AM Lecture 4

Management > Asian Management > Culture-organisational background > Laoban characteristics > Structure > Effectiveness of structure > Guanxiqiye

Guanxiqiye

"Guanxiqiye" refers to particular types of business groups. Although they are legally independent, they do not operate in isolation and they have concerted policies and institutionalised relationships. This means they work coherently as a unit, maintaining a coalition for decades in order to make long term profits.

They are not of the same structure as Keiretsus, which are more formal conglomerates.

Chung (2001) studied 150 groups and made the following observations explaining the development of guanxiqiye and why Laoban are so small:

• Institutional factors - The government was trying to increase the economy by export, and introduced laws in the 1960s and 1970s, which gave tax holidays to new establishments. This gave an incentive to set up new businesses, rather than expand existing ones. As the change in the law created a tax loop hole, firms never grew. Most groups formed in the period up to 1974.
• Cultural factors - Equal inheritance pattern of family property. It is much harder to divide a firm when it is large.

Management problems

Problems and solutions

Implications for management

Internationalisation of Taiwanese firms

Superior strategies

Further superiority