© 1994 Oxford University Press
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Project Execution Capability, Organizational Know-how and Conglomerate Corporate Growth in Late Industrialization
MIT, Cambridge, MA 02139
aHarvard Business School USA
Abstract
In many successful late-industrializing countries in the 20th century, business groups with operating units in technologically unrelated industries have acted as the microeco-nomic agent of growth. This paper explores why this business form has characterized countries which industrialized ‘late’, and why this form succeeded in the early phases of catching up whereas the advanced-country conglomerate has had an undistinguished performance. The paper uses internal resource-base theories of the firm to explore the significance of organizational knowledge and resulting increasing returns in the group form which, even in mature markets and especially in late industrialization, constitute a sustainable source of competitiveness. In the case of late industrialization foreign technology acquisition capability became a necessary condition for corporate success. In the best diversified business groups this capability was transformed into organizational know how that provided a key resource in the effectiveness of corporate growth through diversification. The first two parts of the paper briefly survey diversified industrial groups in historical contexts and then across a broad array of late-industrializing countries. Then the paper considers why diversification was not prevalent among firms attempting to catch up in earlier historical periods, why the strategy of leading late industrializing firms was one of diversification rather than specialization and why their chosen diversification path was one involving technologist colly unrelated industries. This is followed by the core argument of the paper about the transformation of technology acquisition into a competitive asset and illustrated with evidence from South Korea. Finally, the paper analyzes why the behavior of the late industrializing group differs from that of the American conglomerate.
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