Introduction

Summary

This book began as a study of the business groups in South Korea and Taiwan, but has grown into something much more. Business groups – affiliations of firms, usually with some degree of common ownership – have been a favorite topic of study among a number of economists (who have had a principal interest in the keiretsu in Japan, but also the groups found elsewhere in Asia) and economic sociologists (including one of the authors), as well as political scientists and area specialists. In economics, the traditional explanation for these groups has been that they are a response to market failure; because the market for capital or entrepreneurial skill or some other asset does not function well within the economy at large, business groups allocate this scarce resource among affiliated firms, thereby substituting managerial initiative for market mechanisms. In political science, rather than being a function of market processes, these groups are explained as being the creation of government mandates, expressed by preferential policies toward business groups and the entrepreneurs who establish them. In sociology, the explanations also downplay purely market processes, but make these groups the outcome of background institutional environments in which political and social institutions place parameters on how economies operate.

On the surface, these various explanations have little in common. Obviously, they are all shaped by the disciplinary gaze of the analysts and the countries they observe.