Institutional Transition and Cultural Inheritance Network Ownership and Corporate Control of Business Groups in Taiwan, 1970s–1990s

Business groups are a prominent enterprise system in most East Asian and emerging economies. This article addresses an important but understudied issue – ownership and control of these large conglomerates. Studying the ownership structure of the top 100 Taiwanese business groups sheds light on the debate between the culturalists and the institutionalists. Culturalists claim family domination even in institutional changes while institutionalists suggest more dispersed and open shareholding after economic liberalization. The longitudinal analysis of group ownership across three time periods reveals a mixed structure. Although the family still controls most of the old, core group members, new firms and joint ventures that are owned by multiple family groups rose significantly during the institutional transition of 1987–93. The evidence shows that organizational changes neither completely comply with emerging rules, nor do they hold on to existing cultural logics. Neither the culturalists nor the institutionalists have correctly predicted the metamorphosis. Rather, the concept of compromise strategy, which allows organizations to retain their core interests while at the same time respond to institutional constraints and/or incentives, provides a proper explanation. keywords: business groups ✦ compromise strategy ✦ institutional change ✦ ownership ✦ Taiwan International Sociology ✦ March 2004 ✦ Vol 19(1): 25–50 SAGE (London, Thousand Oaks, CA and New Delhi) DOI: 10.1177/0268580904040919 25 02 ISS 040919 (bc/t) 4/2/04 8:59 am Page 25