Journal of Business & Industrial Marketing

Exploring the components of success for the Korean chaebols

Du Sig Choi Paul Michell Dayananda Palihawadana
Article information:
To cite this document:
Du Sig Choi Paul Michell Dayananda Palihawadana, (2008),"Exploring the components of success for the Korean chaebols",
Journal of Business & Industrial Marketing, Vol. 23 Iss 5 pp. 311 - 322
Permanent link to this document:
http://dx.doi.org/10.1108/08858620810881584
Downloaded on: 18 May 2015, At: 11:14 (PT)
References: this document contains references to 54 other documents.
To copy this document: permissions@emeraldinsight.com
The fulltext of this document has been downloaded 1797 times since 2008*
Users who downloaded this article also downloaded:
Seung-Rok Park, Ky-hyang Yuhn, (2012),"Has the Korean chaebol model succeeded?", Journal of Economic Studies, Vol. 39
Iss 2 pp. 260-274 http://dx.doi.org/10.1108/01443581211222680
Chad Albrecht, Chad Turnbull, Yingying Zhang, Christopher J. Skousen, (2010),"The relationship between South Korean
Downloaded by UFPR At 11:14 18 May 2015 (PT)

chaebols and fraud", Management Research Review, Vol. 33 Iss 3 pp. 257-268 http://dx.doi.org/10.1108/01409171011030408
Michael S. Minor, J. Michael Patrick, Wann-Yih Wu, (1995),"Conglomerates in the world economy: comparing keiretsu, chaebol
and grupos", Cross Cultural Management: An International Journal, Vol. 2 Iss 4 pp. 35-45 http://dx.doi.org/10.1108/eb008399

Access to this document was granted through an Emerald subscription provided by 232213 []
For Authors
If you would like to write for this, or any other Emerald publication, then please use our Emerald for Authors service
information about how to choose which publication to write for and submission guidelines are available for all. Please visit
www.emeraldinsight.com/authors for more information.
About Emerald www.emeraldinsight.com
Emerald is a global publisher linking research and practice to the benefit of society. The company manages a portfolio of
more than 290 journals and over 2,350 books and book series volumes, as well as providing an extensive range of online
products and additional customer resources and services.
Emerald is both COUNTER 4 and TRANSFER compliant. The organization is a partner of the Committee on Publication Ethics
(COPE) and also works with Portico and the LOCKSS initiative for digital archive preservation.

*Related content and download information correct at time of download.

 Exploring the components of success for
the Korean chaebols
Du Sig Choi
Seoul Women’s University, Seoul, South Korea, and
Paul Michell and Dayananda Palihawadana
Leeds University Business School, University of Leeds, Leeds, UK

Abstract
Purpose – This paper aims to discuss the profiles of Korean chaebols involved in global electronics
Design/methodology/approach – The research was conducted among 132 of their Korean suppliers, with linked in-depth interviews with chaebol
managers. From an initial set of literature-based variables, factor analysis is used to generate six chaebol characteristics, which are then correlated with
four chaebol-supplier relationship outcomes.
Findings – “Decision making” and “social exchange”, in particular, are found to correlate positively with all four chaebol-supplier relationship
outcome measures, relationship satisfaction, performance, cooperation and conflict resolution. “Partnership” is associated positively with three of
these outcomes, and “strategy-longevity” with relationship satisfaction. The chaebols’ “structure-control” and “leadership” are not found to be
predictors of successful relationship outcomes as measured in this study. A combination of higher quality, lower cost products with linkages to a
foundation of decision making, social exchange, partnership and strategy-longevity appears to be a potent mix for global players.
Originality/value – The paper provides the underpinnings of the marketing strategy and component strategy profiles of a number of major Korean
Downloaded by UFPR At 11:14 18 May 2015 (PT)

multinationals in the belief that they would inform western relationship marketing strategies.

Keywords Suppliers, Partnership, Decision making, South Korea, Family firms, Electronics industry

Paper type Research paper

An executive summary for managers and executive
readers can be found at the end of this article.
Introduction
The genesis of this study was a wish to research the
underpinnings of the marketing strategy and component
strategy profiles of a number of major Korean multinationals
in the belief that they would prove to be helpful examples of
successful relationship marketing in themselves and also
might help to inform western relationship marketing
strategies. Using the context of Korean chaebols and their
Korean suppliers, we research the association between the
characteristics of chaebols and their supplier relationship dyad
outcomes.
The story of the remarkable post-war growth of the Korean
economy revolved around the growth of its chaebols (Michael
et al., 1998). A chaebol can be defined as “a business group
consisting of large companies which are owned and managed
by family members or relatives in many diversified business
areas” (Yoo and Lee, 1987); “a gigantic business group which
is controlled by a family or closely related members, and
growth aided by government support” (Cho, 1997); and, as:
“Chaebols are a group of large companies which operate in
The current issue and full text archive of this journal is available at
www.emeraldinsight.com/0885-8624.htm
diverse, mostly unrelated, industries and which are owned
and controlled by a family” (Shin and Kwon, 1999). A group
of companies under a single owner, or family or associates,
having 150 billion won in combined bank credits, is
categorised as a chaebol or business group (Korea Company
Yearbook, 2003).
Buckley’s (2004) analysis of Asian network configurations
distinguished between the characteristics of the chaebols,
Keiretsu and Guanxi and led him, in the context of the Asian
recession and market maturity, to categorise the chaebols as
closed, opaque, and high level networks. Chaebols have
subsequently had to increase their international
competitiveness and more open, less opaque and higher
level networks have emerged.
History and growth of chaebols
The chaebols may be examined across five stages (Cho, 2003;
Loret, 2003; Pecht et al., 1998):
1 First stage (1945-1960): Korean chaebols were mainly
formed in the 1950s, a capital-gaining period. Due mainly
to the non-stabilised social structure and market
mechanisms at that time, chaebols were able to obtain
their capital with substantial governmental support
encouraging employment and general stability.
2 Second stage (1961-1971): Korean chaebols grew rapidly
under government leadership, and the chaebols
oligopolised most of the domestic market, including

Journal of Business & Industrial Marketing

23/5 (2008) 311– 322 Received: March 2006
q Emerald Group Publishing Limited [ISSN 0885-8624] Revised: February 2007
[DOI 10.1108/08858620810881584] Accepted: March 2007

311
 Exploring the components of success for the Korean chaebols
Du Sig Choi, Paul Michell and Dayananda Palihawadana
light and heavy industry. They also had the benefit of
favourable loans, the government’s export-oriented
support policies, and a growing domestic market.
3 Third stage (1972-1979): the main features were: heavy
involvement in heavy and chemical industries and other
fast growing industries, using favourable loans, mergers
and acquisitions, investments in real estate, and increased
monopolisation.
4 Fourth stage (1980-1987): the chaebols focused on
increasing sales volume and new ventures with existing
partners within their groups. The manufacturing sectors
grew significantly while the chaebols tried to extend their
activities into the financial field.
5 Fifth stage (1988-present): chaebols were actively involved
in new ventures, such as information and communication
technology and supply chain management; and, the
emergence of “glocalisation”. At the same time, they
heavily invested in the electronics and the automotive
industries, both internationally and domestically. The
chaebols also focused on developing high technology, and
building the brand and marketing channels, partly
through obtaining or investing in foreign companies.
Downloaded by UFPR At 11:14 18 May 2015 (PT)
Korean electronics industry
Chaebols involved in the electronics industry have been
selected for this focused study. Shin and Ho (1997) have
suggested that the Korean electronic industry has been
successful in moving from the low-value, labour-intensive
production of the early 1970s to technologically sophisticated
high-value production in the 1990s and onwards. However,
they have also stressed that as the electronics industry has
become increasingly mature, the government’s role toward the
industry, as well as the industry itself, must change to build
competitiveness in an increasingly global marketplace. Kim
and Campbell (1995) have reported that, within the Korean
electronics multinational corporations, those chaebols with
strong formal control processes have tended to perform more
effectively than those with other control processes. Further,
they have suggested that strategic processes have been more
responsible for the differences in performance between
Korean MNCs compared with organisational strategy or
structure. Lee and Kim (1999) have identified partnership
quality as a key predictor of successful outsourcing. Further,
they have found that participation, communication,
information-sharing and management support have tended
to be positively related with partnership quality.
Literature review
Chaebols’ characteristics
The characteristics of the chaebols in terms of marketing and
general management can be summarised as:
.
Structure/control. Family control and management (Steers
et al., 1989), centralised planning (Rapert and Wren,
1998), a vertical structure to the organization (Jwa, 2002),
paternalistic relationships (Yoo and Lee, 1987), internal
transactions (Shin and Stulz, 1998), a share in each
member’s stock (Lee, 2002), old school hiring (Steers,
1991), with volume expansion (Hwang, 2000), and large
capital investment (Hadlock et al., 2001).
.
Strategy-longevity. A longer-term orientation (Ganesan,
1994), growth through diversification (Lim, 2000), the
312
Journal of Business & Industrial Marketing
Volume 23 · Number 5 · 2008 · 311 –322
organisation as a basis for career success (Steers, 1991),
long-term supplier partnerships (Mohr and Spekman,
1994), and a strong work ethic (Business Korea, 1986).
.
Partnership. An entrepreneurial orientation (Steers et al.,
1989), with the government as partner, supporter and
developer (Hakansson et al., 1999), and a share in each
member’s stock (Lee, 2002).
.
Decision making. Concentrated resources (Penrose, 1995),
deployed by coordination (Richter, 1999) and quick
decision-making (Zeithaml and Bitner, 1996).
.
Social exchange. The importance of personal relationships
(Wilson and Mummalaneni, 1991), social contacts and
group harmony (Steers et al., 1989).
.
Leadership. Combining strong leadership (Sohal and
Ritter, 1995) and an entrepreneurial orientation (Steers
et al., 1989).
Relationship outcomes
The above chaebol characteristics, built from the related
literature, may be associated with four satisfaction and
performance outcomes, namely relationship satisfaction,
relationship cooperation, relationship conflict resolution and
relationship performance:
1 Relationship satisfaction. An important outcome of
successful buyer-seller relationships (Smith and Barclay,
1997), both sides of the dyad will have positive
experiences for a high level of satisfaction to be achieved
(Conway and Swift, 2000). A more satisfied commercial
customer will tend to have a stronger relationship with the
supplier, leading to increased relationship longevity
(Grönroos, 1994). In this way, relationship satisfaction
is linked to perceived performance (Kotler, 1997).
2 Relationship cooperation. Seen as a main characteristic in
buyer-seller relations (Palmer, 2000), cooperation
develops with the fulfilment of promises by the other
party (Grönroos, 1994). Cooperation may be
demonstrated by long-term contractual commitments or
the adoption of processes to meet partners’ requirements.
With cooperation, there is an expectation of longer-term
reciprocity (Palmer, 2000).
3 Relationship conflict resolution. Effectively managed conflict
can have a positive effect on relationship outcomes, with
Mohr and Spekman’s (1994) model of partnership
success identifying the conflict resolution mechanisms
associated with successful long-term partnerships.
Benefits from conflict resolution include motivating
parties to adapt and grow, mobilising the resources in a
relationship, and revitalising relationship norms (cf.
Amason, 1996; Stern et al., 1996).
4 Relationship performance. Performance measures related to
relationship antecedents have been used in a number of
studies (cf. Labahn and Harich, 1997; Morgan et al.,
2004; Eng, 2005; Palmatier et al., 2006).
The above dependent variables are also linked. For example,
Holm et al. (1996) have associated cooperation with raising
the value of business relationships.
Model development
As a starting point, the model (Figure 1) seeks to associate the
six chaebol characteristics to four relationship satisfaction and
performance outcomes, in the context of Korean chaebol-
supplier relationships. Initially, 23 variables were gleaned
 Exploring the components of success for the Korean chaebols
Du Sig Choi, Paul Michell and Dayananda Palihawadana
Figure 1 Model of chaebol characteristics and relational outcomes
Downloaded by UFPR At 11:14 18 May 2015 (PT)
from the relationship marketing, business-to-business and
inter-organisational relations literatures, and from interviews
with chaebol key informants. Confirmatory factor analysis
was then applied to the data (see methodology for details),
resulting in six dimensions having an Eigen value of greater
than one, namely: structure-control, strategy-longevity,
partnership, decision making, social exchange, and
leadership.
In the small number of buyer-seller studies conducted to
date, relationships characterised by a high level of
relationalism have tended to produce superior partnership
outcomes (Simpson and Mayo, 1997), with, for example,
relational characteristics building cooperation, conflict
resolution and satisfaction (Palmatier et al., 2006), and
network-based resources relating positively to relationship
performance (Eng, 2005).
In the above model (Figure 1), an association is posited
between the six chaebol characteristics confirmed by factor
analysis and the four relationship outcomes (as dependent
variables), and is offered as hypothesis H1, that:
H1. Higher levels of each of the six chaebol characteristics
(structure-control, strategy-longevity, partnership,
decision making, social exchange and leadership) will
associate positively by suppliers with higher levels of
each of the four relationship outcomes (relationship
satisfaction, cooperation, conflict resolution, and
performance).
313
Journal of Business & Industrial Marketing
Volume 23 · Number 5 · 2008 · 311 –322
While some researchers have included relationship age as a
measure of endurance in overcoming problem areas (cf.
Anderson and Weitz, 1989; Heide and John, 1992), Black and
Peebles (2005) have concluded that a longer-term industrial
partnership does not necessarily invoke additional resources
to develop relational norms. The authors posited that a
specialisation in expertise and few supplier alternatives could
result in long relationship endurance but not necessarily in the
development of relational arrangements. Equally, Sampson
(2005) found that the benefits of prior alliance experience
depreciated rapidly over time; and Caniels and Gelderman
(2005) found that perceived mutual interdependence and
trust tended to increase only until a satisfactory partnership
was achieved. From the studies above, we can formulate H2,
that:
H2. There will be similar perceptions among suppliers of
the relative strength of the six chaebol characteristics
regardless of the duration of the chaebol-supplier
relationship.
While a few studies have stressed the diversity rather than the
similarity of supplier relationships in East Asia (cf. Kim and
Michell, 1999), the large majority of studies have researched
the strategies and characteristics of major structures such as
the chaebols as a group (cf. Whitley, 1994). In comparing the
main electronics chaebols, we have taken the latter perspective
in formulating H3, that:
 Exploring the components of success for the Korean chaebols Journal of Business & Industrial Marketing
Du Sig Choi, Paul Michell and Dayananda Palihawadana Volume 23 · Number 5 · 2008 · 311 –322

H3. There will be major similarities and only minor Table I Breakdown of sample of suppliers
differences in the perceptions of suppliers to each of
the chaebols concerning the relative strength of the six n %
chaebol characteristics. No. of employees
1-25 43 32.6
> 25-100 25 18.9
Methodology
> 100-500 41 31.3
The first qualitative stage involved in-depth interviews with 500 or over 23 17.4
key informants at seven of the top ten chaebols principally 132 100.0
involved in the electronics industry, the details having been Assets
obtained from Korean business directories. At each chaebol, < 500 57 43.2
either two or three managers in the purchasing department 500- < 10,000 14 10.6
were interviewed separately, on average for a total of two and 10,000- < 50,000 23 17.4
a half hours. Semi-structured questionnaires, in Korean, were 50,000- < 100,000 12 9.1
provided for the interviewees, together with an English 100,000 or over 26 19.7
version to aid communication. During the interviews, the 132 100.0
Korean-speaking researcher checked the validity of the each
of the 23 variables to be included in the profiles of the
Sales (thousands won)
chaebols with the key informants, and obtained the official
< 10,000 67 50.8
lists of suppliers for each chaebol.
After successful piloting, as stage 2 the mailed questionnaire 10,000- < 50,000 30 22.7
was dispatched to the full universe of suppliers to the ten 50,000- < 100,000 14 10.6
chaebols most involved in electronics, 340 firms in total. After 100,000- < 1,000,000 17 12.9
Downloaded by UFPR At 11:14 18 May 2015 (PT)

two mail-outs, 132 usable replies were received from the
suppliers, a response rate of 39 per cent.
A second follow-up qualitative stage involved in-depth
semi-structured interviews with three Korean senior
procurement managers with extensive Korean and global
experience, working on short-term secondments with UK
subsidiaries of three of the top five Korean electronics firms,
to present to them the main results of the research, and to
receive their comments and interpretations of the findings.
The three selected firms were subsidiaries of three of the
chaebols originally interviewed at stage 1 and also involved in
stage 2.
Sample of suppliers to chaebols
The supplier sample characteristics exhibited in Tables I and
II indicate that the sample was split almost equally between
firms with one hundred employees or fewer, and firms with
more than 100 employees; that the duration of the suppliers’
relationship with their chaebols was spread evenly across the
five duration lengths from new to 20 years or more; and that
there was a high incidence of supplier response across the
main chaebols researched. The relatively high overall response
rate (39 per cent), together with the relatively uniform sub-
sample breakdowns by numbers of employees, relationship
duration, and suppliers’ responses among the top five
chaebols, have suggested that no or little response bias
occurred in the sample. The average size of supplier was
similar to that seen in other business-to-business studies, for
example in a study of supplier management strategies among
Japanese automakers (Kim and Michell, 1999).
Structure of the mailed questionnaire to suppliers
After checking for the detailed validity and relevance of the
questionnaire at stage 1, and further minor amendments at
the pilot stage, the resulting questionnaire was divided into
two parts, comprising A: general information (relevant
partnering chaebol, company name, title of respondent and
number of employees), and four questions exploring the
relative success of the partnership in terms of relationship
satisfaction, cooperation, conflict resolution and performance.
1,000,000 or over 4 3.0
132 100.0
Profits (thousands won)
Under 0 6 4.5
1- < 100 51 38.6
100- < 1,000 30 22.7
1,000- < 10,000 28 21.3
10,000 or more 17 12.9
132 100.0
Each of these four questions used a seven-point Likert scale,
from 1 ¼ strongly disagree to 7 ¼ strongly agree; and B:
Profiling of the chaebols, related to the suppliers’ profile of
the partnering chaebol, using 23 chaebol-related descriptor
variables taken from the specialist literature described above
in “Chaebol characteristics”. This section utilised a seven-
point Likert scale, from 1 ¼ not important to 7 ¼ very
important to chaebol success in partnerships.
Respondents were urged to utilise the scales as widely as
possible. The questionnaire was structured to take no more
than 15 minutes to complete and pilot study respondents were
timed and completed their forms within this timescale.
The independent variables and factor analysis
The suppliers’ data for the 23 variables (from section B of the
questionnaire) were then factor-analysed using the database
of 132 suppliers to identify the main factors, the factor
loadings for each variable and the variance explained by the
retained factors (see appendices 1 and 2). Using SPSS version
11.5, the principal components method was selected as the
extraction method, using the varimax rotation of factor
loading matrices to maximise the sum of variances of squared
factor loadings to produce some high and some low loadings
on each factor. This method of factor analysis was selected
primarily because it has been by far the most commonly
utilised in marketing studies (Green et al., 1988). Factors with
an eigenvalue in excess of one were retained for consideration;

314
 Exploring the components of success for the Korean chaebols Journal of Business & Industrial Marketing
Du Sig Choi, Paul Michell and Dayananda Palihawadana Volume 23 · Number 5 · 2008 · 311 –322

Table II Sample characteristics of the suppliers to the chaebols

Suppliers Job titlea No. employees Duration of relationship with chaebols (years)
Chaebols n % Pro n Sales n CEOn # 100 > 100 0-2 n 3-5 n 6-10 n 11-20 n > 20 n unkn. n
Hyundai 16 12.1 9 6 1 5 11 0 4 4 7 0 1
Samsung 15 11.4 8 3 4 3 12 0 1 2 7 4 1
LG 33 25.0 23 2 8 8 25 11 18 2 0 0 2
Daewoo 23 17.4 7 11 5 20 3 1 2 7 9 0 4
Orion 23 17.4 4 10 9 22 1 4 2 4 7 1 5
Taihan 9 6.8 2 7 0 4 5 1 2 1 5 0 0
Kolon 2 1.5 0 2 0 1 1 1 0 1 0 0 0
Lotte 2 1.5 2 0 0 1 1 0 0 1 0 1 0
SKC 3 2.3 0 2 1 3 0 0 0 3 0 0 0
Sha han 6 4.6 1 5 0 1 5 0 0 1 5 0 0
Total 132 100 56 48 28 68 64 18 29 26 40 6 13
% 42.4 36.4 21.2 51.5 48.5 15.1 24.4 21.8 33.6 5.1 –
Notes: a Pro = procurement manager; Sales = sales manager

six factors emerged which met the condition of .1.0 eigen each of the six component-factors to verify internal
value. Since there were 132 supplier respondents in the consistency. A Cronbach alpha score of 0.7 or greater is
sample, and six factors, the ratio of 22:1 was in line with normally accepted as constituting a reliable set of variables
Downloaded by UFPR At 11:14 18 May 2015 (PT)

acceptable practice in the subsequent application of EQS
structural equation modelling version 6.1 and linear multiple
regression. The six factors accounted for 73.6 per cent of
cumulative variance. The rotated component matrix was used
to identify the variables attached to each component, and is
shown as Appendix 2. To aid clarity, the highest loading
scores (0.40 and over) are shown in italics for each variable for
each component-factor. Thus:
1 Component one, explaining 30.0 per cent of variance in the
data, comprised nine variables: family control/
management, centralized planning, vertical structure,
paternalistic relationship, internal transactions, share of
each member’s stock, volume expansion, large capital
investment, and strong school ties hiring. This factor
primarily concerned “structure-control”.
2 Component two, explaining 13.6 per cent of variance,
comprised five variables: work ethic, growth through
diversification, long-term orientation, basis for career
success, and long-term supplier partnership. This factor
primarily concerned “strategy-longevity”.
3 Component three, explaining 10.1 per cent of variance,
comprised five variables: share of each member’s stock,
the developmental role of government, government
support, entrepreneurial orientation, and work ethic.
This factor involved mainly “partnership”.
4 Component four, explaining 9.8 per cent of variance,
comprised three variables: quick decision making,
coordination, and concentration of resources. This
factor mainly concerned “decision making”.
5 Component five, explaining 9.0 per cent of variance,
comprised two variables: personal relationships and social/
group harmony. This factor mainly concerned “social
exchange”.
6 Component six, explaining 7.0 per cent of variance,
comprised two variables: entrepreneurial orientation and
strong leadership. This factor is labelled “leadership”.
Measure validation
Having allocated variables to new component-factors,
Cronbach alpha analysis was conducted on the variables in
(Nunnally and Bernstein, 1994). All six sets of variables
achieved scores higher than 0.7, ranging from 0.91 to 0.73.
The Cronbach Alphas were: 0.9058 for factor 1; 0.8195 for
factor 2; 0.7329 for factor 3; 0.7526 for factor 4; 0.8512 for
factor 5; and, 0.7821 for factor 6. All factors had a
discriminant validity exceeding 0.5 (from 0.65 to 0.51), and
all factors had construct validity exceeding 0.8.
The entire measurement model produced good fit statistics
(Joreskog and Sorbom, 1993), with a chi-square of 35.24,
6 df, p ¼ 0.000, and GFI ¼ 0:945. Together, these validation
statistics indicate good reliability and validity of the scale. We
may thus anchor the 23 independent variables by factor
analysis, confirmed by Cronbach alphas, to six component-
factors, which will be used as the basis for the structure of the
ensuing analyses.
Results
Chaebol characteristics and relationship outcomes
EQS 6 structural equation modelling was utilised to correlate
the factor scores that emerged from the factor analysis for the
six independent variables, namely structure-control, strategy-
longevity, partnership, decision making, social exchange, and
leadership, against each of the four dependent variables,
relationship satisfaction, cooperation, conflict resolution, and
performance. As reported in the methodology, the
measurement model produced good fit indices and
reliability coefficients.
The results are summarised in Table III. Each of the four
dependent measures, all proxies for relationship management
outputs, correlated positively with three of the six chaebol
characteristics as independent variables, with high
standardised positive beta coefficients and with strong
statistical significance (with seven of the significant variables
across the equations at p ¼ 0.01, and five at p ¼ 0.05). Each
of the four sub-models was statistically significant at the 0.00
level.
The highest positive association, with an adjusted r2 of
0.184 (p ¼ 0.000), was between relationship performance and
three chaebol characteristics, social exchange (b 0.348),

315
 Exploring the components of success for the Korean chaebols Journal of Business & Industrial Marketing
Du Sig Choi, Paul Michell and Dayananda Palihawadana Volume 23 · Number 5 · 2008 · 311 –322

Table III Summary of structural equation results for four relationship outcomes (dependent variables) with six predictor components (independent
variables)
Predictor components:
Relationship outcomes: dependent variables Adjusted R square (ANOVA sig) significant variables b p significance
Relationship satisfaction 0.148 (0.000 sig) Strategy-longevity 0.234 0.005
Decision making 0.247 0.003
Social exchange 0.164 0.048
Relationship performance 0.184 (0.001 sig) Partnership 0.239 0.003
Decision making 0.175 0.031
Social exchange 0.348 0.000
Relationship cooperation 0.112 (0.000 sig) Partnership 0.182 0.032
Decision making 0.173 0.041
Social exchange 0.294 0.001
Relationship conflict resolution 0.152 (0.000 sig) Partnership 0.268 0.001
Decision making 0.187 0.024
Social exchange 0.264 0.002

partnership (0.239), and decision making (0.175), the first combinations of positive correlations (between the six
two at 0.01 and the third at the 0.05 level. There was also a characteristics and four relationship outcomes) had
positive association between relationship conflict resolution statistically significant associations, seven at the 0.01 level
Downloaded by UFPR At 11:14 18 May 2015 (PT)

and the same three characteristics with an adjusted r2 of 0.152
(p ¼ 0.000), the strongest being partnership (b 0.268), and
also social exchange (0.264) and decision making (0.187), the
first two at the 0.01 level and the third at 0.05. Relationship
satisfaction also correlated positively with these three
characteristics (adjusted r2 0.148, p ¼ 0.000), with decision-
making having the highest b (0.247), followed by strategy-
longevity (0.234) and then social exchange (0.164), the first
two at the 0.00 level and the third at 0.05. For relationship
cooperation, there was a positive association (adjusted
r2 ¼ 0.112, p ¼ 0.002) with three chaebol characteristics, in
order social exchange (b 0.294), partnership (0.182) and
decision making (0.173), the first at 0.00 and the latter two at
0.05.
Decision making and social exchange had the strongest
salience among chaebol characteristics with regard to their
positive associations and levels of beta and significance, as the
only predictor variables represented in all four model
equations (see Table IV). Partnership could also be
regarded as having major salience, since it was significant in
three of the four models and was the strongest variable in the
equation concerning relationship conflict resolution.
Strategy-longevity featured statistically in one equation,
associated with relationship satisfaction. The other two
posited predictors, structure-control and leadership, were
not significant.
Table IV shows a frequency of three chaebol characteristics
in each of the four equations, with 12 of the 24 possible
and five at 0.05. It would thus be realistic to claim partial
support for H1, given the positive correlation at the 0.01 level
of seven of the combinations and at 0.05 for five others. Clear
statistical support is thus offered for 12 sub-hypotheses,
namely decision making and social exchange each positively
correlating with relationship satisfaction, performance,
cooperation and conflict resolution; partnership correlating
positively with performance, cooperation and conflict
resolution; and, strategy-longevity correlating positively with
relationship satisfaction.
Chaebol profiles by supplier partnership duration
Table V shows two sub-samples of suppliers split by
relationship duration, of up to five years and over five years
of continuous business partnership with respective chaebols.
On five of the six chaebol characteristics, while there were
slight increases in mean scores of suppliers involved in longer
durations of partnership compared to those of shorter
duration, these differences were not significant. The only
statistically significant difference between the two groups
concerned “decision making”, which appeared to diminish in
importance as relationship duration increased, from a mean of
5.59 for newer dyads and 5.17 for older relationships
(p ¼ 0.05).
Qualitatively, one major chaebol took the view that
important dimensions were important irrespective of the
relative duration of the relationship. Another believed that the
key issue concerning the perceived lack of impact of duration

Table IV Frequency of statistically significant chaebol characteristics and outcomes

Structure- Strategy- Decision Social Frequency of
control longevity Partnership making exchange Leadership signif outcomes
Relationship satisfaction p 0.005 p 0.003 p 0.048 3
Relationship performance p 0.003 p 0.031 p 0.000 3
Relationship cooperation 0.032 p 0.041 p 0.001 3
Relationship conflict resolution p 0.001 p 0.024 p 0.002 3
Frequency of significant characteristics 0 1 3 4 4 0 12

316
 Exploring the components of success for the Korean chaebols Journal of Business & Industrial Marketing
Du Sig Choi, Paul Michell and Dayananda Palihawadana Volume 23 · Number 5 · 2008 · 311 –322

Table V Suppliers’ perceptions of chaebols’ profiles over partnership durations

All suppliers 0-5 yrs 6 yrs and onwards
n 5 132 n 5 45 n 5 71 T-test * *
Chaebol characteristics Mean Mean Mean Significance
Structure-control 4.08 3.89 3.99 0.648
Strategy-longevity 5.33 5.27 5.31 0.827
Partnership 5.11 4.96 5.31 0.827
Decision making 5.37 5.59 5.17 0.038 *
Social exchange 5.10 4.81 5.23 0.090
Leadership 5.60 5.55 5.58 0.839
Notes: *Statistically significant at the 0.05 level; * *Two-tailed student T-tests

length to partnership outcome was that dealing with a
supplier for many years gave that supplier only a very small
advantage in the total evaluation process. The third
interviewee took a similar almost philosophical view
concerning “duration”, stressing that it was the managers
making the decisions who were conducting the business, not
the “duration”.
Thus, the evidence concerning the similarity of response by
Downloaded by UFPR At 11:14 18 May 2015 (PT)
Samsung received the highest scores on strategy, decision-
making and social exchange, overall the dedicated suppliers
tended to rate the chaebols similarly, with for example
consistently lower scores for structure-control compared with
other variables. There were only two statistically significant
differences, on leadership between Orion (mean 5.98) and
Daewoo (5.00) at the 0.01 level, and on decision making
between Samsung (mean 5.80) and Daewoo (5.07) at the

suppliers in relationships of differing durations concerning the 0.05 level.

salience of five of the six chaebol characteristics, and In the in-depth interviews, a senior manager at one major
underlined by key informants’ views of the dynamics of the chaebol made a connection between long-term investment in
relationship, provide sufficient and consistent evidence to product-markets and sustaining long-term coexistence with
uphold and support hypothesis two concerning the similarities suppliers. He also believed that size was an important element
of perceptions among suppliers of the relative strength of for a chaebol to gain large government contracts and
chaebols’ characteristics related to supplier relations government support in maintaining a large workforce.
regardless of the duration of the relationship. Again, this manager believed that the chaebol, despite its
size, possessed a high level of entrepreneurial spirit. He also
regarded the social exchange dimension to be more concerned
Suppliers’ perceptions of chaebol partner profiles
with social contact and harmony within the chaebol itself than
This section investigates the chaebols’ profiles according to
between partners, although both were important. Another
the responses of the suppliers related to their particular
chaebol believed that all organisations had their own
chaebol partners. We will concentrate on the five chaebols
structural characteristics, and that there were no
receiving double-digit questionnaire responses, Hyundai,
circumstances where technological development was not
Samsung, LG, Daewoo, and Orion. Basic data are given possible nor supplier selection and retention possible simply
about them in Table VI. because of the size of the supplier firm and its structures. The
The results from the suppliers’ responses concerning their last chaebol key informant regarded structure-control as a
respective chaebols are shown in Table VII. Clearly, while relatively easy variable to manage, with suppliers having to fit
Samsung and Orion had stronger and Hyundai and Daewoo their structures as closely as possible to those of the chaebol to
had relatively weaker profiles, and LG was average in profile, leverage partnership and strategic improvements in
overall these were minor differences were secondary effectiveness and efficiency.
compared to the overall similarity in the profiles. This study’s evidence concerning the elements of the
Chaebol profile similarity is illustrated clearly by the cob- chaebols’ profile has been weighted towards commonality
web representation in Figure 2. While Orion had the highest rather than divergence, although there were some differences
scores on structure control, partnership and leadership, and in the profiles of the five chaebols, and is sufficiently strong to
partially support the third hypothesis concerning the major
Table VI Some characteristics of the five chaebols similarities and only minor differences among suppliers in
their perceptions of the relative strength of the six chaebol
No. of No. of years characteristics.
Chaebols employees established Annual revenuesa
Hyundai 21,802 51 6,841,372,888 Discussion and managerial implications
Samsung 42,335 32 25,176,736,305
We have found statistically significant associations between
LG 31,265 42 10,546,759,000
the decision making, social exchange, partnership, and
Daewoo 5,875 29 2,422,074,000
strategy-longevity characteristics of the chaebols and
Orion 3,913 35 677,854,620
chaebol-supplier relationship success. The first two
Note: a Thousands won characteristics, decision making and social exchange, were
Source: Han Kook Shin Young Peang Ga (2002) positively correlated with all four relational outcomes,
satisfaction, cooperation, conflict resolution, and

317
 Exploring the components of success for the Korean chaebols
Du Sig Choi, Paul Michell and Dayananda Palihawadana
Table VII Suppliers’ perceptions of chaebol profiles
Hyundai Samsung
n 5 16 n 5 15
Chaebol characteristics Mean Mean
Structure-control 3.85 3.99
Strategy-longevity 5.14 5.55
Partnership 4.88 5.35
Decision making 5.23 5.80 * * *
Social exchange 4.91 5.40
Leadership 5.41 5.67
Notes: *Statistically significant at the 0.01 level; * *Significant at the 0.05 level; * * *Two-tailed student T-tests comparing the highest with the lowest mean
scores
Figure 2 Cob-web representation of chaebol profiles
Downloaded by UFPR At 11:14 18 May 2015 (PT)
performance. Partnership as a chaebol characteristic was
positively associated with three of the four relationship
outcomes, cooperation, conflict resolution and performance,
while strategy-longevity correlated with relationship
satisfaction. Structure-control and leadership were not
significant variables in a supplier relationship context.
With quick decision making, chaebols can release capital
and other resources through the supply chain, making
decisions faster and acting more quickly, with the
implication that chaebols tend to start initiatives quickly and
adjust later. In particular, once decisions are resolved resource
allocation across the supply chain is typically highly
coordinated. Also, maintenance of the personal relationship
and the enhancing of mutual benefits have been key elements
of social exchange; and group harmony has been linked to
opportunities for a smooth, constructive, conflict-free
interpersonal and inter-organisational relationship.
On partnership, chaebols (unlike smaller firms) can be
nominated by Government to perform the largest projects,
and as major employers also have negotiation powers with
government. Also, closely related government and private
sectors have contributed to South Korea’s rapid growth. On
strategy-longevity, Korean firms have historically believed in a
318
Journal of Business & Industrial Marketing
Volume 23 · Number 5 · 2008 · 311 –322
LG Daewoo Orion
n 5 33 n 5 23 n 5 23 T- test
Mean Mean Mean significance
4.15 4.05 4.26 0.323
5.41 5.07 5.39 0.084
4.96 4.89 5.45 0.074
5.49 5.07 * * * 5.52 0.040 * *
4.97 4.67 5.39 0.070
5.62 5.00 * * * 5.98 * * * 0.004 *
longer-term business perspective, in relational coexistence
and in long-term product presence.
The similarity of results in relationships of differing
durations, as seen in this study, are in line with a number of
recent studies, including Black and Peebles (2005), who
concluded that a longer-term industrial partnership did not
necessarily invoke additional resources to develop relational
success; with Sampson (2005) who found that the benefits of
prior alliance experience depreciated rapidly over time; and,
with Caniels and Gelderman (2005) who found that once
satisfactory partnership strategies had been achieved then
relational outcome tended not to increase further. Moreover,
the profiles of the five major chaebols in this study had many
more similarities than differences, suggesting that a number of
commonalities exist in terms of characteristics and the
emphasis between these characteristics.
This study, as any other, had its contextual aspects, and
thus the results should be interpreted with care when applied
to other industries and countries. This study, of course, was
undertaken in Korea, among Korean chaebols and their
suppliers, in electronics. Different results might have been
obtained from a different industry. The study focused on the
primary layer of suppliers in the chaebol’s network, which in
the case of some chaebols’ suppliers would include the sub-
contracting of electronics parts to suppliers’ suppliers. Such
secondary suppliers, typically very small or highly specialised
firms, were not included in this study.
Several implications can be drawn from our research. The
detailed findings will help Korean chaebols to develop a
strategic agenda for future growth and to fine-tune their
modes of supplier relationship. Equally, large multinational
firms from other parts of the world, notably the west, can
benchmark their supplier partnership profiles with those of
the chaebols, and consider how, in a western context, they
might try to address issues related to partnership marketing
strategies and longer-term relations. Since the Korean
economic crisis in the early 2000s, chaebols in electronics
and other global industries have adopted or updated systems
and operations to stimulate efficiency and other global
standards. Chaebols have been especially seeking cooperative
relations in technology with their suppliers, and to assist them
with financial support to improve the supply chain in terms of
higher quality, higher technology, and more consistent
products. The potential combination of higher quality, lower
cost products with linkages to a foundation of decision-
making, social exchange, partnership and strategy-longevity
appears to be a potent mix for global players, including
 Exploring the components of success for the Korean chaebols
Du Sig Choi, Paul Michell and Dayananda Palihawadana
western firms. The importance and relative pervasiveness of
technology, quality, networks, speed and cost were stressed by
the senior Korean managers in the in-depth interviews. For
both chaebols and suppliers, it was expected that even greater
focus would be placed on technology, systems efficiency and
cost efficiency during the rest of this decade.
References
Amason, A.C. (1996), “Distinguishing the effects of
functional and dysfunctional conflict on strategic decision
making: resolving a paradox for top management teams”,
Academy of Management Journal, Vol. 39, February,
pp. 123-48.
Anderson, E. and Weitz, B. (1989), “Determinants of
continuity in conventional industrial channel dyads”,
Marketing Science, Vol. 8 No. 4, pp. 310-23.
Black, G.S. and Peebles, D.K. (2005), “The impact of a
propensity for relationalism and market growth on
distribution channel outcomes”, Journal of Business
Strategies, Vol. 22 No. 2, pp. 119-9.
Buckley, P.J. (2004), “Asian network firms: an analytical
Downloaded by UFPR At 11:14 18 May 2015 (PT)
framework”, Asia Pacific Business Review, Vol. 10 Nos 3/4,
pp. 254-71.
Business Korea (1986), “Woman power: unsung praises”,
Business Korea, Vol. 4 No. 3, pp. 20-5.
Caniels, M.C.J. and Gelderman, C.J. (2005), “Purchasing
strategies in the Kraljic matrix: a power and dependence
perspective”, Journal of Purchasing and Supply Management,
Vol. 11 No. 2, pp. 1-17.
Cho, D.S. (1997), “Han Kook chaebols”, Mae Il Business
Newspaper Publication, Seoul, pp. 13-17.
Cho, D-S. (2003), “Imperatives in restructuring: lessons from
the Korean economic crisis”, Entreprises et Historie, No. 32,
Paris, June, pp. 120-37.
Conway, T. and Swift, J.S. (2000), “International relationship
marketing, the importance of psychic distance”, European
Journal of Marketing, Vol. 34 Nos 11/12, pp. 1391-413.
Eng, T-Y. (2005), “An empirical analysis of the influence of
cross-relational impacts of strategy analysis on relationship
performance in a business network context”, Journal of
Strategic Marketing, Vol. 13 No. 3, p. 219.
Ganesan, S. (1994), “Determinants of long-term orientation
in buyer-seller relationships”, Journal of Marketing, Vol. 58
No. 2, pp. 1-19.
Green, P.E., Tull, D.S. and Albaumn, G. (1988), Research for
Marketing Decisions, Prentice-Hall International, London.
Grönroos, C. (1994), “Quo vadis, marketing? Toward a
relationship marketing paradigm”, Journal of Marketing
Management, Vol. 10, pp. 347-60.
Hadlock, C., Ryngaert, M. and Thomas, S. (2001),
“Corporate structure and equity offerings are there
benefits to diversification?”, The Journal of Business, Vol. 74
No. 4, pp. 613-35.
Hakansson, H., Havila, V. and Pedersen, A.C. (1999),
“Learning in networks”, Industrial Marketing Management,
Vol. 28, pp. 443-52.
Han Kook Shin Young Peang Ga (2002), Han Kook Gea Up
Jae Mu Chong Ram, available at: www.rm1.co.kr
319
Journal of Business & Industrial Marketing
Volume 23 · Number 5 · 2008 · 311 –322
Heide, J.B. and John, G. (1992), “Do norms matter in
marketing relationships?”, Journal of Marketing, Vol. 56
No. 2, pp. 32-44.
Holm, D.B., Eriksson, K. and Johanson, J. (1996), “Business
networks and cooperation in international business
relationships”, Journal of International Business Studies,
Vol. 25 No. 7, pp. 1033-53.
Hwang, I.H. (2000), Diversification and Restructuring of the
Korean Business Groups, Korea Economic Research
Institute, September.
Joreskog, K. and Sorbom, D. (1993), LISREL8: Structural
Equation Modeling with SIMPLIS Command Language,
Lawrence Erlbaum Associates, Hillsdale, NJ.
Jwa, S.H. (2002), “Why firms and markets in economics?”,
Seoul Journal of Economics, Vol. 15 No. 2, pp. 277-94.
Kim, J-B. and Michell, P. (1999), “Relationship marketing in
Japan: the buyer-seller relationships of four automakers”,
Journal of Business and Industrial Marketing, Vol. 14 No. 2,
pp. 118-29.
Kim, Y.H. and Campbell, N. (1995), “Strategic control in
Korean MNCs”, Management International Review, Vol. 35
No. 1, pp. 95-100.
Korea Company Yearbook (2003), Korea Company Yearbook,
p. 1.
Kotler, P. (1997), Marketing Management, Analysis, Planning,
Implementation, and Control, 9th ed., Prentice-Hall
International, Inc., Upper Saddle River, NJ, p. 79.
Labahn, D.W. and Harich, K.R. (1997), “Sensitivity to
national business culture: effects on US-Mexican channel
relationship performance”, Journal of International
Marketing, Vol. 5 No. 4, pp. 29-51.
Lee, J.M. and Kim, Y.G. (1999), “Effect of partnership
quality on IS outsourcing success: conceptual framework
and empirical validation”, Journal of Management Systems,
Vol. 15 No. 4, pp. 29-61.
Lee, K.U. (2002), “Linking corporate governance to firm
behavior and performance: the case of Korean chaebols
viewed as a leveraged CMS firm”, Managerial Finance,
Vol. 28 No. 10, pp. 19-32.
Lim, U.K. (2000), “Ownership structure and family control
in Korean conglomerates: cases of the 10 largest chaebols”,
The Management Research Centre, Yonsei University,
Seoul, Sang Nam Forum, Spring, pp. 87-143.
Loret, D. (2003), “The shipbuilding industry in Korea”,
Entreprises et Historie, No. 32, Paris, June, pp. 94-116.
Michael, P.G., Bernstein, J., Searls, D. and Peckerar, M.
(1998), “Korea’s focus on market dominance”,
Semiconductor International, Vol. 21 No. 1, pp. 118-22.
Mohr, J. and Spekman, R. (1994), “Characteristics of
partnership success: partnership attributes,
communication behavior and conflict resolution
techniques”, Strategic Management Journal, Vol. 15 No. 2,
pp. 135-52.
Morgan, N.A., Kaleka, A. and Katsikeas, C.S. (2004),
“Antecedents of export venture performance: a theoretical
model and empirical assessment”, Journal of Marketing,
Vol. 68 No. 1, p. 90.
Nunnally, J.C. and Bernstein, I.H. (1994), Psychometric
Theory, 3rd ed., McGraw-Hill, New York, NY.
 Exploring the components of success for the Korean chaebols
Du Sig Choi, Paul Michell and Dayananda Palihawadana
Palmatier, R.W., Dant, R.P., Grewal, D. and Evans, R.E.
(2006), “Factors influencing the effectiveness of
relationship marketing: a meta-analysis”, Journal of
Marketing, Vol. 70 No. 4, pp. 1-11.
Palmer, A. (2000), “Cooperation and competition: a
Darwinian synthesis of relationship marketing”, European
Journal of Marketing, Vol. 34 Nos 5/6, pp. 687-704.
Pecht, M., Bernstein, J., Searls, D. and Peckerar, M. (1998),
“Korean focus on market dominance”, Semiconductor
International, Vol. 21 No. 1, pp. 118-21.
Penrose, E. (1995), The Theory of the Growth of the Firm,
Oxford University Press, Oxford.
Rapert, M.I. and Wren, B.M. (1998), “Reconsidering
organizational structure: a dual perspective of frameworks
and processes”, Journal of Managerial Issues, Vol. 10 No. 3,
pp. 287-302.
Richter, F.J. (1999), The East Asian Development Model,
Economic Growth, Institutional Failure and the Aftermath of the
Crisis, Macmillan Press, London.
Sampson, R.C. (2005), “Experience effects and collaborative
returns in R&D alliances”, Strategic Management Journal,
Vol. 26, pp. 1009-31.
Downloaded by UFPR At 11:14 18 May 2015 (PT)
Shin, D.Y. and Kwon, K.H. (1999), “Demystifying Asian
business networks: the hierarchical core of interfirm
relations in Korean chaebols”, in Richter, F.J. (Ed.),
Business Network in Asia, Promises, Doubts, and Perspectives,
Quorum Books, Westport, CT, p. 113.
Shin, H. and Stulz, R.M. (1998), “Are internal capital
markets efficient?”, Quarterly Journal of Economics, Vol. 113
No. 1, pp. 531-52.
Shin, R.W. and Ho, A. (1997), “Industrial transformation:
interactive decision-making process in creating a global
industry (Korea’s Electronics Industry)”, Public
Administration Quarterly, Vol. 21 No. 2, pp. 143-75.
Appendix 1
Table AI Factor analysis total variance explained
Initial eigenvalues
Component Total % of variance Cumulative %
1 6.717 29.204
2 4.546 19.766
3 1.734 7.538
4 1.646 7.155
5 1.228 5.340
6 1.048 4.556
Notes: Extraction method: principal component analysis
Journal of Business & Industrial Marketing
Volume 23 · Number 5 · 2008 · 311 –322
Simpson, J.T. and Mayo, D.T. (1997), “Relationship
management: a call for fewer influence attempts”, Journal
of Business Research, Vol. 39 No. 3, pp. 209-18.
Smith, J.B. and Barclay, D.W. (1997), “The effects of
organisational differences and trust on the effectiveness of
selling partner relationships”, Journal of Marketing, Vol. 61
No. 1, pp. 3-21.
Sohal, A.S. and Ritter, M. (1995), “Manufacturing best
practices: observations from study tours to Japan, South
Korea, Singapore and Taiwan”, Benchmarking for Quality
Management and Technology, Vol. 2 No. 4, p. 4.
Steers, R. (1991), “Culture and communication patterns in
Korean firms”, paper presented at the Pacific Region
Forum, Simon Fraser University at Harbour Centre,
September 19.
Steers, R.M., Shin, Y.K. and Ungson, G.R. (1989), The
Chaebol, Korea’s New Industrial Might, Harper & Row, New
York, NY.
Stern, L., El-Ansary, A. and Coughlan, A. (1996), Marketing
Channels, 5th Ed., Prentice-Hall, Upper Saddle River, NJ.
Whitley, R. (1994), Business Systems in East Asia: Firms,
Markets and Societies, Sage, London.
Wilson, D.T. and Mummalaneni, V. (1991), “The influence of a
close personal relationship between a buyer and seller on the
continued stability of their role relationship”, Working Paper
No. 4, The Institute for the Study of Business Markets,
Pennsylvania State University, University Park, PA.
Yoo, S.J. and Lee, S.M. (1987), “Management style and
practice of Korean chaebols”, California Management
Review, Vol. 29 No. 4, pp. 95-110.
Zeithaml, V.A. and Bitner, M.J. (1996), Services Marketing,
The McGraw-Hill Company, New York, NY, p. 121.
Rotation sums of squared loadings
Total % of Variance Cumulative %
29.204 5.515 23.976 23.976
48.970 3.134 13.625 37.601
56.508 2.338 10.164 47.765
63.663 2.264 9.843 57.608
69.003 2.070 9.002 66.610
73.560 1.598 6.950 73.560
320
 Exploring the components of success for the Korean chaebols Journal of Business & Industrial Marketing
Du Sig Choi, Paul Michell and Dayananda Palihawadana Volume 23 · Number 5 · 2008 · 311 –322

Appendix 2

Table AII Factor analysis rotated component matrix

Component
Variable 1 2 3 4 5 6
Family control/management 0.891 0.031 0.014 2 0.104 0.037 0.183
Centralised planning 0.860 0.002 0.050 2 0.065 0.015 0.144
Vertical structure in organisation 0.883 0.119 0.057 0.001 20.019 0.192
Paternalistic relationship 0.896 0.018 0.106 2 0.056 20.015 0.137
Quick decision-making 20.207 0.238 0.303 0.794 20.067 0.083
Coordination 20.198 0.340 0.291 0.771 20.066 0.106
Concentration of resources 0.328 0.011 20.155 0.655 0.307 0.175
Internal transactions 0.795 2 0.076 0.053 0.069 0.130 2 0.245
Share of each member’s stock 0.503 0.051 0.463 0.168 0.244 2 0.355
Developmental role of government 20.058 0.209 0.793 0.121 0.181 0.094
Government support 0.323 0.085 0.652 0.141 0.241 0.051
Entrepreneurial orientation 0.078 0.300 0.478 0.281 20.007 0.541
Strong leadership 0.170 0.182 0.254 0.399 0.195 0.606
Work ethic 20.084 0.598 0.461 0.093 0.005 0.302
Volume expansion in growth 0.576 0.316 20.208 0.324 0.070 2 0.278
Downloaded by UFPR At 11:14 18 May 2015 (PT)

Large capital investment 0.552 0.349 20.361 0.212 0.191 2 0.200

Growth through diversification 0.329 0.407 20.228 0.222 0.306 0.380
Long term orientation 20.015 0.773 0.093 0.190 0.112 0.313
Basis for career success 0.142 0.847 0.099 0.163 0.153 2 0.155
Long term partnerships 0.069 0.778 0.140 0.091 0.253 0.046
Importance of personal relationships 0.041 0.202 0.135 2 0.007 0.880 0.028
Social contact and group harmony 0.122 0.242 0.242 0.076 0.818 0.049
Strong school ties hiring 0.623 0.023 0.066 2 0.031 0.287 2 0.319
Notes: Extraction method: principal component analysis; rotation method: varimax with Kaiser normalization; rotation converged in 13 iterations

diverse, mostly unrelated industries and which are owned and

Corresponding author
Dayananda Palihawadana can be contacted at:
dp@lubs.leeds.ac.uk
Executive summary and implications for
managers and executives
This summary has been provided to allow managers and executives
a rapid appreciation of the content of the article. Those with a
particular interest in the topic covered may then read the article in
toto to take advantage of the more comprehensive description of the
research undertaken and its results to get the full benefit of the
material present.
The combination of higher-quality, lower-cost products with
linkages to a foundation of decision-making, social exchange,
partnership and strategy-longevity. What global player would
not put that sort of achievement high on their “wish list”?
The potential for such a desirable way of progressing the
business might exist in many different approaches. However,
the way that Korean conglomerates are structured might hold
valuable lessons for western companies.
Korea’s remarkable post-war growth has been attributed in
large part to the success of its “chaebols” – variously defined
as “gigantic business groups controlled by a family or closely
related family members, and growth aided by government
support” and “a group of large companies which operate in
controlled by a family.”
A brief history of chaebols sees them being formed mainly
in the 1950s, when, due to the non-stabilized social structure
and market mechanisms at the time, they were able to get
their capital with substantial governmental support,
encouraging employment and general stability.
They grew rapidly in the 1960s, running most of the
domestic market, including light and heavy industry. They
also had the benefit of favourable loans, the government’s
export-oriented support policies, and a growing domestic
market.
Main features of the following decade were big involvement
in heavy and chemical industries and other fast-growing
industries, using favourable loans, mergers and acquisitions,
investments in real estate, and increased monopolization.
In the eighties the chaebols focused on increasing sales
volume and new ventures with existing partners within their
groups. The manufacturing sectors grew significantly while
the chaebols tried to extend their activities into the financial
field, and from then until now they have been actively
involved in new ventures, such as information and
communication technology and supply chain management;
and the emergence of “glocalization”.
At the same time, they heavily invested in the electronics
and the automotive industries, both internationally and
domestically. They also focused on developing high

321
 Exploring the components of success for the Korean chaebols
Du Sig Choi, Paul Michell and Dayananda Palihawadana
technology, and building the brand and marketing channels,
partly through obtaining or investing in foreign companies.
While western multinationals cannot, and should not, try to
do what’s worked well for the Koreans within the confines of
their own culture and history, they can still take a look at the
ways chaebols work, and pick up many lessons along the way.
In an effort to help inform western opinion, Du Sig Choi
et al. researched the profiles of chaebols involved in global
electronics among 132 of their Korean suppliers. The Korean
electronics industry has been successful in moving from the
low-value, labour-intensive production of the early 1970s to
technologically sophisticated high-value production in the
1990s and onwards. It is recognized, however, that as the
electronics industry has become increasingly mature, the
government’s role, as well as the industry itself, must change
to build competitiveness in an increasingly global market
place.
Chaebols with strong formal control processes have tended
to perform more effectively than those with other control
processes. There is also evidence that strategic processes have
been more responsible for the differences in performance
between Korean MNCs compared with organizational
strategy or structure.
Downloaded by UFPR At 11:14 18 May 2015 (PT)
Chaebol characteristics include structure/control (family
control and management, centralized planning, a vertical
structure to the organization, paternalistic relationships,
internal transactions, a share in each member’s stock, old
school hiring, with volume expansion and large capital
investment); strategy-longevity (a longer-term orientation,
growth through diversification, the organization as a basis for
career success, long-term supplier partnerships and a strong
work ethic); partnership (an entrepreneurial orientation with
To purchase reprints of this article please e-mail: reprints@emeraldinsight.com
Or visit our web site for further details: www.emeraldinsight.com/reprints
322
Journal of Business & Industrial Marketing
Volume 23 · Number 5 · 2008 · 311 –322
the government as partner, supporter and developer, and a
share in each member’s stock); decision-making
(concentrated resources deployed by coordination and quick
decision-making); social exchange (the importance of
personal relationships, social contacts and group harmony);
leadership (combining strong leadership and an
entrepreneurial orientation).
Higher levels of each of these six characteristics was, in the
main, found to be generally positively associated with higher
levels of relationship satisfaction, cooperation, conflict
resolution, and performance.
Choi et al. say that with quick decision-making, chaebols
can release capital and other resources through the supply
chain, making decisions faster and acting more quickly, with
the implication that chaebols tend to start initiatives quickly
and adjust later. In particular, once decisions are resolved
resource allocation across the supply chain is typically highly
coordinated. Also, maintenance of the personal relationship
and the enhancing of mutual benefits have been key elements
of social exchange; and group harmony has been linked to
opportunities for a smooth, constructive, conflict-free
interpersonal and inter-organizational relationship.
The importance and relative pervasiveness of technology,
quality, networks, speed and cost were stressed by senior
Korean managers. For both chaebols and suppliers, it was
expected that even greater focus would be placed on
technology, systems efficiency and cost efficiency during the
rest of this decade.
(A précis of the article “Exploring the components of success for the
Korean chaebols”. Supplied by Marketing Consultants for
Emerald.)
 This article has been cited by:

1. Michael C. McDermott. 2014. Interstate competition in the US South for South Korean auto investments: a US perspective.
Asia Pacific Business Review 20, 153-173. [CrossRef]
2. Toni Cho, Kate Hutchings, Teresa Marchant. 2013. Key factors influencing Korean expatriates' and spouses' perceptions of
expatriation and repatriation. The International Journal of Human Resource Management 24, 1051-1075. [CrossRef]
3. Yang-Im Lee, Peter R.J. Trim. 2012. How mutuality reinforces partnership development: Japanese and Korean marketing
perspectives. Industrial Marketing Management 41, 770-779. [CrossRef]
Downloaded by UFPR At 11:14 18 May 2015 (PT)