Ongoing Challenges on Managerial Innovation at the Korean High-Tech Firms (Part III): Lack of Social Capital

In understanding the Korean management system and practice, one may need to look into their unique relationship-driven culture: the family, school alumni, and regional relationships. Of course, in the Western economies, alumni and social networks are crucial elements of business activities. The Korean businesses, both chaebols and SMEs, have been the family businesses in many cases. As Korean workers and managers climb the corporate ladder, they often face a subtle regional relationship. The underlying concern seems to lie in trustworthiness. The Koreans tend to trust people based on these relationships. Although things are changing, the velocity of change has been rather slow. The Chaebol’s succession process through generations may need to be understood in this context.

Why can’t the founding families of chaebols leave management to their most capable professional managers? This may be largely related to the issue of social capital, as mentioned in my previous post.

“Social capital refers to the existence of a certain set of informal values or norms shared among members of a group or society that allow cooperation among them on the basis of interpersonal trust. This includes virtues like truth-telling, the meeting of obligations and reciprocity.”

How to forge social capital can be a major challenge for the Korean high tech firms and policy makers alike.