Quasi-Judicial Mechanisms in Asian Production Networks: Archetypes for Emerging Market Strategy

Despite their predominance in developing countries, production networks vary enormously among countries and yet attempts to systematically compare their nature have been done very sporadically in the literature. Drawing on relational contract theory, this paper presents a novel framework for analyzing the differences in the ways production networks organize themselves in emerging markets by utilizing successful Asian organizational structures to illustrate strategy archetypes. The paper analyzes three different relational employment and outsourcing contract forms through which the lead firm in a production network can maintain a quasi-judicial role in resolving the contracting problems inherent in multi-firm transactions. The production network templates embodied by Korean chaebols, Japanese keiretsus and Taiwanese guanxi relationships use different explicit and implicit contractual arrangements to adjudicate interparty disputes internally and can serve as more appropriate benchmarks for firms operating in emerging markets as opposed to existing templates based on mainstream strategy theories generated in developed countries.