AAS Annual Meeting

Interarea/Border-Crossing Session 641

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Session 641: Corporate Governance in East Asia

What is the Lifetime of the ‘Lifetime-Employment’? An Empirical Research from Japan
Takashi Saito, Waseda University, Japan

It seems to be difficult to judge whether and how much Japanese management is in need for transformation today, as academic and business literature also contain contradictory opinions. And it is not certain to what extent Nippon companies can be governed by ways borrowed from drastically different cultures as the United States. The focus of this paper is put on the ways and philosophy Japanese companies are managed at the very top level. The authors examined how theoretically change could, can or should happen in order to reach higher cohesiveness between context and management. In this paper, three main concepts are compared to explain changes in national patterns: internal pressures are highlighted by the institutional (or evolutionary) theory, and the ‘fighting generations’ perspective. The power or dependence school explains external pressures coming from dependent situations or effects of global competition. In order to bring in empirical data, a questionnaire survey has been conducted in Japan with about 1,000 participants. The authors could evaluate here recent attitude of the society towards the old management practices. Should Japan change in terms of her management practices? Who are the main supporters of the traditions and who are for more reforms? In which directions changes are to be expected? The findings of the survey give fascinating answers to these questions. Older people are more for traditions and young are more for reforms – there are easy clichés but through the details we can predict some more sophisticated change in the system.

The Rise and Fall of Daewoo: The Making and Unmaking of the High-Debt Firm in Korea
Jong-Cheol Kim, , South Korea

This paper explores the history of Daewoo from a political economy perspective. By examining Daewoo’s 32-year growth trajectory from 1967 to 1999, it aims to understand the rise and fall of Daewoo from a political economy perspective and to explain how and why the high-debt corporate model was constructed and destructed during this period of high growth in Korea. Theoretically, it develops a high-debt corporate model as a counterpart institution of the developmental state in Korea and explains how and why a high-debt corporate model was created, transformed, and dismantled using the example of Daewoo. For analytical purposes, it suggests a preliminary concept of the high-debt model that is composed of diversified business group structure, highly leveraged financial structure, and dual control/governance structure. Further, it shows how the high-debt model was transformed with its growth and finally dismantled in the liberal economic framework of the late 1990s. This study will contribute to the knowledge of the political economy of Korea in two respects. First, given the shortage of historical studies on Korean firms in the field, this study will fill an empirical void by providing a historical analysis of Daewoo’s evolutionary path from its birth to its demise. Second, given the lack of attention paid to firms in the developmental state approach, this study will fill the theoretical gap by developing a high-debt corporate model as a counterpart institution of the developmental state in Korea’s political-economic development.

Outsourcing and Intellectual Property Misappropriation in China: Why Firms Outsource IP Intensive Activities in Weak IP Enforcement Environments
Kjell Carlsson, Harvard University, USA

During the last decade, firms have outsourced intellectual property (IP) intensive activities to China at an unprecedented rate. This is despite the fact that China is perceived as a weak IP enforcement country, which has had many high-profile cases of IP misappropriation. Understanding how firms protect their IP and weigh the risk of infringement in China is extraordinarily important for understanding China’s economic development, but also for understanding how firms transfer technology to emerging markets more broadly, which in turn has enormous implications for economic growth and development policy. This paper examines what causes foreign firms to outsource IP intensive activities (vs. establish a local subsidiary or acquire a supplier), and when this leads to IP misappropriation, in the different IP enforcement environments in China. The paper first demonstrates that the Hart-Moore property rights view of the firm provides a good foundation for studying how firms adapt to weak IP regimes. The paper then develops a multi-period model that identifies how incentive considerations, technological diffusion, local IP enforcement, and trade across different IP enforcement regimes, lead firms to choose outsourcing or vertical integration, and in turn, when this leads to IP misappropriation. The paper then tests the predictions of this model using IP judgments from 2006-2009 from the 94 courts in China that most actively handle IP cases and finds that industry factors in China and the foreign firm’s home country explain much of the variance in IP infringement across industries in China.

Making Adaptive Institutions Work: Corporate Governance in China’s Central State Firms
Yukyung Yeo, Kyung Hee University, South Korea

While studies on corporate governance in China have been growing, their discussions tend to remain limited to uncovering the party’s political control over firms’ decision-making and debating its impact on the business performance, or the influence of weak legal institutions on the issue of accountability and productivity in the state-owned enterprises (SOEs). Yet what has been little analyzed is how the Chinese state oversees the “managers” (particularly top executives) of central state firms and their business performance. The rise of external board of director (waibu dongshihui, 外部董事会) in the central state firms is the latest state effort for such a political-economic oversight. Its creation was formally announced in 2005 and organized by the State-owned Asset Supervision and Administration Commission (SASAC). By narrowly defining Chinese corporate governance as the monitoring the managerial performance, this study investigates the nature and effect of the external board of director as a newly emerging regulatory instrument, and attempts to explain the underlying political logic of party-state’s control over key state firms. In doing so, this study focuses on central state firms where the external board of directors is introduced as experimentation unit (试点单位). Particular attention will be paid to the case of Baogang (宝钢) steel corporations because its experimentation of external board of director is initially carried out and considered as highly successful.

What is the Lifetime of the ‘Lifetime-Employment’? An Empirical Research from Japan
Balazs Vaszkun, Independent Scholar, Hungary