Political Embeddedness in the New Triad: Implications for Emerging Economies

By Choi, Chong Ju; Manoj, Raman et al. | Management International Review, July 1999 | Go to article overview

Political Embeddedness in the New Triad: Implications for Emerging Economies


Choi, Chong Ju, Manoj, Raman, Usoltseva, Olga, Lee, Soo Hee, Management International Review


In spite of the dominant rhetoric of interlinked economy and global market homogenisation, the compelling need to explain the differential rates of organisational performance on the basis of different modes of co-ordination and transaction governance over the past two decades has prompted many strands of international and comparative research on national business systems (Olson 1991, 1992, Boisot/Child 1988, Choi et al. 1996, Choi 1994, North 1990). According to Nelson (1992), there are three clusters of analysis concerning the determinants of "national competitiveness". Firstly, viewing firms as the main competitive unit; secondly, the macroeconomic performance of national economies; thirdly, microeconomic policies at the level of industries. Research in comparative governance and business systems needs of course needs to take into account all three levels of analysis and also include the importance of the interactions between institutions and organisations.

Dunning (1996), in his reexamination of the eclectic paradigm, recognizes that the socio-institutional structure of market-based capitalism is undergoing changes characterized principally by innovation-led growth, a "voice" (Hirschman 1970) reaction to market failure, and cooperation as competitiveness enhancing measure. These catalysts for the structural economic changes and the blurring of national boundaries as well as their various consequences on firm activities and performance have led to an urgent need to reassess the traditional frameworks of international business and strategy for global competition. A key issue is the role of political, social, institutional factors driving today's successful business system, and how such systems can be emulated by other countries. Roe (1994, 1997), Boddewyn and Brewer (1994), Kogut (1993), Albert (1991), and Toyne (1988), have analyzed in depth the importance of the socio-economic environments of firms' home environment, or home market constraints on their competitiveness, which other researchers have generally treated as exogenous to the autonomous market system. In this paper, we develop this approach by showing the importance of the governance systems within countries, especially the political embeddedness (Zubkin/DiMaggio 1990), or the nonmarket effects on national competitiveness. We extend the various works of Boddewyn and Brewer (1994), Kogut (1993), which have shown the importance of the political dimension and its interactions in international business research, to include various noneconomic aspects of a national business system. This article proposes that groupings of countries can share such "non-economic", social, political foundations and that the borders across countries within the same grouping or business system.

In terms of research on comparative management and societal institutions, one area that has received vast academic attention in recent years, has been in the area of comparative corporate governance; corporate governance has been defined as, "the relationship among a firm's shareholders, its board of directors, and its senior managers" (Roe 1994, p. 1).

The growing literature on comparative corporate governance provides important preliminary comparisons between successful business systems. Comparative successful business systems research needs to take into account the nature of corporate governance, as well as the broader social, cultural, political issues such as the relationships between business and government, an issue that has been highlighted in international business research (Lenway/Murtha 1991, Hill 1995, Shan/Hamilton 1991, Choi 1994, Choi/Lee 1997, Kogut 1993, Brewer 1993, Buckley 1996). We believe that the vast amount of academic research recently undertaken within comparative corporate governance highlights the importance of studying national business systems and the role of social and political aspects of capitalism (Dunning 1996, Boddewyn/Brewer 1994).

In terms of recent comparative corporate governance research, recent works such as Gerlach (1992), Franks and Mayer (1997), and Roe (1994, 1997) compare the legalistic, stock market driven approaches of the United States and the United Kingdom with the more informal cross share holding system adopted in Japan and Germany. …

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