Towards a Pan-Asian Perspective on Organizational Learning
The previous section has reviewed the conceptual foundations of Nonaka’s knowledge creation theory, along with critiques thereof. It appears that his original SECI model and enabling factors are imbued with assumptions that are derived from the unique socio-cultural characteristics in Japan, thereby constituting a barrier to its applicability across the rest of Asia.
Although Asia is populated by diverse institutional environments, the societies therein tend to have in common the two cultural characteristics of high collectivism and high power distance (Hofstede, 1980). We shall argue that the strong cultural propensity to form extensive social networks in Asia is driven by collectivistic values, and that this, combined with the high power distance evident in most Asian countries, generates a strong tendency for organization members to regard proprietary knowledge as a means for increasing one’s personal power base and an extreme reliance on leaders to resolve problems. Thus it is that three sets of cultural practices or assumptions are especially salient in shaping and channeling organizational learning processes in Asian societies outside Japan (Bhagat et al., 2002). These are: (1) guanxi networks, i.e. personal connections, serving both as pervasive resources and as pervasive barriers; (2) possession of privileged knowledge as a powerful status symbol; and (3) paternalistic leadership.
In this section, we shall characterize the contribution of these factors to organizational learning as being interdependent, such that while pervasive guanxi networks can broaden the sources of external knowledge available to an organization, the effectiveness of learning inside an organization is likely to depend on the personal motivations of organization members to share their knowledge with other co-workers, and on the leadership quality to navigate asymmetric power relations within the organizational hierarchy (Easterby-Smith et al., 2008). Based on our final analysis, we will also suggest some possible adjustments to Nonaka’s SECI model which may facilitate its wider generalizabilty and applicability across Asia.
Guanxi networks as pervasive resources and barriers
Collectivistic cultures entail strong predilection to act as members of groups. For example, the traditions of Confucianism assume that social order is governed by the specific roles and responsibilities of individuals, who are situated within relatively stable networks of relationships (Redding and Whitley, 1990; Whitley, 1991). Thus, the Chinese typically construct their social identity and derive experiential meaning with reference to close relationships with significant others.
The importance of cultivating and maintaining interpersonal relationships for achieving business success in Asia has been extensively documented (Yeung and Tung, 1996; Chen and Chen, 2004; Tsang, 1998). Across much of Asia, because legal systems and institutional rationality are relatively less developed than in the West, intricacies of social relationships permeate all aspects of life, such that even in formal working contexts the quality and effectiveness of interpersonal cooperation depends on the strength of the social and kinship ties that bind the parties, along with the associated particularistic obligations (Tsui et al., 2000). Such ties are inescapable considerations when managing and working within and between business organizations (Chen and Chen, 2004) and when interfacing with government bureaucracies (Xin and Pearce, 1996).
Among traditional Chinese, the relative closeness of any particular social relationship may be categorized into a small set of concentric circles (Luo, 1997; Redding and Wong, 1986), such as: family members, familiar persons, strangers with common identity, and strangers without common identity (Tsui and Farh, 1997). It is assumed that family members should be given unconditional support and assistance without obliging other parties to reciprocate, whereas there is an expectation of mutual commitment and reciprocity among familiar persons with whom the focal person shares some close connections. Transacting with strangers with common bonds, such as same origin, neighborhood, or school ties, is treated with depersonalized affection, but social exchanges with pure strangers are regarded as purely utilitarianistic and instrumental (Tsui et al., 2000).
In traditional Confucian societies, individuals interpret and apply the principles of reciprocity, mutual obligation, and loyalty in building and maintaining particularistic personal connections or guanxi (Xin and Pearce, 1996), which link into networks of informal and personal ties and which serve as bases for (1) securing useful resources and (2) developing a sense of social connectedness in the business context (Luo, 1997). Individuals, who are connected by guanxi, relate to one another on the basis of the particular social psychological meanings, expectations, and obligations that match the strength of their relationship ties (Tsui and Farh, 1997). Strong guanxi ties are characterized by mutual feelings of warmth and shared fate (Hwang, 1987). Social hierarchy is structured and supported by guanxi ties (Chen and Chen, 2004; Luo, 1997), which confer status and behavioral norms upon individuals and groups, depending on their location within the guanxi network. As argued by Chen (1995: 144), ‘a Chinese should first and foremost know his place in society and how to interact with others in a proper manner.’ Given the importance of the relational circles (Redding and Wong, 1986) people tend to invest considerable effort in maintaining and extending their guanxi networks and thereby improve their relative social standing. In the context of organizational learning, building guanxi with appropriate parties, including key employees, business partners, and members of central and local government agencies, may help a firm to gain access to necessary information about government policies (Tsang, 1998) and to overcome problems and barriers related to knowledge transfer (Buckley et al., 2006).
The cultural preference for collectivism extends from managing social relationships to the development of inter-firm relationships, as manifested by the prevalence of business groups in Asia, such as Japanese keiretsus, Korean chaebols, and Chinese family businesses (Chang, 2006). Although their structures and management practices have some distinctive national characteristics, a common feature of such business groups is that they operate as networks of affiliated companies that are connected by cross-shareholdings and interpersonal ties (Tipton, 2007; 2008). Members derive value from such arrangements through reduced transaction costs, availability of valuable resources, and increased flexibility (Carney, 2008). The recent emergence of Asian conglomerates can, to a certain extent, be considered a reflection of the effective utilization of guanxi networks at the firm level for mutual advantage. Such ‘Dragon Multinationals’ appear to thrive on a new linkage-learning-leverage (LLL) paradigm by developing strategic alliances with partner firms, sharing the partners’ critical resources, and augmenting their own organizational capabilities (Mathews, 2002). For example, in a study tracking the past development of high-tech industries in Asia, Mathews and Cho (2000) described how new start-ups in Asia established extensive links with foreign advanced companies in order to achieve technological development.
The application and manifestation of guanxi practices also extends to relationships between private and public organizations (Chen, 2005). For example, a so-called ‘main bank’ system has been set up in Japan, with the purpose of ensuring that there is a supportive, relational basis to the financial resourcing of firms by banks, thereby reducing the threat of hostile takeovers and enabling managers to take a long-term view in their investment decisions (Chang, 2006). There is also a prevalent assumption among Asian governments that neither ‘perfect’ nor maximum competition constitutes optimal market conditions, and that the level of competition needs to be ‘fine-tuned’ to promote investment and technical change (Enderwick, 2005). Government regulation of business is enacted through ‘administrative guidance,’ and through visible and active co-participation, rather than through formal legislation (Tipton, 2007; 2008).
It is evident, however, that pervasive guanxi networks have substantial downsides at the societal level. Asia’s economic crisis in 1997 has been attributed to ‘crony capitalism,’ a typical phenomenon in Asian societies (Singh and Zammit, 2006), describing an economic system in which successful businesspeople derive their success from close relationships with politicians and government officials. Thus, for Johnson (1998), crony capitalism means ‘corruption, nepotism, excessive bureaucratic rigidity, and other forms of trust violation that can occur whenever a state tries to manipulate incentives or, in other words, alter the market,’ while Thompson (1998) characterizes crony capitalism as ‘a kind of subcontracting of corruption that relied on state power to provide monopolies for private accumulation.’ Crony capitalism thus describes a capitalist economy in which contracts, loans, appointments, concessions, subsidies, tax incentives, and so on are awarded to friends, relatives, and other privileged clienteles rather than on the basis of due process and open contracting. Generally speaking, crony capitalism arises when political cronyism spills over into the business world, and when self-serving friendships and family ties between business people and government officials influence economic and social policies to the extent of corrupting public service and political ideals (Enderwick, 2005), such that business success is not determined by the disciplines of the free market and the rule of law, but depends instead on relationships with the ruling government.
We have thus highlighted the pervasiveness of guanxi networks in Asian societies as a manifestation of Asian collectivistic social values, and their salience at all levels of social and organizational behavior, extending to corporate strategy making and economic development. The following section will discuss how high power distance is manifest in the treatment of privileged knowledge as a powerful status symbol, and in paternalistic leadership.
Privileged knowledge as a powerful status symbol
Although knowledge is considered to be the most critical resource for the firm (Grant, 1996), perceptions and assumptions about its role and value differ across cultures (Bhagat et al., 2002; Buckley et al., 2006). While in some cultures, knowledge is treated pragmatically, as a means to achieving other ends, other cultures attach a high symbolic premium to the possession of valuable and rare knowledge, which mediates power relations and social interactions between providers and recipients of knowledge resources. Thus, across much of Asia, foreign partners with substantial knowledge resources have been revered as leaders in the upgrading of local business operations (Clark and Geppert, 2006). We have noted earlier the other side of the coin, in that the potential for ‘reverse flow’ knowledge appears to be neglected, and is even considered undesirable, not only by Japanese companies (Wong, 2001; 2005), but also by partners from Singapore and Hong Kong (Tsang, 1999, 2002; Wang and Nicholas, 2005).
Due to the influence of Confucianism, Asian societies have traditionally emphasized the value of education and learning opportunities. Those assumed to be in possession of knowledge, and with the associated academic or titular credentials, tend to be accorded greater trust and higher social status (Redding, 2002). This nexus of cultural assumptions is manifest in day-to-day organizational behavior activities and knowledge management practices (Glisby and Holden, 2003). Superiors are expected, by virtue of their position, to be knowledgeable and resourceful, and therefore it is rare for Chinese subordinates to query a superior’s ideas, since this is likely to cause loss of ‘face’ and to be perceived as a sign of incompetence on the part of the subordinate. Superiors are also reluctant to be seen to receive advice from subordinates (Weir and Hutchings, 2005).
As a means of preserving their leadership legitimacy and the governmentality of subordinates, Chinese managers tend not to make their knowledge widely accessible across the firm, preferring instead to confine any sharing to a trusted few within their inner network circle (Weir and Hutchings, 2005). Through selective disclosure and sharing of information (Silin, 1976) they generate greater dependency (Mintzberg, 1983) and secure stronger commitment from some subordinates, while restricting others’ access to intraorganizational knowledge. Subordinates may thus engage in guanxi building (Fu et al., 2006) and face giving (mianzi), in relation to their leaders (Buckley et al., 2006), as means of removing knowledge sharing barriers (Husted and Michailova, 2002).
Leader-centric relationships
Large power distance among Asian people, especially the Chinese, stems primarily from Confucian values and ethics, which emphasize respect for hierarchy (Hofstede, 1980). Leaders have considerably more power, privileges, and status than their subordinates, who expect and are expected to be submissive and compliant. Accordingly, relationships between leaders and subordinates are unequal, often authoritarian. Inside Chinese firms, decision making is typically concentrated in the hands of a small group of leaders (sometimes a single leader) who have absolute control and prefer not to delegate power (Redding and Wong, 1986). Leaders typically use secrecy, cliquishness, and nepotism as means to secure the obedience and compliance of subordinates. They are likely also to seek to appear intelligent and resourceful, and to cast themselves as experts and role models (Silin, 1976). In reciprocation, subordinates are socialized to be loyal and submissive, and not to speak out (Kirkbride and Tang, 1992).
Chinese leaders appear also to assume the behavioral attributes of ‘paternalistic leadership’ (Farh and Cheng, 2000) and ‘headship’ (Westwood and Chan, 1992). Leader behavior toward subordinates is underpinned by benevolence and care as major guiding principles, whereas subordinate behavior toward superiors is characterized by compliance, obedience, gratitude, and respect. According to Chong (1987: 137), ‘most owner-managers are paternalistic toward their employees and do feel responsible for their well-being, which is very much like the responsibility felt by most heads of families toward members of their own households.’ They feel a sense of moral obligation to take care of the well-being of their subordinates, while in return the latter are expected to demonstrate their loyalty and support, thus maintaining harmonious and stable employment relations (Westwood et al., 2004).
The combination of authoritarian and paternalistic management (Westwood, 1997) fosters strong deference by subordinates to their leaders (Bond, 1991). This is reflected in studies of organizational learning in Sino-foreign joint ventures, which report that Chinese subordinates tend to avoid exposing ideas to public scrutiny, thus dampening the lateral flow and quality of knowledge available to other team members (Buckley et al., 2006), and are unwilling to participate in group decision making (Child and Markoczy, 1993; Hong et al., 2006b).