Gordon Redding

Asian business systems: institutional comparison, clusters and implications for varieties of capitalism and business systems theory

We present an institutional comparison of 13 major Asian business systems — China, Hong Kong, India, Indonesia, Japan, Laos, Malaysia, the Philippines, Singapore, Korea, Taiwan, Thailand, Vietnam — with one another and five major Western economies — France, Germany, Sweden, UK, USA. We find five major types of business systems in Asia: (post-)socialist, advanced city, emerging Southeast Asian, advanced Northeast Asian, and Japanese. With the exception of Japan, all Asian forms of capitalism are fundamentally distinct from Western types of capitalism. We conclude that the Varieties of Capitalism dichotomy is not applicable to Asia; that none of the existing major frameworks capture all Asian types of capitalism; and that Asian business systems (except Japan) cannot be understood through categories identified in the West. Our analysis further suggests a need for the field to invest in further research on social capital, culture, informality, and multiplexity.

The Capitalist Business System of China and its Rationale

Recent reviews have recommended more contextualized analysis of economic systems, and the business systems of theory of Whitley is taken as exemplary in this regard. Three slight amendments are proposed to his main framework: acknowledgement of the ‘prior’ nature of culture in the shaping of institutions; the introduction of the question of rationale as a component of culture; and the mediating role of government in the flow of influence between culture and the formation of institutions. This model is applied to a description of the private sector in China. Rationale is treated in Weberian terms, but after disagreggation of the rationality concept into categories of formal calculation, ends, and means. The emergence of a distinct business system is examined for its historical path dependence and its current internal dynamics, using the notion that the business system is embedded in an institutional fabric, which is in turn embedded in a societal culture.

Separating Culture from Institutions: The Use of Semantic Spaces as a Conceptual Domain and the Case of China

The analysis of societies, and of systems of business within them, has tended to be heavily influenced by institutionalist perspectives. Many scholars using this approach include culture as a subset of institutions, but often without specifying the logics of doing so. Others remove culture from the account, or acknowledge its significance without placing it clearly in their models. Culturalists, however, tend not to venture into the details of economic coordination and action. To resolve the theoretical challenges posed by this set of contrasting views, it is necessary to specify how culture works and how it is different from institutions. As ‘the societal effect’ is the influence of culture on institutions, it may thus be easier to study its workings. Here culture is seen, following Sorge, as meaning relevant within a series of semantic spaces, each related to a field of action, the total integrated coherently by social axioms binding the spaces and the meanings within them into a total societal fabric of meaning. The private sector of the Chinese economy is analysed, drawing from recent extensive empirical reports as to its functioning. Theory development is in line with business systems theory.

China: Authoritarian Capitalism

This chapter of The Oxford Handbook of Asian Business Systems provides an overview of the institutional structure of the business system of China. It explores the role of the state, the financial system, ownership and corporate governance, the internal structure of the firm (management), employment relations, education and skills formation, inter-company relations (networks), and social capital. Our analysis suggests a form of authoritarian capitalism, with the Communist Party retaining pervasive influence throughout the system. Within the basic architecture now in place, much institution-building remains to be done, with bottom-up, decentralized processes playing an important role in institutional change. Salient systemic characteristics include informality - deviance of actual practice from formal structures - and multiplexity - the presence of multiple business systems within China. This chapter contributes directly to the business systems and varieties of capitalism literature and identifies institutional contingencies for comparative and international social science research in general.

The Conditional Relevance of Corporate Governance Advice in the Context of Asian Business Systems

Advice on corporate governance is pouring out of the United States, and to a lesser extent out of the United Kingdom, as if it were the key to the raising of ‘performance’ by financial systems generally. It is met elsewhere with reactions which range from the positive ‘this is a perfect antidote to our problems’, to the negative ‘this will not fit, but I cannot understand why’, through the middle range reaction of most business executives, which is ‘I suppose we had better look at it, but I don’t want to lose my grip on an already uncertain world.’ The debates which surround the issue badly need context, and the simplest way of providing that is to consider some stark, simple data. The function of good quality corporate governance is to serve the interests of shareholders. But shareholders are not equally significant across societies. In fact their significance is decidedly skewed. At the individual level of single shareholders, concerns are likely to be equal across societies, but when looking at the salience of such concerns for society as a whole major variations occur. If we take the distribution of equity as a source of financing, the variation in its distribution is startling, and so too, one might assume, its relevance in the larger scheme of things. The funding of industry varies enormously around the globe. Taking institutional investments as an indicator, it measures around 200% of GDP in the economies of the USA and the UK, but only 32% in Germany, 63% in Japan, and 54% in Italy (Davis, 2002: 227). Taking another index, that of market capitalization to GDP, the same contrasts are visible, with many Asian economies running with market capitalization proportions to GDP of a sixth to a tenth of those in the west. Considering the case of private equity markets as such, Allen and Gale (2000: 316) point out that:

Building human and social capital in Pacific Asia

This editorial serves as a topical discussion and thought-piece with relevance to many types of readers, not just academic, but also policy makers and practitioners. This is especially so in light of debates raging about trade and currency manipulations, as well as the 2010 tragedies and convulsions in China at Foxconn and also strikes at plants serving Honda, Toyota, and so forth. Some of the causes of these are Dickensian working conditions and poor pay, underpinned by the fundamental model of competition – price. Moving on from this sort of model will require greater human capital development. The general message about human capital is persuasive: that skills, knowledge and competencies are key factors in determining whether organizations and nations prosper (Reich 1991, Schuller 2000). The rest of this piece has the following sections. First, we consider human capital, in terms of its development, what it is, definitions and its significance and role. Second, we analyse and detail the context of global higher education in terms of: worldwide shifts affecting education; resultant changes; new structures in education; the growth of mass education centres and industry-science clusters. Third, Asian development and the regional need for human capital development is noted. We end with a conclusion section.

Asian Business Systems

Great Clarendon Street, Oxford, ox2 6dp,United KingdomOxford University Press is a department of the University of Oxford.It furthers the University’s objective of excellence in research, scholarship,and education by publishing worldwide. Oxford is a registered trade mark ofOxford University Press in the UK and in certain other countries© Oxford University Press 2014The moral rights of the authors have been assertedFirst Edition published in 2014Impression: 1All rights reserved. No part of this publication may be reproduced, stored ina retrieval system, or transmitted, in any form or by any means, without theprior permission in writing of Oxford University Press, or as expressly permittedby law, by licence or under terms agreed with the appropriate reprographicsrights organization. Enquiries concerning reproduction outside the scope of theabove should be sent to the Rights Department, Oxford University Press, at theaddress aboveYou must not circulate this work in any other formand you must impose this same condition on any acquirerPublished in the United States of America by Oxford University Press198 Madison Avenue, New York, NY 10016, United States of AmericaBritish Library Cataloguing in Publication DataData availableLibrary of Congress Control Number: 2013956539ISBN 978–0–19–965492–5Printed and bound in Great Britain byCPI Group (UK) Ltd, Croydon, cr0 4yyLinks to third party websites are provided by Oxford in good faith andfor information only. Oxford disclaims any responsibility for the materialscontained in any third party website referenced in this work.

Culture and the Business Systems of Asia

This chapter of the Oxford Handbook of Asian Business Systems provides an overview of culture in Asia. Culture is defined as shared meaning interpreted in institutions in patterns that are best analysed through a complex adaptive systems framework. The understanding of the variety of Asian cultures begins with certain socio-economic givens, such as level of development. Data are then presented to reveal variations between societies in values, social axioms, and patterns of socializing. Clusters of countries are proposed, namely the Advanced Cities, Japan, the Advanced Northeast, the Emerging Southeast, and the Post-Socialist. The effects of culture on organizations are introduced via analysis of vertical order, horizontal order, and differences in rationale. This chapter contributes to the literature on business systems and varieties of capitalism as well as international management.

The Unexamined Differences in Dreams: Chinese Firms’ Globalization and Interface Challenges

Most of the issues that undermine firms’ globalization efforts are attributable to a combination of cultural differences and weak managerial skill and experience. Because of its exclusive focus on influences from the political stability and institutional maturity aspects of country contexts, Child and Marinova’s (2014) framework for identifying the challenges faced by Chinese firms going abroad is incomplete. It needs to also include the cultural mindsets of executives as an explanatory factor in analyzing how the ‘qualitative interface’ in contextual combinations affects the operation of firms investing into foreign countries.

Dealing with the Complexity of Causes of Societal Innovativeness: Social Enabling and Disabling Mechanisms and the Case of China:

Societies progress by the influence of two forces: innovativeness and cooperativeness. A capacity for enabling these forces constitutes a society’s transformative capacity. The article proposes a vocabulary for certain universal requirements for use in comparing the various societal trajectories aiming towards shared prosperity. Progress to date has in consequence normally seen the growth of empowerment and of more benevolent forms of domination over time. Economic action fosters the sharing of prosperity when systems encourage competition to cooperate. Studies that stress the heritage of ecological context in shaping relevant responses in the present-day social psychology are considered. The specific field of innovativeness is considered by an analysis of Silicon Valley. From this, and from other studies, seven features are identified for an ideal type of societal system high on innovativeness. These are capacity to scale up, worker creativity, individual autonomy, property rights and incentive, open society, stable institutional order and rationality. China is assessed against these criteria, and found to have certain inadequacies that are currently the subject of policy attention. JEL: Z1, N00, O01, P5