Managing multi-business firms: A comparison between Korean chaebols and diversified U.S. firms

Abstract

We identify and examine the efficacy of organizational mechanisms through which diversified firms are effectively managed without loss of control. Building on the resource based view of business groups, we argue that business groups in emerging markets use these mechanisms more often and derive more benefits from the use of these mechanisms than the diversified U.S. firms. Empirical results based on samples from Korea and the U.S. show that structural mechanisms such as strategic control and contingency arrangements, do not affect divisional performance, whereas socio-cultural mechanisms, such as shared values and corporate-level training, have significant effect on divisional performance. We also find that Korean chaebols have leveraged socio-cultural mechanisms better than large U.S. firms, and thus, have an advantage in continuing to diversify.