Affiliation Divestiture As a Detour for Succession - in Case of Korean Business Groups, 1989-2010

This paper examines affiliation divestiture process of Korean business groups, chaebol, in 1989-2010. One of the characteristics of chaebol is that its head and his/her family members rule the structure, the whole group network, despite their little shares. It is possible because they are major shareholders of the group network's holding company. Thereupon, the corporate network, composed of individual legal corporations, is the group owner family's privately owned social structure and succession of ruling right is regarded as if a private property. Consequently, some Korean conglomerates have divided itself for succession from group owner to his family members. This affiliation divestiture process differs from a firm's typical spin-off because it results separation and survival of the business group network. This research, hence, analyzes the process based on three points: how each structure is cohered; how major human agents locate within each structure; and what happens in the structure's network across time. The result is as follows. First, group network's cohesiveness is an important factor of making affiliate divestiture. Next, separation experience works as a path-dependency by becoming 'a logic of succession.' Third, business groups which have not concluded their way of transfer select joint succession as a temporary expedient. Last, group network forms plural cores before commencing gradual affiliate divestiture. By those processes, Korean chaebols get on different ways in succession due to how inner network of each structure is organized. In other words, cohesiveness of structure and composition of network show how a network of business group is divided, is transferred from previous owner to his descendants, and maintains its survival. This result provides a key to understand formulation and survival of derivative chaebol, which will continuously come into the world.