The Limits of Convergence: Globalization and Organizational Change in Argentina, South Korea, and Spain

The Limits of Convergence: Globalization and Organizational Change in Argentina, South Korea, and Spain

by Mauro F. Guillén

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This book challenges the widely accepted notion that globalization encourages economic convergence--and, by extension, cultural homogenization--across national borders. A systematic comparison of organizational change in Argentina, South Korea, and Spain since 1950 finds that global competition forces countries to exploit their distinctive strengths, resulting in

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This book challenges the widely accepted notion that globalization encourages economic convergence--and, by extension, cultural homogenization--across national borders. A systematic comparison of organizational change in Argentina, South Korea, and Spain since 1950 finds that global competition forces countries to exploit their distinctive strengths, resulting in unique development trajectories.

Analyzing the social, political, and economic conditions underpinning the rise of various organizational forms, Guillén shows that business groups, small enterprises, and foreign multinationals play different economic roles depending on a country's path to development. Business groups thrive when there is foreign-trade and investment protectionism and are best suited to undertake large-scale, capital-intensive activities such as automobile assembly and construction. Their growth and diversification come at the expense of smaller firms and foreign multinationals. In contrast, small and medium enterprises are best fitted to compete in knowledge-intensive activities such as component manufacturing and branded consumer goods. They prosper in the absence of restrictions on export-oriented multinationals.

The book ends on an optimistic note by presenting evidence that it is possible--though not easy--for countries to break through the glass ceiling separating poor from rich. It concludes that globalization encourages economic diversity and that democracy is the form of government best suited to deal with globalization's contingencies. Against those who contend that the transition to markets must come before the transition to ballots, Guillén argues that democratization can and should precede economic modernization. This is applied economic sociology at its best--broad, topical, full of interesting political implications, and critical of the conventional wisdom.

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Editorial Reviews

International Affairs
A very ambitious study, striding across a number of disciplines. . . . This is a groundbreaking contribution to the study of business organization and economic development.
Political Science Quarterly
This book offers a sophisticated and lively analysis of three well-researched and important cases of distinctive political economies. It is a valuable contribution to the debate about the impact of globalization on national trajectories and the varieties of capitalism in the modern world.
— Anthony W. Pereira
Social Forces
The strength of this book is its comparative and historical approach to the study of organizational and institutional change. . . . [A]n informative work and a valuable contribution to the literatures on these countries and to debates about globalization generally.
— Robert K. Schaeffer
American Journal of Sociology
This is an important book: theoretically nuanced, comparative in the best sense, and empirically rich.
— Stephen Haggard

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The Limits of Convergence

Globalization and Organizational Change in Argentina, South Korea, and Spain
By Mauro F. Guillén

Princeton University Press

Mauro F. Guillén
All right reserved.

ISBN: 0691116334

Chapter One

Material progress [is not simply] a matter of settled determination, reliable numbers, and proper theory.
(Geertz 1995, 139)

CONVENTIONAL wisdom has it that the world is undergoing rapid globalization and that this process compels countries, industries, and firms to converge toward a homogeneous organizational pattern of "best practice" or "optimal efficiency"-those who fail to conform are doomed to fail in the global economy. I argue against this modernist, flat-earth view of globalization. Countries and organizations do not gravitate toward a supposedly universal model of economic success and organizational form as they attempt to cope with globalization. Rather, the mutual awareness that globalization entails invites them to be different, namely, to use their unique economic, political, and social advantages as leverage in the global marketplace. This is the central argument of this book on organizational change in the newly industrialized countries.

Observers and theorists of globalization have variously argued that the rapid increase in cross-border economic, social, technological, and cultural exchange is civilizing, destructive, or feeble, toborrow Albert Hirschman's (1982) celebrated metaphors. Many management scholars and gurus promise a world of boundless prosperity and consumer joy as a result of globalization, that is, the global as civilizing (Levitt 1983; Ohmae 1990; Naisbitt and Aburdene 1990). Other scholars see danger and uncertainty in globalization because we lack structures to deal with post-cold-war politics or with free international economic and financial flows (Kennedy 1993; Rodrik 1997; Mander and Goldsmith 1996; Mittelman 1999). As in the civilizing thesis, the destructive interpretation regards globalization as leading to convergence, albeit predicting harmful rather than beneficial consequences. A few skeptics propose yet a third perspective, arguing that globalization is a feeble process that has failed to advance enough to challenge the nation-state and other basic features of the modern world (Hirst and Thompson 1996; Wade 1996).1

In this book I cast doubt on the civilizing and destructive metaphors of globalization by documenting that this process actually encourages diversity in economic action and organizational form rather than convergence. I also refute the argument of feebleness on the grounds that globalization is in fact redefining the modern world as we knew it. My conceptual and empirical analysis rests on the assumption that the study of globalization needs to be firmly rooted in the debate about economic development. Globalization and economic development are intimately related to each other (Giddens 1990, 63-65; Kobrin 1998; Sklair 1991; Waters 1995). In fact, globalization is simply impossible without development. In turn, globalization is not only the result of an intensification of long-standing trends-such as increasing cross-border flows of goods, money, and people, and a growing mutual awareness and interdependence among social, economic, and political units in the world-but also the very context in which development has taken place during the post-World War II period. Economic development is about finding politically feasible, ideologically tolerable, and economically workable combinations of domestic and foreign resources to promote growth. Obsessed with the obstacles to economic growth, previous theories of development and globalization neglected evidence showing that countries and organizations look for ways to be different. The comparative institutional perspective on globalization and development advanced in this book emphasizes that countries and firms seek to find a unique place for themselves under the sun of the global economy.

While most previous theories of development have seen global forces as tending either toward convergence and homogeneity or toward duality and oppression, there is ample evidence suggesting that governments and countries can and do exercise policy choice in the global economy. In making decisions, governments follow their political and ideological instincts and preferences, and they try to strike a balance among competing claims and pressures (Boix 1998; Campbell 1998a; Garrett 1998; Gilpin 1987; Haggard 1990). Like governments, organizational actors such as labor unions and firms also respond in a variety of ways to globalization, adopting different approaches and organizational forms. Following economic sociologists (Smelser and Swedberg 1994), I take actors and their preferences as problematic, and assume that they may shift over time as they learn how to cope with globalization.

This book documents and makes sense out of the diversity in organizational form induced by processes of economic development and globalization. An appreciation of diversity, however, should not lead to an "atheoretical, 'every case is different' indeterminateness Not everything is possible" (Geertz 1963, 146). Following the anthropologist, I look for "intensive comparative investigations," searching for "regularities," for "middle-range" sociological theories of economic and organizational change (Geertz 1963, 147). I adopt a variation-finding comparative approach that seeks to establish "a principle of variation in the character or intensity of a phenomenon having more than one form by examining systematic differences among instances" (Tilly 1984, 116; Skocpol 1984, 368-74).

The analysis focuses on three newly industrialized countries-Argentina, South Korea, and Spain-which initially differed relatively little in terms of government policy and dominant organizational forms. Back in the late 1940s and 1950s the three countries attempted to develop their manufacturing industries by protecting domestic producers from foreign trade and investment. Business groups and state-owned enterprises reigned supreme, while foreign multinationals were kept at bay and small firms remained largely oriented toward the domestic market. Over time, however, the patterns of organizational change diverged, largely as the result of shifting interactions between sociopolitical institutions and government policies in a context of increasing globalization. I document that Argentine firms remained largely oriented to the domestic market as policies toward foreign investors and traders oscillated between relative openness and closeness. By contrast, South Korean firms pursued export-oriented growth under restrictive policies toward foreign investors and traders. Finally, Spanish firms also became more export oriented but, unlike Korean companies, under conditions of free foreign investment and trade. While Korean business groups have grown rapidly at the expense of small firms and foreign multinationals, it is the latter that have thrived in Spain. In Argentina, business groups and foreign multinationals have ended up becoming the dominant organizational actors. This diversity in organizational form has enabled each country to pursue certain activities more successfully than others in the global economy. It is the diversity in organizational form and its consequences that I seek to document and explain in subsequent chapters.

The Controversy over Globalization

Globalization is among the most contested topics in the social sciences. Its nature, causes, timing, and effects are hotly debated issues, including whether globalization induces convergence in economic and organizational patterns across countries or not (for a review of the globalization literature, see Guillén 2001). Intuitively, globalization is associated with increasing cross-border flows of goods, services, money, people, information, and culture, although most scholars are not sure whether it is a cause or an effect of such exchanges. Globalization and the spread of economic development across the world appear to be related to a disjunction of space and time (Giddens 1990, 64; 1991, 21), a shrinking of the world (Harvey 1989; Mittelman 1996). The global economy-driven by increasing technological scale, connections between firms, and information flows (Kobrin 1997, 147-48)-is one "with the capacity to work as a unit in real time on a planetary scale" (Castells 1996, 92). It is also one in which national economies become more interdependent in terms of trade, finance, and macroeconomic policy (Gilpin 1987, 389). What is perhaps most distinctive about globalization is that it intensifies our consciousness of the world as a whole, making us more aware of each other, and perhaps more prone to be influenced by one another without necessarily making us more like each other (Robertson 1992, 8; Albrow 1997, 88; Waters 1995, 63). It is in this reflexive sense that globalization is defined for the purposes of this book.

The effects of globalization are perhaps the most hotly debated issue. While some sociologists have observed greater similarity among countries in terms of such rationalized features as bureaucratic administration, formal education, civil and citizenship rights protection, and organized science (Meyer and Hannan 1979, 3, 13-15; Meyer et al. 1997, 145, 148, 152-54, 161), convergence in the organizational forms adopted by labor unions or firms across countries has generally not been found. In fact, many sociologists have documented the opposite: the resilience of indigenous organizational patterns in the face of economic development and globalization (Dobbin 1994; Guillén 1994; Orrù, Biggart, and Hamilton 1997; Biggart and Guillén 1999; Whitley 1992). Comparative studies of corporate governance have also found that countries differ in the extent to which families, banks, the state, multinationals, and other actors play a role as owners and controllers of incorporated firms. No convergence is observed as to who owns and controls the corporation around the world (Guillén 2000b; La Porta et al. 1998; La Porta, Lopez-de-Silanes, and Shleifer 1999; Roe 1993; see also chaps. 3 and 4). It is precisely because globalization enhances mutual awareness in the world that diversity in organizational form is expected as countries and firms seek to differentiate themselves in the global economy.

Examining the impact of globalization on organizational patterns at the country, industry, and firm levels requires careful analysis because scholars do not agree as to when globalization started and to what extent it has made inroads (Guillén 2001). While some date the beginning of globalization with the first circumnavigation of the earth or the rise of the European-centered world-economy in the early sixteenth century, others would rather wait until the turn of the twentieth century, World War II, the oil crises of the 1970s, the rise of Thatcher and Reagan, or even the collapse of the Soviet Union in 1989. For most analytical purposes-including the study of cross-national organizational patterns-it is preferable to date the beginning of globalization with the post-World War II period, that is, with the emancipation of colonies, the efforts to accelerate growth and development, and the renewed expansion of foreign trade and investment (Gilpin 1987, 341-44; Kennedy 1993, 47, 50; McMichael 1996; Guillén 2001).

A sound analysis of the impact of globalization on a certain organizational variable should avoid assuming that globalization is a uniform and inexorable trend. Rather, globalization is a fragmented, incomplete, discontinuous, contingent, and in many ways contradictory or incongruous process. Sociologist Anthony Giddens (1990, 64, 175) observes that globalization "is a process of uneven development that fragments as it coordinates The outcome is not necessarily, or even usually, a generalized set of changes acting in a uniform direction, but consists in mutually opposed tendencies." Anthropologist Jonathan Friedman (1994, 210-11) further notes that globalization is the product of cultural fragmentation as much as it is the result of modernist homogeneity, and that "what appears as disorganization and often real disorder is not any the less systemic and systematic." These perspectives are consistent with the reflexive definition of globalization proposed above, which emphasizes that it creates mutual awareness as opposed to mindless conformity.

Main Approaches to Globalization and Development

Despite the intensity of current controversies, the social sciences' interest in economic development and globalization is not new. Right from their beginning as scholarly disciplines, sociology and economics concerned themselves with industrialization and socioeconomic change (Giddens 1990; Robertson 1992; Smelser 1976; Smelser and Swedberg 1994). Such pivotal social scientists as Comte, Saint-Simon, Spencer, Marx, Durkheim, Weber, and Parsons formulated theories to understand the social and economic change induced by industrialization, and could be considered as pioneering theorists of globalization as well (Albrow 1997; Robertson 1992; Waters 1995). However, the systematic study of the causes of economic development and underdevelopment, and the formulation of specific prescriptions as to how to generate economic growth in an interdependent world, did not start until the end of World War II. The time was then ripe for development studies to flourish: economies had to be reconstructed, colonies were emancipating themselves, and the two superpowers competed with each other to extend their influence throughout the developing world (Bell 1987; Gereffi 1994b; McMichael 1996; Portes 1997). Not surprisingly, the first students of economic growth adopted a "developmentalist" approach, first formulated in terms of modernization and later of dependency.

The publication of Walt W. Rostow's Stages of Economic Growth in 1960 marked the heyday of modernization theory. In his view, countries evolve from "undeveloped" to "developed" via five stages as long as the right value incentives are in place: traditional society, preconditions for takeoff, takeoff, maturity, and high mass-consumption. Each stage is a prerequisite for the next because new political, economic, and social institutions make possible ever more economically advanced and differentiated activities over time, a point also underscored by Kerr, Dunlop, Harbison, and Myers in their landmark book, Industrialism and Industrial Man ([1960] 1964). Political scientists (e.g., Apter 1965) refined the argument when asserting that the primary engine of change was a piecemeal shift from traditional to modern values, that is, a transformation of authority structures, a perspective also embraced by many sociologists (see the review by Smelser 1976, 144-63). As reflected in table 1.1, the modernization approach to economic development regards globalization as a civilizing force.2 In addition, modernization theorists think of economic development as contributing to a "shrinking" of the world, a convergence of economies and societies, a trend toward homogeneity, or at least toward a restricted set of alternatives (Kerr et al.


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What People are saying about this

Frank Dobbin
Mauro Guillén's rich narrative of industrial strategy in Argentina, South Korea, and Spain sets its sights squarely on the conventional wisdom. It fills a gaping hole in comparative studies, and it is the first book to succeed at showing the substantial variation that persists in national economic institutions. It effectively undermines a fundamental assumption that shapes contemporary economic thought.
Frank Dobbin, Princeton University
Bruce Carruthers
This is a valuable contribution, based on an impressive collection of different kinds of data combined with some smart thinking. Globalization is almost an academic buzzword, and has generated too much trendy-sounding but muddle-headed thinking. Guillén cuts through the jargon and dissects the issues precisely. He also brings some new cases to the discussion. His book will be of interest to academic scholars, but also to policy analysts and business school students.
Bruce Carruthers, Northwestern University, author of "City of Capital"

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Meet the Author

Mauro F. Guillen is Associate Professor of Management and of Sociology at the Wharton School of the University of Pennsylvania. A former Guggenheim Fellow, he is the author of "Models of Management: Work, Authority, and Organization in a Comparative Perspective" and the coauthor of "The AIDS Disaster".

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