Markets, culture and institutions: The formation and transformation of business groups in Taiwan, 1960s--1990s (China)

Business groups are a special type of enterprise system existing in almost every market economy. This study tries to explain why business groups emerge in Taiwan in the first place and what induces their structural change in ownership and management from the 1970s to the 1990s. For these issues, I review three theoretical frameworks, market-centered theories of organizational form, the cultural perspective on organizational evolution, and the institutional approach.; By using data for Taiwan's largest 100 business groups in 1973, 1986, and 1994, I show the significant effect of regulatory institutions on the formation and evolution of Taiwan's business groups. It is the institutional incentives that induced entrepreneurs to adopt a grouping strategy rather than a hierarchical one. Although market expansion was a necessary condition, markets alone are not sufficient to determine why firms organize in certain ways rather than others. I also show how the privatization process between 1987 and 1993 changed the inter-group ownership structure and created new property forms. This challenges the cultural determinist view and calls for a contingent stance on Chinese familism. My institutional argument is also confirmed by the change of the composition of the top management team before and after the institutional transformation between 1987 and 1993. By comparison with the effects of markets and culture, my study shows the importance of governmental regulations in explaining business organizations. Although the institutional effects are significant, the relationship between institutions and organizations is mutually constructive rather than unidirectional. The last part of this dissertation deciphers the laws of business groups in Taiwan and shows the corporate actions of large business groups in the initiation, legislation, and implementation of corporate laws.; The evidence and arguments presented have substantial implications for three lines of current research, economic sociology of firms, institutions and organizations in transitional economies, and business, states, and economic development. For future studies, the outcomes of group structure such as member firm performance and national income distribution are promising directions. Secondly, the interactive relationships between institutions and organizations will be further corroborated by incorporating comparative studies of business groups in different institutional contexts.