedbylaws.Theentiresocietylivesaccordingtomoralnorms.Thisstandardencouragedinterpersonalrelationstobecomestrongerandmoreimportant.Confucius believed that by teaching and education, a person could

become perfect. With wisdom, the person could distinguish betweenhonourandshameandbehaveproperlyandwillingly.Thus,thereneedbe

nolawstoforcepeopletodo‘therightthing’.Greatlyinfluencedbythisidea, the Chinese were to become very serious and careful abouteducation and behaviour. Familymembers are closely bonded by filialpietyandsocialgroups(peoplewhoworktogether,studytogetherandsoon)arecloselybondedbyloyalty.InChina,asiswell-known,thefamilyis the most important social entity. The Chinese consider filial pietytowards parents to be a key responsibility, the same as parents to theirchildren. In society, the relationship is built on trust, and this trust isbased on one’s social behaviour, age, credibility and possible commonexperience.

Businessmanagement

Historically,businesspersonshavebeendiscriminatedagainstasasocialclass inChina.Moral standards, for instance,were set strongly againsttheallegedgreedofbusinesspeople.Anindividual’ssocialpositionwasnot measured by wealth, but by success in politics or knowledge.Although those in business were seen as low in social class, from theState’spointofviewcommercewasstillaveryimportantmatter.Threecommonapproacheswereusedwidely.Statemonopolyemerged

veryearlyandwaswidelyused.Forexample,salt,preciousmetalminingand coinage became permanent monopolies. Other fields such aswinemaking andmetal-smelting (iron earlier and steel later) were alsofrequentsubjects.Theconceptofmarketinterferencewasfirstaddressedin the Spring andAutumn periods, and was first practised in the Handynasty.Thegovernment setupa special structure topurchasegrain ingoodharvest years,when themarket pricewas low, in order to lift thepriceandsellgraininpoorharvestyearswhenthemarketpricewashigh,inorder to stabilise the level.The last commonapproachwas themaintool of taxation. SangHongyang (152BC–80BC), an economist in theHandynasty,firstimplementedacomplexanddynamictaxationsystem.One of his most famous ideas was that a continuous heavy tax uponpeasantswould lead to revolt and a periodical heavy tax uponbusinessactivity would benefit and enrich the government, because there will

alwaysbenewbusinessestoreplacethebankruptones.

Economicbackground

China’s current economic growth rate is approximately 9 per centannually. Its contribution to global GDP growth since 2000 has beenalmost twice as large as that of the next three biggest emergingeconomies (Brazil, India and Russia) combined. In 2011, China stillmaintainedarapideconomicgrowthrate,andtheestimatedGDPgrowthratewasabout9.8percent,whichwasslightly lower than that in2010.China’sGDPgrowthwas10.3percentin2010.Directlyorindirectly,theChineseeconomyhas influenced interest rates,prices for rawmaterialsandwagesintheWesternestablishedeconomies.Currently,Chinaisthemost R&D intense emerging market country and is seventh of all thecountriesintheworld.Withitshighgrowthrate,thepresenceandimpactof theChineseeconomywillonly increase in theworld (seechapter2).Itseconomicpowerisexemplifiedbythefactthatitwasexpectedtobethefifthlargestsourceofoutwardforeigndirectinvestmentduring2004–7.ChinaattractedUS$105.74billioninforeigndirectinvestmentin2010whileitinvestedUS$590millionabroadinthesameyear,notincludingthefinancialsectors.Since adopting the ‘Economic Reforms’ and ‘Open Door’ policy of

Deng Xiaoping 30 years ago, China has moved from a traditionalplanning economy to a market economy. In 1978, Deng made asignificant decision thatChina should focuson socialistmodernisation.HepointedoutthatinthenewperiodofchangethehistoricaltaskofthePartywastobuildChinaintoamodern,powerfulsocialistsociety.Eversincethatkeymoment,Chinahassteppedontoafast-growingtrackandhasmade remarkable achievements. Thus, since 1978, China hasmaderapid progress in industrialisation and urbanisation. The Chineseeconomyhassustainedrapideconomicgrowth.Fromtheyear1978tothepresent day, China’s GDP has grown relentlessly at an average rate ofclose to 10 per cent (People’s Daily , 2010; World Bank, 2010). At

present,Chinaisthesecondlargesteconomyintheworld.China’s foreignexchangereserveshaveburgeoned toUS$3.2 trillion.

Thisfigureexceedsthesumoftheworld’smajorsevencountries(UnitedStates,Japan,Britain,Germany,France,CanadaandItaly,referredtoastheG7).Chinahasgainedarapidincreaseinlivingstandards.Forurbanresidents,thebenefitshavebeensignificant.Forruralareas,theproblemof feeding hundreds of millions of poor people has been solved in arelativelyshortperiodoftime.The socialist market economy has thus dramatically expanded and

improved.China’seconomicreformsfirststartedintheruralareas,andgradually advanced to the cities. The ‘Open Door’ policy saw theestablishment of ‘Special Economic Zones’ along the coast. In ruralreforms, Anhui Province took the lead in adopting the ‘HouseholdContract Responsibility System’. This démarche was a great success,gainedofficialsupportandthenspreadacross thecountry. Inenterprisereforms, theChinesegovernmentconductedvarious formsofautonomyexperiments with State-owned enterprises to expand pilot-sites such asthose originally in Sichuan Province; at the same time, collective andprivate enterprises were gradually reformed.Management training wasreintroducedandbusinessschoolswereestablished(WarnerandGoodall,2009).Commodity, financial and labour markets have since evolved, and

gradually amodernmarket systemhas taken root.With the continuousdeepeningofthereforms,themarketsystemhasbeengreatlyexpanded.Factor-marketshavegraduallybeenintroducedwiththeabolitionofdual-pricing systems of production and with further liberalisation of thecompetitiveprice-mechanismsforgoodsandservices.Withtheshrinkingof the scope of government investment, businesses have filled the gap.Despite the relatively short historyof the capitalmarket,China’s stockmarket size,GDPmarketvalue,volumeand tradingsystemshave risensharply.Relevantfinanciallawsandregulationscontinuetoimprove.Thedevelopment of capital-market reform has played a great role inpromotingState-ownedenterprisesandreducingfinancialrisk.China has become an important member of the global economic

system.From1978to2011,foreigntradevolumeincreasedfromUS$109billiontooverUS$3trillion,analmost300foldincrease,andwillreachUS$5.3trillionbytheyear2020.WithitsaccessiontotheWorldTradeOrganization (WTO), China cannot only coordinate and resolve tradedisputesbytherulesof international tradeorganisations,butalsobettersafeguard its economic interests and promote a fairer world economicorderthroughparticipationintheformulationofworldtraderules.Chinaisnowrankedamongstthetopemergingmarketeconomiesfor

attracting foreign capital. Products which are nowmade in China (andassembled) are exported widely, which has won China the accolade‘workshop of the world’. Exports of labour-intensive products onceexploited thecomparativeadvantageofcheap labour inChina,butsuchcostsarenowrisingdramatically.In thepast30years,Chinahasparipassuneglected theprotectionof

natural resources, the environment and the labour rights of itsworkers.To be specific, environmental resources have been over-consumed.EconomicdevelopmenthasbeenachievedatthecostofseveredamagetoChina’s environment and resources.Thegapbetween the rich andpoorhas deepened and the Gini-coefficient is now as high as in Westerncountries.

Societalculture

We will now discuss the societal culture of China through theexamination of education, social values, consumption behaviour,religiousbeliefandsubcultures.

Education

China has a long history and tradition of educating its talent. Chinesepeopleattachgreatimportancetoeducationfortheiroffspring.AlthoughChinahadanearly,well-establishededucationsysteminImperialtimesforthefew,thetransformationfromatraditionaleliteeducationsystem

toamodernbroad-basedoneencounteredmanydifficultiesandwasnotable to make significant progress until the founding of the People’sRepublicofChina(PRC)in1949.Today,Chinaisbuildingahigh-qualitymoderneducationsystem.Theilliteracyratehasdroppedto3percentin2010, from 80 per cent in 1900. Today, China has over 20 millionuniversityundergraduateandpostgraduatestudents.ItalsohasagrowingnumberofbusinessschoolsandMBAgraduates(seechapter15).

Socialvalues

Socialvaluesrefertotheattitudesandperceptionsofpeopletowardstheworldinwhichtheylive.ThetraditionalChinesevalue-systemisformedwith Confucianism at its core and with Buddhism and Taoism at theperiphery.ThecentraldominationofConfucianismislong-lasting,stableandsolid(seeWarner,2011).ThetraditionalConfucianismideologyaddressestheideaofloyaltyto

the ruler, filialobedienceand the fidelityof thewife to thehusbandaswellasvarious typesofpersonalbehaviour,socialconductandrites. Inthenineteenthcentury,Chinaenteredaphaseofcomprehensivehistoricalchange,andthetraditionalvalue-systemwasseverelychallenged.Inthelast century, we have seen both the disintegration of traditional valuesandtheemergenceofmodernideas.Nowadays, theChinesepeoplestillplacegreat importanceon loyalty

insocialrelations,filialpietyinfamilyrelationsandfidelityinmarriage,although these may be weakening. While Chinese people are eager tolearnfromtherestoftheworldandopentheirmindstoacceptWesternnotions,theveryessenceofbeingChineselingers.

Consumptionbehaviour

TheChineseare famous forbeing thriftyandarekeenon saving.Afterthe Opium War, the disintegration of the traditional lifestyle and theinfluxofforeigngoodsgraduallychangedtheconsumptionbehaviourofthe Chinese. While recently becoming the world’s second largest

consumer market and the largest luxury market, the Chinese stillparadoxicallyhavetheworld’slargestbanksavings.Thegrossdomesticsavingsrateisnowaround50percentperannum.

Religiousbelief

Today’sChina is said to be a ‘multi-religious’ country.Where citizensfreely choose and express their religious beliefs and religious identity.Themost popularreligionsareBuddhism,Taoismand Islam.Thereareothers,suchasCatholicismwithinChristianity,buttheirnumberremainsrelatively small. However, many Chinese are neither atheists norbelieversofany religion.Thedominant ideology inChina is,wewouldargue,Confucianism.AlthoughmanyWesternersseeConfucianismasareligion,theChineseconsideritasa‘philosophyoflife’(seeChildandWarner,2003;Bell,2008).AninterestingphenomenonisthatmanyChinesearebothbelieversof

allandbelieversofnone,atthesametime.ApersonwhonevergoestoaTaotempletoprayforanythingmaypiouslyprepareandperformaTaoritual before the opening of business and the same personmay pray toBuddha for prosperity another day, when passing a Buddhist temple.ManyChineseused to believe inCommunism inChairmanMao’s day,beforetheCulturalRevolution,buthavenowlostmuchoftheirfaith(seeBell,2008).

Subcultures

ThemajorityofChineseareHanpeople (over90per cent).Becauseofthewidegeographicdistributionandtheabsorptionofmanyotherethnicgroupsthroughouthistory,thesubcultureswithinthiscategorymayvarygreatly,whilealsosharingmanytraditionsandideologies.Geographically, the Chinese may be roughly divided into northern

people and southernpeopleby theHuaiRiver.Thenorthernpeople aresaidtobemoregenerousandstraightforward,whilethesouthernpeopletendtobemorededicatedandpersistent.Afterthe‘OpenDoor’policyin

the last 30 years or so, another difference between coastal areas andinland areas has begun to emerge. The coastal people appear to attachgreater importance to individualism and openness to change and arehencemore likely tobeentrepreneurial,whilst the inlandpeopleattachmoreimportancetocollectivismandtradition.The subcultures of the Chinese exist in every domain. Different

provinces have different subcultures, different cities within a provincehave different subcultures and even some different areas within a cityhave different subcultures. This difference of subcultures generates avery strong concept oflaoxiang (meaningpeople from thesameplace).People from the same village, the same city, the same province staytogetherevenwhenplacedindifferentsituations.Trustrelationshipsareusuallymuchstrongeramongkithandkin.BothWesternandJapanesemanagementmodeshavetheiradvantages.

Many Chinese enterprises like to apply and get lessons from bothmanagementmodes.Butanycountryandnationhasitsspecificculture,which is the accumulation of wealth during the process of long-termhistoricaldevelopment; it is thesumofcustoms,values,ethics,codeofconduct and the idea of the peoplewhich is refined and formed in thecommonsociallife.In modern enterprise management, although possessing a sound

businessoperationsystemisthekeytosuccessandfailure,theinfluenceof culture cannot be underestimated. Chinese traditional culture is thecrystallisation of thewisdom of 5,000 years of Chinese history, and itreveals the goodness of human nature,establishes enterprise ethics,builds an effective corporate culture and creates Chinese-typemanagement.

Corporateculture

Undertheimpetusoftheeconomicreforms,Chinesebusinessischangingrapidly. At the same time, as a result, Chinese enterprises also varyextensively, ranging from State-owned enterprises [SOEs] to

collectively-ownedenterprisesandprivatefirms.Inlate1978,corporatecultureemergedinthelandmarkchangesthattookplacewhenthe‘new’Chinesemanagerialmodelwas first piloted inSichuanProvince.State-ownedenterprises(SOEs)hadoncedominatedindustrialproductionandtheir work-units (danwei) had embodied the so-called ‘iron rice-bowl’(tiefanwan)regime(seeChild,1994).Since1979, economicchangeshave resulted in the formationofnew

corporatecultures (seeHawes,2008). InmanySOEs, the residueof the‘ironrice-bowl’modelcontinuestopersistandcollectiveenterprisesmayvary greatly between conservative, unsophisticated cultures to moremodern entrepreneurial ones. Different corporate cultures also arisethroughlinkswithforeignfirmsandtheirdifferentnationalownerships.ThegreatestimpactonChineseenterprise-culturesandpracticesisfrommultinationalenterprises.Byinheritingaculturewithstrongfeudalisticorigins,Chinaprovidesa

favourablecontextforpaternalisticcorporatecultures.Enterprisesatbothextremes of the range, traditional SOEs and private firms, exhibitcorporateculturesthatreflectpaternalisticculturalvalues.IntraditionalSOEs, the culture has been one of ‘top-down’ leadership and authority,collectivism and mutual dependence, with an emphasis on conformityand attachment to the organisation based onmoral rather thanmaterialincentives (Child, 1994).A kind of ‘noblesse oblige’ has prevailed inmanyofthesefirms.Loyaltytosuperiorsandtotheworkunithasbeencomplemented by employment protection and the provision of welfarebenefits.This‘moralcontract’isnowfastbreakingdownasSOEseitherreform or go bankrupt. There is little evidence as yet of what thecorporate culture of reformedSOEsmay turn out to be, although case-studies suggest that it might combine an emphasis on personalachievementwithastrongcollectivespirit.In the private sector, most firms are still small and their culture is

much centred on the owner. Only among some larger and longer-established private firms is there evidence of decisions beingmade bymoreformalbodiessuchasaboardofdirectorsoramanagementteam.Inruralprivatefirms,thedirectionofthesefirmsisalmostexclusivelyin

thehandsoftheirowner-managers.Withinprivate firms,be theyurban (e.g.SOEs)or rural (e.g.TVEs),

workers do not normally participate in decision making, even onquestions concerning benefits. In the typical urban private firm,employees can be divided into two groups. The first comprises localpeople and externally recruited university graduates. These employeesgenerally hold better positions in the firms, enjoy superior wages andbenefits and staywith the firm longer. They are regarded as long-termprimarymembersofthe‘corporatecollectivity’andarelikelytoidentifywith itsculture.Thesecondgroupconsistsofmigrantsfromruralareas,whooccupyamuchmoremarginalposition.After the reform and opening-up, the entry of foreign capital has

createdmany joint ventures andwholly foreign-owned enterprises. Theculture inChineseenterprises, at first influencedbyChinese traditionalculture and specific products of historical development, has started toexperiencecollisionandfusionandhasgraduallybecomediversified.Forexample,inmanyjointventures,animportantroleintheorganisationalstructurebelongs toemployeespossessingcross-cultural skills,whoarenot just interpreters or translators, but thosewho are capable of givingtimely advice to leaders andmanagersonhowcertain things shouldbehandled with the Chinese personnel and in China in general.Organisational structures should be differentiated depending on anenterprise’s life cycle and growth. While committing to work in thePeople’sRepublicofChina,itisveryimportanttoconsiderthefactorsoforganisational change, due to existing adaptation to the Chineseleadershipstyle.Itisstronglydesirabletohaveateamofpeoplewithin-depth knowledge of Chinese language and culture as a safety layeragainstthesepotentialchallenges(PedyashandShi,2010).

Managerialbehaviour

China, a country with a long historical tradition, has evolved its own‘typical’managerialbehaviourwhichisgreatlyinfluencedbytraditional

Chineseculture(seeLamondandLeung,2010).Thus,inordertoexploremanagerial behaviour in China, we need to probe into this legacy ofChinesevalues.Yu etal.(2000)haveproposedanumberofkeyculturalfactors – the patriarchal system, putting principles first, exhibitingpoliteness,beingpolitics-oriented,havinga‘petty’producers’mentality,having patience and patriotic sensitivity – that Chinese culture hasimposed on business operation and communicating activities, whichfurnishes the fullest explanation of managerial behaviour under theinfluenceofChineseculture.Sinceitishardtoidentifyorsummariseonesingle stereotypical management model in China, the most effectiveapproachtoinvestigatingthesubjectistotargetthetwocontrastingtypesof firm: State-owned Enterprises (SOEs) and private firms (Child andWarner,2003).Chinesecultureischaracterisedbyhierarchies(Hamilton,1991)anda

firm in China is said to be usually tightly controlled by its ‘top boss’(Redding and Wong, 1986), which is particularly true in SOEs, largeenterprises invested in or owned by central government or localgovernments. In SOEs, there are elaborate structures with manyspecialised departments among which necessary communication andcoordinationareinadequate.Theirrationalsettingofdepartmentsfurtheraffectstherealisationofbusinessgoals.Informationandauthoritytravelsone way – from the top down – in SOEs, since vertical links withinhierarchies are emphasised (Rarick, 2009). Being a society with highpower distance, the top boss in China automatically establishes his/herauthoritativepositionand is respectedbyothermembers.Thedecisionsarealwaysmadebytheauthoritieswithlittleornoparticipationbyothermembersofthecorporation.Andwhiledissensionsamongsuperiorsandsubordinates do occur, subordinates are inclined to be obedient to theirsuperiors to show their respect. The largest problem in SOEs has beenrootedinthepatriarchalsysteminChina.PatriarchyfeaturesprominentlyintheperceptionofChinesestaffwhoseetheworkplaceastheequivalentofthefamilyunitinChineseculture(Child,1994).Thus,Chinesepersonnelarehighlygroup-orientedandprefertoshare

responsibilitiesamonggroupmembers,ratherthanacceptjobdutiesthat

allocate performance on an individual basis. However, these attitudestend to beweakening amongmembers of theurbanyounger generationwhohavereceivedhighereducationandareexposedtoWesternculture(see Lin and Ho, 2009). Furthermore, in order to conform to socialdevelopment and the market economy, SOEs have been undergoingreforms that absorb modern management methods. Privatisation andforeign acquisition impelsSOEs to shoulder the responsibility for theirown economic survival, which provokes their exploration of newmanagerial behaviour. And in the acquisition process, new problemsoccur in cross-culture teams. Wang (1998) discovered that whenconfronted with different opinions or conflict, Chinese managers arereluctant to solve theproblem throughdirect communicationwith theirforeigncolleagues,whileforeignmanagersfeeloffendediftheirChinesecolleagues make the conflict public through discussing the issue withsuperiors,raisingitinaformalmeetingortellingtheirfriends.Private firms in China have been developed mainly from self-

employedenterprises,family-runenterprisesandpartnershipenterprises,with family-run enterprises being the pervasive form. Being deeplyinfluenced by Confucian ideas that emphasise a strict hierarchy ofprimary relationshipsbetweeneither familymembersor thepeopleandtheir rulers, owners of private firms tend to run their businesses in ahighly centralised manner (Child and Warner, 2003). This can beexplainedpartlybya‘pettyproducers’mentality.PettyproducersreferstopeasantsinChinawhowereforalongtimeundertheinfluenceofthenatural economy and are conservative, selfish and show distrust (Fan,2004).Thus,enterpriseownersmaintaintheirauthoritativepositioninthefirm by making all decisions by themselves without effectivesupervision, feedback or control. And while conflicts arise betweensubordinatesandmembersoftheowningfamily,ahighvalueisattachedtopreservingloyaltytotheowner.AsChen(1995)notes,comparedwiththeir performance the owners of private firms in China are inclined toattach greater significance to the loyalty of their subordinates. Theownersfavourthosewhoareloyalandpayspecialattentiontothemanddevelopspecialtieswiththem.Thoseloyalpeoplearemorelikelytobe

assignedwithvitaltasksandbepromoted.SOEs and private firms in China share one similarity in their

managerialbehaviour;thatis,theyareall‘politics-oriented’anddependo nguanxi to develop their external networks and acquire businessopportunities (Tsang, 1998). These opportunities include the smoothrunning of routine business operations, obtaining information aboutgovernment policies, achieving success in business negotiations andgaining the receipt of administrative approvals. When China firstembarkedonreformandopening-upin1978,newwaysofdoingbusinesswere primarily initiated through theguanxi system,when therewas nomarket-drivensystemtoguidetheeconomicflow.Businesstransactionsin China are carried on relying more on the mutual responsibilitiesimplicitly expressed byguanxi between two parties than on legalcontracts,sincetheChineseculturalpreferenceisforamoralbasisratherthan a formal one. Besides business transactions among firms, internalemploymentmechanismsandperformanceappraisal systemsare reliantonguanxiaswell.Lackingtalentselectionandmotivationmechanisms,enterprise owners may appoint and promote people by favouritism, inwhichprocessguanxiplaysamajorrole(seechapter10).However, asmarket competition has become increasingly fierce, the

value and effectiveness of theguanxi system has greatly deteriorated.Guanxihasbeenneutralisedormarginalisedinindustrieswherethereisvigorous competition. Since more SOEs are privatised or acquired byforeignventures,contractsinbusinesstransactionsaregainingincreasingimportance.AsLuo(2002)states,whilepersonalrelationshipsmaystillbe a key factor affecting business transactions between local Chinesefirms, contractual principles become significant in joint ventures withforeign firms and are even welcomed by Chinese partners. Moreover,Gonget al., (2007) found an immediate increase in the efficiency oflabour use following the ownership change of SOEs. Thus, in such acompetitive market, enterprises, no matter if they are State-owned,collectiveor privatelyowned, have tooperate according to the rules ofeconomicefficiency.Chinesemanagers’behaviourhas longbeen influencedby traditional

culture and social character, and the individual reflects many typicalcharacteristics. In addition to the previous discussion, we can alsoidentifyfurthersocialbehaviourswhichareacquiredbytheindividualintheprocessofsocialisation.Forexample,conformity,whichmaybeoneof the expressions of lack of confidence; self-examination; and self-control, which in turn is affected by the ideal role model of‘Jun Zi’,originatingfromConfucianism.Mildandgentle individualbehaviour isinaccordancewiththeharmoniousmoralnormsofsociety;conservativebehaviour has the same meaning as the long-term-oriented culturaldimensiondescribedbyHofstedeandBond(1988);andfinallytherearethosebehaviouralchangesandtrendsarousedby‘theface’problemandcomplex relationships, which unconsciously influence daily life andmanagementpractices.

Managerialvalues

As business has become increasingly global, the transferability ofmanagementtheoriesandpracticesacrossnationalbordersanddifferentcultures has become an increasingly debated topic. Societal values,managerial practices and the congruence between the two entities haveincreasingly been shown to influence critical organisational outcomes.Researchdesignedtoassessthedegreetowhichnationsdifferintermsofattitudes, beliefs and values has resulted in widely different findings.Attitudestowardbusinesspracticesandprioritieshavealsobeenfoundtodifferbynationality.Managerial values in China are remarkably affected by traditional

Chinese cultural factors like Confucianism. However, when Chinesepeopleareexposed toWesterncultureonthewaytorealisingeconomicsuperpowerstatus,willtraditionalvaluesbeabandonedorkept?China’sentryintotheWTOhasarousedexperts’interestinstudyingmanagerialvaluesinChina,becauseacomprehensionofChinesemanagerialvaluesas well as Chinese thinking is essential for Westerners who plan toengageinbusinessinChina(Tung,1994).

Initially,Confucianism,whosemajor ideas includethreebasicguides(ruler guides subject, father guides son and husband guides wife), fiveconstant virtues (benevolence, righteousness, propriety, wisdom andfidelity),andthedoctrineofthemean(harmony),hasbeenidentifiedasthe primary force that shapes Chinese values. The Chinese culturalpreference is thus laid upon amoral basis rather than a formal footinglikecontracts.Thus,businesstransactionsinChinaaremorelikelytobebased upon the quality of interpersonal relationships and disputes aresettled throughmediation in order to achieve harmonious interpersonalrelations, which can be seen to stem from the philosophy ofConfucianism(seeRarick,2009).In the early 1990s, economic modernisation in China rekindled the

prideofChinesepeopleintheirnationandculture,whichisexplainedbyMackerrasetal. (2000)whoseetheresurgenceofConfucianismaspartofanewtypeofculturalnationalism,targetingmoralandfamilyvalues(Bell, 2008). In the meantime, Western business policies, values andmanagement behaviour are now increasingly introduced into China,impactingand influencingChinesemanagers.More recently, new typesof managers have emerged who combine both traditional ConfucianvaluesandWesternvaluesinmanagementpractice.Theoriesofconvergenceanddivergencehavebeenapplied toexplain

whether one’s values change in new circumstances or keep constantregardless of the changing environment (see Warner, 2009, 2011).Supportersfortheconvergencetheorystatethatvaluesaredrivenbytheideologyoftheworkplace.Whenanation,especiallyanunderdevelopedone,embracescapitalism, itsvalue-systemwillbechanged to resemblethat of Western capitalistic economies. Vertinsky et al. (1990) havefound that traditional Chinese values prove to be more intensive inMainlandChinathaninHongKong,whichismoreindustrialised.Chiuetal. (1998) discovered in another study that traditional values are morepervasiveincitizensinGuangzhouthaninthoseofHongKong.Closertothepresentday,LinandHo’sstudy(2009)seesvaluesasbeinginflux.Those who support the divergence theory insist that the key factordetermining individual values is the national culture rather than

workplaceideology.Thus,whetheranationadoptscapitalismornot,thevalue-systemoftheworkforcewillbestable.Amorerecentperspectiveis ‘cross-vergence’ theory which takes both national culture andworkplaceideologyintoconsiderationinshapingvalue-systems.Therearealsoempiricalstudiesconductedtoexaminetheinfluenceof

WesternworkplaceideologyonmanagerialvaluesinChina.SinceChinaisahugecountrywithmanyregions,thus,onthewaytoindustrialisation,coastal regionsmaywitnessmoreevidentchanges inmanagerialvaluesthaninlandregions.Ralstonetal.(1996)surveyedthemanagerialvaluesof704managersfromsixcitiesinChina.Whileindividualisticattitudes(individualism, openness to change andself-enhancement) are found tobe more prevalent among the cosmopolitan Chinese than in localChinese, commitment to Confucianism (societal harmony, virtuousinterpersonalbehaviourandpersonalandinterpersonalharmony)isfoundtobe the sameamongmanagers fromall sixcities.The result supportstheviewthatindividualismtendstobegreaterinmanagersfromcoastalareasthanthosefrominlandareas.Theoutcomeofafurthercomparisonfocusing on the individualism–collectivism construct of ChinesemanagersfromtherelativelycosmopolitancityofGuangzhoucomparedwiththosefromthemoretraditionalcityofChengduwasinaccordancewith theviewthatdevelopingeconomieswouldcreate theirownhybridversion of amarket economy under the influence of traditional cultureinteracting with new workplace ideology (Ralstonet al., 1999b). ThatGuangzhoumanagers attach greater importance to individualism,whilecollectivism is better preserved byChengdumanagers, further supportstheviewthatcoastalandinlandareasarepermeatedbyindividualismtodifferentextents.Ralstonet al. (1999b) also compared the managerial values of 869

ChinesemanagersandprofessionalsemployedinSOEs,focusingontheindividualism,collectivismandConfucianismaspectsofChinesevalues.Three generational groups were compared in the research: the ‘newgeneration’ of theChinesemanagers, comprising subjectswhowere 40yearsoldoryounger;thecurrentgenerationofmanagers,comprising41-to 51-year-old subjects; and the older generation, comprising subjects

whowere52yearsofageandolder.Resultsshowthatthenewgenerationofmanagers scored higher on individualism and lower on collectivismandConfucianism.TheseyoungerChinesemanagers,whowillbeleadingChinaintothetwenty-firstcentury,possessgreatermobilityandaremoreinclinedtoactindependentlyandtakerisksinthepursuitofprofitssincetheir values are more individualistic, less collectivistic and lesscommitted to Confucian philosophy than their previous generationcounterparts (Ralstonet al., 1999b).However,Heffernan andCrawford(2001),who conducted a survey of 210Chinesemanagers employing amore comprehensive assessment of Confucian values, challenged theprevious conclusion.Among the new generation of Chinese managers,some elements of Confucianism are weakening while others(benevolence, temperance and persistence) are maintained (see Chen,2008;LinandHo,2009).These studies of managerial values in China suggest that younger

managersinmorecosmopolitancoastalregionsexposedtoWesternideasareadoptingnewvalues.However, towhatextent traditionalConfucianvaluesarebeingforsakenordiscardedstillremainsopentoquestion(seeWarner, 2009). Apparently a unique value-system is being formed inChina, integrating new Western notions and traditional Confucianculture,whichreflectsthatontheonehandChinesesocietyisstrugglingtopreserve its social tradition thathaspasseddown fromgeneration togenerationforover2,000years,whileon theotherhand it strives tobecompetitivebyabsorbingWesternelementsinthenewglobaleconomiccompetition(seePedyashandShi,2010).More and more Chinese managers are adjusting their managerial

valuesaccordingtotheenterprisemissionandvision.Managerialvaluesexisting in an organisation are the strength which can save theorganisation from a hopelesssituation.Thesekindsofvalues cannotbelearned or duplicated by a series of behaviours, such as stories, norms,policies, rules and strategies, and they should be combined with theformation of an organisational mission and vision, which can bedescribed as the goals that founders possess, other than for makingprofits.Organisationalmissionsandvisionsareveryimportantelements

buteasytoignore.Managerspaymostattentiontoorganisationalprofits,process and growth, which modifies their behaviours in short-termorientation,while effectivemanagement, but not efficientmanagement,actually needs more organisational behaviour modification from theperspective of strategy and long-term orientation. Therefore, all of thetraditionalculture,socialnormsandsituationalfactorscanhelptoformmanagerial values which improve organisational effectiveness (seeWarner,2011).

Labour–managementconflictresolution

Western labour–management relationships (both formal and informal),withtheirrespectiverights,obligationsandnegotiatingframeworks,havebeen well-established for most of the last century (seechapter 13). Inadvanced economies, and some less advanced ones, the relationship ismoreorlessuniversallyunderstoodandsupportedbyacomplexbodyofassociated legislation, despite recent attempts to modify or erodeemployee conditions and benefits in some countries in the name ofenhancedefficiency,effectivenessorcompetitiveness.However,inmanydeveloping countries, including China, Vietnam and Indonesia inAsia,historical,sociocultural,ideologicalorpoliticalfactorshaveconstrainedthe development of such formalised labour–management (LM) systems(Collinsetal.,2011).In 1949, based on the SovietUnionmodel, theChinese built a ‘top-

down’ structured labour–management conflict resolution system. Allworkerswere enrolled in this single trade union automatically, namelytheAll-ChinaFederationofTradeUnions[ACFTU].MostofitsmembersweretobefoundinSOEsuntilrecently.TheACFTUcurrentlyhasover230millionmembersandisthelargestintheworldintermsofnumbers.No other work organisations or unions are allowed outside ACFTU.Insteadofusing ‘strikes’as theultimateweapon,acomplexarbitrationandconciliationsystemfordealingwithdisputeswasintroduced(Brown,2009).

TherateofunionisationvariesbetweenoneSOEandanother.ManyoftheState-ownedplantsformerlyhadofficialunionmembershipasgreatas 100 per cent, with an average of 92 per cent found on many sites.However,membershipissociallyencouragedbutnotmandatory,anditisactuallypossibleandlegalforaworkertooptoutatanytime,intheoryifnot inpractice.The rateofunionisation ismuch lower in firmsoutsidetheStatesector,isverylimitedinforeign-investedenterprises[FIEs]andis almost completely absent among rural private firms. Many urbanprivate firmswill usually choose to have a unionwithin the company.Thisgivesthemtheadvantageofdealingwithdisputesinternally,ratherthanbeinghandledexternallybyacourtoragovernmentagency.TheACFTUwassetupin1925,organisingworkersonindustriallines

althoughwith occupational groupings.After 1949, this set-up prevailedandwas legalised bytheTradeUnionLawof1950. ItwasdesignedonLeninist lines, as a ‘transmission-belt’ between the Party and the‘masses’,when itwas set up.Tradeunionorganisations, at least primafacie,maybesaid tohave institutionalised thepowerof theworkersas‘masters’ ( zhuren).Themost important roleamongmostof theunions,including those of today, is fostering labour–management relations inenterprises to boost production output. But most importantly, theyprovide adequate collective welfare services and organise after workactivities. TheACFTU receives 2 per cent of itsmembers’ payroll forwelfareandotherpurposes.During the Cultural Revolution in 1966, the unions were officially

dismantled.With the onset of the economic reforms at the end of the1970s, theACFTUwas encouraged to promote economic developmentandmaintainsocialstability.Thetradeunionswereofficiallyreinstalledin 1978 along with economic reforms through the influence of DengXiaoping.Theygraduallyrecoveredinfluenceoverthe1980sandplayeda supportive role in helping the economic reforms. Labour laws wererecasttoregulatetheemergentlabourmarket(seeBrown,2009).Worker representation was closely connected with the above

institutional framework of the ‘iron rice-bowl’ welfare system, whichexistedmainlyinChineseSOEsandurbancollectives.Inthispre-reform

system,wageswereevenlydistributed,thepaceofworkwassteadyanddismissalswereextremelyrareevents.Extrafinancialincentivesbesideswageswere veryminimal or even did not exist inmany plants; itwassometimesreferredtoaseating‘outofonebigpot’(daguofan).However,despitethelocationorthedegreeofprotection,onlyaboutoneinsevenChineseworkersoutoftheentireworkforceenjoyedthisprotectedstatus.Socialcritics (Chan,2001;ChanandSiu,2010)point to shortfalls in

labour standards, especially in FIEs in the coastal areas, such as thosenear Hong Kong and in Shenzen. It was almost impossible to conductindependentstudiesofliving-andwork-conditionsforaverylongperiod.Thoseinthecities,especiallyinpublicemployment,appearedatleasttohavesomedegreeofprotection,with thevirtually lifetime-employmentsystembeinginoperationuntilrecently.Butlifehaschangedinthelastdecadeor soand the social costsofeconomic restructuring, as inotherparts ofAsia, are now being increasingly felt in China. The oversizedworkforce became a major issue for both the government and privatefirms.Downsizingandunemploymenthavebecomequitecommon.

Implicationsformanagers

The implication of the shift from a centrally planned economy to so-calledmarketsocialismhasbeenconsiderableformanagers.Translatinghigh-levelmacroeconomic policy intomicroeconomic detail has led tomany key shifts. Before the early 1980s, managers had very limitedautonomyandcouldneitherhirenorfireworkers.Liketheiremployees,their performance was not linked to effort; motivation was low andmobilitywas restricted.Today,all thathaschangedandmanagershavesignificantly expanded powers. Over the 1980s and 1990s, Chinaunderwent a ‘managerial revolution’. The enterprise and managementreforms of 1984, the labour contract reforms of 1986, the personnelreformsof1992andthelabourlawsof1994andmorerecently2008andso on, have proved to be major landmarks on the ‘Long March’ tomarket-driven management.After the reforms of the 1980s and 1990s

promotedbyDeng,managersfoundtheirrolesbecamemorecentralandmarket-driven.At the same time, managerial mindsets were radically transformed.

Chineseexecutivesbecameresponsibleforfinancialperformancetargetsandcouldbemore significantly rewarded if theydidwell.Some largerformerly State-owned firms have been floated on the internal andexternalstockexchanges.AstrongelementofparticularismistobefoundinChinesecultureand

this has practical significance for business transactions. This traitaccounts for theconsiderable attentiongiven to thenotionofguanxi. Itcontrasts with universalism, which denotes that it is culturallyappropriate to apply the same rules and standards whoever the personmaybe.Giventhelatitudethatlocalofficialsgenerallyenjoyindealingwiththeforeignfirmslocatedwithintheirpurview,particularismmakesChinaan‘uncertain’placevis-à-visinternationalbusinessstandards.Now, it is difficult for China to adjust to competitive environments

witheffectivemanagementwhenfullyengagedininternationaltradeandinvestment.WhilstChinesemanagementvaluesandbehaviourhavebeenimportantlyconditionedbythecountry’spoliticalandeconomicsystem,Chinese culture is free of the active hostility it experienced underMaoism.Thebig issuehasbecome the extent towhichmanagement inChina will be fashioned according to international ‘best practice’ asopposedtofollowingitsownprinciplesandpractices.Given the external competitive pressures to adopt new forms of

organisation such as teamwork, it will be instructive to see whetherChinese cultural attributes help or hinder this process. The collectivistorientation, importance of relationships and concern for harmony inChinese culture might assist crucial aspects of teamwork such ascommon purpose, task interdependence and group orientation. On theother hand, the Confucian emphasis on rigid hierarchies and upwarddeferencetoleaderscouldmaintaintop-downcontrol.

Conclusions

China has been shaped by its history and in turn modern Chinesemanagement has been influenced by deep cultural roots.We have seenthat the Dengist reforms of the last two decades have changed themanagementsystemfromonebasedonacommand-economytoonethatismoremarket-driven,withincreasedprivateownership.Inarapidlychangingandvariedcontext,suchascontemporaryChina,

it is very difficult to assess the degree to which traditional culturecontinuestoexertaninfluenceonmanagementvaluesandbehaviour(seeWarner, 2011). When addressing this subject we need to reiterate anumberof issues andquestions.First,wemust recogniseChina’s greatdiversity and start by asking ‘towhich China arewe referring?Whichsector,whichregion,whichgeneration?’Second,whatistakingplaceinChina, keen to learn from the outside world yet also conscious of itshistory, may force us to abandon the notion that people necessarilyconformtoasimplenotionof‘culture’.Inthesecircumstances,theymaynotnecessarilyfitneatlywiththeculturaldimensionschosen,butinsteaddisplay apparent paradoxes (seechapter 16). The social identity ofmodernChinesemanagersmayindeedbemorecomplexthanappreciated(seeChen,2008).A third possibility deserving of further investigation, is thatChinese

managers,aremoreflexibleintheirculturalreferentsthantheoristssuchas Hofstede (1980, 2010) assume is normal for adults. Chinese peoplewho are exposed to ‘Western’ values through their roles at work, orequallyasconsumers,maychoosetosegmenttheirculturalmindsets.Forinstance, ifconforming tocertainWesternnormsandpractices,suchashigherpayinreturnfor individualperformance, thenChinesestaffmaydecidetogoalongwiththemwithintheconfinesoftheirworkplaceroles.Theymayalsobeencouragedtoacceptpracticesimportedfromanothercultureiftheseareperceivedtobepartofamorecomprehensivepolicy,offering other benefits such as equitable treatment, comprehensivetrainingandgoodprospectsforadvancement.At thesametime,as theyswitch social identity in ‘converting’ to their non-work roles in thefamily and community, they might well revert to a more traditionalChineseculturalmindset.

In summary,Chinaoffersachallengingand fascinatingarena for thefurtherexplorationofthetheoreticalandpracticalissuesassociatedwithculture and management. Whether the future will lead to a degree ofconvergenceisnotthequestion;itiswhatwillbethepaceandultimatelimitofsuchchange.

Note1 This is a part of research funded by the National Natural Science Foundation of China

(ProjectNo.:70732002).The authors would like to thank Professors MalcolmWarner and Betty Coffey for theirreviewcommentsonapreviousversionofthechapter.

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6ThechangingnatureofmanagementandcultureinHongKong,MacauandTaiwanOliviaIpandSek-HongNg

Introduction

HongKong,MacauandTaiwanarethethreeOverseasChinesesocietieson the fringeof theMainlandwhichhave eachexperienced spectaculareconomicgrowthasnewlyindustrialisedeconomies(NIEs)ofEastAsia.In spite of their common Confucian heritage and signs of mutualinstitutional convergence, we will argue in this chapter that there arevisible diversities whichmake each distinctive in their cultural, socio-political, economic andmanagement systems.A salient sourceof thesedifferences,wegoontosuggest, is inthefinalanalysishistorical.BothHong Kong and Macau were under colonial rule, until the PRCpromulgatedthenovelpoliticalformulaof‘onecountry,twosystems’inthe1980stopavethewayfor theirreunificationin1997and1999.ThelegaciesleftbehindbytheBritishonHongKongareevidentlydifferentfrom the Portuguese influences which envelopMacau. Conversely, themixed imprints of successive regimes of the Dutch, Japanese andAmericansinTaiwanhaveconverteditintoahybridsocietywhichnowyearnsforanidentityofitsown,asepitomisedbythecontestbetweenthebid for independence and the sentiments of reintegration with theMainland.Economic affluence and post-industrialism have taken root in Hong

KongandTaiwan,whileMacauhascaughtuprecentlywithaswiftpacewhenits‘core’hospitality-andleisure-industriesmodernised.BrandedasAsia’s ‘Little Dragons’ since the 1980s, Hong Kong and Taiwan haveachievedspectaculareconomicgrowthasleadexamplesoftheleagueofnewlyindustrialisedeconomies(NIEs)(seechapter2).TheHongKongSpecialAdministrativeRegion (SAR)nowexcels as

one of the world’s largest cities and financial centres. Backed byadvancedtechnologyborrowedfromtheUnitedStatesandJapan,TaiwaninitsturnhasenteredtherealmofOriginalDesignManufacture(ODM)initsproductionactivities–notablycomputermakingandanassociatedelectronics industry. Many Taiwanese firms became partners intransnational high-value-adding production chains and networks. HongKonghaswhistled througha staggeringperiodofpainfuladjustment toalmost complete recovery after the global shock of the 2008 FinancialTsunami (seechapter2).Conversely,Taiwanappears tobestill trappedinalowgrowthsyndrome.Bycontrast,duringthelastfiveyearsMacauhas stridden ahead swiftlybecause of the sizeable inflow of foreigncapital to itsbulwark‘casino’ industry,alongside thecommissioningofanarrayofinfrastructuralconstructionprojectsbythegovernment.Againsttheabovebackdrop,thischapterwillsetouttolookathowthe

managementofbusiness(andpublicorganisations)hasevolvedinthesethreeplacesinrelationtotheirculturalbackgrounds.

Commonshapingandconstrainingfactors

Late-developingeconomies

The three societies of Hong Kong, Macau and Taiwan are all ‘late-developers’. As such, they have the strategic advantage of borrowingadvanced technology from the ‘First-World’ nations and emulating thelatter’ssuccessfulpracticesinmanagingbusinessesandthepeoplewhomthey hire. The risks besetting such late-developing technological andinstitutional transplants, however, are those of non-discriminatoryborrowing and excessive zeal in copying the examples of the exaltedarrangementsandpatternsfromthehighlydevelopedeconomies.Taiwaninthelate1980sappearedtohavebeentrappedinsuchadilemmainthedomainoflabourlaw.Anxioustorevampandmoderniseitsinventoryoflabour legislation as economic development was underway, thegovernment introduced the labour standard law extensively modelled

upon the Japanese precedent. However, its promises, especially thosegoverningredundancypayments,wereconsidered tobe tooburdensomeby business. Subsequent hectic haggling between the State and capitaleventually led to the former’s capitulation and amendments to the law,liberalisingtheprovisionsonredundancypay(cf.chapter13).Thehallmarkofthe‘strategicedge’enjoyedbythelate-developersis

probably the building of physical infrastructural facilities, inasmuch asthey are able to choose the bestmix of technology and hardware fromwhattheprovidersintheFirstWorldcanoffer.HongKong hence excels as a cosmopolitan international citywith a

‘lead’ airport which probably ranks as the world’s best, designed by adistinguished British architect, Norman Foster, alongside an efficientnetwork of highways, a mass-transit underground rail system and aninexpensiveweboftelephoneservices.Macauhasalsobeencatchingupon its infrastructural investment since its reunification with China in1999. And now under construction is a highway-cum-bridge complexwhich will link up, trilaterally, Hong Kong, Macau and Zhuhai, a keyoutpost of the Pearl River Basin. Importing technology from Japan,Taiwanhasalsobuiltamodernandextensivehighway-cum-railnetworkwhichconnectsthenorthernandsouthernpartsoftheisland.However, there are always a host of constraints which pose an

impediment to the pace of late development. A common source ofresistance is the conservation upheld by the traditional elite andstakeholders who have a vested interest in the status quo. Besides,moderninstitutionsandnormativevalues,likethosepropagatinggenderandethnicequality(seechapter9)mayconflictwithpre-existentbeliefs,traditionandideologicalsystemsacrossAsia,aswellinIslamicsocieties(seechapter14).Asarefugeehaven,HongKonghasbeenafluidsocietyadmissive to changes, especiallygiven aBritish administrationprior to1997 which was permissive rather than interventionist vis-à-vis theprivate sector (Turneret al., 1981). By comparison, Macau as aPortuguesecolonybefore1999hadbeentraditionalandlukewarmaboutchange. Taiwan, in its turn, was trapped in a Confucian ‘doldrum’ ofstatusquoandhadnotstriddenaheadonamodernisationagendauntilthe

‘democratisation’ decree issued by President Jiang Jing-guo in 1987(MaedaandNg,1996).

Theroleofthestate

Anyendeavourtomapthelatedevelopmentexperiencesofasocietycanhardly be dissociated from a concomitant discussion of the role of theState. The presence of the State has been consistently conspicuous inbacking businesses in Taiwan. Tax-holidays and stock-subsidies areextendedtothoseindustrieswhichareconsideredtobestrategicorwhichengender high linkage effects in nurturing other industries. Substantialgovernmentfundsarealsochannelledtomanpowertrainingtogroomthehuman resourcesneeded to sustaineconomicdevelopment.Bycontrast,thegovernmenthasalwaysexpresslyabstainedfromactive interventionin private sector businesses in Hong Kong, reputed to be the world’sbastionof‘freewheelingcapitalism’–aplacewhereAdamSmithwouldhavefeltathome.TheBritishadministrationpriortothe1997datelineofreunificationwithChina purported to pursue a policy of ‘positive non-intervention’.A typical examplewas the rhetoricaldistinctionmadebythe authority between technical education as falling under thegovernment’s jurisdiction and industrial training as private business’sresponsibility.However,therewerealsooccasionsonwhichthepre-SARgovernmentdepartedfromsuchaprinciple.OflandmarksignificanceinthecontemporaryhistoryofHongKongweretwoincidents,namely:

Theinceptioninthe1970softheIndependentCommissionAgainstCorruption(ICAC)whichnowpolicesagainstcorruptandfraudulentpracticesinboththecivilserviceandtheprivatesector.1ThepeggingoftheHongKongcurrencytotheUSdollarsince1983.Thiswasoriginallya‘stopgap’measuredesignedandimplementedbythegovernmenttoarresttheheavyfallinlocalconfidenceamidstthethornySino-BritishnegotiationsonthefutureofHongKong.

The post-1997 SAR government has essentially inherited the above

approach.Itpledgestopursuethepolicyofa‘free’economyandallowmaximumlatitudetoprivatebusinesses.However,ithasdriftedsteadilytowards extending its ‘visible hands’, especially in aiding smallbusinessesandpettycapital.Suchapolicyshiftisprobablyprudent,asithelpsenhanceHongKong’scompetitivenessinanageof‘globalisation’.ButitisalsoexplicablebythechainofcriseswhichhavebesettheSARsinceitsinauguration.Inflictedonitseconomyandsocietywerethe‘financial-cum-currency’

upheaval of EastAsia of 1997, the epidemic of SARS in 2003 and theworldwidefinancialtsunamiof2008.Thegovernmentwasproactivehereand intervened, for example, in the labour market by funding theretrainingof theunemployedandprovidingunemployment subsidies tothe jobless. It also ‘proactively’ canvassed the reinstatement of an enmasse intake of guest-workers to stimulate the revival of the garmentproductionindustry,althoughthe‘motion’didnotmaterialisebecauseofoppositionfromorganisedlabour.InMacau,thePortugueseadministration,priortoitsreunificationwith

itsmotherlandin1999,essentiallyadoptedalaissez-fairepolicyvis-à-visabasicallyone-industryeconomydominatedbythecasinobusiness.Thepost-1999SARgovernment appears tohave steered steadily away fromsuch an approach. Public funds are heavily deployed, for instance, tosustain an extensive programme of infrastructural investment.A ‘lead’exampleamidsttheseprojectsisthenewlycommissionedMacauairport,which helps to provide a bridge between theMainland and Taiwan, aswell as playing the role of a ‘feeder’ complementing Hong KongInternational Airport. Backed by the government, the once monolithic‘casino industry’ branched into a pluralistic hospitality sector, theenhancementofwhich in turnhelpsstimulate the tourist trade.And theofficially sponsored intake of guest workers, especially those recruitedfrom Hong Kong, helps sustain a booming building and constructionindustry.ItmaybepostulatedthattheStatehasbeenpivotalinassistingprivateindustrytotakeoffandenterarealmofrapidgrowthsince1999whentheSARgovernmentcameintoincumbency.

Culture

Itisevidentthatthemany-facetedfactorof‘culture’isapervasiveforceshaping management assumptions, ideologies and behaviour amongenterprisesinEastAsia(seechapters3,12,14 and16).Simultaneously,such an imperative also gives rise to a wide latitude of diversity inbusiness practices within this region (see Warner, 2003). As Chinesesocieties, Hong Kong, Macau and Taiwan share a common heritage.There already exists an ample literature exploring the thesis that theConfucianprescriptionsnurtureasuccessfulethosof‘familycapitalism’.Inthe1980sandearly1990s,popularmanagementwritingsextolledthelegendaryefficacyofAsianvalues,whichpivotaroundConfucianethicsin away similar to the exalted relationship between Protestantism andWestern capitalism, itself a controversial link. According to such aperspective,themodernpracticeandapplicationofaConfucianapproachtowards the etiquette of people-governance atworkplaces has yielded a‘local preference formanagerial paternalism, cooperation,mutual trust,harmony and aversion from open conflict’ (Ngetal., 1997: 81–2).Theargument goes further in suggesting that such an Asian trait favours‘labour-management collaboration and helps explain the relativequiescenceof theworkforce inacceptingtechnologicalandproductivityinnovationsinitiatedbythemanagementattheworkplaces…’(ibid.,82–83).SuchaculturistthesisexaltingAsianvaluesappearstohavebeenakey

imperative behind the success of Taiwan, Hong Kong and other EastAsianNIEs.Thiswas,however, thrownintoquestionbytheeruptionofthe‘financial-cum-currency’crisis in1997.DoubtshavealsobeensheduponthenormativeefficacyofthereputedAsianapproachtoenterpriseandmanagementbythesceptics.Forexample,HongKong’slastBritishGovernor,Christopher(now,Lord)Patten,lamentedupontheAsianmythinhisbookEastandWestinthefollowingterms:

ThecaseputfortheinventedconceptofAsianvaluesissointellectuallyshallow….TheAsian-valuesproponentsbelievethat…AsiansbenefitfromadifficultculturewithdeeprootsinConfucianism….[Yet,]ThediscoveryofConfuciusasthereasonforAsians’

economicsuccesswouldhavepuzzledsomeofhismostfaithfulfollowersaswellasearlierEuropeanphilosophersandhistorians….AsWeberargued,itwasConfucianismwhichwasresponsibleforAsia’seconomictorpor,becauseitlackedtheanimatingworkethicofProtestantism.(Patten,1998:149–50;163–4)

Manymanagersintheso-called‘LittleDragon/Tiger’economies–HongKong, Macau and Taiwan – are becoming closer to their Westerncounterparts in their managerial practices if not wholly in values.American-inspired management training and socialisation intomultinationals’practiceshavemadetheirmark.YetinspiteofthecontroversyovertheimplicationsoftheConfucian

prescriptions formanagement andbusinessperformance (seeHamilton,2006;Guthrie, 2009), Taiwan,HongKong andMacau are probably thecustodiansof the authenticChinese traditionalvaluesof thisheritage–inasmuchas theMainlandisstill in thebackwashof thediscontinuitiescaused by several decades of the reign of Marxist socialism, whichclimaxedinthe1960sCulturalRevolution.Comparingthesethreesocietiesvis-à-viseachother,Taiwanisperhaps

the most Confucian. However, such a legacy is compounded by ‘folkreligions’, like Buddhism and Taoism, as well as the diffusion ofJapaneseaswellasAmericaninfluences.AccordingtoChow,managerialpaternalism was an entrenched practice among enterprises in Taiwanbefore the 1990s but thereafter there was ‘a shift from differentialrelationship based on paternalistic provisions’ to the ‘impersonalrelationships of the 1990s’ (Chow, 2003: 221). This facet is probablyexplicablebythechangingcompositionofthebusinesseliteasmembersof the second generation of family entrepreneurs are educated abroad,especiallyintheUnitedStates.LikeHongKongandMacau,TaiwanhasadoptedAmerican-stylemanagementtraining,with‘businessschools’atundergraduate and postgraduate levels (cf., chapter 15). Such schoolsoperate in tandem with extensive in-house training but are mainlyconfinedtothelargerfirms.Bycontrast,HongKonghasthrivedessentiallyasarefugeesociety.Its

historysince itscolonisationbyBritain in1842hasbeenpunctuatedbyepisodesof inundationsof refugees seekingasylum in the territory (the

latest onebeing the influxofVietnameseboat-people in the late 1970sandearly1980s).Concomitantly,enmassemigration,both intoandoutof Hong Kong, has added to the fluidity of thissociety, shaped andreshaped itscultureandhelped transformmanagementassumptionsandstrategies.Ofparticularsignificanceweretwo‘landmark’movements.Onewas the influxof refugees from theMainlandas a sequel to the

warofliberationandthechangeoverofgovernmentin1949.Theinflowof capital, technological and managerial know-how and refugee labourenabled Hong Kong to take off in its infancy of industrialisation. Thecaptains of the Shanghai textile-mills transferred their plants to the‘British colony’ and inaugurated an entrepreneurial culture whichcombined Confucian paternalism and Western imported ideas ofrationalistic Taylorism (Chen, 2000: 4–6; Wong, 1988). Yet, such anapproachofemployerbenevolencewasmaskedbyapervasivementalityof transient orientation of the working people due to their refugeebackground. ‘Casualisation’waswidespread in the labourmarket,withthe proliferation of piecework and daily-rated payment in the firms’hiringpractices during the1950s and through to the1970s (seechapter13).Theseconddemographicmovementwas themassiveexodusofHong

Kongemigrantsseekinga‘secondpassport’orresettling insuch‘First-World’ countries as Australia, Canada, the United Kingdom and theUnited States. Stemming essentially from an almost neurotic anxietyabouttheirsecurityandlifestyleafterHongKongrevertedtoChina,suchan ‘escape’ of its people happened during the 13-year transition periodleadinguptoitsreunificationwithChinaasaSARin1997.The‘brain-drain’, inasmuch as these emigrants were preponderantly middle-classprofessional and managerial personnel and their families, engenderedfears about the local managerial competitive advantage. In order toaddress themanpowergap,manyHongKongcompanies, especially themultinationals, began to ‘delocalise’ and recruit from the international(or, more specifically, theAsian) managerial and professional market.Theseshiftsaddedtothecosmopolitanismofthecity,whichwasalreadybranded with an element of cultural pluralism by virtue of its British

heritage.Inshort,HongKongisnowtrulya‘melting-pot’,wheretheEastandtheWestmeet.It may be legitimate to postulate that Macau has a somewhat

amorphousculturalmix.Thisplaceis intrinsicallyatraditionalChinesecommunity.However, such a native character has been truncatedby anarrayofcomplexinfluences.First, theNationalistsandtheCommunistshave each maintained a foothold in this former Portuguese colony.Second,Portugalhasleftbehindacolonialimprint,especiallyintermsofCatholic ethics and educational missionary work. Third, Macau hasalways sustained a criminal subculture, inasmuch as secret (triad)societiesanda ‘gangster’communityhavesurvivedandappear tohavemaintained covert links with theMainland and Taiwan. Such elementsareassociatedwith,inthefourthplace,the‘mainstream’casinoindustry.Fifth, there is a group of local-borns, and yet of Portuguese descent,labelled asMacanese. They are confrontedwith a status and ‘identity’hiatus.Suchambivalencearises fromtheirdesire tosecureassimilationwiththelocalMacauChinese–buttheyarestillgreetedbya‘we-they’divide (Hao:2005;2011:chapter4).Sixth, therehasalwaysbeenspill-overfromneighbouringHongKong,whichprovidesamodelforMacauinvariousdomains.A leadexample is thealmostwholesale transferofthe Hong Kong SARformula toMacau upon its reversion to China in1999. Seventh, the arrival of multinational capital, notably thatemanatingfromtheUnitedStates,tothecasinoandhospitalityindustriesin thepost-handover erahas exerted apivotal impact upon the renewalandinnovationofmanagerialpracticesinMacau.

Thepolityandlegalsystem

Ostensibly, politics and the political and legal systems have alwaysplayedakeyroleinaffectinghowbusinessworksandtheflowofcapitaland its activities in these three societies. The foremost events in thecontemporarypoliticalhistoryofHongKongandMacauunfoldedintheyears 1997 and 1999, when both were returned by a colonialadministrationtoChina’ssovereigntyasSpecialAdministrativeRegions

(SAR). Paradoxically, these processes of ‘decolonisation’ havestimulatedboththeeconomyandbusinessineachplace,fortworeasons.First,Chinahasbeenkeentosustainthecapitalistsysteminbothplaces,inorder toattest to theviabilityof itsnovel ‘one-country-two-systems’policy and to enlist these two cities in support of its ‘marketisationreforms’ (seechapter 5). Second, both territories have attracted moremultinational capital with the intention of anchoring upon these twoplacesasa‘springboard’fortradinganddoingbusinessintheMainland.Enterprises established by Mainland capital entering Hong Kong arebrandedas‘redchip’companies,whicharemanagedunderadistinctivestylereminiscentofPRCmultinationalsoperatingabroad.InTaiwan, themost salient development in its external relations has

been the opening of dialogue and economic-cum-cultural mutualitieswith theMainland. There has been since the 1990s a mushrooming ofTaiwanese businesses trading or investing in industry along the coastalfringeof theMainland, especially in the south-east provincesofFujianandZhejiang.Taiwanesemanagementhasbeenperceivedasefficaciousin theMainlandcontextbut canbenotorious in termsof itspropensityforindustrialhazards–likefireandworkplaceaccidents.Another political factor affecting businesses in Taiwan and Hong

Kong,andmorerecentlyMacauaswell, is thedemocratisationprocess.InTaiwan,theliberalisationofthegovernmentwasinitiatedin1987byPresident Jiang Jing-guo. Politics in Taiwan, as a result, becamebipartisanwhenthemonolithicreignoftheNationalPartygavewaytoanincessant contest between that party and the Democratic ProgressiveParty. Power was no longer concentrated within a closed oligarchycontrolledbya juntaofpoliticalandmilitary leadersbutdevolved toamiddle-classstratummadeupofthebusinessandprofessionaleliteandintellectuals. Comprising increasingly the younger generation who arelocallybornandeducatedabroad(conspicuouslyintheUnitedStatesandJapan), the business elite are enlightened in their managerial ideologyand perspective and are also keen to import Western notions andprescriptionsofmanagementtoreformbusinesseswhichareoftenfamilyestates. Politicisation compounds the practice of management as it

becomesattractiveforbusinesstoseekanalliancewiththepoliticalelite.Businessdonationsinsupportofcandidatesbiddingforpoliticalofficeshave become a commonplace, yet this is liable to breed irregularactivitiessuchas corruptionandbribery.The labour agendaalsoentersthe political arena. Reforms of workplace conditions are widelycanvassed by pro-labour politicians, creating an imperative whichcompelsmanagement tomake better provision for their employees (cf.chapter13).InHongKong, the stepped introductionof electedand representative

governmentunder thepresentSARandtheformercolonial regimeshastransformed the relationship between capital and labour. The shift inpower relations is manifested in the domain of the elected LegislativeAssembly, as attested by the incessant confrontations and hagglingbetweenthetwosidesintheassembly.AvividillustrationisprobablytheenactmentofthelongawaitedMinimumWageOrdinancein2010,whichcame into effect the following year. Business has been successful fordecadesinshelvingsuchalegislativemotiononthegroundthataleverof thisnaturewould compromise the logicof free enterprise.However,thecreepingproblemoflowwagesandtheascendingpoweroforganisedlabour as a stake-holder in elected politics eventually coerced businessintomakingaconcessionbygivingitsconsenttotheestablishmentofastatutorywagefloor.In Macau, an elected government was also introduced upon the

inception of theSAR in 1999.However, political haggling between thevarioussectarianinterestshasbeenlessintensethaninHongKong.Yetthe formal system of political governance largely emulates the HongKongarrangements.AsinthecaseofHongKong,theMacauBasicLawcreated theofficeofChiefExecutiveas thegoverningheadof theSARand established the law-making LegislativeAssembly. Political partieshave not yet gestated but instead ‘interest groups’ representing diversesectariandivisionssecureseatsintheLegislativeAssemblybydirectandindirect election or government appointment. There are three pointsworth noting in terms of the relationship between the polity andbusinesses.

The first is the pervasiveness of the theme-gambling-industry,revamped and modernised and transformed into a multinational andpluralisticindustrysincethereversionofsovereignty.IthasbecometheprincipaldriverofMacau’seconomic‘take-off’inthefirstdecadeofthetwenty-firstcentury.Theindustryalsowieldsformidablepoliticalpowerandinfluence,beingdeputisedintheLegislativeAssemblybytheinterestgroup‘MacauDevelopmentAlliance’(NUDM)(Lee,2011:82).The second is the secular decline of the traditional associations,

including those organising business and labour, notably the MacauChamber of Commerce and the Macau Federation of Trade Unions.During the Portuguese reign, these bodies acted as the key links andtransmission belt between the Portuguese administration, the localChinese community and the Mainland government (both the centralgovernment as well as the provincial government of Guangdong).However,sucharoleisbeingincreasinglyeclipsedandemasculatedasamodernisedMacau becomesmore pluralistic and cosmopolitan and theyounger generation emerges as a more inquisitive and articulatepopulation.With an entrenched and growingmiddle-class,Macaumayfollow in the footsteps of Hong Kong to evolve into a ‘civil society’governedbythe‘ruleoflaw’.Suchaprogressioncouldposeachallengetothetraditionalassociationswhichareintrinsicallytradeandmerchantin character. The decline of these associations hence signals that thetraditionalmodeofrunningandmanagingbusinessinMacauiswitheringaway and giving way to a more modern andWesternised approach tomanagement.ThethirdistherampantvolumeofcorruptionwhichexistsinMacau,

ofwhichthe‘AoManLeung’casewassymptomatic(Brewer,2011:99).To curb this type of duplicity, the SAR government created a high-powered agency, the Commission Against Corruption (CCAC),extensivelymodelleduponitscounterpartinHongKong,theIndependentCommission Against Corruption (ICAC). If vested with sufficientautonomy and power, the CCAC can exert a powerful impact onreshaping the conduct of businesses and enhancing their quality ofgovernance. Whether Macau will enter a new ‘estate of realm’ in the

eradicationofembeddedbusinessmalpracticeschainedtocorruptionwillhavetoawaitthetestoftime.The legal system apparently excels in Hong Kong in providing a

hospitablemilieuforbusiness.Before1997,Britishcommonlawwasthecornerstone, which upheld the principle of economic freedom andcensuredanydeedswhichwouldrestrainorimpedethefreedomoftrade.Suchalegalheritagehasbeenperpetuatedbeyond1997,asguaranteedbythe1985Sino-British treatyor theBasicLawpromulgatedbyChina in1991. In particular, the simple procedures prescribed by the British-inheritedCompaniesOrdinancehavebeenconducivetotheformationofcompanies with limited liabilities and accumulation of capital. Theprosperityandexpansionofthecapitalfundmarketmadepossiblebytheabove legalpermissivenessanda free regimeonforeignexchangehaveencouragedastampedeoflocalbusinessesaswellasforeigncompaniesintothestockexchangeastheyaspireforthestatusandrightsofapubliccompany listed for open stock trading and capital formation.Many ofthese companies are Chinese family businesses, for which corporategovernancehasalwaysbeenproblematic.Suchweaknesseswereendemictothepre-1997government’sregimeofmoralguidanceandnon-coercivecontrol.Thedistressassociatedwiththelackofadequateregulationwasexposed in the 1987 crisis,when the shares exchangemarket collapsedamidsttheeuphoriaofatradingboom.The lessonsof1987, in the end, caused thegovernment todevelop a

more legalistic and punitive approach to its control regime.Concomitantly, the individual companies also began to modernise andbenchmark themselves against the practices of governance pursued bytheirWesterncounterparts.Atthemacrolevelofofficialsupervisionandsurveillance, theregulatory infrastructurewent throughanalmostentireoverhaul.Therelativelyfeeblesystemoflegalnorms,whichhadhithertoreliedupontheCompaniesOrdinanceandthe1974SecuritiesOrdinancefor exercising a voluntaristic type of gentlemanly control, was visiblystrengthened, albeit in agradual reformist fashion.At the coreof theselegislative initiatives was the enactment of the Securities and FuturesCommissionOrdinancein1989,astheenablinglawtocreateaSecurities

andFuturesCommission(SFC).TheCommissionhassincethenassumedtheroleofapolicingagency

withaprerogativetoinvestigateandinitiateprosecutionsagainstactsofdefault in this industry.However, someof its sanctioningabilitieshaveremainedsurfacemoralistic rather than legalistic.Anexamplehasbeenthe non-statutory Codeon Take-overs and Mergers and ShareRepurchases which it administers. However, legal prescriptions havebecome increasingly specific and explicit on the appropriate etiquettegoverningdisclosureofinformation,especiallypertainingtotheinterestsof key corporate officials and dominant shareholders in publicly listedcompanies,aswellascensuring‘insidertrading’.TheICACalsoplaysacardinal role in complementing the work of the SFC and investigatinganygovernanceandmanagerialmisdeedswhichhavealinktocorruptionorfraudulence.

Discussion

Thebruntofthe1997EastAsianfinancial-cum-currencycrisisunmaskedthevolatilenatureofthestockmarket,especiallybecauseofthegrowingmutualitybetween shares and futures trading. In thewakeof the crisis,the SAR administration ushered in the merging and integration of thestocksandsharesand futureexchanges,whichwasachieved in2000. Italsopromptlymoved toenactacomprehensive repertoireof legislationtoregulariseandpolicesecuritiesandfutureactivities.By comparison, the regulation of corporate governance and ethical

businessandmanagerialbehaviourisquitedifferentinTaiwanorMacau.InMacau, a stock exchange has been conspicuous by its absence. Thenotionofacompanywithlimitedliabilitieshasbeenblurred,ratherthanmadeexplicit,by legislativecodification.Themechanismofenactmentis dualistic or ‘bi-rail’ (Yu, 2011: 60). Parallel to the law-makingprerogative of the Legislative Assembly, the Portuguese governor, orsince1999theChiefExecutiveoftheSAR,isabletopromulgatedecrees(laws) as administrative regulations. Licences are granted in this

connection to the casino operators. The following narrative is anexemplary illustration of the myriad laws and legislative intricacyinvolvedinlegitimisingbusinessesintheleadgamblingindustry:

Thelegislaturepassedagaminglawfortheregulationofcasinooperationsin2001,specifyingthatthreegamingconcessionswouldbegrantedbythegovernment….However,thegovernmentthenissuedadministrativeregulationsthatallowedeachconcessionairetosub-contracttherighttooperatecasinostoanothergroup(ibid.,61)

In Taiwan, there are no legal institutions governing the formation oflimited companies analogous to those in Hong Kong. However, thepresence of the ‘visible hands’ of governmental intervention in thecapital market is pronounced. On various occasions, the officialadministrationhasapplieddiscretionaryleverstohelpstabilisethestockmarket and the exchange rate of its currency. In the heritage of theRepublic of China which reigned over the Mainland before the 1949‘Liberation’,Taiwanadoptsessentiallythe(European)Continentallegaltradition instead of British common law as in the case of HongKong.Litigation on business deals and disputes in a complex process can becumbersome. And it is not clear as to whether a company or anincorporatedbodycanberecognisedasalegalpersonintermsofstatus.The Japanese system of corporate structure and governance exerts aninfluence upon the formation of capital (seechapter 7). Althoughsupervisingboardscanbefoundinsomecompanies,thecorporatecultureremainsconventionalanddemocraticmanagementoftheEuropeantypeisrarelyknown,asinmostofEastAsia.

Conclusions

To sum up, Hong Kong, Macau and Taiwan have each seen rapideconomicgrowthasnewlyindustrialisedeconomies(NIEs)ofEastAsia.Although they have a commonConfucian heritage, they are each quitedistinctive in their cultural, socio-political, economic and managementsystems.

They are also multicultural in their different ways. Hong Kong hadover a century of British rule;Macau had an even longer, Portuguese,colonial inheritance; and Taiwan had a complex and diverse Japaneseimprint.Wehaveattempted toexplore thesedifferences in this chapterandmakeplaintheirsalientpoints.

Note1 The ICAChas been standard-bearing in the eradicationof corruptionwhichwas notorious

previously among such key government departments as the police and public works.Besides, this agency has been instrumental in uplifting the standard of business ethicspractisedamongprivatebusinesses.Theseeffectswillbediscussedinanensuingsection.

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7ThechangingnatureofmanagementandcultureinJapanJohnBensonandPhilippeDebroux

Introduction

In thepost-warperiod, Japanesemanufacturingcompanies significantlyincreasedtheirshareoftheglobalmarketofautomobiles(Womacketal.,1991)aswellasachievingmorethan50percentoftheworldmarketincameras, video-recorders, watches, calculators, microwave ovens,motorcycles and colour televisions (Oliver andWilkinson, 1992, p. 5).Much of this success was seen as being due to the ‘unique’ form ofmanagement tobefoundinJapanesecompanies,althoughthe industrialstructure and the commitment of Japanese workers were also seen asimportant (Abegglen and Stalk, 1987; Clark, 1987; Dore, 1990;TachibanakiandNoda,2000).Management practices such as lifetime employment, seniority

promotion, consensual decision-making and continuous on-the-jobtrainingweresingledoutasitwasarguedthatthesepracticesencouragedthe incorporation of employees into the enterprise culturewhich led tostrongemployee identificationwith the firmandahighcommitment toimprovedproductivity(Moore,1987).The value of these management practices came under increasing

scrutinywiththecollapseofthe‘bubble’economyinthelate1980s,theonset of the recession in the early 1990s and the Asian and globalfinancial crises in 1997 and 2008 (seechapter 2). The decline ineconomic growth, the lack of consumer confidence and the intensecompetition from China and other developing economies increasedpressure on Japanese companies to reconsider and reconfigure theirmanagement practices. Only by doing so, Japanese enterprises argued,wouldtheirproductivitybeimprovedandtheircompetitiveadvantagebe

restored.Yet, Japanesemanagement is embedded in thewider businesssystem, institutions and social values (Clegg andKono, 2002;Whitley,1992). This contextual dependency has meant that change would bedifficult and slow, and would proceed through experimentation ratherthan radical changes to themanagement system (Benson andDebroux,1997;Benson,1998;Warner,2011;SpecialIssue,Japan,2012).The prolonged nature of the 2008 global financial crisis, which has

continued well into 2011, has increased the possibility of change inJapanesemanagementaccelerating.

Thisdémarcheraisesanumberofquestionssuchaswhatarethekeyunderpinningfactorsinfluencingmanagementtoday,howhasmanagementrespondedtothecurrentchallengespresentedbytheglobalfinancialcrisis,whataretheconstraintsoperatinginJapantosystematicchange,andwhatconclusionscanwedrawintermsofthestructureandformofpresentdayJapanesemanagement?

This chapterwill address such issues, although itmust be stressed thatchange in the management practices of Japanese companies is notuniform or clearly transparent. The focus of the chapterwill be on themanagementofhumanresources–asthisiswheresignificantchangeistakingplaceandwheretheenvironmentalcontextsaredynamicandfluid.ItcommenceswithabriefoutlineofthehistoricalandculturalcontextofJapan which is then followed by a discussion of the development ofJapanese business andmanagement, and recent economic development.This elaboration provides the backdrop for the following sectionwhichdiscusses why change has been necessary and the difficulties oftransitioningtoa‘new’managementsystem.Theslowandvariedrateoftransition in Japan demonstrates how corporate and societal culturemodifies and reinforcesmanagerial values and behaviours. The chapterconcludeswithadiscussiononhowfar thedysfunctionalaspectsof thecurrentJapanesemanagementsystemarerootedinsystemicproblems.

Thehistoricalandculturalcontext

The entry-point intomodernity for Japanwas significantly different to

that of Europe and the United States, which subsequently led to adifferent path being taken in its industrial and technologicaldevelopment.Intheseventeenthcentury,Japanattemptedtocloseitselfoff from the external world, although this did not stop economic anddemographicexpansion.ThisTokugawaperiodofrelativeclosuretotheworld was characterised by a growing importance given to businessvaluesandeconomicproblemsthatrancontrarytotheregime’sidealofsocial stability (Carré, 1995). Thesamurai supporting the Tokugawagovernment were, during this time, facing a declining income as their‘wages’werebasedonanallocationofricewhichwasdifficulttosellasthemarketsufferedfromoverproduction.Asaconsequence,distinctioninrankandconditions,onwhichsamurai

powerwasbased,wasincreasinglythreatenedbytheeconomicandsocialsituation.Duringthistime,bigtradinghousesdevelopedandestablishedthegoalofbusinessprofitasanimportantsocialvalue(Norman,1940).Despite strong political control, a pragmatic approach stimulated

considerable intellectual activities among a number ofsamurai andmembers of the bourgeoisie eager to assert their roles and values insociety.ThisfacetwasmostnotablyillustratedintheinterestinWesternscience and techniques, which introduced the Japanese to the best ofWestern knowledge that existed at this time (Totman, 1993).This gainmay partially explain why during the later Meiji period, theJapaneseeliteswereabletoassimilate,overaperiodofabout30years,amoderncompany system that had been developed over several centuries inWesterncountries.With thecommencementof theMeijiRestoration in1868, the Japanese adopted and adapted Western practices. Althoughlimitedorganisational resourceswerea constraint togrowth this forcedcompanies to concentrate their resources in simple and functionalorganisations with strong collaboration between them. Foreigntechnology transfers also called for rapid organisational learningwhichturned companies’ ability to adapt and cooperate into a competitiveadvantage(Fruin,1992).It is insuchacontextthatJapandevelopedanumberofmanagement

practices, not somuch rooted inhistory and culture, but as a relatively

modern phenomenon loosely related to the proto-industrial stage ofeconomicdevelopment.Skilled labourwas scarce,particularlyafter theRusso-Japanese war of 1904–5, so employers offered long-termemploymentandwagesbasedonlifestagestoattractandretainworkers.These practices were critical to securing labour during the subsequentdevelopmentoftheheavyindustrialsectors(Taira,1970).Similarly, the job-rotation system developed as a response to high

levelsofabsenteeism(Koike,1988).Likewise,tocopewiththeshortageof qualified labour in the 1920s, employers attempted to control thelaboursupplybyencouragingthecreationofcompanyunions.Overtime,theseunionsbecamethenexusforexchanginginformation,bargainingoncompany-specific working conditions and promoting agreements thatwerefavourable to theirmembersaswellas thecompanies themselves.Thus,itwasatthestartofthetwentiethcenturythatthekeyfeaturesofthemodernJapaneseapproachtomanaginglabouremerged(seeBenson,2008,Gordon,1985,Kawanishi,1992).Japanese culture sees the self to be deeply embedded in social

relationships (seechapter3).Assuchthereexistslittleconfidenceinthepower of the individual to devise, control and execute his or her owndestiny,especiallyifthoseplansruncountertoprevailingexternalsocialand structural norms and conditions (Hamaguchi, 1988). Nevertheless,younger Japanese today are increasingly rejecting notions that thefulfilment of security and stability needs can only occur within thetraditional boundsof the closed ‘communityof fate’ (Sugimura, 1997).This challenge to the long standing psychological contract betweencompanies,unionsandworkers is increasingasyoungpeopleno longerwishtobeboundto,andsacrificetheirprivatelifeto,asinglecompany(EconomicPlanningAgency,2000).Theseattitudesarealsoincreasinglyshared by the wider Japanese society. Employees of all ages areexpressing a desire to develop closer relations with their family andfriends, aswell as to pursue leisure or volunteer-type activities outsidethe boundaries of the organisation (Economic PlanningAgency, 1999).Suchasocietal transformation isnotnewaswasearlier illustratedwitheconomic modernisation which could not have taken hold so

comprehensivelyand so rapidly from theMeiji periodonwardswithoutforces for change and modernisation building up within the ‘closed’Tokugawa society.Nevertheless, it is also the case that theMeiji elitessought to limit the penetration ofWestern ideas through the policy ofwakon yosai (Japanese spirit, Western technology) and, later, with anextreme form of nationalism. So,modernisationwas imposed upon theJapanese people from outside and from above, and the process ofmodernisation beganwith changes in the external andmaterialworlds,notfromwithinashappenedintheWest.

ThedevelopmentofJapanesebusinessandmanagement

Therehavebeen,and there remain, twoalternativeparadigmsoperatingintheJapanesemanagementsystem.Theseparadigmsreflectthebalancebetween the emphasis on social harmony and the company as a familythat has been inspired by Confucianism and Shinto Buddhism, and thestressplacedonmarket rationality and the interpretation, in a Japanesecontext,oftheprinciplesofTaylorismandmassproduction(seechapter4). At various times companies would claim to uphold paternalisticprincipleswhileatothertimestheyexpressedallegiancetotheprinciplesof market rationality and emphasised the economic rationale of theirmanagementsystems.In general, enterprises emphasised the market rationality of

managementsystems.Horizontalcoordinationbetweendepartmentswasofutmost importance in termsofknowledgemanagement.The rotationof employees between departments gave companies the opportunity tonurture autonomous problem-solving capabilities and to enhance theiremployees’ability toprocessandcommunicate informationback to theproduction system. At the same time, incentives were devised thatallowed individual employees to commit themselves to the collectiveprocesseswithoutfearof losingcompensation.The trade-offofsuchanapproachwasclearinthemindsofbothparties.Companies needed long-term, committed employees in the post-war

yearswhere a shortageof skilledworkers existed.Companies thereforemanaged the careers of their permanent employees, ensuring adequatetrainingbasedontheirspecificneeds,andpaidwagesbelowproductivityinearlyperiodsofemploymentwhilstraisingthemaboveproductivityinthesecondpartofaworker’scareer.Inreturn,workerscouldonlyrecoupthe early losses if theywerediligent and avoidedbeing laidoff.Underthissystemworkersnolongerhadanincentivetoretirevoluntarily,andso the retirement age had to be specified in advance to control labourcosts(Lazeur,1979).This démarche led to clear, hierarchy-driven career development

schemes where promotions were based on the number of years ofcontinuousemploymentandmerit.Thismeritcomponentwasnotbasedonaparticularjoboroutput,butbroadlydefinedbyproblem-solvingandcommunication skills. Frequent appraisals assessed potential ability,basedonadaptability to technicalchangesaswellas soft skills suchasloyalty and the ability to cooperatewellwith otherworkers. The long-termnatureofcompensationpracticeswascompatiblewiththedominantlong-terminvestorrelationships.Mainshareholdersdidnotpursueshort-term profit maximisation strategies and stable cross-shareholdingsamong affiliated companies prevented hostile takeover bids. As such,companieswere able tomake implicit commitments such as long-termemployment promises andseniority-basedwages to their employees, inexchange for employees’ commitments in terms of long-term loyalty,ethicalbehaviourandstrongworkdiscipline.The source of sustainability, in particular the efficiency and

effectivenessofthebusinesssystem(forinstancethesustainedabilitytocompete on the basis of quality and responsiveness to customers’specialised needs), was also linked to the sociocultural and historicalcontext. The resultant management concepts and practices, the vestedinterests that were created and the high social expectations theydevelopedinJapanesesocietyhavehadanimpactthatisofconsiderableimportanceinunderstandingthecurrentandfutureprocessesforreformof themanagement system, its pace and orientation and the objectivespursuedbythekeystakeholders.

Atthepolicy-makinglevel,companieswereusedasatooltoachievethe over-arching public goal of rebuilding the country. The immediatepost-war economic and political situation also explained why theJapanesebusinesssystemdevelopedasitdid,butitcouldbearguedthatwhiletheuniversalisticwelfare-statedevelopednaturallyintheEuropeanlow-context socio-political and business environment, in the high-context, particularistic Japanese environment, where specific grouprelationships are very tight and exclusive, it was not surprising thateconomicrevivalcentredonbusinessorganisations.Theideaofprivatecompaniesbeingconsideredasnotonlyeconomic

but also social institutions also permeated the US (Berle and Means,1932;Galbraith, 1956) and theEuropean (Crosland, 2002)discourseoncorporate governance and the position of companies in society, beforeand after the Second World War. A transformational drive of thecapitalistic tenets (the supremacy of shareholders’ rights) emerged andlasted until the end of the 1970s and the start of the dominance of theneo-liberal paradigm among the American liberals and the Europeansocial democrats (Utting and Marques, 2010). Companies wereconsideredasakindofpublicgoodwithshareholdersbeingonlyoneofthestakeholders.Suchaviewdidnot,however,gettothepointofpublicauthorities, management and unions talking about companies being anorganic type of ‘community of fate’ with symbiotic relationships withsociety, far beyond the purely institutional devices where managementand employees pursued their separate interests based on individualisticutilitarianassumptions.The official discourse in Japan blurred the line between private and

publicsectors in itsattempt torecreateorganisations in theformof thenineteenth-centuryefficientbutalsosociallyresponsibleOmimerchants(HirschmeierandYui,2006).Inthiscase,corporategrowthequalledtherealisationofsocialprosperityandwealth.Asystemdevelopedinwhichcompanies and their employees cooperated and worked collectively toachieve greater economic outcomes that were subsequently spread asimpartially as possible. Companies were thus expected to display abenevolent responsibility towards those with whom they had direct

relations (i.e. employees, subsidiaries,businesspartners andcustomers)aswellasthewidercommunity,shopkeepersandserviceproviderswhosurvivedonthespendingofitsemployees.InthediscourseofaleadingfiguresuchasKonosukeMatsushita, the founderofPanasonic, thegoalof businesswas to serve citizens, not just topursue profit (Matsushita,2011). Businesses were based on relationship-based psychologicalcontracts emphasising mutual loyalty with interests transcending theinterestsoftheorganisations.It is aparadox that no transformational drive towards the legal and

fiduciarybasisofcapitalism,asintheUSandEurope,emergedinJapanaftertheSecondWorldWar.Thesymbiotictypeofcapitalismwastakenas guaranteed and enjoyed considerable legitimacy without needing tohaveaclearlegalbasis.Rapid industrialisation and urbanisation dissolved traditional

communities and replaced themwith company-based communities andcommunications. Companies thus became the centre of people’s sociallives. Whilst work plays a major role in shaping identities and theunderstanding of societies worldwide, studies have shown that thistendency is the strongest in Japan (Sugimoto, 2010). Long-termemployment, seniority promotion and low-income differentials ensuredthestabilityofJapanesesocietyandprovidednormativereferencepointsintermsofpastachievements,currentpositionandthefutureambitionsofworkers and their children.Management enjoyed internal legitimacylinkedtothesesocio-culturalfactors.Japan has been described as a so-called high power distance country

run according to a concept of hierarchy in which people of all rankstraditionally accepted the legitimacy of their positions in society. Buthierarchy has ameritocratic and not an inherited social privilege-basis(Hofstede, 1991). In credential and status-driven Japanese society,withaneducationsystemassuringtheproductionandreproductionofelitesonmeritocraticcriteria,employeeswerelookingattheirmanagersaspeoplewhohadperformed(startingfromschool)betterthanthemselvesinafairandrelevantcompetitioninwhichtheywereallengagedonequalterms(Sugimoto, 2010). So, employees were strongly driven to act in

accordance with their prescribed roles in a cooperative (mutuallybeneficial)systemratherthanengaginginazerosum(ornegativesum)struggletoalterthedistributionofpowerandrewards.Thislevelofcooperationbetweenlabourandmanagementtoachievea

flexibleandefficienthigh-skill/high-wageproductionsystemhadlittletodowith formal institutions and laws imposing binding obligations (seechapter13).Japanesecorporatelawpaysscantregardtoworkersandtheprincipleof shareholderprimacy is clearlyenshrined in the law (Araki,2005).Lifetimeemploymentwasnotanexplicit contractualpromiseorfiduciary duty on the part of companies to protect the interests ofemployees. The agreement between job stability for employees andflexibility for employers was based only on an ‘unwritten guarantee’(Dore, 2000), a ‘social norm’ (Jackson, 2007) or a ‘moral imperative’(AhmadjianandRobinson,2001)(Wolff,2010:81).Notwithstanding this lack of formal legal protection, employment

agreements subsequently became backed by the state through legaldoctrineandcourtprecedents.Permanentemployeesweredependentontheiremployersandfacedincentivestoactinaccordancewiththelong-term interestsof thecompany, lest theywould lose their statusand fallinto the categoryof theunprotectedworkforce.But Japanhad (andhasstill largelykept)a legalstructure inwhich thedoctrineofemploymentat-will is not recognised. An employment relationship is normallydeemedtobecontinuousandmayonlybeterminatedforjustcause.Thebasic legal doctrine and court precedent is that in contested cases anemployerwillonlybefoundtohavejustcauseforterminationifalllessdrastic alternatives have been ruled out. In Japan, however, employerswhowishtodischargeemployeesforwhateverreasonusuallycircumventthelawbyaskingemployeestoresign.Thisis,inmostcases,effectiveasinacollectivecultureemployeesoftendonotwanttotakealonestanceagainst their employer. There was, and still is, the possibility forpermanent employees in large companies to be transferred to a lesserorganisation in the case of poor performance and/or disagreementwithsupervisorsandmanagers.Theemployercouldbackuptherequestwithfinancial inducements or/and by threats, but in any case the employee

almost always had to comply. Therefore, management was clearly incommand but there was to some extent an effective balance of powerwiththestate’sintervention.Rationalityandsustainabilityalsojustifiedthecreationofduallabour-

markets.Whileclaimingtoupholdthepaternalisticapproachcompaniescould, in different contexts, integrate the principles of market andeconomicrationality into theirmanagementsystemsbyadoptingmodesofproductiondrivenbycostcontrol.Japanisasocietythatmakesacleardistinction in status and treatment based on theuchi (inside) andsoto(outside) concept which differentiates between insiders’ and outsiders’membershipofagroup. Japanesecompaniesdonot consider theuseofcontingent labour, those workers denied access to fringe benefits andgenerally working for lowwages without job guarantees, and the widewagegapbetween largeandsmallcompanies, as incompatiblewith thecooperative,long-termworkarrangementstheyhavedevelopedwiththeirpermanentemployees.

Recenteconomicdevelopment

Running parallel to the developments identified above have beensignificant changes in the economic fortunes of Japan.Agriculture hascontinuallydeclinedinitsshareofemploymentsincethe1950sandmostworkersarenowemployed in theservicessector.RealGDPgrowthhasslowedconsiderablysince1991andhasaveragedlessthan1percentperyear. This is in contrast to the 10 per cent average growth rates of the1960s and the nearly 5 per cent average growth rates of the 1970s and1980s. Industrialproductionduring this timealsoexperiencedasimilardecline;fromahighaveragegrowthof13.3percentinthe1960stothepresentlowofanaveragefallofone-thirdof1percentinthefirstdecadeofthetwenty-firstcentury.Asaconsequence,unemploymenthassteadilyrisenfrombetween1to2percentinthe1960stoanannualaverageof4.7percentinthelastdecade.Thesechangesaredetailedfortheperiod1960to2010inTable7.1below.

Much of the traditional Japanese management model stemmed fromthemanufacturingsector,particularlythelargercompanies.Thedeclineinindustrialproduction,asillustratedabove,hashadasubstantialimpacton employment in this sector. These declines were caused by poorconsumerdemand(Yoshikawa,2002)andtherisingcompetitivenessofanumberofdevelopingcountries.This

Table7.1AveragerealGDPgrowth,unemploymentrateandindustrialoutputgrowth,Japan,1961–2010(%)

Sources:Benson,2005;Ito,1993;JILPT,2007and2010;JPC,1995;Nakamura,1981;Odagiri,1992;Uchino,1983.

step has led many Japanese manufacturers to relocate parts of theiroperations overseas, particularly to other Asian countries. This‘hollowing out’ ofmanufacturing led employment in this sector to fallfrom15.5millionemployeesin1991tolessthan10.2millionin2009;afallof34.5percent in themanufacturingworkforce(Benson,2005:40;JILPT,2010:23).Whilethelossofmanufacturingjobsoverthepasttwodecades has been substantial these lossesweremore than compensatedforbyanincreaseinemploymentintheservicessectorof38.8percentor 9.4million employees (JILPT,2007: 23; JILPT,2010: 23).Manyofthesenewjobs,however,wereofacasualorpart-timenature.Thisshiftawayfromfull-timeworkpartlyaccountsfor therapid increase innon-regularemploymentinJapan,andthelowerwagespaidtotheseworkershaveraisedconcernsasto‘whethersuchemploymentcansupportcareerdevelopmentandfamilyaspirations’(Whittaker,2004:30).Theseeconomicdifficultieswereexacerbatedbysomeexternalities,as

alluded to in the introduction.The1997–8Asian financialcrisis,whichdeveloped in Thailand as a result of a drastic fall in confidence in theThai currency, quickly spread to a number of other Asian countries,including key Japanese trading partners such as Indonesia, Korea,MalaysiaandTaiwan.AlthoughtheAsiancrisishadasevereimpactonmanyof theAsianeconomiesat the time,by2001mosthad recovered.ThiswasnotthecaseforJapanwherefinancialscandalsinthelatterpartof the1990s,anincreaseintheconsumptiontaxin1997whichledtoadampeningof consumerdemand, adecrease inpublic spendingand theuse of publicmoney to support the ailing banking system added to theeconomicdifficultiesfacingthecountry.TheJapaneseeconomydidbegintoimproveafter2002witheconomic

growth and domestic investment increasing (see Special Issue, Japan,2012).Exportsalsoincreased,althoughdomesticconsumptionremainedsluggish. This outcome resulted in improvements to the labour-market,with increasedhiringofemployeesand improvedwages.These factors,in turn, contributed to a subsequent increase in private consumption(Tselichtchev and Debroux, 2009: 337). The 2008–9 global financialcrisis,whichcommencedwitha restriction in lendingbroughtaboutbysub-prime lending in theUS, saw Japanese consumption fall (althoughthis had commenced around 2006) resulting in a concomitant fall ineconomicgrowth and an increase in unemployment. Although by late2009, Japan appeared to be out of recession, after a year of negativeeconomic growth, the impact of theTohoku earthquake and tsunami inApril of 2011, and the following explosion at the Fukushima nuclearplanthasmeantthatagreatdealofuncertaintynowexistsinJapan.Accompanying theeconomicchangesover thepast twodecadeshave

been a number of other developments that will influence the nature ofJapanese employment and labour-markets in the future. The labour-marketparticipationrateformaleshasfallenfrom77.2percentin1990to72.0percentin2009(JILPT,2010:20).Forwomen,theratehasalsofallen,(cf.,chapter9)butbyasmallerpercentage:from50.1percentin1990to48.5percentin2009(JILPT,2010:21).Inaddition,theageingofthepopulationandthedeclineinthebirthratehasmeantthatthenormal

working age population has declined in recent years. This trend willprobably continue, as the low birth ratemeans fewer young people areentering the labour-market. It has been exacerbated by the rise in thenumberofyoungpeoplenotmakinganimmediatetransitionfromschoolto full-time employment; in 2002, therewere4.2millionyoungpeoplewhohadnotgonedirectlyfromgraduationtofull-timeemployment.Ofthis group, 1.9 million were ‘freeters’ – young people working intemporary jobs – 1.7millionwere young peoplewithoutwork and 0.6millionwereyoungpeoplenot inwork (JILPT,2005: 2).These factorshaveledtoanincreaseinthepercentageofworkerswhoare65ormoreyearsold,upfrom12percentofthetotalpopulationin1990to22.6percentin2010(JILPT2010:18).

Managementchangeandtransition

The acceleration of the pace and scope of changes in the Japanesebusiness system since the 1980s has occurred in an environmentcharacterisedbyasignificanttransformationoftheeconomic,socialandcultural environment. There are two dimensions to this change.On theonehand,during the lastdecade,Japanesecompanieshavesteadily lostgroundtoChinese,KoreanandTaiwanesefirmsinindustrieswheretheywere once the dominant players, such as electronics andtelecommunication. Moreover, they also lost ground against the bestEuropean andUS companies in launching new and successful productsand services. In short, Japanese companies seem to have lost theirinnovativepoiseandarestrugglingtoremainafloatinaglobalisedworld(LeeandKim,2011;SpecialIssue,Japan,2012).On the other hand, the shift towards cultural capitalism in a

postmoderneconomyandsocietyisclearlynoticeable(Sugimoto,2010).The‘CoolJapan’drive,symbolisedbytheflurryofproductsandservicessuccessfully mixing modernity with traditions, shows the depth ofinnovative traditions in Japan (Sugimoto, 2010). There are a growingnumberofworkers inknowledgeindustriesandtheimportanceofstart-

upentrepreneurshiptoenhanceinnovationisbeginningtoberecognised(Jackson and Debroux, 2009). These changes are not only driven byestablished companies but also by newcomers, especially those in theserviceandmanufacturing sectors.Manynew (but also old) companiesshowahighlyflexibleandcostefficientuseofhumanresourcesbasedoninnovations in incentive systems and a systematic diversification ofemploymentpatterns.Despite the social legitimacy of the business system, the seniority-

basedpayandpromotionsystemhasbeenunderscrutinysincetheearly1950s. However, it was only since the 1980s that its basic tenetsgradually began to be seriously challenged. The cost of such a systembegantobehigherthanitsmeritbecauseoftheageingofthepopulationand the slowing of economic growth. In addition, it was increasinglyconsideredill-suitedtosustainthenecessarydynamicsinafastchangingbusiness environment (Nikkeiren, 1995). Under such conditions theintroductionofperformance-relatedpaywasanattractiveoptiontolessencost pressures and to enhance employee motivation. Such a reformbecame all the more urgent as the government began to pressurecompanies to fulfil their social responsibilities by keeping redundantworkers employed and offering a longer career span to older workers.This policy-shift proved difficult for theseworkers as theywere losingtheir mandatory retirement options in a period of rapid market andtechnological changeswhich renderedmanyof their skillsobsolete andmadeitdifficultforcompaniestodispatchthemtorelatedcompanies.Butvestedinterestandhighsocialexpectationsofcontinuityoftheold

practices explain why the employment practices orthodoxy was notsomething that could easily be changed simply by wage-engineering.Middle-aged workers resented the introduction of performance-relatedpay as a breach of the psychological contract and insisted on thefulfilment of their implicit contracts of seniority-based reward. Thenoryokushugidriveinthe1980sdidnotoverturntherulesgoverningtheage versus pay curve, that is the skill-grading classification and theoperational rules for promotions. Rather, it has been argued, it createdgapsintheaverageageversuspaycurvewiththosegapsdeterminedby

merit (Ishida and Sato, 2011). The artificial creation of managerialpositions acceleratedbecauseof the ageingof thework-force. Japanesecompanies thus continued to go against the trend of what the modernbusiness environment required, namely the development oforganisational structures with fewer management layers and flatterhierarchiessoas to reduceoverallpersonnelexpenditureand turn fixedcostsintovariablecosts.Itwasonlyinthelatterhalfofthe1990sthatasignificantnumberofcompaniesbegantoexperimentwithnewappraisal,compensationandpromotionelementsbasedon individualperformanceas part of the revamping of their management systems. The termseikashugi, roughly translated as ‘performance-ism’,was coined in thatperiodasasymbolofthestrongbeliefthatacloserelationshipbetweenthemarket andmanagement philosophy and practiceswas a ‘must’ forthelong-termcompetitivenessofJapanesecompanies.This external pressure on companies, brought about by social and

economic pressures, was the major factor underpinning attempts toinstitute market-driven HRM systems in place of organisation-drivenpersonnel systems (seechapter 13). It did not mean, however, thatJapanese companies were moving closer to adopting employmentpracticesbasedontheexternallabourmarket.Thestyleoforganisationalgovernance in Japanese companies ismore sensitive to theproduct andrawmaterialsmarketsaswellas to thecapitalandfinancialmarkets.Itdoes,however, reflect thegrowing interdependencewith the changes incorporate governance. The coalition of shareholders and employeesintegratedandmediatedbymanagement (Aoki,1988) inwhathasbeentermed symbiotic capitalism started to disintegrate 20 years ago.Ownershipoflargecompaniesisnowlargelyinthehandsofshareholderswho are more interested in economic and financial rates of return incontrast to the earlier sales and market shares as indicators ofperformance. As a consequence, more precise methods of managingorganisational performance that reflect the market’s evaluation ofcorporateperformanceareincreasinglybeingadopted.Japanesemanagement, and particularlyHRMsystems, are nowmore

heterogeneousthaninthepastandpracticesnowdiffersignificantlyfrom

companytocompany.Thereformprocess,necessitatedbythechangingeconomicandsocialconditions,triggeredanevolutioninthecriteriafordeterminingthetreatmentofemployeesinorganisationsincludingthoseof age, tenure, gender and education. Increasingly, companies areeliminatingorsignificantlyreducingtheseniority-relatedelementinpayandretirementallowancesandreplacingthiswithacomponentrelatedtocompetency.Atthesametime,companiesareincreasinglydiscardingtheremnants of thewelfare corporatist philosophy by removing traditionalallowances such as housing, family and transportation. These actionshaveleadtotheabolitionoftheability/skillpayformanagerialpersonnelandtheadoptionofroleandperformance-relatedpayasintheUS.Asaconsequence,awiderdispersionofwagesforthemostimportant

and influential group of employees in Japanese companies, theuniversity-educatedmaleemployeesinmediumandlargecompanies,hasoccurred(Rebick,2005).Ashasbeenpointedoutbyanumberofauthors(Debroux, 2003; Takahashi, 2004; Meyer-Ohle, 2009) the adoption ofperformance-relatedpayschemeshasledtoadeclineinmorale.Inmanycases,thiswascausedbythesplittingofworkforcesintopredeterminedperformance bands and a decline in productivity due to the setting ofcontradictory objectives. The focus on the narrow objectives of‘ManagementbyObjectives’schemesthathadbeenintroducedinmanycompanies had the effect of neglecting irregular but important orstrategic tasks, which led to an increase in unpaid overtime. In mostcompanies,however,theseproblemswereconsideredtransitory.Thereformsoutlinedaboveandthedecliningemployeemoralereflect

the tensions between the old and new ways of doing business, whichraises important questions concerning how companies can mosteffectivelyutiliseanageing,yethighlyeducatedandskilled,workforcewhosecostsaremakingthemlesscompetitiveonglobalmarkets.Inpart,thistension(notablythatamongtheolderworkers)hasbeensimmeringoveralongperiodascompaniesgraduallychangedtheseniority-relatedsystem that had been in place for many years. Nevertheless, asgenerations that have worked in an essentially time-related pay andpromotionsystemretirethisproblemwilllessen,althoughthesesystems

are embedded in company culture, especially for regular, full-timeemployees. At the present time, however, the important issue facingmanagementishowtomaintainacooperativeandcollectivemanagementsystem at a time of considerable decentralisation and individualisation,notwithstanding that future generations of managers will have a betterunderstandingofperformancemanagementschemesandcanbeexpectedtoadapttothenewworkrules.TherapidchangesintheexternalenvironmentofJapanesecompanies

haveledtoimportantchangesinthemodeofemployment.AsintheUSandEurope,athree-tieredworkforcestructurehasemerged,composedofashrinkingeliteofpermanent,long-termcoreworkers,asecondgroupofmedium-term skilled workers, increasingly cut off from the traditionalwelfare corporatist system and a growing third group of casual, short-term, semi-skilled routine workers. This model has worked well forJapanese companieswho have over the past decade begun to repatriatefactories to Japan after four decades of seeking offshore expansion.Production processes that, due to their labour intensiveness, were oncemost economically performed in low wage countries can now beperformedmore economically,more quickly and/ormore reliablywithflexible automated equipment requiring minimal direct labour inintegrated facilities in Japan. This shift allows companies to respondquickly to rapidly changing technology and product markets, and tocoordinate production with engineering, product design and marketing.Deskillingoftheproductionprocesseswasmadepossiblebysubdividingtasks or by introducing special purpose machines that can be operatedwithlessskilledoreducatedworkerswhocanbeemployedascontingentworkerswith lowerwages, fewerbenefitsandlessemploymentsecuritythan regularemployees.Suchaproductionapproachalso is suitable forsubcontractingcertainfunctionstosmallfirmsthatpaylowerwagesortoindependentcontractors.Notwithstandingthe tensionsoutlinedabove, theprocessofreformis

still,althoughincreasinglylessso,reflectingaconsensualapproach.Thetransformation isunderpinned, toa largepart,bybothderegulatoryandre-regulatorymeasures thatallowsomebalance tobeachievedbetween

job securityand flexibility.This ‘flexicurity’, amodel that is receivingconsiderable attention in Europe, suggests that Japan is not convergingtowardamarket-based,dismissalat-willsystemoflabourregulation(cf.,chapter13).Theprotectionofjobtenure(albeitforadecliningnumberofpeople) remains in place and has been bolstered by initiatives to keeppacewith evolving social values concerningprivacy, gender equity andwork/life balance. After 30 years of limited acceptance. the EqualEmployment Opportunity Law is now increasingly integrated into theHRM‘family-friendly’policyofleadingcompanies.Inordertobalancethe expenses of the social security system in a fast ageing society thegovernmentnowencouragesemployers toensurestableemploymentuptotheageof65years.Nevertheless,since2004themandatoryretirementagehasbeensetat60yearsofageandsocompaniescanstill limit therangeofworkerswhoareeligibletoworkbeyondthisage.Therealitiesof a declining labour force coupled with the changing social fabric ofJapan,however,meansthatcompaniesmusttakestepstoenableworkerstoworkbeyondthisage.Thismounting pressure to allowpeople to retire laterwill, however,

haveadownsideascompanieswillattempttodecreasetheirlabourcostsfurther throughthe utilisation of casual labour, technology and reducedworkingconditions.Thisstepcanbeseen in recentderegulatorymovesthat are broadening the powers of employers to deal flexibly withworking conditions. The legal maximum limit for an employmentcontract has been increased fromone to three years.Casual labour cannow be utilised freely in manufacturing. The section in the WorkerDispatchingLawthatprohibiteddispatchingworkerstoproductionsiteswasremoved in2004.Thesechangesareallexamplesof theerosionoftheidealisedmodelofJapaneseemployment,whichhasrealimplicationsforworkersandtheirunions.AnumberofleadingJapanesecompanieshavesucceededingathering

support fromtheircoreshareholders,whoaccept thebasic tenetsof thehighperformanceworksystems(HPWS).AdoptionofHPWSgoeswithacompensation differential that remains relatively low (around 1:20betweentherank-and-fileworkersandtopmanagers)andwithlong-term

jobguaranteesfora(shrinking)poolofpermanentworkers.Nevertheless,the accumulation of incremental changes over a number of years hasreachedthepointwheresomeinstitutionalinnovationsaresodifferenttothe legitimated rules onwhich the Japanesemodel ofHRMwas basedthat it has created new patterns of behaviours. This has led to theemergence of a new management system which is underpinned by‘negotiations’betweenemployerandemployee.Theresultantemployer–employee relationship is now open-ended and is continually beingredraftedoutsideofthesocietallegitimacythatcharacterisedthepast.Inshort,thegainsandlossesdependonthebargainingpowerofthepartiesandaremoreuncertain.Therelationshipbetweenemployerandemployeeisincreasinglyseen

inmarket-basedtermsinsteadoforganisationaltermsandwheretheageandcapability-orientedprinciplesofremunerationandadvancementhavediminished and been replaced with a result-oriented approach. Casualemployment has risen sharply over the past two decades and theseemployees, along with their permanent counterparts, are expected toimprove their productivity. The level of commitment and ability nowdemandedmeans thatmany employees areworking above their currentrankinglevelwithlittlechanceofpromotion,aswouldhaveoccurredinthepast.Issuchanapproachsustainableinthelongterm?Canworkersachieve

company demands as well as fulfil their own needs and the changingrequirementsofsocietyintermsoffamily,work-lifebalanceandgenderequality?These arequestions that aredifficult to answer at thepresenttime.Whatcanbesaidisthatformanyworkerstheiroverallperceptionis that theyarebeingasked toworkharderand longer thanbeforewithmore accountability and responsibility but with uncertain careerprospects.Insuchconditions,thetraditionalacceptancebyemployeesofmanagementlegitimacycannotbeassumed.Moreover,themodernityoftheHPWSmodelappealstothenewgenerationsofAsianmanagerswhosee this as a way to overcome obsolete social norms, organisationalstagnation, complacency towards bad performers and unfairness to thewell-performingworkers(Debroux,2010).

One outcome of the ongoing changes tomanagement practices,withtheincreasedemphasisonthemanagementofperformanceunitbyunit,is the possible negative impact on knowledgemanagement.Knowledgemanagementisavitalpartofdailyprocesseswithnewknowledgebeingcreated continuously. The traditional Japanese approach to knowledgemanagementwasbasedon theembodiedknowledge thateverymemberof the work group possessed (Nonaka and Takeuchi, 1995). Culturalcharacteristics, like the importance of face-to-face contacts andcommunicationstyles,providetheframeworkforthisdistinctivestyleofknowledge management. According to Nonaka and Takeuchi (1995),Japanese companies reliedon the experienceofworkers, andmanagingknowledge involvedallmembersof theorganisation. In thismodel, thefocusliesonhowthiscanbeimprovedtoreachasmanymembersoftheorganisation as possible. In short, the Japanese knowledge-creatingcompany is built upon the high level of the institutionalisation ofpersonal relationships, and the strong high-context character of theJapaneseculture.Tacitknowledge isexchanged through jointactivities,suchassocialisingorlivinginthesameenvironment,ratherthanthroughwritten or verbal instructions. Communication between workers, whichhappensoutsideofformalmeetingssupports thedevelopmentofsharedmental models of ideas and beliefs and encourages dialogue that iscrucialforknowledgecreation(NonakaandTakeuchi,1995).Socialstructuresandtechnologicaldevelopmentsshapeorganisational

structures which, in turn, impact on the methods and quantity ofinformation exchange within companies. More recent changes toJapanese organisational structures have led to the perception that theinformal exchange of information has decreased. This has created adilemmafortheJapanesecompany.Ontheonehand,theneedformoreemphasis on analysis, individual autonomy and explicit knowledge isconsidered necessary in the modern competitive environment. Yet, asCollinson andWilson (2006) argued, the self-sustained, self-containedJapanese organisation has become inflexible as its very high level ofculturalhomogeneitycreatesdifficultiesifitwishestotakeadvantageofprevailing technologies. Technology changes the way people can

exchangeinformationwitheachother.TraditionalworkingmodeswithinJapanesecompaniesandtheirrelatedpartnersarebuiltthroughintensiveinteractionamongorganisationalmembersandareexpected to result intheoutputofinnovativeproductsand,subsequently,ineconomicgrowth.Newmedia technologiesenablevirtualdialogues, informationexchangeandexplicitknowledgesharinginnewwayswhichfavourtheintegrationof knowledge from different outside players. This démarche has ledNonaka and Toyama (2005) to argue that the organisationalba (sharedcontext for knowledge creation) has to be extended beyond the presentorganisation’s boundaries.On the other hand, Japanese companiesmaybe right to continue with their integrated production approach with itsfocusonthelong-term,gradualimprovementsofproducts(Itami,2011).Ifthisissothenthisrequiresthecontinuationofbroad,multifunctionalexpertise,thelong-termdedicationofstableprojectteamsandlong-termrelationshipswithkeypartners.Thekeyquestion forJapanesemanagement is thereforehow tomake

an efficient, but self-contained, system of production and knowledgemanagement an open system inclusive of all human resources whilemaintainingthecorecomponentsofwhatmadeitefficientandeffective.To takeadvantageof theopen technologymodel requires themasteringof global mechanisms of exchange, sharing and new collaborativerelationships.AsLuhmann(1995)argued,organisationssurvivebecausethey open their boundaries and can manage the balance of mutuallyopening and maintaining the boundaries. Ehnert (2009) introducedAristotle’s idea of a self-sustainingoikos (household) for an economicinterpretation of sustainability. Theoikos has to be self-sustaining to aconsiderableextent,inthatitmustnotonlybeconsumption-oriented,butmustalsohaveastrongfocusonreproduction.Uptothebeginningofthe1990s Japanese society and its companies were arguably the bestillustrationofthatidea.Japanese management, companies and their networks have not,

however,beenentirelyself-sufficient.Atthesocietallevel,attemptsweremade to achieve some long-term balance between the internal andexternalenvironments.AsEhnert(2009:147)noted,the

consumptionandreproductionofhumanresourcesoccurredbyfosteringboththeregenerationofhumanresourcesandalsobyinvestinginthe“origin”ofhumanresources,thatisbyinvestinginorganisationalenvironmentswherehumanresourcescomefromsuchasschools,universities,educationsystemsandfamilies.

As a consequence companies established close relationships withuniversity professors, not somuch to collaborate in research (althoughthathaschangedconsiderablyoverthepastdecade)buttohaveaccesstotheir best students.Moreover, despite Japanesewomenbeing treated asancillaryworkers they performed a crucial corporate role through theiractivities at home (allowing their husbands towork longhoursbecausetheywouldtakecareofthehouseholdalone)andintheeducationoftheirchildren (inmaking themwell-socialised Japanese fit to enter into thecorporate society). In this respect their input in maintaining thesustainability of the corporate system was considerable, albeit notnecessarily by choice. This gender-role segregation was largelylegitimised in society at large as had been the case before the SecondWorld War. Women had been placed at the centre of the polity butwithoutbeinggiventheopportunitytopursueacareeroftheirown(cf.,chapter9).Theeconomicandsocialchangesthathaveincreasinglyoccurredsince

theearly1990s,coupledwithincreasedcompetitionfromcountriessuchasChina and India, havemeant that amature knowledge-based societyandeconomysuchasJapancannotcompeteonthestandardisedproductmarkets.Tocreateproductswithuniquefeaturesrequiresthecooperationof bothwhite-collar andblue-collarworkers at thepoint of production,who have broad integrative skills and problem-solving abilities ratherthannarrowfunctionalspecialties (Shibata,2009).This is thechallengefacing Japanese companies and managers. In a world where the onlysustainableadvantageisbasedonknowledge,acooperativeandmutuallybeneficial management system has to remain the cornerstone of theJapanese company’s strategy (Itami, 2011). A mix of modularisation,outsourcingofopenlyavailable technologyand integratedproduction isnecessary. Competitive advantages basedon production acumen andincremental innovations must be kept but the capability of making

breakthrough innovations and managing intangible assets such asbrandingandintellectualpropertyrightshastobeimproved.Itrequiresashift from the traditional focus on the embodied knowledge of theindividualtocodifiedknowledgeasindocumentsordatabases.AsEhnert(2009:162),however,pointedout thedifficultyforJapanesecompaniesinthecurrentsituation‘isthattensionmayoccurinbalancingthehumanresourceefficientlyandeffectivelytodayandsustainingtheHRbaseforthe future’. This is precisely where the Japanese companies have beensincetheearly1990s.However, the strength of the organisationalba as a support for the

knowledge-creating company resulted from the lack of mobility ofJapaneseworkerswhichservedasanincentivetosharetacitknowledge.Theincreaseinnon-regularworkersemployedincompanieswhotendtohave lower organisational commitment, coupled with the growingmobility of knowledge workers, challenges the extent of knowledgesharing.Bothcategoriesofworkerscan take their embodiedknowledgewith them. The twoba supporting socialisation (originatingba) andexternalisation(interactingba)arethespacesthatseeminglybecomelessimportant for theseworkersandcould lead toapotentialdecline in theknowledge conversion processes. The shared spaces in which theseprocessescanbefacilitated(originatingandinteractingba)becomelessidentifiableinanorganisation.Inshort,lessinter-departmentalmobilityand,subsequently,lesspersonalcommunication,meanslesssharingofacommoncontextaboutanissuewhenexchanginginformation.The Japanesemanagementmodel kept open the necessary spaces for

discussion,communicationandexplorationaboutthekindsofknowledgeneededwithin the organisation but also in society at large. Importancewasgiventothetechnicaldimensionofknowledgebutalsotoitssocialand cultural dimensions which led to the development of multilevel,integrative networks with constant cross-fertilisation of interconnectedknowledge. Yet, the increased casualisation and mobility of theworkforcemeansthatlessemphasisisplacedoncooperationandgenericskill training,withmorefocusonspecialist trainingwhichwill threatenthesenetworksand isolateworkers.Theproblemwillprobablybemost

acute in the case of engineers (Nakata and Miyazaki, 2011). Theemphasis performance-related pay places on goals in which employeeperformance is evaluated objectively, and in a horizontal manner, cutsacross job descriptions. But in R&D results often take many years toemerge and when they do become clear they are often the result ofteamwork which makes the objective assessment of each individual’scontributiondifficult.Oneway these problems could be addressed is through externalising

the labourmarket. Ingeneral,Japanesecompanieswant todiversify thepoints of entry into the enterprise: however, an external labourmarkethas been slow to develop (Benson and Debroux, 2003). Managementremains mostly composed of insiders who are graduates of a limitednumberofeliteJapaneseuniversities.Companiesarebeginningtorecruitnon-Japaneseemployeesintothemanagerialtrackattheheadquartersbuttheobstaclestotheirintegrationremainsevere.Thisisnotsurprisingaseven the most successful companies have generally been unable tooptimise the talent of the non-Japanese employees working in theiroverseas operations. In Japan, companies are recruiting fewer newgraduatesthantheydid15yearsagobuttheinternallabour-marketlogicremains the cornerstone of the system. Its social legitimacy has beeninternalised in Japanese society to such an extent that it remains theexpectationofparentsandstudentsthatlargecompanieswillcontinuetorecruit new graduates every year and provide long-term job guaranteesandcareeropportunities.Despitethechangesinthecorporategovernancesystemthatencourageshorter-termhorizonsforcompanies’strategythislong-termmindsetissopervasivewithintheeducationalsystemthat20years of reforms have had little noticeable effect. The long-termorientationoftheproductionandreproductionoftheelitecanbeviewedas an asset or a drawback. The current examination-driven educationsystem assures continuity, facilitates training of the new entrants,decreasesthecostsofmonitoringandisinlinewiththekaizenprocessofincremental progress (seechapter 15). On the other hand, it createsrigidities,encouragesgroupthinking,tendstobecometoohomogeneousovertimeandleadstoarejectionofdiversity.

ThisprovidesJapanesecompaniesandmanagementwithadilemmainthe current globalised, highly competitive market place. In order tobecome more agile, Japanese companies have flattened structure andhierarchywhichhasincreasedefficiencybuthasledtofewerpromotionalopportunities being available. Yet, while employees were willing toacquire firm-specific skills that had value, and to work hard to boostproductivity, it was in the context of an expanding company in whichthey had a stake and prospects of advancement. If companies cannot,however,respondandmeetsuchexpectations,intheabsenceofavibrant,inclusive external labour market, they will end up with dissatisfiedemployees, lower productivity and ultimately lower returns on capital.Thisoutcomeexplains theparadoxical result that the levelofemployeeengagement in Japanese companies is strikingly lower than in UScompaniesthatoffermuchlessjobstability(SasakiandNorquist,2005).These ‘trapped workers’ may not only be more dissatisfied and lessproductivebuttheymayalsoimpedetherecruitmentofbetteremployeesthatcoulddevelopahigherlevelofengagement.

Managementtoday:dysfunctionalaspectsandsystemicproblems

Over the past two decades, Japanese companies have faced a difficulteconomicenvironment thathas led them to implementnewgovernanceand management structures which have incorporated social andenvironmental issues into strategic planning, business decision-makingandcomplianceandrisk-assessmentfunctions.Thesenewpracticeshave,however,notbeensufficienttopreventscandalsfromoccurring,astheyhavebeenconstrainedbythetraditionalbusinesspractices.ThescandalsthathaveoccurredinJapanaredifferentfromthosethathaveoccurredinWesterncompanies as theywerenot the result of individual issues, forexamplethegreedoftopmanagement,butweresystemic.Inthesecasesthe wrongdoing occurred further down the company hierarchy andinvolvedalargenumberofpeople.Topmanagementdidnotknowordid

notwant to know. This led companies to adopt a fortressmentality ofdenial of responsibility, requiring the absolute loyalty of all employeesand the minimum disclosure of information to the outside. Theseresponses demonstrated the difficulties Japanese companies have withengaging with a number of parties (for example, non-governmentorganisations(NGOs)ornon-permanentemployees)becausetheyarenotconsideredasbonafidestakeholders.Underthereformstomanagement,Japanese companies are now asked to engage more dynamically instakeholder relations, although this will prove difficult, at least in theshort-term, due to their self-sustained and self-contained mindset. Incontrast, these same companies find it relatively easy to put in placeenvironmentalmanagementsystemsorengageinphilanthropicactivitiesbecause, although they cost money, they do not affect the company’sinternaldynamics. Inshort,companiesaremuch lessenthusiasticaboutinitiatives that could engineer changes from outside as such changescouldbeconsideredathreattomanagementauthorityandcontrol.In the particularistic Japanese society, it is almost impossible to

engage on the basis of general and universalistic principles, linked tosocial,environmentalandhumanrights-relatedissues,ortodebatesuchissues objectively. Relationships are based on specificmutual intereststhat exclude groups such asNGOs and non-permanentworkers. In thislatter case, it is likely that the situation will become worse. Japanesecompaniesalwayshadanumberofnon-permanentemployeeswithwhomlong-term relationshipswere established. This démarche has led to theintegration of some of them asmembers of the group benefiting frommonetary and non-monetary advantages bestowed upon permanentemployees.Itislessthecasenowwiththeutilisationofalargenumberof transient workers with whom relationships are kept to a minimum.Fundamental tensions between regular employees and non-regularemployeeshaveincreasedwiththewideningdisparitybetweentherole-basedpaystructureforregularemployeesandthe job-description-basedwage system for other employees. Very few Japanese companies haveadopted organisational principles that would allow them to internalisethese employees by establishing role-based classification systems and

codificationoftheroutesbywhichtheycouldbecomeregularemployees.Atthesametime,Japanesecompanieshaveplacedmoreemphasison

philosophy and guiding principles than on formal administrativeprocesses in the development of a corporate culture. Codifiedmechanisms for getting information to flow up the chain of commandoperate poorly and do not encourage the passage of objectiveinformation.Filtersandchannelsexistbuttheyarestronglydependentonpersonalrelationships.Forexample,Japanesecompanieshaveintroducedchildcareandfamily-careprogrammes,aswellasmadeeffortstoreduceovertime, or at least unpaid overtime. But the existence of thoseprogrammes does not mean that it is acceptable to utilise them. Fewemployees, for example, take advantage of family-care leave becausethey still assume that taking time off signals to their supervisors ormanagers that they are not entirely loyal to the company. So far, topmanagers have not in anymeaningfulway sought to dispel this notionandsoahighdegreeofambiguityremains.ThedimensionsoftheHPWS,promotedstronglyincountrieslikethe

US, are not alien to Japanese companies. Some of these aspects wereinspired by Japanese practices and corporate culture. It is, however,difficult for companies in Japan to adopt such systems as Japanesecompanies are based on different concepts of organisations and valuesystems. The HPWS expects more from core employees than purelyutilitarian calculation and individual benefit. But the objective ofWestern firms that introduce HPWS is not to reproduce the Japanese‘communityoffate’.Highcommitmentandengagementdonotexcludemobility and individual development. Indeed a sense of autonomy isexpected and HPWS cannot be based on top–down communication. Inthiscontext, teamworkdynamicswithempowerment inflathierarchicalstructures presupposes a proactive management of conflicts andacceptanceofdiversity.Employee mobility linked to employability is a crucial element of

cross-fertilisationofideasandmethodsbetweenworkers.Suchmobilityfits well with themindset of a low-context culture (Hall, 1977) wherepublic and private concerns are separated and compartmentalised. In

contrast, in high-context cultures such as Japan mobility may createmistrustandfeelingsofbetrayalasrelationshipsareexpected toextendbeyond functional purposes. ‘Impatience with rule’ (Storey, 1995) andhigh discretion in work organisation is difficult to introduce intoJapanese companies where respect for hierarchy and a mindset ofhumilityandself-restraintareconsideredvirtues.Self-developmentandautonomy have always been promoted in the Buddhist and Confucianworldsbutitiswithinawell-defined,hierarchicallyorganisedframeworkaccompanied by a subtle social control influencing behaviour andattitudes. Accepting diversity remains difficult, especially in theculturallyhomogeneouscompaniesandorganisationsfoundinJapan(cf.,chapter 16). It goes to the core of the reflection on the appropriateboundariesoftheorganisationsandchallengesthemeaningofbelongingtoaspecificgroupwithitsconnotationsofgender,ethnicity,lifestyleandfamilyrelationships.IntheUS,thesuccessofHPWSreflectsastrongbeliefintheidealsof

individualism and the ethics of self-responsibility and individualcompetitiveness.Exceptforasmallsegmentof theworkingpopulation,concepts and practices simultaneously promoting individualism andcollectivismaredifficultforJapanesetounderstandascollectivevaluesare still at the centre of private and public life in Japan. As aconsequence, the introduction of HPWS could cause a range ofdysfunctional problems, and possibly rejection, on the part of theemployee.As Dochertyetal. (2002) observed,HPWS can lead to self-exploitation,burnoutandmentalproblemsamongthehighestcommittedand engaged employees andmanagers.Although suchproblems arenotlimited to Japan, the increase in work-related mental diseases ofemployees and managers – for instance cases ofkaroshi (death byoverwork) and occupational-related suicides (Furuya, 2007), andoccupational psychiatric disorders – show the seriousness of the issue.Whilstkaroshi is a product of the traditional Japanese managementsystemthefactthatitdoesnotdisappearwiththeuseofHPWSindicatesthatitismisusedinsomecompaniesandhasnotcorrectedtheproblemsofthepast.Indeed,asignificantlylowerlevelofemployeeengagementis

observed in Japanese companies comparedto their US counterparts(SasakiandNorquist,2005).Thisfacetmayreflectthespecificsituationof the Japanese labour-market, or it could also be considered as anindicationoftheincompletefitoftheHPWSwiththeJapanesecorporateculture.

Conclusion

AfterfourdecadesofeconomicexpansioninJapan,thelasttwodecadeshave been characterised by low levels of growth, a decline inmanufacturing, increased competition from other Asian economies, aseries of financial crises and considerable social and demographicchange. These factors have impacted on the structure and form ofJapanesemanagement,althoughtheembeddednatureofthemanagementsystem has meant that change has been slow and uneven. Japanesecompanies have attempted to adopt someWestern approaches such asHPWSandreducetheirrelianceonexpensivefull-timeregularworkers.Bydoingsosomecompanieshaveimprovedtheirpositioninthewakeofthe1997–8Asianfinancialcrisisandthe2008–11globalfinancialcrisis.However, for most companies the change has been restricted by theformablebarriers inherent in the traditionalmanagement system.Thesebarriers, as illustrated above, include the limitations of the internallabour-market,alessthanconduciveenterpriseandsocietalenvironment,the lack of opportunities for younger workers and resistance to theindividualisation of performancemanagement. This state of affairs hasplacedJapanesemanagement inastateof fluxwhere theclashbetweentheoldandnewpracticesisstillbeingplayedoutandahybridsystemisemerging. This new system is inherently unstable and has been furthercomplicatedby the reductionof security forallworkers, andespeciallythe increasing number of irregular workers. As such, any newmanagement system that relies on employee loyalty and commitmentmaybedifficulttoeffectivelyimplement.

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8ThechangingnatureofmanagementandcultureinSouthKoreaChrisRowley1

Introduction

Post-1960sSouthKorea(hereafterKorea)developedrapidlyfromapooragricultural society into a rich, industrialised ‘Asian Tiger’ economy.Thenthe1997AsianCrisishitand‘themiracleontheHanRiver’seemeda‘mirage’.However,performancerecoveredup to thepost-2008globalfinancial crisis (seechapter 2). Within this roller-coaster ride ofdevelopment,managementandculturechangedfrombeingeulogised tobeing castigated. So, examining the development and influence ofmanagementandcultureinKoreaisimportantforseveralreasons.First,managementplaysaroleinbusiness,economicdevelopmentand

society but does not exist in a vacuum. A significant work whichindicates management variations stemming from culture is a seminalbook by Hofstede, 2001). Second, even for some non-culturalists, theconcept of culture is recognised (seechapter3).Cultural underpinningshave consequences for institutional environments, which for Whitley(1991)wereviathesystemsof:

authority relations, importance of personal ties and conception ofappropriatebehaviour;trust,reciprocity,obligationandenterpriseloyaltyandcommitment;organisationandpracticesofpoliticalandbureaucratic stateelites,policiesandfinance.

So,institutionalperspectivesneedgroundinginculturalcontexts.Third,in contrast to the implications of universalism and convergence-typeviews,cultureremainsnotonlyimportantanddiverse,butisportrayedas

ingrained,deepandslow-moving.The format of the rest of this chapter is as follows. The crucial

historical setting is followed by an overview of the economicbackground. Culture, societal and corporate, is dealt with in thesubsequent two sections, followed by management in terms of values,behaviour and labour conflict resolution. Final sections on theimplicationsformanagementandconclusionscompletethepicture.


Korea evolved over a long, sometimes tumultuous, history. The ‘ThreeKingdoms’ (39 BC onwards) were united in the Shilla Dynasty (from668), followed by the Koryo Dynasty (935 to 1392) and then the YiDynasty, which was ended by Chosun’s annexation by Japan in 1910.While colonised, Koreans were restricted in organisations to lowerpositions and excluded from managerial roles. Infrastructuredevelopments, industrialpolicyimitation,applicationof technologyandoperation management techniques and Korean émigrés, were otherJapanese influences (Morden and Bowles, 1998). The experience ofcolonisation, along with the forcible introduction of the Japaneselanguage,namesandlabour inculcated‘…strongnationalistsentimentswhichinduecourseturnedouttobeacentralpsychologicalimpetusfortheeconomicmiracles…’(Kim,1994:95).WithJapan’sdefeatin1945cameKorea’spartition,withUSmilitary

governance until the South’s independent government in 1948. Furtherwidespread devastation followedwith the 1950–5KoreanWar.A largeUSmilitary presence remains,with ongoing tensions and flare-ups andconfrontationswith theNorth, suchas theNorth’s sinkingof awarshipand an artillery barrage in 2010 (on North Korean economy andmanagement,seeCollinsetal.,2012)TheAmericanmanagementsystemwasstudied,especiallyasstudents

going overseas most often went to the US. This focus had impacts onmanagerialoutlooks,views,perspectivesandcomparisonsandsourcesof

practicesandexamples(seechapter4).Mixinginwiththisweremilitaryinfluences and authoritarian rule until 1987.Many executiveswere ex-officers, while male employees served in the military and had regulartraining,andcompaniesevenmaintainedreservemilitarytrainingunits.This Northeast Asian country, formerly known as ‘The Hermit

Kingdom’, now occupies almost 100,000 square kilometres of theSouthern Korean peninsula (6,000 miles from the UK). Korea’straditionallyveryhomogeneousethnicpopulation rapidlyurbanisedandgrew.AftertheKoreanWar,therewasababyboomwithhighbirthrates.Atthesametime,modernisingthesocietybroughtabout‘increasedfoodproduction, improvement of hygiene and sanitation, development ofmedical knowledge, technology, and widespread use of antibiotics,resulting in a sharp decline in mortality’ (Eun, 2008:7). These eventscaused a dramatic increase in population. However, in the early 1960sKoreaimplementedthenationalfamilyplanningprogrammefortheuseofbirthcontrol.Yet,eventhoughfertilitylevelsbegantofall,mortalityalsocontinuedtodecreaseamidadvancesinmedicalservicesandhealthcare. As a result, the population continued to increase (Table 8.1).However,thissituationhasnowchanged,withfallingbirthrates(1.2percent) and population growth (0.23 per cent) and an increasingly olderpopulation.Rapidindustrialisationinthe1960sgeneratedjobsinurbanareasand

promptedpeopletomigratefromruralareastothecities(Han,1978).By197043percentofthepopulationwaslivinginurbanareas,reaching80percenttoday.Ofthenearly49millionpopulation,nearly10millionareinthecapitalcity,Seoul(more

Table8.1Trendsinpopulationandagestructure,1960–2010(%)

thandoublethe1960sfigure),thedestinationof40percentofintercitymigrantsandover50percentofmigrantsfromruralareas,withafurther3.5millioninBusan(Pusan),2.5millioneachinIncheon(Inch’on)andDaegu(Taegu)and1.5millioninDaejon(Taejon).Seoulisthedominantcentre for political, social, business and academic interests and isregarded as ‘a case of third-world “glocalization”, in whichmodernityinteracts with postmodernity, random development with cultureconservation and space dissolution with space reconstruction’ (Lee,2004:112).Asaresult,Seoulhasdevelopedwithskyscrapers,residential-commercialcompoundsthathavebeencalled‘dreampalaces’andlargeshoppingmalls.

Economicbackground

Korea’sevocativenicknameof‘thecountryofthemorningcalm’becameincreasingly obsolete with the cacophony of continuous constructionrapidly transforming a poor, rural backwater with limited natural orenergyresources,domesticmarketsandalegacyofcolonialruleandwarwithdependenceonUSaidintooneofthefastestgrowingeconomiesinarapidly expanding region. For example, gross domestic product (GDP)realannualgrowthratesof9percentfromthe1950stothe1990s(withover11percentinthelate1980s)tookGDPfromUS$1.4billion(1953)to US$437.4 billion (1994) (Kim, 2000). Per capita GDP grew fromUS$87 (1962) to US$10,543 (1996) and gross national product (GNP)from US$3 billion (1965) to US$376.9 billion (1994). From the mid-

1960s to the late 1990s annualmanufacturing output grew at nearly 20per cent and exports at over 25 per cent, rising from US$320 million(1967)toUS$136billion(1997)(KimandRowley,2001).Koreabecamea large manufacturer and exporter of ‘ships to chips’, in both more‘traditional’(steel,cars)and‘newer’(electrical,electronics)sectorsandthe world’s eleventh largest economy, joining the OECD in 1996.Employmentgrewandunemployment levelsdeclined to just2per centbythemid-1990s.This developmental, state-sponsored, export-orientated and labour-

intensivemodel of industrialisationwas reinforced by exhortations andmotivations,oftenwithculturalunderpinnings,suchas ‘nationalgoals’.Theseincludedtheneedtoescapepoverty,achieveeconomicsuperiorityover ‘the North’, compete with Japan, repay debts and elevate thecountry’simageandhonour.

Thechaebol

Integral to thiseconomicdevelopmentwasaparticularbusinesssystemand form of business organisation, thechaebol. These drivers of theeconomywere family foundedandownedandcontrolled largebusinessgroupings with a plethora of diverse subsidiaries, as indicated in theirKorean label, ‘octopuswithmany tentacles’.For example, ‘FewpeopleknowthatSamsungmakessummerydressesandblouses.Evenfewerarelikely to remember… it rose to prominence in the 1950s as awoollenmill’(OliverandSong,2011:22).Muchofthelargebusinesssectorwaspartofachaebolnetworkandit

exerted widespread influence. Held together by a variety of means,including cross shareholdings, subsidies and loan guarantees in opaquefashion, there was competitive tension, distrust and rivalry betweenchaebol.Theywereunderpinnedbyavarietyofelementsandexplainedby a range of theories. The state–military links and interactions wereimportant, producing politico–economic organisations substituting fortrust, efficiency and the market (Oh and Park, 2002). The state bothownedbanks(withresultantcapitalguarantees)whichpromotedchaebol

asadevelopmentstrategyandintervenedtomaintainlabourquiescence.Suchcloseconnectionshavebeendamnedas‘cronycapitalism’(Rowleyetal.,2002).A fewof themore than 60chaebol dominated.At their zenith in the

1990s the top five (Hyundai,Daewoo,Samsung,LG,SK)accounted foralmostone-tenth(9percent)andthetop30foralmostone-sixth(15percent) ofGDP, spread across over 800 subsidiaries and affiliates. Somechaebol becamemajor international companies in the global economy,engagedinacquisitionsandinvestmentsoverseas,whosedestinationwasdominatedbytheUSandChina(Chungetal.,1997).Post-1997 there were problems and some, such as Daewoo and

SsangYongcollapsed,butothersprosperedandgrew, suchasSamsung,whichovertookHewlett-Packard in2009 tobecome theworld’sbiggesttechnologycompanybysales,whileHyundaigrewfromseventhtofifthlargest car maker after the crisis (Oliver and Song, 2011). Recentdevelopments, such as recent mergers at Hyundai, undermine thegovernment’s‘…attemptstoshifttheeconomy’scentreofgravityawayfrom unwieldy conglomerates that have traditionally weakenedthemselves by over extending into non-core businesses’ (Oliver,2010:23.).Wenowgiveillustrativesketchesofthreeimportantchaebol.Hyundai began in the 1940s as a car repair shop, spreading into

construction,cars(buildingthefirstinKoreain1968)andships.By1998its 63 subsidiaries also included heavy industry,machinery, chemicals,electronics,banking,financeandotherservices.Itwassopowerfulitwasdubbed the ‘Republic ofHyundai’,with 1996 sales ofUS$92.2 billion,over 200,000 workers and ranked amongst the world’s largestconstruction companies and producers of cars and semiconductors. The1997crisis,however,forcedHyundaitoinvestinothercountriestooffsetthenegativeeffectsandmaintainprofits,butalsoenabled it to indicatethat itwasaglobalplayer.However, itspost-2000dismantling saw themotor,engineeringandconstruction,semiconductorandheavyindustriesparts disaffiliated, pushing it outof Korea’s top 20 largest groups.According toHyundaiEngineering’svicepresident, ‘TheChung familyhas withdrawn from the business. We’re no longer a family-run

company’(Ward,2002b).Nevertheless,oneofthemostsuccessfulspin-offs, Hyundai Motor, remains part of the Chung dynasty. The familyownsa22percentstake,retaininglinksby‘…blood’(Ward,2002b)tothe Hyundai Group, still composed of 63 diverse subsidiaries in:Securities and Investment Trusts; Merchant Marine; Elevator;Corporation; Asan; and Logistics. In 2011 Hyundai Motor took acontrolling stake inHyundaiEngineering&Construction (E&C)Groupto diversify its business portfolio and to make Hyundai E&C a worldleadingconstructioncompany(Hyundai,2011).ThiswillallowHyundaiE&C to takeadvantageofHyundaiMotor’sglobalcompetitivenessandits high credibility in foreignmarkets. Indeed, itwas argued that thesechangesat‘…Hyundaiillustratehowfamilyloyaltiesandrivalriesstilldominatedecision-makinginSouthKorea’sbiggestcompanies’(Oliver,2010:23).Inshort,‘BringingHyundaiE&Cbackunderfamilycontrolisamatter of deep pride for the rivalwings of the clan’ (ibid.). In 2010,HyundaiMotor’snetprofitssoaredtoWon5,267billion(US$4.7billion),with a market value of US$49 billion in 2011 with other parts of thegroup valued at: US$36 billion (Heavy Industries); US$33 billion(Mobis); US$9 billion (Steel); US$9 billion (E&C) (Oliver and Song,2011).Samsung,theoldestchaebol,startedasatradingcompanyin1938and

developedfromafruitandsundrygoodsexporterintoflourmillingandconfectionery. With roots in the Cheil Sugar Manufacturing Company(1953)andCheilIndustries(1954),ChairmanLeeByung-Chullbeganthemanufacturing business after the Korean War. His business expansionprovided ‘a roadmap of how the Korean economy and its industrialstructure developed over time’ (Chang, 2010:59). The companydiversifiedintotextiles,paper,fertilisers,retailing,lifeinsurance,hotels,construction, shipbuilding, aerospace, bioengineering. In the 1970s,Samsung expanded exports by switching focus from light industryproducts to electronics and heavy and chemical industrial goods.Withrapid economicgrowth in the1980s,ChairmanLee started investing inthe semiconductor field andSamsungbecame the first conglomerate inKorea to introduce a full-scale business unit system (Chang, 2010). Its

sales of US$3 billion and staff of 45,000 (1980) ballooned to US$96billion and 267,000 (1998) (Pucik and Lim, 2002). By the late 1990s,SamsungElectronicsalonehad21worldwideproductionbases,53salesoperations in46 countries, salesofUS$16.6billion andwasoneof thelargest semiconductorproducers.By2002Samsungstillclaimedglobalmarket leadership in 13 product categories, from deep-water drillingshipstomicrowaves,televisiontubesandmicrochips.By2010netprofitsoared toWon16,150billion (US$15billion) fromWon9,800billion in2009withthemarketvalueofSamsungElectronicsstandingatUS$1,221billion; Life Insurance at US$17 billion; Heavy Industries at US$10billion;FireandMarineInsuranceatUS$9billion;EngineeringatUS$9billion(OliverandSong,2011).Lucky Chemical Company, founded in 1947, manufactured facial

creamsthentoothpasteandsoap.Asthecompanyexpandeditsbusinessto the plastics industry in 1952 it contributed to improving the livingculture of Korean society. Goldstarwas founded in 1958, going on toproduceradios,telephones,fansandconsumerelectronics,refrigerators,televisions (the first built in Korea), computers, semiconductors andmicroprocessors. From the 1970s, media, advertising, engineering andpetrochemicalswere added to its portfolio of businesses. In the 1980s,Lucky Corp. further developed its chemical business in the cosmeticsindustry and Goldstar Corp. intensively invested in the semiconductorbusiness. To become a global company, LG created ‘Jeong-DoManagement (the way they display their uncompromising integrity inpursuing LG’s management principles)’ in the 1990s. LG ElectronicsalonehadsalesofUS$9.3billionand22,800staff inearly2000. Its59branches, 18 sales subsidiaries and 31 manufacturing subsidiariesspanned171countries,with26R&DfacilitiesinKorea(Kim,2000).LGhasfocusedonfourbusinesssectorssincethe1990s:Chemicals/Energy,Electronics/Information/Communications, Financing and Services. In2003,LGintroducedaholdingcompanystructureandcommitteditselftoovercoming chronic problems in circulatory investments betweensubsidiaries.

The1997Asianfinancialcrisis

The 1997Asian financial crisis hitKorea badly. In 1998 came falls inGDPof–5.8percent,GNPoftwo-thirds,currencyof54percentagainsttheUSDollar,numberofestablishmentsby14percent(68,014),jobsby1million,wageratesby–2.5percent(nominal)and–9.3percent(real)in 1998 and the stock market by 65 per cent (between June 1997 and1998).Bankruptciesandunemploymentsoared,almosttriplingto8.6percent(twomillion)byFebruary1999.Thiseconomiccollapseledtomuchanxietyandincomprehensionasto

howquicklyandtotallythingshadcollapsedandwhy.Managementandculturewerequicklyimplicatedashavingaroleinthisdownfall(Rowleyand Bae, 1998a; 1998b; 1998c). The crisis was due to hikes in labourcosts and a decline in international competitiveness. Legalisationregarding labour unions aggravated labour–management conflict andstrikeswerefrequent.Thestrikesandwageincreasesresultedinasharpdecline inexports,whileat thesametime, thegovernmentdecontrolledtheincreaseofinternationalcapitalinflows(HeoandRoehrig,2010).However, the economy rapidly recovered by implementing reform

policies to meet the conditions of the IMF bailout programme. Thegovernment enhanced economic openness to attract foreigncapital/investment and intervened to improve the profitability of someindustriesbyreducingexcessiveproductioncapacityandenhancingsomeregulations. Moreover, thechaebol attempted to improve theircompetitiveness and profitability by pursuing joint ventures withmultinationalcorporations(HeoandRoehrig,2010).Korea’sGDPgrewby 10.7 per cent in 1999 and by 2000GDPwas US$461.7 billion, percapitaGDPUS$9,823 andGNPUS$459.2 billion.Growth continued intheearly2000s.The economy continued its impetus through the decade. Yet, this

recovery was fragile. Korean companies remain plagued by adversepublicity and opaque operations. High profile examples includedDaewoo’s huge debts and accountingfraud, Ford’s abandonment of itsinterestinDaewooMotor(aftersixmonths)in2000followedbylengthy

subsequentnegotiationswithGM.Others include lengthy talksbetweenHyundai’s securities andAIG (18months), Seoul Bank andHSBC andDeutscheBank(threeyears)andtheHynixandMicronsaga.Thentherewere the charges against the chairmen of Hyundai (2007) forembezzlement and breach of trust and Samsung (2008) for tax evasionand breach of trust. These events, and the need for a Fair TradeCommission and restrictions on investments in affiliates and cross-investments,indicateproblems,especiallythosethatmaybemoredeep-seatedorhidden.

Thepost-2008globalfinancialcrisis

Thepost-2008global financialcrisis impactedon theKoreaneconomy.Due to the high level of dependence on foreign trade and financialintegration with other nations, Korean exports and the domestic sectorexperienced declines in international demand and 2008’s fourth quarterannualGDPgrowthratefell to–5.1percent.Theeconomydeterioratedandthecurrencydepreciatedbyover25.4percentinUS$terms.Theriseinexternaldebtalsohasbeenamaincauseofthecrisis.Morerecently,theeconomyhasslowlyimproved,withstepstoprevent

asimilarcrisisinthefuturebyintroducingalow-carbonandeco-friendlyeconomy paradigm, reconstruction of organisations, fiscal policy andbankingreformsandbalancingexportandimportgrowth(KDI,2010).Intermsofregionaltrade,KoreaislocatedinamorecentralzonethantheUSandChina,inwhichKoreaplaysakeyroleasabroker.Consequently,todaytheeconomyisheavilydependentoninternationaltrade(nearly70percentofitseconomy).Post-1997trendscanbeseeninTable8.2.

Labourmarkets

The post-1997 employment and unemployment trends can be seen inTable 8.3. This shows the recovery in unemployment levels, from thezenithof7percentin1998to3.3percentin2002,slightlyrisingto3.7percentby2005andfallingto3.2percentin2008beforethepost-2008

crisisimpactandanincreaseto3.7percentby2010.Animportant impacton the labourmarketstemsfromdemographics.

Thepost-1960trendscanbeseeninTable8.1.Therehasbeenahalvingin the percentage of the population aged 14 or younger, from just overtwo-fifths (42.3per cent) in1960 tomuch less thanone-fifth (16.2percent) by 2010. At the same time, numbers in the aged 65 or abovecategoryhavejumpedfromaminute2.9percentin1960toasubstantial15.6percentby2010.Thedemographic issuesofanageingpopulationand a declining workforce are critical. The role of women workers isproblematic(seechapter9).Anageingpopulation isbringingdifficultieswith lessopportunity to

engageinproductiveactivitiesbecauseofearlierretirementsandlimitedjoboffers.Thus, theproportionofworkingpeopleaged50–64hasbeendeclining since 1990, even though there was a slight increase inemploymentbetween2000and2005(Eun,2008).

Table8.2TrendsinGDPpost-1997

Table8.3Trendsinlabourforce,employmentandunemploymentpost-1997

Comparedwithothercountriestheemploymentrateofolderpeopletendstobehigher.Yet,morethanhalfofolderworkersareintheagriculturalandfisheryindustriesduetoalackofyoungerlabour,althoughtherearealso some inmanufacturing ormanual labour.Continuing towork intooldageisduetotheneedtosustaintheirlivelihoodbyengagingeveninlow-payingmanuallabourbecauseofthelackofpublicsupportorotherincomesourcesafterretirement(ibid.).The implications for the management of demographic changes are

stark.Thisisexacerbatedbypossiblealternativesourcesoflabourbeingconstrained,givensomeofthetraditionalaspectsofsociety,notleastitshomogeneity and exclusiveness. However, on some dimensionsKoreansocietyisnowlesshomogenous.Oneexampleisintermsofinternationalmarriages,with35,000casesin2004,11.4percentofallmarriages,7.5times the 1990 level and 2.9 times the 2000 figure (Kim, 2006). Thegrowth rate of internationalmarriages has accelerated, especially since2000.Therehasalsobeenashiftwithinthistrend.Inthepast,amajorityof international marriages were between Korean females and foreignmalesbut now it isKoreanmales and foreign females.Foreignwomen

came from poorer countries to supplement a shortage of brides.International matchmaking programmes were introduced by localgovernments to help ruralmen findmarriage partners.As a result, thenumber of foreigners living with Korean spouses amounted to nearly75,000 in2003 (Cho,2005).Among foreign spouses, themajoritywerefromAsiancountries,suchasChinaandVietnamand theproportionofwomenwasmorethan90percent.Anotherdimensionof lesshomogeneity is indicatedby thegrowthof

Korean transnational families or multinational households, which afterthe IMFbailout increased inmany regionsof theworld.Somewell-offKorean families had babies in developed countries, mostly the US, toacquire localcitizenshipandotherseducatechildrenoverseas;so-called‘gireogi’families(Cho,2005).TheseindicatethechangingdynamicsofKorean families and reflect Korea’s position in the global capitalisteconomy.An increase in foreignworkers inKorea isanotherdimensionof less

homogeneity. Due to labour shortages the government adopted anindustrial training system for foreign workers in the early 1990s forutilising themasemployees.Since then, thenumberof foreignworkershas risen tenfold, going from about 100,000 (including illegalimmigrants) to about one million (including about 200,000 illegalimmigrants)(Yoo,2010).Thegovernmenthasalsotakenstepstoattracttalented foreign workers, primarily in the new growth sectors bysupporting diverse programmes for multicultural families (Lee, 2011).Therefore, a number of companies have increasingly employedforeigners.

Societalculture

There is a dynamic interaction among political, economic, social andcultural factors and ‘… the selective adoption, absorption andassimilation of some foreign elements; and the selective abandonment,modificationandutilizationofothers’(Kim,1994:103).Thisselectivity

occursthroughcultureorpoliticaldecisions.Traditional social values have been identified in Korea (Lee, 1997;

Kim, 1994; Cho and Yoon, 2002). These include: absolute loyalty ofsubjects to sovereigns; close relationship between father and son;separaterolesforfemalesandmales;precedenceofolderoveryounger;mutualtrustamongfriends;unequalinheritanceinfavourofeldestson;ancestorworshipandemphasisonfamilymembersinadirectline;faithin the transformability and perfectibility of the human condition;importance of self-cultivation; hard work and frugality as socialdiscipline; duty; reciprocity of respect and authority and publicaccountability; emotional harmony; hierarchy; discrimination againstout-groups.BeneaththeKoreanpeople’swaysofthinkingandvalueslieamixtureof theeasy-goingandoptimisticbehavioursofConfucianismontheonehandandhard-working,‘palli-palli’(‘quickly-quickly’),highachievementandgoal-orientedperspective,ontheother.Societal culture can be seen as underpinning development. For

example, Shin (1991) argues that rapid economic development wasmainlyduetothe‘progressivism’and‘optimism’oftheKoreanpeople.Progressivismmeanspeople’sorientationtowardschangeandinnovationagainstenvironmentaluncertainty.Optimismmeanspeople’sorientationtowardsoptimisticviewsandpreparationforthefutureregardlessofthecurrent situation. Work using such concepts compared 1995 and 2006usingthefourlargestchaebol:Samsung,LG,SKandHyundai(Choetal.,2007).ItisarguedthisindicatesasignificantchangeinemployeevaluesforKoreancompanies,especiallyaftertheAsianCrisis(seeTable8.4).ItisfurtherarguedthatthischangemaybeinterpretedasachangefromarelationalpsychologicalcontracttoatransactionalpsychologicalcontractinRousseau’s(2001)classification.Wheredo thesevaluescome from?Aswehave seen,Korean society

experienced many influences. Additionally, Korea’s religious andphilosophicalinfluencesincludeBuddhism(from372,andespecially935to1392)andConfucianism,thestatereligionforover500yearsuptotheearly twentieth century.This influence can be seen inKorean society’srigid Confucian code of personal and social behaviour and its feudal

system, maintained by a hierarchical, authoritarian structure, rigidlystratified from top tobottom (KwonandO’Donnell, 2001).Within thisthere was theyangban (the upper class or ruling class), thejungin orseoin (middle class), thesangmin (peasant farmers and craftsmen) andthecheonmin(underprivilegedclass).Confucianism’s influence remains,withvalues,waysof thinkingand

modes of conduct revolving around hierarchy, seniority and respect foreducation.Educationwas regardedasoneof thebestandshortestwaysfor attaining upper social status and the better way forjasusungga(‘makingone’sown fortune’), one reason for expenditureon children’seducation. Parents educate their children in an intense and uncommonway,commonlydepictedas‘excessivefeverforeducation’(Lim,2007).ThestructureofKoreaneducationstemsfromhighcompetitioninpursuitof the goal of entering the very ‘best’ universities, dubbed ‘entranceexam hell’. To make matters worse, Korean public education is nowfacingdifficultiescausedby‘…theexpandedprivatetutorialmarket,thedegraded authority of teachers, rising levels of school violence arisingfromstudents’stressfromentrance

Table8.4Trendsineducationparticipation(%)andexpenditureonprivateeducation

examinations …’ (Lim, 2007: 83). These occurrences have becomeserioussocialmattersinKorea.

Therewasextensiveinvestmentineducation,forinstance,intermsofthe shareof education expenditureby central government in relation toGDP.Koreaspent3.6percentin1982,fallingto3.2percentin1990and2000butrisingagainto4.2percentin2007,althoughsomewhatbelowthe OECD average of 5.0 per cent. However, Korea has the leastfavourableratioofteacherstostudentsatprimaryandsecondarylevelintheOECD(OECD,2009).Nevertheless,privatespendingoneducationislarge(seeTable8.5)andoneofthehighestintheOECDwithahighandrisingrelianceonprivatetutoringatprimaryandsecondarylevelsonthebasisoffiercecompetitionforprestigiousuniversityplaces.Whilefewerareleavingschoolatsecondarylevel(fallingfrom38percentto21percentsince1997),percentagesinhighereducationarestaticwithasmalldecline(44percentto45percentintheearly2000sto43percentbythelate 2000s) but with a large growth in above higher education, whichnearly doubled, going from one-fifth (20 per cent) to nearly two-fifths(37percent)since1997.SomeofthesetrendscanbeseeninTable8.5.Management education and training, along with the expansion ofAmericanstylebusinessschools,havealsogreatlyexpanded(seechapter15).Koreansremainintenselyproudoftheircountry.Furthermore,Korean

societywas traditionallyvery exclusive towardsother countries, peopleand cultures due to several reasons. First, the single ethnic group andtraditionallyhomogeneouspopulation (albeitwithsomerecentchanges,asnotedearlier)isonereason.Second,thehistoryofanagrariansociety,characterised by passive, closed and dependent views is another.Contributingtothesewasaclimatefavouringricecultivationasthiswaslabour and time intensive and spread along rivers and deltas incommunitiesrelativelyisolatedbymountainsanddistance.Thisstateofaffairs

Table8.5Changingvalues1995–2006

Source:Choetal.(2007)

encouragedcooperationandclose-knitgroupsdependentoneachotherinthe community for survival, with collectivism and inter-groupresponsibilities (seechapter 10). Third, the antagonistic memories andfeelings against foreign interventionist powers persist. For some, this‘one-race-one-culture’mentalityproducedinsensitivity.Cuttingagainstthesesocietalculturalaspectsaresomedevelopments,

such as experience of education or work in the West, businessinternationalisation, influx of foreign capital, ideas of importingmanagement‘bestpractice’andopeninguptoglobalcultures.Indeed,inthe early 1990s the administration explicitly employed asegyewha(globalisation)policyfacilitatingmorecommunicationsandinteractionswith foreign countries. Companies adopted similar policies, sendingemployeestoothercountriesforexposuretoforeigncultures.However,culturesremainrobustandslow-moving.Furthermore,there

have been some reactions againstWestern cultures, with the enhancedpower of Korean culture, especially within Asia (Ward, 2002a).Paradoxically,itisarguedthatthisresurgencepartly‘…reflectschanges

in the country’s make-up. Society is becoming more modern and lessformal…’(ibid:12).

Corporateculture

There is interaction between social values and corporate culture. TheimpactsofthetraditionalsocialvaluesnotedearlieroncorporateculturalcharacteristicsareseeninTable8.6.ThecorporatecultureofKoreancompaniesisdifferentiallyviewedas

morecollectivistbyWesternersversusmoreindividualisticbyJapanese(Cho andYoon, 2002). This is explained by the concept of ‘DynamicCollectivism’,anelaborationoftraditionalnotionsofcollectivismwhich‘…applies collectivist norms for in-groupmembers and individualisticonesforout-groupmembers’(ibid.:71).Asaconsequence,theboundarybetweenin-andout-groupmemberswasreinforced

Table8.6Impactsoftraditionalsocialvaluesoncorporateculturalcharacteristics

Source:AdaptedfromLee(1997)

andcompetition intensified.This isbuilt into corporate culture through

the interplay between internal mechanisms (learning, selection andattrition)andexternalforces(theenvironment).Theseforceswere:

‘CultureLegacy’,traditionalcultureembeddedinConfucianvalues;‘Social Climate’, socio-political situation created by the stateeconomicdevelopmentstance;‘Corporate Leadership’, with paternalism and authoritarianism.Their interaction with internal culture management producedDynamic Collectivism’s triple dimensions: ‘In-Group Harmony’;‘OptimisticProgressivism’;‘HierarchicalPrinciple’(ibid.).

Wewillreturntotheselater.To further investigate corporate cultureCameron’s (1978) competing

values and culture quadrant framework (Quinn, 1988) was used in asurveyof2,000indigenous,US,JapaneseandEuropeancompanies(BaeandSa,2003).Someinterestingresultsemerged(seeTable8.7).All the value quadrants, except Group Culture, were statistically

significant at the conventional level. In the case of Group Culture, allcompanygroupshadsimilarlevelsofthevalueregardlessofthecountryoforigin.USsubsidiaries,comparedtoAsian,hadhighervaluesatbothDevelopmental Culture and Rational Culture. The reverse was true forHierarchicalCulture,wherefirmsfromAsiancountries,onaverage,hadhighervalues.EuropeansubsidiarieswereinthemiddleandUSfirmsthelowest.Asian firmshadhighervaluesatGroupvaluesandHierarchicalvalues vis-à-vis Developmental values and Rational values, while thereversewastrueinUSfirms.Despite an increasing diversity of business ownership in Korea,

corporate culture in thechaebol remains important and powerful. Itretainsitshighprofile,influentialandnormativenature,withrootsinthefamily. The founders’ beliefs permeate organisations, replicated andreinforcedbyscionsoffamilies.Practices

Table8.7Culturetypesandcharacteristics

such as long in-house induction with employees staying at trainingcentres,wheretheyareinculcatedwithcompanyhistory,events,visionsand songs, are important (Kim and Briscoe, 1997). Somechaeboldominate localities, even leading to ‘company towns’, suchasWoolsan(Hyundai)andPohang(POSCO),housingandservicinglargenumbersofemployees.

Examplesofcorporateculturechange

Given the above analysis, how do corporate cultures change? AnoverviewofcorporateculturechangecampaignsinKoreaandthereasonsfor problems and effectiveness notes the need to secure qualifiedcampaignmanagersandconsistencywithoverallorganisationalstrategy(Park, 2002). For further detail we use examples of corporate culturechange in two leadingchaebol. First, Samsung, which had twodistinguishable stages in its establishment. The founder, Lee Byung-Chull, remained its ‘leader’ until the mid-1980s, with 1983–92 atransitionperiodforthechangeovertohisson,LeeKun-Hee.Arationaland bureaucratic internal processwas emphasised.High rationality and

low risk taking were important values, with rules and regulations,thorough analysis and evaluation and hardworking and well-plannedprocesses. These were necessary and sufficient during the high growthstage in a low uncertainty environment. In that period, even thoughSamsungwas the leading company inKorea inmost of itsmarkets, itsoverseas position was relatively low and unstable due to competitionfromJapanesecompanies.Tosurpassitsrivalsandbecomea‘superfirstclass’ business, Lee Kun-Hee’s Frankfurt Declaration (1993) launchedthe ‘New Quality Management’ movement in 1993, promotingrestructuring and radical organisational, including cultural, change. Hemade his top managers aware of how poorly Samsung products werepositioned in the global market and proclaimed ‘quality-firstmanagement’at theexpenseofproductquantity.The firmredefined itscore business areas by merging or consolidating ten companies andremoving or separating 16 companies out of the Group (Chunget al.,1997).ThroughthisprocessSamsung’sdirectionshiftedfrom‘domestic-centered, rationality’ towards ‘global player, risk taking’ values. Topmanagementwereencouragedtotakerisks,withautonomyanddiversitypromoted. Samsung’s style has moved from utmost caution to riskierapproaches and a focus on core businesses and decentralisedmanagement. In this way, Samsung developed its hybrid managementsystemfromJapaneseandWesternbusinesspractices.A second example is LG, whereinhwa (harmony) and solidity were

corevalues,suchas‘respect’amongmembers,‘toleranceandtrust’anda‘sense of unity and cooperation’ stressed. These values had enhancedloyaltyanddevotionandwerekeytogrowth(seechapter13).However,over time thesevaluesmadeLGmoreconservative,withpassive,easy-going attitudes and behaviours. For example,inhwa sometimes meantmorelenientevaluationsandoverlookingoffaults.Inthelate1980s,anLGsurveyshowedthatabout60percentrecognisedLGasahumaneandconservativeorganisationbutlessthan2percentperceivedLGashavingahighprogressivespirit(Lee,1997).So,a‘VisionTeam’tochangeLG’score values was launched. In 1990, LG’s chairman, Koo Cha-Kyung,declarednewcorevalues: ‘creatingvalue for customers’, ‘management

basedonesteemforhumandignity’and‘empowerment’,bychangingitsorganisational structure andmanagement practices.Simultaneously,LGemphasisedautonomytoquicklyrespondtouncertainenvironments.Bydoingso,LGrestructureditsbusinessbasedoncommonproductlinesortechnologies,which enabled it to streamline complexproduct lines andeliminate duplications of products and labour (Chungetal., 1997).TheGroup moved towards a better understanding of individual ability,promotingcreativityandpersonaldevelopment.

Managerialbehaviour

Managerialbehaviourstemsfromavarietyof influences.Theinfluenceof hierarchical traditional family systems impacts on managementbehaviour. This includes decision-making, business strategies,organisational structures and HRM (Cho andYoon, 2002). Companieswere centralised and hierarchical with formal structures and verticalorganisationalprinciplesandfamily-stylerelationships.Thehierarchicalprinciple made for more predictable behaviour; obligations andindebtedness, contributing to vague roles between personal and publicrelationships(ChoandYoon,2002).Foundersorganisedandmanagedonthe basis of principles governing family life. There was bothauthoritarianism and paternalism, with companies as ‘parents’ andemployees as ‘family’; often they actually were, of course. There waskinship-basedrecruitingfromextendedclans(chiban)or regions,whichdominated positions of power, with kinship-based relationships withowners (hyulyon). Ideas of harmony,inhwa and family-orientatedHRMhad seniority as the primary factor,with special allowances for familymatters, frommarriage and parents’ sixtieth birthdays to funerals (ChoandYoon,2002).ThereareimpactsonHRMpractices,suchasappraisalsandevaluations,teams,empowerment,andsoon.A group-orientated approach is also often noted.However, practices,

endorsed by Confucianism, made in-group members mutuallyinterdependent and emphasisedinhwa, making the out-group boundary

more salient and contributing to strong competition with other groups.This helps explain why ‘… delegation of authority, often espousedformally, is ineffective andwhybottom-up and lateral communicationsareconsistentlypromotedonlytofail’(ChoandYoon,2002:79).Managerialbehavioursalsoreflectedthehighregardforeducationand

supportingaskilledworkforcewithheavyinvestmentinhumanresourcedevelopment. Thechaebolputstrongemphasisonthis,withlarge,well-resourced and supported training centres.These provided induction andongoing training and a variety of programmes. For example, in 1995Samsung spent US$260 million on training, Hyundai US$195 million,Daewoo and LG US$130 million each (Chung et al, 1997). In 2010Samsung educated and trained each employee for 87 hours on averageand spent nearlyUS$10,000 per person for the purpose of training andeducation(Samsung,2010).LGhasoperated‘theLGTrainingAcademy’intheUSsince2008totrainengineers,contractorsandtechnicians(LG,2008).Furthermore, as education is regarded as the most importantcriterion of success and social status inKorea,most firms still tend tohire and promote employees according to educational background andachievement(seechapter15).Another form of management behaviour relates to mergers and

acquisitions.Theprotracted negotiationswithWestern companies post-1997wenotedearlierdisplay this.While therearehistorical, technical,structural and transparency reasons, culture also has a role. This is interms of the process itself, with concepts such as ‘face’ and ‘shame’,alongwithxenophobia.Forexample,Koreansrarelyseenegotiationsas‘win-win’propositions,but‘zero-sum’games,implying‘Anyagreementmeanstheyhaveconcededtoomuch’(Economist,2002:61).Alongwithnegotiators being criticised in the press for being ‘easy’ on foreigners,this produces ‘… paranoia and posturing by Korean negotiators’(ibid.:62),whotoprovetoughnessfrequentlystormoutofmeetings.Dueto corporate culture, such as hierarchical and top–down management,Koreans still seem to be reluctant towork directlywith foreigners andfindithardtoembracedifferentculturesandraces,despitethefactthatmorecompaniesneedmulticulturalandcosmopolitanworkforces.

Thecommonconcepts,meaningsandresultantmanagerialbehavioursandmanagerialcharacteristics,areoutlinedinTable8.8.

Managerialvalues

Managerial behaviour is influenced by managerial values. Where dothese values come from?As we have seen, these include history (i.e.Japan’srole),themilitaryandConfucianism.Thus,Koreanorganisations‘… are like families as well as armies’ (Cho andYoon, 2002: 79). Inparticular, Confucianism’s influence on values ‘… spilled over to thefundamental underpinnings of the Korean management system andhumanrelationshipswithinKoreancompanies’(Song,1997:192).A late 1980s survey of Korean large companies showed various

common core values in their vision statements (Lee, 1997). Theseincluded,fornearlyone-half,inhwa,solidarity,andcooperation(46.4percent); and devotion and hardwork (44.2 per cent) – and, for just overtwo-fifths, creativity and development (41.2 per cent). Other commonvalueswere:honestyandcredibility(28.8percent);quality, technologyand productivity (16.9 per cent); responsibility (16.9 per cent);progressiveness or enterprising spirit (14.3 per cent); national wealththrough business (14.3 per cent); rational and scientific approach (10.4per cent); and sacrifice and service, etc. (6.9 per cent).However, sincethencompanieshavebeguntofurtheremphasisetheissuesofcreativity,competitiveness, diversity, customer satisfaction, value-creation, and soon.In-group harmony is one of the most important managerial values

(Chung and Lee, 1989). Korean employees, therefore, tend to respectgroupopinionandsometimesareevenwillingtokeepsilentabouttheirown opinions for group harmony. For the sake of this people sacrificetheir own goals for collective ones. In return, companies take care ofemployeesandmanagementhelpssubordinates

Table8.8CulturalinfluencesandparadoxesinKorea

save ‘face’ (Cho and Yoon, 2002). Another value is the hierarchicalprinciple,which reinforcesparticularistic relationships amongmembers(ibid.).

Contrastingcompanyexamplesofmanagementbehaviourandvalues

Samsung and Hyundai contrast in management behaviour and values.This includes styles, decision-making processes, risk propensity andHRM. Traditionally, Samsung tried to minimise strategic risks, usingwell-establisheddecision-making systems throughutilisingprofessionalstaff and pursuing standardisation and formalisation, emphasisingrationality,analysisandcause-effectrelationships.Bycontrast,Hyundaidisplayed high-risk propensity and emphasised intuition, totality andcontexts and a lower utilisation level of professional staff in decision-makingandlessstandardisationandformalisation.Asaresult,Hyundaiwasmoretoleranttowardscause-effectambiguityandnon-specificityofgoals and minimised their efforts for the acquisition and analysis ofinformation.These behavioural differences can be related to their founders (Lee,

2002).LeeByung-ChullofSamsungprioritisedthepursuitofrationality,arguing that they should emphasise scientific judgements and logicalreasoning. Lee was very analytical and cause-effect oriented, stressingphilosophy and principles, prior research, thorough planning and well-establishedsystemsbasedoncoreideologies.Hewasa‘riskaverter’,asmentioned,withahighlycautiousapproach.Chung Ju Yung of Hyundai was very different in values and

behaviours. Chung disliked sticking to theories, rationality, commonsense, fixed stereotyped ideas and logical thinking and discouragedpeople from clinging to textbook approaches or theories taught inschools.Hewas a ‘crisis generator’, believing this helped learning andbuildinguporganisationalcapabilities(Kim,1998).Chungwasintuitive(Lee,2002)anda‘risktaker’as‘adventures’wouldinjectfreshvigourtoinertialorganisations.Why do such firms differ? Carroll (1993) used several perspectives:

individual (dispositional and situational), organisational (spin-offs andinternalchange)andenvironmentalsourcesandorganisationalblueprints.Our example is related to individual sources.The founders’ values andstyles affected organisational characteristics by influencingorganisational strategic choice (Hambrick and Mason, 1984) andstructure(MillerandDröge,1986)andbymediatingcontextualvariables

to organisational behaviour (Child, 1972). Thus, founders’ values andbehaviourswereembodiedinorganisationalstructure,culture,decision-makingprocessesandsystems.However,thisorganisationalarchitectureis double-edged: well-aligned architecture is a source of competitiveadvantage; but it can slowly become organisational inertia which canhinderfurtherdevelopmentandgrowth.

Exampleofmanagementbehaviourchange

ChangesinmanagementarecontrastedinTable8.9.Akeyareaconcernsemployment, much propounded in the literature, regarding endinglifetime employment and seniority-based reward systems (Rowley andBae,2002).Theseareseen

Table8.9KeycharacteristicsoftraditionalandnewermanagementinKorea

Source:AdaptedfromBaeandRowley(2001).

Source:AdaptedfromBaeandRowley(2001).

ascostly,‘inflexible’,unfairandadragonmotivationanddevelopment(seechapter13).Thereareconcernsthatjunior,youngerworkersarepaidlower and senior, older workers higher, than their ‘real’ contributions.These characteristics are seen to stifle recognition and reward ofperformance.Bycontrast,aflexiblelabourmarketmodelwouldgenerateemployment and reward performance. Therefore, the frequently arguedtrajectory is towards greater flexibility and performance in labourmarketsandremuneration.A range of anecdotal, quantitative and qualitative evidence indicates

managementchangeshere.First,KoreanmanagementismovingtowardsWesternmanagement inwhich personal relationships have less bearingon business operation. In terms of organisational structure andmanagement, it changed from ‘efficiency valued’ to ‘effectivenessvalued’seekinghorizontalnetworkorganisation(Parketal.,2001).That management behaviour changes were attempted and practised

could give strong signals that othersmight follow this route.However,therewere also counter examples ofmanagement behaviour continuity.As well as exact coverage in terms of breadth (between and withincompanies),we can alsoquestion thedepth and acceptanceof changes.The rhetoric may well be different from reality. Institutional theory(Meyer and Rowan, 1977) and isomorphism (DiMaggio and Powell,1983) play a role (see Bae and Rowley, 2001). Then there are alsoparticular cultural (obligations, loss of face) and institutional (unions,limited unemployment support) constraints (Rowley andBenson, 2002;Baeetal.,2011).Today,KoreanemployeeshavecoexistingvaluesfrombothConfucian

and Western cultures (cf., chapter 16). For example, although manyKoreanworkersstillperceiveacompanyasa‘secondhome’,theycanbeunwilling to show strong loyalty or commitment to a company whileattitudesandbehaviour to improvean individual’svaluehaveincreased(Park, 2001). Korean employees are not only content to comply withgroupopinion,buttheyalsowanttouttertheirownideasmore(Chungetal.,1997).However,arecentstudyshowedthatKoreanworkersstillhave

ahighlycollaborativeteamspirit(Kwon,2006).

Labour-management/conflictresolution

Labour-management has occurred in a variety ofmacro contexts, fromauthoritarianandmilitarygovernments tocorporatism.Also, labourhasplayed roles at critical points in history, struggling against occupationand fordemocratisation. In termsofonedimensionof conflict, officiallabourdisputes, thefrequencyhasvaried, fromjust4 in1970 to322 in1990,withpeaksof3,749in1987and1,873in1988.Mostofthestrikeswerefoughtoverwagedemandsandthefreedomtoestablishtheunionofaworker’schoice.PartlyinresponsetotheAsianCrisis,strikesincreasedby 65 per cent, from 78 (44,000 workers) to 129 (146,000 workers)between1997and1998.Sincethen,labourdisputesincreasedto322by2002(Park,2007).FurtherfiguresaregiveninTable8.10.

Tradeuniondevelopments

From the early twentieth century, poor wages and conditions and anti-Japanese sentiments contributed to union formation (Kwon andO’Donnell,2001).Fromthe1920sunionsgrew,reaching488and67,220members in 1928. Decline as a result of repression for Japanese warproduction and internal splits followed.Union numbers fell to 207 and28,211membersby1935(ibid.).Thepost-war radicalunionmovement, theChunPyung,wasdeclared

illegal by the US military government, which restricted activities toencourage ‘business unions’. The subsequent strikes and the GeneralStrike resulted in 25 deaths, 11,000 imprisonments and 25,000dismissals.Amore conservative, government-sponsored industry-basedmovement was decreed, signalling labour’s incorporation by the state,conflict repression and an ‘… authoritarian corporatist approach …’(ibid.:29).Thus, thegovernment officially recognised theFederationofKoreanTradeUnionsandbecameincreasinglyinterventionist,enactinga

plethoraoflawsregulatinghours,holidays,pay,unionforms,theLabourManagementCouncil (LMC)system,more‘cooperative’ formsof tradeunionism,evenprohibitingconflictsinforeignbusinesses(ibid.).Thediversityoflabour-managementapproacheswaspartlyinfluenced

bychaebolgrowthstrategies(KwonandO’Donnell,2001).Forinstance,growth and focus onminimising labour costs resulted in the expansionand concentration of workforces in large scale industrial estates withauthoritarian andmilitaristic controls.Labour resistancewasgenerated,thecatalystforconflictandthere-emergenceofindependentunionsfromthe 1970s. Employers responded by disrupting union activities,sponsoringcompanyunionsandreplacinglabour-intensiveprocessesbyautomating, subcontracting or transplanting overseas (seechapter 15).Fromthelate1980s,companiesalsosoftenedstrictsupervisionandworkintensification by widening access to paternalistic labour-managementpractices and welfare schemes, subsidised school fees and housingbenefits(ibid.).Thegovernmentdeclaredthatlabourconflictsshouldberesolved by employers and employees themselves. Trade union densitygrewfrom12.6percent in1970,peakingat18.6percent in1989withnearly2millionmembers(Park,2001).Onestudyshowedthatnon-unionisedfirmswithfewerlabourdisputes

were more likely to adopt labour-management approaches involvinghigherwages,betterworkingconditionsandotherpersonnelmanagementpractices, whereas unionised companies with repeated labour disputeslacked these (Chung and Lie, 1989). Samsung was famous for its ‘nounion at any cost’ policy and adopted specific labour-managementprogrammes,suchasarigorousselectionprocess,employeetraininganddevelopmentandsoon(Chungetal.,1997).However,thereisacausalityquestionhere, i.e. is it a threatofunionisation thatencourages firms toactthatway?During the 1990s, independent trade unions established their own

national organisation, with federations ofchaebol-based and regionalassociations. In 1995, an alternative national federation, the KoreanConfederation of Trade Unions (minjunochong), emerged. It organisedthe 1996 General Strike (Baeet al., 1997), enhancing its legitimacy.

However, the economic whirlwind of theAsian Crisis then hit. Tradeuniondensity fellback to11.5percentby1998andunionmembershipdecreasedto1.6millionby1996(Parketal.,2001).After the Asian Crisis, the government strove to resolve labour

problemscausedbyeconomicrestructuringwithamorepassivepolicy-making approach. However, as irregular employment and incomeinstability increased considerably, the labour market faced the mostseriousproblems,whichresultedinstrikeactivitiesattheKoreaMintingand Security Printing Corporation, Daewoo and the Artificial TextileIndustry(Choi,2002),amongstothersin1999.Labour-managementdoesnotseemtohavechangedsubstantially,despiterestructuring.Post-1997tradeunionmembershipanddensityaregiveninTable8.10.Obviously,labourstrengthandinfluencealsodependsoncontext,such

as the locations, legal constraints and opportunities operating and thenature and character of the disputes themselves. In Korea, unions arestrategicallywelllocatedinshipandautomobilemanufactureaswellaspower, transportation and telecommunications.Aswe have seen above,conflicts can be high profile, large scale and confrontational. Thischaracteristichasremained.This current position is the context for ideas of increased employee

involvement,participationandpartnership,whichhaveemergedatduallevels. Examples at the macro level include the neo-corporatist typePresidentialCommissiononIndustrialRelationsReform(1996)and thetripartite Labour-Management-Government Committees (nosajungwiwonhoe)onIndustrialRelations(1998)(YangandLim,2000).At themicro level is theexampleofLGwhich lookedatpractices inplants intheUS(Saturn,Motorola)andJapan.Toimprovelabour-management,tradeunionsnowplaytworoles:asa

management partner and as a negotiator for distribution by movingtowardsan

Table8.10Trendsintradeuniondensity(%),membership(‘000s)anddisputespost-1997

industry-based system (Choi, 2002). The LMCs are becoming moresystemisedinordertoshareinformationaboutindustrytrends,helpingtosupportavarietyofjobstabilityandtrainingprogrammeswiththepublicandprivatesectors.Overtimethedemandformorepublicfeedbackandsocialconsensushassteadilyincreased.Insum,theinstitutions,frameworkandpoliciesoflabour-management

all shifted under pressures from political liberalisation and civiliangovernment, ILO (1991) and OECD (1996) membership, trade unionpressure and the 1997 Asian and post-2008 global financial crisis.Nevertheless, the framesof reference andperspectives formanagementremain strongly unitary. By contrast, this is less so for labour, withstrongerpluralist,andevenradical,perspectivesevident.Thisdichotomycontinues(seechapter13).

Implicationsformanagers

Theimplicationsformanagersfromculturecanbeseenin termsofnotjustindigenous,butalsootherAsianandWestern,managers.First,thereis the need to recognise paradoxes between concepts and managementbehaviourandmanagerialcharacteristics,notedearlier.Second, there are variegated implications dependent onmanagement

level. Ghoshal and Bartlett (1997) suggested variations in changingmanagementrolesandtasks,asfollows:

1. Operating level managers from ‘Operational Implementers’ to‘AggressiveEntrepreneurs’.

2. Senior level managers from ‘Administrative Controllers’ to‘SupportiveCoaches’.

3. Toplevelmanagersfrom‘ResourceAllocators’to‘InstitutionalLeaders’. These models can be applied to some Koreancorporations.Oneissueisthattraditionalculturefacilitatedtop-down, paternalistic and authoritarian styles of leadership.Yet,givenuncertainglobalenvironmentsandmoreknowledge-basedcompanies,sometransitionisnecessary.Thisculturalconflictisanothertasktoberesolved.

Third,theinfluenceoftheinternationalisationofKoreancompaniesandthe influx of foreign capital produces tension between managers, inparticularthosewithexperienceoftheWest.Forexample,theremaybeincreasedexpectationsandrequirementsincorporategovernance(suchasfortransparency)andHRM(suchasmorerigorousandopenrecruitmentand selection).Also, in termsof the lengthy, strainednegotiationswithWestern companies, management on both sides need to recognise thereasons,which are not just process- or tactical-based, but have culturaldimensions.Fourth,thereisaneedforgreaterunderstandingofanyapplicabilityof

Western management concepts. Shifts from more traditionalorganisational systems, with strong internal labour markets, towardsexternal labour markets, are not ‘costfree’. There is the problem oftrying to maintain commitment, loyalty and team work with easierdismissalsandafocusonindividual,sometimesshort-term,performance.This issuemaypartlybedue to the traditionaldominanceof theUS inbusinessandeducational spheres (anda lackofquestioningofWesternviews). For instance, perceived ‘inflexibilities’, such as seniority andlong-termemployment,cangeneratebenefits(evenflexibilities)suchas

willingness to change and stimulation of innovation and long-termdevelopment. In contrast, some ‘flexibilities’ produce problems (eveninflexibilities),aswhencompanies look toaddressproblems inashort-termfashionbycuttinglabourandtrainingatthecostofalternativesandlong-termanddynamicgrowth. Ifoptions to followthis latter routearemorenarrowed,managementwouldbeencouragedtoconsideralternativeavenuestopursue.Thereisalsoapracticalimplicationintermsof‘firstmovers’ and a criticalmass.Whowill be first to try such numericallyflexibleexternallabourmarketsandforgothesecurityandcertaintiesofthe internal labour market? What happens if this does not suit or thecompany fails? There is no going back for employees as previousrecruitmentwasbasedonlimitedpointsofentryandcareersandpayonseniority.Theymustseekmoreofthesameinsecureemployment.There are also many problems in ‘measuring’ performance. These

concernperformanceappraisalsingeneral,whenlinkedtorewardsandinAsian contexts. For instance, well known human traits lead towardssubjectivityinappraisals.Furthermore,itiscommontorecommendthatappraisals should not be linked with remuneration. Finally, there arecultural biases. For example,inhwa and requirements to ‘care’ forsubordinates, encourages tolerance and appreciation of efforts and notbeingexcessivelyharshinassessingsincereefforts(Chen,2000).Fifth,thereistheproblemofdemographicswithanageingpopulation

anddecliningindigenousworkforce.Yet, the traditionallyhomogeneousand inclusive society makes changes and responses in terms of amulticultural workforce somewhat problematic. The areas ofmanagingdiversity (Wei andRowley, 2011) and the requisite training for it havekeyrolesinthis.Sixth, there is an implication for management in terms of a greater

need to recognise variedmanagement perspectives. There are not onlyunitary perspectives and approaches, but also pluralist ones. In suchapproaches disagreements and conflicts are not seen as aberrations, butnormal,andevenuseful.Alternativemechanismsfordealingwithlabour-management can then be explored. There would then be less highlyconfrontationalandentrenchedapproaches,withgreateruseofprocesses

such as collective bargaining, negotiation and even conciliation,mediationandarbitration (Rowley,2011),despite theculturalproblemsmentionedabove.

Conclusion

This overview of the key broad dimensions and developments ofmanagement and culture in Korea shows that context is important,despitetherhetoricof‘globalisation’(cf.chapter16).Whileinstitutionalperspectives remain important,culture also retains its salience formanagementandforunderstandingitsbehaviourandpractices.The roller-coaster ofKorea’s development indicates the need for the

careful analysis of the roles of management and culture, as they havebeen both canonised and then vilified.Both of these labelsmay be toodeterministic,starkandnaïve.However,whatusefullyemergesfromthisis a greater balance as to the roles of management and culture ineconomies,which ultimately rest on an amalgam of foundations.Also,theremaybe lesshagiographyofmanagementand thenaïve search forsomemagic ‘one best way’ elixir tomanage, which, as we should notforget, remains complex and often specific as the power of particularmanagementandcultureispertinentandpersists.

Note1Acknowledgement:thankstoHyunYoungJoforkindlycheckingandupdatingpartsofthis

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PartIVIssuesandchallengesinEastAsianmanagement

Richesandhonoursarewhat[people]desire.If[they]cannotbeobtainedinaproperway,theyshouldnotbeheld.

(Confucius:Analects,IV,v.)

9GenderandmanagementinEastAsia1

FangLeeCooke

Introduction

The advancement of women in leadership positions in politics andcorporations is essential to achieve gender equality (Schein, 2007).However,accordingtoSchein(2007),30yearsafterherrevelationofthe‘think manager – think male’ attitude in the United States, genderstereotypes in management roles continue to exist worldwide, despitesomeprogress.Thischapterexaminesopportunitiesandobstacles facedbywomeninthreemajorEastAsiancountries–thePeople’sRepublicofChina (hereafter China), Japan and the Republic of Korea (hereafterKorea) – in developing theirmanagerial careers. These three countrieswere chosen in part because of their geographical and culturalproximities, their relatively similar economic growth stages and theprofoundhistoricalinfluencetheyhaveexertedoneachotherinspiteofsignificantdifferencesintheircontemporarypoliticalsystems.JapanandKoreaaredevelopedcountrieswhereasChinaisanemerging

economywithrisingeconomicpowerglobally.JapanandKoreaaresmallcountriesintermsofgeographicalandpopulationsizeandhavedifferentindustrial structures compared with China. China (seechapter 5) is asocialistcountrythathasbeenunderthecontroloftheCommunistPartysince1949.Itbeganitseconomictransformationinthelate1970s.Japan( s e echapter 7) is a modernising imperial country with Westerninfluences,whereas themodernRepublic ofKorea, established in 1948(seechapter8)hasbeenunder thecontrolofauthoritariangovernmentswith emerging democracy since the 1980s, largely as a result of masspublicdemonstrations.JapanandKoreaweretwomajordrivingforcesoftheAsianeconomyinthe1970sand1980s,butwerebothheavilyhitbytheAsia financial crisis in 1997 and the global financial crisis in 2008

(e.g.LeeandLee,2003;Magoshi andChang,2009).Meanwhile,Chinahas emerged as amajor power house in the development of theAsianeconomy since the 1990s (Khanna, 2007). The governments of China,JapanandKoreahaveallpursuedexport-orientedeconomicgrowth(seechapters5,7 and8). These developments have been accompanied by asubstantial fertilitydeclinesince the1980s inall threecountries.Whilethe low birth rate in China is a result of the government’s ‘one child’policy enacted in the 1980s, the low birth rate inJapan and Korea islargely an outcome of women’s choice (the Korean government isproviding incentives to encourage women to have more children).Decliningfertility isaffecting the labourmarketstructureandwomen’sroleinit,particularlyinJapanandKorea,andtheglobalisingeconomyofthe three countries adds further dynamics to women’s choices andconstraintsontheircareerandfamilydomains.

Women’seducationprofileandimpactonemployment

According to the human capital theory (e.g. Becker, 1964), educationlevelisanimportantdeterminantofaperson’semployabilityandearningpower.Lowereducationalattainmenthasoftenbeencitedasoneof thereasons for women’s disadvantage in the labour market. In all threecountries,women’seducationlevelsarerelativelyhigh.AswecanseeinTable9.1,at theprimaryandsecondaryschoollevelfemales’educationlevel is very close to that of males. At the tertiary level, women’sparticipation levels in Japan andKorea have been high in the last twodecades and are getting close to those ofmen. InChina,while a lowerproportionofmenandwomenhavereceivedtertiaryeducationcomparedwith those in Japan and Korea, the proportion of Chinese womenenrolling in tertiary education is now higher than that of their malecounterparts.However, the improved educational attainment of women is not

necessarily translated into economic empowerment through theirincreasedparticipationintheindustriallabourforce(Brintonetal.,1995;

Lanticanetal.,1996).ThisisparticularlythecaseinJapanandKorea.Ithas been noted that the continuous growth in higher education amongwomeninJapanhasnotledto‘improvementsinwomen’swagesorthegreater participation of educatedwomen’ (Shimada andHiguchi, 1985:S372;also seeNakataandTakehiro,2002).Thisobservation reflects tosomeextent‘theuniquefeaturesof theJapanesesociety,suchasstrongfamily cohesiveness and integrity, limited promotion opportunities forfemale workers in employment systems’ (Shimada and Higuchi, 1985:S372). In addition, there is a sharp gender divide in the type of highereducation pursued bymen and women.Men tend to study engineeringand science subjects,whereaswomen tend todiversify intohumanities,arts,homeeconomicsandsocial sciencessubjects that lead to jobs thatare lesswell-paid (Nakata andTakehiro, 2002). In the next section,weexamine women’s employment patterns in all three countries in moredetail.

Women’semploymentpatterns

China, Japan and Korea have witnessed an increasing or steadyproportion of women in employment since the 1980s, with womenmakingup40–45percentofthetotalworkforce(seeTable9.1).Womenarealsomaking inroads intopublicservicesandmanagementpostsandpositionsinpoliticalleadership(seeTable9.1).However,womenarestillunder-representedinmanagerialandprofessionalpositionsandareover-representedinfirmsofcertainownershipforms(e.g.theprivatesectorinChina)andinirregularemployment(JapanandKorea)markedbylowerlevelsofjobsecurityandtermsandconditions.China has an above world-average record of women’s labour force

participation.Thevastmajorityof themareinfull-timeemploymentaspart-timeworkisuncommonandthosewhoworkpart-timeoftenneedtodomorethanonejobtomakeupalivingwage(Cooke,2005).ComparedwithJapanandKorea,gendersegregationisperhapstheleastpronouncedinChina.Whilewomentendtobeover-representedincertainindustrial

sectorssuchaseducation,healthcareandservices,theyarepresentinallsectors and occupations in a relatively even pattern (Cooke, 2005).However, Chinese women tend to be under-represented in certainindustrial sectors and organisations; for example, mining andconstruction;duetothephysicallydemandingnatureofthejobs,andingovernment organisations, where power and control continue to bedominatedbymen(Cooke,2010).ChinahasarelativelystrongerinternallabourmarketthanJapanandKoreainthatthemajorityofwomenhavecontinuous employment with limited career breaks (seechapter 13). Inspite of declining job security, those in professional and managerialpositionstendtohaveenhancedjobsecurityduetoskillshortagesinthelabourmarket.Compared with China, Japan’s integration of women into the

workforce has been more moderate, although the increasing labourshortage of the country due to declining fertility has providedopportunitiesformotherstore-enterthelabourmarketfortheir‘secondcareer’ (Worthley et al., 2009). In general, women’s employment inJapantakesanMshapebyageandmaritalstatus(HousemanandOsawa,1998; Gelb, 2000). It has a high employment participation rate fromyoung women until they get married and pregnant. Women who haveaccesstofamilysupportforchildcarearemorelikelytohavefull-timejobs than thosewithout support.Similarly, thosewhohave elderly carecommitmentarelesslikelytoworkfull-timeorworkatall(OgawaandErmisch,1996).Marriedwomenwhoreturn to the labour forceafteranemploymentbreakusuallyfindthemselvesinlower-statuspositionsthanthey had prior to their break (Steinhoff and Tanaka, 1993). They aregenerally classified as part-time workers, not because of the slightlyreducednumberofhourstheyworkcomparedwithfull-timeworkersbutbecauseof theabsenceof job security, careerprogressionopportunitiesand other benefits that are enjoyed by their full-time counterparts(Steinhoff and Tanaka, 1993; Wakisaka and Bae, 1998). Japaneseemployershavestrongincentivestoemploypart-timefemaleemployeesbecause they ‘received only 60 to 70 per cent of a regular femaleemployee’s wages, as well as fewer benefits’ (Kucera, 1998: 27). The

Nenkosystemthatrewardsemployeesbasedonthelongserviceandhardworkprinciplefurtherassumesthatthisprincipleonlyappliestoregularmale workers but not women even if they are in regular status jobs(NakataandTakehiro2002;Yuasa,2005).Another factor is theweakerbargaining power of women workers in the labour market. In Japan, awideninggenderwagegapwasobserved.Amajorreasonforthisis‘thesystemofseniority-basedearningsandpromotion,fromwhichpart-time,temporary, and non-union employees are typically excluded’ (Kucera,1998:28).

Table9.1AsummaryofgenderprofileofChina,JapanandRepublicofKorea

In Korea, women’s economic status in the labour market has beensignificantly improved throughout Korea’s economic developmentprocesssincetheearly1960s(JungandChoi,2004).Sincethe1980s,theKorean tertiary sector has been absorbing large numbers of womenworkersasthesectorexpandedsignificantly(Yoon,2003).However,liketheir counterparts in Japan, a large proportion of Korean (married)womenhaveinferioremploymentstatusmainlybecauseoftheirmarital

status(KangandRowley,2005).VanderMeulenRodgers’study(1998)revealedthatdespiterapideconomicgrowth,Korea’sgenderpaygapsforall education groups had actually widened during the 1970s and early1980s. This fact indicates that gender discrimination might haveincreased inKorea. Infact,JungandChoi’s(2004:577)analysisof the1997and2001earningsdataforfull-time,year-roundworkersemployedinmanufacturingandserviceindustriesinKorea‘confirmstheexistenceofsubstantialgenderwagediscrimination,especiallyinnon-knowledge-intensiveindustriesandoccupations’.Itwasnotuntilthelate1980sthattheKoreangovernment issued regulations thatwereaimed to eliminategenderdiscriminationinemployment,althoughtheeffectivenessoftheseregulationsremainsquestionable(Monk-TurnerandTurner,2001).In addition to societal cultural norms and ineffective legislative

intervention (seediscussion in thenext section), amajor reason for thegender inequality displayed in the labour market across all threecountrieshasbeentheineffectivenessofthetradeunionsinrepresentingwomenworkers (e.g. Broadbent, 2008; Cooke, 2008;Hill, 2008;MoonandBroadbent,2008).InChina,tradeunionsplayalargelywelfarerolewithlimitedcapacityandcapabilityindefendingworkers’rights,inspiteoftheirstatutoryroletodoso.InJapanandKorea,tradeunionstendtobe more interested in representing male workers (and those) inmainstreamemployment. In Japan, ‘itwasmostlymarriedwomenwhodrovewomen’s progress in theworkplace’ during the 1960s and 1970s(NakataandTakehiro,2002:521).InKorea,femalefactoryworkershavebeen‘attheforefrontofindustriallabouractivism’,particularlyfromthemid-1970s to mid-1980s, ‘against exploitative working conditions’(Yoon,2003:123).However,theseachievementshavenotautomaticallyledtotheirenhancedpoliticalposition.

Womeninmanagementandentrepreneurship:progressandbarriers

Opportunitiesforandbarrierstowomen’scareeradvancementinChina,

Japan andKorea are shaped by a broad range of societal, political andorganisational factors, and their personal choices reflect these optionsandconstraints.Inthissection,weexaminewhatprogresshasbeenmadeandwhatbarriersremaininwomen’smanagerialcareeradvancementinthesethreecountries.

Women’sshareinleadership,managerialandentrepreneurshippositions

Inspiteoftherelativelylargeshareofwomeninemployment,womeninmanagementpositionsinChina,JapanandKorearemainaminority,asisthecaseinmostcountriesintheworld.AsindicatedinTable9.1,womenmakeupaverysmallproportionofthoseinpoliticalleadershippositionsand progress appears to be negligible. According to the InternationalLabourOrganization(ILO)(2003),women’sshareasadministrativeandmanagerialworkers in Japanwasonly8.9per cent in theperiod2000–2002.ThiswasmarginallyhigherthanthatinPakistan(8.7percent)andBangladesh(8.5percent),butsignificantlylowerthanthatintheUnitedStates(46percent),Thailand(27percent)andMalaysia(20percent).InKorea,women’sshareas legislators,seniorofficialsandmanagers

was about 5 per cent in the period 2000–2002. Korea ranked 48thamongst the Major Group 1 countries, trailing behind Cyprus (16 percent) and Egypt (11 per cent) (ILO 2003). According to the UnitedNations Development Programme’s Gender Empowerment Measure in2004,Korearanked68thoutofthe78countriescategorised(Kim,2005).The picture in the private sector is even grimmer with few of the topKoreanfirmshavingwomenintheirseniorexecutiveteam(Kim,2005).AsChoandKwon(2010)reported,withtheexceptionofthecateringandhotelindustry,overhalfoftheKoreanindustriesdonothaveanyfemalemanagers.Female entrepreneurship provides an important source, albeit still

relatively small in many nations, of economic growth through thegenerationofemployment,businessactivitiesand revenue (e.g.FieldenandDavidson,2005;Leeetal.,2009;DavidsonandBurke,2011).Inall

threecountries,adiscernibletrendofgrowthinfemaleentrepreneurshiphasemerged(e.g.Tan,2008;Griffy-Brown,2011;Leeetal.,2011).In Japan, female entrepreneurship has been growing since the 1990s,

aided by government legislative changes in financing businesses(FutagamiandHelms,2009), thewomenconsumers’movementandthedigitaleconomy(Griffy-Brown,2011).Italsoemergedasaresultofthedesireofwomentocombinetheirmotherhoodwithworkandofferotherworkingmothersabetterwork-lifebalance(e.g.Leung,2011).AccordingtoGriffy-Brown(2011),normativeinstitutionalchangeshavebeentakingplace in Japan in recent years, including attitudes to women’s role insocietyandattitudes towardsmarriage,delayedparenthood,non-maritalbirth and divorce. International education and exposure serves as afurther catalyst for women to consider embracing an entrepreneurialcareer.The emergence ofwomen entrepreneurship is a new addition tothe Japanese business landscape that has been dominated by well-establishedlargefirmswhosehighquality,efficiencyandinnovativenesswerethedrivingforceforthecountry’seconomicgrowth(Griffy-Brown,2011). However, Japanese women entrepreneurs have demonstrated ahighlevelofprudenceinthespeedandscaleinwhichtheywishtogrowtheirfirmsinordertoaccommodatetheirfamilycommitment.InChina, a nationwide survey in 2004 revealed that firms owned by

womenentrepreneursaresignificantlysmallerinsize,revenueandprofit.Inaddition,Chinesewomenentrepreneurstendtohaveasmallerfamilysize and work longer hours than their male counterparts (Yu 2011).Interestingly,Tan’s(2008)studyfoundthatwomenentrepreneursintheChineseelectronicsindustryarehighlygrowth-oriented,andtheypursuebolder andmore risky strategicmoves than theirmale counterparts. InKorea, over a third of enterprise owners are women and thetrend iscontinuing to rise (Leeet al., 2011). However, despite the growingnumberofwomenentrepreneursandincreasedgovernmentsupport,over93percentof thebusinessesownedbywomenentrepreneursaremicrobusinessesemployingfewer thanfivepeople.Theyoperateprimarily inthe service industry and retail trades. In 2004, women entrepreneurs’exports accounted for less than 1 per cent of the total export value of

Korea(Leeetal.,2011).

Barrierstocareeradvancement

Despite the considerable progressmade inwomen’smanagerial careersinallthreecountriessincethe1980s,significantinstitutionalandculturalbarriers remain that prevent women from fulfilling their careeraspirationsandpotential,asdiscussedbelow.Labour law and government policy intervention: The elimination of

gender inequality necessitates state intervention through legislation andaffirmativeactionstoprovideat least themostbasiclevelofprotectioninprinciple.Forthispurpose,thegovernmentsofallthreecountrieshaveintroducedgenderequalitylawsandothermechanismsatdifferentstages(e.g.Cooke, 2005;Kang andRowley, 2005;Yuasa, 2005;Magoshi andChang, 2009). However, ineffective enforcement of equal opportunitylegislationhas been a common finding inChina, Japan andKorea (e.g.Cooke,2005;MagoshiandChang,2009;ChoandKwon,2010).Forexample,itwasreportedthatdespitethepromulgationoftheEqual

EmploymentOpportunityLaw(EEOL)in1986,Japanhadamuchlowerproportion ofwomenmanagers in government organisations than in itscorporations in the early 1990s (Steinhoff and Tanaka, 1993). Theintroduction of EEOL was controversial amongst the legislators,employers and the state at the outset and had ‘produced few gains inemployment opportunities for women’ (Gelb, 2000: 385). There is awidespread consensus amongst scholars in Japan that the governmentpassedtheEEOLmoreasaresponsetointernationalpressurethanasanacknowledgement of the changing social values in Japan (Gelb, 2000).EEOLhasbeencriticisedforits‘over-relianceonvoluntarycompliance’with‘littlegovernmentenforcementpower’.Nevertheless, ‘ithas led torenewed efforts at litigation, increased consciousness and activismamongwomen,andamendmentstothelaw,passedin1997’(Gelb,2000:385;alsoseeBroadbent,2008).For both Japan and Korea, the affirmative action programmes have

been adopted only in the 2000s on a voluntary basis with little

enforcement power. Private sector employers have the autonomy todecidewhether theywish to adopt theprogrammeornot, and evidencesuggests that there is little incentive for them to do so. For example,accordingtoBensonetal.,(2007),onlyasmallproportionoffirms(e.g.justover20percentin2003)inJapanhaveadoptedanaffirmativeactionprogramme.Even fewer firms (e.g. less than 9 per cent in 2005) had atraining programme specifically tailored for women to develop theirleadershipskills.InKorea, theAffirmativeAction Programmewas first introduced in

2006 ‘as a major public policy to expand female employment and torectify gender-discriminatory employment practices’ (Cho and Kwon,2010:111).Companieswith1,000ormoreemployeesareencouragedtoimplement the Programme although employers were given a two-yeargrace period for implementation. However, according to the KoreaMinistryofLabour(2007,citedinChoandKwon2010:122),only41percent of companies took up the initiative in the first year. Lack ofvacancies, lack of qualified female applicants and male preference ofbusiness partners have been given as the key reasons by employers fornot adopting the programme (Cho andKwon, 2010).This is not only aresult of employer discrimination, but also an outcome of themisalignmentofeducationandindustrialstructure.Forexample,womentendtochoosesocialsciencesandartssubjectsfortheirhighereducation,while theKorean economymay lean towards industrial sectors such ashigh-techmanufacturing and the chemical industry (the same is true inJapan).ChoandKwon’s(2010)studyfurtherrevealedthatahighlevelofdistrust of government policies imposed via political processes and theignorance of the potential benefits of affirmative actions are two otherreasons for the Korean employers’ apathy towards the programme.Compared with Korea, the Japanese affirmative action policy is evenmorepassivewithequallylimitedeffect(e.g.ChoandKwon,2010).Traditional societal value: It has been widely observed that gender

stereotypingremainsamajorbarriertowomen’sprogressinmanagementworldwide(e.g.Kanter,1977;YukongdiandBenson,2006;DavidsonandBurke,2011).ThisproblemmaybemorepronouncedinChina,Japanand

Koreawhichshareamale-dominantConfucianculture(seechapter3) inwhich women are subordinate to men socially and economically (e.g.Worthleyetal.,2009).Women’sprimaryresponsibility ishomemakingwhereasmenareseenasthepillarofthefamily,socially,financiallyandspiritually.Inallthreecountries,thehome-caringrolefallslargelyuponwomen, regardless of their employment status (e.g.Cooke, 2005;KangandRowley,2005;Yuasa,2005).Childcaresupport, fromtheextendedfamily,stateprovisionorothersourcesthereforeplaysanimportantroleinwomen’saccesstoemployment.However,evenwhenwomenmanageto stay in employment, the traditional gender norm presents persistentbarrierstotheircareerprogression.Asdiscussedearlier,womenandtheirmaritalstatusarecrucialsources

ofdiscriminationagainst theiremployment statusandpay in JapanandKorea and to a lesser extent in China. In Japan, the breakdown of theinternal labour market, the erosion of the grading system that rewardslife-time employment and seniority and the mainstreaming of atypicalworkers (themajorityofwhomarewomen)havenotbrought sufficientinstitutional changes for women to break into the managerial rank enmasse (Bensonetal., 2007).ComparedwithChina, a relativelyweakerchildcaresupport system inJapanandKoreaadds furtherconstraints towomen’slabourmarketparticipationandcareerprogression.Employer’sperceptionsandorganisationalpolicy :Employersplayan

important role inmediating the levelofgender inequality.Wherefirmsarefacingshortagesoflabourandtalent,theymayintroduceaproactivehumanresourcepolicytoattractandretainwomenworkers(seechapter13).Wherethelabourmarketisslackandbusinesscompetitionpressureisheightened,employersoftenadopta labourcost reductionstrategy tokeepoperatingcostsdown.Andwomentendtobemorevulnerablethanmen. For example, inKorea,women are encouraged by companies andunion members to resign ‘voluntarily’ and accept a re-employmentcontractasanirregularworkerwithlowerpayandlessjobsecuritywhentheir companies are undergoing downsizing processes (Chun, 2006). InJapan,newopportunitiescreatedforwomenbytheequalopportunitylawin the late 1980s and early 1990s were then eroded when Japan’s

economic growth ‘bubble’ burst after 1992 (Gelb, 2000). It was ‘themarginal nature of Japanese women’s employment’ as a deliberatestrategy of the employers that accommodated the core employmentsystemwhichprivilegedmenduringaperiodofheightenedinternationalcompetition, reduced growth rate, a rapidly ageing workforce and theinflexiblehiringandfiringsystem(Kucera,1998:28).Employers in Japan and Korea also exert pressure, albeit nowmore

implicitlyfollowingtheintroductionofequalopportunitylawsinthelate1980s,forwomentoresignwhentheygetmarriedandbecomepregnant.Agelimitsarealsousedtoscreenoutwomen(Gelb,2000).Althoughthe‘marriage bar’ is far less common in China, employers in privateenterprises may impose an (unlawful) age limit on female factoryworkers. To some extent, if themarriage bar for Japanese and Koreanwomen is aimed primarily at protectingmen’s jobs and earnings, thenage discrimination in China is motivated by increased productivity. Inboththeprivateandpublicsector,womenaremuchlesslikelythanmentobeselectedforcareerdevelopment(e.g.Lee,1995;Cooke,2009).Research evidence (e.g.Duignan and Iaquinto, 2005;Cho andKwon,

2010; Xiao and Cooke, 2012) suggests that employers in all threecountries appear to share a common (mis-) perception that womenemployees are less productive or committed to their job/career due totheir family commitment. Employers are hence much less willing toinvest in the training and development of female employees. A glassceilingiscommontowomenwhoaspiretobemanagers.Evenwhenmenandwomenareallocatedtothesame(managerial)jobcategory,womenare often assigned to positions that make them peripheral toorganisationalresourcesandcareeradvancementopportunities(e.g.Kim,2005;Yuasa,2005;Cooke,2009).InpublicsectororganisationsinChina,womenareoftenpromotedtotheirleadershippositionfortheirsymbolicvalue,tofulfilthequotasimposedbythestate(Cooke,2009;Tsangetal.,2011). There is limited organisational support, such as training ormentoring, to enable women to develop their leadership skills. Themarginalisationof(married)womeninthestronginternallabourmarketinJapanandKoreaaddsafurtherstructuralbarriertowomen’sabilityto

advancetheircareers(Bensonetal.,2007).Women role models : Lack of women role models has often been

suggestedasoneof the reasons thataccount for theshortageofwomenmanagers (e.g. Kim, 2005;Yuasa, 2005). However, having female rolemodelsmaynotnecessarilyhelpimprovethesituation,inpartduetothedistortedimageofwomenmanagers.Womenaregenerallybelievedtobeless likely than men to possess leadership qualities (e.g. Bowenet al.,2007; Schein, 2007; Cooke, 2005).According toJavalgiet al.’s (2011)comparative study, Chinese men and women displayed the lowestperceptionsofwomenasmanagerscomparedtotheircounterpartsintheUSA and Chile. Bu and Roy’s (2005) study of senior and middlemanagers inChina that compared the composition and social exchangepracticesofChinesemaleandfemalemanagers’careersuccessnetworks(CSNs)foundthatmostoftheCSNtiesformedbybothmaleandfemalemanagersarewithmen,especiallypowerties.BuandRoy’s(2008:1088)study further revealed that whilst Chinese male and female managersgenerally prefer to form CSN ties with individuals who are older thanthemselves,‘theyarerelativelymorereluctanttoincludemiddle-agedorelderwomenintheirCSN’.InKorea,womenmanagers’mistakestendtobeamplified(Kim,2005).Women’s career–family choice : Cocooned by institutional, societal,

organisationalandfamilyconstraints,womeninChina,JapanandKoreafaceatoughchoicebetweentheirmanagerialcareerandfamily.Researchfindingssuggestthatmanywomenmanagersendedupintheirleadershipposition ‘byaccident’ insteadof throughcarefulplanning.They tend totake a passive attitude in their career battles and often adopt a non-confrontational and conciliatory style of leadership in order to gainacceptance (e.g. Cooke, 2009; Tsanget al., 2011). Many of them arestruggling to balance their career and family responsibilities, so thatwhenacriticalchoiceneedstobemadetheywillchoosetheirfamilyfirstandtheircareersecond(e.g.Kim,2005;Yuasa,2005;AaltionandHuang,2007; Tsanget al., 2011). It is therefore important to view womenmanagers’private‘attitude’and‘choice’withintheorganisationthroughthemechanismswithinwhichtheirattitudesandchoicesareconstructed

(Yuasa,2005).

Conclusions

This chapter compared the patterns of women’s participation inemploymentandmanagementinChina,JapanandKorea.Itexaminedthepolitical environment and institutional context within which women inthese countries have been facilitated or hindered in pursuing theirmanagerialcareers.Thechaptershowedthatwhileconsiderableprogresshasbeenmadeinthelastthreedecadesinwomen’seducation,whichinsome cases has surpassed that of men of the same age groups, thisachievement has not been matched by the same level of earnings andorganisational/corporate positions. Although affirmative actionprogrammes invariousformshavebeen introducedby thestate ineachcountry, which are aimed at enhancing gender equality, theimplementationof thesepolicy interventions ishamperedbya rangeoffactors, not least by gender-biased work organisation and employmentpractices.The comparison revealed a common historical trend of women’s

disadvantages in employment and in their prospects of a managementcareer, although progress has been made in each country to varyingdegrees.Institutionalstructures,persistentpatriarchalgendernormsandstereotypes and ineffective representation limit women’s bargainingpower in the labourmarket (and family) and hold down their financialrewards as well as their career progression. However, the variousinstitutionalandculturalfactorsarenotplayedout to thesamestrengthand each national employment system contains its unique features (seechapter13).Wehave tried tohighlight theparadoxofhowstrongstateintervention is possible and indeedneeded to achieve a level of genderequalityinpatriarchalsocietiesontheonehand,andhowtheinterveningpower of the statemay be circumvented inEastAsian countrieswhereglobalisationhashadprofound impactson thenation’seconomyon theother. In the absence of effective law enforcement to enhance gender

equality and organisational support to facilitate work-life balance andcareerdevelopment,wecannotbeoptimisticoftheprospectsforwomeninChina,JapanandKoreatoadvancetheirmanagerialcareersinthenearfuture.

Note1PartofthispaperdrawsfromCooke,F.L.(2010)‘Women’sparticipationinemploymentin

Asia:acomparativeanalysisofChina,India,JapanandSouthKorea’,InternationalJournalofHumanResourceManagement,21,12:2249–70,withpermission.

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10ContinuityandchangeinguanxinetworksinEastAsiaJaneNolan

Introduction

Theuseofsocialnetworksisnotunusualinbusinessandiscertainlynotconfinedto theEastAsianregion.Therearenumerousstudies, fromallquadrantsoftheglobe,whichshowthatpeopleprefertodobusinesswiththosewithwhomtheyhaveexistingtiesoffriendshiporkinship(Borgattiand Foster, 2003; Burt, 2000; Uzzi, 1996). Personal connections areuniversally valuable for gaining access to jobs and enhancing careerprospectsandforprovidingorganisationswithaccesstoawiderrangeofmarkets,suppliersandinformation(BianandAng,1997;DavidssonandHonig,2005;Granovetter,1974;Kotabeetal.,2003;Uzzi,1996).Onthedownside,iftheybecometooexclusive,networkscanstifleinnovationascertaincoreassumptionsandworkpracticesbecomehabituated,closingoffpotentiallymoreproductivealternatives.Allthatsaidtherearethosewho argue that the form of networking used in China –guanxi – isdistinctlydifferentfromthosefoundinothersocietiesbecauseofitsdeepculturalrootsintheConfucianphilosophicaltradition(seechapter3).Alternatively, there are those who argue thatguanxi is principally a

product of localChinese institutionswhich, in turn, are embedded in asocietyandeconomyundergoingrapidtransformation.Consequently,the‘rules’ofguanxiarelikelytochangeasthoseinstitutionsmodernise(seechapter5). If foreignmanagersdevelopanidée fixeonwhatconstitutesChinese‘culture’thentheyruntheriskofbuildingnetworksandmakingdecisionsonthebasisofoutdatedstereotypes.What,then,isreallyusefultoknowaboutsocialnetworksinChinaand

inEastAsiamoregenerally?IsguanxireallyimmutablyfixedinChineseculture never to be understood or infiltrated by outsiders? And whathazardsmight guanxi pose to a foreignmanager in a rapidly changing

globalbusinessenvironment?Toanswerthesequestions,thischapterwillbe divided into three sections. The first will look at the Confuciancultural heritage underlying East Asian business networks generally,including those in China, Japan and South Korea.1 The second willconsider researchwhich focuseson the relationshipbetweenguanxiandinstitutionalstructures.Herewewillinvestigatethequestionofwhetheror not the region is experiencing a decline in the importance ofguanxinetworksinlightofeconomicreforms.Thethirdsectionwilloffersomeevaluationof thisdebatebyarguingthat, inglobalbusinessat least, thecontinuingneedofMNCstoestablishlinkswithgovernmentofficialsisaformofguanxinetworkingthatneedstobemaintained,butthatcanalsoproveparticularlyriskyfortheforeignmanager.Finally,wewillevaluatecontinuity and change inguanxi in the post-reform period in Chinaexaminingbothwhatitisprincipallyusedforandwhoismostlikelytostillneedtouseit.

TheConfuciantraditionandEastAsiannetworks

OverrecentdecadesscholarsofEastAsianmanagementhaverepeatedlyargued that the economies and businesses of the region need to beunderstoodontheirownterms,notsimplyintermsoftheirdifferencestoWesternmodels(Hamilton,2006;Redding,1990;TungandWorm,2001;Warner, 2010).More specifically,most researchers emphasise theneedto focus on the continuity of ‘civilisational norms’ in the region and,particularly, on the enduring influence of the Confucian world view.Briefly,Confucianismischaracterisedasaphilosophicalapproachwhichislargelyfreeoftherigidrulesandlawswhichdefinethemonotheisticbeliefs which underpin theAbrahamic religions dominant in theWest.Instead, Confucianism is based on a set of principles which prioritise‘natural’ harmonies and hierarchies in relationships. Five relationships,the‘wu-lun’,areseenasespeciallyimportant:theruleroverthesubject,the father over the son, the older brother and the younger brother, thehusbandandthewifeandthefriendandthefriend.Iftheserelationships

are pursued with loyalty and benevolence, by all the parties involved,then a harmonious society is believed to be the inevitable outcome(HwangandStaley,2005).In broad terms, many observers of management in EastAsia argue,

therefore, that organisations in the region are fundamentally orderedaroundrelationships,whereasthoseintheWestarelargelycontrolledbyabstract laws. If Western capitalist economies are firm-based, Asiancapitalist economies are network-based. Moreover, East Asianorganisationsaregenerallyseentoplaceparticularimportanceonrespectfor age-based seniority in business relationships and on a paternalisticorganisational form (Boisot and Child, 1996; Tung and Worm, 2001;Warner,2010).All that said, however, there are clearly differences between the

nationswithin theregionand,while ‘maintainingharmoniousrelations’isakeyunitingtheme,therearevaryingdegreesofemphasiswhichcanguidesocialnetworkingbehaviourindifferentwaysindifferentcountries(Alston,1989).Forexample,guanxiinChinesecommunitiesemphasisesthedevelopmentoflong-termpersonalrelationshipsbasedonkinshipandregional connections. The Japanese, on the other hand, foreground theimportance of group harmonies and social relations and place moreemphasis on corporate connections than those based on strictly kinshiprelations. In Korea, the emphasis on maintaining harmony, orinhwa,frequently occurs through kin-based hierarchies and authorityrelationships,apatternwhichisreflectedinthe‘clan-like’natureofthenation’s largest organisations. Each approach will be briefly discussedbelow.

GuanxiinChina

In a very general sense the termguanxi is often used to indicate theexistence of some sort of personal relationship such as a friendship,classmateorkinconnection(Guthrie,2009).However,apartfromguanxiitself, there also exists a separate phenomenon,guanxi xue (orguanxi

practice), which is used to refer to the material aspect of relationshipbuildingorthe‘manufacturingofobligationandindebtedness’whichcanbeachievedthroughgiftandfavourexchange(Yang,1994).Thecodesofpractice underlying this element ofguanxixuearesometimesargued tohavederivedfromtheConfuciandesireforrespectandharmony,wherereciprocitybecomesamoraldutyandthegift,inthiscontext,becomesanobject that materially acknowledges the existence of a ritualisedrelationshipbetweentwopeople(Ledeneva,2008).Itis,however,alwaysassumedthatthenatureoftherelationshipgoals(mutualobligationandindebtedness) are to be kept implicit and, furthermore, that there is norealtimelimitonthe‘repayment’ofthedebtcreatedbythegift.Second,theimportanceofaffectorsentiment(ganqing) inguanxiisalsoheavilyemphasised.Thosewhoprioritisetheroleofcultureinunderstandingguanxitakeas

afoundationalassumptionthatChinaisaparticularisticandcollectivistsociety (Hofstede, 2001; Hofstedeet al., 2010; Inglehart and Welzel,2005) and subsequently seek to describeguanxi andguanxi practice inrelation tootheraspectsof social life inChina, suchashuman feelings(renqing), face (mianzi) and reciprocity (bao) (Chen and Chen, 2004;Yan,1996;Yang,1994).Whilstoutsidecommentators (businesspeopleparticularly)may emphasise the instrumental nature ofguanxi practice,Chinese usually emphasise that ‘real’guanximust contain an affectiveelement(Goldetal.,2002).Interestingly, some scholars in this tradition tend to favour the view

that the significance ofguanxi practice in business has increasedsignificantly since the post-1978 reforms (cf., chapter 5). The stressesand strains of the transition to a market economy meant that peopleneeded to utilise informal networks, such asguanxi, in order to ensuretheir economic survival and prosperity. Mayfair Yang (1994) hasdescribedthewaythatguanxipracticeisusedasawayofcircumventingnewly-establishedformalrulesandregulations.Othershaveemphasisedthe intrinsic value ofguanxi for maintaining and building trustingrelationshipswithinanorganisation.For example,Wong etal.’s (2010)studyofemployeesinjointventuresinsouthernChinashowsthatawork

culture based on traditionalguanxi influences the nature of Chineseemployees’ trust in both their supervisor and their organisation. Theyarguethatgoodsubordinate-supervisorguanxiisacoreHRMconceptinChinabecauseitinfluencesemployees’perceptionsofproceduraljusticeandjobsecurityand,consequently,theirturnoverintentions.Indeed, recent debates have argued for international recognition that

HRM practices in China now constitute what can be defined as‘Confucian HRM’. As Warner (2010) notes, although Western-basedindustrial relations and HRM concepts and practices have been widelytaught through management programmes in Chinese universities andbusiness schools, such institutions are also nowdeveloping HRMprinciplesbasedonclearlyidentifiable‘nationalguisesandincarnations’(Warner, 2003;Zhu etal.,2007).Fromthephasingoutof the‘ironricebowl’ ( tie fan wan) in the 1980s through to the development ofcontemporaryHRMpracticesusedinlarge‘learning’organisationsinthe2000s,Warner(2010)identifiestheemergenceofConfucianHRMwhichtakes ‘harmony’ as the template for interpersonal relationships. In thecase ofguanxi, he argues, HRM correlates lead to both positive andnegative outcomes. On the one handguanxi may lead to ‘benignhorizontal communication or on the other, a less benign form ofcorruption’,athemeweshalldeveloplaterinthischapter.Warner(2010)also notes, however, that the identification of Confucian principles inHRMpracticesinChinacannotbeexplainedsimplythroughthe‘culturaldifferences’argument.Thetermmustalsobecontextualisedagainstthebackdrop of the current popular discourse on Confucianism in ChinawhichcoexistswithSino-MarxismandtheCCP’sadoptionoftheconceptof the ‘harmonious society’ to legitimate its current political agenda.Thus,Warneralsoforegroundstheimportanceofinstitutionalinfluencesinadaptingseeminglystable‘traditional’elementsofChinesephilosophytomodernHRMpractices.

WaandamakudariinJapan

Much of what has been written about business networking in Japan isfirmly rooted in theNihonjinron (theories of ‘Japaneseness’) paradigmwhich is based on the following assumptions: first, the Japanese,psychologically speaking, are particularly dependent on their superiors’approval for gaining emotional satisfaction; second, maintenance ofharmonywithin thegroup is essential and extensive effort is placedonsustaining relationships; third, there is a tendency to imply that allJapanese share the attribute under examination to an equal degreeregardless of gender, age, education or position in the labour market;fourth,thattheattributeisuniquelyJapaneseinformandhasexistedinJapanese society for an indefinite period of time (Sugimoto, 2010).Indeed, theseassumptionscanalsobe found inmuchof theEastAsianbusiness literaturewhichtakes‘culture’as itscoreexplanatoryvariable(Hofstede, 2001;McSweeney, 2002). It is important, therefore, that thereader retains a critical distance when engaging with studies in thisparadigm,despiteitsintuitiveappealtopractitionersandtheoristsalike.Nevertheless, with these caveats in mind, there are still some

interesting business networking patterns which are worthy of furtherstudy. It hasbeen suggested thatmaintainingWa,orharmony, in Japantends to occur through group activities in organisations rather thanthroughthedyadicrelationshipsbasedonfamilyandregiontiesthataremorecommoninChina(Alston,1989).Fromabusinessperspective,oneimportantaspectof this relationshipformis that,onceaccepted intoanorganisationalgroup,membersareconsideredtobeunderitspermanentprotection. This is reflected in the labour market ideal of lifetimeprotectioninanorganisationinreturnforloyaltyandhighlevelsofworkcommitment (Abegglen, 2006; Alston, 1989). Of course, while jobsecurity may have been an identifiable characteristic of the Japaneselabourmarketinthepast,oneinthreeemployeesarenowinnon-regular‘precarious’employment(Sugimoto,2010).Moreover,in2006,nineoutoftenemployeeswereworkinginSMEswherethelifetimeemploymentsystem simply does not operate. Indeed, demographically, the average‘Japanese’ is a ‘female, non-unionised non-permanent employee in asmallbusinesswithoutauniversityeducation’(Sugimoto,2010,p.1).Yet

themajorityofstudiesofbusinessnetworksarebasedonsampleswhicharelargelymale,highly-educatedpermanentemployeesworkinginlargeorganisations or of powerful bureaucrats and state officials involved inlucrativebusinessdeals(seechapters7and9).Nevertheless, even among this elite group, some interesting

networkingpatternscanbeobserved,particularlyforthoseemployedin,or associated with, theKeiretsu (sets of companies and banks withinterlocking relationships and shareholdings). One example is theextensive ‘old boy’ network of government officials who, post-retirement, ‘descendfromheaven’ (amakudari) into themanagementofprivate (or quasi private) businesses and public sector organisations(Schaede, 1995).Amakudari becameparticularly prominent in Japanesebusiness when nationalised industries were privatised and bureaucratsretired relatively early (between 50 and 60 years of age). Becausetraditional Confucian values of hierarchy and respect for authoritymitigated against placing senior officials seeking a ‘second life’following retirement as the subordinate of more junior staff, suchindividuals often found themselves placed in positions ofdisproportionatepowerandinfluence(ColignonandUsui,2003;Schaede,1995).Unsurprisingly,perhaps,thepracticewasvulnerabletoabuseandledtothedevelopmentofcorruptpracticesinthatformerofficialstendedto join organisations linked to their former ministry and to collude inhelpingtheirnewcompanysecuregovernmentcontracts(Schaede,1995).Although attempts have beenmade to curb the influence ofamakudariand new laws have been passed to limit the appointments of retiringofficials, the practice remains widespread (Japan Times, 4May 2011).Wewill not delve into the historical and institutional structureswhichmay magnify and sustain the problem; suffice to say that the role ofConfucianvaluesinrelationtohierarchicalrelationshipsandrespectforauthority are important explanatory elements for understanding at leastthegenesisofthisformofnetworking.Intra-industry networks, which circle around the membership of

professional associations, are another important networking pattern(Witt, 2006). Interestingly, membership of these professional

associationsisdefinedprincipallybythefirmsthemselves,ratherthanbythe individuals who represent those firms. Witt (2006) outlines howorganisations appoint specific managers,madoguchi (windows), to therole of association networking who, as well as being tasked withestablishing connections during the formalmeetings of the association,are expected to engage in informal, after-work socialising, or ‘barhopping’(nijikai)togainvaluableinformation.AccordingtoWitt(2006)theterm‘nominication’,acombinationoftheJapanese‘nomu’–todrink– and the Englishword ‘communication’, highlights the importance ofalcohol in theseexchanges, confirming the Japanesenorm that ‘what issaidundertheinfluenceofalcoholcannotbeheldagainsttheindividual’(p.99).Interestingly,however,theconnectionswhichmadoguchidevelopremaintheconnectionsofthefirm,ratherthanoftheindividual,whowill‘passon’hisnetworktohissuccessorwhenheleavesthemadoguchirole.This isan importantdifferencewithguanxi inChinawhere thenetworkremainsthe‘property’oftheindividual,ratherthanofthefirm.

Inhwaandyon-goinKorea

Muchhasbeenwrittenaboutthedistinctivepatternof‘clanmanagement’inKoreancorporations(seechapter8).KnownasChaebol,thesefamily-ownedorganisationsaredominatedbypowerful foundingchairmenandrunonauthoritarianandpaternalistic lines (RowleyandWarner,2005).Companies are frequently viewed metaphorically as ‘parents’ andemployees as ‘family’, which, in fact, is often a reasonably accuratedescription of the structure of the organisation (Rowley and Warner,2005).Forexample, in the1980s,one thirdofexecutives in the largestbusinessgroups inKoreawere familymembersof fellowemployeesoremployers (Alston, 1989). And drawing on one of the most quotableKoreancorporate examples, theheirsofChung Ju-yung, founderof theHyundaigroupin1947,stillrunallofthenamedcompaniesinthegroup.TheinfluenceofConfucianismonKoreancorporatelifemaybemost

clearly observed through organisational structures, which are based on

theestablishmentandmaintenanceofharmoniousrelationshipsbetweenthose of unequal status (Alston, 1989). One of the key businessadvantages of this practice has been to promote ‘in-group’ harmony orinhwa in the organisational network, leading employees to prioritisecollective,corporategoalsoverindividualpersonalambitionandtomakegroupmembersmutuallyinterdependent.Consequently,fromabusinessperspective,inhwaisseentoreinforcein-groupidentityandtocontributeto the desire to compete with clearly defined ‘out-groups’ (Cho andYoon, 2001). In terms of networking behaviour, yon-go relations havealso been of particular importance for recruitment purposes.Yon-goconnections are those based on clan, blood, geography or education(Chunget al., 1997) and business owners would traditionally recruitemployees from their hometown, school or university in the samewaythattheywouldbringtheirrelativesintotheorganisation.ChungandJin(2011) note that, historically speaking at least, school and universityrelatedconnectionshavebeenparticularlyimportant.Theserelationsareoften based on hierarchical seniority which is defined by year ofgraduation.There is, however, increasing evidence that, as in Japan, the

‘traditional’ model of lifetime employment, seniority and recruitmentthroughconnections isundergoingsignificantchange(Baeetal.,2011).Due to increasingly difficult economic conditions, numerical andfinancial flexibility is becomingmore common than ‘clan’ loyalty andage-related promotion (Baeet al., 2011). Moreover, theyon-go systemhas come to be seen as too closely associated with nepotism andfavouritismandthereisagrowingsocialuneasewithitsuse.Thisissuehas seen a shift towards recruitment practiceswhich are now based onmoremeritocraticsystemsofassessmentandopencompetition.Allthatsaid, there remains an ‘enduring preference’ for in-group relations (ofwhichyon-go is onekind) inbusiness-to-businessrelationships,suchasfirm- and supplier-chains, where pre-existing relationships have beenshown to increase trust between buyer and supplier and reduceopportunisticbehaviourinsuppliers(ChungandJin,2011).Furthermore,given the intense competition among large companies to recruit top

graduates,theyon-gosystemofrecruitmentfromeliteuniversitiesisstillinevidenceintheChaebol(ChungandJin,2011)Inallofthenationalcasestudiescitedabove,theinteractionbetween

Confucianculturalvaluesandpoliticalandinstitutionalsystemshasbeenhintedatbutnotdrawnoutexplicitly.WenowthereforeneedtoexaminethisspecificissueinmoredetailifwearetoevenbegintounderstandtheinfluenceofnetworkingonbusinessoutcomesinEastAsia.Inordertodothis,therestofthischapterwillfocusontheChineseexampleofguanxi.First,wewillexaminetheuseofguanxiinChinesecommunitiesoutsideof the PRC, and secondwewill considerwhether or not the economicreforms on the mainland have led to an increase or decrease in itsimportance.

GuanxiandChinesecommunitiesinEastAsia

Researchon the socialnetworksofChinesecommunitiesoutsideof thePRC,inareaswhererational–legalsystemsarealreadywellestablished,providesausefulframeworkforexaminingtheextenttowhichguanxiisa fixed and immutable feature of Chinese culture, or whether it is amalleable system which adapts to shifting local economic and legalconditions.Forexample,LinandHo’s (2010)comparisonof theuseofguanxi inTaiwanandmainlandChina showed that inTaiwan, althoughguanxiremainsanimportantelementofbusinessdevelopment,managersare less driven to maintainguanxi relationships over the long term,adopting a more ‘business is business’ approach to networking (cf.chapter 6).Lin andHo (2010) attribute this finding to themore firmlyestablished historical links with Western companies by businesses inTaiwan.Similarly,TongandYong’s(1998)studyofChinesebusinessnetworks

in Singapore shows that a ‘desire to gain legitimacy in the eyes ofinternationalcompanies,[and]greatersystemsoftrustandacceptanceoflegal–rationalistic procedures, have effected changes in businessprinciples’ (p. 95). In their study, Chinese business people working in

Singapore felt that impersonal ‘professionalism’, rather than thepersonalismassociatedwithguanxi,wasthemostcredibleandeffectiveway of doing business. However, they also noted that there was anenduring sense of insecurity and vulnerability amongst some of theirparticipants which led them to continue to rely heavily onguanxi,particularlyamongstthosewhowereemployedinfirmswhereownershipandcontrolwasfamily-based.Furtherevidenceoftheenduringlegacyofaninsecurepastoncurrent

networking practices comes from a fascinating empirical study of the‘mindscapes’ of Chinese business people in Hong Kong, Taiwan,SingaporeandIndonesiacarriedoutbyRedding(1990).Heshowedthat,despite their move away from the Chinese mainland, three primarycomponents of Chinese culture and history continued to permeatebusinesspractices:paternalism,personalismandinsecurity.ForRedding,the influence of paternalism was the result of the power of Confucianideals to encourage rigid vertical order in organisations based on theexchange of obligations. Interestingly, however, he found that trust inbusinessrelationshipsandnetworkswasalso,infact,heavilyinfluencedboth by recent personal experiences of insecurity and the perception ofenduringwidespreadinsecurityontheChinesemainland.Particularly,theremoval of traditional sources of government support, such as thefinancialandmaterialstabilitypreviouslyprovidedbythedanwei (stateowned enterprises) permeated his participants’ sense of vulnerability.WhileReddingissensitivetothepowerofConfucianheritageinguidingthe preference for personalism underlying theguanxi networkingpractices of his participants, he does not place all of the explanatoryweightonculture,arguingforaneedtounraveltheinfluenceofpersonaland institutional histories for a fuller understanding.We shall explorethis theme further in the following sectionwhere wewill consider theevidenceforchangeintheimportanceofguanxiinthelightofeconomicreformsinthePRC.

Theinfluenceofinstitutionalforcesonguanxipractices

Inthelast30years,thousandsoflaws,regulationsandresolutionsaimedat rationalising business practices and increasing transparency andefficiencyinmainlandChinahavebeenpassedbytheNationalPeople’sCongress (China’s ‘Parliament’) (Guthrie, 2002; Nolan, 2010; Wang,2007). Some argue that this transformation has fundamentally changedtheattitudeofChinesemanagers towardsguanxi, to theextent that it isnow broadly the same as what, in the West, would be called ‘socialcapital’(Goldetal.,2002).AkeyexampleofthisapproachistheworkofDougGuthrie(1998;2002;2009)whoarguesthataconsciousattemptonthe part of the Chinese government to rationalise business practices,coupled with increasing efforts to reduce the influence of informalnetworksinpubliclife,meansthatguanxipracticeisindeclineasChinadevelops a rational-legal system based on formal laws and procedures.Guthrieclaimsthathisdata(collectedin themid1990s)showsthat theuse ofguanxi practice in China’s urban economy is increasingly‘unnecessary and dangerous’, particularly amongst firms which arehigher up the state administrative hierarchy. Huang (2008) has alsoshown that whileguanxi networks are still important for gainingdesirablejobsinthestatesector,largenon-statesectorcorporationsnowrelyonamorestandardisedandtransparentrecruitmentprocessthatcanaccurately identify themostwell-qualified candidates in ameritocraticfashion,regardlessoftheirconnections.It is central to the arguments of these scholars that rationalisation

processes,competitivepressuresandthenascentdevelopmentoftheruleoflawmeansthatChinesefirmsandtheiremployeesarenowmuchlessin need ofguanxi practice to get things done, be that finding reliablesuppliers,accessingnewmarketsorgainingaccesstogoodjobs.Notonlydoeslegalandinstitutionalchangeencourageeconomicactorstochangetheirbehaviour,butcompetitiveprocessesinamarketeconomyshifttheemphasissuchthatthebestservices,products,peopleorprojectsarenowmorelikelytobeselected,regardlessofthepersonalguanxirelationshipsof anyof the individuals involved.However, there remain a number ofscholars who, although also working broadly within an institutionalframework,aresomewhatmorepessimisticthatforcesofrationalisation

and market forces will reduce the influence ofguanxi practice.Researchers in this camp argue that the continuing impartiality of lawenforcement in China means that the economic system is still heavilyrelianton‘back-doorpractices’(houmen)andbriberytoadegreewhichremains distinct from what is usually found in Western marketeconomies.Li (2011), for example, argues that someChinesemanagers nowuse

guanxi ‘discourse’ as an informal institutional mechanism to facilitatethecontractingprocess incorruptexchanges. Inotherwords, thosewhoare being bribed can overcome any sense of moral wrongdoing byredefining their situation as merely part of a ‘traditional’ culturalheritage.Thus,thetermguanxiisusedasaculturalshieldwhichenablescorruption to appear in a morally neutral way to those involved.Similarly,Wank’s(2002)researchinXiamen,basedondatacollectedinthemid 1980s and themid 1990s, uncovered the existence of what helabelled ‘symbiotic clientelism’ between private businessmen andofficials. Inhis studyhe showshow theperception that the ruleof lawremains weak encouraged local entrepreneurs to continue to seek toinfluenceofficialsthroughtheuseofguanxipractice.Hearguesthatthemoremarket-orientatedregionsofChinahavenotseentheeliminationofguanxipractice,but,rather,atransformationinthescopeofitsinfluence.Yang(2002)supportsthisargumentsuggestingthattheprincipaldeclineinguanxipracticehasbeen in theneed tousesuchnetworks toacquireordinary consumer goods and daily essentials. Such items, for themajorityofthepopulation,areindeednowreadilyavailablethroughthenormaldistributionmechanismofthemarketeconomy.ForYang(2002)whereguanxicontinuestothrive,however,isintherelationshipsbetweenentrepreneurs, managers and state officials. The implications of thispattern for foreign managers in MNCs based in mainland China arediscussedbelow.

GuanxinetworksamongstforeignandChinesemanagers

Aswell as studieswhich investigate theuseofguanxibetweenChinesemanagersandofficials,thereisalsoalargeliteratureexaminingtheuseo fguanxi in an international business context. Many of these studiesunderscorethedifficultiesinvolvedinrunninganMNCinaregionwhereaccess to informal but influential networks remains a necessity (Luo,2000). For example, Wang’s (2000) study of the role of transnationalguanxi networks in facilitatingFDI development inChina showed that,for foreigners,guanxi are often difficult to sustain and costly to buildand,crucially,maydependtooheavilyonakeyindividualwhomaylosetheir power very rapidly.Moreover, the lack of transparency inguanxinetworks means that foreigners are particularly vulnerable to theinfluenceof ‘phonyplayers’whoarenotas influentialas theyclaim tobe, leading the MNC to significant losses in time and money and toextensivereputationdamage.Furthermore, Langenberg’s (2007) work discusses the problem of

‘ethical relativism’ for non-ChineseMNCs attempting to develop theirbusinesses throughthe use ofguanxi. He draws attention to thedifficultiesinvolvedintryingtoreconcileinternationalcodesofconduct,which are based on the assumption that there exist universal ethicalvalues, with the multiple local ‘exceptions’ that managers inevitablyencounter in their day-to-day experiences. Langenberg argues thatforeignersneedtoexercisegreatcarewhenengaginginguanxipracticesbecause it is simply not in the interests of the organisation to becomeinvolvedinactivitieswhichmayinthelongtermbecomeharmfultothecompanyasalegalentity.Moreover,hesuggeststhattheimportanceofdeveloping a good corporate social responsibility profile is becomingincreasinglyimportantforMNCsinChinaandthat, inasimilarveintoGuthrie, the significance ofguanxi is very likely to decline both asformal lawsbecomemore strictly enforced andChinesemanagerswithinternational MBAs seek to run their organisations according tointernationalbusinessnorms.All that said, however, there are numerous examples reported in the

financialpressofforeignbusinessexecutivesbeingdrawnintoseeminglyguanxi-type relationships with local Chinese officials which have,

ultimately, led to theirprosecutionforfraudandthepaymentofbribes.One of themost recent examples in the financial sector is the case ofGarthPeterson,anAmericanvice-presidentatMorganStanley’spropertyinvestmentoffice inShanghai,whowas fired inDecember2009on thesuspicion that he had violated the US Foreign Corrupt Practices Act(FCPA),a lawwhichaims toeliminate thepracticeofpayingbribes tooverseas public officials. In addition, a study byDeloitte inMay 2009reported that nine in ten US businesses were concerned about thepossibility of FCPA violations while doing business in China, and anOctober2009reportbythelawfirmShearman&Sterlingshowedthatatleast 24 US companies have had recent FCPA issues involving China(Reuters, 10 November 2010). While such cases may well proveinsignificant inthedevelopmentofrational-legalsystemsinChinaoverthelongterm,itisimportanttonotethatitisnotinevitablethatChina’sincorporation into the international economy will lead to thedisplacement of such practices, not least because of the processes ofadaptationwhichsomeinternationalmanagersthemselvesexperienceasthey adjust their strategies to conform to what they believe to beacceptableandlegitimate‘culturalpractices’inthelocalcontext.For example, Nolan’s (2011) study of Western bankers in China

showedthatwhilethenetworkpracticesofmanyWesternmanagersmaycontributetotheadoptionofinternationalbusinessnormsinChina,thereisanothergroupofmanagerswhomakesignificantadjustmentstolocalconditionsandengageinstrategieswhichactuallyreinforcesomeoftheexisting evasive practices sometimes associated withguanxi. Someforeignmanagerscreativelyreinterpretthenormsofthelocalcontexttojustify their actions, engaging in ‘back-door practices’ such as theprovision of preferential loans and bribes to certain officials under theassumption that this is what is necessary to advance their businessagenda.Moreover,ratherthanacknowledgetheimplicationsoftheirownactions,somemanagerstransferredresponsibilityfortheirbehaviouronto domestic actors, arguing that such action was necessary in order tocomply with ‘cultural norms’. Some managers were, in effect,contributingtothemaintenanceofinformalcircumventorypracticesand

werecertainlynotencouragingconvergencetowardsinternationalnorms,acommon justification for allowing themaccess toChinesemarkets inthefirstplace(Wang,2007).Tung and Worm’s (2001) research, which also draws on studies of

MNCsthatoperateinChinais,however,moreoptimisticintoneonthenatureandusefulnessoftransnationalguanxi.GiventhattheruleoflawisnotnecessarilyenforcedimpartiallyinmainlandChina,theyarguethatforeign firms are driven by necessity to form relationships withgovernmentofficialstosecurebusinessdeals.Thisfact,inturn,leadstoanasymmetryinthebalanceofpowerbetweenthetwopartieswhichcaneither favour thegovernmentofficial (whocan influenceadministrativeprocedures), or the Western company (which possesses the desiredexpertise and ‘know how’). Given the uncertainty of the businessenvironmentinmainlandChina,guanxicanincreasetheefficiencyofanMNC because bureaucratic blocks are removed and this, in turn, cancreate greater stability due to the influx of more reliable flows ofinformation. Moreover, good connections may also increase thelegitimacyofthefirm,particularlyifitisenteringanewmarket.In short, foreign managers should aim to build personalguanxi

relationships which meet their organisation’s needs for resources,political support and/or legitimacy in a new environment. Otherresearchersalsocontinuetoemphasisetheenduringimportanceofguanxiin MNC collaboration, focusing on topics such as its importance forknowledge sharing in R&D collaborations (Honget al., 2010) and itsimportance in talent management practices (Hartmannet al., 2010).However,wemustconcludebyreiteratingthatforeignmanagersneedtotreadcarefullyintermsofjustquitewhattheyarepreparedtoexchangein order to create the principle of ‘mutual indebtedness’ commonlyassociated withguanxi practice. In an environment which changes sorapidlytheyareparticularlyvulnerabletothedownsidesof‘bad’guanxi;namelycorruption,falsepromisesandcorporategovernancequagmires.

Conclusions

The question of whether or notguanxi is changing in form andimportance through the course of China’s economic reforms is, as wehave seen, answered in different ways by researchers who choose toemphasisedifferentaspectsoftheproblem.Someareconcernedtotracktangibleincreasesanddecreasesovertime,forexamplethroughthestudyofjobseekers’experiencesormanagers’attitudes,whileothersdrawoutthesubtlewaysinwhichguanxihasadaptedtochangesintheeconomicsystem.Authors likeGuthrie (2009) argue that, as formal lawbecomesstrongerandthemarketeconomybecomesevermorefirmlyestablished,the role ofguanxi practicewill diminish in the urban industrial sector.WhilestillacknowledgingthatguanxiisadistinctiveculturalpracticeinChina,hisoverallviewisthatbecauseguanxiisinconflictwithrational-legalsystems,andisultimatelyanimpedimenttocompetitiveprocesses,itsinfluencewillinevitablydecreaseovertime.However,thereisanotherpositionontheroleofguanxiwhichargues

thatwhatisactuallyimportanttounderstandiswhatpreciselyitisusedfornowandquitewhoitisusedby.AsLedeneva(2008)argues,becauseofchangesinChina’sstatedistributionsystem,‘previouslyscarceitemssuchastelevisions,traintickets,restaurantseats,leanmeat,andnurseryschoolspacearenoweasilyavailablethroughthemarket,ordinarypeople[now] have less need to practiceguanxi’ (p.136).However, it is in thesphereofbusinesswherebothChineseand foreignmanagers still oftenneed toengagewith figuresofpolitical influence (Ledeneva,2008).AsYang (2002) argues theChinese state still has strict control ‘over statecontracts,accesstoimports,bankloans,favourabletaxincentives,accessto valuable market information and to influential persons, andexemptionsfromtroublesomelawsandregulations.Itisherethatguanxifindsnurtureintheneweconomy’(Yang2002,464).While guanximayindeed be of less importance to ordinary Chinese people for theacquisitionofessentialdailyitems,itisstillaveryreal‘socialfact’forthose who are involved in business. It is in the interactions betweenprivate entrepreneurs, managers (both Chinese and foreign) and stateofficialswhereguanxiretainsitsinfluence(Nolan,2011;Yang,2002).Social networks are a universal feature of human societies and they

play a crucial role in businesses around the world (seechapter 16).Guanxi andguanxi practice clearly display features that are culture-specificandheavilyinfluencedbytheConfuciantraditionsuchasrespectfor authority, the establishment of long-term relationships, and theformalised exchange of gifts and favours as a means of re-enforcingcommitted,harmoniousassociations.Inmorepracticalterms,guanxihasbeenusedtohelppeoplesurviveinconditionsofshortages,tofindgoodjobs, to launch new businesses, to circumvent formal procedure, tonegotiatefavourabledeals,toaccessandkeepclientsandsuppliersandtocontact powerful and influential people. However, there is a fine linebetween demonstrating sensitivity to cultural norms and developingcorrupt and compromised relationships which are cloaked, by bothparties, as merely an ‘inevitability’ of local custom. For the globalmanager, the benefits of establishing ‘good’guanxi are significant, butthey should also be alert to the dangers of ‘bad’guanxi; for the timebeingatleastitremainsnecessarytoproceedwithcaution.

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11EastAsianbusinesssystemsintransitionMichaelA.Witt

Introduction

This chapter draws on the analytical framework of business systemsanalysis(Redding,2005;Whitley,1999)toofferacomparativeoverviewof business and its cultural and institutional underpinnings in China,Japan, and South Korea. The overall picture that emerges is one ofconsiderablevariety inEastAsianeconomies.Chinapresents itselfasamixed economy that combines several distinct business systems,includingastrongprivatesectorandapossiblyresurgentState-controlledsector, both operating by different sets of rules. Despite minorinstitutional changes in recent years, the Japanese business systemremainshighlycoordinatedandemployee-centric.SouthKorearetainsabusiness-group-ledformofcapitalism.Givenspaceconstraints,Iwillbepainting with a broad brush and will refer readers looking for moredetailed expositions to volumes dedicated to Asian business systemsanalysis(e.g.,ReddingandWitt,2007;Whitley,1992;WittandRedding,2013). This account builds on the topic introduced in chapter 4 andextendsitsscopebyemploying,asstated,the“businesssystemanalysis”approach.

Businesssystemanalysis

A society’s way of doing business—its business system—can beunderstood in the context of three main components: culture, theinstitutional context of firms, and the rules of coordination inside andamong firms (Redding, 2005). Each of these components breaks intothreeparts.

Culture refers to the social construction of reality (Berger andLuckmann,1966)inasociety;thatis,itenablespeopletomakesenseofactionsandattributes (seechapter3).Businesssystemanalysisexploresthreeaspectsofculture:rationale,whichexpressestheendsandmeansasociety considers acceptable for business; identity, which relates to asense of belonging and ranges from individualism to collectivism; andauthority,whichrelatestohierarchyinsociety.Theinstitutionalcontextofthefirmdescribestherulesgoverningthe

abilityofactorstodrawonthreemainformsofcapital:financial,human,andsocial.Forfinancialcapital,thekeyquestionsarewherefirmsobtaintheirfundsandonwhatconditions.Forhumancapital,thesalientpointsare the availability of skills and theorganization of labor. For socialcapital, the pivotal distinction is between interpersonal trust, whichevolves between individuals, usually through positive experiences, andinstitutionalizedtrust,whichreliesonlegalsystemsorgeneralizedsocialpressure to keep people honest and thus enables strangers to trust oneanother.Thebusinesssystemitselfconsistsofthreemainareasofcoordination.

The first explores what kind of ownership patterns are present and towhatextentownershavecontrolover themanagementof the firm.Thesecondrelates tocooperationacross firmboundaries,usually invariousformsofalliancesandnetworks.Thethirdconsiderstheinternalstructureofthefirm,andespeciallythemodesofdecision-makingandpromotion.Interacting with all of this are various actors and influences (cf.

Redding,2005).ProminentamongthemistheroleoftheState,whichinmanysocietiesrepresentsthemostimportantsinglesourceofinstitutions—intheguiseoflawsandregulations—constitutingtheoverallshapeofthebusinesssystem.

China

Chinatodayfeaturesseveralmajorbusinesssystems,differentiatedbothbyownershipofbusinessesandbyregion(seechapter5).Thechallenge

foranalysis is to identifysensiblebroadcategories tohelp interpret theoverall picture. In linewithmuchof the literature,wepropose that themainbusinesssystemsinChinatodayare:

TheState-ownedsector.Oncethedominantformofbusiness,itsshareofeconomic output has declined to about 30 percent of GDP. Mostenterprises in this category are large, capital intensive, andbureaucratic. Many receive special benefits and protection fromvariouslevelsofgovernment.

The private sector. Private business reemerged rapidly followingeconomicreformsinthelate1970sandnowaccountsforabouttwo-thirdsofGDP.Firmsareusuallysmallfamilybusinesses.

The local corporates. This category represents a large variety of firmsinvolving elements of both the private and theState-owned sectors,andtheymayappearinthestatisticsasbelongingtoeither.Manyofthem developed from collective enterprises into hybrids blendingsome aspects of the State-owned sectors with elements of privatebusiness. Often, local governments protect and promote thesebusinesses, giving privileged access to financial and fixed capital,labor,andland.Sincethecharacteristicsinthisgrouplieinbetweenthose of the private and the State-owned sector, Iwill for themostpartbracketitfromthediscussionbelow.

These threemajor forms coexistwith a sizable foreign-invested sector.These firms are important contributors to Chinese GDP and are alsosources of learning for local firms. They usually represent hybridsbetweenChineseelementsandaspectsoftherespectivehomecountryofthe foreign investor. Given our emphasis on Chinese ways of doingbusiness,Iwillexcludethissectorfromexplicitdiscussion.

Rationale

There are twomain societally accepted reasons for the existenceof thefirm in China today: generating family wealth, and contributing to

Chineseeconomicdevelopment. In theprivatesector,generatingfamilywealthoccupiesacentralposition.Thisneedstobeseeninthecontextofthe need to earn a living, but also of the centuries-old need to usematerial resources as a buffer against environmental uncertainty. ThisaspectofChineseculturewassuppressedinMao’sdaysbutre-emergedafterwards and became fully legitimatewithDengXiaoping’s assertionthatitwasglorioustogetrich.Mostprivateentrepreneursholdthattheirstriving for private wealth also enables them to contribute to Chineseeconomicdevelopment.In the State-owned sector, the order of priority is reversed. This is

particularlysalientforthepresently117so-calledcoreSOEs(orcentralSOEs)underthecontrolofSASAC(theState-ownedAssetsSupervisionand Administration Commission). These firms cover virtually allindustries one might consider strategic or vital. The Chinese StateprotectsandnurturesthesefirmswiththeobjectiveofdevelopingleadingChinesefirmsintheseindustries,thoughtheStatehasalsopushedthemtoreformthemselvesintoprofitableenterprises.

Identity

Chinese society, like allAsian societies (2010), is collectivist.Thekeyreferencegroupisthefamily.Concentriccircleswithadiminishingsenseof affiliation follow, extending over the extended family to the clan,friendships of various strengths, and (loosely) people from the samegeneralgeographicarea.One’scompanyisatbestaveryweaksourceofidentityforprivatesectoremployees,whilesomesenseofbelongingmayremain in the State sector despite years of market-oriented reformsinvolvingrestructurings.

Authority

Chinese society ishighlyhierarchical,more so than thoseof JapanandSouthKorea(Hofstedeetal.2010).Authorityrelationsareestablishedona range of criteria. Some, such as age, education, and sex, have their

origins inConfucian ideals of social order.Counter toConfucian ideasthat a gentleman would not handle money, wealth has in recent yearsemergedasastrongstatussymbol,withrespectgoingtothosewhomaketheirwealthconspicuous.Communistpartymembershipandofficemayestablishhierarchy,especiallyintheState-ownedsector.

Financialcapital

ThemainorientationoftheChinesefinancialsystemistoprovidefundsto theState-owned sector. State-owned enterprises (SOEs) attract up to99percentofcommercialbankloanstoChinesefirms(Tsai,2007),andthey usually receive funds at low interest rates. SOEs also havepreferentialaccesstothestockmarket.As a result, the private sector in China finds it difficult to obtain

external funding.Most capital seems to stem from savings or informalloans from family and friends. In addition, there is a large shadowbanking system providing access to short-term funds, though at highinterest rates that in spring 2011 reached 6 to 8 percent per month(Economist,The,2011).Oneofthemajoradvantagesoflocalcorporatesis that they usually succeed in circumventing the funding issues of theprivatesectorbymaintaininggoodconnectionswithlocalgovernment.

Humancapital

Theoverallqualityandavailabilityofhumancapitalintheeconomyhasconsiderable development potential (Sheldonet al., 2011). While theChineseschoolsystemproduceslocallygoodoutcomes,asdemonstratedbythestellarresultsoftheShanghairegioninthe2010PISAstudybytheOECD, the average remains weak. Technical skills in particular are inshortsupply.Thereisnostrongpublicvocationaltrainingsystem,andonthe job training is difficult for firms to sustain because of short-termaverage employment tenures, especially in the private sector. Unionsexist at the company level and are joined together in the All ChinaFederation of Trade Unions (ACFTU). While unions in the West are

nongovernmental organizations, in China they are a branch of theCommunist Party. In labor conflicts, they usually side with thecompanies.

Socialcapital

TrustinChinaispredominantlyinterpersonal(cf.chapter10).Itfollowsthesamegeneralpatternasidentity,withtrustbeingunconditionalwithinthe core family and weakening with each concentric circle. Peopleoutsidethelastconcentriccirclearedistrustedandseenascompetitorsina zero-sum game. Institutionalized trust in China is for all practicalpurposesabsent.Asaresult,peopledonottruststrangers;thisactsasabarriertodoingbusinessandtodelegatinginsidecompanies.

Ownership

Privatefirmsareusuallyownedandrunbyprivateindividualsandtheirfamilies.State-ownedfirms,bydefinition,areinthehandsoftheState.Whilepartoftheirstockmaybelistedonthestockexchangeandthusbeheldbydomesticandinternationalinvestors,theStatewillusuallyretainoperational control and the right to appoint top management. Hybridfirmsfallinbetween,oftenmixingprivateandlocalStateownershipandcontrol. Large firms that from the outside look private often haveconsiderablelevelsofgovernmentownership.

Networks

Despite China’s reputation for valuing relationships(guanxi), asdiscussed in chapter 10, non-hierarchical forms of networking amongfirms are relatively sparse. In the private sector, personal relationshipsenable so-called production networksinwhichanumberof small firmsproduce jointlybydividingup the labor among themselves.For simpleproducts such as lighters or toys, this formula canbehighly successful(ZengandWilliamson,2007).Privateentrepreneursmayalsoengagein

businessassociations,whichmayhelpthembuildinterpersonal trust.Inthe State sector, non-hierarchical ties are weak. There are numerous(hierarchical)conglomerates,andtheCommunistPartynexuspermeatesthesector.

Management

Major decisions in Chinese firms are usually made at the top of theorganization. In private firms, decision-making is in the hands of theowner-manager. InSOEs,ultimatedecisionpower remains in thehandsof the State. Delegation in the firm suffers from the absence ofinstitutionalized trust, which implies that strangers are not trusted.Promotion criteria in the private sector include skills and trust. Toppositions are usually reserved for family members. In SOEs, senioritycontinuestomatter,andtheStateappointstopmanagement.

TheState

TheChineseStateishighlyinterventionist.Atthesametime,thecentralgovernment has far less control over the country than Westernerscommonly assume. China features high levels of decentralization ofpolicy-makingtolocalgovernments,andcentralgovernmentpoliciesanddirectives have proved hard to enforce. The result is much regionalvariation in theways businesseswork and the institutions around themevolve.TheChineseStatehasfoundthesedifferencesusefulinthattheypermit institutional experimentation, which helps evolve informationaboutthefeasibledirectionofcentralgovernmentpolicy.Governmentpolicytendstopayrelativelylittleattentiontotheprivate

sector,thoughithasinrecentyearsemphasizedtheneedtoprovidebetteraccesstofinance.TheoppositeistruefortheState-ownedsector.Whileminor SOEs have beenwound up or privatized, the core SOEs alreadymentionedreceiveprotectionandpromotion in thecontextofJapanese-inspiredindustrialpolicymeasures.Inparticular,theseSOEshaveaccesstoampleandcheapfinance,areprotectedfromforeigncompetition,and

areencouragedtoexportorinvestabroad(seechapter12).Theultimateobjectiveforthesepoliciesistocreateapopulationoflarge,competitive,Chinesefirmsinsectorsdeemedstrategic.Centralgovernmentpolicyforthemostparttreatslocalcorporateslike

privatefirms.Localgovernments,ontheotherhand,mayprovidesupportand protection similar to those the central government extends to coreSOEs.

Japan

Rationale

Japanese firms exist to serve society in general and their employees inparticular (seechapter 6). Shareholders have gained acceptance asstakeholders,butfewfirmswouldconsiderthemprimary.Theperceivedneed to justify business activities to society originates in Confucianvalues introduced to Japan during theTokugawa era (1603–1868).Trading was seen as a parasitic activity without value added, andmerchants were consequently at the bottom of the social order of thetime. Their status improved once government needed their funds andbusiness experience to modernize Japan from 1868 onward. After theSecondWorld War, Japanese economic policy refocused on economicgrowth and spreading economic wealth evenly among the Japanesepeople.Universalmaleemploymentemergedas theJapanese recipe fordoingso. Inprovidingfor theiremployees,Japanesefirmsthusfulfillasocietalmandate.

Identity

LikeallAsiansocieties,Japan’siscollectivist,aschapter7makesclear.ThemainreferencegroupforJapanesemales,andinJapaneseeconomiclifemoregenerally,isthecompany(cf.chapter9).ThisisunusualintheAsiancontextinthatthisrepresentsanadoptedgroupratherthanonethe

individual is born into. The background of this pattern is that mostJapanese men still work for the same company for most of theirproductive life and tend to spendmore timewith colleagues thanwiththeir family during those years. Family life is mostly in the hands ofJapanesewomen,andaccordinglytheirmainreferencegrouptendstobethe family. In addition, school ties represent an important source ofidentity.

Authority

Japanesesocietyisfairlyhierarchical,thoughlesssothanthoseofChinaand SouthKorea (Hofstedeetal. 2010).Authority relations continue tobe structured according to Confucian principles,which became officialgovernmentpolicyduringtheTokugawaera(1603–1868)inordertohelpestablish and maintain order in society. Determinants of respect arepredominantlyage,educationalattainment,andsex.Of these,age tendsto supersede the others; a university graduate behaving inappropriatelytowardanolderpersonwouldbeconsidereduneducated,hisorherdegreenotwithstanding.

Financialcapital

Themain sourceof financial capital for Japanese firmscontinues tobebanks, meeting around 60 percent of the annual need for new funds.Markets make up for the remainder through stock and bond issues.Allocation decisions involve a combination of market criteria such ascredit worthiness, strength of the existing business relationship, andgovernmentinstructions.Theprecisemixhaschangedconsiderablyovertime, with the role of government now much diminished and that ofmarket criteria considerably enhanced. Firms usually receive loans forthelongterm.UnlikeWesternbanks,Japanesebanksoftendonotrecallloansfromfirmsintroublebutmayoffernewloanstohelpthemsurvive.

Humancapital

Skill levels in Japanaregenerally among thehighest in theworld.Theeducation system produces high attainment that scores well ininternationalcomparisonssuchas theOECD’sPISA tests, thoughsomeAsian nations such as South Korea tend to perform even better (cf.chapter8).SimilartootherAsiansystems,Japan’shasinvitedcriticismforbeingoverlyfocusedonroterehearsalandtesttakingratherthanonpracticalapplicationandcreativethinking.Firmsusually spendconsiderable timeand resourceson trainingnew

hires, usually through a rotation system that exposes them to variouspartsofthecompany.Firmscanaffordtodosobecauseemploymentislongterm,whichenablesfirmstoreapthebenefitsof their investmentsin their staff. Similarly, long-term employment enables employees todevelopskillsthatarevaluabletotheirfirms.Unions are usually company-based. Strikes are rare, and when they

occur,theytendtobeshortandsymbolic.Giventherationaleunderlyingthe firm, identification with the firm, and participation in decision-makingprocesses,thereisgenerallylittlereasonforemployeestostrike.

Socialcapital

Japan features relatively high levels of both interpersonal andinstitutionalized trust. Personal relationships are important, especiallywithin teams, organizations, and among business partners. Havinggraduated from the sameschool,or retired from the sameorganization,can greatly enhance this form of trust. However, it is relatively lessimportantthaninKoreaandespeciallyinChina.Japan attains institutionalized trust not through the legal system but

through social pressure and collective enforcement. For instance,companiesbreachingpublictrustintheirproductshavebeendrivenintobankruptcybyconsumerboycottsoftheirproducts.

Ownership

Most important Japanese firms are listed corporations.However, about52percentoftheoutstandingstockoftheaveragefirmisinthehandsoffriendlyfinancialinstitutionsandcorporations,whichtendtoholdtheseshares for the long term. Part of these shares involves cross-shareholdings, that is, companiesmutually holding each others’ shares.TheeffectofthesepatternsisthatJapanesefirmsremainrelativelywellinsulated from pressures from their owners. Other measures bluntshareholder influence even further. For instance, about a quarter ofJapanese firmsnowhavepoison-pill defenses againsthostile takeovers,andmanyfirmsholdtheirannualgeneralmeetingsconcurrently.

Networks

Japanese firms network extensively with one another. There are threemain types of Japanese firm networks: first, the business group, alsoknown as horizontalkeiretsu.Thesebring together firms fromdifferentindustries, usually about 30 to 40 of them. Prominent examples havehistoricallyincludedMitsubishi,Mitsui,andSumitomo.Recentmergersacrossgroupboundarieshaveblurredthepictureandraisethequestionofwhetherthegroupsarereconfiguringordissolving.Second, there are supplier networks, also known as verticalkeiretsu.

These tie together firms with their suppliers in long-term sourcingrelationships. Third, there are intra-industry loops, in which firmsinformally exchange information concerning their industries, frommarketinformationtotechnicaldata.Theseloopsusuallydeveloparoundindustryassociations.

Management

Japanese management is unusual inAsia in that non-routine decision-makingisconsensualandparticipatory.Majordecisionsusuallyinvolveinformal consensus building among the major stakeholders inside thefirm before being brought up for a vote at the appropriate forum.Employees are also encouraged to look for possibilities to improve the

workings of the company, and systems are put in place to enableemployeestofeedtheirproposalsintothedecision-makingprocess.Thedrawbackoftheseprocessesisthatdecision-makingcantakealongtime.Ontheotherhand,oncedecisionsarereached,implementationisusuallyquick.Promotioninvolvesastrongelementofseniority,whichisdefinedas length of service in the firm. Performance is taken into accountthroughfasterperformancepaths.Lesscapableemployeesaresidelined,secondedtosubsidiaries,orretiredearly.

TheState

The JapaneseState used to be theparadigmatic developmentalState. Itused to intervenemassively in theeconomy in thecontextof industrialpolicy aimed at accelerating the development of the economy. Thismodelhadrun itscourseby the1980s,and theOECD(2011)nowratesJapan as a relatively low-interventionist State. However, this probablyunderestimates the true extent of intervention, as much of it hashistoricallyoccurredinformally(e.g.through“administrativeguidance”)(Johnson, 1982). The thrust of government policy today is unclear, aspolitical leadership in Japan has been in short supply since theresignation of PrimeMinister Koizumi in 2006. The general directionseems to be to move toward a more social welfare-oriented regime,possiblysimilartonorthernEuropeanStates.

SouthKorea

Rationale

Korean firms pursue stakeholder value. Key stakeholders areshareholders(especiallytheso-called“ownerfamilies”),employees,andsociety as a whole(seechapter7).Underlying this configuration is theneed to balance the interests of owners, who want to maximize theirreturns, against those of the other powerful constituents in Korean

business. Employees in Korea are well-organized and proficient atattaining their goals, such as fair wages, through strikes. Society as awhole tends to be suspicious especially of large business inKorea andexertsconsiderableinfluenceontheState’shandlingofbusinessthroughpublicopinion.Asa result, businesseshavea strong incentive to try tosatisfyallthreemajorstakeholderssimultaneously.A residual and fading element in Korean rationale relates to the

development of the nation. While South Korea is now clearly anadvancedindustrializedcountrywithapercapitaGDPthatexceedsthatofmanyEuropeannations,Koreansseeacontinuedneedforgrowthanddevelopment. Part of the reason for this is that Koreans tend tobenchmark their progress against neighboring Japan, which has arelativelyhighpercapitaGDP.

Identity

The Korean sense of identity is collectivist, with family as the mainreferencegroup,followedbyconcentriccirclesofdecreasingstrengthofaffiliation along the same general lines as in China (seechapter 8).However, identification with the workplace is in many cases strongerthaninChina,thoughitdoesnotreachJapaneselevels.

Authority

KoreansocietyismorehierarchicalthanJapan’sbutlesssothanChina’s.Themainvariables affecting authority relations are age, education, andsex, which in turn derive from the Confucian value system thatconstitutedthebasisofsocietalorderduringtheChosundynasty(1392–1910). In addition, personal wealth has emerged as a status criterion,though the traditional Confucian disdain for wealth has not entirelydisappearedfromKoreansociety.

Financialcapital

TheKoreanfinancialsystemremainsfundamentallybank-based,withonaveragemore than 80 percent of the funding needs of firms beingmetthroughdirect finance. In fact, despite reforms intended to increase therole of direct finance, the importance of indirect finance has increasedsince 2000. Even the large conglomerates, the so-calledchaebol, meetonly about 40 percent of their financial needs through direct finance.Whiletheyareforbiddentoownbanks, theyusuallyincorporatealargearrayofnon-bankfinancialinstitutionssuchasinsurancesandcreditcardbusinesses that canbe tapped for funds.Theoverall effect is that largeconglomerates have captive, long-term sources of funds while smallerfirmsaremoredependentonmeetingcreditworthinesscriteria toobtainlesspatientfunds.

Humancapital

TheKorean education system counts among the best performing in theworld. In the 2009 OECD PISA tests, Korea ranked on average fourthamongmorethansixtycountries,1toppedonlybyHongKong,Singapore,andFinland.TertiaryenrollmentratesarehigherthananycountryexceptCuba.Asa result,general skills levels inSouthKoreaarehigh.On theotherhand,technicalskillscontinuetoposeachallenge.Thevocationaltraining system isweak, and on the job training suffers from the shortaverage employment tenure in most Korean firms. Longer tenures arereported forchaebol firms,whichin turnshouldenablehigher levelsofinternaltraining.Koreahaspredominantlycompanyunions,withaunionizationrateof

about 10 percent.Unlike Japanese unions,Korean unions are notoriousfor theirmilitancy. Identificationwith the firm ismuchweaker than inJapan. In addition,workers usually donot trustmanagers to treat themfairly, in part because the centralized decision-making structure ofKorean firms makes it difficult for workers to verify the claimsmanagementmakesaboutthehealthofthebusiness.

Socialcapital

Korea has high levels of interpersonal trust centered on the family.Similar to China, this trust weakens as one proceeds through theconcentric circles of identity, and there is a tendency toward zero-sumcompetition among strangers, though it is weaker than in China.InstitutionalizedtrustlevelsarehigherthanthoseinChinabutlowerthaninJapan.Socialpressureplaysaroleinenforcement.SodotheStateandthe legal system, though citizens usually do not trust them fully,especially when the interests of major businesses are concerned. Forinstance,theKoreanStatehasahighpropensitytoreleasemajorbusinessleaders convicted for crimes from prison on grounds of their supposedimportancetotheKoreaneconomy.

Ownership

LargeKoreanconglomerates—includingSamsung,Hyundai,SK,andLG— usually consist of publicly listed firms. The so-called “ownerfamilies” who started these conglomerates usually hold less than 10percent of the overall outstanding stock in their conglomerates. Theyremainincontroloftheentireconglomeratebyretainingcontrolofonekeyenterprisethatinturncontrolstherestthroughvariousmechanismssuch as pyramidal or circular shareholdings. As a result, corporategovernance is relatively weak when viewed from the perspective ofshareholdersother than theowner families,andbenefitsaccruing to theownerfamiliesareoftendisproportionatetotheirshareholdings.

Networks

Korean entrepreneurs tend to build up conglomerates of firms withactivities in diverse industries. Though these entities may appear likenetworks,theyremainunderthehierarchicalcontroloftheownerfamilyandtheirrespectiveholdingcompany.Othernetworksacrossfirmstendtobesparse.

Management

Decision-making in Korean companies is top-down and highlyhierarchical. Even in large conglomerates, much strategic decision-makinghappenswithin thechairman’soffice.Delegationoccursmostlyin the execution of tasks, though some firms such as Samsung andHyundai appear to have built up professional management cadres.Promotionsinvolveamixofrelationships,seniority,andperformance.Ingeneral,thetoppositionsinacompanyarereservedformembersoftheownerfamily.

TheState

TheKoreanStateusedtobeastrongdevelopmentalState.Itfollowedtheexample of Japan while arguably streamlining the Japanese model.Businesseswere clearly subservient to the State and the policy goal ofeconomic development, as expressed in Samsung’s corporate motto(scrapped following theAsian Financial Crisis of 1997/8) that “we dobusiness for the sake of nation building.” Firms meeting governmentexport targets—the key metric used to judge performance—wouldreceivesupport,thosefallingshortwouldbeshutdown.Though State influence has receded, it continues to be a strong,

interventionist actor in the Korean economy. Many of its effortsnowadaysseemtobefocusedontamingtheenormouseconomicmightofthechaebol.Samsungalone, for instance,accounts forabout20percentofSouthKoreanexports.Ontheonehand,thissuggestsaneedtobreakuptheconglomeratestoreducetheriskassociatedwithanyoneofthemfailing.On theotherhand,errors in theprocesseschosencouldkill thegeese that lay golden eggs for the Korean economy.As a result, Stateaction has at best retarded further economic concentration around thechaebolbuthasfailedtostoporreverseit.

Conclusions

Predictions of the future evolution of business systems are alwaysdifficult, and seemingly minor events can fundamentally changedevelopments that had previously appeared to be inexorable.With thiscaveatinmind,Iconcludethischapterwithsomegeneralthoughtsaboutlikelydevelopmentsinthethreenationsstudiedinthischapter.There is a range of uncertainties around the future shape ofChinese

business(cf.ReddingandWitt,2011).OfparticularinterestfortheshapeofthebusinesssystemisthatafteryearsoflettingprivatebusinesspushChinaforward, theChineseStatenowseemstobereassertingaroleforState-ownedandhybridbusinesses.Itispossiblethatpolicy-makersmayhaveconcludedthatpurelyprivatefirmsareunlikelytoreachthelevelsof capital and technology intensitynecessary to move the Chineseeconomyfurtherup thevaluechain.Given thepoorhistorical recordofSOEs both inChina and elsewhere, themost likelywinner of this newdevelopmentmaybethelocalcorporates.GivensufficientStatesupportpaired with private leadership, it is possible that in the long run theChinese business landscapewill come to resemble that of SouthKorea(cf.ReddingandWitt,2009).ThefutureoftheJapanesebusinesssystemislikelytolookverymuch

likeitspresent.Whiletherehavebeenconsiderablepressuresforchange,the Japanese business system features such high levels of institutionalinertiathatlargescalechangeisunlikely(Witt,2006).Theaftermathofthe 2011 Tohoku earthquake and resultant tsunami, and especially thenucleardisasteratFukushima,mayyetprovidetheimpetustoovercomethe status quo and initiate structural adjustments, including a strongerrole forwomen inbusiness (cf. chapter9).Failing that, an increasinglyassertiveChinamayeventuallypushJapanintostructuralreforms.ThemainareainneedofreformintheKoreanbusinesssystemis,as

already mentioned, high levels of industrial concentration. It seemsunlikely thatgovernmentwillbeable todomuchabout it,notonly forfear of damaging the Korean economy, but also because thechaebolownerfamilieswillputupstrongresistance.Inthelongerterm,however,reformofthechaebolwillbeunavoidable.Familybusinessesusuallydonot survive for long unless they succeed in separating ownership from

control and turnover the runningof the firm toprofessionalmanagers.Where thisdoesnotoccur,decline iscommon,usuallyaround the thirdgeneration of owners. Thechaebol will need to begin tackling thischallengewithin thenextdecade. If theysucceed, theKoreanlandscapemay begin to resemble that of European business systems, whichcombine stakeholder value with family owned but professionally runfirms.

Note1‘Country’looselyappliedheretoincludeHongKong,aSpecialAdministrativeRegionofthe

People’sRepublicofChina.

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Hofstede, G., Hofstede, G. J. and Minkov, M. (2010)Cultures andorganizations:Softwareforthemind.NewYork:McGraw-Hill.

Johnson, C. (1982)MITI and the Japanese miracle: The growth ofindustrial policy 1925– 1975. Stanford, CA: Stanford UniversityPress.

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Redding, G. (2005) ‘The thick description and comparison of societalsystemsofcapitalism’,JournalofInternationalBusinessStudies,36:123–55.

Redding, G. andWitt, M.A. (2007)The future of Chinese capitalism:Choicesandchances.Oxford:OxfordUniversityPress.

—(2009)‘China’sbusinesssystemanditsfuturetrajectory’.AsiaPacificJournalofManagement,26:381–99.

—(2011) ‘Chinesebusinesssystemsand thechallengesof transition’ inSheldon, P.,Kim,S., Li,Y. andWarner,M. (eds) China’s changing

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workplace:Dynamism,diversityanddisparity.LondonandNewYork,NY:Routledge.

Sheldon, P., Kim, S., Li, Y. and Warner, M. (eds) (2011) China’schangingworkplace:Dynamism,diversityanddisparity.London andNewYork,NY:Routledge.

Tsai, K. S. (2007)Capitalismwithout democracy:Theprivate sector incontemporaryChina.Ithaca,NY:CornellUniversityPress.

Whitley, R. (1992)Business systems in East Asia: Firms, markets andsocieties.London:SagePublications.

—(1999)Divergent capitalisms: The social structuring and change ofbusinesssystems.Oxford:OxfordUniversityPress.

Witt,M.A.(2006)ChangingJapanesecapitalism:Societalcoordinationandinstitutionaladjustment.Cambridge:CambridgeUniversityPress.

Witt,M.A.andRedding,G.(eds)(2013)TheOxfordHandbookofAsianBusinessSystems.Oxford:OxfordUniversityPress.

Zeng, M. and Williamson, P. J. (2007)Dragons at your door: HowChinesecostinnovationisdisruptingglobalcompetition.Boston,MA:HarvardBusinessSchoolPress.

12SMEsinselectedeconomiesinEastAsiaLiXueCunningham

Introduction

Morethan1.5billionpeople,about38percentofthepopulationofAsiaor 22 per cent of theworld’s population, live in geographic EastAsia.Theregionisoneoftheworld’smostdenselyinhabitedplaces,with133inhabitantspersquarekm(340persquaremile),beingaboutthreetimestheworldaverageof45persquarekm(120persquaremile).EastAsiaisthe home of the People’s Republic of China (hereafter referred to asChina), the second largest economy in theworld, and three of the fourformerly-named ‘LittleTigers’, namely,HongKongSAR,SouthKoreaandTaiwan(seechapter2).Withasustainedhighsingle-todouble-digiteconomic growth and development in recent decades (CIA WorldFactbook, 2010), the region is increasingly playing the role of a globalgrowth-pole and is fast emerging as a manufacturing and informationtechnologyhuboftheworldeconomy.Oneof thekeycharacteristicsof theEastAsia region is thepresence

and importance of a large small and medium-sized enterprises (SME)sectorwhichmakesup themajorityofenterprises inallof the region’seconomies. Although it is important to recognise that the challengesSMEs face, and thecorrespondingpolicies aimedat strengthening theircompetitiveperformance,mayvaryduetoagreatdiversityofeconomiesanddevelopmentexperiencesamongthecountriesintheregion(Chiaetal., 2007), the broad challenges faced byEastAsianSMEs are similar.Influences suchasglobalisation, technological innovation,demographicand social change, the level of technologydeployed, innovative ability,financial support and entrepreneurship, can be found in the businessenvironment, impacting as both external and internal factors.Consequently, the way SMEs develop in a changing globalised

environmenthasbecomeakeyissue.This chapter will provide an overview of SMEs in East Asia, by

looking at their historical development and examining their currenteconomicsituation,withspecialattentiontofourmaineconomiesintheregion:China,HongKong,SouthKoreaandTaiwan.TheimportanceofSMEs in their nations’ economies is demonstrated. The difficulties,challengesandopportunitiesforSMEsintheneweconomicenvironmentafter the 2008 global financial crisis are discussed. The chapter showsthatinstitutionalsupportformsabackdroptothegrowthinthenumberofSMEs in EastAsia. It also asserts that a strong, dynamic and efficientSMEsectorwillensurethenation’ssustainableeconomicdevelopmentinachangingglobalisedworld.

Definitions

Table12.1 illustrates that there isnogeneral, legallybindingdefinitionforSMEsglobally.SMEshavebeendefinedagainstvariouscriteria,suchas different sectors, the number of workers employed, the volume ofoutputorsales,thevalueofassetsemployedandtheuseofenergy(ILOreport, 2003). For example, the OECD (2001) defines establishmentswithupto19employeesas‘verysmall’;withupto99as‘small’;from100 to 499 as ‘medium’ andwith over 500 as ‘large’. However,manyestablishmentsinsomedevelopingcountrieswith100to499employees,whichaccordingtotheOECDdefinitionwouldbeconsidered‘medium’,areregardedasrelativelylargefirms(ILOreport,2003).

Table12.1SomedifferingdefinitionsofSMEsinmostAsianeconomies

Source:CunninghamandRowley2008

Table12.2NationalstandardsonSMEsinChina

Source:StateEconomicandTradeCommission,China2003

Statisticsbenchmark:Thepayrollistheyear-endemploymentnumber;therevenueofindustrialenterprisesistheannualsalesrevenue;therevenueofconstructionenterprisesistheyear-endcompletedrevenue;therevenueofwholesaleandretailenterprisesistheannualsales;andtherevenueandtotalassetsofenterprisesinthetransportationandpostssectorandhotelsandrestaurantsareoperatingrevenueandcombinedassetsrespectively.

In addition, the definitions of an SME differ from one country toanother, as they can be based on a nation’s economic situation. Forexample, theEuropeanUnion defines a SMEas having fewer than 500employeeswhereasSouthKorea classifies aSMEashaving fewer than1,000 employees.Somecountries donot evenhave fixeddefinitionsofSMEs (for example, Vietnam and the UK) (www.ciionline.org, 2011).Further,within a country or region, definitions ofSMEare different atdifferent stages of economic development. For example, in China thedefinitions and criteria of SMEs have been adjusted four times since1949.On19February2003,anewSmallandMedium-SizedEnterprisesstandardsdocumentwaspublishedtorelevantgovernmentagencieswiththeapprovaloftheStateCouncilinChina(seeTable12.2).Thestandardsapply to the government statistics for work and replace the oldclassification standards, which came into effect in 1988. They alsoreplacethesupplementarystandardspublishedin1992.

SMEsinEastAsia

http://www.ciionline.org

EventhoughthedefinitionsofSMEsarevaried,theimportanceofSMEsin contemporary East Asian economies has been demonstrated. It isevident that East Asian SMEs are the largest source of domesticemployment across all economic sectors, in both rural and urban areas(Ganapathi and Joshi, 2008). SMEs are very active in some spheres,engaging in multiple product lines, small-series production and theserviceindustry(ParkandKim,2011,HallandHarvie,2003,WangandTsai, 2010). The SME sector is also seen as a major and sustainablegeneratorofemploymentandincomeforcitizensworkingoutsideoftheState sector (Cunningham, 2011). SME development holds the addedallure of being a key component of wider economic development andpovertyalleviation, especially indevelopingand transitional economies(UNESCAP, 2009). Moreover, a vibrant SME sector helps promotecompetitionandaculture

Table12.3TheroleofSMEsinselectedEastAsianeconomies

ofentrepreneurship,whicharebothconducivetoeconomicgrowth(GriesandNaude,2010).Table 12.3 describes the share of the number of enterprises,

employment, exports and the contribution to gross domestic product(GDP) by SMEs for the four East Asian economies. On one hand, itdemonstrates that SMEs have contributed significantly to the overall

figure. On average, they represent some 98.7 per cent of all business,providealmost64per centof total employment andcontributeover50per cent of national exports and 47 per cent of industrial outputrespectively. On the other hand, statistics also illustrate that SMEs’relative roles and contributions to their national economy differ. Forinstance, it shows that Taiwanese SMEs are focusedmore on domesticdemand while exporting is still a major business activity of SMEs inothereconomies.Consequently,theSMEsectorinTaiwanplaysacrucialroleasalocaljobproviderandisthusastabilisingforceinsocietyratherthanamajordriverforthenation’sexportgrowth.Whilesimilaritiesineconomic, historical, institutional and social influences on thedevelopmentofSMEsareevidentinChina,HongKong,SouthKoreaandTaiwan, underlying conditions and trends are different in each of thesefoureconomies(seechapters5,6and7).

China

Chinaisacommunistcountrywhichadoptedanopendoorpolicyin1979andhastransformedfromaplannedstatetoasocialistmarketeconomy.Nowadays,Chinaplaysamajorglobalrole.Astheworld’ssecondlargesteconomy and the largest exporter, international trade is the largestcontributor to the nation’s GDP, accounting for 44.2 per cent of thenationaltotalin2009(SSB,2010).The early development of SMEs in China was promoted partly to

create employment for recently redundant rural labour and partly tolessen the impact of mass lay-offs from both state-owned enterprises(SOEs) and urban collectively owned enterprises (COEs).Over the lastthirty years, the role of SMEs in the Chinese economy has graduallytransformedfrom‘thefringes’to‘asupplement’andthen‘animportantcomponent’ofthismarket-basedsocialisteconomy(Cunningham,2011).SMEshavebecometheenginesofChina’srapideconomicgrowth.Everyyear they contribute around 59 per cent of GDP, 50 per cent of taxrevenue, 68 per cent of foreign trade volume and 75 per cent of urban

employment.They are also responsible for 65 per cent of inventionpatents and 80 per cent of new products in China. Moreover, ChineseSMEs not only maximise the efficiency of the nation’s resourceallocation anddistributionbymobilising andutilising local human andmaterial resources,but theyalsostimulate thegrowthofcertainsectors(Cunningham,2010a).Whilethereisaradicalreshapingoftheeconomyin terms of enterprise ownership (seechapter 5), the mindset of theChinese government is also changing. It has largely de-emphasisedownershipandextendedsupporttoallsortsoffirms,especiallySMEs.A2003 law on SME promotion affirmed SMEs’ role in the economy(XinhuaNewsAgency, 2003).After the global financial crisis in 2008,andinthefaceofseveresurvivalpredicaments,especiallytheshortageofelectricity,labourandcapital,thefirstnation-levelspecialplanforSMEswas issuedby theChinesegovernment on22September 2011, so as tobuild the public service platformnetwork and improveSMEs’ capacity(ChinaDaily,2011).

HongKong

Hong Kong has been a special administrative region (SAR) of Chinasince1997.Asoneoftheworld’smostopentradeeconomieswithaveryhigheconomicdevelopmentlevel,theeconomyofHongKongismadeupmostlyofSMEs(seechapter6).Attheendof2009,forexample,98.9percent of 12,204 manufacturing business units employed fewer than 100persons,while98.3per cent of the273,350 servicebusinessunitswereSMEs (employing fewer than 50 persons)(www.gov.hk/en/about/abouthk/Factsheets,2011).DuetoHongKong’sgeo-strategicposition,achannelandanentrepôt

fortradeingoodsandservices,HongKong’sSMEsdifferfromtheirEastAsian counterparts as they are highly dependent on international tradeandfinance(Bjerke,2000).In2010,thevalueofthegoodsandservicestrade,includingthesizeableshareofre-exports,wasaboutfourtimesthesizeofHongKong’sGDP.HongKong’sSMEsarealsolargelyinvolved

http://www.gov.hk/en/about/abouthk/Factsheets

in the service industry.As the twelfth largest services exporter in theworld,HongKong’sservicesectoraccountedformorethan90percentofthe territory’s GDP and constituted a share of 88 per cent of totalemploymentin2009(CIAWorldFactbook,2010).Furthermore,exceptintheverybroadestsensetheHongKonggovernment’sroleistoprovideasuitable and stable framework for commerce and industry to functionefficientlyandeffectivelywithminimuminterference(Siuetal.,2006).Economic planning is not practised by the government. Hence, theeconomic policies of free enterprise and free trade stimulated the hugegrowth of SMEs, but also exposed them to the global economicslowdown.

Taiwan

Taiwan’s SMEs have been recognised as the key driving force of thecountry’s economic development over the past half century (Tai andHuang,2006).IncontrasttoChinaandSouthKorea,indeed,Taiwanhastypically been viewed as adiverse ‘small firm’ economy (for example,Hamilton, 1996, Bjerke, 2000, Hall and Harvie, 2003,Wang and Tsai,2010).Asfamily-basedorfamily-likerelationshipsdominateandsupportsocialinteractioninTaiwan,themajorityofTaiwaneseSMEsarefamilybusinesses(GabrenyaandHwang,1996).TheemergenceofSMEsinTaiwaniscloselyassociatedwithdomestic

conditions, global economic developments and the government’seconomic,socialandeducationalpolicies(Siuetal.,2006,Wang,2007).For instance, the earliest Taiwanese SMEs were encouraged by theNationalistgovernmentasameanstoovercometheshortagesoffoodandotheressentialdomesticcommodities.Theexpansionofexport-orientedSMEs in labour-intensive industries in the 1950s was the result of aneffort by the Taiwanese government to use limited state resources tospeed up economic growth (seechapter6).From the1970s to themid-1980s,Taiwan’sexportpromotionpolicyanditsopeneconomyhavelaidasolidfoundationforthefurtherdevelopmentofTaiwaneseSMEs(Ahn

2001).As the government relaxed its grip on the New Taiwan dollar,followed by increasing labour costs and growing environmentalawareness,TaiwanSMEshavegonethroughindustrialrestructuringandbecomemore service-oriented in thepast two to threedecades (SMEA,2011). Some SMEs moved their operations to mainland China andSoutheastAsiancountries insearchofcheaper labourandnewbusinessopportunities, while others were forced to become more innovative,upgrade their operations and partner with companies from developedeconomies to cope with the increasingly adverse conditions. Withcontinuedgovernmentsupport,mosteconomistsbelieve thatSMEswillmaintaintheirpositionasthemainstayofTaiwan’seconomyforyearstocome(WangandTsai,2010).

SouthKorea

SouthKoreapresentsanothervariationincomparisonwiththeotherthreeeconomies. A dual structure, which combines a small number ofsuccessful large enterprise groups with the marginalisation of a largenumberofSMEs, forms thecountry’s industrialdevelopment (Hall andHarvie, 2003,Park andKim,2011). Itwasnotuntil the late1990s thatpositive measures were implemented to encourage SME promotion inSouth Korea (Gregoryet al., 2002). The increasing focus on thepromotion of SMEs has been encouraged on the basis that they offergreater economic benefits than large firms. In 2010, for example, thetotalamountofproductionandaddedvalue inKoreanSMEsaccountedfor 46.4 per cent and 49.2 per cent of the national total outputrespectively(SMBA,2010).Therefore,SouthKoreanSMEsarenotonlyamajorplayerwithregardtothetotalnumberofcompaniesandoverallemployment (seechapter8),buttheyalsoplayacorepartinproductionand bring added value that contributes to the economic growth (Yang,2009).Althoughthegovernmentdevelopmentstrategyhasbeenchangedfrom

a‘Chaebol-ledeconomy’ toone thatpromotes the jointdevelopmentof

SMEs, following the 1997 Asian financial crisis and the 2008 globalfinancialcrisis,thepoliticalbattlegroundcentresonthefactthatlargelydomesticSMEsarestillfarweaker(TheFinancialTimes,2010).Alackof competitiveness of Korean SMEswas criticised by economists as akey factor behind high youth unemployment and the shrinking servicessector(WangandTsai,2010).Moreover,acentre-peripheryrelationshiphasgraduallyformedbetweenKoreanSMEsandbigbusinessinthelong-termexport-based industrialisation strategy (FinancialNews, 2011).Asvertically integrated organisations, many Korean SMEs have becomesubcontracting companies for the large conglomerates (Kong, 2000).With vertical rather than horizontal relationships between theconglomeratesandtheSMEs,itisarguedthatacontract-basedunilateralrelationship restrains the expansion of SMEs’ business activities andresults in a high dependency of SMEs on the conglomerates (Park andKim,2011).Table 12.4 summarises the similarities and differences among the

selected East Asian economies, in relation to the SME sector inparticular. While most East Asian economies are export-oriented, theSME sector, which fulfils an important economic role in virtually alleconomies,hasbeenthemostvitalcontributorintheexportingbusiness.InthecaseofTaiwanandKoreanSMEs,eventhoughtheydonotexport,their products feed into theproductionof goods that are exported. It isestimated that, for instance, SMEs’ export contribution ratio in SouthKoreaincreasesupto71.5percent,ifpartsandcomponentssuppliedforthe exports of large sized firms are added (Park and Kim, 2011).Moreover, it is clear that SMEs in EastAsia are at different stages ofevolutionintheirrespectiveeconomies.Asaresult,thevariationsinthedegreeofthestate’sinterventionintheeconomy,thesupportprovidedbythe external business environment and the social roots of businessorganisation determine different paths and strategies in SMEdevelopmentacrosstheeconomiesintheregion.

Table12.4Comparisonsamongselectedeconomies,EastAsia

SMEsinachangingglobalisedworld

Although constraints and policies vary with each economy, there aresimilarities in the challenges faced by SMEs across the East Asiancountries.Among them all, structural changes due to both internal andexternal pressures present the most serious challenge to SMEs in theregion.

Dramaticdeclineinmarketdemand

It is argued that, on average, SMEs are more oriented towards thedomesticmarketand thereforeare less likely tobe theworst-hitby theglobal economic slowdown in comparison to large firms in the region(ADB, 2009). However, while a strong incorporation into internationaltradeandfinancehasbeenthemostimportantcontributorinEastAsiancountries’GDPgrowth,SMEsaccountformostbusinessesintheregion

(seeTable12.2).StatisticsalsodemonstratethatSMEs,especiallythosetowardsthemedium-sizedendofthescale,playanimportantroleintheprocessofeachnation’seconomicdevelopment inEastAsia,especiallyfortheexportingbusiness(seeTable12.3).Further,anumberofstudiesconfirm that SMEs are highly sensitive to changing tendencies andenvironments (for example, Gray and Mabey, 2005, Siuet al., 2006,Cunningham,2010b).Therefore,thegreatdependencyonexportsinmostEastAsianeconomiesintensifiesahighdegreeofvulnerabilityofSMEstothedownturnoftheworldeconomy.WhileitiswelldocumentedthatSMEsfaceproblemssuchasdifficult

access to credit andpoor technological andmanagerial capabilities, the2008 global financial crisis has indeed exacerbated these problems.Unlike large firms, export-orientedSMEs have little flexibility to copewithplummetingdemand,cancelledorders,scarcefinancinganddelayedpayments (Economist Intelligence Unit, 2010). Data from the NationalDevelopmentandReformCommission (NDRC)showed that in the firsthalf of 2008 67,000 Chinese SMEs collapsed, each with sales incomeexceeding 5 millionYuan, laying-off more than 20 million employees(APEC, 2009). Industry officials attributed Chinese SME difficultiesmainly to the growing costs of production (materials and labour), thedecliningneedsofoverseasmarketsandthefastappreciationoftheRMB(Renminbi)(XinhuaNewsAgency,31July2011).WhileHSBC’ssurveyresults reflect Korean SMEs’ pessimistic view of the nation’s futureeconomy (SMEWORLD,2008), the studyconductedby theMinistryofEconomicAffairsinTaiwanfoundthatapproximately55percentoftheirSME respondents were greatly affected by the crisis (Chung, 2010).BusinessinHongKong,mostlySMEs,hadalsobegunshrinkingandtheprofitmarginhadnarrowed inmanysectorssince2008.TheFederationofHongKongIndustries(2009)reportedthatin2009nearly90percentofmanufacturershad lessorders thanbefore,withanaveragereductionof36percent inordervolumeand30percent inprofitcomparedwiththepreviousyear.A steep fall inGDPgrowthamong theeconomies intheregion,duetothecontractionininternationaltradeinthe2008globalfinancial crisis (Figure12.1),means that SMEs inEastAsia have been

severely affected by the downturn in the international economy (seechapter2).

Figure12.1GDPgrowth(1999–2010)

Source:CIAWorldFactbook2010(CIA,2010)

Various approaches and policies have been actively taken bygovernments to rectify and foster SMEs in the region (EconomistIntelligenceUnit, 2010). In order to overcome the over-dependency onexports,forinstance,ChineseSMEshavestartedtomakeastrategicshiftto focus on the domestic market rather than Western consumers(EconomistIntelligenceUnit2010).SMEsinmoreadvancedeconomies,such asTaiwan andSouthKorea, have been upgrading themselves intohigh-value-added enterprises to achieve high growth (Park and Kim,2011,TaiandHuang,2006,WangandTsai,2010).Further,intra-regionaltradeamongEastAsianeconomieshasrisenconsiderablyinrecentyears,

notedbytheAsianDevelopmentBank(ADB,2009).WhileSMEscontinuetodemonstratemoreflexibilitythanlargefirms

intermsofmarketentryandexit(SMEA,2011),however,somescholarshave pointed out that the fierce competition in the Chinese domesticmarketandafragmentedinternalmarketwithhugeregionaldifferencesinconsumertastesanddistributionchannelshavecreatedgreaterbarriersfor SMEs to overcome. In addition, other economists argue that thecurrentlongsupplychainacrossnationalbordersviaintra-regionaltradedoesnot insulateEastAsian economies from thedemand cycle outsidethe region (Economist Intelligence Unit, 2010). Although the gradualupturn in the economybegan in the second half of 2009 (Figure 12.1),with the continued danger of an asset bubble forming and a renewedeconomicdownturn, due to thedebt crisis in several consumernations,uncertainties will remain amid increasingly complicated domestic andoverseas conditions. While restructuring industrial competitiveness byshifting thedriverof the recovery fromanexport engine towardsmoreregional-anddomestic-focusedmarketdemands,SMEs,themajorforceofalleconomiesinEastAsia,arechallengedbytherapidpaceofchangeintheglobalbusinessenvironment.

Moreintensecompetitionforhumantalent

While a number of studies have addressed the significance of a well-motivated, highly skilled workforce as being a key to the success ofsmallerfirms(forexample,Storey,2004,KoteyandSlade,2005,Selsetal., 2006), finding and retaining skilled staff has been a major andgrowingproblemforSMEsacrosstheworld(forexample,HornsbyandKuratko,2003,GrayandMabey,2005,Cunningham,2010b).Inresponseto the 2008 global crisis, moreover, SMEs in East Asia have beenencouragedtotransformthemselvesfromlabour-intensivemanufacturingto innovation-oriented operations (for example, Hall and Harvie, 2003,Park and Kim, 2011, UNESCAP, 2009, Wang, 2007, Wang and Tsai,2010).Asknowledge-basedgrowthdepends largelyon thequantity and

qualityofitshumanresources(SMEA,2011),humantalenthasbecomethe main factor affecting SMEs’ competitiveness. However, adeterioratinglabourmarket,alongwithrisingunemploymentratesandarapidly ageing population, has intensified the competition for humantalent,andtheshortagesofhumantalentwhichhavebeenaffectingSMEshavebeenexacerbated(cf.chapter13).Figures 12.2 and12.3 exemplify the essential social-demographic

changes faced by the East Asian economies. It is clear that anincreasingly ageing population has become a common phenomenonacrossallfoureconomies.Forinstance,thenumberofpeopleover65inTaiwan accounted for 10.9 per cent of the island’s total population in2011,while thepopulationofelderlypersonsagedabove65willbe14percentofthetotalpopulationinHongKong,asestimatedbyTheHongKong Council of Social Service (2011). In the case of China, lifeexpectancyhas improvedfrom48years in1960to74.51by2010(withwomenin2010havingalifeexpectancyof76.77years),whiletheUnder-FiveMortalityRatehas

Figure12.2Populationgrowthrate(2000–2011)


Figure12.3Lifeexpectancyatbirth(2000–2011)


beenreducedfrom209per1,000livebirthsin1960to21by2008(SSB,2010).Whilstpopulationageingopensupopportunitiesforeconomiestoinvest in human capital formation thatmay stimulate economic growthand mitigate the possible negative economic effects of an olderpopulation,italsoresultsinfiscalproblemstothegovernmentaswellasthepotentialofashortageinthelabourmarket(Banisteretal.,2010).Inthemeantime,theunemploymentrateclimbedsharplyin2009inall

economies (Figure 12.4). In China, the rise of official urbanunemploymentto4.3percentin2009broughtittoitshighestlevelinthelastfiveyears.Joblessurbanitesjumpedto8.86millionbytheendofthefourthquarterof2008,upmorethanhalfamillionfromthethirdquarter

of2008(SSB,2010).Officially,inthethirdquarterof2008morethan10millionmigrantworkers lost their jobs,while 670,000 factories closed.AlthoughHongKong and Taiwan’s labourmarkets assure intersectoralshifts of employment as they are better characterised as integrated andwell functioning rather than segmentedand inefficient (Ahn,2001), therise in unemployment rates in Hong Kong and Taiwan has been morepronouncedincomparisontotheonesofChinaandSouthKorea(Figure12.4).Forinstance,theunemploymentrateinTaiwanhitarecordhighof5.8 per cent in May 2009 after almost a year of consecutive monthlyrises,whileforthethree-monthperiodendingFebruary2009HongKongregistered its unemployment rate as 5 per cent,whichwas 1.7 per centhigher thanayearearlier(CIA,2010).Hence,anageingpopulationandhighunemploymentrateshaveunderminedthelabourmarket.

Figure12.4Unemploymentrates(2005–2010)


Consequently, SMEs are facing more intense competition for humantalent while rationalising their operations to enhance the efficiency ofresourceutilisationandstrengthentheoverallstructureoftheirbusinessinthecomingyears.Overall, the above-mentioned problems are mutually shared and

interrelated.Theyaddto thedifficultiesofandincrease thepressureonSMEs. Facing the ever-changing external business environment and adeclining internal labour market, how to gain their competitivenessbecomesakeychallengefacedbynotonlySMEsthemselvesbutalsotheeconomiestheyoperatein.

Conclusions

ThischapterexaminedtheissuesandchallengestoEastAsianSMEsinachanging globalisedworld.Whilst globalisation brings opportunities toSMEsinEastAsiaintermsofhigherefficiencyandadvancedpractices,it poses threats to their development. Yet, the impact of the renewedglobalbusinessenvironmentdidnotapplyequallytoalleconomies.In order to enhance SMEs’ competitiveness in the subsequent credit

crunch and global recession, it is apparent that not only industrialstructures but also the labour market and management systems whichSMEsoperateinneedtobereshapedandtransformed.VerticalalliancesbetweenbigbusinessesandSMEswithinandbeyondthenationalbordershouldbepromotedsoastoensurearapidengagementofSMEsinglobalproduction and trading. Not only intra-trade but mutual learning fromeach experience in the region should also be fostered. In so doing,atransitionary and evolutionary change in SMEs across East Asianeconomies should occur, and simultaneously distinctive managementsystems, institutional structures, and businessmodelsmay emerge (seechapter11).The examination of SMEs in East Asia also provides a useful

theoreticaldeparturepointfromwhichtoanalysethechangingdynamicsofmanagementsystemsinaglobalisedenvironment.AlthoughsomeEastAsianSMEsareoperatinginternationally,itcantakealongtimebeforethe impacts of the change in the global business environment becomeinternalised and stabilised by businesses. Thus, more empirical studiesare needed so as to understand the complex relationship between thechangingbusinessenvironmentandtheimpactsonSMEswithrespecttoeconomic,socialandculturalfactors.Inaddition,futureresearchfromalong-termperspectiveonthechangingimpactsonSMEs’developmentintheregionisencouraged.

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13HRMstrategies,informalityandre-regulationinEastAsianemploymentrelationsSaroshKuruvillaandSun-wookChung

Introduction

Although employment relations (defined as labour relations and humanresourcesmanagement (HRM)) institutionsandpracticesgenerally tendtobestableoverlongperiodsoftime,thatcannotbesaidtobethecaseinthe three largest economies of East Asia, i.e. China, Japan and SouthKorea (hereafterKorea), during the last two decades (seechapters 5, 7a n d8). In this contribution, we briefly review the most significantdevelopment in EastAsian employment relations, i.e. the growth of avariety of non-standard employment arrangements which we subsumeundertheterm‘informality’inallthreecountries.Weseethisgrowthassymptomaticofthe‘externalisation’ofemploymentrelationsbeyondtheenterprise, a development that imposesmajor challenges for traditionaltradeunionismandforemploymentpolicy.Wearguethattheeffortsofgovernmentsaimedat‘re-regulating’employmentrelationstocurbsuch‘informalisation’areevidenceofanemerging‘labourprotectionlogic’inthesecountries,althoughweremainscepticalabout theeffectivenessofattemptsatre-regulation.Our use of the terminformal is broad and inclusive.Weconceiveof

informalworkasworkthatisnotpermanent,notalwaysregulatedbyanemploymentcontract,notalwaysregulatedbycurrentlawandnotalwayswith benefits. Thus, temporary and part-time workers (many of whomreceivepartialbenefits)are includedwithin thescopeofourdefinition.The use of directly engaged contract workers is also covered by ourdefinition.Also included is ‘agency work’ or ‘despatched labour’, thetriangular employment relationship where workers are employednominally by a labourmarket intermediary agency, butwork at a third

location that pays the agency a fee for using the worker. The primaryemployer in this case remains the agency, but the liability of theemployerattheplaceofworkis,inmanycountries,unclear.

Contextualisingnon-standardemploymentinEastAsia

The last two decades have witnessed dramatic changes in employmentrelations systems1 in all three countries. Perhaps the greatestcommonality has been themovement towards a ‘logic of competition’(Frenkel and Kuruvilla, 2002) thatunderlies employment relations, amovement that privileges employers’ interests of ‘employmentflexibility’overworker’sinterestsofemployment‘stability’.Duringthelasttwodecadesthismovementhasbeencharacterisedbytheadoptionofflexibility oriented HRM strategies that have emphasised the use ofcontingent labour in response to the economic pressures of heightenedglobal competition. The strategies of firms were encouraged andfacilitated by institutional changes that permitted the use of suchstrategies.We focus on the changes in the institutional context in eachcountrybelow.InJapan, theeconomic recessionbeginning in theearly1990s forced

the government to ‘deregulate’ labour laws in ways that helped firms‘adjust’ to decliningmarkets and profits, resulting in challenges to thetraditionalJapaneseemploymentrelationssystem(seechapter7).Akeyderegulationdevelopmentwas the1999amendment to the lawallowingcontractedworkers (commonly referred to in the Japanese literature asagencyworkersor‘despatchworkers’)tobeemployedinmanyindustriesexcept five areas (including manufacturing and construction). In 2004,theuseofsuchworkerswaspermittedinmanufacturingaswell,therebyallowing more manufacturing firms to make use of this flexible workarrangement.In2007,thelawwhichhadonlyallowedsuchworkerstobeemployedontemporaryone-yearcontractsinthemanufacturingindustrywas further modified to allow them to be employed on three-yearcontracts. As was expected, there was a major increase in the use of

temporary, casual and agency workers as a result of these changes inJapanasthesechangeslegitimisedthemovementawayfromtheconceptof ‘lifetime employment (LTE)’ that was a central pillar of Japaneseemploymentrelations.Ono(2010)documentsthedecreaseinLTEfromahighofover30percenttolessthan20percenttoday.These changes occurred in conjunction with an increase in

unemployment, and a continuing decline in ‘countervailing protectiveinstitutions’ such as labour unions and collective bargaining (see Table13.1).The relative importanceof the traditional ‘Shunto’ (SpringWageRound) mechanism in national wage bargaining has declined, with thefocus ofwage bargaining shifting towards the enterprise level (Suzuki,2010).Increasingdifferencesintheprofitabilityofenterprises,reflectingincreased global competition, have been amajor driver of this change.TheinfluenceofthenationalunionfederationRENGOhasalsodeclinedduring the recession, as enterprise unions have been the locus of‘adjustment’bargaining(Yoon,2009).TheinstitutionalchangesinKoreatellasimilarstory,althoughthekey

impetus was the Asian financial crisis of 1997. Although a tripartitecommission was formed to deal with the crisis, a key outcome of thetripartiteagreement(oneofthetwounionfederationsdidnotsupportthisagreement) was the legitimisation of HRM strategies emphasisingflexibility (Shin, 2010).As a result, most firms which hadmaintainedJapanese-style long-term employment have abandoned lifelongemploymentandgenerousbenefitsandhaveincreasinglytakenonHRMstrategies promoting efficiency and flexibility, specifically through theuse of temporary and casual workers (Kim and Kim, 2003, Jung andCheon,2006).Thisprocesswasacceleratedbylegislativechangeswhichjustifiedlay-offsandopened

Table13.1UnemploymentanduniondensityinJapan

theway to diverse short-term, indirect employment practices including‘despatch labour’ under theKim (1998–2003) and Roh administrations(2003–8) (Lee 2011). The pro-business administration of the currentPresidentLee(aformerCEOoftheHyundaigroup)makesitclearthatitslabour agenda is job creation through labour flexibility.As such, a keyagenda item in the National Employment Strategy (NES), issued inOctober 2011, was to expand the occupations and areas in which‘despatch labour’ could be used. Furthermore, the Lee administrationweakened unionism by enacting long-standing proposals in 2011 toprohibit employers from paying full-time union officials and theintroduction of single bargaining agent principles. Finally, thegovernment, public sectors (e.g. schools and post offices) and state-ownedenterprises(SOEs)haveexpandedtheiruseofnon-standardworkarrangements,aspartoftheirrestructuringeffortsunderthecurrentLeeadministration.InKoreaaswell(asTable13.2indicates),thesechangesalsocoincided

with an increase in unemployment and a general weakening of tradeunion power as more Korean firms relocated production to China (seechapter 8). Korean unions did little to organise the largely increasinginformal and ‘non-standard’ workforce, and the decline of large firmssignificantly affected union density. Importantly, unionism has always

beenalargefirmphenomenoninKorea,althoughmorethan80percentof Koreans are employed in small firms with less than 50 employees(unionism in small firms represents only 3.3 per cent of total unionmembership).Incontrast,largefirmswithover1,000employeesaccountfor62.5percentofunionmembershipinKorea.TheTripartitecommission,importantduringtheAsianfinancialcrisis,

hasbeengraduallydeclininginimportance.TheKoreanConfederationofTradeUnions (KCTU), themoremilitant labour federation,was almostnever on board with the commission’s activities, and gradually thecommitmentofbothemployersandthecurrentLeeadministrationhaverendered it toothless. In some industries, enterprise labour unions havenowbegun to form industry-widebargainingorganisations (Lee, 2011),although here too (with exceptions in the banking and hospital sector),their effectiveness has been limited in view of both employer andgovernment opposition.Thus, institutional developments inKorea havebeen broadly similar to those in Japan, resulting in creating anenvironment that has encouraged firms to adopt non-standardarrangements, amidst a decline in countervailing forces such as unionsandthetripartitecommission.Unlike Japan and Korea, China has seen a huge expansion in its

economyduringthelasttwodecades(seechapter5).IntheChinesecase,the institutional transformation has been the break away from the rigidfeaturesofthe‘iron-rice-bowl’( tiefanwan)system.AsKuruvillaetal.(2011)suggest,

intheearlystagesofreform,theprocessof“denationalisation”,i.e.thewithdrawalofthestateinthemanagementofstate-ownedenterprisesandtheconsequentincreaseinmanagerialautonomy,theincreasingdiversityofownership(theadventofprivateandforeignownership),andthenumerousjointventuresthatarea“recombinationofownership”spawnedincreasing

Table13.2UnemploymentanduniondensityinKorea

variationinemploymentpractices,andincreasinginsecurityofemployment,particularlyasstateenterprisessoughtHRMstrategiesthatincreasedlabourflexibilitytobemorecompetitive.

(Gallagher2004:20)

Regional and local government responses to the numerical flexibilitystrategies pursued by employers were quite varied. Some localgovernments, to attract foreign investment, emphasised firm autonomyand labour flexibility at the expense of workers’ rights, while others,facingpoliticalandsocialpressures,attemptedtoprotectemploymentbypreventing SOE firms from laying off workers. Thus, the initialmovementtowardsinformalisationwasrelativelyuneven.Asmanyhavesuggested, many foreign invested enterprises, whose competitiveadvantage stemmed from low costs and labour-intensive production,madeuseofthegrowingpoolofmigrantlabourwillingtoworkwithoutformalcontracts,whileSOEstovaryingdegreesbegantolayoffworkersas part of their restructuring efforts. SOE lay-offs and increasedemploymentinsecurityforSOEworkersbeganinearnestin1997.Bytheend of the re-structuring period, over 30million SOEworkers had losttheirjobs(Kuruvillaetal.,2011).The second phase commenced with the 1995 Labour Law, seen by

manyasadecisivestepbytheChinesestateto‘smashtheironricebowl’in order to accelerate the restructuring process. This reform, whichpermitted short-term contracts, was seen as a solution to two differentproblems.On the onehand, formal labour-contractswould improve the

efficiencyofstatefirmsbyendingthepracticeoflifetimeemployment.Second,thelegalisationoflabourrelationsthroughawrittenemploymentcontractwouldreducethepotentialforlabourexploitation,particularlyinthe non-state sectors by enshrining ‘certain rights and responsibilities’.As many have noted, the formalisation of the labour-contract systemhelped facilitate and legitimise the massive lay-offs that began in theSOEsectorin1997(Gallagher,2004),sinceterminationattheendofthecontractwasdoneusingthelanguageofthelaw.The transition tomore informalwork has ‘intensified the process of

“commodification and casualization of labour” (Friedman and Lee,2010), where HRM strategies emphasising flexibility interact with thelack of effective regulation, resulted in plummeting labour standards’.Therehasbeenaremarkablegrowthintheviolationoflabourstandardsandinadeclineinworkingconditionsincludinglonghours,lowpay,lackof social insurance,wage arrears, poor safety andhealth, illegal firingsandsoforthduringthe1995–2007period(Lee,2007).Andthereisrisingdissatisfaction,expressedinamulti-foldincreaseinlabourdisputessince1994 (Hurst,2009).Thus, althoughChinawasgrowing rapidly, anddidnot evidence the rise inunemployment thatwehave seen inKorea andJapan, its countervailing institutions such as trade unions (despite theirgrowth) did not have the power or independence to halt the decline inlabourstandards.Table13.3belowshowsthedramaticincreaseinlabourdisputesduringthelastdecadeorso.Thus, in all three countries the economic pressures of a more

competitiveenvironment,combinedwithlegislativechanges,openedthedoorforageneraldecline

Table13.3Unemployment,labourunionsandlabourdisputesinChina

in labour standards and a general growth in the informalisation ofemployment. The ability of countervailing institutions such as tradeunionsandoppositionpoliticalparties to arrest thesedevelopmentshasbeen limited. Clearly competition and flexibility appear to be thedominant logic underlying the employment system transformation inthese three countries during the last two decades.We turn in the nextsection to the impact of this transformation on non-standard forms ofemployment.

Theextentandnatureofinformal(non-standardemployment)inEastAsia

As noted, our definition of ‘informalisation’ of employment is broadenough to encompass any movement away from permanent and stableemployment and includes temporary, casual, agency, part-time anddespatchworkers.Eachofthecountriesusesdifferentdefinitionsofwhatisnon-standardwork,hence, thedataarestrictlynotcomparableacrosscountries. Despite these definitional differences, it is important toremember that the commonality is that all these forms represent amovementawayfromastable,securejobwithgoodbenefits.In Japan, the proportion of people in non-standard employment has

increasedfrom18.3percentto34.9percentoftheemployedworkforce(seeTable 13.4). Fully half of the non-standard group comprises part-time workers.Table 13.4 shows a dramatic increase in the number ofcontract workers, who account now for a third of the non-standardworkers. What are calledarbeito workers, now defined as temporaryworkers (originally it referred to thepart-timeworkdonebyuniversitystudents),arealsogrowingsubstantially.In particular, non-standard work has crept in to replace regular

employment.Table 13.5 below shows the percentage of non-standardworkersacrossanumberofoccupationsinJapanandasthedatasuggest,even manufacturing, sales and office jobs, which were traditionallyunionised and generally permanent, are now increasingly dominated bynon-standardemployment.Inaddition,thenumberofFreeters(orfurita),definedas thepeoplebetweentheagesof15and34wholackfull-timeemploymentorareunemployed,dramaticallyincreasedfrom0.5millionin1982 to 1.78million in 2009.The trajectoryof theseyoungworkersrepresentsdeviations from thebasic school-to-work transitionmodel inJapan,wherestudentsbecomefull-timetenuredworkersupongraduation,with continuous vocational training provided by the company (Reiko,2006).AlthoughbecomingaFreeterwas initially avoluntary choice, itcurrentlyrepresentsmoreofaforcedchoiceforyoungworkersinJapanbecause a shrinking number of Japanese companies recruit newgraduates.Currently, a largeproportionof youngworkerswork at low-paying,low-skilledjobsintheserviceindustry.Andthereisalsogrowthin the ‘NEET’ proportion of the population (neither in employment,education and training),whowork informally. Thus there is a growingpool of informal employment, encompassing casual, temporary, part-time, agency and ‘despatched’ workers, whose wages and workingconditionsareconsiderablybelowthenorm.

Table13.4Growthofnon-standardworkersinJapan(1988–2010)

Table13.5Ratioofregularworkersandnon-standardworkersacrossjobs(2007)

Source:GeneralSurveyonDiversifiedTypesofEmployment(2007)andFutagami(2010).

Further, ‘non-standard’ and ‘gender’ are highly correlated. Womenmake up 89.7 per cent of all part-time jobs and 62.1 per cent of all‘despatch’jobsinJapan(2007)asTable13.6suggests.Womendominateinpart-timeandnon-standardemployment(cf.chapter9),bothasaresultof a paternalistic employment system and of a paternalistic tax system(Abe,2008).2Inaddition,thereareatleastonemillionforeignworkersinJapan, working in a wide range of jobs, andmany of them, especiallyChineseworkers,workinformally.HousemanandOsawa(2003)findthattemporaryjobsarelesslikelyto

besteppingstonestofutureregularjobsinJapan.Notsurprisingly,manytemporary agencyworkers say theywould rather be regular, permanentworkers.AccordingtoMinistryofHealth,LabourandWelfare’sSurveyof the Diversification of Employment Status (2003), while many non-regular workers choose to be so because they are willing to tradecompensationandjobsecurityforbetterworkschedules,21.6percentofpart-time workers and 40 per cent of agency workers worked in non-regularjobsbecausetheycouldnotfindapermanentposition.Beinginnon-standardemploymenthasitsdisadvantages.Anumberof

Japanese surveys on the working conditions of non-standard workersshow that, while they often perform jobs similar to those of regularworkers,thewagedifferentialsarewidening(JILPT2008,2009,2011).

Table13.6PercentageoffemaleworkersbyemploymentarrangementsinJapan(2007)

Table13.7Non-standardemploymentinKorea(2002–2010)

If thelevelofnon-standardemployment inJapanissizeable, therateof growth of non-standard employment inKorea has beenmuch faster,has happened over a shorter period and the levels of non-standardemployment are even higher. Between 1997 (the onset of the AsianFinancialCrisis)and2010,thepercentageofemployeesinvarioustypesof non-standardwork increased so dramatically that according to someestimates (seeTable 13.7) they constitute the largest segment of theworkforce.The differences in wages and benefits between regular workers and

nonstandard workers are as large as the differences we have seen inJapan.Theemploymenttenuregapiswideningaswell,from69.8months(regular workers) and 24.1 months (non-standard workers) in 2002 to77.3months(regularworkers)and23.6months(non-standardworkers)in2010.Second,andincontrasttoJapanwhereasignificantportionofnon-standardworkisaresultofvoluntarychoicesbywomenandFreeters,alarge proportion of non-standard employment in Korea is involuntary.Surveysindicatethatmanynon-regularworkerswouldlikestandardjobs,but employers are increasingly avoiding regular employment. The

percentage of workers who are forced to work in non-standard jobsincreased from 48.5 per cent in 2006 to 55 per cent in 2010. It is alsonotable that most non-standard employment is considered as quasi-permanent,inthatmostnon-standardworkersaretrappedintheircurrentcategoriesratherthanbeingabletostepintoregularjobs(NamandKim,2000).Table13.8providessomedataonthedifferencesbetweenregularandnon-standardworkersintermsofwages,tenureandbenefits.Thegrowthinthenon-standardworkforceismirroredbythegrowthin

the subcontracting of work in the Korean manufacturing industry.Currently 326,000 workers work under subcontracting conditions innumerous industries, including the shipbuilding, electronics, auto,chemical manufacturing and service industries (Kim, 2011). It isnoteworthythatbothprivatecompanies(e.g.Hyundai,LGand

Table13.8Wages,tenure,benefitsdifferencesbetweenregularandnon-standardworkersinKorea(2002–2010)

Samsung)andstate-ownedenterprises(e.g.IncheonInternationalAirportCorporation) use subcontracted workers. In the shipbuilding and steelindustries,theratioofsubcontractedworkersvis-à-visregularworkersis,respectively,61percentand43percent(Kim,2011).Further, apart from increasedsubcontractingand themovingofwork

to lower cost locations in China, there is a significant increase in thenumber of foreign migrant workers in Korea. The number of foreignworkers doubled between 2002 and 2007. Most foreign workers areunskilled workers employed in the labour-intensive sectors, such asconstruction,serviceandmanufacturing,andtheyaredoingthelow-paid,dangerous, dirty and difficult jobs in South Korea. It is estimated thatforeignworkersaccountformorethan5percentofthetotalemployees.AlthoughtheyreceivelegalprotectionbasedonKorea’sLabourStandardAct,MinimumWageLaw,andtherecentlyenactedActonEmploymentof Foreign Workers in 2010, they are still considered to be the mostvulnerable, marginalised group in Korea, as these laws are not wellenforced. It is this variation in the different types of non-standardworkers that accounts for thedifferent estimatesof thenumberofnon-standard workers in Korea. Irrespective of the variation however, it isclearthatnon-standardworkhasbecomethe‘newnormal’inKorea.EstimatingthequantityofinformalworkinChinaisalsoproblematic

giventhatthestatisticscollectedbythegovernmentarenotveryreliable.Weknow the key source of the growth in informal employment comesfrom Chinese migrant workers, who work and live in places far awayfromtheirhomeprovinceswheretheirhukou(householdregistration)islocated. According to the 2010 census, the size of this ‘floatingpopulation’ was 230 million. Most of these migrant workers rely onhometown networks, labour-contracting companies or other labour‘despatch’agencieswhensearchingforjobsinurbanareas.Mostly,theyend up working in non-standard employment arrangements, such astemporary work, part-time domestic work, ‘despatched’ work andsubcontractedwork.Asecondkeysourceoftemporarylabourisstudentinterns. Local governments have expanded vocational schools inanticipation of a future need for skilled workers, and the number ofinterns has increased from approximately 12.5 million in 2003 to 22millionin2009(Liang,2011).Althoughstudent internsaresupposedtoworkunderthepartialsupervisionoftheirvocationalhighschools,theyare increasingly seen as a source of cheap labour by employers. Thesestudentworkersareusuallynotcoveredbywritten labour-contractsand

social insurancebenefitsbecause theyare ‘students’,not ‘workers’.Forexample,ifworkinjuriesoccur,theyarenotentitledtothegovernment’sworkinjuryinsurancebecausetheyarenotworkers.Untilrecently,Chinahasnothadlawsonlegalprotectionforinformalandsubcontractedwork,andeventhoughanewlawwasintroducedin2008(discussedlaterinthischapter),theimplementationoflabourlawsinChinavariesdramaticallyacrossprovinces(Kuruvillaetal.,2011).Asnoted, formalestimatesof informalwork inChinaaredifficult to

obtain.ThebestavailableestimatesarefromParkandCai(2011).Theyanalyseavarietyofgovernmentdatabasesandconcludethatthenumberof non-standard workers comprises about 40 per cent of the Chineseworkforce,asindicatedbelow.

Table13.9UrbanemploymentbyemployertypeinChina

AsTable 13.9 notes, the category of ‘other’ workers or undocumentedworkers is a residual after counting the number of workers in formalemployment.It isobviousthat thewages,benefitsandjobsecurityof the informal

workforce in China will be substantially below that of permanentworkers, although unlike in Japan and Korea there are no statistics toindicate the extent of those differences. The abuses that these workerssuffer (e.g. such as unpaid or underpaid wages, no work injurycompensation and forced, unpaid overtime work) have been welldocumented (Lee, 2007). Recent empirical studies indicate that these

migrantnonstandardworkersreceiveone-halftotwo-thirdsthewagesofregular workers and make up one-third to one-half of the factoryworkforceintheautoindustry(Zhang,2010).Althoughbylawtheratioofstudentinternscannotexceedone-thirdoftheworkforceinfactories,itwasreportedthat70percentoftheworkersataHondafactoryinFoshan,where a lengthy strike occurred in 2010, were student interns (Liang,2011). Thus, migrant workers and student interns are emerging as acheap,convenientsourceoflaboursupplyincontemporaryChina.Insummary,thegrowthofnon-standardwork(orinformalworkaswe

termitinthispaper)hasincreasedsubstantiallyinthethreelargestEastAsian economies. The growth in the number of suchworkers has beenclear and measured in Japan, with many workers making voluntarychoices towork in non-standard employment. InKorea, thegrowthhasbeensuddenanddramaticandlargely involuntary. InChina, thegrowthof informal employment has seen amajor spurt since the 1994LabourLaw changes, and has been driven largely by the rise in its ‘floating’population. In all three countries, the definitions of such work differ,making comparisons difficult, but it is clear, particularly inKorea andChina, that these departures from regular stable employment nowencompass the largest proportion of the workforce. Since thesetemporary,casual,informal,agencyand‘despatched’workersarenotinregularemployment,theiremploymentrelationsarelargely‘external’tothe firm.Thisexternalisationofemployment relationsposessignificantchallengestobothtraditionalunionism,whichhasnotevolvedadequateresponsestothisphenomenon,andgovernmentpolicy,whichisonlynowevolvingtotakeintoaccountthesedevelopments.Weturntotheseissuesinthenextsection.

Responses:apathy,resistanceandre-regulation

The growth in non-standardwork exacerbates existing divisionswithinthe working class. Trade unions have been historical protectors ofworkers,andhaveinmostcountriesattemptedtoimposestandardisation

onwagesandbenefits.However,inbothJapanandKorea(seechapters7and8) the dominance of the enterprise union structure has preventedunions from focusing on these ‘externalised’ employees. Thus, whenHRM strategies in enterprises add temporary, or subcontracted or‘despatched’workers, they are not represented by traditional enterpriseunions who focus on their core membership, the permanent workers.Thus, by and large, trade unions in Korea and Japan have been eitherpassive or ineffective in protecting the interests of broadly definedinformal workers, with some exceptions. In Japan, RENGO includedimprovements in theworking conditions of non-standardworkers in itsspringwage offensive in 2006 for the first time, despite the long-termgrowth in temporary and casual workers. It also has made variousattemptstorecruitandprotectnon-standardworkers,forinstance,bythecreationofaContingentWorkerCentrein2007,therebycontributingtoincreasing theunionisationrateofpart-timeworkers from3percent in2003to5percentin2009.Although some industrial unions inKorea have had some success in

improving theconditionsofnon-standardworkers inbanking, janitorialservicesandsales,Koreanenterpriseunionshavealsofocusedlargelyontheir permanent workers. As can be seen inTable 13.10 below, eventhoughKoreanunionshavegradually

Table13.10Unioncentralisationandunionisationratefornon-standardworkersinKorea(2003–2009)

moved into industry-wide bargaining, they have not substantiallyincreasedtheorganisationofnon-standardworkers.In China, official trade unionism has an ambiguous role vis-à-vis

protectingtheregularworkforce(forexceptions,seeLiu,2010),letalonetemporaryworkers.Largelyignoredbythetradeunions,thenon-standardworkforce inall threecountrieshavehad to takematters into theirownhands. In Korea, non-standard workers went on strike at Ki-RyungElectronicsin2005,E-Landin2007andDong-HeeAutoin2008.Thesethree strikesbegan spontaneously,withoutunion support, butwithhelpfromsocialjusticeandcivilsocietygroups(e.g.theContingentWorkers’CentreinKorea).Similarly,wildcatstrikesandspontaneousprotestsareincreasinginChina(seeZhuetal.,2011).Theseincludenotonlystrikesinforeign-ownedfactories,3butalsostrikesindomesticandstate-ownedfacilities.4Inaddition,Zhang(2010)documentssubstantialresistancebytemporary and informalworkers in the auto industry. InChina aswell,informalworkersuse thehelpof labour-friendlyNGOs tohelp them inresolving their issuesandgrievances (e.g.,SACOMandLittleBird). Inothersituations,theyhavetakenmoredrasticsteps,suchasthesuicidesin Korea Express in 2009 and China’s Foxconn in 2010, to draw theattention of the public to their plight (Shin, 2010, Friedman and Lee,2010).

Themost significant response in these countries has come from thegovernment, in response to the growing and increasingly expresseddissatisfaction of a nonstandard workforce that constitutes a sizeableproportionoftheworkforceinallthreecountries.InJapan,anexampleistheRevisedPart-TimeWorkAct,whichwasimplementedinApril2008.Themajorprovisionsinclude

writtendocumentationofemploymentandworkingconditions;nodiscrimination regardingequalemploymentconditionsvis-à-visregularworkers;encouragementofemployerefforts tomovepart-timejobs towardsregularjobs;thegovernment’sactiveengagementinpart-timeworkers’grievanceproceduresthroughgovernmentagencies(Morozumi,2009).

Since the new ruling party (Democratic Party of Japan) took power inAugust 2009after campaigningwith a strong emphasis on employmentissues, they have introduced a new law concerning ‘despatch labour’whichisunderreviewintheDiet.Theoverallfocusofthelawistolimittheuseofsuchlabour.Accordingly,thedraftlawseeksto

prohibititsregistrationexceptin26specialareas;prohibititinthemanufacturingindustry;prohibit contracts of less than two months when using contingentwork.

Inaddition,thenewdraftalsoseekstorenderequaltreatmenttoworkersdoingthesamejob(whethertheyareregularornot)andforcesstaffingagencieswhoaretheprimaryemployersof‘despatchedlabour’tonotifytheir employees about their rights and working conditions. Thus, theresponse of the Japanese government has been to ‘re-regulate’; i.e.producenewregulationstosolveproblemscreatedbyoldlegislation.In Korea, after five years of debate among business, labour and the

state, the Protection Law on Contingent and Despatch Labour was

implementedin2007.Thislaw,whichfocusesontherightsandworkingconditionsof‘contingent’and‘despatched’workers,includestwomajorprovisions: it prohibits employers from using the same worker intemporary jobs formore than twoyears (i.e. theworkersmustbemadepermanent thereafter if the job still exists) and also prohibitsdiscrimination.Notonlyare theseprovisionscontentious,but theyhaveresulted in unintended consequences, as employers have foundways toengage more indirect labour through direct subcontracting. Given that‘despatched’ workers are protected by this law, while subcontractedworkers have no regulations to protect themselves with, the employerresponse was to start using diverse in-house sub-contracting, with anominalsubcontractorintherecords.Withthesuddenjumpintheuseoffar-externalisedemploymentpractices,andtheensuingprotestsamongsttemporaryworkersandtheircivilsocietysupporters,thegovernmenthastried to respond with both non-mandatory guidelines and stricterregulations.Theguidelines,issuedinJuly2011,suggestthattheprincipalcompany

should give subcontractors a month’s warning before the job isended;shouldimprovetheworkingconditionsofsubcontractedworkers;should share a greater amount of profits with the subcontractingagency;shouldrecognisesubcontractedworkers’rightstounionise;shouldextendwelfarebenefitstosubcontractedworkers.

The normative ‘soft law’ version of the government’s response wasstrengthened with a new draft ‘hard law’ effort. This re-regulationinitiative,issuedinAugust2011,proposesto

prohibitsubcontractinginthecoreworkofcompanies;limit the number of subcontracted workers to a proportion of theprincipalcontractor’semployeenumbers;providethemwithpriorityinpermanenthiring.

In a similar vein, the SupremeCourt’s ruling againstHyundaiMotor’ssubcontractingemploymentinJuly2010hasbeenfollowedbyaseriesofcourtrulingsatvariouslevels(specifically,aboutHyundaiAsanin2010,KoreaGMin2010andKumho in2011).Thecourt ruled in thesecasesthatthecompanieswereusing‘disguisedsubcontracting’(i.e.theillegaluse of despatch labour) and forced the companies to transfer thesubcontractedworkerintoregularworkerstatusaftertwoyears.It is in China that we have seen the greatest legislative efforts to

control the growing informality ofwork (Kuruvillaetal., 2011).Undertherubricofa‘harmonioussociety’(seeWarner,2011)thegovernmentimplemented a series oflabour laws in January 2008 (namely, theLabour-Contract Law, the Arbitration and Mediation Law and theEmployment Promotion Law) reinforcing previously nominal IRinstitutions(e.g.tradeunions(theAll-ChinaFederationofTradeUnions,ACFTU), collective agreements, wage negotiations and the tripartitesystem) (seechapter5).Thesenewlawsnotonlyprovideamodicumofemployment security forworkers (through a variety of provisionswithregard to employment contracts), but they also expand the rights ofworkerstofileclaimsforarbitrationorlitigatethemandprovideunionswith legal encouragement to engage in unionisation and collectivebargaining.Forexample,Articles10and82oftheLabour-ContractLawrequirethattheemployermustenterintoawrittenlabour-contractwithaworker within 30 days of employment. Failure to do so leads to thepenaltyofpayingtheworkerdoublewagesforanytimeservedwithoutawritten contract. If employees work for 12 months without a contract,they must be provided with an indefinite term contract (i.e. madepermanent). The changes in the Arbitration and Mediation Law areintendedtonotonlyspeeduptheprocessofdisputeresolutionbutalsotoextend the time limit during which the aggrieved worker can file forarbitration (from 60 days to one year), and completely eliminate thearbitrationfee,whileshiftingtheburdenofproofontotheemployer.Evenmorefar-reaching(relativetoeffortsinKoreaandJapan)arethe

special provisions in the Labour-Contract Law which try to regulatelabour staffing agencies or ‘despatch agencies’ as well as ‘despatched

labour’. First, the law requires minimum capital requirements forregistrationasastaffingagency(0.5millionRMB).Second,itspecifiesthatthe‘despatchlabour’shouldonlybeusedfortemporary,auxiliaryorsubstitute jobs and that theworkers are tobe remuneratedaccording totheprincipleof‘equalpayforequalwork’.Severalarticlesfocusonthedivision of responsibility between the ‘despatching agency’ and theemployer, specifying that both share responsibilities for some aspectssuch as dismissal and workplace injuries. The Law also regulates theconditionsofpart-timeworkers,notingthatpart-timeworkisspecifiedtobelessthan4hoursperdayand24hoursperweek(Article68).China’s legislative efforts have been far more comprehensive than

thoseofJapanandKorea,andintheKoreancasethelegislativeeffortisstillcontested.Ontheotherhand,theimplementationofthelawinChinais uneven. The goals of the central state in controlling the growth ofinformalworkhavebeenunderminedbytheinabilityorunwillingnessoflocalgovernmentstoenforcethelawforavarietyofreasons,notablytheneedtoattractforeigninvestment(Kuruvillaetal.,2011).Thisproblemof the enforcement of the law raises the possibility that the Labour-contractLawmayhavetheunintendedconsequenceofdrivingevenmoreemployment underground into the informal sector (Kuruvillaet al.,2011).On the other hand, there is an increased effort in some parts ofChina to better enforcement, through the efforts of workers, labour-friendlyNGOsandlocallabourbureaux(Cooney,2011,Kuruvillaetal.,2011).Insummary,inallthreecountriesitisthegovernments,ratherthanthe

trade unions, that have been the primemovers in developing policy tocontainthegrowthofinformalwork,andtobolstertherightsofinformalworkers. Thislegislativeeffortof thegovernments issuggestive, inourview,ofanemergingandcompeting‘logicoflabourprotection’(FrenkelandKuruvilla,2002).

Conclusions

What we have identified in this chapter is a clear and significantmovementinemploymentrelationsandHRMstrategiesawayfromstableregularemployment toavarietyofcontingentarrangements inall threecountries. These contingent arrangements externalise employmentrelations at the firm level, creating a new segmentation in enterpriseworkforces. As such, these new forms of workers do not often comeunder the purview of bilateral labour relations, as enterprise unionsrepresentonly thosepermanentworkersdirectlyhiredby theemployer.In all three countries, these contingent arrangements account for asignificant proportion (if not the major proportion) of the workforce.Their growth represents a challenge not only to traditional industrialrelationsactors,but also for industrial relations scholarship, apart fromgovernmentpolicy.Giventhe inabilityofbilateralemploymentrelations toaddress these

issues(eitherthroughlabourunionactionorhighroadHRMstrategies),governments,respondingtogrowingsocialpressurefromtheseworkers,havebeguntointervene.Inallthreecountries,thegrowthinthenumberofinformalworkerswastheresultofgovernmentpolicyandregulationsaimedatincreasingflexibility.Thecurrenteffortsrepresentasignificanteffort at ‘re-regulation’, i.e. to control the growth of contingentemployment unleashedby their prior regulations. It is still too early toestimatetheimpactofsuchre-regulation,giventhatitisquiterecent,andalso given some evidence that these protective laws are havingunintended consequences. However, it is evident that there is a clear‘labour protection’ logic underlying these efforts. The challenge forworkersand tradeunions in thesecountries ishow tocapitaliseon that‘emerginglogic’.

Notes1Notethatouruseof theterm‘employmentrelationssystems’ includesthevarietyof labour

relationsandhumanresourceinstitutions,policiesandpractices.2 If a married woman works part-time and earns less than 1.03 million yen annually, her

husband iseligible to receiveseveral typesofbenefits.These include1)hersocial securityandhealthcarebenefitsunderherhusband’scoverage,2)herexemptionforincometax,and3)anallowanceforalow-incomespousefromhisemployer(Abe,2008).

3ExamplesincludestrikesinJapaneseHondaAuto(2010),TaiwaneseWintek(2010),KoreanSungwoo(2010)andAmericanPepsicoBottling(2011).

4 Examples include a strike inTonggang Steel (2010), a railwayworker strike inChangsha(2011)andahospitalcustodianstrikeinShanghai(2011).

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14ManagementandcultureinEast,SoutheastandSouthAsiaComparisonsandcontrasts

ShaistaE.Khilji

SouthAsia,whichwewillcomparewithEastAsia(andSoutheastAsiainpassing) in this chapter in terms of itsmanagement and culture, is thesouthern region of theAsian continent, which comprises an emergingeconomicgiant, India,Maldiveswith thehighestGDPpercapita in theregionandanumberofpre-emergingeconomies includingAfghanistan,Bangladesh, Bhutan, Nepal, Pakistan and Sri Lanka (TheWorld Bank,2011).With a population exceeding 1.6 billion, SouthAsia is home toapproximatelyonefourthoftheworld’spopulation,makingitoneofthemostdenselypopulatedregionsintheworld(TheWorldBank,2011).Itisalsooneofthemostdiverseregionsintermsofthemultiplicityofitslanguages and its rich culture (Ahmedet al., 2010). Collectively, theSouthAsian regionhas a growth rate of 8.9 per cent, thereby it is alsoconsidered to be one of the fastest growing regions in the world.Unfortunately,itisalsohometo50percentoftheworld’spoorest(TheWorld Bank, 2011). Economic development in the region remainssporadic and uneven, and overall humandevelopment is a lownationalpriority (Ghani, 2011). Hence, South Asian countries display starkcontrasts; dark slums in the shadows of palatial buildings, highlyqualified talent with illiterates and jobless and world-class nimbleorganisations with an inefficient, bureaucratic public sector. Bycomparison,EastAsiahaswitnessedsystemiceconomicgrowth,whichisattributedtoconsistentinvestmentinhumandevelopment(Tilak,2002).EastAsiangrowthhasfascinatedmanyintheWest(Dunning,1993;Hill,2007; Singh, 1998) and has been used to draw lessons for leadership,strategy and organisations for many businesses in theWest (Chen and

Miller,2011).UnlikeEastAsia,theSouthAsianregionhasbeenslowtoprogressand

is facedwith several socio-economic challenges in terms of populationgrowth, poor infrastructure, terrorism, corruption and elitism (Khatrietal.,2011).However,EastAsia(becauseofitsgeographicproximity)andsome countries in Southeast Asia (including Malaysia and Singapore)have served as a shining example to many struggling South Asiancountries,whichlookuptotheeconomicdevelopmentinTaiwan,China,Japan, Hong Kong, Malaysia and Singapore, and often debate if theyshould emulate aWestern or anEastAsianModel (Ghani andAhmed,2009).Nevertheless,theEastAsiancountriesthemselvesareinastateofflux, following aperiodofAsian crisis and the recent global economicdownturn.StudieshaveshownthatmanagementisbeingreformedinEastAsia(Zhuetal.,2007;Nowland,2008).Forexample,theriseofChinaisinfluencing corporate Japan,which seems to be in relative decay alongwithSouthKoreaandTaiwan.AlthoughEastAsianphilosophymaybepowerful,agrowingnumber

ofcompaniestherearepursuinganamalgamofEast–Westmanagementpractices (Chen and Miller, 2011; Hill, 2007; Lin and Hou, 2010).Companies in rapidly growing India have also caught the attention ofmanagementscholarsinrecentyears,whohaveattributedtheirsuccesstothe India Way, a unique management philosophy that places a strongemphasis on investment in human capital (Cappellietal., 2010).Giventhese developments in the continent, it is important to evaluate whatrepresentsacontemporaryAsianmodel,andhowitcancontributetothedevelopmentofmanagementthoughtandpracticeglobally.Inthischapter,wefirstpresentSouthAsiaasaregionthatissimilarto

EastAsia in some respects, but is also different in others.We identifycontemporary management behaviour, business ethics issues andmanagementpracticesinordertoevaluatetheimpactofglobalisationinSouthAsia. The challenges and strengths of SouthAsian organisationsarecaptured.BaseduponadiscussionofIndianandChineseapproaches,we argue that successful globalmanagement behaviour is ambicultural,which exhibits the hybridisation of values – taking the positive from

indigenous local culture and the West. We conclude with a note toenhance learning between East and South Asia and across East/SouthAsiaandtheWestinordertodevelopapproachesthatareappropriateforacomplexglobalenvironment.

Socio-economicandculturalenvironmentinSouthAsia

AsmanyWestern(includingtheUSA,theUK,GermanyandFrance)andEastAsiancountries(includingSouthKorea,JapanandTaiwan)grappledwith the recentglobal crisis, theSouthAsian regionwitnesseda robusteconomicrebound(seechapter2inthisvolume).Itgrewbetween7percentand9percentin2010and2011,exceedingotherregionsaroundtheworldandevensurpassing thehighgrowthrates(6.5percentannually)experienced between 2000 and 2007 (The World Bank, 2011). ManyeconomistshaverebuttedtheargumentthatSouthAsiaisrelativelylessintegratedwiththeoutsideworld,andthathashelpedprotectitfromtheglobal recession. Instead, they have attributed South Asian economicgrowthtoIndia’sunprecedentedgrowthandvariousgovernments’effortsatmakingtheirrespectiveeconomiesmoreopen(Dorjietal.,2007;TheWorldBank,2011).Suchan impressiveperformance,whenseveralothermoredeveloped

countriesaroundtheworld(includingGreece,Italy,SouthKorea,Taiwanand Japan) show signs of decline and stagnation, offers optimism tobusinesses within South Asia. According to a World Bank Report onDoing Business in South Asia (2007), which compared businessregulations in the region with 175 economies around the world,governments in SouthAsia have taken consistent steps to improve theinvestmentenvironmentand introducewide-ranging reforms; from landregistration in Bangladesh to reducing the time, cost and hassle forbusinessestocomplywithlegalandadministrativerequirementsinIndia(TheWorldBank,2007).Themost transformativechangeactually tookplaceinPakistan.ModelledonMalaysia,SouthKoreaandSingapore,theHigherEducationReformswereinitiatedin2002.Thesechangesfocused

uponimprovingtheresearchandeducationinfrastructureinPakistan;andledtoupgradingresearchlabs,strengtheningresearchsupport,providinglucrativesalariesandscholarshipsforacademics,initiatingglobalfacultyexchanges,establishingqualityassuranceandaccreditationprocessesanddeveloping the best digital library in the region. The progress placedPakistan’shighereducationprogrammeas‘thebestpracticeexamplefordeveloping countries’ (Michael Rode, UNESCO Chairman quoted inHayward,2009).ScienceWatch (2009)also rankedPakistanasa risingstar in fivedisciplines,more than anyother country in theworld.As aresult of some of the aforementioned steps, four SouthAsian countrieshave been included in the Global Competitiveness Index (GCI) since2002, including India, Sri Lanka, Bangladesh and Pakistan (Hallward-Driemeier, 2007).Most recently these countries are ranked 56, 52, 108and118respectively.Nepalwasranked130intheGCI2010–11report(WorldEconomicForum,2011).Despite its impressivegrowth,manyweaknessespersistwithinSouth

Asia.Most notable among these are weak institutions, underdevelopedinfrastructureandafeebleknowledgeeconomy(WorldEconomicForum,2011).Arigidlabourmarketwithhighredundancycostsisalsoanareaofmajor concern.Although India has branded itself as the provider ofservices in information technology, it lags on most indicators ofknowledge economy, in particular education (Ahmed andGhani, 2006).Forexample,in2004grossenrolmentratesforsecondaryeducationwere49percentforSouthAsiacomparedto69percentinEastAsia(AhmedandGhani,2007).Inarecentsurveyofglobalcompanies,CEOssaidthattheir fourthbiggestconcernwas theshortageofhigh-skilledworkers inIndia(TheEconomist,2007).In contrast, East Asian economies fare much better on the GCI,

highlighting better-developed infrastructure and more sophisticatedinstitutions.Forexample,Japanispositionedatnumber9,HongKongat11,Taiwanat13,SouthKoreaat24andChinaat26.Japanhasamajorcompetitive edge inbusiness sophisticationand innovation.HongKonghas consistently maintained its leadership in financial marketdevelopment because its economy has proven resilient post the recent

global crisis, and offers one of the world’s most friendly businessenvironments. China continues to show its strength in its large andgrowing market size, macroeconomic stability and steadily improvingbusinesses (seechapter5).On the other hand,much like SouthAsia, amajority of East Asian countries present rigid labour markets. Forexample, business leaders in South Korea face extreme difficulty inhiring and firing employees.TheWorldBank (2011) estimates that theaverageseverancepay fordismissinganemployee isnowequivalent to91 weeks of salary. This fact leads companies to resort to temporaryemployment, thus creating precarious working conditions (seechapter13).

Historyandculture

Throughout SouthAsia’s history and primarily because of its strategiclocation (in betweenCentralAsia and theMiddleEast and providing apassageway to EastAsia), several countries in South Asia (includingPakistan, India, Afghanistan and Bangladesh) have served as majorcultural and trade hubs. Consequently, the region has been invaded,occupied and settled by many different peoples, including theAryans,Greeks,Arabs,Turks,MongolsandtheBritish,whocolonisedtheentireUnited India, until the Indian subcontinent (Bangladesh, India andPakistan)gained independence in1947.Therefore, itspeoplehavebeenexposedtomanydifferentculturesandinfluences.Theregionhistoricallyshared a common Vedic culture, and later absorbed Islamic, Buddhist,BritishandAmericaninfluences(Khilji,2002).Levi-Strauss (1951) argued that the peaceful and interactive

coexistence of diversity was a distinct cultural feature of the region.Howeverrecenthistoryprovesotherwise.Forexample,the1947partitionof the Indian subcontinent into Muslim majority Pakistan and Hindumajority India led to extreme religious violence, killing over half amillion people on both sides (Butalia, 2000). Since then Pakistan andIndiahavefoughtthreefull-fledgedwars,andHinduMuslimriotsremaincommonoccurrencesinseveralIndianstates.Inrecentyears, theUSSR

invasion of Afghanistan and a growing partnership with Saudi ArabiawhereamoreorthodoxformofIslamispractised,alsoledtoagradualradicalisation of some Islamic societies, such as Pakistan, BangladeshandAfghanistan (Wong etal., forthcoming).Here tensions inbalancingthe many influences have become apparent, as these countries arestruggling to achieve harmony between liberal (Sufi-influenced) andorthodoxformsofIslam.Ithasoftenresultedinviolence,creatingunrest(and fear) amongst thegeneral public andhurting their socio-economicdevelopment.Incontrast,EastAsiahasbeeninfluencedbyBuddhist,Confucianand

Taoistprinciples(Hill,2007),althoughitisoftendescribedintermsofastrongConfucianideologywithanemphasisonmaintainingharmonyandbalancewithin all relationships (Chen andMiller, 2011).ConfucianismteachesZhonghe,or‘balancedharmony’forobtainingprosperity.IntheBookofMeans,Confuciuswrites,‘Ifbalanceandharmonyarereached,heavenandearthwillbeinplace,andallthingswillgrow’(Chen,2001,p. 88).Many scholars have attributed the economic prosperity of EastAsian cultures (including Japan which shares a close affinity with theChineseculture–Houseetal.,2004)toConfucianism.Ithasbeenarguedthatfamilyties,combinedwithahighregardforintellectualshavebeenthe primary driving force behind EastAsian commitment to educationandlearning(Khiljietal.,2011).ChenandMiller(2011)explainthatforthe Chinese opposites does not exist in the ‘either/or’ form known tomanyofus.Ratheroppositesareinseparablewheretheyinterdependentlyunite ina ‘both/and’ framework tocreateanewpossibility (seechapter16).ThisfeatureisthekeytoholismpractisedbyChinesecultures,butitappearstobelackinginSouthAsiaasdiscussedpreviously(seechapter3). On the other hand,much like EastAsia, the social set-up in SouthAsiaisfamily-centred.Theheadofthefamilyisoftenamalemember.Traditionally,theroleofawomanistoperformhouseholdchoresand

tobearchildren;however,thispracticehasbeenchanginginurbanareasas female enrolment in colleges/universities is rising (seechapter 9).Family-like ties are also created with persons who are not biologicalrelativesbutwhoaresociallyintegratedintotheirgroups.Family/social

allegiance is abiding and generally takes precedence over rules.Conformitytoagroupisanextremelyimportantvalue(Lyon,1993).Traditionally, South Asian culture has been characterised as

collectivist(withanin-grouporientation),hierarchicalwithahighpowerdistance, masculine, ascription-oriented and with a high uncertaintyavoidanceandalowcontext(Hofstede,1980;Khilji,2002).AreviewofTrompenaars’ (1993)work indicates thatSouthAsians andEastAsiansare both outer-directed, and ascription-oriented; however, Indians,NepaleseandPakistanispreferlessofanorganisationasasystemthanasocialsystem,comparedtoChinesefromtheMainlandandHongKong.The GLOBE (2004) study found India to be lower on performanceorientation, higher on power distance and more humane oriented thanother East Asian economies, including Japan, Taiwan, South Korea,ChinaandHongKong.Indiawasalsolessfuture-orientedthanJapan,butmore than China, Hong Kong, Taiwan and South Korea, more maledominated than all East Asian countries (except South Korea), lessassertive thanSouthKoreaandHongKongbutmore than Japan,Chinaand Taiwan, and less collectivist than all EastAsian countries (exceptHongKong).Recentstudieshoweverindicatethatindividualvaluesareintransition,

and find evidence of converging values especially among the youngadultsinAsia.Forexample,Khilji’s(2004)andDavisetal.’sstudiesofPakistanis and Indians (2006) show that younger individuals are moreopentochangeandmoreachievement-oriented(Lyonsetal.,2005)thantheiroldercounterparts.Kwong(1994)alsonotedthatindividualismhadbeen growing among the younger groups ofChinese,which is in sharpcontrast to older Chinese who grew up in ‘seclusion’ under socialistregimes.Egri andRalston’s (2004) study supports these arguments andshows that American and Chinese youth have more similar valuesorientationsthandoChineseyouthandChineseolderworkers.

Globalisationandchange:contemporarymanagementbehaviour,businessethicsandmanagementpractices

SincetheSouthAsianeconomiesderegulatedandopenedupforforeigndirect investment (FDI) in 1992, the region haswitnessed a substantialincrease in multinational activity. Exposure to the global marketplacebrought about a reconceptualisation of work values, organisationalprocesses and approaches. This step gradually led to changes inmanagementbehaviour,andbusinessethics,asmultinationalstransferredtheirpolicies andpractices to local companies that emulatedand learntfromtheglobalcompanies(Khilji,2004;ChatterjeeandPearson,2000).Below, we discuss contemporary management behaviour and businessethics.

Managementbehaviourandpractices

In2000,ChatterjeeandPearson’sstudyofIndianmanagersindicatedthata cadre of seniormanagerswasmore influenced by themarket cultureand economicreforms,and lessbound to tradition.Theyconcluded thatIndian organisations were at the crossroads, and needed to balancetraditionandmarket-orientedcultureinordertobecomecompetitive.Adecade later, some SouthAsian companies (including Biocon, Infosys,Reliance and Tata from India and TRG from Pakistan), have becomestrong global competitors. In particular Indian companies are not onlyattracting FDI or innovating, but they are also acquiring other globalcompanies.Cappellietal.(2010)arguethatmanyIndiancompanieshaveblazedtheirownpath.Theirtwo-yearstudyofthe100largestcompaniesin India proposes a new framework formanaging in India, which theyrefer to as ‘the India Way’. It includes a focus upon social mission(versus shareholder value), investment in human capital, adaptability, aunique approach to problem solving (referred to as ‘juggad’) andpursuingastrategyfromwithinforbuildinginternalcapabilitiesfirstandforemost. Cappelli et. al. (2010) suggest that the source of thedistinctivenessoftheIndiaWayrestsheavilyuponthecarefulandlong-termdevelopmentofpeople,theirempowermentandmotivationtoworkhard at solvingproblemsbit bybit until theybreak through. It is clear

that Indiancompaniesand theirmanagementhavegainedconfidence intheir own ability. They have also learnt from theWest and EastAsiancompanies (such as Samsung, Sony, ACER, Toyota, etc.), which theylookeduptointheirinitialyearsofgrowth.The concept of frugal innovation (also referred to as reverse

innovation), popularised byThe Economist (2010), is an illustrativeexample of management excellence in SouthAsia (in particular India)where companies are reconfiguring and re-bundling products andprocesses (Henderson and Clark, 1990). They are also leading theredesigningofproductsandprocessestocutunnecessarycostsandmakethem available to poorer populations who, otherwise, may not haveaccesstotheseproducts.NanocarbyTata,ahand-heldelectrocardiogramby GE in Bangalore, GasFans (to overcome electricity shortages inPakistan) and Telenor Pakistan’s Easypaisa to carry out financialtransactions via mobile devices are some of the examples of producttrends emanating from South Asia. The recent Global InnovationEfficiencyIndexbyINSEADhasplacedPakistanatnumberfour,Indiaatnine and Bangladesh at ten in terms of their innovation efficiency(Innovation Excellence, 2011; INSEAD, 2011). China has occupied thethird place on this index, and also offers many examples of frugalinnovation, including BYD with its low cost lithium ion batteries andelectriccars,whichhasbeensupportedbythemostrespectedAmericaninvestor,WarrenBuffet.In contemporary management literature, Indian companies are being

labelled as a ‘compelling exampleof amodel that succeeds financiallywhile succeeding socially’ (Cappelliet al., 2010, p. 22), ‘worthy ofemulation’, a ‘change agent’ (Kristie, 2010: 29) and offered as analternative to theWestern management models. It is a tall order evenwithinIndiawhereforeveryexemplaryorganisation therearehundredsof private and public sector organisations that are caught in a culturalparadox – either maintain a traditional mindset or adopt a globaleconomic order in order to achieve international standards ofperformance,professionalismandquality.Sinhaetal. (2002)argue thatthis situation has created a dissonance among Indian managers. It has

also been witnessed in other South Asian countries, wheremanymanagers are trying to balance tradition with global demands (Khilji,2004).Itisparticularlyapparentinthebureaucraticpublicsector,whichstillsuffersfrompoormanagerialefficiency.Forexample,studieshavereportedalackofmanagerialautonomy(Batra,1997)anddifficultiesinregulatory compliance, human resource management and ITmanagement. Public sector reforms in Pakistan, although focused onpublicparticipatoryorientationinpolicydevelopment,strategicplanningand awareness of public needs, have not led to satisfactory results astraining practices there still remain ineffective (Rehmanet al., 2011).Similarly,a studyof thepublic sector reported loweffortsatemployeeretention and lack of transformational leadership in Sri Lankan publicsectororganisations(Gilletal.,2011).

Businessethics

Corruption is widespread in SouthAsia, and remains a huge challengedespitemuch economic development. It is often argued that corruptionhas severely undermined the economic growth, political structures andgeneral well-being of South Asians (Khatriet al., 2011). Nepotism,bribery and administrative corruption are most commonly practisedwithin these societies (Thakur, 2000). The hierarchical structure oforganisations often inhibits transparency and traditional managementpractices promote favouritism in the workplace (cf. chapter 10). Inaddition, the collectivist culture (with an in-group orientation) canlegitimise patterns of behaviour, in that it makes it difficult to detectbribery or nepotism because the entire group might approve of thesepractices due to pluralistic ignorance and overall group conformity(Mujtaba, 2011). These practices have resulted in inefficiencies, delaysanddistrustamongpeople.Administrativecorruption,drivenbycomplexrules and procedures, is particularly detrimental to doing business inthese countries. Clearly, corruption and cronyism weaken the fragileinstitutions, which need to be strengthened in order to support a

competitiveglobaleconomy.TheTransparencyInternationalCorruptionPerceptionIndex(2010)placedallSouthAsiancountriesintheredzone(forexample, India is ranked87,SriLanka91andPakistan143among178 countries) indicating high levels of corruption and lack oftransparencyindoingbusiness.Some regulatory developments have taken place within Sri Lanka,

which were aimed at improving the level of corporate governance.However,itisstillthecasethatmultinationalcompaniesaremoreawareofethicalconcernsthanlocalcompanies(Battenetal.,2007).Astudyofcorporate social responsibility reporting fromBangladeshalso indicatesthat although there are pressures from the international market,companies have only produced cosmetic responses (Belal and Roberts,2010). More robust codes of ethics, the effective use of monitoringsystemsandtheconsistentenforcementofhighethicswithsocialsupportwithin South Asian organisations may improve ethical behaviour andencouragethefocusontherightthingstobedonebyemployees.Astudyof business ethics in Pakistani public and private sector organisationsshowed that employers are aware of the negative consequences ofunethicalbehavioursonstakeholders,andemphasisedtheneedforethicseducationwithinorganisations(Mujtaba,2011).

ChallengesfacedbySouthAsianorganisations

DespitetheimpressivegrowthoftheSouthAsianregion(mainlydrivenbyIndia)andarecentfascinationwiththeIndiaWayintheWest,therearemanychallengesthatSouthAsianorganisationsarefacedwith.First,operatinginafastchangingenvironmenthasnecessitatedafundamentaltransformation in their orientation to focus more upon quality,professionalism,customersatisfaction,performanceandemployeewell-being.Managersarebeingpressured(bytheyoungergenerations,andthesuccess of some companies) to reconcile a traditional cultural mindset(hierarchical,in-grouporientedandreactivetochange)withthegrowingdemandstobecomeglobal.Thesedivergingcharacteristicsaregenerally

seen as incompatible, and have resulted in a cultural paradox for theseorganisations.Organisations that have learnt theneed tobalanceglobalintegration with local adaptation have blazed the trail by exhibiting acreativenewmanagementphilosophy(ortheIndiaWay).Second,despiteverylargepopulations,organisationsinSouthAsiaarebeingstretchedtorecruit qualified professionals. Even within India with its largepopulation in the region,TheEconomist (2007)hasestimated that therewill be a shortage of half a million IT professionals by 2012. ThisshortageispartlyduetotheimpressivegrowthoftheITsector,andalsoduetoasmallerpercentageofhighlyskilledlocalworkerswhohavetherelevant expertise inmanagingglobal transactions.At the same time, acompetitive higher demand for the same kind of skills has created anemployeelabourmarketfortoptalentresultinginhighlabourmobility.Consequently, organisations are experiencing difficulties in retainingemployees who have been trained and exposed to leading complexprojects. Third, managers in local indigenous organisations areconstrained in the actual implementation of effective managementpractices, because of widespread resistance, poor organisational designand lack of visionary leadership (Balasooriyaet al., 2010; Khilji andWang,2006;Subedi,2006),At a macro-level, a bureaucratic government structure, cumbersome

trade tariffs and rigid business/labour policies generally hinder thegrowth of smaller entrepreneurial firms (seechapter 12), resulting infrustration among managers. Perceptions of poor business ethics andcontinuing business scandals also damage business potential in theregion. The global community (and the regional) is pressuringorganisations to reform its management systems to become moretransparentinordertogaininvestor,employeeandcustomerconfidence.Terrorism and internal conflicts in some countries (in particularAfghanistan,PakistanandSriLanka)haveposedadistinctchallenge toforeigninvestmentandeconomicdevelopment.Inaddition,terrorismhasaltered the business environment by consuming organisational andmanagerial resources to prevent and guard against possible violentattacks.Finally,SouthAsia isoneof the least integrated regions in the

world, because of a long standing rivalry between India and Pakistan.Thesetraitsaresystemic,rootedinunevensocio-economicdevelopment.Unfortunately,theyarealsoreflectiveoflocalgovernments’inabilitytopreventanascentofextremisminsocietyandfullyengageinadeliberatedevelopment agenda through macroeconomic reforms, efficientgovernanceandrestructuringmeasures.

AcomparisonwithSoutheastAsia

It was mentioned previously that the countries of Southeast Asia, inparticularSingaporeandMalaysia,haveservedasmodelsofhumanandeconomicdevelopment tocountries inSouthAsia.WehavealsoshownthatHigherEducationReformsinPakistan,consideredexemplaryinthemodern era, were modelled after Singapore and Malaysia. Hence it isimportant that inorder todevelopacompletediscussionofSouthAsia,wealsoneedtodrawupacomparisonwithSoutheastAsia.SoutheastAsiaiscomposedof11countries,includingBrunei,Burma,

Cambodia, East Timor, Indonesia, Laos, Malaysia, the Philippines,Singapore,ThailandandVietnam.Ithasatotalpopulationof593millionpeople.Indonesiahasthelargestpopulation,followedbythePhilippinesandVietnam.MuchlikeSouthAsia,SoutheastAsiahasalsoservedasamajor cultural and trade hub for centuries. Consequently, it has beeninvaded, occupied and settled by many different peoples, includingIndians, Chinese, Arabs, Japanese, Dutch, French, Portuguese andSpanish. The dominant religions in Southeast Asia include Hinduism,Buddhism, Christianity and Islam. Over the past two decades, manySoutheastAsiancountrieshavegraduallyupgraded theireconomiesandexportstructuresfrombeingcommodity-basedtobecomingmorerelatedto high-technology (Ahlstrometal., 2010).Furthermore,Singapore andMalaysia have a rapidly growing service sector (Economic SurveysSeries, 2011; Economy Watch, 2010). Newly industrialised countriesincludeMalaysia,Thailandand thePhilippines; Indonesia is the largestregional economyand is amemberof theG-20.Singaporehasbecome

oneofthewealthiesteconomiesintheworld(Ahlstrometal.,2010).Therest of Southeast Asia is heavily dependent on agriculture; however,Vietnam is notablymaking steady progress in developing its industrialsectors.ASEANprovides an effective framework for the integration ofcommerce, unlike the South Asian Free Trade Association (SAFTA)withinSouthAsia,whichsuffersfrombarriersagainsttheflowofgoodsto and fromseveral countries inSouthAsia (AsianDevelopmentBank,2009).There are some distinctive features of Southeast Asian businesses,

includinghigh levelsofstatedirection, lowlevelsofstatecapacity, thepresence of large conglomerates and the dominance of a Chineseminority (Tipton, 2009). Typically, large business groups dominate theSoutheastmarketandarecontrolledbyfamilies,withbothshareholdersand stakeholders excluded from influence. With the exception ofSingapore, this has generally prevented established institutions frombeing reshaped according to changing global needs.However, in recentyears, following the 1997 financial crisis, governments have launchedreformstoimprovetheoverallefficiency,responsivenessanddynamismoftheireconomies.AlthoughamajorityofSoutheasterncountrieshavearelatively lower state capacity, the reform agenda in the direction ofexport-orientedindustrialisation(EOI)hasstrengthenedtheireconomies,inparticularwithinMalaysia,Indonesia,ThailandandVietnam.TheonlyexceptionisSingapore,wherestatecapacityanddirectionarebothhighenough to develop a distinct model of coordinated ‘liberal marketeconomy’thatisbothentrepreneurialanddynamicinnature.Finally,theethnic Chinese minority plays a disproportionately dominant role inSoutheastAsian economies.For example, inMalaysia theyhold61percentofthelistedsharecapitalandconstitute60percentofprivatesectormanagers; and in Singapore and Thailand they own 81 per cent of thelisted capital (Tipton, 2009). Some scholars have argued that it is notpossible to understand the Asian miracle without understanding theChineseminority.DruckerandNakauchi(1997)havealsoarguedthatthegrowthandeconomicpoweroftheoverseasChinesehasnoprecedentinhistory.TheyarescatteredalloverSoutheastAsiaandareconcentrated

in family businesses kept together by strong collectivist ties, hence theChinesevalue system (ConfucianismandTaoist principles of harmony,loyalty, thrift, self-sacrifice, respect for elders and the primacy ofrelationships)servesasamajorinfluenceonSoutheastAsiancultureandmanagementpractices.SignificantgrowthwithinSingapore,Malaysia,IndonesiaandThailand

hasbeenspurredbyethnicChinesefirms(Haleyetal.,2009),whichareoftencharacterisedbysimpleandflatstructures,focusonhighvolumes–lowmargin business and frugal family leaders. However, there is alsoevidencetosuggestthatcompaniesintheregionhavemovedawayfroma traditional relation-basedmodel to amarket-basedmodel in order toovercome thevulnerability thatwas exposedduring theAsian financialcrisis. Hence, much like South Asia, management and culture in theSoutheast is being constantly shaped by globalisation in terms ofattitudes,symbols,ritualsandbehaviour(Fang,2010).

Conclusions

ManagementinEastAsiancompanies,suchasACER,isbasedupontheprincipleofsharedvalue,or ‘creatingvaluewhichbenefitsothers’ (LinandHou,2010,p.7).ChenandMiller(2010)showthatmanagersinEastAsia embrace the best of both worlds, that is, taking the best fromChinese and Western philosophies and businesses, while deliberatelyavoidingthenegatives.AlookatStanShih’smanagementstyleatACERindicates that hehas taken a holistic and communitydrivenorientationfrom the Chinese culture and fused it with decentralisation andempowerment from the West to successfully lead the second largestcomputercompany in theworld. It is an integrativeapproach,which ininternationalmanagementhasbeenobservedformanyyearsindifferentparts of the world, and referred to as the crossvergence of values(Ralston, 2008). Khilji’s (2002) study of multinational companies inPakistan also showed that changes inmanagement culture are complexand are facilitated by both global convergent influences and cultural

divergent factors. Organisations that succeed in a global environmentdevelopintegrativeapproachestomanagingchange.ThesuccessoftheIndianITindustryisattributedtothederegulation

oftheIndianeconomy,itsdynamic,mobileandwell-educatedworkforce,the entrepreneurial spirit and innovation of the employee-base and atransformational leadership. It has boosted the confidence of investorsglobally and trickled down tomanyother industries in India, includingsteel,automobiles,thefinancialsector,telecommunicationsandbiotech.TheIndianapproachtomanagement(amongthetop100companies)hasbeen found to be distinct from theWestern businessmodel and deeplyrootedinacultureofscarcity,sharedvalues,employeeengagementandinvestment in people (Cappelliet al., 2010). Managers in theseorganisationshaveavoided thenegativeaspectsof in-grouporientation,suchasascriptionandlackoftrust,hierarchicaldecision-makingandtop-bottom approaches to managing. They are aware of the environmentwithinwhichtheyoperateandhaveadoptedsomeWesternmanagementpractices.Infact,theyhaveusedtheiruniqueconstrainedenvironmenttodevelop newproducts and services.Theyhave also avoided some localcultural practices while maintaining a strong collectivist orientation,much like successful dragon multinationals from East and SoutheastAsia.In essence, a successful Asian management model reflects a high

awarenessofitslocalcultureandtheglobalenvironment(seeNankerviset al., 2013). It exhibits a blend of East and West philosophies toaccentuate thepositivesofbothwhileavoiding thenegativesofboth. Ithas‘learntfrom,absorbedtherichnessandenthusiasticallyembracedthebestmodelsofgovernance,leadership,andadministrationfrombothEastand West’ (Chen and Miller, 2010, pp. 21–2), and adopted anambiculturalapproachtomanaging.AsWesterncompaniesstrugglewiththerecenteconomiccrisis,anambiculturalAsianmodelcouldoffernewideas formanagement (cf., chapter 16). Globalmanagers need to opentheir minds and engage in deliberate learning between East, SoutheastandSouthAsiaandacrossEast/SouthAsiaandtheWest.Inaddition,asFang (2010) has argued, ‘Asian philosophies and changing institutional

andculturalcontextscanserveasanimportantsourceofinspirationforcrossculturaltheorybuilding’(p.159).The success ofmany Indian companies offers hope tomanagers and

organisations throughout South Asia, which like India, operate in aconstrained environment with limited government support. Anambicultural Asian model could serve as a good framework for allstruggling South Asian organisations and likely position them as rolemodels for futuregenerationsofglobalmanagers. Italsopresents themwiththepossibilityofcontributingwherelocalgovernmentshavefailed,i.e. addressing the inconsistencies and disparate social developmentfoundinSouthAsia.

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15ManagementeducationandtraininginEastAsiaChina,JapanandSouthKorea

MalcolmWarner

Introduction

In this chapter,we look atmanagement education and training inAsia,focusinginparticularonthreecountries,namelythePeople’sRepublicofChina,JapanandSouthKorea.Allarecoreeconomies inEastAsiaandaremajorplayersintheexpandingtradeandgrowingwell-beingofthatpart of theworld.Wewill also refer to a number ofOverseasChinesedomainsintheregion,suchasHongKong,MacauandTaiwan,ifonlyinpassing(seechapters5,6,7and8).EastAsiahasseenunprecedentedratesofeconomicgrowthoverrecent

decades, with China leading the pack, although many of the otherregionalplayersarenowadvancing,butlessrapidlyrelativetotheirgiantneighbour. Extensive economic, industrial and structural reforms havetaken place, nonetheless. Such changes have led to quite differenteducational and training requirements from those in place in earlieryears.AsoneSpecialReportputit:

ChinacouldovertakeAmericainthenextdecade.Itseconomyhasgrownbyanaverageofmorethan10%ayearoverthepasttenyears.Asthecountrygetsricheranditsworking-agepopulationstartstoshrink,thatgrowthrateislikelytotailofftoperhaps8%soon.FortheAmericaneconomythecalculationassumedanaverageannualgrowthrateof2.5%.(Economist,The,2011a).

The countries all differ in terms of their economics, demography andpolitics.Ofthethreecountries,JapaniscurrentlytherichestwithaGDPper capita ofUS$34,780 in purchasingpowerparity (ppp) terms,SouthKorea comes next at US$29,010 and China at US$7,570; in terms of

incomeinequality,paradoxically,ChinahasthehighestGini-coefficient,in rounded figures, at 0.47,with Japanat 0.37andSouthKorea at 0.31(WorldBank,2011).Indemographic terms,Chinanowhas1.3billionpeople,Japan127.5

millionandSouthKorea48.7million.Ofthese,Chinahas25percentofitssecondary-educatedcohortintertiaryeducation,Japanhas59percentandSouthKoreahas100percent.Tertiaryeducation,‘whetherornottoan advanced research qualification normally requires, as a minimumcondition of admission, the successful completion of education at thesecondarylevel’(WorldBank,2011).Intermsofpolitics,Chinahas longbeenledbya top-downMarxist–

LeninistChineseCommunistParty (CCP), Japan isa liberaldemocracybut for a long time was dominated by only one, business-friendly,politicalparty,theLiberalDemocraticParty(LDP)andisnowdominatedby the breakaway Democratic Party of Japan (DPJ) and South Korea,whichwasformanyyearsamilitarydictatorship,isnowgovernedbytheGrandNationalParty(GNP)whichhasaparliamentarymajority.In the respectivecountries,better trainedmanagershave increasingly

becomederigueur,tocopewiththefastglobalisingworld,asfirmsseektokeepupwith their rivals and enhance competitive advantage.Anewbreedofinternationalmanagersisneeded,abletomanagebothathomeandabroad,equippedwithforeignlanguagesandaknowledgeofforeignmarketsandworkforces.Sinceinvestmentinmanagementeducationandtrainingisonlyonevariableinboostingbothmicro-andmacroeconomicperformance, however, it is very difficult to evaluate its specificcontribution. The number of trained managers, especially top ones, issmall vis-à-vis the aggregate size of the labour-force. Identifyingsignificantstatisticalrelationshipsisthusamajorchallenge.Evenso,thecontributionofeducationandtrainingshouldnotbeunderestimated.

Managementeducationandtraining:background

Business schools and similar institutions inAsia are now to be found

almosteverywhere.Thefastestexpansionofmanagementeducationandtraining in theworld isnowtobefound in that region(seeWarnerandGoodall, 2009). In accreditedAsia Pacific business schools, there hasbeena14.6percentincreaseinsuchenrolmentfrom2008–9to2010–11.TheAACSB International – TheAssociation toAdvance Collegiate

Schools of Business – was set up to accredit management educationestablishments.Only5percentofschoolsworldwideearn itsapproval,namely1,182,inall.Outofitsrecentlistings(AACSB,2011),theUShas651member-institutions,Chinahas26,Japanhas6andSouthKoreahas22 (ofOverseasChineseones,HongKonghas 7,Macauhas 1,Taiwanhas27).In any model of management education and training at the macro-

level, the initial drivers are likely to be the modernisation process,economic growth and the need for trained managerial personnel.However, such a model has to be seen in the context of its historical,culturalandinstitutionalexperience.Anumberofmajordeterminants,suchaslatenessofentry,natureand

paceofindustrialisation,pre-industrialsocialandculturalnorms,socio-political system, social class, as well as social geographical mobility,amongst others, may help influence the configuration of managementeducationmodelsthattakerootinaspecificculturalandsocietalcontext(seeWarner,1992:104).An initial hypothesismight be to predict ‘convergence’, for if given

industrial societies are becoming more alike, they might choose acommon institutional and organisational solution as to how best traintheir managers. Is this likely to be the case, as the convergence–divergence debate might surmise? Will it be true ofAsian economieswhich appear to have experienced modernisation and industrialisation,albeitoverdifferenttimescales?Willtheir‘solutions’be,plusorminus,comparable?Orwilltherebeonly‘soft’convergenceasinstitutionalandorganisationaltransferonlyoccurswithinculturalparameters?Onthefaceofit,thethreeAsianeconomiespresentedherehavemuch

incommon.TheyareallsuccessfulplayersintherespectiveEastAsianmarkets, they have all had impressive economic growth-paths and they

allseekhighlyeducatedworkforces.Theyalsoshare,inpart,aConfucianand a Neo-Confucian cultural inheritance and its consequences for thedevelopment of education and governmental systems (Bol, 2008). Thelegacy has been a focus on an interdependent collectivistic socialbehaviour code in the East rather than an independent individualisticmodeasintheWest(seeLuo,2000).TheChinese Imperial examination system has long had an extensive

influence throughout East Asia over the centuries (Elman, 2000). Themeritocratic Chinese Imperial examination system in addition hadimportant influences outsideAsia; for instance, it was admired by theeighteenth-century Enlightenmentphilosophes inEurope and latermostsignificantlyshapedtheNorthcote-TrevelyanReport(1857)intheUKonthe reform of theCivil Service inBritish India and later in theUnitedKingdom.TheChinesemayindeedbesaidtohaveinventedbureaucracy.It was used as amodel by both the Goryeo and Joseon dynasties in

Korea, too,until thecountry’sannexationbyJapan.Japanalsoused theChinese Imperialexaminationsystemasa template in theHeianperiodbuttheinfluenceinvolvedonlytheminornobilityandwassubsequentlyreplaced by the hereditary system during the Samurai era. Itscontemporarybureaucracyhasitsrootsintheseorigins.There are thus precedents for contemporary developments in

management education and training, in terms of the notion of highlyselectiveeliteschoolsbutwithvaryingdegreesofcontinuitylinkingpastand present. There may of course be ‘family resemblances’ from onecountrytoanotherbuttheymaynotbeexactlyalike.WherethethreecountriesdifferisthatJapanmodernisedearlierthan

the other two after 1868with theMeijiRestoration. In their respectiveways, China and South Korea might be described as ‘late developers’experiencing their significant industrialisation in the 1950s. AlthoughChinahasleftitsmarkonmuchofEastAsiaoverthemanycenturies,inrecent years thewaves of Japanese imperialism led to the export of itsinstitutions toManchuria in1905,aswell as toKoreaafter1910.Eventoday, there is an organisational legacy in both places. In the north ofChina,intheManchuriancase,theJapaneseenterprisemodel,whichtook

the form of the lifetime employment ‘golden rice-bowl’ ( jin fan wan)system morphed into the later Chinese ‘iron’ ( tie fan wan) variant;similarly, in South Korea, the (chaebol) corporations resemble theirJapanesecounterpartsinmanyways.Thus,wefindmanyoverlappinginfluencesintryingtomakesenseof

contemporary developments in management education in East Asia.There are, in effect, three overlapping influences, namely traditionalChinese, later Japanese and even laterWestern ones (seeFigure 15.1).Amongst these Chinese influences, Confucianism has of course beencentral(seechapter3).

Figure15.1InfluencesonmanagementeducationandtraininginEastAsia.

Standingback,itispossibletomodeltherespectiveinfluencesgrossomodo.Wecanhypothesise that themorerecentWestern influenceswillnowhaveagreaterimpactontrainingthanthepastAsianonesexercise,on theoverlapat thecentreof thediagram.Wecan see from theVenndiagramabove,howtheseoverlapsareconfigured.

China

ThePeople’sRepublicofChinaisthefirstcaseweexaminehereindetail(see alsochapter 5). Traditional belief-systems, such as Confucianism,havehadacontinuinginfluenceinthe‘MiddleKingdom’forwelloveramillennium, as we have previously noted, in promoting the study ofbureaucracy and organisation (see Child and Warner, 2003). Thephilosopher,Confucius,551–479BC(KongFuzi)maywellberegardedas‘theuncrownedemperor’ofChina(Ronan,1978:79).Hisinfluencehasbeen pervasive, if at many times diffuse, over thelongue durée (seeWarner, 2011). Once thought demoded, as reflected in the 1912 ‘NewCultureMovement’,Confucianismhasnowsprungbackintoprominence.Although there areothermajor streamsof thought inChinese thinking,such as the Legalists and the Daoists, the Confucians still retain theirniche,eveninthe‘harmonioussociety’oftoday’sChina(Bell,2008).TheMasteralsocastsashadowoncontemporaryChinesemanagementtheoryandpractice:

WhenonedescribesthemanagerialapproachoftheChinese,someofthemorecommonlymentionedcharacteristicsincludecollectivismandharmony,centralisedcontrol,authoritarianandpaternalisticleadership,family-staffedbusinesses,expectationofhardworkingemployees,andstrongorganizationalnetworksandbusinessconnections.ThesecharacteristicsarepracticedbothinChinaandoverseasbytheChineseDiaspora,andthesepracticescanbetracedtothevaluesystemdictatedbyConfucius.ThesepracticesareinfluencedbytheFiveRelationshipsofConfucianism,theFiveVirtues,andtheConfucianWorkEthic.TheFiveRelationshipsdictateappropriatebehaviourandrolesfororganizationalmembers;theFiveVirtuesprovideamoralframeworkforsocietyandstresstheimportanceofharmony;andtheConfucianWorkEthicstressestheimportantofhardwork,loyaltyanddedication,frugality,andaloveoflearning(Rarick,2007:22ff).

The Party has now in effect co-opted Confucius since 2001, when hisbirthdaywas officially once again celebrated in his birthplace,Qufu inShandung Province. The Chinese set up Confucius Institutes(kongzixueyuan)aroundtheworldin2004,particularlyinuniversitiesandothereducationalvenues, to teachChinese culture and language, as avehiclefor‘softpower’uponwhichopinionsaredivided.Thenon-profitmakingbody, with Ministry of Education support, encouraging these

developments, the Office of Chinese Language Council International(Hanban),aspirestohave1,000ofthemby2020.The Imperial Civil Service examinationwas first set up in the sixth

centuryAD,inspiredbyConfucianthoughtandpractice.TheeliteHanlinAcademy, was established in Beijing in the eighth century AD andproduced its last graduates in 1911. This body trained scholars andadministratorsforover1,300years(seeWarnerandGoodall,2009:15).The curriculum covered the ‘Five Classics’ (Wujing), as well as

agriculture,civillaw,geography,militarystrategyandtaxation,amongstothers.Thetermjingwasusedtorefertotheinterweavingoftheverticaland horizontal threads of a loom, analogous to what ties a communitytogether. The choice of this descriptor suggests that the Classics wereconsidered the key unifying underpinning factor in Chinese society. Inthis format, the examinations were institutionalised to last for manycenturies.Theyareregardedbymosthistoriansas thefirststandardisedtestsinrecordedhistorywhichweresolelybasedonmerit.Theybuiltupacriticalmassofqualifiedindividualswithknowledgeandskillsabletorunthehighofficesofthenation.Theexaminationsystemattemptedtoselect men on the basis of merit rather than of their family or theirpolitical connection. The notion of a state ruled bymen of ability andvirtuewasthusalikelydirectspin-offofConfucianphilosophy.After the1911NationalistRevolution, the leadershipunderSunYat-

sen established a new selection system for the reformed bureaucracycalled the Examination Yuan, which had continuities with the oldertraditionalone.ItwassuspendedintheCivilWarandSecondWorldWarbutwasrevivedin1947untilthecommunisttakeoverin1949andisstillextantinTaiwan.The growth of management education and training in modern China

has been remarkable since Deng Xiaoping introduced his economicreformsin1978(seeGoodalletal.,2004;WarnerandGoodall,2009)notlongafterMaoZedongdiedin1976.Thenewleaderlaunchedthe‘FourModernisations’(sige xiandaihua) and ‘Open Door’ (kaifang) policieswhich were designed to shake up the old commandeconomy system(Child, 1994). The reformers wanted to reinvigorate the system with

incremental,market-ledpolicies.Dengfamouslyarguedthat itdoesnotmatterwhat colour the cat, as longas it catchesmice, inproposinghispragmaticreformprogramme(Vogel,2011).Hewas to achieve this goalwith great success over the 1980s. This

démarchealsohadconsequencesformanagementeducation(seeWarner,1986;1992).Previously,managementcadres(ganbu)astheywereknownwere trained on Soviet lines, appropriate to the state-owned enterprise(SOE)modelinparttakenfromtheUSSR(seeKaple,1994).Chinahadadoptedthe‘commandeconomy’modelbutwithmodificationsfromtheSoviettemplate.Such industrial firms epitomised the ‘iron rice bowl’ ( tie fan wan)

model,whichmore or less institutionalised lifetime employment and amini-welfare state within the enterprise (Dinget al., 2000). It was amodelwhichdominatedChineseindustryfromtheearly1950sonwards.Although the Sino–Soviet split in 1960 put an end to such closecollaboration, the SOE model took a long time to wind-down and itsaccompanyingtrainingsystemlimpedonuntilthelate1980s.Ittooktwoforms:one,anetworkofregionaltrainingcentresforseniorcadres;two,awide rangeof in-housemanagement trainingcourses. Itwasnotuntilthe1990sthatmajorchangeswereintroduced(SeeWarner,1995).Eventually, education and training in the People’s Republic was

reformed root and branch and was slowly replaced by a more market-oriented initiative.Delegationshadsent to theUS,WesternEuropeandJapan in the early 1980s to seewhatmight replace it. But theChinesewere reluctant to adopt one single foreign model and wanted to avoidbeingtoodependentontheAmericans,sotheydiversifiedtheirmentors.Helpwas sought frombothWestern andEastern countries, although intheendtheUSbusinessschoolmodelprevailed,asadapted‘withChinesecharacteristics’.Amajorfieldof innovationwascentredonthedevelopmentofMBA

courses in China. The US Government helped to set up an MBAeducation centre at Dalian, in 1984, in the North-East of China, incollaborationwiththeStateUniversityofNewYork(SUNY)atBuffalo.Thisstepconstitutedaveryuseful‘learningexperience’fortheChinese

side. Itwas tosignal theconfirmation that theMBAcouldbe taught intheChinesecontextandthatrelevantmaterialscouldbedevelopedwhichwouldbemeaningfulforChinesemanagers.ChinaalsolookedtoWesternEuropeforassistance.AEuropeanUnion

(EU) initiative, developed through the European Foundation forManagement Education and Development (EFMD), resulted in thesetting-upof theChinaEUManagement Institute (CEMI) inBeijing in1984.Itsphilosophywasoneof‘actionlearning’,amixtureoftheoryandpracticepromotedbyitsearlyDirectors,namelyProfessorsMaxBoisotandJohnChild,bothteachersofmanagementfromtheUnitedKingdom,mixing theory with practice. It went on to become the China EuropeInternational Business School (CEIBS) eventually to be moved to adifferentlocationinShanghai,in1994.Thischangeinstrategyresultedfromamissionthatthepresentwriter

undertook with Professor Edouard Vermeer of Leiden University, onbehalfoftheEFMD,toseekoutauniversitycampushomeforCEMI,asitwasoriginally located inaStatemanagementeducationcentre in thecapital. Six noteworthy Chinese universities were visited and theirsuitability for hosting the European venture was evaluated. The finalrecommendationwasmadeby theVermeer–Warner team. It involvedarelocationoffacilitiesfromBeijingtoShanghaisoastoimproveaccesstomultinationalcorporations,manymoreofwhichwere tobe found inthelatterthantheformercity.Intheend,Shanghai’sXiaotongUniversitywasselected.The Vermeer–Warner report recommended that the Beijing-based

CEMIbetransplantedtoauniversityenvironment,withanewpartnerinShanghai. The role of the municipal government there was veryencouragingand its supportwithmatching fundsclinched thedeal.Thenewinstitution,CEIBS,openeditsdoorstherein1994,hasmovedhouseseveral times in the city since and has ended up in a ‘state of the art’campusdesignedbythefamousChinese-AmericanarchitectI.M.Pei,inthedistrictofPudong.Itisnowrecognisedasthe‘numberone’inallofAsia, although it only dealswith postgraduatemanagement courses. Itsmission statement runs as follows: ‘To prepare highly competent,

internationallyorientedmanagerswhoarecapableofworkingwithintheChineseeconomicenvironmentwhileadapting to theforcesofbusinessglobalisation,internationalcompetitionandinternationalcooperation’.By 2000, 62 universities in China offered MBA courses, such as

Beijing (Beida) and Tsinghua in the capital, as well as others such asNanjing and so on. By 2004, nearly 90 institutes and schools wereofferingMBAdegrees.By2011, over 35,000were registered forMBAcourses at 236 universities (China Daily, 4 November, 2011: 24).McKinseyestimatesaneedfor75,000Chinesetopmanagerswithglobalexperienceinthenearfuture;thecountryhasperhapsatenthatpresent.TheChinesegovernmenthasalsosetagoalof1.4millionMBAstofillthetalent-gap,anambitioustasktoachieve.Asarecentaccountnoted:

Theprogramsaresetuptoofferprofessionalandpracticaltrainingforexperiencedmanagers.SomeexpertssayChina’sprogramsneedtoreducetheirfocusontheoryandimprovetheirpracticaltraining.Andsomestudentsfindtheexpansionofbusinesscontactstheymakeisatleastasvaluableastheirlessons.Whatevertheshortcomings,ChineseenterpriseshavecometovalueMBAsastheyhiremanagementpersonnel(ChinaDaily,op.cit.).

Nearby,inthesamedistrict,istheChinaPudongCadreAcademy,openedin2005byPresidentHuJintao,whichisrunbythePartyfortopofficialsandwhichalsooffersanMBA.TheCentralPartySchoolinBeijingalsooffersmanagementcourses.Asof2009,oneschool,namelyCEIBS,alonehadgraduatedover8,000

MBAandEMBAgraduatesandcompletedmanagementtrainingforover80,000 executives. Additionally, a wide range of undergraduate andbusinessandmanagementcoursesisnowofferedinChineseuniversities,bothfamousaswellaslesswellknown.Thetopuniversitiesmentionedabovesetstandardsfortheothers.TheupshotofallthisisthatChinahasnowtrainedanimpressivecore

of professionalmanagers, although there is still a shortfall not only ofseniorexecutivesbuteventhosefurtherdowntheline.It isevidentthattheirveryrapidrateofeconomicgrowthhascreatedademandforhighly

trainedpersonnelacrossallfieldsandatalllevelsandthatthesystemoftraininghasnotquitemanagedtokeepup.Thesupplysideefficiencyisnowparticularlyacuteinrespectofskilledworkers,aswell(seeWarner2009,2011).China’suniversitiesarenowcomingupintheworldrankingsbutonly

slowly.PekingUniversityisnowratedat49thandTsinghuaat71stintheTimesHigher top 100 list of 2011; in theFT rankings, CEIBSwas theonlyoneforMainlandChinalistedintheTop100GlobalMBAcategory,at17th(withHKUISTat6thandMacaunotatall);itscored11thintheFTGlobalEMBAlist; in theEduniversal list,CEIBS,Fudan,Tsinghua,PekingandShanghai Jiaotongwere entered in the top classification forChina;intheAsiaweekone,onlyCEIBSwasratedinthetop20forAsia;anditwastheonlymainlandChineseone,rated91st,inTheEconomist’s‘100TopMBAs’list,withtheUniversityofHongKongat36th,HKUISTat62nd,andtheChineseUniversityofHongKongat88thandnoMacaumention(seeTimesHigher2011,FT,2011,Eduniversal,2011,Asiaweek,2011,Economist,The,2011b).Tosumup,asChenandYang(2010)putit:

It was found that successful practices such as the National MBAEducation Supervisory Committee, the top-down approach by thegovernment, the emphasis on international collaborations and facultydevelopment, national MBA entrance examinations, and other relatedmeasures have maintained the MBA education system on its currentdevelopment course, while challenges from the ever-changing context,the balance between internationalization and localization, curriculumdesignwiththeChinesecharacteristicswillcontinuetoshapethefutureofMBAeducationinChina(ChenandYang,2010:128).

Japan

Japanisthesecondcaseweexaminehere(seechapter7).Atfirst,JapansharedtheexperienceofImperialChinainsetting-upaConfucianmodel

of education and training and we find here similar precedents forcontemporary practices. The classical autocratic state required aneducated bureaucracy. During the Taika Reforms (645 AD), Chinesepoliticalsystems(fromtheSui(581–618)andTang(618–907)dynasties)were imported to establish a legal–political system called theritsuryosystemthatwouldlastsomefivecenturiesandsetthescene.Theritsuryogovernment established what they called thedaigakuryo, a school thattrained administrative bureaucrats in the capital. It also establishedschoolsintheoutlyingregions.Later,bothBuddhist,ConfucianandShintoinfluencescoexisted.These

precepts centred upon the ruler–subject relationship, key toConfucianism,theimportanceofpietyfromBuddhism,thedisciplinesofeveryday living and the importance of education. After theMeijiRestoration in 1868, Japan moved towards modernising not only itseducation system but also its government administration. AlthoughBritishandAmericanliberalideascirculated,FrenchandGermanstatistnotions found greater favour in Imperial circles (Education in Japan,2011).The evolution of modern management education in Japan has been

ratherdifferentfromthatoftheChinesemodel.Itwasveryslowtoadoptthe North American business school model. Instead, it proceeded onsomething similar to German experience, with vocational technicaleducation and engineering degrees as the main influence. After theSecondWorldWar, thebigbusiness conglomerate groupings ( keiretsu)were largely uninterested in establishing business schools and theJapanesesystemremainedresilienttotheNorthAmericanmodelinspiteof the US Occupation regime. There was the widely held view thatAmerican methods did not suffice and Japan must develop its modelbasedon an emphasis on technical competence, as in theGermancase.Over40percentofschoolleaverswenttouniversityorcollegeandtheywere expected to have a higher standard of general education with astrongemphasisonmathematicsandscience.Studentswhowanted to get on studied economics or commerce, not

management.ThoseintheelitewhowenttotopuniversitieslikeTokyo

pursuedstudiesinlaworengineering.Universitywasseenasprovidingarounded education and later on company-specific skills couldbe taughtin-house. As Locke and Spender (2011:45) put it; ‘Companies spendmuchtimeandmoneyonin-housetraining,jobrotationandmultiskillingthatimparttacitandexplicitlearningtailoredtothefirm’senvironment’.Training programmes in-house fell into four categories: programmedtraining, cafeteria-type training, a combination of the above andcafeteria-typetrainingwithsupervisors’advice.AmajorbodyprovidingacertificationwastheJapaneseManagement

Association (JMA), the oldest such entity in Japan: during thewar theNippon Industrial Management Association and the Nippon ScientificManagementAssociationhadmergedin1942.Itsactivitiesincludeopenprogrammes,in-housetraining,distancelearning,andpublications.The absence of North America-style business schools in Japanese

universities is remarkable; there are only a few comparable to the USmodel,suchKeioUniversity’s.Althoughtherehavebeensomeshiftsinrecentyears,thereisstillagreatdealtodovis-à-visinternationalisation.Compared with other Asian countries (including China), Japan

producesonlyalimitednumberofhome-grownMBAs(seeWarnerandGoodall, 2009:4). The QS Global Top Business Schools 2009 listingfeatured only three Japanese schools amongst the 200 schools thatconstitute the MBA elite in Asia: Waseda Business School (WBS),International University of Japan (IUJ) and Ritsumeikan Asia-PacificUniversity (APU) although 78 institutions teachmanagement studies atgraduate level. More and more of these teach the course entirely inEnglish.ButitisclearthatthereisadearthofJapaneseMBAcandidatesor practisingmanagers attendingWestern business schools, whether inCambridge,EnglandorCambridge,Massachusetts.Ontheotherhand,theHarvardBusinessSchoolJapanResearchCenter

(JRC)wasestablishedinTokyoalmostadecadeago,inJanuary2002.Itsprimary aim is to support HBS faculty research and case-writingactivitiesinthatcountry:

ThroughitsactivitiesinJapan,HBSstrivestodeepenfaculty’sunderstandingofand

exposuretoJapanesemanagementissues,trends,andpractices,aswellasdevelopinglocallyrelevantcase-studiesandcoursematerialsforuseinMBAandExecutiveEducationprogramsaroundtheworld(HBS,2010).

Japan’suniversitiesdonot fare thatwell in international rankings,suchas theTimes Higher top 100 list, but Tokyo University achieved areasonablestatusat30thplaceandKyotoat52nd;noJapanesebusinessschoolfeaturedinthe‘100TopGlobalMBA’orEMBAcategoryintheFinancialTimes (FT) currentmanagement education institution rankingin 2011, or at Masters level (or others) globally, or even for Asia;Eduniversal recently mentioned three business schools in their topranking for Japan, namely those of the University of Tokyo, Keio andWaseda; and in theAsiaweek list, thereare two listedforJapan in theirtop list: International University of Japan andWaseda are featured as13thand16th;nobusinessschoolfromJapanwastomakethetop100inThe Economist’s 100 Top MBAs (seeTimes Higher, 2011,FT, 2011,Eduniversal,2011,Asiaweek,2011,Economist,The,2011b).Accreditation agencies have problems in Asia with the Japanese

educational bureaucracy, as the Ministry responsible appears to bereluctanttodealwiththem.

SouthKorea

SouthKoreais thethirdcaseweexaminehere(seechapter8).As in itsChinese neighbour, there was a long tradition of Confucian educationwhich passed on the scholarship, aswell as the theory and practice, ofbureaucracy in the Korean dynasties. This not only influenced thegovernanceof thecountrybutalsopassedona legacyoforganisationalhierarchytobeincorporatedinbusinessadministration,pastandpresent.South Korean business is dominated by big formally structured

businessgroupsknownasthechaebols.Theworditselfmeans‘businessfamily’or‘monopoly’ in theKoreanlanguage.Itsstructurecancoverasingle large company or several. Each is controlled, managed and/orownedbythefamilydynasty,generallythatof thegroup’sfounder.We

find giant indigenousMNCs such asHyundai, LGGroup and Samsungareamongthebiggestandmostnoteworthy.AftertheJapaneseoccupationendedin1945,Koreaendedupdivided

intothenorth(theDemocraticPeople’sRepublicofKorea(DPRK))andthesouth(theRepublicofKorea(ROK)),withtheformerunderRussianhegemony and with the latter underAmerican military government.Adestructive localisedwar in1950ensued,withdisastrousconsequences.The north consolidated its Soviet-style economic system, with RussianandChinesebacking,with itsownkindofdevelopmentofmanagementeducation and training for its cadres (see Collinset al., 2012) in theCentral School for High Ranking Cadres (see Kim, 2006:167) andupgradingof institutions isbeingconsideredwithUNadvice(seeDPU,2009).AnAmerican-ledrecoveryplanwaslaunchedtorebuildthesouthin1953,whichlaidgreatemphasisontrainingneedsinthewidestcontextandhasbornesubstantialreturnsaswillbeseenbelow.ManySouthKoreanswent to study in theUS,and thereforeWestern

management practiceswere adopted there (seeRowleyetal., 2005), asadaptedtothelocalculturalenvironment.AlthoughWesternersperceivecorporatecultureinKoreaastypicallyAsianandhighlycollectivistic,theJapanesehoweversee itmoreasbeing individualistic,as theydovis-à-vis the Chinese equivalent. Some commentators see this as ‘DynamicCollectivism’(seeRowleyandBae,2003:193–4).Management education and training in SouthKorea has largely been

based onUS lines for some decades now. In recent years, its businessschoolshavetriedtogainwiderrecognitionintheAsianmarket.Thebestknown business schools are at public institutions such as the SeoulNational University (SNU) and KAIST Business School at KoreaAdvanced InstituteofScienceandTechnology,aswellas sevenprivateschools:YonseiSchool ofBusiness (YSB) atYonseiUniversity;KoreaUniversity; Sejong University; Sogang University; SungKyunKwanUniversity;HanyangUniversity;andEwhaWoman’sUniversity.Yonseihasbeenteachingmanagementsince1915.ItsGlobalMBAProgramwasinauguratedin1998asthefirstEnglish-only-speakingoneinthecountry.Arecentcommentatorarguedthat:

SouthKorea’sYonseiUniversity,whichtoutsitsexpertiseinchaebol,orthemanagementoffamily-runenterprises,hasoffereditsservicesglobally.Thechaebolcurriculumreflectstheworkofwell-knownAmericanresearchers,buttheprogramworksonlywhereitreflectsindigenousvaluesystems(Lovett,2010:1).

International rankings of SouthKorean universities remain very low astheyhaveveryfewinternationalfaculty-membersandstudentsandlittleinternationally published research. Pohang Institute of Science andTechnology achieved 53rd position in theTimes Higher 100 list, withKAISTat94th;onlyoneKoreanbusinessschoolfeaturedinthetop100oftheGlobalMBAFTlistingsin2011,however,namelyKAISTas99th;in theFT Global EMBA listing, Korea University was placed at 23rd,Yonseiscored57th; in therecentEduniversal list,Seoul,Korea,KAISTandYonseiareratedastopKoreanschools;inAsiaweek,Seoulwaslistedbut was low down inAsia rankings; and inThe Economist’s Top 100MBA list, Yonsei was the only one noted, at 76th (see Times Higher,2011,FT, 2011,Eduniversal, 2011,Asiaweek, 2011,Economist, The,2011b).Salaries have been on the low side for many years, compared with

other professions. Recently, there has been a determined effort toimprove matters, with an attempt to recruit more foreign faculty-members, especially English-speaking ones. As a response toglobalisation, anumberofKoreanuniversities andbusinessschools arebeginning to teach inEnglish.Yonsei (YSB)hasnowembarkedon thiscourseofactionasnotedabove,aswellasanumberofothers,suchastheSolBridgeBusinessSchooloutsidethecapital,inWoosong.

Conclusions

Itwouldbeunwisetogeneralisetoosweepinglyaboutthelinksbetweenpastandpresent.Indeed,adegreeofcautionisneededwhenconsideringthe origins of business schools in general and in Asia in particular.However,wewillnowpresentsomebroadconclusions.Takingtheirevolutioninsequence,wefindthatthenewerparticipants

in themodernisationprocesswehave looked at seem tohave a greaterattraction to theNorthAmerican business schoolmodel, namelyChinaandSouthKorea,comparedwithJapan(seeJenster,2009).GiventhattheJapanese started earlier in their modernisation process in the latenineteenthcentury,itisunderstandablethattheymightnothaveadoptedaparticularmodeofeducationandtrainingwhichwasonlyjustemergingin theUS around the turn of the last century, bearing inmind that theHBSonlycameintobeingin1908.ThelaterdevelopmentofbothSouthKoreaandChinaperhapsmade themmoreopen towhatwere,by then,well-established Western management education and training modes,namelyfull-blownbusinessschools.Even so, teaching in such training institutions in the three Asian

countries remains largely glocal rather than global and is often in theindigenous language, with only distinct exceptions. Most businessschools in East Asia teach their main courses in their own tongues;Chinese, Japanese or South Korean. A good part of the instructionalmaterials are filtered by the local culture, are in its language and anycase-studies written are mainly locally focused ones. This emphasis isevenmoremarkedinsuchschoolsinprovinciallocations,wherethebulkof management teaching takes place and where the majority ofmanagement graduates have jobs in nearby enterprises, usually notMNCs. Cases are Western-based only where appropriate, such as in‘InternationalBusiness’courses.Textbooksarealsooftenonespublishedbyindigenousauthorsinthelocallanguage,withaminorityofWesterntextsusedintranslationorinEnglish,althoughmoresothelattercaseatthehigher-statusschools.We may therefore conclude that the ‘convergence’ theory does not

fullyresolvetheissueinthiscontext.Modernisationandindustrialisationdonothavethesameimpactonthesecountries’systemsofmanagementeducationandtraining.NeitherdoestheculturalandhistoricallegacyofConfucianismpointtooverlycommonoutcomes.Theculturalresilienceof the Japanese system seems to protect it more from exogenousinfluencescomparedwiththeChineseorSouthKorean.OneironyisthatAmerican-style business schools have diffused more widely in

communist China than in anti-communist Japan. If ‘soft’ convergencedoes occur, it might be likely to do so within cultural parameters butpossiblyinunanticipatedways.

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PartVThefutureandconclusions

Whenrulerslovetoobservetherulesofpropriety,thepeoplerespondreadilytothecallsonthemforservice.

(Confucius:Analects,XIV,xlv)

16ThefutureofEastAsianmanagementRosalieL.Tung

Introduction

It is both exciting and intimidating to speculate on the future of EastAsian management. It is ‘exciting’ because it presents a wonderfulopportunityforme,asoneof thefirstWesternmanagementscholarsofChinesedescenttoundertakesystematicresearchonChinaandJapan,tosetforthmyperspectivesonthewaythatthingsmightbeinthefuture.Itisalso‘intimidating’–sinceforecastingisalwaysdauntingparticularlyintimesofveryrapidanddramaticchanges.Perhapsthebestexampleofa seismic change that has occurred in the last quarter of the twentiethcenturyisthemeteoricriseofChina,theworld’smostpopulatednation.In the late 1970s,Chinawas one of the poorest countries on earth; yetwithin thecourseof three shortdecades, ithasbecome themost ‘cash-rich’nationandhas assumed the statusof theworld’sbanker.The factthat European leaders turned toChina for assistance in solving the EUsovereigndebtcrisisisaclearsignthatthatcountryhasalreadybecome‘a dominant global power’ whose scope andmagnitude of influence is‘fargreater…thananyoneimagines’(AldermanandBarboza,2011).This chapter will first briefly identify some of the forces that have

contributedtothetransitionfrom‘WestleadsEast’to‘WestmeetsEast’(Chen and Miller, 2010: 17) before speculating on the future of EastAsianmanagement.

From‘WestleadsEast’to‘WestmeetsEast’

BeginningwiththeIndustrialRevolutionthatbeganinthesecondhalfoftheeighteenthcentury,theWest(first,theUK,thenfollowedbymuchof

therestofEuropeandsubsequentlytheUS)hasbeenupheldasthemodelof economic development around the world. China and India, twocountries once known for their economic and military prowess in thecenturies preceding the Industrial Revolution, were reduced to a semi-colonial or colonial status, respectively. From then onwards,industrial/business practices in theWest (particularly those in the US)became synonymous with efficiency resulting in superior performanceandwerehenceemulatedworldwide.Thisstatusquowasmaintainedforalmosttwocenturiesuntiltheend

of the SecondWorldWar when the rapid ascendancy of the Japaneseeconomy in theworld attracted widespread attention – researchers andpractitionersalikewerekeentounravelthefactorsthathavecontributedtotheeconomicmiraclethathastransformedJapanfromtheruinsoftheSecondWorldWartoitsemergenceasthesecondlargesteconomyintheworld in a few short decades. These factors included Japaneseinstitutions, such as the Ministry of International Trade and Industry(MITI), that transformed Japan into an efficient export machine thatgeneratedhuge trade surpluses for that country (Johnson,1982).Othersasserted that the secret of the Japanese economic miracle lay in itssuperiormanagementpracticesandleadershipstylesasepitomisedbythepublication ofTheory Z by William Ouchi (1981). Concepts such asquality control circles (QCC), just-in-time (JIT) inventory systems andzero-defects (ZD) movements – typically associated with JapanesemanagementpracticesalthoughtheymaynotnecessarilyhaveoriginatedinJapan–receivedworldwideattention(seechapter7).Yetothershaveargued that theformulaforsuccesscouldbefound inJapan’sability toharnessandleverage itshumancapital tocompensatefor thatcountry’slackofnaturalresources(Tung,1984).Japan’s ascendancy was rapidly followed by the emergence of the

‘AsianTigers’consistingofHongKong,Singapore,SouthKorea (ROKorKorea, inshort)andTaiwan(seechapters6 and8).Whilesignificantdifferencesaboundamongthesecountries,theydosharecertaincommoncultural characteristics. In their correlational analysis of culturaldimensions and rates of economic growth worldwide for the 1965–85

time-period,HofstedeandBond(1988)foundthattheculturaldimensionthat has the most significant explanatory power for variations ineconomicgrowth rates around theworld isConfucianDynamism (CD).CDwas subsequently relabelled asHofstede’s fifth cultural dimension,long- versus short-term orientation. The characteristics associated withCD included persistence, thrift, the ordering of relationships in societyandasenseofshame(HofstedeandBond,1988:17).Just as the Japanese economy began to lose its momentum and

direction, commonly referred to as the ‘lost decade(s)’, two other EastAsian countries quickly took Japan’s place. First, therewasKorea andthenthePeople’sRepublicofChina(PRCorChina,inshort).DespitetheyetunsettledpoliticalsituationontheKoreanpeninsula,SouthKoreahasproduced severalchaebols, such as Samsung, Hyundai and LG, whichhave become major manufacturers or leaders in semiconductors,electronics,automobilesandconstructiononaworldwidebasis.ThepercapitaGDP inKorea expanded from$87 at the endof theKoreanWar(1950–3)toitscurrentrankasthefifteenthlargesteconomyintheworld(2009WorldBankdata).TheAsian financial crisis that erupted in thatregion in1997marked theentranceofChinaasa formidable force thathastobecontendedwithintheworldeconomicarena(seechapters2and5).Withinthecourseofthreeshortdecades,Chinawastransformedfromabackwardcountrythatwasbroughttothebrinkofeconomicbankruptcyat the end of the Cultural Revolution (1966–76) to become the secondlargesteconomyintheworldin2010andtheholderofthelargestforeignreserves in theworld.China isprojected toovertake theUSby2030orperhapsbeforethen(TheWorldin2050,2011;Ferguson,2011).The2008–9globalfinancialcrisis(GFC),withitsepicentreintheUS,

followedbythesovereigndebtcrisisthatcontinuestoplaguecountriesintheEuropeanUnion, has exacerbated the gap in economic growth ratesbetween the industrialisedcountries,on theonehand,and theemergingmarkets,particularlythoseofChinaandIndia,ontheother.EventhoughtheUS

continuestodominatetheranksofFortune’sGlobal500companies

stillleadstheworldintermsofpublicationinscientificjournalsishometosomeof themost innovativeandadmiredcompanies intheworld(suchasApple,GoogleandMicrosoft)andremains as the most attractive destination for pursuing studies inscience, technology and business administration, the winds ofchangearegatheringforcethatchallengetheWesttomakewayforor,attheveryleastsharetheworldstagewith,Asia1.

Theseforcesofchangeinclude,butarenotlimitedto

the widening disparity in rates of economic growth between theindustrialisedvis-à-vistheemergingmarkets;therisingcompetitivenessofnon-Westernmultinationals;the increasing awareness in Western countries of the need tounderstandandperhapslearnfromtheirAsiancounterparts;the surge in scientific knowledge generation in the emergingmarkets, as evidenced by the growing share of publications inscienceandscholarlyjournalsbyresearchersfromChina.

Eachofthesefactorsisbrieflydiscussedbelow.

Wideningdisparityineconomicgrowthrates

As noted earlier, the epicentres for the 2008–9GFC and the sovereigndebt crisis are the US and Europe, respectively. These crises havecrippledtheeconomiesinthesetworegionsandhaveresultedinnegativeor very low rates of growth in each of the past four years. In starkcontrast, China and India have continued to experience high rates ofgrowth. In fact, since 2003–4, the rates of economic growth in theemergingmarkets have surpassed those of the industrialised countries,(TDEconomics, 2009) and this gap is expected towiden further in theyears ahead (Bremmer and Shalett, 2011). To reflect this new worldeconomicorder,theindustrialisedWesthasfinallyrealisedthefutilityofattemptingtochartthecourseofworldeconomicdevelopmentamongthe

G-7membercountriesalone(US,Germany,UK,France,Japan,ItalyandCanada), particularlywhen some of them are the source of the currentfinancialwoes.ThesubstitutionoftheG-7bytheG-20countries(theG-7plus the BRICS countries and other emergingmarkets) means that theemerging markets, particularly those countries with hefty foreignreserves and strong economicgrowth,will have a broader say inworldeconomicaffairs.Inshort,theformationoftheG-20representsacrisisofconfidenceinthedevelopedWest’sabilitytoleadtheworld.AsFerguson(2011:5) has aptly described it: ‘… the West has suffered a financialcrisis that has damaged not only thewealth of theWesternworld, butperhapsmore importantly the legitimacy, the credibility, even the self-esteemoftheWest’.In fact, because of the persistent problems in the US and EU

economies,therehasbeengrowingtalkoftheneedtodecoupletheAsianeconomy from those of the US and Europe so that the growth in theformer group of countries will not be hampered by the lingeringeconomicwoesinthelatterregionsoftheworld.

Risingcompetitivenessofnon-Westernmultinationals

Earlieron,referencewasmadetotheemergenceofJapaneseandKoreanmultinationals after the 1950s. Products by Toyota, Nissan, Sony,Samsung, Hyundai and LG have become internationally recognisedbrandsthatchallengeand,insomecases,surpassthosethatemanatefromtheWest. In themore recent past,multinationals from other emergingmarkets have also made substantial inroads into the internationalmarketplace.Table 16.1 presents the growing representation of Global500 companies inFortune’s 2011 list that emanate from the emergingmarkets (Fortune, 2011). For comparison purposes, those from theG-7countrieswillalsobeincludedinthistable.Some of the emerging market multinationals (EMMs) have become

activeplayersinthemergersandacquisition(M&A)arenaincludingtheacquisition of some leading international brands. Examples includeLenovo’spurchaseofIBM’sPC,Tata’sacquisitionofJaguarandTetley

Tea,andZhejiangGeelyHolding

Table16.12011Fortune’sGlobal500companiesfromBRICS,AsianTigersandG-7

Source:Fortune,25July,2011.*ThisincludesfourfirmslocatedinHongKong,SAR.

Group’spurchaseofVolvo.M&Aaside,someofthehome-grownfirmsintheemergingmarketshaveverysizeablemarketvaluations.Examplesinclude China-based Alibaba, one of the largest B2B e-commercecompaniesintheworld;Baidu(marketvaluationofUS$37.3billion),thebiggest internet searchengine inChina; andHuaweiwhich ispoised toovertakeEricssonas the largest network equipmentmaker in theworld(‘HuaweineartoovertakingEricsson,seesconsumerdevices’(EconomicTimes,2011).Giventherapidriseandexpansionofindigenousemergingmarketcompanies,threeofthelargestmarketsforinitialpublicofferingsin2010wereHongKong,ShanghaiandShenzhen(Sorkin,2011).

AwarenessoftheneedtounderstandandperhapslearnfromAsia

Just as the motto for China after its humiliating defeat by Westernpowers in the mid-nineteenth century was ‘to learn from the West todefeattheWest’,inlightoftheriseofAsiaandtheemergingmarketsitappearsthattheWesthasfinallyawakenedtotheneedtounderstandandperhapslearnfromAsia.AsHexterandWoetzelhaveobserved(2007:7):‘As China emerges into the world economy, best practices there willbecomebest practices globally.More products developed inChinawillbecome global products; more industrial processes developed in Chinawillbecomeglobalprocesses’.This crude awakening first surfaced in the 1980s in the form of the

desiretounravelthesecretsoftheJapaneseeconomicmiraclealludedtoearlierinthechapter.Inthemorerecentpast,inlightofthephenomenalgrowthoftheChineseeconomy–economicgrowthratesofatleast9percent for three continuous decades – the West, including the US, hasfinally awakened to the need to understandChina. Some indications ofthis growing awareness include the following.One, in his 2009visit toChina, US President Obama unveiled his ‘100,000 initiative’, theobjective of which is to send 100,000 American students to study inChina in thenext 4 years (‘Obamapledges to send100,000 students toChinainthenext4years’,ChronicleofHigherEducation,The,2009).Two, the growing enrolment of international students in Asian

universitiesisnowofkeyimportance.WhileAsianstudentsarestillverymuch attracted to North American universities, in the recent past agrowing number of non-Asian students have been lured to Asianuniversities for two primary reasons: the economic ascendancy ofAsiaand the rapid rise in the rankings of Asian universities (‘AsianUniversities Become Draw for Foreign Students’,Chosun Ilbo, The,2010)(seechapter15).Forexample,thenumberofinternationalstudentsinChinadoubledfrom110,844to223,500between2004and2008.AttheNationalUniversity of Singapore, an estimated 20 per cent and 60 percent of its undergraduate and graduate students, respectively, areforeigners. At the University of Hong Kong, a high percentage of its

students are from overseas; it plays host to around 5,300 mainlandChineseandinternationalstudents,outofjust22,000studentsintotal.Three,thereisagrowingforumforresearchonChineseand/orAsian

management; for example, the mission of theAsia Pacific Journal ofManagement(APJM)istopublish‘originalmanuscriptsonmanagementand organisational research in the Asia Pacific region, encompassingPacific Rim countries andmainland Asia’.APJM had attained animpressive 3.36 impact factor in 2010 (Asia Pacific Journal ofManagement, 2011). Other examples include the establishment of theInternationalAssociation for Chinese Management Research (IACMR)and that association’s journal,Management Organization Research(MOR), as well as theAsia Pacific Business Review (APBR). Even thetop-ranked management journal, theAcademy of Management Journal(AMJ),willdevoteaspecialissuearoundthethemeof‘WestmeetsEast:NewConcepts andTheories’ (based onMing-JerChen’s theme for the2010AOM annual meetings). The objective of that special issue is tomove beyond the North American-centric research paradigms andconceptsto‘tapintotheempiricalphenomenaoftheEastanditscultural,philosophical and broader intellectual tradition to create a richer,morerobust and “powerful” field ofManagement, in terms of understandingand managing organisations and behavior globally’ (Barkema et al.,2011). This growing attention to Chinese and/or Asian managementpractices by Western or Western-trained scholars will undoubtedlytranslateintogreaterknowledgeandawarenessand,mostprobably,haveaninfluenceonmanagementliteratureingeneral.

GrowingshareofpublicationbyChinesescholars

The 2011 British Royal Society report entitledNetworks and Nations:Global scientific collaboration in the 21st century, confirmed theemergenceofChinaasascientificpower that rivals,and insomecasessurpasses, the traditional ‘scientific superpowers’ of the US, WesternEuropeandJapan(BritishRoyalSociety,2011a).Table16.2presentsthecomparativeproportionofglobalpublicationauthorshipbyselectcountry

forthetoptencountriesintwotimeperiods,1999–2003and2004–8.It is important to note that the aforementioned statistics may mask

higher numbers for China since a country’s publication record isdetermined by the country of affiliation of the authors as opposed tocitizenship and/or ethnic background.A cursory reviewofmanagementjournals’publicationattests totheexponentialgrowthinethnicChineseauthorsamongourranks.BrazilandIndia

Table16.2Comparativeproportionofglobalpublicationauthorshipbycountry

Source:RoyalSociety’sKnowledge,NetworksandNationsreport,’WouldEinsteingetfundedtoday?’(2011).

arealsocatchingupandSãoPauloisnowrankedamongtheworld’stop20citiesforresearchoutput(‘RoyalSociety’sKnowledge,NetworksandNationsreport:WouldEinsteingetfundedtoday?’,BritishRoyalSociety,2011b).Whilequantity is not necessarily synonymouswithquality, thesheerincreaseinthevolumeofpublicationinrefereedscientificjournalsby scholars from emerging markets does attest to the risingcompetitivenessofemergingmarketsinresearch.ThesameBritishRoyalSociety reportalsoprojected thatChinamay

likelyovertake theUSas theglobal leader inscientificoutputby2013.Since1999,ChinahasincreaseditsinvestmentinR&Dby20percentperyear to reach over US$100 billion in 2007 (or 1.44 per cent of that

country’sGDP).China’sR&Dbudget in2020 is projected to reach2.5percentofitsGDP.In2010,ChinaembarkedontheNationalMedium-and Long-term Talent Development Plan (2010–20) that established ablueprint forcreatingahighlyskillednationalwork-forceover thenextdecade (Wang, 2010). Foreign-educated Chinese talent is an obvioustarget. The growth in the emergingmarkets hasmeant that immigrantsandtheiroffspringmaybereturningtotheircountriesoforigininpursuitofcareeropportunities.Infact,becauseofthecontinuedweaknessintheUS economy contrasted with the growing strength of the emergingmarkets, this reversemigrationhasalreadybegun.Settingasidereversemigration, to capitalise on the growth opportunities in the emergingmarkets, there is a growing trend among high-tech immigrants toestablish dual beachheads of businesses in theUSorCanada, i.e., theiradoptive country of residence and their country of origin. Saxenian,authorofTheNewArgonauts:RegionalAdvantageinaGlobalEconomy(Saxenian,2006),notedthatbytheendofthe1990s,ChineseandIndianimmigrants accounted for 29 per cent of all IT start-up companies inSiliconValley.Anotherstudyin2005byDukeUniversityandreleasedin2007hasindicatedthat thepercentageof immigrantstart-upsinSiliconValleyhas risen to52percent (Labriet-Gross,2007).Themigrationofhumantalenttotheemergingmarketsisnotconfinedtoimmigrantsandtheir children. In fact, Beijing and Shanghai have become attractivedestinations for a growing number ofAmerican graduates in search ofjobsand/orcareerdevelopmentopportunities(Seligson,2009).

ThefutureofEastAsianmanagement

InlightoftheriseofAsiaandthegrowingrolethatitcurrentlyplaysintheworldeconomicarena,thereismuchspeculationastowhatthefuturewillhold in termsofmanagementstylesandpractices inEastAsiaandhow these developments can, in turn, affect the rest of the world (seechapters4 and11).Toput itdifferently,with the transitionfrom‘WestleadsEast’to‘WestmeetsEast’,doesitmeanthatWesternmanagement

theories and practices will be eclipsed and replaced by East Asianmanagement paradigms and styles? Some have raised the spectre thatWesterndominancemaybeover–see,forexample,PaulKennedy’sTheRise and Fall of the Great Powers (Kennedy, 1987) and the six-parttelevisionserieshostedbyhistorianNiallFergusonentitled,Is theWestHistory? which examine these issues, albeit on a grander scale thatencompasses political, economic and socio-cultural dimensions.Others,however, have pointed to the continued ingenuity ofthe West,particularly theUS (seeGupta andWang,2011, for example) andhavesuggested that the current economic woes confronting the West aremerelytemporaryhiccupsthatwillberesolvedintime.It isnot theintentionheretodebatewhethertheEastwilleclipsethe

West or vice-versa; rather, the focus here is on what will East Asianmanagementpracticeslooklike?Inmyview,EastAsiancountries,Chinainparticular,willnotbesofoolishastodiscardcompletelywhatWesternmanagement styles and practices have to offer; at the same time,however, given China’s rich cultural heritage combined with its new-found success and confidence, it will continue to espouse East Asianfundamentals and principles including elements of the so-called CDcultural dimension that have served the countries in this regionwell inthepast. In otherwords, on the surface,Chinesemanagement practiceswill appear to resemble those of the West but with Chinesecharacteristics, thusgiving rise to adiversityof styles characterisedbyeclecticism,perhapswithmorewomenmanagers(seechapter9).Inmakingthisassertion,IamremindedofTakeoFujisawa’sresponse

to the question as to how Japanesemanagement practices are differentfromthoseof theWest: ‘JapaneseandAmericanmanagement is95percent thesameanddiffers inall important respects’ (PascaleandAthos,1981,p.85).TakeoFujisawaistheco-founderofHondaMotorCompany.Hisanswerwhileshortisaveryprofoundoneindeedbecauseitcapturesthe essence that while East Asians, in general, are ‘savvy’ enough toabsorb thebest fromtheWestand therestof theworld, theyareat thesame time fully aware of the futility of thewholesale appropriation offoreign techniques and principles as the context/environment differs

significantly from country to country. Furthermore, it is foolish toabandonprinciplesandvaluesthathaveservedthemwellinthepast.Forexample, many East Asians, including those who have emigrated toforeignlands,continuetocherishmanyoftheattributesassociatedwiththeConfucianDynamismdimension(HofstedeandBond,1988),suchaspersistence,emphasisoneducation,hardworkandsavings(seechapters3and11).Inacomparativeanalysisofsavingsratesandattitudestowardsmoney

ofChineseinChina,CanadaandAustralia,andCaucasiansinCanadaandAustralia,TungandBaumann(2009)observed that thesavingsrateandattitude towards money of overseas Chinese resembled that of theircounterpartsinChinaasopposedtothatoftheCaucasiansintheircurrentcountryofresidency.As such, the future of EastAsian management, particularly Chinese

management,wouldmost likely exhibit the following characteristics ortraits:

1. A more intense scrutiny of Western management practices,particularlytheirpitfalls,andastheyapplytothecontextoftheinstitutionalenvironmentspecifictoagivencountry.

2. AmorebidirectionalflowofknowledgefromEast toWestandvice-versa as distinguished from themoreunilateral flow fromWesttoEastprevalentinthepast.

3. Adiversityofstylesandpracticescharacterisedbyeclecticism.

Eachofthesetraitsisbrieflydiscussedbelow.

MoreintensescrutinyofWesternmanagementpracticesandprinciples

As noted earlier, the GFC and sovereign debt crisis have negativelyaffectedthe‘wealth’,‘credibility’,‘legitimacy’and‘self-esteem’oftheWest(Ferguson,2011:5).Assuch,EastAsiannationsthatarebentonthepathofeconomicdevelopmentareintentonavoidingthesamemistakesthathavecontributedtothefinancialwoesthatcurrentlyplaguetheWest.

Inthenearfuture,attheveryleast,EastAsianswillcontinuetostudyintheWest,particularlytheUSwhichcontinuestobethebreedinggroundforsomeofthemostinnovativeandcreativecompaniesaroundtheworldand whose business schools are still in the forefront of knowledgegenerationasfarasmanagementstrategiesandpracticesareconcerned.However,EastAsianswillhenceforthbemorediscerningandcarefully

scrutinisewhatworksandwhatdoesnot,particularlyinthecontextofthepeculiar institutional environment that each of these countries isconfronted with. In fact, this approach resembles a ‘latecomer effect’whereby the more recent adopters of the latest technologies andtechniques, in this case East Asia, have the advantage of observingdecades of development and experimentation in theWest duringwhichprocesstheflawsandlimitationsassociatedwithsuchsystemshavebeenexposed. In other words, East Asian societies have the advantage ofdistilling decades of trial-and-error in theWest, observingwhat worksand what does not and thus leapfrogging decades ofprogress/developmenttoselectivelyimplementwhatshouldbepreservedand discard those elements that do not fit their own country, as inmanagementeducationandtraining(seechapter15).IntermsofselectivelearningfromtheWesttosuitthelocalsituation,

evenbeforetheoutbreakofthecurrentfinancialwoes,theChinesehavealways insisted on adapting foreign concepts and principles to fit theircountry’s conditions (seechapter 5). For example, Mao Zedong, thefounder of the People’s Republic of China, asserted that the brand ofsocialism to be implemented in China would take on ‘Chinesecharacteristics’(Schram,1963).

Morebidirectionalflowofknowledge

Until the recent past, the flow of management knowledge has beenprimarilyunidirectional,namelyfromWesttoEast.Atleasttwoeminentscholarshave lamented this sad stateof affairs. JamesMarch (2005:7),for example, has called for the fostering of a ‘multidisciplinary,multinational,multilingualcommunity’tobetterprepareusfora‘future

world of scholarship less dominated by North American research’.Similarly, Bruce Kogut has exhorted the US ‘to re-import ideas at thesamelevelasweexportideas’(Kogut,2005).Thecurrenteconomicturndownhasbecomeaclarioncall tomanyin

theWest that thiscomplacencyon itspartmayno longerbe tenable inthelongrun.Thiscrudeawakeninghasbecomeacatalystforchangeandhas contributed to the recent surge in interest to garner insights fromsome predominantly EastAsian phenomena that may be better able tocapture the realities of the new economicorder.Take, for example, the‘either-or’ mindset that is dominant in the West. Because Westernthinking and the Western civilisation have been largely influenced byGreekAristotelian logic that favours linear thought, such as inductionanddeduction,mattersare typicallyviewedaspossessingeitheronesetof attributesor another but not both. These include concepts such as‘competition’ versus ‘cooperation’, ‘good’ versus ‘evil’, and so on. Bycontrast, Eastern thought, as represented by Taoism, a majorphilosophical tradition that originated in China, is based on thecomplementarity of opposites. Inyin-yang philosophy, for example,‘darkness’ and ‘light’ are complementary; the ‘male’ should becomplemented by the ‘female’; similarly, good coexists alongside evil,andsoon.Withthechangedcalculusinglobalcompetitionwherefirmshavetoconcurrently‘thinkglobalandactlocal’andwherecompaniesinstrategic partnershipswith other external entities (whether domestic orinternational)havetosimultaneouslycooperateandcompeteinordertosucceed,Westernmanagementisthoughttohavebecomemorereceptiveto paradoxical thinking (Smith and Lewis, 2011). Paradoxical thinkingallowsfortheunityofoppositesandcanaccommodatesuchdualisticandcontradictoryconstructssuchas‘glocalization’and‘coopetition’(Chen,2008)tocapturetherealitiesoftheneweconomicreality.Inotherwords,East Asian philosophical traditions can be a ‘potential fount ofmanagerial wisdom that can help the renewal of Western economies’(ChenandMiller,2010:217).AnotherexampleoftheinfluenceofEastAsianthoughtpertainstothe

current interest in studying networks and social capital in the

managementliterature.WhilethesetwoconstructsareneitherinherentlynoruniquelyEastAsianconstructs,theimportantrolethatnetworksandsocialcapital, suchasguanxi inChinese,kwankye inKoreanandkankaiinJapanese(seePaikandTung,1999)haveplayedinbringingoutsuchremarkableeconomictransformationsinChina,JapanandKoreawithinarelativelyshortperiodoftimehastranslatedintoamoreintensedesiretounderstandthecomparativedynamicsandprocessesassociatedwiththesetwophenomenaacrosssocieties(seechapter10).StanShih, anativeofTaiwanand founderof themulti-billiondollar

electronicempireknownasAcer,embracesthebestpracticesassociatedwith Chinese and Western management practices and epitomises the‘ambicultural approach tomanagement’ advocated by Chen andMiller(2010). Shih retained Chinese values such as long-term orientation,harmonyandcollectivismwhilediscardingotherChineseattributes thatarenotconducivetosuccessfulperformanceintheglobalcontext.Thesedysfunctional aspects include mistrust, secrecy, centralisedauthoritarianismandethnocentrism(LinandHou,2010).

Diversityofstylescharacterisedbyeclecticism

Despitesimilarities,salientdifferencesanddiversityexistacrosstheEastAsiancountriesofChina,JapanandKorea.EvenwithinChina,giventhegeographic spread, strong regionaldifferences exist (Tungetal., 2008).Furthermore, in light of different types of ownerships (state versusprivateownership), it isnaïve toassume that therewillbeone styleofmanagementthatfitsallsituations.Throughouthistory,theChinesehavebeen eclectic in their approach to religion and philosophical traditions.During theTang dynasty (618–907 AD), for example, Buddhism wasintroducedfromIndiatoChinaandBuddhismhascontinuedtoremainanimportant religious influence inmany aspects ofChinese society.Eventoday, many Chinese do not see any contradiction in venerating theirancestors (often erroneously translated as ‘ancestral worship’) andconversiontoChristianity.In a similar vein, many Chinese subscribe concurrently to the

principles of Confucianism and Taoism, two major philosophicaltraditions that appear to be diametrically opposed to each other. Theformer prescribes a moral code of conduct or ethical behaviour to beobserved inacivil societywhereas the latter focuseson thepragmaticsand realities of life and living. In my 1994 article entitled, ‘Strategicmanagement thought in EastAsia’ (Tung, 1994), I outlined the twelveprinciples that have served as a handbook or ‘bible’ formany businesspractitioners inChina,Koreaand Japan.From theWesternperspective,manyof theseprinciplesappear to resemble thecunningandwiles thatare characteristics of the preaching of Machiavelli inThe Prince andhence are diametrically opposed to the teachings of Confucius thatemphasise ethical behaviour and conduct. This Western perspectivestemsfromthe‘either-or’thinkingdescribedearlierwhereastheChineseperspective is one of dialectic harmonisation that suggests that in thepresenceof contradictionswe should ‘project ourselves into a situationwhereconflictandantagonismwilldisappearthroughanoverallprocessofadjustmentofourselvestotheworld’(Cheng,1991:195).As noted above, amajor tenet of Taoism is theyin-yang philosophy

that accepts inherent contradictions in all things and matters. Thisphilosophical tradition has enabled the Chinese to embrace Hegeliandialectics, as adapted by Karl Marx, and explains the coexistence ofsocialism andmarket capitalist principles in today’s Chinese economy(Lin,2011;Warner2011).

Conclusions

TheforegoingdiscoursesuggeststhattheEastAsiancountries,Chinainparticular,intheirattempttomaintaintheireconomicdevelopmentwillmostlikelynotcompletelyabandonthewisdomfromtheWestinfavourof a home-grown tradition, at least not in the foreseeable future (seeWarner,2011).Infact,thetitleofFerguson’ssix-parttelevisionseries Isthe West History? is a very Western concept based on the ‘either-or’mentality associated with Greek Aristotelian logic. Rather, the most

likely scenario is one where East Asian management concepts andpracticesexistonamoreequalfootingwiththosefromtheWesttoresultinamoretrulybidirectionalflowofknowledgefrom‘WestleadsEast’to‘WestmeetsEast’.Thisoptimismstemsfromthe fact that, ingeneral,mostChineseare

veryintrospective.AsFerguson(2011:15)noted,theChineseleadersarekeen students of history – ‘more historically minded than Westernleaders.They’remorehistoricallyeducated’.Assuch, theyareeager tolearnfrom,andhenceavoid,sinsofcommissionand/oromissionbytheirancestorsaswellasmistakesmadeinothercountries.AsCharlesZhang,founder ofSohu.com(aleadinginternetportal inChina)observed,afterChina’shumiliatingdefeatintheFirstOpiumWar(1840–2),thatcountryhasbeenengagedin150yearsofsoul-searchingofwhatwentwrongandin the process it ‘has been the best student because it has continuouslysought to understand what went wrong and learn how to correct thesituation’(Zhang,2004:148).ThissituationwillmostlikelyholdaslongastheChinesedonotlapseintothe‘hubrisbornofsuccess’trapthattheyfell victim to several centuries ago.As the popular saying goes, ‘Pridegoes before a fall’, a phenomenon that Collins has documented in hisbook,How theMighty Fall: AndWhy Some Companies Never Give In(Collins, 2009), which identifies the deadly sins associated with thecollapseoflargecorporations.In the final analysis, perhaps no organisational entity or nation can

progressinastraightline.AsFerguson(2011:19)hasastutelyobserved:‘theprocessofhistoricalchangeisnon-linearanditischaracterisedbyareallyhigh levelofunpredictability. It’snotaquestionofsmooth trendlinesthatyoucanprojectforwardto2050’.Afterall,afundamentaltenetofEastAsianwisdom, theyinyangprinciple, supports thedualityofallmatters and so can accommodate the coexistence of diametricallyopposedmanagementthoughtsandtrends.

Note1 Besides China and other EastAsian countries, other emergingmarkets such as India and

http://Sohu.com

Brazil haveattained rapid economicgrowth.Given the emphasisof thisbookandchapter,thefocushereisonEastAsia,particularlyChina.

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17ManagingacrossdiverseculturesinEastAsiaConclusions

MalcolmWarner

Introduction

In this edited volume, we have set out to examine the problem ofmanaging across diverse cultures in East Asia. We looked at theunderpinning influencesat themacro-(economy) level,aswellasat themicro-(firm) level, which were related to the economy, culture andmanagementinthesecountriesandhowfareachsocietalcaseprovidesaunique story within the parameters of diversity. We also tried to linkdysfunctions in these societies to changing values and analyse thepositiveandnegativecharacteristicsof these.Rather thandealwith theregion in its entirety, we concentrated on the major players, such asChina,JapanandSouthKorea,aswellasinpassingtheOverseasChinese(Nanyang) enclaves of Hong Kong SAR, Macau and Taiwan. Therationaleforthischoicehasbeenspelledoutinchapter1.In the region as a whole, we have dealt with a number of major

dimensions, suchas thecultural, economicandpoliticaloneswhichwewould argue are the key shapers of management in its various guisesfoundthere.Wewillnowtakeeachin turntosumuptheirbroad-brushcharacteristics and try to relate them to their specific managementimplications.

Cultural

Manyscholarshavesuggestedthatthereisacommontraditionalculturalinfluence inmostofEastAsia (see forexample,Holcombe,2011).The

phenomenondatesbackmanycenturiesasChinaadvancedandretreatedacross the region (see Maddison, 2007; Moore and Lewis, 2009). Wehavenotedherethatthemostsignificantbelief-systemshapingvaluesinEast Asia has arguably been Confucianism (see Warner 2011). Thedegree towhich culture, or specifically the thoughts of Confucius (seeKwon,2008;Lin andHo,2009),mightbethe key independentvariabledeterminingeconomicandrelatedbehaviourinthissociety,is,however,moot. Social scientists and others differ in their opinions regarding itsimportance for contemporary affairs. Even so, we have given aconsiderable emphasis to it in this volume, with caveats duly noted.Chapter3,forexample,noteshowAsianvalues,suchastheemphasisoneducation, have been crucial formany centuries.Scholars in the regionhave reflected on economics and management, either directly andindirectly, since ancient times (seeChen, 1911; Rindova and Starbuck,1997;Trescott2007), forexample.AsAsiahasasserted itself in recenttimes,therehasevenbeenadeterminedattempttopresent‘Asianvalues’as an almost ideological platform, and with an implication of moralsuperiority.ButasTung(inchapter16)putsit:

Rather,themostlikelyscenarioisonewhereEastAsianmanagementconceptsandpracticesexistonamoreequalfootingwiththosefromtheWesttoresultinamoretrulybidirectionalflowofknowledgefrom‘WestleadsEast’to‘WestmeetsEast’.

The phenomenon of culture has also been a significant key todisentangling the twin threads ofconvergence anddivergence (seeWarner, 2003, 2011). Cultural variationmay characterise diversity andgive it its flavour. We have made it clear that we do not accept‘convergence thesis’ as such, and prefer to speak of ‘soft’convergence/divergence.Globalisation finds its roots inmany commondriversofchangebutnonethelessspecificAsiansocietiesstillretaintheirdistinctive characteristics. The typical Chinese shop-floor sometimeslooks like its JapaneseorKoreancounterpartbutwhatstandsout is the‘socio-technicalsystem’.Notonlyisthelanguagedifferentbuttherearenuances of culture. Most East Asian management structures arehierarchicalbutstillvaryintheirspecifics.

Howcultureimpactsuponmanagementhasbeenmadeclearinalmostallthechaptersinthisbook.MostexpertsinthefieldwouldnotfindthissurprisinggivenitsAsiancontext,sincewearedealingwithrelationship-based societies.Guanxi, forexampleremainsveryimportant inChineselife(seechapter5),asdoesitsequivalentinJapaneseandKoreansociety(seechapter10).Further,agreatdealhasbeenwrittenonthesubjectofculture across the board. The bibliographies of the contributionspresentedabovetestifytotheamountofacademicinterestinthisfieldinrecent years. Itwould perhaps be invidious to suggest that culture is amore important variable than others, as it varies from one place toanother to another but theways inwhich itmanifests itself are clearlydifferenthereandthere.Wehaveseenintheearlierchapters(5,6,7and8) in the book detailed accounts of how this relates tomanagement inChina,HongKong,JapanandSouthKoreaforexample.Inonesense,itmaybesaidthatAsiansocietiesareperhapsblending

(seeRowleyetal.,2005),inthattheymaybebecominglesscollectivisticand more individualistic. This may, however, be debatable as there ismixed evidence regarding intergenerational changes in the values. Fewwoulddenythatwomen’sparticipationinthelabourforceinAsiaisnowexpanding too, as chapter 9 points out. This trend is increasinglyobservablewithintheranksofmanagementbutmayvarygreatlybetweensocieties.Asia isalsosaid tobenowbuildinganew‘consumer-driven’society on the back of its formerly production-oriented one. China’smanagersandworkersarenowmotivatedbymonetaryrewards,asneverbefore.Evenso,thelegacyofpasthabitsdieshardandAsiansstillsavemuchmoreoftheirincomesthantheirWesterncounterparts(seechapter16)oftenasmuchashalfagain.Thishabit,itissaid,maybeduetothelackofarobustwelfarestate,whichisthecaseacrossAsianeconomies,andtheneedtopreparefortheunforeseen.Notable toohasbeen the riseof anAsianmiddle class, especially in

EastAsia. It has been evident in Japan, Hong Kong, South Korea andTaiwanformanyyearsnow.ButthedevelopmentofsuchaclassinChinahas also been growing in recent years. It consists of those who derivetheirwealthand income fromentrepreneurial activityasmuchas those

whobenefit fromtheir rolesandstatusasmanagersandadministrators.This new middle class is in many ways a ‘meritocracy’, in great partderivingitspositionfromeducationandtraining.ButalthoughChinahadatraditionaleliteeducationsystemforhundredsofyears,itwasnotuntilthetwentiethcenturythatopportunitiesopenedupfor themany.Today,China has expanded its colleges and universities on amassive scale toencouragethedevelopmentoftalent.Indeed,educationalinvestmentbothat the personal and the national level characterises all East Asianeconomies.Wehaveseeninchapter15,forexample,howasubsetofthishasbeenchannelledintomanagementeducationandtraining.Althoughthenumbersofmanagersarerelativelysmallcomparedwith

the huge labour force, they constitute an elite which is growing inimportance.Whetherornot therehasbeena ‘managerial revolution’ isdebatablebutitisevidentthattopmanagersinChinanowhaveveryhighstatus (see Redding and Witt, 2007). Entrepreneurs andbusinessmen/women have also come into prominence,which is quite achangefromthelowlystatustheyweretraditionallyaccorded.Social stratification in what were formerly feudal societies has now

changed considerably. It has been transformed into one increasinglybased on merit and achievement. Managers selected by competitiveprocesses, including formal examinations, are now more and morelegitimised,astheyareintheWest,ontheonehand.ButthisismitigatedbydysfunctionalbehaviourwhichseemstobeveryprevalentinallEastAsiansocieties, relating tocorruptionandfavouritism.Itbecomesmostvisiblewhenitmakestheheadlinesinvolvingseniorexecutivesatthetopcorporate level. So, as Nolan suggests earlier in this volume, there is‘good’guanxiand‘bad’guanxi:‘Fortheglobalmanager,thebenefitsofestablishingthe“good”onearesignificant,buttheyshouldalsobealertto the dangers of the “bad”; for the time being at least it remainsnecessarytoproceedwithcaution’(seechapter10).

Economic

It is now becoming conventional wisdom that Asia has become the‘powerhouse’ of the global economy. In chapter 2, Das notes that: the‘[E]mergenceoftheAsianeconomyasadynamiceconomicgrowth-poleovertheprecedingfourdecadesisaneventofhistoricsignificance’.EastAsia inparticularcontains theneweconomicsuperpower,China,whichhasdisplacedJapanasnumber two,at least in termsofaggregateGDP,vis-à-vistheUSA.Ifonehadpredictedacoupleofdecadesagothatthiswouldhavebeen thecase, itwouldhaveseemedquiteimprobable,as itwouldwithIndia(seeNankervisetal.,2013).Evenso,acommuniststatehasoutperformedacapitalistnation,albeitonewithastatisthistory.Thismight have appeared even more improbable given the debris of theCulturalRevolutionyears.MuchofthecreditmustbelaidatthefeetofDeng Xiaoping. His bold démarche in initiating the ‘Open Door’ and‘FourModernisation’policies in1978 laid the foundations for the latersuccesses.The next three decadeswere to see a seemingly unstoppableperiodofrapideconomicgrowth,sometimesalittleunevenbutmostofthetimeatfullspeed.Thenetresultwastoincreasethestandardoflivingof all classes in the PRC; all are now equal citizens in China’s new‘harmonious society’ but some are more equal than others. The‘economic rent’ the elite claims there, due to the scarcity of resourcesand talent amongst other considerations, has led to one of the widestdegrees of inequality ofwealth and income in theAsian societies. TheGini-coefficientis0.47,meaningthatMao’slevellingdownto0.24isinthe dim and distant past, with a steeper 0.53 in Hong Kong. Japan’sposition is somewhatmore egalitarian but it is still 0.37; SouthKoreacomesinat0.31(WorldBank,2011).The economic growth of East Asia has wide implications for its

management.Inthedetail,thepicturevariesfromonecountrytoanother.TherelentlessexpansionoftheChineseeconomyanditssea-changefrombeing a ‘command economy’ to becoming a ‘market’ one has hadenormous consequences, as we saw in chapter 5. The nature of theenterpriseswas tochangefrombeingunderstatecontrol tobecomingamixtureofpublic andprivate invariouscombinations.Chinanowevenhas its ownMNCs that operate on a global basis. This newstatus quo

requires a new breed of managers and a new kind of managementeducationandtraining(seeWarnerandGoodall,2009).Japanhadearlierpresented amodelwhichmany countriesEast andWest looked to (seechapter7);butthisbecamelessconvincingwhenitseconomyentereditsdecade ofstasis.InthecaseofSouthKorea, itsreputationslidaftertheAsianFinancialcrisis,butithasbouncedbackinrecentyears,aschapter8notes.

Political

China’s ‘peaceful rise’ (or ‘development’ as they prefer to call it) hasnowbecomeafamiliarphraseintheeditorials.ThePRChasnowbecomethe dominant player in terms of both ‘hard’ and ‘soft’ power in theregion.Given thehistoryof the twentiethcentury, ithashadanuneasyrelationshipwithitsneighbour,Japan,andanequallycomplexonewiththe twoKoreas,North andSouth.Today, it is increasingly asserting itshegemonyovertheregion.Politics, both internal and external, have a wide influence on both

micro-andmacro-management in therespectiveeconomies. In thecaseof China, there was a deliberate political choice to switch from a‘command’toa‘market’economy(seeLin,2011).WithitsidiosyncraticformofParty-ledcapitalism,strategystillcomesfrom‘onhigh’.Japanhad earlier its own statist form of development (seechapter 7) as didSouthKorea,(seechapter8).Inbothcountries,thereisalsoaclosenexusbetweenthepoliticalandbusinesselites.Atthemicro-level,thepoliticalbalancebetweenthemanagersandthe

managed is moderated by workers’ representatives in differentconfigurations in the respective East Asian workplaces, as we see inchapter13.ThereisonlyonetradeunionmanagementinChinawhichistheofficialone,theACFTU;thepositioninJapanismoredifferentiated,with enterprise based unions; similarly so in South Korea (seechapter13).

Conclusions

The implications for management of the above cultural diversity areindeed complex, as has been seen in the above three-dimensionalanalysis.Wehaveattempted tosumupwhathasbeensaid in thebook,why it was important and where it is leading to.Culture, it may beargued, still influences the parameters of Asian values within whichmanagement functions.Economics, especially the quite extraordinarygrowth inGDP in recent times, has also been a driver ofwhat specifickindsofmanagementhaveemerged.Politics,too,stillplaysanimportantroleinhowthesystemworks,withtheStateinteractingwiththemarketbutnowperhapslessso.The‘devil’is,however,always‘inthedetails’.

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Glossary

(includesChinese,JapaneseandKoreanterms).

amakudari,‘descendfromheaven’bao,reciprocitycaihai,‘takingtheplunge’[intobusiness]chaebol,businessfamily,Koreanconglomeratedaigakuryo,bureaucrat’strainingschooldanwei,work-unitdingti,inheritedpostsdongbei,North-Eastghaizi,‘changingthesystem’gong-guan,publicrelationsgonghui,tradeuniongongzibiaozhun,wagestandardsguanli,managementguanlirenyuan,managerguanxi,connectionsguojiazhuren,‘mastersofthecountry’guoyouqiye,state-ownedenterprisesinhwa,kin-basedhierarchiesjinfanwan,‘goldenrice-bowl’jingjigaige,economicreformsjingjiguanli,economicmanagementjuyouZhongguotese,‘withChinesecharacteristics’kankai,relationships,inJapankaifang,OpenDoor

kaisha,Japanesecorporationkeiretsu,Japanesebigbusinessgroupingkexueguanli,scientificmanagementKongzixueyuan,ConfuciusinstitutesKongFuzi,Confuciuskwankye,relationships,inKorealaodong,labourlingdaojieji,‘leadingclass’mianzi,facemingsheng,reputationmunojojeongchaek,Korean‘no-labourunion’policy.nanyang,OverseasChineseNihonjinron,theoriesof‘Japaneseness’nonmingong,peasantworkerspalli-palli,‘quickly-quickly’poka-yoke,mechanisminJapaneseleanmanufacturingrenliziyuanguanli,HumanResourceManagement,(HRM)renminbi,people’scurrencyrenshiguanli,personnelmanagementsanxiangzhidugaige,thethree-systemsreformssegyewha,Koreanglobalizationpolicyshifu,Mastershijiedatong,‘viewingtheworldinaharmoniousstate’shiye,unemploymentsigexiandaihua,FourModernizationstiefanwan,‘ironricebowl’tudi,apprenticewa,harmonywon,Koreancurrencyxaihai,‘tojumpintothesea’yen,Japanesecurrencyyon-go,connectionsyuan,Chinesecurrencyzaibatsu,Japanesebigcorporations

Zhongghuo,MiddleKingdomZhonghuaRenminGongheguo,People’sRepublicofChinazhuren,‘masters’xiagang,workerredundancy

Index

AACSB,247,258Acer,237,241,244,272,275ACFTU,81,186,228,281ADB,16,32,204,242ageing,50,107,108,109,128,146,162,206agency-workers,211,212,218,220,223,228agriculture,105,240,250Alibaba,267All-ChinaFederationofTradeUnions,seeACFTUamakudari,171,172,180ambicultural,14,233,242,272,275Apple,265arbeitoworkers,218;seealso‘freeters’ASEAN,23,27,29,30,32,240AsiaDevelopmentBank,seeADBAsianFinancialCrisis,11,118,122,127–8,193,221‘AsianMiracle’,4,241AsianTigers,4,11,91,122,196,264,266AssociationofSouthEastAsianNations,seeASEANAssociationtoAdvanceCollegiateSchoolsofBusiness,seeAACSBauthority,17,75,89,116,122,131,134,137,169,172,185,188,191

‘ba’,113–14Bangladesh,159,232,237,243bankers,4,177,181Beijing,3,6,56,250,251,269;seealsoPekingBrazil,Russia,India,China,SouthAfrica,seeBRICSBRICS,265,266bubble-economy,99,162,204bureaucracy,248,249,250businessnetworks,8,12,168,172,174business schools,14, 72, 91, 133, 170, 247, 254, 255, 256, 271; see also management

educationbushido,54businesssystems,13,183,184,193–196

capitalism,7,30,104,125,179,183,280career,12,52,102,146,153,155,159,160,164,269casualization,13,14,92,11,114,212,216,218,225CCAC,95CFB,seeChineseFamilyBusinesschaebol,54,59,125,135,142,143,173,194,201,248,255,264Chengdu,80China3,4,6,9,12,14,25,30,38,40,44,50,56,59,69,71,73,78,84,93,130,153,155,

164,169,175,178,184,194,196,199,211,226,232,246,263,277ChinaEuropeanInternationalBusinessSchool(CEIBS),251,252,253ChineseCultureConnection,34,37,39,68ChineseFamilyBusiness,56,57,58;seealsoCFBChinesemanagement,67–86Christianity,7,69,74,240,273clan,12,126,137,169,179,277collectivism,7,38,68,75,80,82,102,117,134,170,183,191,236,242,249,256,272Communist,7,15,92,185,199,247,257,280competitors,50,55,59,186,237conformism,38Confucius,19,65,68,70,91,151,235,249,250,260,273,277ConfucianDynamism,44,264,270Confucianism,6,7,16,34,69,80,102,131,137,169,173,235,241,248,277connections,seeguanxiconvergence,6,11,15,23,79,84,87,122,178,247,257,278‘CoolJapan’,107corporateculture,68,75,97,116,134,136,256corruption,89,94,96,171,176,178,232,238,279cross-cultural,8,9,34,35,40,57,67cross-vergence,79

Daewoo,125,127,137,143daguo-fa,82;seealsoironricebowlDalian,58,251danwei,75,175,283;seealsoironricebowlDaoism,seeTaoismDengXiaoping,4,51,71,82,185,280deregulation,14,212,241despatch,211,214,218,223,225,227diversecultures,managingacross,3–20,277–82dragons,little,4,87,91,242

earthquake,30,107,194EastAsianculture,34–48EastAsianeconomy,21–33EastAsianemploymentrelations,211–31EastAsianmanagement,49–66

economicdevelopment,10,11,21,31,38,54,57,72,82,89,101,125,185,190economicreform,4,10,56,67,71,85,168,174,239,240education,185,188,192,201,218,234,235,238,246,279,280egalitarian,40,43,280electronics,22,29,50,55,87,107,124,159,221,264,272EMEs,28EmployeeRelations,111;seealsoIndustrialRelations,Labour-ManagementRelationsentrepreurship,107,158,199,ethics,7,75,92,117,233,236,239EU,4,9,13,22,58,110,194examinations,248,250,279expatriate,57

‘face’,seemianzi‘FactoryAsia’,26,31family-runfirms,seeChineseFamilyBusinessFDI,9,27,236female,seegenderfinancialcrisis,193,221,280‘FourModernisations’,250,280ForeignDirectInvestment,seeFDIforeign-invested,seeFDIFoxconn,226‘freeters’,107future,262–76

ganbu,251GDPgrowth,24,29,204Geely,57gender,8,12,88,109,117,153,158,160;seealsowomen;andmanagement,153–67Gini-coefficient,72,246,280;seealsoinequalityglobalisation,9,14,21,28,34,89,134,146,164,196,233,236,252,256,278GLOBEstudy,34,38,43,236Guangdong,94Guangzhou,79,80guanxi,12,13,56,70,77,78,83,168,170,174,178;andmanagement,168–82

Haier,5,57HanlinAcademy,250hardwork,37harmony,12,40,56,70,79,83,102,131,136,169,170,173,235,250,272HighPerformanceWorkSystem,111Hindu,235,240HongKong,SAR,10,11,13,27,30,37,40,43,56,79,87, 196, 200, 246;management in,

87–98HPWS,117

Huawei,5,57,267hukou,223HumanCapital,14,154,183,186,192,233,264Human Resource Management (HRM),108, 137, 140, 145, 171, 211, 225, 229; strategies,

211–31Hyundai,54,58,125,255,264,266

ICAC,95IMF,30,127,130Imperialexaminations,seeexaminationsImperialism,248India,14,33,71,113,232,233‘IndiaWay’,14,233,237,239individualism,7,38,74,80,117,236Indonesia,22,27,30,41,81,106,174,240,Industrial Relations,143, 170, 229; see also Employee Relations, Labour-Management

Relationsinequality,30,40,158,160,240,246,seealsoGini-coefficientinformallabour,14;seealsore-regulationinhwa,12,134,136,146,169,173;seealsoharmony,guanxiInternationalMonetaryFund,seeIMFinternet,59,267,274ironrice-bowl,57,75,82,171,216,251;seealsodanweiIslam,7,74,89,235,240

Japan,3,6,8,12,25,43,52,59,97,99,111,134,143,153,183,187,211,246;managementin99–121

jinfanwan,248;seealsoironricebowl,tiefanwanJunZi,78‘Just-in-Time’,264;seealsokanban

kaisha,52,59kaizen,115;seealsoQualityCircleskanban,52;seealso‘Just-In-Time’karoshi,54,117KCTU,143,214keiretsu,172,190,254;seealsoManagementinJapankeyeconomicindicators,6kinship,12,134,137,168Korea,11,13,15,28,44,54,122,190,246;managementin,122–54KoreanFederationofTradeUnions;seeKCTU

labourbureaux,228labour-management,68,81,90,127,142LabourRelations,seeEmployeeRelations,IndustrialRelationsLegalism,69

Lenovo,5,57,266LG,55lifetimeemployment,82,99,104,140,171

Macau,87–98Malaysia,159,232,240managementeducation,246–62,271,279;seealsobusinessschools;MBAsmanagementsystems,7,10,14,49,102,116,207,208,239,MaoZedong,7,74,83,185,250,271,280Marxism,91,171,247,273MBAs,251MeijiRestoration,100–102mianzi,56,170‘MiddleKingdom’;seeChinamigrant,76,92,124,130,216,223,269mingsheng,70Mitsubishi,54,190Mitsui,190Multinationalcorporation(MNC),5,13,52,178,255,257

Nanjing,252Nanyang,seeOverseasChineseNewlyIndustrialisedEconomies(NIEs),87–98Nihonjinron,171Nissan,266NUDM,94

‘OpenDoor’,71,199,250OverseasChinese,11,14,87,270,277

Pakistan,37,42,159,232,234,241palli-palli,131Panasonic,104Peking,seeBeijingpersonalitytraits,40–1PESTEL,49,51,58Philippines,27,37,240Politics,Economic,Socio-cultural,Technological,EcologicalandLegal,seePESTELpopulation,124,205PRC,seeChina

QualityCircles,264;seealsoJust-in-Time,kaizen

RENGO,212,225re-regulation,employment,211–31

Samsung,55,125,128,131,143,192,223,255,264,266samurai,54,100,248Sanyo,55SARSepidemic,90savings,38,73,186,270seniority,99,103,108,131,137,140,146,155,161,169,173,187,190,193SFC,95Shanghai,52,92,177,186,251,267,269Shenzen,82Shinto,7,102,253Shunto,212SichuanProvince,72,75SilkRoad,4Singapore,5,8,27,36,37,40,44,56,174,192,264,267smallandmedium-sizedenterprises(SMEs),196,197,198,200,203,208,210;seealsoSMEssocialism,82,91,271,273societalcase-studies,67–152societalculture,11,56,68,72,130,SouthAsia,232–45South-EastAsia,232–45SouthKorea,3,5,7,8,10,12,37,54,58,122,188,191,201,233,246,255,280SovietUnion,43,81,251,255SriLanka,232,234,238stakeholders,50,88,103,187,190State-OwnedEnterprises(SOE),51,56,59,78,82,185,216,251;seealsodanweisteel,54,70,124,223,241,strategy,27,51,81,113,115,125,136,162,201,232,250,280strikes,81,127,142,189,191,224,226Sumitomo,190SunTzu,7,16

Taiwan,10,27,28,36,40,56,87–98,107,174,196,200,234,236,250,272,279Tata,237,266Taoism,69,73,91,272,273;seealsoDaoismTaylorism,92,102Thailand,27,30,240tiefanwan;seeironricebowlTownandVillageEnterprise(TVE),75Toyoda,52Toyota,52,55,237,266tradeunions,seeACFTU;KCTU;RENGOtradition,7,10,14,37,44,69,73–84,96,101,112,118,131,169,239,241training,5,14,72,84,89,91,99,102,132,137,146,186,246transitionaleconomy,67Tsingtao,57Tsunami,29,59,87,107

unemployment,30,106,129,206,207,212,215,217uniondensity,144,213,215,224unions,seetradeunionsUnitedKingdom,40,92,248universalism,12,42,83USA,5,11,15,25,41,52,55,87,91,123,246

Vietnam,4,27,36,81,91,130,198,240

wage,minimum,94,223wages,222women,seegenderWorldTradeOrganization(WTO),50,67,72,79WorldValueSurvey(WVS),35,37,44wu-lun,169wu-wei,69

yin-yang,272yon-go,173

Zero-Defects,5,264;seealsoJust-in-Time

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Managing Across Diverse Cultures in East Asia€¦ · 2011-11-07 · 17 Managing across diverse cultures in East Asia: conclusions MALCOLM WARNER (UK) Glossary Index. Figures and