Tapping value from others value is sum of parts What do networks provide for

Tapping value from others value is sum of parts what

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Tapping value from others … value is > sum of parts What do networks provide for firms? 1. Create social capital 2. Create status and categories in the market 3. Create trust 4. Inspire conformity 5. Create information cannels Why do business networks reduce risk? 1. Reduce the likelihood of fraudulent behaviour between parties a. One didn’t cheat on ‘a brother’, ‘the family’, ‘a partner’ 2. Increased the flow of information a. Mediated by formal and informal association, as well as explicit business group supplier-buyer ties 3. Networks became a club-like institution a. Membership imply acceptance of an invisible code of ethics embedded in mutual transaction/relationships b. a reciprocity system of debt, obligation and face We may use institutional transaction framework to look at the issues
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IBUS20001: BUSINESS IN ASIA - An institutional framework o Formal and informal institutions that govern individual and firm behaviour - What do institutions do? o Reducing uncertainty Uncertainty can lead to high transactions costs - How to reduce uncertainty? o Informal institutions: Network o Formal institutions: Arm’s-length transactions What business groups exist in Asia? - Keiretsu in Japan - Chaebol in Korea - Guanxi in China - Government Linked Corporations (GLC) in Singapore - Business Groups in India Characteristics of the Japanese Keiretsu - Inter-business alliance or enterprise group in which business families join together to fight for market share - Often cemented by bank ownership of large blocks of stock and by cross-ownership of stock between a company and its buyers and non-financial suppliers - Keiretsu executives can legally sit on one another’s boards, share information, and coordinate prices Characteristics of the Korean Chaebol - Composed of dozens of companies, centred around a holding company, and dominated by a founding family: o E.g. Samsung, LG, Hyundai, Daewoo - Extended into related and unrelated diversifications - HQ serves as important role o E.g. Office of planning and coordination (OPC) - Chaebol executives can legally sit on one another’s boards, share information, and coordinate prices Chaebol vs. Keiretsu 1. Chaebol are still largely controlled by their founding families, while keiretsu are controlled by groups of professional managers. 2. Chaebol are centralized in ownership, while keiretsu are more decentralized and connected by cross-shareholdings. 3. Chaebol are prohibited from owning private banks, partly in order to increase the government’s leverage over the banks in areas such as credit allocation. Keiretsu have historically worked with an affiliated bank, giving the affiliated companies almost unlimited access to credit, although this is no longer a universal feature of keiretsu Chinese business networks and Guanxi
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IBUS20001: BUSINESS IN ASIA - Role of PRC business group networks o Access resources horizontal (from other firms) and vertically (from government agencies) - Business groups are organised Guanxi o If Guanxi networks are an informal institution to reduce transaction costs, o
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  • '19
  • Business, Asian Financial Crisis

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