Globalisation and Institutional Change in the State-Led Model: The Case of Corporate Governance in South Korea

Abstract

This article explores the homogenising pressures of globalisation and institutional change in the state-led model of capitalism, within the purview of the ‘varieties of capitalism’ literature. In light of the observation that the national political economies which are the exemplars of the state-led model have undergone a more fundamental change towards the liberal market model than the other non-liberal variant (namely, the coordinated market model), the article asks what systemic (structural-institutional) factors make the state-led model less resilient in the face of pressures for change. Focusing on corporate governance in South Korea as an illustrative case study, the article argues that the absence of the kind of institutional complementarity (that is, mutually reinforcing link) between the key capitalist sub-systems found in the coordinated market model can help to explain the profound, and even path-shifting, change in the state-led model.

Keywords:

• varieties of capitalism
• institutional complementarity
• state-led model
• corporate governance
• South Korea

Notes

Exceptions include Streeck and Thelen (2005) and Lane (2003).

This is not to suggest that Germany and Japan have been stagnant. Whilst they were successful in maintaining their distinct models of capitalism up until the late 1990s, they too have made some adjustments approximating the LME model. See for instance, Kitschelt and Streeck (2004). However, observers with a knowledge of both the CME and the state-led model have pointed out that there has been a more visible acceptance of neoliberal reforms in the latter than the former; for example, see Tiberghien (2007).

The ‘national business systems’ approach identifies a slightly different set of sub-systems (that is, the political, financial, educational and labour, and cultural systems). However, the sub-systems identified by the VoC approach (that is, the financial system, labour relations, education and training, and inter-firm relations) have a more direct and immediate bearing on firm relations, which is perhaps why the VoC has been able to demonstrate the institutional linkages and complementarities more explicitly. Although Hall and Soskice have identified these sub-systems, they are accepted by many within the VoC school as the key sub-systems, including those who take on a more historical-institutionalist approach.

For more recent work that brings France and Korea together, see Lee and Yoo (2007).

In fact, neoliberal reforms were introduced in the early 1980s. However, they were not strongly enforced due to a combination of factors, including regulatory capture and the declining institutional capacity of the state (Kim 2002: 237).

Whether the move towards shareholder value system of corporate governance is desirable is a contested issue – explicitly or implicitly – in the comparative corporate governance literature. For example, see Vistols (2001).