Change and continuity in management systems and corporate performance: Human resource management, corporate culture, risk management and corporate strategy in South Korea

Abstract

Embedded traditional management systems can change under the influence of several forces. The 1997 Asian financial crisis was such an event. This paper empirically investigates changes in the human resource management, corporate culture, risk management and competitive strategy parts of management systems in the General Trading Companies of South Korea in terms of internal perceptions of impact on corporate performance. It finds both change and continuity, particularly in corporate culture. This indicates that cultural change in organisations is not an easy task, not least because it is associated with changes in the values, attitudes, expectations, beliefs and behaviour of people. It also shows the importance of disaggregating trends as there can be simultaneously change and continuity.

Keywords:

• corporate culture
• financial crisis
• general trading company
• human resource management
• Korea
• organisational change

Introduction

Before the 1997 Asian financial crisis the economy of South Korea (‘Korea’ in this article) was seen as a ‘miracle’ in terms of its rapid growth. Part of this was based on the state-directed economic development model, business organisation structures and human resource management (HRM) practices. Moreover, Korea's economic success was considered a possible role model to be followed by other newly industrialising economies.1

However, this glowing image was shattered in 1997 with the economic crisis and bankruptcies, including some Chaebol. We do not detail the causes of the crisis or focus on the Chaebol per se, but examine changes in elements of the management system and impacts on internal perceptions of corporate performance of the general trading companies (GTCs) that operate within the Chaebol.

As the main affiliated firm, GTCs not only played a crucial role in Chaebol development with a variety of business functions, but also contributed to national economic growth. Since their foundation in the mid-1970s, GTCs recorded high export growth rates, averaging over 40% and by 1982 accounted for more than 48% (US$15 billion) of total exports.2 However, GTC business volumes started to fall from the mid-1990s due to both macro and micro business environment changes. These included: greater liberalisation of world trade and investment; national economic turmoil; government organisational restructuring programmes; the ending of assistance; and high competition among GTCs, etc. One way to address these challenges was by management system change.

Our paper is important for several reasons. First, the importance of studies of Korea have come to be recognised. This includes in Business History, for instance, economic development with industrial policy,3 the growth coalition between government and business associations,4 state strategic policy for supporting national champions,5 networks6, and the origin of business groups.7 In particular, the first three studies dealt with economic growth, industrial policy, institutional changes, state-businesses cooperation and policy for industries, which are related to our study. Second, notwithstanding their important roles in Korea, there have been few significant studies of GTCs (in contrast to the Chaebol), which are unusual and little-known in the West. These studies there have been simply focused on historical quantitative growth, emphasising major functions and financial outcomes, rather than approaching GTCs from an organisational change perspective. Third, studies have found organisational change in many different fields in Korea. However, there has been less work examining different areas of change together, giving integrated insights. Our study, therefore, fills this literature gap.

Based on the above, our paper empirically analyses the post-1997 Asian financial crisis changes in the management system of GTCs. This is in the four areas of HRM, corporate culture, risk management and competitive strategy. It is measured in terms of the internal perceptions of managers of impacts on corporate performance.

Background

Economic

Korea's stellar economic performance ended with the 1997 Asia financial crisis. Foreign exchange rates soared from 848 Korean won per US dollar in January 1997 to 1715 Korean won per US dollar by January 1998. The stock exchange index tumbled from 699 points in January 1997 to 310 points by September 1998 and company bankruptcies increased from 1000 to 3500 per month.8 Figure 1 outlines these large negative trends in the economy.

Figure 1 The movement of exchange rate and stock market index. Source: Korea Stock Exchange. Various years.

The causes of the crisis can be divided into external and internal. As for external reasons, the crisis was triggered by foreign political as well as economic forces. Thus:

Since the early 1990s, the IMF and the World Bank have put heavy pressure on Asian governments to open them up to global market forces. The U.S. wanted to improve its trade balance; if dollars were allowed to flow into Korea, the Korean won would appreciate, American manufacturing companies could export more, and American financial institutions could gain …, thereby killing two birds with one stone.9

As for internal reasons, the crisis could be seen as the result of a combination whose origins can be traced to three factors; government, financial institutions and business organisation.10 These can be seen in the state's practice of incentives, protection and encouragement for the large, diversified conglomerates, the Chaebol, to expand and diversify with debt capital, generating a collusive relationship. In the light of the crisis, the management system was also looked at.

GTCs: their history and major functions

To better understand the nature of GTCs, it is crucial to outline the Chaebols and the relations between them. Chaebols can be defined as family-controlled business groups in many unrelated industries.11 Depending on the variety of networking that is closely related to family, kinship and lineage,12Chaebols are diversified conglomerates owned and controlled by family members with the strongest kinship and blood relations. According to Lee and Jin, such business groups emerged by establishing affiliates at several different tiers or cross-ownership among affiliates.13

Chaebols originally meant ‘money cliques’ encompassing many subsidiary firms and controlling the whole group with cross-shareholding among affiliates.14 Like Keiretsu (Japanese conglomerates) consisting of a main bank, a large trading company and a manufacturer,15 most Chaebols also have a big trading company (i.e. GTC) as a main engine for the whole group. For instance, Samsung Group has Samsung Corporation (GTC), Samsung Electronics (mobile firm), Samsung Life Insurance (insurance and financial firm), Samsung Heavy Industries (manufacturing firm), etc. Such a tight relationship among a financial firm, a trading company and a manufacturing firm allowed Chaebols to diversify their businesses and maintain scale. In particular, GTCs, by their position at the heart of Chaebols, have carried out an unusually important role in developing internal growth of the whole group as well as in facilitating international trade between Korea and the rest of the world.

To examine the evolution of GTCs, it is necessary to recall Korea's general economic environment in the 1950s–70s. As a result of the Japanese Colonial Period (1910–45) and the Korean War (1950–53), there was almost a total absence of accessible natural resources, capital stock and technologies in the economy.16 Thus, the state focused on exporting strategy, realising it was the only way to earn the foreign currency necessary to purchase raw materials or industrial goods, which were necessary for national economic development. To achieve its goals, the government shifted its economic policy basis from import substitution to export orientation.17

Korea's rapid economic growth began with the military government and its national economic development plan. Two impetuses in the early 1970s were important for the growth of the Korean economy: (1) the government's policy emphasis on heavy and chemical industries; (2) the establishment of a business system based on the Japanese GTC (JGTC)18 model to expand exports worldwide and achieve economic internationalisation. The government recognised the need for export companies in overseas markets and in 1975 adopted the JGTC system seen as important in the export-led economic growth of Japan.

From the distribution channel theory viewpoint, trading companies have considerable potential to increase the efficiency of export and import channels in developing countries.19 Before adopting the GTC system, distribution channels in Korea were highly fragmented and no organisations had the necessary power to organise others in an efficient manner. This made it difficult to achieve economies of scale.

With preferential treatment by the government, a small number of Chaebol groups were able to obtain GTC licences and to expand. GTC status could enhance the business group's credibility both in Korea and in world markets as well as increase the probability of obtaining government concessions on various government-initiated projects, such as heavy and chemical plants.20 Samsung Corporation was designated as the first GTC in 1975, followed by Ssangyong Corporation and Daewoo Corporation later in the same year, with the total number of GTCs reaching 13 by 1978. However, some companies failed to retain their GTC status and went bankrupt.

GTCs are highly specialised trading organisations whose functions consist of minimising risks involved in transactions through their ability to distribute risks, reducing transaction costs via their ability to take advantage of economies of scale and making efficient use of capital. Albaum et al. argued:

Such trading houses are engaged in a far wider range of commercial and financial activities than simply trade and distribution. They play a central role in such diverse areas as shipping, warehousing, finance, technology transfer, planning, resource development, construction and regional development, insurance, consulting, real estate and deal making in general.21

Tanaka stressed that trading houses (Japanese) are characterised firstly by colossal sales, secondly by diversity of goods traded and thirdly by global reach of their business network.22 The six major functions of GTCs can be summarised as follows.

• Trading intermediation: The primary function of GTCs is export, import and third-country trade intermediation. GTCs work as intermediaries between sellers and buyers and match them through diverse products in long-term contractual relationships.23 They are involved in all phases of transactions, from upstream to downstream, including: machinery and equipment, steel, minerals, energy, petrochemicals, textiles, food products, etc.

• Financial intermediation (quasi-banking): In addition to expanding the traditional commodity transaction, GTCs engage in financial activities to earn profits. They entered into credit liquidation by asset-backed securities, provision of clearing functions of trade credit, financing social infrastructure by private finance initiatives and establishing venture capital.24 They serve as a ‘risk-buffer’ between supplier and purchaser firms in intermediate product markets.25

• Information gathering: Through their global networks GTCs collect and analyse a wide range of information from all over the world and utilise it for corporate strategy and management planning, as well as for promoting their daily business activities.26 This information includes political, socio-cultural, economic, technological and legal factors as well as industry environments such as competitors' movements, their price and marketing policy and consumer buying behaviour.

• Warehousing and logistics: GTCs take part in the creation and running of logistics network systems. They also participate in the operation of such logistics facilities as warehouse and distribution centres.27 GTCs normally run their own warehouses in major seaports throughout the world and keep enough inventories to supply customers on time.

• Project organising and coordinating: GTCs combine and organise three basic functions: trade intermediation, financial intermediation and information gathering. These enable GTCs to act in a unique way as organisers and coordinators of entire production systems on an international scale.28 In promoting such large-scale projects as the construction of oil refineries, petrochemical plants, steel mills and natural resources development, GTCs put together packages combining their various capabilities.29

• Developing new resources: The main stimulus for the development of GTC functions was mineral resource development. GTCs have been investing for a long time in developing fuels, raw materials and natural resources; these are seen as a new growth engine for economic growth.30

Literature review: theoretical and practical approach

Theories and studies of organisational change

The term ‘change’ carries various meanings according to different processes, such as to alter, modify, adjust, convert, switch, replace and transform.31 Many approaches, theories and models have been developed regarding organisational change. The first approach is a planned organisational change model. Lewin is recognised as an early leader in change theory, and his three-step planned change model.32 The first step, ‘unfreezing’, is about encouraging people to think about the present situation and helping them recognise the need for change. The second step, ‘moving’, entails studying the system in place and creating a new system.33 The third step, ‘refreezing’, occurs when new behaviours are adopted to the extent that the system stabilises in the new order, often involving changes in cultural norms and practice in order to support individual behavioural change.34 However, one criticism is that such planned models work better in stable environments.35

A second approach emphasises the process of change. Kotter introduced the eight-step change process model that organisations go through: (1) establishing a sense of urgency; (2) creating the guiding coalition; (3) developing a vision and strategy; (4) communicating the change vision; (5) empowering broad-based action; (6) generating short-term wins; (7) consolidating gains and producing more change; and (8) anchoring new approaches in the culture. Emphasising the critical need for leadership to make change happen, Kotter stressed that the successful transformation is 70–90% leadership and only 10–30% management.36

A third approach relates to speed and scope of change: incremental or radical. Daft argued that incremental change represents a series of continual progressions that maintain the organisation's general equilibrium and often affect only one organisational part. Radical change, by contrast, breaks the frame of reference for organisations, often transforming the entire organisation.37

Studies of organisational change include that of Weick and Quinn, who conducted a comparison between episodic and continuous change.38 Episodic organisational change is a system-based, macro-level view where a change agent plans a specific change that is normally dramatic and infrequent. Continuous organisational change is a micro-level view where change is evolving and continuous.39 Poon and Rowley approached change more specifically. They examined management theory and research related to HRM change in Asia in the early twenty-first century (2000–2006). Three research themes were discussed in terms of ‘change’: (1) Context, which is about the issues of forces facilitating or hindering HRM change; (2) Process, which includes pace, sequence and magnitude of change; and (3) Direction, which is about resultant change outcomes.40

In terms of Asia, Hassard et al. examined changes in Chinese state-owned enterprises (SOEs) following the 1979 economic reforms. They reviewed three phases: (1) the problem; (2) restructuring with case evidence; and (3) future trends in reform and restructuring.41 Examples of Korean studies of change include the following. Kim examined HRM reform in the civil sector covering entrance examinations, pay, performance evaluation and promotion systems.42 Kwun and Cho examined the change process by investigating the sources and facilitators of change and inertial forces. Two main questions were: who initiated change and participated in the different phases to facilitate or constrain the process; and how were change processes facilitated or constrained by the institutional factors surrounding the organisation.43 Pucik and Lim investigated HRM change in Samsung.44 Investigating the overall management system, Shim and Steers argued that past mistakes are most likely to be repeated in firms without major changes in the management structure and practices.45 Park examined corporate culture change.46 Rowley and Bae examined change in terms of their ‘reconfiguration process’ in business groups as regards downsizing, organisational restructuring, M&As, privatisation, HRM, etc.47 Kwon found: (1) top-down decision-making is not changing considerably; (2) HRM has changed little; (3) paternalistic leadership is not fading; (4) the seniority system is not really disappearing; but (5) lifetime employment practices are disappearing.48 Choe and Pattnaik reviewed the post-crisis changes in business structure and corporate governance systems. They found changes as firms were off-loaded, with less diversification and improved corporate governance, but also continuity with the continued dominance of family-based management.49 Table 1 summarises these studies.

Table 1 Selected studies on Korean management change.

Author (s)	Main study areas	Key findings and results
Kim (2000)	• HRM (Civil service sector)	(1) The economic crisis of the late 1990s triggered HRM reform in the Korean civil service sector.
		(2) The major reform policies undertaken by the government are: (i) restructuring the entrance examination, (ii) establishing an open employment system, (iii) reforming pay system, (iv) undertaking performance evaluation, (v) reforming training and promotion, and (vi) building a HR database.
Kwun and Cho (2001)	• Organisational structure & inertia • HRM	(1) The process of organisational changes is complicated because people resist. (2) In the case of KT (Korea Telecom), inertial forces in the HRM change were much stronger than in the structural change.
		(3) Organisational changes need strong support from top management.
		(4) The change agents need to be empowered fully to overcome strong inertia within as well as outside the organisation.
Pucik and Lim (2001)	• HRM	(1) The transformation of Samsung's HRM system is being successfully implemented.
		(2) Samsung's new HRM policies include: (i) fair treatment of employees, (ii) continuous professional development, (iii) encouraging creativity, (iv) diverse channels for open communications, and (v) fair management without discrimination.
		(3) More specified policies are: (i) from hierarchical HRM control to flexible decentralization, (ii) from quantity-based employment to quality-based hiring, and (iii) from seniority-based promotion to performance-based promotion.
Shim and Steers (2001)	• Overall management structure	(1) Without major changes in the management structure and practices, past mistakes will probably be repeated in Korean firms.
		(2) New management strategies must be formulated to revitalise entrepreneurial spirit.
		(3) These include: (i) continued corporate restructuring, (ii) HR leadership, (iii) increased globalisation of firms, (iv) enhanced technological development, and (v) mutually supportive business-government relations.
Park (2002)	• Corporate culture	(1) The overall effectiveness of Korean corporate culture campaigns was not positive.
		(2) To improve effectiveness, firms pay more attention to some basic issues: (i) securing qualified campaign managers who have professional knowledge and skills in managing organisational culture, and (ii) integrating the campaign programmes into the overall strategies of the organisation.
Rowley and Bae (2004)	• Downsizing • Organisational restructuring • M&As • Privatisation • HRM	(1) After the Asian crisis of 1997, there has been a reconfiguration process in Korean big business groups. (2) The first reaction was the downsizing and closure of companies. (3) The next reconfiguration response was organisational restructuring driven by the state. (4) Another reconfiguration form concerns M&As, and privatisation. (5) Much has been propounded regarding reducing ‘rigidities’ and fostering ‘flexibilities’ in HRM.
Kwon (2006)	• General management system (structure, decision-making, HRM, leadership, lifetime employment, and seniority system)	(1) The hierarchical layers in the organisational structure are not decreasing. (2) Top-down decision-making is not changing to a considerable extent. (3) HRM had changed little. (4) The paternalistic style of leadership is not fading. (5) Lifetime employment practices are disappearing. (6) The seniority system is not really disappearing.
Choe and Pattnaik (2007)	• Organisational structure • Governance	(1) The Chaebols eliminated highly indebted firms through divestitures after the financial crisis.
		(2) Most surviving Chaebols did not pursue diversification as actively as before the economic crisis.
		(3) The corporate governance of the Chaebols has improved in terms of corporate transparency, implementation of monitoring mechanism and the accountability to shareholders.
		(4) But the dominance of family management still remains as an important feature of Korean business groups.

As organisations are faced with extraordinary diversity, ambiguity, turbulence and information overload,50 Korean firms need to deal with continuous changes. The previous studies revealed that the change process has been occurring in many directions ranging from HRM, decision-making, corporate culture, leadership and organisational structure, to compensation and promotion. Although it is difficult to apply only one specific theory of organisational change to Korean firms, all the theories (e.g. incremental, radical, episodic and continuous) are connected, to a greater or lesser extent.

Practical examples of GTC reform

From a practical viewpoint the organisational change programme of GTCs after the financial crisis can be explained by radical and episodic change theories. Radical change aims to transform entire organisations, burst current paradigms and create new structures and management.51 Episodic change occurs during periods of divergence when organisations are moving away from their equilibrium conditions with changes that tend to be infrequent, discontinuous and intentional and tending to occur in distinct periods during which shifts are precipitated by external events. Episodic change combines the following characteristics: (1) a preoccupation with short-run adaptation rather than long-run adaptability; and (2) constraints on action in the form of institutionalisation and powerful norms embedded in strong cultures.52 Episodic change also tends to be dramatic and driven externally after a period of inertia, requiring outsider intervention.

This model seems to fit our example. For instance, the GTCs' organisational change was conducted intentionally by the government (i.e. outsider intervention) within a specific time of period (i.e. during the period of the financial crisis) when the GTCs were moving away from their equilibrium conditions (i.e. management failures).

Since their foundation, GTCs had been receiving many incentives from the government, such as licences to trade, preferential access to bank loans, tax reductions, the unfair allocation of trade financing and credit, etc. For instance, for each dollar of exports, the state allowed GTCs to secure an equivalent amount in loans with an 8% interest rate. Since the average interest rate in the 1970s was 20%, the government subsidised the difference. It also gave GTCs a licence to import various raw materials and exempted them from various taxes.53 In order to improve the performance of GTCs, the subsidies offered by the state can be summarised as follows: (1) trade administration (e.g. preferential support for trade); (2) financing (e.g. export/import financing, and a guaranteed letter of credit); and (3) waiver of taxes.54

However, GTCs' business performance started to gradually fall from the mid-1990s. The government abolished the support system by amendment of the Foreign Trade Act.55 Under the government-led restructuring plan, substantial change occurred in many organisational aspects, such as financial structure, corporate governance, HRM and structure. For instance, the top five GTCs reduced their average debt–equity ratios from 655% in 1997 to 442% in 1998. In 1999 the ratio was finally reduced to 187%.56 However, the ratio was again raised to 355% in 2011, and this denotes that GTCs are suffering from management difficulties after the abolition of government support policy. Details can be seen in Table 2.

Table 2 Changes in the debt–equity ratios of the top five GTCs (%).

	1997	1998	1999	2000	2011
Samsung Corporation	620	333	165	191	121
Hyundai Corporation	395	325	156	218	438
LG International	817	523	195	260	264
SK Networks	312	313	107	233	239
Hyosung Corporation	478	275	126	173	360
Average	655	442	187	268	355

Source: DART (Data Analysis, Retrieval and Transfer System, 2013).

Research hypotheses

The following section outlines our hypothesis regarding change within GTCs in four dimensions (HRM, corporate culture, risk management, competitive strategy). From the academic perspective the dimensions are derived from studies of Korean management change (see Table 1). From the practical viewpoint the dimensions are based on various internal and external publications, such as GTC medium and longer term management plans, annual reports, research reports, books, newspaper articles, etc.

HRM change

Under the influence of Confucianism, underlying corporate culture had been harmony-oriented.57 These cultural traits were reflected in HRM practice. Traditional HRM was characterised by mass, annual recruitment of new graduates, lifetime employment and seniority-based rewards.58 Although such traditional HRM policies were useful for the rapid growth of the past, they lost some effectiveness as they proved to be less fit for changing business environments due to globalisation, it was argued by some. It is further asserted that internationally accepted labour standards are now required, again impacting on traditional HRM.59

From the GTCs' perspective, people are the most precious management resource. It is they who buy, sell and coordinate the various activities and who contribute to corporate objectives. GTCs have been successful in some export markets since the 1970s by using human resources who are well-educated, skilled and relatively inexpensive.60 Kunio argued that, unlike manufacturing companies which are essentially ‘joint ventures’ between people and machines, people are the sole determinant of the success or failure of JGTCs.61 Bae and Lawler stressed that many Korean firms recognised that human resources are a critical source of competitive advantage.62 Some examples include the following: Samsung Corporation, Daewoo International, SK Networks and Hyundai Corporation have chosen HRM as their long-term management philosophy since 2005, while SK Group introduced the revised SK Management System (SKMS) in 2008 – an all-inclusive management development strategy based on respecting the dignity and creativity of each employee to instil vision, values and goals in employees, encourage them to achieve high performance, bring together diverse groups of individuals and achieve consensus and find, develop and reward the unique talents of all people.63

Based on the above discussion, we propose:

Hypothesis 1

=

GTCs' emphasis on HRM after the financial crisis may positively impact on corporate performance.

Corporate culture change

The general perceptions of Korea's national and corporate culture are that it is family oriented, with a ‘be quick’ spirit, educational connections, blood relationships, top-down decision-making, favouring seniority. Cho and Yoon suggest that the six key components of Korea's traditional cultural legacy are Confucianism, emotional harmony, hierarchy, discrimination against out-groups, networking and high context orientation.64 Of these, the dominant influence has been Confucianism. Endorsed by this ethical norm, most interpersonal relationships are defined in terms of social status of gender, age and position in society.65

Another striking feature of Korea is an unusual decision-making culture within organisations. In most firms, decision-making power and authority are concentrated in the higher echelons of managerial hierarchies. Decision-making, in particular financial decision-making, is centralised and tightly controlled by top executives in most organisations.66 There is little resistance to this decision-making system because of the Confucian ethical system, which entails paternalism, loyalty and respect for elders and seniors.67 According to Hofstede, of the five major dimensions of culture, Korea was one of the countries with the highest power distance between superiors and their subordinates.68 This denotes that decision-making power is not distributed, but is centralized at the upper level.

For example, with regard to the culture of appraisal system, Korean firms regarded seniority as the most important indicator to evaluate employees' performance,69 and the system also tended to be group-oriented rather than stressing individual differences in performance.70 The traditional system emphasised seniority based on age and tenure, pay equality and no appraisal feedback. However, some have moved from systems based on length of service (i.e. seniority) toward performance.71

As an increasing number of Korean firms are initiating changes in the performance evaluation process, employees are given opportunities to evaluate themselves and this self-evaluation data is taken into consideration not only in performance evaluation, but also in training and career development.72 Another system adopted by the Korean firms is the introduction of TDRs (the system evaluates the employees according to their tasks, duties and responsibilities) and KSAOs (the system based on employees' knowledge, skills, abilities and other characteristics).73 Rowley and Bae identified the key characteristics of pre- and post-crisis Korean HRM by comparing traditional and newer ones. Newer characteristics include: ability- and performance-based appraisal, appraisal feedback, merit pay and 360-degree appraisal.74 The public sector also adopted a performance-related pay system in order to change the civil service.75

These arguments allow us to look at corporate culture in terms of two dimensions: decision-making and appraisal system. We propose:

Hypothesis 2a	=	GTCs' corporate culture change in the decision-making process after the financial crisis may positively impact on corporate performance.
Hypothesis 2b	=	GTCs' corporate culture change in the appraisal system after the financial crisis may positively impact on corporate performance.

Risk management change

With preferential financial assistance the government had encouraged steel, petrochemicals, machinery, shipbuilding, etc. as ‘strategic industries’ and large-scale projects. The GTCs played crucial roles in raising funds from domestic or international money markets. As a result, large corporations were able to grow rapidly.

The close ties with government and financial institutions enabled the Chaebols' excessive investment and over-expansion as loans and investments were determined not by decisions on the economic profitability of businesses, but rather by favouritism and poor executive decisions. As Shim and Steers state: ‘Korean Chaebols simply made poor decisions, and short-sighted executive decisions based on limited financial and strategic analyses led both companies to the brink of bankruptcy with mounting debts and excess production capacity.’76 Focusing on quantitative growth without consideration of risk led to Chaebols' multiple investments within the same industries and eventually, their loss of international competitiveness.

The GTCs sometimes neglected their natural role of business intermediary and trading functions and rather concentrated on raising inordinate funds for their parent company of Chaebols. Yet GTCs have been paying special attention to risk management issues since the economic crisis. For instance, Samsung Corporation, LG International, Daewoo International, SK Networks and Hyosung Corporation have chosen risk management as their long-term management philosophy since 2005.77 In particular, Samsung stressed the importance of the prevention of risk recurrence in order to achieve management soundness.

This argument leads to the following hypothesis.

Hypothesis 3

=

GTCs' adoption of risk management policy after the financial crisis may positively impact on corporate performance.

Competitive strategy change

GTCs have been involved in all kinds of trading transactions by dealing with various, often unrelated, products (e.g. machinery, industrial products, metals, minerals, energy resources, chemicals, textiles, foodstuffs, finance, services, etc.) with highly diversified organisational structures and overseas networks. For example, as of 2009 Daewoo International had four main business groups and 67 overseas branch offices worldwide. Under these groups were huge numbers of divisions dealing with a number of different products and services, such as metals, steel, machinery, electronic equipment, textiles, nonferrous steel, chemicals and petrochemicals, energy and mineral resources.78 In the case of LG International there are nine business areas: coal; petroleum; metal; project organising; green energy; petrochemical; nonferrous metals; electronic equipment; import and distribution.79

GTCs have traditionally diversified their businesses into all areas in order to capture more market share. The result was fierce competition among GTCs in the same industries or businesses. In order to avoid this competitive situation some GTCs pursued a ‘choice and focus’ strategy – for example, entering into environment-friendly businesses. With the implementation of new legislation enacted to create a recycling-based society, some GTCs are developing more recycling and reuse related businesses in various fields. Additionally, in response to international agreements under the Kyoto Protocol, some GTCs are actively approaching new businesses aimed at emission rights trading, photovoltaic and wind power generation and the development of such alternative fuels as bio-ethanol and bio-diesel. Samsung Corporation, for instance, has environment-friendly businesses dealing with bio, wind and solar energy.80

This leads to the following hypothesis.

Hypothesis 4

=

GTCs' adoption of ‘choice and focus’ strategy after the financial crisis may positively impact on corporate performance.

Methodology

Our paper uses primary research based on a judgement or purposive sample selection method whereby the authors select the sample on the basis of a judgement about the appropriate characteristics required of the sample member. The samples selected based on the judgement method are believed to represent the population of interest.81

Our sample is focused on the manager level (i.e. manager, middle manager and senior manager) within five of the eight biggest GTCs: Samsung Corporation, Hyundai Corporation, Daewoo International, Hyosung Corporation and Lotte Corporation. Two of the other GTCs – LG International and SK Networks – were excluded as those firms were reluctant to take part in the survey, while GS Global Corporation was also excluded as it was a newcomer in the market by merging with Ssangyong Corporation in 2009, and so not within our time-frame.

Next, those employees with less than 12 years' working experience at their current firms were excluded. The reason for restricting the sampling was not only to increase data representation and consistency, but also to gain more reliable data from those who experienced the financial crisis at their current organisation. In addition, manager-level personnel are believed to be key informants because they should be familiar with general issues occurring within their firms, such as HRM policy, decision-making processes, management strategy, etc. Executive-level personnel were also excluded for several reasons. It was difficult to obtain information and data from the executive-level personnel because most of them were frequently not available for various business-related reasons and some disliked survey participation in principle.

Data collection

Data collection was by a questionnaire survey in July 2011. A cover letter was attached explaining the purpose of the study and assuring the confidentiality of responses. Both hand-delivered (for Hyundai Corporation and Lotte Corporation because they are centrally located in Seoul) and mailed (for the rest) questionnaires were used. In the case of the hand-delivered survey, a ‘drop-off and collect method’ was used. This method undoubtedly helped to increase the rate of response to the questionnaires.

We ascertained the numbers of manager-level employees within the GTCs by using the Handbook of Korean GTCs. According to the handbook, there were in total 397 manager-level employees in the headquarters of the ‘big five’ as of April 2010. More specifically, there were 172 managers in Samsung Corporation, 53 in Hyundai Corporation, 97 in Daewoo International, 37 in Hyosung Corporation and 38 in Lotte Corporation, respectively.82 Before distributing questionnaires we contacted each firm by telephone in order to check how many managers might participate in the survey and discovered that most managers were hesitant to take part in surveys during business hours.

Based on this preliminary surveying, we decided to distribute 88 questionnaires in total to five firms on the basis of purposive sampling, one of the non-probability sampling methods. Questionnaires were finally distributed to each firm as follows: 15 to Samsung Corporation, 21 to Hyundai Corporation, 21 to Daewoo International, 21 to Lotte Corporation, and 10 to Hyosung Corporation. Although the sample may look small, our study is of note because of the challenging attempt to gather primary data from key persons in leading GTCs. Moreover, the data in our study is representative as all informants took part in the survey have been working over 12 years in their current companies. Of our 88 questionnaires, 76 (86.36%) were finally returned. Table 3 shows the details of respondents.

Table 3 The details of respondents.

		Frequency	%
Job title	Manager	26	34.2
	Middle manager	24	31.6
	Senior manager	26	34.2
	Total	76	100.0
Working years	10∼15 years	34	44.7
	15∼20 years	31	40.8
	Over 20 years	11	14.5
	Total	76	100.0
Job position	Strategy planning	9	11.8
	Marketing and sales	52	68.4
	Finance and accounting	7	9.2
	Procurement	6	7.9
	Others	2	2.6
	Total	76	100.0

Questionnaire formation and measurement

The questionnaire was divided into six sections: HRM; corporate culture in decision-making; corporate culture in appraisal; risk management; choice and focus strategy; and perceptions of corporate performance. The last section was designed to gather demographic information on the respondents. In the questionnaire design we followed the typical nine steps of developing questionnaires. The questionnaire was prepared in the Korean language in order to reduce misunderstandings and the full meaning of questions, including their academic terms.

With respect to the question items, all items were developed by the authors because our paper is exploratory research on GTCs' management change and so it does not allow us to use relevant question items from previous literature. As the authors developed all the question items we carried out a reliability test in order to check internal consistency among items measured. According to the result of the reliability test, Cronbach's a is over 0.8, which denotes that internal consistency among items is significantly high. The values of Cronbach's a are HRM (0.906), corporate culture in decision-making (0.839), corporate culture in appraisal (0.560), risk management (0.919), choice and focus (0.902) and management performance (0.904), respectively.

To measure each section of the variables, we used a five-point Likert scale ranging from ‘strongly agree’ to ‘strongly disagree’. In particular, for measuring corporate performance, the literature suggests various ways: financial statements; return-on-equity (ROE) and return-on-assets (ROA),83 balanced scorecard84 and asking employees' perception with a five-point Likert scaled questionnaire.85 The development of such diverse measuring methods resulted from criticism of the traditional use of financial-based performance measures: for instance, their relative incompleteness and lack of accuracy and neutrality, their encouragement of short-termism, lack of balance,86 too much emphasis on pure profit measures87 and their failure to keep pace with the rate of change in the workplace.88 For this reason, to measure corporate performance, we did not use the corporate financial data which focused merely on profit-oriented performance. Rather, we let managers answer the questionnaire about how they felt about their companies' performance, both financial and non-financial aspects. So, three items are related to financial performance, and six items are related to non-financial performance (see section 2 in Appendix 1). The reason we adopted this method was to obtain answers that represent each GTC's internal situation. We believed that the corporate financial data made public, in some cases, may not represent the real status of corporate performance. In the past, some Korean firms have announced false financial data to the public. We thus decided that asking the manager-level employees about their perception of corporate performance would be one of the reasonable methods as they are familiar with the internal situation, including the financial performance and overall strategies.

Results and analysis

Descriptive statistics and validity analysis

Appendix 1 shows the value of mean and standard deviation. The value of the mean ranges from 1.84 to 3.32, and the value of standard deviation ranges from 0.663 to 1.169. Before testing the hypotheses, validity analysis was undertaken in order to check how a test procedure accurately measures what it was designed to measure. This study used a factor analysis to test a construct validity, and adopted a principal component analysis with varimax rotation (for more details, see Appendix 1).

Test of hypotheses

This paper used regression analysis to test hypotheses and found that the regression model is statistically significant as the value of coefficient of determination (R²) is 0.528 (52.8%). According to our results, Hypotheses 1, 3 and 4 received full support, while Hypotheses 2a and 2b did not receive statistical support.

Hypothesis 1 is related to GTCs' HRM policy. Consistent with our prediction, the result shows that the emphasis on HRM stimulates corporate performance (p value = 0.000, p < 0.05). Hypotheses 2a and 2b were formulated to investigate the relationship between GTCs' corporate culture changes and corporate performance. According to our results, both hypotheses were rejected because the p value of 2a is 0.501 (p>0.05), and of 2b is 0.350 (p>0.05), which means that there are no statistical significance between the variables.

Hypothesis 3 is designed to examine the relationship between GTCs' adoption of risk management strategy and corporate performance. As we anticipated, the hypothesis received full support statistically (p value = 0.000, p < 0.05). Finally, Hypothesis 4 is also accepted (p value = 0.000, p < 0.05). This means that GTCs' employment of choice and focus strategy after the financial crisis positively impacted on corporate performance.

Table 4 Results of regression analysis.

Independent variables	Regression coefficient (β)	Std. error	t value	p value
(Constant)	0.000	0.082	0.000	1.000
HRM	0.314	0.082	3.818	0.000
Corporate culture (Decision-making system)	0.056	0.082	0.677	0.501
Corporate culture (Appraisal system)	0.077	0.082	0.942	0.350
Risk management	0.435	0.082	5.296	0.000
Choice and focus	0.481	0.082	5.852	0.000
Model summary	R^2	Adjusted R^2	F value	p value
	0.528	0.494	15.644	0.000

Dependent variable: Management performance.

Significant at p < 0.05.

Discussion

Our paper investigates changes in components of the management system and internal perceptions of the impacts on corporate performance. According to our results we engage in the following discussion and note some key implications of our findings. First, based on the previous literature and examples of organisational change in Korean organisations our paper assumed there would have been overall organisational changes within the GTCs following the 1997 crisis. Indeed, as we anticipated, our results show that there have been notable changes in HRM, risk management and competitive strategy and these changes positively affected perceptions of corporate performance.

This result implies recognition that management system change could be a resource which would increase competitiveness. GTC growth had required more than their own endeavours – it was based on outside help, particularly special treatment by the government with favourable terms and conditions in taxation, finance, bank loans and market access. However, preferential treatment ended and so GTCs needed to try to survive by their own exertions by changing HRM policy, strengthening risk management and adopting a specific competitive strategy, like choice and focus.

Second, contrary to our prediction, there have not been changes in corporate culture, either in decision-making processes or employee appraisal systems. Our result supports studies showing that a top-down and authoritarian decision-making system was not changing to a considerable extent.89 Consistent with many arguments in the literature on decision-making systems in Korea, it seems that decision-making power still tends to be centralised in the hands of senior management because of long-standing traditional and cultural reasons dominating society and organisations.

This result implies that organisational cultural change is not easy and is time-consuming. This is because culture change is associated with changes in the values, attitudes, expectations, beliefs and behaviour of employees.90 In Kotter's view, culture is an element that is difficult to change (or even recognise) because it is largely invisible and tied to organisational norms and values.91 Moreover, Confucian culture still dominates Korean society, individuals and even organisations. Korea is a profoundly Confucian culture. The influence of Confucius is still felt and this also impacts on business activity as on every area of behaviour, values and ways of thinking. Such widespread traditional practices may influence social decisions, including management decisions in organisations. As Bae et al. argued, changes within Korean organisations by a new culture and system are relatively difficult because of the wide gap with old traditions.92 Park's investigation of corporate culture change campaigns in Korean companies also supports how difficult change is. His study found culture change campaigns were not successful because of: (1) insufficient understanding of the concept of organisational culture; (2) lack of professional knowledge and skills among campaign managers; (3) hastiness in culture change movement; (4) low employee interest and participation; and (5) poor linkage with other corporate innovation activities, including strategy.93

Our study provides some academic and practical contributions. One contribution is to introduce Korean GTCs, an unusual organisation type which has a variety of business functions at once and is little-known in the West. Our study reconfirms that organisational change is not an easy task since it is often hindered by diverse interest groups and external forces and changes within organisations by a new system is difficult because of wide gaps with old traditions.

As for practical contributions, our study calls for managers' special attention to organisational changes. As noted earlier, since the ending of government support (in 2009), GTC financial structure (e.g. debt–equity ratios) has significantly worsened. Despite some changes in their management system, our study sends a message to managers that they need to further change their existing management system in order to survive by themselves.

Limitations and future research directions

There are the obvious limitations in our study. As we are usefully reminded: ‘The role of chance – risk and uncertainty in business, fortune or fate in history is often underrated in a search for determinism’.94

There are some further points to bear in mind. First, in the process of designing our research we decided to deal with manager-level staff as major informants because senior management were frequently unavailable for various reasons and reluctant to take part in the survey. A challenging future field survey with senior management may be developed. Second, our work is a ‘snapshot’ in time. Adding longitudinal dimensions could be a new research project. Third, to measure corporate performance we adopted the method of asking about perceptions on corporate performance rather than using financial data. This is because our informants were key personnel and played pivotal roles within the organisations. Nevertheless, it is based on the recollections of individuals, who can be fallible and biased. Further studies with various data sources on corporate performance could be used. Fourth, from historical and socio-cultural viewpoints there are many differences between Korean and Japanese management in terms of the decision-making processes, corporate culture and overall business strategies. Future studies of JGTCs or a comparison with GTCs is recommended to identify the similarities and differences of the two.

Notwithstanding these limitations, our study does have several benefits. Indeed, it introduces scholars to decision-making issues within Korean organisations and can motivate them to think about further research in this field.

Conclusions

As indicated in the literature, the government played an important role in the process of national economic growth. For instance, the state promoted the motor industry by restricting imports, imposing a high level of local sourcing for parts and supporting national champions95 and industrial policies, e.g. export-oriented and selective industrial policies, etc.96 As a result Korea achieved remarkable economic growth and was regarded as a possible role model for other developing countries. However, the 1997 crisis was a turning point.

Based on this background, our study examined the post-crisis changes in components of management systems in a specific type of organisation, GTCs. Consistent with previous studies of Korean management our paper empirically ascertained that while changes have occurred in some parts of the management system, they have not happened across the entire system. Rather, the decision-making process and appraisal systems remained less changed. The dominance of top-down decision-making and the seniority-based appraisal system still remain important features of the management system.

In conclusion, our study provides empirical evidence that a single theory or model of organisational change may not be applied to explain management system change. It can be better explained by multiple models or theories, such as incremental change theory, Lewin's three-step planned change model or Kotter's eight-step change process model, and episodic change model. As a result, our study suggests the following. First, as organisational change is a time-consuming task and there are structural limitations to entire organisational change at once, managers need to place their steady attention on change issues because their success or failure may depend on how to deal with these issues. Second, GTCs were not ‘naturally’ established organisations, but were artificially created by the state and modelled on the JGTCs. Therefore, they have tended to rely on the state's support in the process of forming their businesses and developing strategies. However, there is no longer help from the state. As a famous proverb indicates ‘opportunities can be found in times of crisis’, this would be the right time for GTCs to become more independent business organisations, rather than being dependent on the state. Third, the top management of GTCs need to bear in mind that the dominance of decision-making by few people is an important issue that cannot be overlooked. They need to recall that irrational short-sighted or short-term-oriented decisions and behaviour may lead organisations to the edge of disaster.

Acknowledgements

This study was supported by Wonkwang University in 2013.

Additional information

Notes on contributors

Woo Jun

In Woo Jun is a Professor of the Department of Business Administration, Wonkwang University, Korea, and received his MBA and PhD from Birmingham Business School, University of Birmingham, UK. His research interests include sustainable management, corporate social responsibility and competitive advantage of international and Korean businesses.

Chris Rowley

Chris Rowley is a Professor of HRM, Cass Business School, City University London, UK, and Director of Research and Publications, HEAD foundation, Singapore. His research areas include international and Asian HRM and management with over 450 publications in books and journals such as California Management Review, Journal of World Business, British Journal of Management, Human Relations, New Technology, Work and Employment, Asia Pacific Business Review, Human Resource Management, Personnel Review and International Journal of HRM amongst others.

Notes

^1.Rowley, Bae, and Sohn, “Capability to Liabilities,” 1.

^2. The Handbook of Korean GTCs, Seoul, 2005.

^3. Lee, Clacher, and Keasey, “Industrial Policy as an Engine.”

^4.Park, “Cooperation between Business and the Government.”

^5.Catalan, “Strategic Policy Revisited.”

^6.Choi, “Kinship and Business.”

^7.Lee and Jin, “The Origins of Business Groups.”

^8. Korea Stock Exchange, Seoul. Various years.

^9.Amsden and Hikino, “East Asia's Financial Woes,” 43.

^10.Cha, “The Korean Economy”; Kwon, “Recent Changes in Korea's Business.”

^11.Kang, The Korean Business Conglomerates.

^12. Choi, “Kinship and Business.”

^13. Lee and Jin, “The Origins of Business Groups.”

^14.Chang, Financial Crisis and Transformation.

^15.Miyashita and Russell, Keiretsu.

^16.Haggard, Kang, and Moon, “Japanese Colonialism and Korean Development.”

^17.Lee, Clacher, and Keasey, “Industrial Policy as an Engine.”

^18. JGTCs are also called ‘Sogo shoshas’ (in Japanese). Some scholars and business people prefer to use Sogo shoshas instead of JGTCs. The major JGTCs are Mitsui & Co. Ltd., Mitsubishi Corporation, Marubeni Corporation and Sumitomo Corporation. As Korean GTCs and JGTCs have almost identical functions, business style and organisational structure, this paper also mentions about JGTCs as occasion demands.

^19.Visvabharathy, “Trading Companies.”

^20.Chung, “The Korean General Trading Companies.”

^21.Albaum, Strandskov, and Duerr, International Marketing and Export Management, 278–9.

^22.Tanaka, “Why were Sogo Shosna Needed?”

^23.Kojima and Ozawa, Japan's General Trading Companies.

^24.Uesugi and Yamashiro, “Trading Company Finance in Japan.”

^25.Dicken and Miyamachi, “From Noodles to Satellites.”

^26. JFTC (Japan Foreign Trade Council, Inc.), Shosha Functions, Tokyo, 2013.

^27. Ibid., 1.

^28. Dicken and Miyamachi, “From Noodles to Satellites.”

^29. JFTC (Japan Foreign Trade Council, Inc.), Shosha Functions, Tokyo, 2013.

^30. Tanaka, “Why were Sogo Shosna Needed?”

^31.Poon and Rowley, “Change in Asia.”

^32.Lewin, “Frontiers of Group Dynamics.”

^33.Levasseur, “People Skills.”

^34.Burnes, “Kurt Lewin and the Planned Approach to Change.”

^35.McNish, “Guideline for Managing Change.”

^36.Kotter, Leading Change, 26.

^37.Daft, Understanding the Theory and Design.

^38.Weick and Quinn, “Organisational Change and Development.”

^39.Norbutus, “Exploring the Experience of Organisational Transformation.”

^40. Poon and Rowley, “Change in Asia.”

^41.Hassard et al., “China's State-owned Enterprise.”

^42.Kim, “Human Resource Management Reform.”

^43.Kwun and Cho, “Organisational Change and Inertia.”

^44.Pucik and Lim, “Transforming Human Resource Management.”

^45.Shim and Steers, “The Entrepreneurial Basis of Korean Enterprise.”

^46.Park, “The Corporate Culture Change Campaigns in Korea.”

^47.Rowley and Bae, “Human Resource Management in South Korea.”

^48. Kwon, “Recent Changes in Korea's Business.”

^49.Choe and Pattnaik, “The Transformation of Korean Business Groups.”

^50. Norbutus, “Exploring the Experience of Organisational Transformation.”

^51. Daft, Understanding the Theory and Design.

^52. Weick and Quinn, “Organisational Change and Development.”

^53. Chang, Financial Crisis and Transformation.

^54.Shin, “Korean General Trading Companies.”

^55.Maeil Economic Newspaper, May 3, 2009.

^56. DART (Data Analysis, Retrieval and Transfer System), Seoul, 2013.

^57.Rowley, “Management and Culture in South Korea.”

^58.Rowley and Bae, “Big Business in South Korea.”

^59.Kim and Kim, “Globalisation, Financial Crisis and Industrial Relations.”

^60. Visvabharathy, “Trading Companies.”

^61. Kunio, Sogo Shosha.

^62.Bae and Lawler, “Organisational and HRM Strategies in Korea.”

^63. SK Management System (SKMS), Seoul, 2008.

^64.Cho and Yoon, “The Origin and Function of Dynamic Collectivism.”

^65.Chung, Lee, and Jung, Korean Management.

^66.Kahal, Business in Asia Pacific.

^67. Chung, Lee, and Jung, Korean Management.

^68.Hofstede, “The Cultural Relativity of Organisational Practices.”

^69. Kwon, “Recent Changes in Korea's Business.”

^70. Chung, Lee, and Jung, Korean Management.

^71. Rowley and Bae, “Bib Business in South Korea.”

^72. Chung, Lee, and Jung, Korean Management.

^73. Pucik and Lim, “Transforming Human Resource Management.”

^74. Rowley and Bae, “Bib Business in South Korea.”

^75. Kim, “Human Resource Management Reform.”

^76. Shim and Steers, “The Entrepreneurial Basis of Korean Enterprise.”

^77. The Handbook of Korean GTCs, Seoul, 2005.

^78. Daewoo International Annual Report, Seoul, 2009.

^79. LG International Annual Report, Seoul, 2009.

^80. Samsung Corporation Annual Report, Seoul, 2010.

^81.Churchill and Brown, Basic Marketing Research.

^82. The Handbook of Korean GTCs, Seoul, 2010.

^83.Choi, Kwak, and Choe, “Corporate Social Responsibility and Performance.”

^84.Kaplan and Norton, “The Balanced Scorecard.”

^85.Shin and Lee, “The Effects of Employee Dispatch System.”

^86.Brown and McDonnell, “The Balanced Scorecard.”

^87.Newing, “Wake up to the Balanced Scorecard.”

^88.Niven, Balanced Scorecard Step-by-step.

^89. Kwon, “Recent Changes in Korea's Business.”

^90. Daft, Understanding the Theory and Design.

^91. Kotter, Leading Change.

^92. Bae, Rowley, and Sohn, “Introduction.”

^93. Park, “The Corporate Culture Change Campaigns in Korea.”

^94.Buckley, “Business History,” 318.

^95. Catalan, “Strategic Policy Revisited.”

^96. Lee, Clacher, and Keasey, “Industrial Policy as an Engine.”

Appendix 1. Descriptive statistics and factor analysis

Section 1. HRM, corporate culture, risk management and choice and focus

Section 2. Corporate performance

Table

					Factor
	Items	N	Mean	SD	1	2	3	4	5
HRM	(1) Our company places human resources in the right position based on their abilities.	76	2.53	0.663	0.115	0.024	0.787	0.192	0.102
	(2) Our company encourages employees with works, motivations or rewards.	76	2.57	0.772	0.100	0.175	0.851	0.203	0.011
	(3) Our company rewards adequately to employees based on their performance.	76	2.63	0.814	0.189	0.330	0.752	0.170	0.113
	(4) Our company carries out a fair personnel appraisal system.	76	2.67	0.700	0.228	0.181	0.523	0.288	0.365
	(5) Our company continuously invests in employees' work or career development.	76	2.58	0.821	0.489	0.179	0.649	0.029	0.117
	(6) Our company operates a systematic training and educational programmes for employees.	76	2.61	0.910	0.444	0.153	0.622	0.106	0.001
	(7) Our company regards human resources as one of the main sources of competitiveness.	76	2.47	0.840	0.343	0.358	0.652	0.193	0.084
Corporate culture (Decision-making)	(1) Top-down decision-making system has decreased.	76	2.82	0.920	0.089	0.154	0.325	0.833	− 0.001
	(2) The ratio of accepting middle-level managers' opinion in decision-making has increased.	76	2.83	0.885	0.232	0.371	0.217	0.737	0.017
	(3) The ratio of accepting stakeholders' (e.g. shareholders, BOD, labour union, etc.) opinion in decision-making has increased.	76	3.00	0.766	0.177	0.177	0.150	0.756	0.223
Corporate culture (Appraisal system)	(1) For a fair personnel appraisal, our company operates multi-tier evaluation system.	76	3.32	1.169	0.254	− 0.110	0.006	0.105	0.848
	(2) Our company operates performance-oriented reward system by diminishing seniority-based one.	76	2.54	0.791	0.143	0.321	0.430	0.058	0.654
Risk mngt.	(1) Our company puts emphasis on the importance of risk management after financial crisis.	76	1.84	0.767	0.850	0.171	0.190	0.108	0.152
	(2) When formulate various strategies, our company regards risks as the first priority.	76	1.96	0.840	0.876	0.129	0.128	0.118	0.105
	(3) All the employees in our company recognise the importance of risk management.	76	2.00	0.783	0.847	0.071	0.173	0.252	0.018
	(4) Our company tries to blocks any expected risks in advance.	76	1.99	0.721	0.800	0.212	0.298	0.081	0.203
	(5) Our company responds and solves as quickly as possible any risks which have already been occurred.	76	2.05	0.746	0.655	0.324	0.330	0.051	0.104
	(6) Our company manages not only financial risks, but operational risks.	76	2.51	0.945	0.584	0.201	0.156	0.116	0.397
Choice and focus	(1) Of many competitive strategies, our company tends to pursue ‘Choice and Focus’ strategy after financial crisis.	76	2.33	0.958	0.204	0.526	0.159	0.233	0.184
	(2) Our company places special emphasis on certain industries or markets where our competitors do not.	76	2.54	0.958	0.394	0.794	0.102	0.107	− 0.077
	(3) Our company enters into certain industries or markets where our competitors do not.	76	2.70	0.924	0.260	0.860	0.093	0.074	− 0.003
	(4) Our company enters into certain industries or markets by enduring some risks in the initial stage.	76	2.91	0.912	− 0.096	0.826	0.172	0.061	0.060
	(5) Our company continuously invest times and capital to explore niche markets or businesses.	76	2.92	0.829	0.090	0.752	0.231	0.250	0.113
	(6) Our company gathers information concerning niche industries or markets through overseas networks.	76	2.64	0.962	0.286	0.786	0.247	0.210	− 0.005
Eigen value					10.554	2.514	1.97	1.344	1.155
Variance explained (%)					43.977	10.475	8.21	5.601	4.812
Cum. (%)					43.977	54.452	62.67	68.269	73.081

Note: The figures highlighted in bold type indicate a surveyed item relevant to each factor. Each numerical figure refers to the degree of correlation with a factor, and the value ranges from − 1 to 1. Therefore, the higher an absolute value is, the more it is correlated with a factor.

Table

					Factor
	Items	N	Mean	S.D	1
Corporate performance	(1) The overall financial performance of our company has increased compared to the period of financial crisis.	76	2.09	0.751	0.791
	(2) The profitability of our company has increased compared to the period of financial crisis.	76	2.17	0.737	0.791
	(3) The cash flow of our company is stable compared to the period of financial crisis.	76	2.24	0.728	0.765
	(4) The overall market share has increased.	76	2.59	0.734	0.743
	(5) The number of new customers has increased.	76	2.63	0.746	0.686
	(6) Employee satisfaction and retention has increased.	76	2.83	0.737	0.745
	(7) Employees are more responsive toward customers.	76	2.95	0.815	0.733
	(8) Employee empowerment has increased.	76	2.67	0.700	0.816
	(9) Employee productivity has increased.	76	2.79	0.789	0.712
Eigen value					5.123
Variance explained (%)					56.918
Cum. (%)					56.918