Managerial structure of business groups in Taiwan: The inner circle system and its social organization

Abstract

This paper examined the management structure of Taiwan's business groups. The objective was to determine how independent group firms coordinate their business. Employing longitudinal data of the top 100 groups, I investigated the "inner circle" system and its evolution. I found that group leaders occupied overlapped positions at the director rather than at the manager level, which implied a separation of strategic planning and routine administration. Secondly, the dynamics of inner circle management did not hinge upon the group president as in the Korean chaebol, nor on the norm of corporate community as in the Japanese keiretsu, but on the social ties in the inner circle. Analyzing the background of the leaders indicated that family never dominated the scene even in the early years, and their significance decreased along with environmental changes. The transition in Taiwan in the late 1980s motivated business groups to introduce more "outside" talent into decision-making.