Hamilton, Gary G., and Nicole Woosley Biggart. 1988. "Market, Culture, and Authority: A Comparative Analysis of Management and Organization in the Far East." American Journal of Sociology 94 (Supplement):S52-S94.


There are three main approaches to understanding economic decision making in relation to organizations. The market approach study the conditions in which business firms arise and operate in relation to market transactions. The second perspective suggest that culture patterns shape economic behavior. The 3rd is the political economy perspective, with a focus on power and authority.

This paper looks at the three approaches as they relate to the developed economies of Japan, Taiwan, and Korea. The authors find that while both market and cultural approaches are important they do not explain the entire story. They argue the political economy approach provides the best explaination of the three. It sees the historically developed authority relations as important in the development of these economic organizations. Organizational practices, instead, represent strategies of control that serve to legitimate structures of command and often employ cultural understandings in so doing. Such practices are not randomly developed but rather are fashioned out of preexisting patterns of domination on economic situations in which profit, efficiency, and control usually form the very conditions of existence" p. 182

They do this via comparison of the three countries, all of which emerged destroyed by war and developed strong but different dominant form of organizational structure. In each country the firm is embedded in a network of institutional relationships that gives each economy a distinctive character. p. 185

In Japan there are loose coupling between large firms in intermarket relational contracts, descendants of the powerful zaibatsu. The second type are vertical relations between subsidiaries of the same firm.

In Korea there are large hierarchical relationships called chaebol. The top 50 caebol control 80% of the GNP. The member firms are in holding companies controlled by individuals or families. But they are directly manged by the government through planning agencies and fiscal controls.

In Taiwan the family firm and the business group are most prominent. Low levels of vertical and horizontal intergration and few oligarchies.

Market Explanation

In this view organizational structures adapted to market conditions. Large firms in the US grew due to the railroads opening up the size of markets and leading to economies and efficiencies of scale. Managerial coordination allowed more productivity, lower costs, and higher profits than coordination by market mechanisms (Chandler). Williamson made a similar argument using transaction costs. Both see structures as rational outcomes to maximize profits. But the enterprise structures are only partly explained by this approach. While the large firms of Japan fit this model, they don't in Taiwan where small firms prevail.

In these countries, organizational structures are better traced to prior political practices.

Culture Explanation

This view sees culture as the primary determinant of structure. But how does one isolate cultural elements? Culture is defined as the socially learned way of life of a people and the means by which orderliness and patterned relations are maintained in society. Theorists tend to focus on the norms, symbols, and shared meanings. But there are many cultural similarities that do not support the different organizaitonal forms seen. The cultural explanation are based on secondary factors (like the market forces argument).

 

Authority Structure and Organizational Practice

This approach is derived from Max Weber. Princples of domination serve as the substantive rationale for action. They provide guies, justifications, and interpretive frameworks for social actors in the daily conduct of organizational activity. Organizations are the result of patterned interactions among people as structures of authority.

In this view structures are largely influenced by how the state regulates the market. In Korea it's highly regulated, in Japan more intermediary, in Taiwan a hands-off approach.

 

Conclusion

Enterprise structure represents situational adaptations of preexisting organizational forms to specific economic and political conditions. This view taps the historical perspective.