Falls from Grace and Lessons from Failure: Daewoo and Medison

Long Range Planning 40 (2007) 446e464

http://www.elsevier.com/locate/lrp

Falls from Grace and Lessons from Failure: Daewoo and Medison Dong-Jae Kim

Corporate transformation has often been viewed as a revolutionary event that separates the company from its past. Obsessed with the radical outcome, managers tend to emphasize grand visions and strategic concepts. But by doing so, they underestimate the difficulties inherent in implementing such radical concepts. Corporate transformation is an on-going process embedded in the larger context of a firm’s growth. Its outcome may be radical change, but its process should consist of gradual and incremental steps. Based on five years of field research into the ‘failure cases’ of two of Korea’s leading companies e the Daewoo Group and Medison e this article argues that the key to successful corporate transformation lies in solid implementation of change management processes. Both Daewoo and Medison had grand vision and fairly clear strategic concepts, strong leadership and capable managers. But they lacked process management and organized systems with which to glue these advantages together. As the two cases reveal, if these elements are not properly organized, each can turn into a negative factor in the transformational process. Corporate transformation requires due time and efforts. Managers should learn from these failure cases and understand transformation in the context of historical evolution of the complex dynamics of interacting organizational elements. Ó 2007 Elsevier Ltd. All rights reserved.

Corporate Transformation: Radical Outcome, Gradual Process Organizational changes have been grouped into two types, i.e., evolutionary and revolutionary,1 which are thought to be not only separate from each other, but even different in nature. When companies aim to achieve big, radical outcomes, they typically pursue revolutionary changes or ‘corporate transformation.’ Embarking on such transformations, managers tend to be obsessed with the radical outcomes, and try to develop unconventional methods to bring about change. 0024-6301/$ - see front matter Ó 2007 Elsevier Ltd. All rights reserved. doi:10.1016/j.lrp.2007.06.003

They typically start with declaring a grand vision and strategic concepts. Once announced, corporate transformation looms large within the organization, managers feel significant pressure in terms of time and scope, and shock therapies and lots of surprises can be expected. Thus managers often develop a serious bias towards the outcomes, while paying less attention to the accompanying processes. Corporate transformation, however, is an on-going process embedded in the larger context of a firm’s growth. The two seemingly different types of organizational changes e evolutionary and revolutionary e should be seen as outcomes of inherently similar dynamics. While radical changes appear to be abrupt, and separate from earlier processes, they are in fact consequences of the preceding dynamics, which are often considered smaller, incremental changes. Put differently, radical and discontinuous changes come only after the organization has consumed due time and resources on prolonged periods of incremental change. What we see is a radical outcome, yet what underlies it is a gradual process. If the underlying structural settings of corporate transformations are ignored, companies cannot achieve their desired outcomes.

Stories of successful transformation are often over-dramatized, highlighting the heroic efforts [rather than] the painful process. Several cases of successful corporate transformation have been widely reported and benchmarked, e.g. GE under Jack Welch2 and IBM under Lou Gerstner.3 These success stories have often been over-dramatized, and tend to highlight the heroic efforts that were poured into the transformation, while giving much less emphasis to the painful process of getting there. Implying that incremental changes never bring significant impact, and that organizations need to cut themselves off from the past and make a whole new start, such stories reinforce the bias towards outcome-oriented notions of corporate transformation. While success stories offer helpful references, cases of failure could provide perhaps even more useful insights, offering us in particular the chance to learn what not to do. Failure cases, however, are rarely made public, and there are often only anecdotal snapshots available, rather than analytical reports. Based on the findings of five years’ field research by the author, this article develops lessons about successfully managing transformation by examining two dramatic cases of failure of corporate transformation in Korea d the Daewoo Group and Medison. Daewoo was the country’s third largest chaebol, or family-owned conglomerate, while Medison was its flagship example of a rapidly growing entrepreneurial startup: they had been dubbed, respectively, as the model companies of Korea’s old and new economy. There could be many reasons for their failures ranging from internal factors, including the companies’ strategic and operational mistakes, to external shocks, among which the Asian financial crisis and stock market crash were clearly critical blows.4 Given this complicated context, this article focuses on the transformational processes in the two companies, arguing that the two cases should be viewed as failures of corporate transformation, and that we can learn from such failures. Recent studies indicate that corporate failures can often be attributed to the risks inherent in organizational change processes.5 Corporate transformation is an iterative, multi-phased corporate renewal process.6 While Daewoo and Medison achieved initial and partial success, they both largely failed to accomplish full-phased organizational change to build solid bases for future corporate growth. What factors explain their failures? While examining the cases in depth reveals some factors, such as institutional and cultural settings, which can be seen as Korea-specific, many other factors can be seen as generic elements which will be relevant to business enterprises anywhere in the world.

Corporate transformation is an iterative, multi-phased renewal process. Long Range Planning, vol 40

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Learning from Failure: Daewoo and Medison In the entire history of Korean businesses, the ‘falls from grace’ of these two companies are seen as the most dramatic. So what happened? The Daewoo Group went insolvent only shortly after its triumphant expansion into emerging markets all around the world, under the vision of ‘sae-gyegyeong-young (transnational management)’, and in early 1999 was dissolved into several independent companies under the control of its creditors. Medison announced its grand vision ‘Medison EcoNet (ecological network)’ and aggressively expanded into diverse business areas, only to see the stock market crash lead to insolvency in early 2002. The author conducted in-depth research at Daewoo and Medison around the time they fell into failure. Based on his detailed records of personal interviews and close observations, this article discusses the corporate transformation efforts at these two companies, why they failed, and what the implications are. Table 1 briefly summarizes the profiles of the two companies.

Daewoo Group’s Growth and Transformation: Mini-Daewoos Founded in 1967 as a textile trading house by a charismatic entrepreneur Kim Woo-Choong, the Daewoo Group rose to be the third largest of Korea’s chaebols, ranked 24th in the Fortune Global 500 with total sales of over US$70 billion in 1998. At that point the Group consisted of 32 domestic companies plus 320 overseas subsidiaries and 149 branch offices, and more than 250,000 employees worldwide.7 Daewoo’s thirty-year history has been characterized by its aggressive penetration into overseas markets. Within five years of its establishment, Daewoo joined Korea’s top ten exporters, becoming number one in 1978. Acquiring troubled companies and then turning them around was Daewoo’s formula for rapid growth, and the group demonstrated an impressive level of competencies in its acquire-to-grow strategies in sectors ranging from construction, automobiles and shipbuilding to electronics, telecommunications and consumer electronics. ‘Sae-Gye-Gyeong-Young’ (Transnational Management) Daewoo’s international expansion culminated in its grand vision of transnational management ‘saegye-gyeong-young.’ Put simply, the vision was to replicate the group’s early domestic success in overseas markets. Daewoo’s extensive experience in government-led projects in Korea meant it could offer strong credentials to the many developing countries where local governments aspired to achieve rapid industrialization. In effect, Daewoo was exporting Korea’s experience as well as its own. Despite the trend toward globalization, Daewoo knew that becoming an ‘insider’ in local markets was critical to longer-term overseas success, and the shortest cut to achieving insider status was to acquire and operate local companies.8 With this conceptual mapping, Daewoo launched and began implementing the ‘sae-gye-gyeongyoung’ strategy in 1990. Specific product-market strategies were laid out.9 On the product Table 1. The Two Cases

Founded Failed Founder/CEO Total Sales No. of Employees Key Products

Daewoo

Medison

1967 1999 Kim Woo-Choong US$ 70 billion* 250,000* Automotives, Consumer Electronics, Shipbuilding and Heavy Industry, Telecommunications, Construction, Trade, Financial Services

1985 2002 Lee Min-Hwa US$ 170 million** 700** Ultrasound, PACS, Electronic Diagnostic System, Medical Information System, Financial Services

Sources: Company Reports (Note) *1998, **2000.

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dimension, Daewoo’s strategy was to have both global platform products and also diverse local products in each target country-market. The group selected automotives and consumer electronics as their two global platforms (with a heavy emphasis on the former), while examples of local products included hotels and financial services. In terms of market dimension, Daewoo went through a candid reality check, and concluded that the medium-to-low end market was their niche. Keeping with its aggressive risk-taking posture, Daewoo made a bold decision to enter massively into emerging country-markets mostly in Eastern Europe, Central Asia, South East Asia and Africa. Although business commonsense warned that there were no significant markets in those countries, Daewoo claimed that they would create markets there, rather than struggling in the overly crowded markets in developed countries. The early outcomes were very impressive, and the global business community paid keen attention in 1995 when Daewoo overbid General Motors to acquire the Polish automobile manufacturer FSO, and again a year later when the group was selected for (although later prevented from) acquiring France’s Thomson Multimedia.

Daewoo sought to create new markets in emerging countries, rather than struggling in the overly crowded markets in developed countries. Transformation Process: Mini-Daewoos False StartdTop-down Declaration and Diverse Speculations Realizing the increased complexity involved in organizing and managing its activities worldwide, Daewoo embarked on a massive corporate transformation in early 1997. The plan was to reorganize the Group’s scattered and diverse worldwide activities into several ‘regional’ clusters. In January 1997, at the annual senior management meeting held at the Corporate Training Center in suburban Seoul, Chairman Kim declared that Daewoo would form 10-15 ‘regional headquarters’ and ultimately transform itself from one big business group into many smaller groups worldwide, i.e., ‘mini-Daewoos.’ Most senior managers regarded the declaration of corporate transformation as a New Year ‘ritual’, rather than as a serious attempt at fundamental change. As usual, Chairman Kim paid little attention to how people received his message e it was a typical top-down announcement, put on the table with scant explanation. While these transformation efforts may have been conceptually sound, without careful explanation they became an elephant touched by many blind men: there was nothing to stop everyone generating their own definition of what it meant. What made matters worse was that people began questioning and interpreting what the ‘real’, hidden intention of the Chairman’s efforts was. As in other Korean chaebols, Daewoo’s decision-making processes were highly secretive in nature, centred around the very top person and not properly shared. As an organization with over thirty years’ history, during which it had been run mostly by founder members or those who joined very early in its history, Daewoo now had to face a transitional challenge in terms of management succession across many affiliated companies. In particular, the new drive for globalization involved, explicitly or implicitly, some shared assumptions about the need for change, including for a new breed of top managers. Naturally, those senior executives who had spent several decades with the company felt the pressure to pass the baton on to younger colleagues. In these rather sensitive circumstances, the transformational move mini-Daewoos invited many misguided beliefs.

Inadequate communication meant many managers believing the mini-Daewoos were intended to ’get rid of’ older senior executives. Long Range Planning, vol 40

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Things began to go against Daewoo. The lack of adequate communication in the early corporate transformation phase resulted in the belief e shared among many Daewoo managers e that the development of regional headquarters would essentially mean old ‘heavyweight’ senior executives being sent overseas to create space for reshuffling the management team at home. Chaos, confusion and anxiety spread, and ungrounded rumours about particular individuals abounded. As virtually no substantial conversations went on between Chairman Kim and his senior executives about the transformation, even the very top key managers began to believe that the mini-Daewoos were intended to ‘get rid of’ older senior executives. As the CEO of one affiliated company remarked, ‘It is about time. I have been with Chairman Kim for over two decades, and the crucial moment is coming. Sending me over to a regional headquarters implies I shall be retiring some time soon.’ And so the grand vision of mini-Daewoos went astray from the very beginning. Feasibility Study d Making the Organisation Change-Ready? Following Chairman Kim’s conceptual messages, the detailed planning was put in the hands of the Chairman’s Office. A taskforce was formed whose primary responsibility was to carry out a detailed feasibility study. But again, having little guidance from his direct boss, the taskforce team leader had to figure out what needed to be done in this particular context. In fact, it was Daewoo’s culture not to raise specific questions about an allocated task. At its root, Daewoo was a trading house, and the leading executives had mainly reached their top positions by demonstrating excellent sales records. As the president of an affiliated company commented: ‘Fundamentally we are salesmen. There is no textbook on sales: the challenges require significant levels of improvisation from one’s imagination.’ Thus the company’s transformation efforts were shaped to a great extent by managers’ ‘interpretations’ rather than by explicit guidance and reinforcement from the Chairman. Fifteen countries were selected as ‘candidates’ for hosting regional headquarters covering the entire world. Arriving in a particular country, the team ran through a fairly standardized feasibility study with assistance from their local operations and outside consultants. They seemed to assume their job was largely confined to confirming technical feasibility, and they therefore focused mostly on issues such as taxation and accounting. In fact, as no one at Daewoo posed any serious challenge against Chairman Kim’s regional headquarters concept, these were not genuine feasibility studies, but rather the technical groundwork for implementing top-down ideas. More important issues in transformation e such as organizational and managerial considerations e were beyond their scope.

As no one posed any serious challenge to Chairman Kim’s concept, the feasibility studies were not genuine Local Daewoo employees and ‘expatriates’ were the most perplexed. All of a sudden, a simple message came down from the headquarters in Seoul announcing ‘Regional headquarters are to be introduced.’ No explanation was given about the background or the strategic intent behind the idea. Again, local operations began to glean information through diverse, mostly informal, channels about what this move implied, and the same communication pattern was replicated, resulting in similar chaos and confusion. In the mean time, Chairman Kim kept on travelling worldwide and occasionally visited the fifteen candidate countries. As always, he gave a talk to his people there, touching upon many issues, with the regional headquarters concept presented as just one of many topics. And as always, the talk was a one-way street, with no questions from the floor. Properly handled, this phase could have turned into an effective dissemination process in the intended corporate transformation. If the feasibility study had had the clear intention of being an opportunity for actively communicating with local operations, Daewoo could have cultivated fertile local settings for a much smoother implementation of the regional headquarters plan. But the company was now well into its transformation process, which affected sites scattered all over the world, 450

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without any clear picture being shared, and Daewoo was undermining its thirty year efforts in building a global business powerhouse. Daewoo was far from being change-ready.

Daewoo was far from being change-ready. Implementation and Initial OutcomesdUnfulfilled Dream In December 1997, Chairman Kim announced the formal implementation of the mini-Daewoos.10 The final picture turned out to be even bigger than the original plan, with a total of twenty-one regional headquarters (RHQs) to be sited in Poland, Romania, Bulgaria, Czech Republic, Uzbekistan, Kazakhstan, Russia, Ukraine, Morocco, Libya, South Africa, Vietnam, Myanmar, India, Pakistan, China, Japan, Mexico, Colombia, France, and the United States. Four basic RHQ functions were identified. First, each RHQ was supposed to coordinate existing local operations, resolving any potential conflicts of interests among affiliated companies so that the country operation as a whole could generate significant synergies as a mini-Daewoo group. Second, each RHQ was expected to offer supporting activities commonly needed by affiliated companies, e.g., managing relationships with the host government and infrastructure services including personnel, finance and public relations. Third, each RHQ would provide strategic control and management of affiliated companies in terms of initiating longer-term growth strategies and resource allocations, and decide strategic priorities among possible business opportunities. Lastly, each RHQ was supposed to create its own businesses (such as new business development and trade brokerages) to help support itself. As expected, a host of top executives with over twenty years’ experiences were assigned to lead the regional headquarters. Most Daewoo people received this move as confirmation that their collectively built-up fears and assumptions were justified, and the whole idea was an excuse to reshuffle the top management team at the Seoul headquarters. Consequently other transformational activities were regarded as minor and peripheral efforts. Even those put in charge of the new RHQs seemed share these misguided beliefs. One RHQ head recalled, ‘Chairman Kim did not explain what I was supposed to do. The four functions were commonsense. I was trying to understand the genuine intention of Chairman, but couldn’t figure it out. Almost all of us (RHQ heads) believed that it was a process of retiring.’ RHQ heads were not properly motivated to build a new Daewoo group in their countries. It did not take long before people began leaving Daewoo: at least three RHQ heads left Daewoo within the first six months of the official launch of RHQs, and thus once hypothetical and speculative worries turned into concrete realities. And as local operations largely maintained their ‘old’ ways of doing businesses, with no significant changes under the new RHQ system, this was hardly a transformation put into practice. In all, no significant group of people at Daewoo was genuinely excited and enthused by the grand vision of corporate transformation. Although it had excellent vision and potentially successful strategic concepts for its corporate transformation, Daewoo was let down by dysfunctional organizational dynamics. Looking back, ‘sae-gye-gyeong-young’ and the mini-Daewoo concept were fairly solid and were both realistic and actionable. Granted, part of the expected outcome, and of Chairman Kim’s intention, might have included a rearrangement of the Group’s top management team. But it should be noted that the mini-Daewoos also represented a genuine corporate transformation plan. The inherent deep-seated and often mythical ambiguity about organizational processes at Daewoo meant that sound vision and strategy were sacrificed. To make the matters worse, the Asian Financial Crisis fell upon Daewoo’s fortunes, and ultimately forced the once mighty chaebol to draw its comparatively short history to a close. Table 2 summarizes Daewoo’s transformation efforts. Medison’s Transformation Attempt: The Ever-Lasting Organization Founded in 1985 by Lee Min-Hwa and other four fellow Ph.D.’s from KAIST (the Korean Advanced Institute of Science and Technology), Medison, named after a combination of ‘medical’ and ‘Edison’ the inventor, made a significant mark on the history of entrepreneurial startups in Long Range Planning, vol 40

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Table 2. Daewoo’s Transformation Efforts: Mini-Daewoos

Phase

Activities

Outcomes

Kick-off (January 1997-) False StartdTop-down Declaration and Diverse Speculations

Transformation declared by the Chairman Vision announced: Mini-Daewoos - From one big business group headquartered in Seoul, Korea - To 10-15 smaller business groups in key country-markets with regional headquarters

- Received as a year-beginning ritual, another big slogan - Believed to be sending old executives overseas, management reshuffling

Preparation/Ground Work (April 1997-) Feasibility StudydMaking Change-Ready?

Taskforce team organized - Ten people divided into two sub-teams covering key regional operations Feasibility study conducted - 15 candidate countries - Professional support from a global accounting and consulting firm - Mostly on taxation/accounting issues One-way lectures by the Chairman Actions taken - 21 regional headquarters (RHQs) finalized and implemented - Senior executives named as the heads of RHQs

- Rumours spread generating chaos and confusion - Local operations perplexed trying to find clues to the sudden moves into regional headquarters - Assumptions and beliefs built mostly on management change-over

Implementation/Actions (December 1997-) Unfulfilled Dream

- Confirmed rumours and reinforced assumptions/beliefs - Three RHQ heads left within six months - No significant change in global and local operations at Daewoo

Sources: Company Reports, Field Study.

Korea. After its IPO in the Korean Stock Exchange in 1996 its market capitalization peaked at around 450 billion Korean Won ($US380 dollars), and by 2000 sales amounted to over 200 billion Korean Won ($US170 dollars). Medison had actively pursued growth and by late 2000 had about 25 affiliate companies (‘the Medison Family’), as well as 12 overseas subsidiaries and minority shares in many early phase startups.11 Founder Lee’s strong leadership was crucial to Medison’s impressive growth, and the company was regarded as the role model for many entrepreneurs in Korea. Breaking a New Ground: Entrepreneurial Spirit and Spin-Out With its first product e ultrasound medical equipment e Medison recorded impressive compound annual growth figures of over fifty percent over the first decade. Their market penetration was based on a typical latecomer strategy d entering the market at the low end, gaining customer confidence while upgrading product quality, and then expanding into higher end product-markets.12 In terms of geographic expansion, they again replicated latecomer approaches, expanding operations from their domestic market to less competitive countries such as Turkey, Pakistan and India, and then ultimately graduating to the advanced markets of Europe and North America. 452

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Keen to keep his organization innovative, the visionary and charismatic CEO adopted an unusual ‘spin-out’ policy to enter new product areas. What separated Medison from many other Korean companies was its diversification into related products from 1992 onwards. The company managed this diversification process in a very unusual way for Korean business practices at the time, adopting a policy called ‘spin-out’ to enter new product areas. The idea came from their visionary and charismatic founder/CEO Lee Min-Hwa, who was keen to address the issue of how to keep an organization innovative. He was inspired by some Western companies who had maintained leadership in innovation, and had specifically studied the case of Thermo Electron Corporation for benchmarking.13 The case offered Lee an insight into how to keep individuals innovative and motivated, which he saw as an important parallel to the innovativeness of the company as a whole. ‘Spin-outs’ are similar to conventional ‘spin-offs’ in that they are separated from the parent company, but differ in some important aspects. By and large, spin-offs are used to divest a company’s less important or troubling businesses. In contrast, spin-outs are primarily used to manage the complexity that is often caused by the rapid growth of a company. The parent company retains a significant level of ownership in spin-outs, which are used to align employee incentives more accurately to their respective contributions by allowing particular elements of the company be separated from each other in terms of inputs and outputs. Medison actively adopted these practices, making its first cluster of spin-outs in 1994. As Medison continued its growth by diversification into related fields, Chairman Lee began to ponder how to manage the complexities inherent in the increased number of products and markets. As the global dot-com boom flourished in 1998-2000, Lee noticed interesting cases in Silicon Valley and elsewhere where, largely through investment relationships, companies began forming networks of organizations such as CMGI, Internet Capital Group, IdeaLab and Softbank.14 At the time, there was a growing belief that something was really changing in the way wealth was created on a global scale, with people referring to a ‘new economy.’ Enron was cited as the model company for the new era, with its asset-light and intangible-heavy strategy.15 This apparently unstoppable global trend encouraged Medison to accelerate its pursuit of aggressive growth with heavy investment in emerging fields. Chairman Lee’s visionary traits were well matched with the favourable environment trends, and the result was his grand vision of the ‘Ever-Lasting Organization.’ Transformational Efforts: the Ever-Lasting Organization Getting Started e Grand Slogan as Usual The single most important question in Lee Min-Hwa’s mind was ‘how can an organization sustain survival and growth?’ Looking at the constant rise and fall of companies, Lee’s ambition was to create a firm that would have ‘eternal life’, and through logical reasoning and observations, he arrived at his own answer: the ‘the Ever-Lasting Organization.’ Put simply, he concluded that any individual organization was destined to die from many internal as well as external causes. The only way to build an entity that enjoyed virtually eternal life would be to form an organization that could continually regenerate itself by spawning offspring. Having already experienced fairly successful spin-outs, Lee was convinced that he had found how this could be achieved, and, starting from an internal CEO lecture, began preaching the ‘ever-lasting organization’ as the company vision. An eloquent speaker and creative thinker, Chairman Lee was well known for his strong propensity for conceptual arguments. In particular, he was deeply interested in chaos theories and Long Range Planning, vol 40

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[The CEO] concluded that the only way an entity could enjoy virtually eternal life would be to enable it continually regenerate itself by spawning offspring conceptualized how to apply those notions to the business world, writing several books to explain his vision and philosophy,16 which certainly sounded fresh and innovative to outsiders. By contrast, Medison employees received Lee’s lectures as largely esoteric, and not really relevant to their daily tasks. Even senior managers did not seem to really grasp the CEO’s true intention. Before this, Lee had introduced many other concepts, some from existing management literature, (e.g., management by objectives) and others from his own conceptualizing, (e.g., yin-yang organization), and so the ‘ever-lasting organization’ was seen by Medison people as yet another in the long line of grand slogans, rather than as a serious signal for transformation. Taking a Company beyond its Life Cycle e the Ecological Network Chairman Lee translated his ‘ever-lasting organization’ notion into a set of diversified companies which were loosely coupled to each other and which shared a common corporate vision and brand. Conceptually, the network would consist of a holding company at the centre, with many sister companies around it. Structural arrangements were made to put the concept into practice. On the one hand, much more extensive spin-outs were undertaken. Apart from its ultrasound equipment business, Medison spun out all its product lines such as X-ray equipments and endoscopes, and then went further, to spin out marketing and sales divisions and even support functions such as public relations, advertising, and customer services. Lee proclaimed that he had created a new organizational model and named it ‘Medison EcoNet (Ecological Network).’ It comprised three types of organizations; a holding company, infrastructure companies, and operating companies, each of them having their own roles and responsibilities within the ‘family circle.’ The holding company was the ‘parent’ of all the other companies, with the key roles of shaping the EcoNet vision and its strategic directions, and offering crucial financial advice to member companies. Infrastructure companies provided services commonly needed by member companies, and when transaction conditions were competitive vis-a`-vis outside markets, member companies were strongly encouraged to buy services from these infrastructure companies. Finally, operating companies were the front-line workers addressing customers and their needs, and were the real revenue-generators for the EcoNet. Table 3 describes the member companies and their areas of expertise within the Medison EcoNet. Lee’s logic of building an ‘ever-lasting organization’ via his EcoNet seemed impeccable. First, at the individual level, as he had shown by his belief in the spin-out system, individual motives could be best aligned by spin-outs. Employee status did not motivate talented people, as the conventional salary and bonus system could not induce dedication, so some form of sharing ownership ought to be the way to go, and the spin-out system would resolve these issues nicely. Early winners of spin-outs could already be observed d executives of Medidas were know to be hugely successful, with its CEO (formerly only a middle manager at Medison) being personally worth an estimated thirty million US dollars, or 10% of the company stock, in early 2000. This potential level of compensation was simply unimaginable within the existing corporate structure. Second, at the company level, by making companies independent, it would be possible to attribute the performance of individual companies to their own specific factors. And, in an efficient internal market, all the member companies would benefit from working harder. Third, at the corporate level, this method was expected to maximize the total value of the Medison corporate as a whole. Finally, perhaps most important in Lee’s mind, this was the only way to achieve close to 454

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Table 3. The Medison EcoNet)

Type

Company Name

Area of Expertise/Main Business

Holding Company

Medison

Infrastructure Company

Future Communications M2 Communications SerTech Muhan Investment

Corporate vision and strategy, Ultrasound diagnostic device Public relations Marketing After sales service Investment/finance

Operating Company

Medidas Meridian BioMedLab BioSys Mediface Welson Endotech Medichems Kretztech

Medical information system Electro-acupuncture system Genetics diagnosis Electro-cardiograph PACS Endoscopes Breath analyzer 3D ultrasound technologies

Source: Company Report. )

As of December 2000.

permanent growth and avoiding company mortality, allowing it to go on living far beyond its conventional life cycle. Putting into Practiceethe Dream Larger than Life The reality was much harsher than the pure concept. Once the ideas began to be put into practice, Medison peoples’ reactions were complex. They realized that the spin-out system could have upside potential for individual employees, particularly for senior managers who were candidates to be CEOs of spun-out companies: if successful, they could potentially realize huge personal wealth. But against this positive prospect, there were deep-seated doubts about the effectiveness of the Medison EcoNet. People wondered how making many smaller companies could build a strong empire: they worried that a collection of many feeble companies was bound to be weaker than one bigger, stronger company. Another serious concern related to the efficiency and effectiveness of the internal market mechanism, which was at the heart of the EcoNet concept, with many spun out companies complaining about the quality of services provided by fellow member companies. For example, sales and marketing were supposed to be offered by EcoNet infrastructure companies, but in reality each operating company preferred to have its own sales and marketing functions. As an executive of a member company said: ‘It is extremely difficult to place our products on top priority on the part of EcoNet sales people. They tend to put priorities from the standpoint of the Medison Group as a whole rather than from that of our company. We are a small company; our products are largely neglected. We need our own salesmen.’ Thus Medison EcoNet had the inherent problem of conflicts of interests between individual member companies and the corporate structure. The way Chairman Lee directed the implementation of Medison EcoNet also raised doubts and concerns on the part of those working for member companies. Lee’s status as the founder, together with his charismatic leadership style, made it difficult for followers to challenge him. He had already become a larger-than-life figure through frequent appearances at various national and international events and ceremonies. As a born ‘big-picture’ person, Lee had figured out the EcoNet system, based on his own logical reasoning, and genuinely believed it had no significant flaw. When complaints came in from various parts of the ‘family’ they were largely ignored or rejected, and soon people tended to give up trying to convey their worries to the Chairman, and used their energies to try to dodge the EcoNet system instead. Long Range Planning, vol 40

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Complaints were ignored or rejected, and people gave up trying to report their worries, using their energies to try to dodge the EcoNet system instead. The most decisive move in the corporate transformation of Medison was its split into two separate companies in early 2001. Already a listed company, Medison went through the necessary steps for a legal split into Medison and Medison EcoNet. The former was intended to retain R&D and the production of ultrasound medical equipment, and the latter to take on sales and marketing for member companies together with responsibility for financial investment. All the investment portfolios went to Medison EcoNet, which, although originally conceptualized as a pure investment holding company, turned out to be an odd mixture of investment holdings and sales/marketing: these functions were retained so that Medison EcoNet would have regular and on-going revenue generation capabilities, which it needed to remain as a listed company. Confusion and chaos within EcoNet doubled when the split was implemented, with member companies worrying about their fate if Medison EcoNet, which held significant shares in them, should move in directions against their interests.

Once individualism and spin-outs flourished, there was little loyalty for group matters. Some of Medison EcoNet’s early actions gave off fairly disturbing signals, and the stock market crash, which began in April 2000, put the network in a troubled position, since it had invested heavily in early phase startups on the assumption of a continuing bull market. Facing repeated difficulties in matching the due dates of its short-term debts, Medison EcoNet frequently pulled member companies’ credit lines in its own favour. Chairman Lee did not offer any explanation to the heads of member companies d it was simply not his style. What he told them was perceived as top-down orders. To make matters worse, spin-outs had spawned a very different corporate culture. Medison had been preserving startup culture, where people were proud of their solidarity and collaborative spirit, and a collective mentality prevailed. However, once individualism and spin-outs flourished, there was little loyalty for group matters, which made for a fundamental challenge to the corporate culture. The already shaky relationships between Medison EcoNet and its member companies, and specifically between Lee and his juniors, were becoming worse, and the mounting distrust resulted in a lack of collaboration at crucial junctures. Finally, Medison declared itself insolvent, and, after only 17 years, a wonderful success had suddenly become a failure. Table 4 summarizes Medison’s transformation attempt.

History Repeating Itself?: Some Unhappy Parallels The cases of Daewoo and Medison reveal how difficult it is to manage corporate transformation processes. Looking at the stories of these two companies in detail, we find some striking similarities to which these dramatic failures can be attributed. Since these two companies can be seen as representative of their own distinct clusters of firms in Korea e Daewoo of large companies, particularly chaebols, and Medison of entrepreneurial startups e the case analyses should deliver fairly broad-based findings. And, given the life spans of the two companies, Daewoo the thirty plus years from 1967 to 1999, and Medison the seventeen years from 1985 to 2002, the cases capture different 456

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Table 4. Medison’s Transformation Attempt: Ever-Lasting Organization

Phase

Activities

Kick-off (March 1999-) Grand Slogan as Usual

Concept developed and the vision declared by the Chairman - Lectures inside and outside the company - Books authored Company booklet prepared and distributed Preparation/Ground Work ‘Medison EcoNet’ developed (April 1999-) - A holding company Beyond Life Cycle? - Infrastructure companies - Operating companies Businesses spun out - X-ray equipments, endoscopes Support functions spun out - Marketing and sales divisions - Public relations, advertising, and customer services Implementation Medison EcoNet system launched (March 2000-) - Roles and responsibilities Dream Larger than Life of each company type identified - Internal market activated Legal split of Medison - Medison (ultrasound) - Medison EcoNet (marketing/ sales, financial investment)

Outcomes - Received by employees as esoteric and not relevant to their daily tasks - Regarded as another conceptual slogan by the Chairman

- Reacted with a complex set of motivesdpersonal incentives, yet serious doubt as to the effectiveness of Medison EcoNet. - Assumed to be an idealistic model, not a workable solution

- Internal market did not function as expecteddlower quality, uncompetitive price - Interests conflicted among member companies - Relations between the holding company (Chairman) and member companies (senior managers) soured and mistrust mounted

Sources: Company Reports, Field Study.

founding conditions and other relevant time-dependent contextual variables. Uncovering commonalities of the two failure cases should help us understand what to do and, more importantly, what not to do, to achieve successful corporate transformation. The Deadly Bias towards Grand Vision and Strategic Concepts In their respective times, both Daewoo and Medison were well regarded, and thought of as visionary companies. But corporate transformation is much more than a brilliant strategic concept: it is more a matter of meticulous implementation, full of intense and careful interactions among people on a day-to-day basis. Both Daewoo and Medison had well designed strategic concepts, and unveiled fairly clear and articulated images of their corporate transformation d the mini-Daewoos and the ‘Ever-Lasting Organization’. Their leaders were undoubtedly outstanding strategists in their day: these companies did not lag behind, rather they excelled in terms of vision and strategic concepts per se. It was the quality of implementation that made the difference between success and failure.

These leaders were outstanding strategists . their companies excelled in terms of vision and strategic concepts. It was the implementation that made the difference between success and failure. Long Range Planning, vol 40

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But while companies were strong on grand strategic concepts, they put little emphasis on implementation: driven by big dreams, they underestimated the difficulties inherent in such massive change efforts. In Daewoo’s case, the mini-Daewoo concept involved doubling the number of overseas operations up to 1,000 within three years. So it had to find double the number of capable managers e Daewoo’s people reacted cynically that this was hardly going to be feasible. In Medison’s case, to realize its vision, the company had to be able to generate many newly-bred affiliates year after year. But Medison people knew that was not possible, and the spin-out companies themselves began complaining at fundamental flaws of the Medison EcoNet system. Stretch goals and radical jumps may stimulate an organization; but such far-reaching corporate transformations can only succeed when their big, radical concepts are firmly based on careful and gradual implementation processes, and thorough communication with people down the hierarchy. The Liabilities of Charismatic Leadership Perhaps the most similar aspect of the two companies was their charismatic leaders. Despite an age difference of over fifteen years, Kim and Lee shared a striking resemblance in their leadership styles. With absolute charisma, both of them dominated virtually every aspect of running their companies, from technology to marketing to finance. Born and trained diligent hard workers, they were handson managers involved even in daily routines. Despite their impressive early successes, they remained entrepreneurial and challenging, and their perfectionist styles of leadership, along with their unchallengeable field experience, mean their effectiveness as top decision-makers was very difficult to question.

People down the hierarchy started to interpret and reinterpret messages from the top, often biasing them towards their own benefit. But there remains an ambiguity about charisma and charismatic leadership,17 and existing literature on leadership proposes that the effectiveness of charismatic leadership hinges on diverse contingencies.18 It is widely acknowledged to be effective at the entrepreneurial stage of the company, and both Daewoo and Medison certainly achieved their impressive early successes under charismatic leadership. The effectiveness of charismatic leadership, however, tends to decrease as the organization goes through the middle stage of its life cycle. As both companies stabilized, their founders’ charismatic leadership began to be taken for granted, and had far less genuine impact than their early days. People down the hierarchy tended not to take what their charismatic leaders said at face value; rather, they started to interpret and reinterpret the messages from the top, often biasing them towards their own benefit. Worse still, people often blamed charismatic leadership for stifling their organizations by hindering open communication. A sense of fear on the part of managers, which resulted in a lack of proper upward communication, misguided the whole organization into an inescapable vicious circle. Kim and Lee seemed not to have paid much attention to the changing context of their leadership. Transformational efforts without careful management of the leader-follower dynamics in situations of charismatic leadership are likely to bring negative consequences.19

[Korean] leaders feel entitled to make important decisions alone; followers rarely challenge them. When they have the added power of charisma, the potential for a negative outcome can be even more serious 458

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Korea’s cultural heritage might have added another more negative element to this situation. Stemming from the centuries-long traditions of Confucian values, Korean people are under the implicit behavioural assumption that they should respect elders and seniors. Past studies indicate that Koreans tend to regard bosses in their companies as strict fathers,20 and in this context, leaderfollower dynamics often become fairly complicated compared to those in Western cultures. Leaders tend to behave as if they are entitled to make important decisions without referring to their followers; followers rarely challenge their leaders, even when the leadership goes a wrong way. When leadership has the added power of charisma, the potential for a negative outcome can be even more serious. With charismatic leaders, Daewoo and Medison were more likely to suffer from the negatively reinforced leader-follower dynamics inherent in the Korean cultural context. Institutional settings such as Korean ownership structures and related governance issues seem also to have worked negatively in these two failure cases. Partly because of its relatively short economic development history, many Korean companies (including Daewoo and Medison) had retained traditional family-owned structures, and thus had no genuinely functioning board of directors. In such settings, decision-making processes can be easily dominated by a small group of individuals without any appropriate system of checks-and-balances. In companies run by an owner/founder, top-down, one-way communication was the norm, and decisions made by Kim and Lee, despite their inherent potential flaws, were never seriously checked within their organizations. Even feasibility studies weren’t ever really intended to question the working out of the CEO’s gut instincts. The Single-Minded Pursuit of Upsizing Both Daewoo and Medison showed a strong bias towards the growth aspect of transformation. To oversimplify, transformation has two avenues d upsizing and downsizing. In-depth case studies of over twenty companies have concluded that successful corporate transformation processes consists of both rationalization and revitalization.21 Rationalization typically brings downsizing, which helps the company build discipline and support by enhancing the quality of performance of each unit, whereas revitalization often involves upsizing, aiding the company to develop stretch and trust by ensuring the quality of integration across units. These two different dynamics are complementary and should be seen as offering a ‘balanced’ perspective. Transformation that relies too much on a single type of effort is likely to fail. Daewoo and Medison were single-mindedly growth-oriented e in fact, most Korean managers have a tendency to favour expansion. This ‘growth mentality’ may reflect the companies’ historical roots as part of Korea’s developing economy. In the process of achieving phenomenal economic growth over the past decades, Korea has praised growth as the primary virtue: bigger size has been the surest ticket to further success. Daewoo used to boast of having Korea’s biggest credit line thanks to its substantial export accounts. Even Medison, founded in the mid 1980s, seemed to have inherited the ‘growth-DNA’ from its Korean predecessors. Being born followers, Korean companies have been rushing into global competition without paying due attention to the need for balanced growth. In retrospect, transformation at both Daewoo and Medison might have been better to have included a proper downsizing or ‘rationalization’ processes. At least, they should have moderated the pace of growth to enhance discipline and quality of performance of existing operational units. Both companies had known only one path to transformation e upsizing e and had never experienced any serious downsizing until their failures. Their reactions to the need for change were largely driven by ‘active inertia’, only reinforcing their old formulae for growth. Smart Individuals without Organizational Systems It may not be obvious in the case stories above that both Daewoo and Medison had excellent pools of individuals in their organizations. One may be inclined to attribute their failures to the lack of capable managers properly able to absorb their leaders’ visions and strategic concepts, but this was not the case. On the contrary, Daewoo and Medison were well known for the talented individuals in Long Range Planning, vol 40

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their respective business contexts. Daewoo was founded and had been run by elites, alumni of the most prestigious Kyunggi High School and Yonsei/Seoul National University. Medison was founded by Ph.D.s from KAIST, an elite engineering school. Top tier college graduates headed for Daewoo in the 1970s and 1980s, and highly qualified young people went to Medison in the 1990s. When the companies rode the early growth curves, those talented individuals made important contributions to their organizations, as well as enjoying vast opportunities for their own personal growth. As their organizations became mature, however, those individuals somehow did not perform as they used to, particularly in terms of lacking their previous motivation levels. When the organization was small, they had casual chances to chat with their boss, the founder/CEO, sharing every new idea, and excited at the prospect of setting new records. As the company grew bigger, communication with their boss lessened and personal interaction was significantly reduced. Close personal ties to their charismatic boss were what mobilized their organizations in the early days, but when they were no longer available, managers felt insecure and less motivated. Another kind of mechanism was needed to replace the old personal ties, specifically, some kind of new organizational system to ‘glue’ people together was needed. It is understandable that Medison, which had just graduated from its startup stage, had not yet developed proper organizational mechanisms, but it is surprising to find that Daewoo, despite its size and age, was still run as a de facto startup company, largely directed by individual decisions at different levels of the hierarchy rather than by organized systems. Corporate culture seems to be an important factor in explaining this aspect. As noted, Daewoo’s culture was that of a trading house, where individual salesmen survived. Medison was a place where entrepreneurial and competitive individuals could dominate. Talented individuals are often ‘lone rangers’, finding it easier to make their own decisions without referring too often to others’ opinions. Managers at Daewoo and Medison seemed to have serious doubts about the future of their companies, but the companies could not offer systematic solutions to respond to this prevailing insecurity. Rather than actively seeking answers about their doubts, these elite people began looking outside for fresh opportunities, and when the most talented individuals were the first to leave, others followed. Table 5 summarizes lessons for managers by highlighting the reasons for the corporate failures at Daewoo and Medison, which capture some of the common mistakes that companies tend to make in their transformational efforts.

Conclusion Corporate transformation has two faces. We are inclined to look at the glorious part of transformation and not to pay attention to the painful part. This article has investigated two cases of the dramatic failure of corporate transformation: the Daewoo Group which was triumphantly expanding overseas to build a global powerhouse, and Medison, the clear leader among Korea’s emerging entrepreneurial startups. Their failures came around the time when they were about to introduce perhaps their greatest transformational change as their company histories reached their peaks. They needed the will and courage to face up to the pains and agonies of transformation processes that underlie the outcomes. Although not so obvious to the outside observers, due time and efforts have to be dedicated to ensuring the success of a desired transformation. Viewed this way, corporate transformation is fundamentally change management. Vision and strategy, strong leadership, and capable managers are often held up as the key factors for success in corporate transformation. This article argues that these are only necessary conditions. To be sufficient, change needs process management and organized systems that glue these elements together. When the key factors are not properly organized, each of them may turn out to have negative effects on the transformational process. Paying attention only to individual success factors may be misleading e managers need to develop a holistic image of successful corporate transformation, to develop a ‘success gestalt,’ so that key ingredients of organizational change can interact effectively and coherently and yield a successful outcome. 460

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Table 5. Lessons for Managers: What Went Wrong?

Daewoo

Medison

Implications

‘Mini-Daewoos’ - Replicating domestic success overseas - Building a network of small Daewoo Groups worldwide - A total of 1,000 overseas operations, doubling the number in three years

‘Ever-Lasting organization’ - Creating a self-renewing organization - Building a set of companies loosely coupled to each other sharing common vision and brand

Corporate transformations are much more than grand vision and strategic concepts To succeed, they need to be accompanied by careful and gradual processes of implementation Managers need to be wary of the tendency to bring the deadly bias for grand concepts into the transformation

Liabilities of Charismatic Chairman Kim Woo-Choong Leadership - Founder/CEO - Sales and marketing expertise - Hard-working, hands-on management style

Chairman Lee Min-Hwa - Founder/CEO - Engineer by training - Hard-working, hands-on management style

Single-Minded Pursuit of Upsizing

- Tried to develop an ever-growing body of companies - Generated many small spin-out companies without due resources and capabilities

Charismatic leadership is mostly effective in the early phase of the company’s life cycle; at later stages, it may turn into a negative factor in transformation When the charismatic leaders happens to be the founder, owner, or has some other special status in the company, the potential negative effect is even more likely Some broader cultural and institutional contexts may also affect the effectiveness of charismatic leadership in transformationde.g., Korea’s Confucian values, family-owned governance structure turned out also to be negative factors Managers need to check the specific contexts for effective leadership Organizations tend to resort to their own formulae for survival, often resulting in ‘active inertia’ Corporate transformation needs to take a balanced approach between upsizing and downsizing, or revitalization and rationalization

Deadly Bias for Grand Vision and Strategic Concepts

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- Attempted to maintain the historical pace of growth by overseas expansion - Set even more challenging goals in an already stretched organization

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Source: Field Study.

- Founded by elite Kyunggi High School and Yonsei/SNU graduates - Recruited top tier college graduates - Top jobs taken by highly competitive salesmen - Largely run by individuals not by organizational systems or clear rules despite the huge size of the company

- Founded by Ph.D.’s from KAIST, top engineering school - Recruited from KAIST and POSTECH, top-tier engineering schools - Dominated by entrepreneurial engineers - Boasted flexible management style, ready to change per needs; no clear rules

Smart people tend to have low level of tolerance for chaos and confusion that are typically brought upon in corporate transformation; they tend to defect rather than to stay Corporate culture is a moderating variable; when it leans towards individualism, smart people’s tendency to go it alone gets reinforced Managers need to see the importance of organizational systems that can glue smart people together, particularly when the company goes through transformation

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Acknowledgement The author thanks Charles Baden-Fuller, the Editor-in-Chief of Long Range Planning, Choelsoon Park, the Guest Editor of this special issue, and two anonymous reviewers for their support and helpful comments on earlier versions of this article. Financial support from the Yonsei Center for Global Studies is also gratefully acknowledged.

Appendix The Research The research began in 1997 when Daewoo was well into its transnational management phase and lasted until 2002 when Medison went insolvent. It grew out of the generic question of why some firms are more successful than others. Daewoo and Medison were regarded as two of the most successful and fastest growing companies in Korea. It is ironic that these two leading companies turned into failures, while the research was originally intended to investigate the success stories of Korean companies. The study went through several steps: (1) To develop key research areas, the author conducted in-depth personal interviews with top management teams, including the Chairman. (2) the author then conducted semi-structured one-on-one interviews with managers at diverse levels both at home and abroad partly to develop further propositions and partly to test already formed hypothetical notions. (3) The author also used company archives and other published materials for detailing stories. For the Daewoo study, which continued until May 1999, the author visited over twenty countries and spent over 300 hours conducted interviews with more than 100 managers. In the Medison case, the author had a series of intensive personal interviews and discussion with Chairman Lee for over thirty hours, as well as conducting one-on-one interviews with over thirty managers throughout the hierarchy for about fifty hours. The Medison study lasted until May 2002.

References 1. M. L. Tushman and E. Romanelli, Organizational Evolution: A Metamorphosis Model of Convergence and Reorientation, in L. L. Cummings and B. M. Staw (eds.), Research in Organizational Behavior, vol. 7, JAI Press, Greenwich, CT, 171e222 (1985); C. J. G. Gersick, Revolutionary Change Theories: A Multilevel Exploration of the Punctuated Equilibrium Paradigm, Academy of Management Review 16, 10e36 (1991). 2. N. M. Tichy and S. Sherman, Control Your Destiny or Someone Else Will, Harper Business, New York, NY (1993); J. F. Welch, Jack: Straight from the Gut, Warner Books, New York, NY (2001). 3. L. V. Gerstner, Who Says Elephants Can’t Dance: Inside IBM’s Historic Turnaround, Harper Business, New York, NY (2002). 4. Refer to S. Choe and T. W. Roehl, What to Shed and What to Keep: Corporate Transformation in Korean Business Groups, Long Range Planning 40(4e5), 465e487 (2007) (forthcoming), for cases of the restructuring of chaebols. 5. See, for example F. C. Wezel and A. van Witteloostuijn, From Scooters to Choppers: Product Portfolio Change and Organizational Failure: Evidence from the UK Motorcycle Industry 1895 to 1993, Long Range Planning 39, 11e28 (2006) for how product expansion and the related organizational changes increase the risk of organizational failure. Also, see J. P. Sheppard and S. D. Chowdhury, Riding the Wrong Wave: Organizational Failure as a Failed Turnaround, Long Range Planning 38, 239e260 (2005) for a description of the sequence of stages of organizational failures. 6. S. Ghoshal and C. A. Bartlett, The Individualized Corporation: A Fundamentally New Approach to Management, Harper Business, New York, NY (1997). 7. Daewoo Group. Daewoo Fact Book (company report), Seoul, Korea (1998). 8. K. Ohmae, Triad Power: The Coming Shape of Global Competition, Free Press, New York, NY (1985). 9. See D. J. Kim, Global Strategy for Korean Companies: Implications of Daewoo’s Transnational Management, Sogang-Harvard Business 81 July-August, 69e74 (1998) (in Korean) for details. Long Range Planning, vol 40

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10. Maekyung Daily, Big Moves at the Daewoo Group: Transferring Overseas, 12.9. 1997. 11. Medison, Medison Culture (company report; in Korean), Seoul, Korea (2000). 12. R. A. Kerin, P. R. Varadarajan and R. A. Peterson, First Mover Advantage: A Synthesis, Conceptual Framework, and Research Propositions, Journal of Marketing 56, 33e52 (1992); S. P. Schnaars, Managing Imitation Strategies: How Late Entrants Seize Market from Pioneers, Free Press, New York, NY (1994). 13. G. N. Hatsopoulos, On Thermo Electron Corporation in Perspectives: How Can Big Companies Keep the Entrepreneurial Spirit Alive? November-December, Harvard Business Review 185e186 (1995) 14. Henig called them ‘Economic Networks.’ See P.D. Henig, And Now, EcoNets, Red Herring, No.75, pp.95e108, February 2000. 15. See for example G. Hamel, Leading the Revolution: How to Thrive in Turbulent Times by Making Innovation a Way of Life, Plume, New York, NY (2002). 16. J. W. Lee and M. H. Lee, Supra-Living Organization, Bakyoungsa, Seoul, Korea, (2002) (in Korean).K. H. Lee and M. H. Lee, Towards the 21st Century Venture Models, Bakyoungsa, Seoul, Korea, (2002) (in Korean). 17. G. Yukl, An Evaluation of Conceptual Weakness in Transformational and Charismatic Leadership Theories, Leadership Quarterly 10, 285e305 (1999). 18. B. Shamir and J. M. Howell, Organizational and Contextual Influences on the Emergence and Effectiveness of Charismatic Leadership, Leadership Quarterly 10, 257e283 (1999). 19. See, for example C. Stadler and H. H. Hinterhuber, Shell, Siemens and Daimler Chrysler: Leading Change in Companies with Strong Values, Long Range Planning 38, 467e484 (2005) for cases where a charismatic and over-ambitious leader presents danger to the organization’s survival. 20. Y. K. Shin, Korean Businesses: Present and Prospect, Bakyoungsa, Seoul, Korea, (1992) (in Korean). 21. Ghoshal and Bartlett, Op. Cit at Ref. 6.

Biography Dong-Jae Kim is Associate Professor of Strategy and International Business at the Graduate School of International Studies, Yonsei University (Seoul, Korea). He received his Ph.D. from the Wharton School, University of Pennsylvania and M.A. and B.A. from Seoul National University. Prior to joining Yonsei, he worked as a management consultant with McKinsey & Company, Inc. and was an Assistant Professor at the Department of Business Administration, University of Illinois at Urbana-Champaign. His current research areas include organizational competences, technological accumulation, global strategy, and entrepreneurship. Graduate School of International Studies, Yonsei University, 134 Shinchon-Dong, Seodaemun-Gu, Seoul 120-749, Korea 82-11-262-4007 [email protected]

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