The co-evolution of institutional environments and organizational strategies: the rise of Family Business Groups in the ASEAN region

Abstract

In this paper we consider Southeast Asian FAMILY BUSINESS GROUPS (FBGs) as a form of business enterprise as well as existing theoretical accounts of their behaviour. To do so, we develop and describe a co-evolutionary framework that incorporates notions of interdependence, path dependence, and 'system openness.' This co-evolutionary framework is used to anchor a case study describing the developmental paths of FBGs and their institutional environments. Because such neo-evolutionary perspectives bring back into account adaptive behavior motivated by human agency and interests, they offer a promising means of capturing the dynamics (Fligstein and Freeland 1995) and complexity (Baum and Singh 1994) of the interaction between institutions and organizations.

Descriptors: co-evolution, family business groups, ASEAN, path dependence, institutional environments

Introduction

The influence of institutional environments (Hamilton and Biggart 1988) culture (Redding 1990; Hall and Xu 1990), and business systems (Whitley 1992) on East and Southeast Asian corporate organization has attracted a lot of attention recently. Such attention is due in part to the performance attributes of organizing principles that differ significantly from orthodox Western practice (Biggart and Hamilton 1992). Despite problems of definition, a number of popular and academic accounts of Southeast Asian industrialization have identified Chinese FBGs as the engine behind the region's rapid economic growth in the post WWII period (World Bank 1993; Seagrave 1995; Hodder 1996; Lim 1996; Weidenbaum and Hughes 1996). While other types of corporation such as multinational enterprises (MNEs) (Hobday 2000) and state-owned enterprises (Lall 1990) have contributed to the region's growth, FBGs controlled by ethnic Chinese entrepreneurs have undoubtedly played a key role in the economies of many East and Southeast Asian ec onomies. The importance of FBGs in these economies indicates that their business models are an important subject for analysis.

In this paper, we consider the developmental path of FBGs as a form of business enterprise, and existing theoretical accounts of their behaviour. FBGs are prevalent in many emerging economies (Khanna and Palepu 1997) and have been analyzed from a variety of theoretical perspectives, yet they are not fully understood (Granovetter 1994). Institutional and cultural accounts of FBGs see causality running from external or institutional factors to internal organizational factors. In an earlier article in Organization Studies, Wilkinson (1996) argued that such deterministic accounts of Asian enterprise run the risk of legitimizing rather than critically evaluating non-Western forms of business enterprise. Wilkinson takes particular issue with institutional theories of East Asian enterprise that lack a plausible account of human agency. Our theoretical exposition addresses these concerns.

Concurrent with the debate regarding the origins of Asian corporate structures, there has been a series of studies reconsidering the accomplishments of institutional theory (e.g. Oliver 1991; Di Maggio and Powell 1991; Scott and Meyer 1994). A major concern in many of these reviews is that institutional theory focuses on the causes and consequences of organizational persistence and continuity. Organizations and institutional norms do change, sometimes quite radically, yet modern or neo-institutional theory has not put change at the centre of its agenda (Greenwood and Hinings 1996). Consequently, recent theorizing about institutions has focused on issues relating to change and the role of human agency (Kondra and Hinings 1998). In the light of these considerations, a number of theoretical perspectives such as structuration (Barley and Tolbert 1997), co-evolution (Keiser 1989; Baum and Singh 1994) and path-dependence (North 1990) have been advanced as either alternatives or complements to more deterministic acc ounts of the environment--organization interface. These alternative perspectives see human action as intendedly rational but constrained by circumstance, past action and existing norms. For example, North (1990) regards institutions as partially malleable entities that may be passively but critically influenced by sometimes small events that lock-in particular solutions to problems and subsequently limit the range of options available to later actors. Such a perspective highlights the fact that rational and reflective actors who are motivated by their values, economic incentives, or the need for collective action are often capable of significantly influencing institutional arrangements, but are nevertheless subject to constraints that limit their range of feasible and conceivable action.

In this paper, we develop the idea of mutual and reciprocal influence between institutional environments and organizational action. We outline a co-evolutionary framework that incorporates the notions of interdependence, path dependence, and 'system openness'. Because such neo-evolutionary perspectives bring back into account adaptive behaviour motivated by human agency and interests, they offer promising ways to capture the dynamics (Fligstein and Freeland 1995) and complexity (Baum and Singh 1994) of the interaction between institutions and organizations. The co-evolutionary framework is illustrated with a historical analysis of FBGs in Southeast Asia's ASEAN member states. (1) ASEAN members straddle a civilizational fault-line (Huntingdon 1997) consisting of predominantly Muslim (Malaysia, Indonesia), Buddhist (Thailand), Sinic (Singapore) and Christian (The Philippines) societies. Sinic culture is prevalent throughout the region due to a broad and continuing Chinese Diaspora (Purcell 1965), but it is far from dominant. Notwithstanding cultural variation, over a thirty-year period a similar prominent organizational form emerged in each ASEAN country. This prominent form is the diversified FBG created and typically operated by migrants (or their descendants) from mainland China. A precise definition of who constitutes this Chinese merchant class in Southeast Asia has long challenged scholars of the region (e.g. SomersHeidues 1974; Wu and Wu 1980; Suryadinata 1989; Hodder 1996). The Chinese in ASEAN are not a homogenous group (Suryadinata 1989). Ethnic Chinese are a linguistically diverse, relatively small and fragmented demographic minority within ASEAN as a whole. Except for Singapore, where ethnic Chinese are a demographic majority, they are a minority in most ASEAN states, yet they control a large proportion of each country's leading businesses (see Table 1).