The low-trust, family-oriented societies with weak intermediate organizations we have observed have all been characterized by a similar saddle-shaped distribution of enterprises. Taiwan, Hong Kong, Italy, and France have a host of smaller private firms that constitute the entrepreneurial core of their economies and a small number of very large, state-owned firms at the other end of the scale. In such societies, the state plays an important role in promoting large-scale enterprises that might not be spontaneously created by the private sector, albeit at some cost in efficiency. We might postulate then that as a general rule, any society with weak intermediate institutions and low trust outside the family will tend to have a similar distribution of firms in its economy. The Republic of Korea, however, presents an apparent anomaly that needs to be explained in order to preserve the validity of the larger argument. Korea is similar to Japan, Germany, and the United States insofar as it has very large corporations and a highly concentrated industrial structure. On the other hand, Korea is much closer to China than to Japan in terms of family structure. Families occupy a similarly important place in Korea as in China, and there are no Japanese-style mechanisms in Korean culture for bringing outsiders into family groups. Following the Chinese pattern, this should lead to small family businesses and difficulties in institutionalizing the corporate form of organization. The answer to this apparent paradox is the role of the Korean state, which deliberately promoted gigantic conglomerates as a development strategy in the 1960s and 1970s and overcame what would otherwise have been a cultural proclivity for the small- and medium-size enterprises typical of Taiwan. While the Koreans succeeded in creating large companies and zaibatsu in the manner of Japan, they have nonetheless encountered many Chinese-style difficulties in the nature of corporate governance, from management succession to relations on the shop floor. The Korean case shows, however, how a resolute and competent state can shape industrial structure and
( Francis Fukuyama )
[ Trust: Human Nature and the ]
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