Industry or Instrument?

The chapter analyzes Spain’s and Korea’s upgrading strategies from the perspective of large banks. The chapter shows that Spain’s and Korea’s approaches were based on two different interpretations of the banking sector. One considered banking as an industry in its own right with high potential for upgrading. The other saw banking as an input for manufacturing. The chapter shows that these two views led to the emergence of a globally competitive banking sector in Spain, but prevented a similar outcome in Korea. The chapter comprises five sections. After the introduction, section 3.2 characterizes the structure of the banking sectorin late industrializing economies and the changes in global banking since the 1980s. Sections 3.3 and 3.4 analyze the role of banking in Spain’s and Korea’s models and how these roles affected the trajectory of Spanish and Korean banks. Section 3.5 takes stock, concludes, and sets the stage for the next chapter.

Integration or Self-Sufficiency?

The chapter explores Spain’s and Korea’s strategies from the perspective of the automotive industry. The chapter contrasts Spain’s integrational approach, with Korea’s emphasis on self-sufficiency and the development of local technological capabilities. These two strategies are linked to the development of competitive automotive industries with very different structures. Spain’s configuration is characterized by a predominance of foreign invested firms, whereas Korea’s is defined by the presence of a local, market-dominant automaker, HMC. The chapter proceeds as follows. After the introduction, section 5.2 describes the structure of the automotive industry and the challenges that late industrializing economies faced in establishing competitive automakers. Sections 5.3 and 5.4 analyze the emergence and evolution of the Spanish and Korean automotive sectors and discuss the outcomes as the industry continues to transform. Section 5.5 reintegrates the material and paves the way for the concluding section of the book.

The Argument Extended

This chapter presents a more general view of the book’s argument. It uses mini-cases to explore additional aspects of Spain’s and Korea’s strategies. It also relies on a short, counterfactual comparison with Brazil to discuss three factors that enabled these countries to succeed where other late industrializing economies failed. In the case of Spain, the chapter underscores the role of path dependence. It also shows that although the characteristics of a national economy shaped upgrading strategies they did not determine them and alternative options leading to different productive structures were indeed possible. In the case of Korea, the chapter highlights the systemic aspects of upgrading strategies and the synergies derived from that country’s particular approach. The chapter consists of five sections. Following the introduction, sections 6.2 and 6.3 flesh out additional details of Spain’s and Korea’s experiences. Section 6.4 compares Spain’s and Korea’s experiences with Brazil’s. Section 6.5 concludes with a summary of the role of coordination in Spain’s and Korea’s upgrading.

Distinctive context, divergent pattern: Diffusion of imported management practices in Turkey and implications for late-industrializing countries

In this paper, we develop and empirically test hypotheses about the diffusion of imported management practices in Turkey. We emphasize the sociopolitical legitimacy of these practices and present hypotheses as to timing, motivations, and self-promotion. We test these hypotheses with quantitative data on Total Quality Management (TQM) adoption by industrial companies in Turkey. Findings reveal that elite companies adopt TQM earlier on, self-report greater levels of sociopolitically driven legitimacy concerns, and are more likely to participate in a prestigious quality award contest. Overall, our study contributes to diffusion research guided by the new institutional approach by expanding existing models to the diffusion of imported practices across organizations in late-industrializing recipient countries. We particularly show that sociopolitical legitimacy of imported practices that is more characteristic of late-industrializing recipient contexts may generate a divergent pattern of diffusion whereby elite organizations emerge as early adopters and engage in brandishing adoption.

Institutional development and bank competitive transformation in late industrializing economies: the Spanish case

This paper explores the contribution of national institutions to the competitive transformation of big commercial banks in late industrializing countries through the analysis of the Spanish case. The paper uses a comparative historical analysis to establish that strategic coordination between the state and large banks is a structural feature of the banking sector but may be articulated differently depending on the balance of power between states, banks and industry, the preferences of these actors, and their resources. Using evidence from Spain since the late 1970s, the paper argues that in this country, state-bank coordination was articulated as a non-hierarchical system of negotiated interactions and mutual exchanges of benefits between small groups of decision-makers at the government, the central bank, and big banks. Under the Spanish model, large banks contributed to the fulfillment of public policy objectives to develop the central bank's capacity to conduct monetary policy, strengthen supervision of the banking system, and modernize the financial sector. In exchange, big banks benefited from a favorable regulation that enabled them to restructure, consolidate the leadership of a new generation of bankers, and reach the efficiency frontier of their industry. The paper contributes to the literature of institutionalism by questioning the traditional dichotomy between market and strategic coordination. It also contributes to the literature of competitiveness by stimulating debate about the role of the state in supporting the transformation of big business.