Abstract
I examine how firms affiliated with Korean business groups utilize decoupling of the stated business area and actual business activities to maintain the economic sustainability of their organizations. In examining the strategic sources of decoupling, I focus on the idiosyncratic nature of Korean business groups, otherwise known as chaebols. I suggest that decoupling of the stated and actual business areas of a chaebol affiliate is affected positively by the number of regulations in the industry, positively by the relative resource endowment of the affiliate within the chaebol, and negatively by the affiliate’s niche overlap with other affiliates. However, the negative effect of niche overlap was moderated by the affiliate’s relative resource endowment.
Highlights
Most of the studies on identity and classification in the organizational ecology literature generally suggest that ambiguous identities incur various disadvantages, since audiences prefer organizations with clear and sharp identities [1,2,3]
This study examines the decoupling of stated business areas (i.e., Standard Industrial Classification (SIC) code) and actual business activities of firms affiliated with the thirty largest Korean business groups, otherwise called chaebols
We can infer from the mean value of 0.555 for decoupling that many firms derive more than half of their sales from industries not conveyed by their officially stated SIC code
Summary
Most of the studies on identity and classification in the organizational ecology literature generally suggest that ambiguous identities incur various disadvantages, since audiences prefer organizations with clear and sharp identities [1,2,3]. I argue that organizations often deliberately choose ambiguous identities for the purpose of maintaining the sustainability of their businesses, by decoupling how they present themselves to external stakeholders from what they do. I examine a type of identity ambiguity that stems from the decoupling of an organization’s externally stated business area (announced through the Standard Industrial Classification code) and its actual business activities. While neo-institutional theory suggests that decoupling of the formal and informal aspects of organizational phenomena occurs as organizations ceremonially adopt widespread formal practices, we still do not know much about the specific mechanisms through which the degree of such decoupling increases or decreases
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