Leadership, organizational culture, knowledge productivity and value creation in four successful Korean companies: toward guidelines for people-oriented business leaders

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(1)Leadership, Organizational Culture, Knowledge Productivity and Value Creation in Four Successful Korean Companies Toward guidelines for people-oriented business leaders. Suk Jean K ang.

(2) Leadership, Organizational Culture, Knowledge Productivity and Value Creation in Four Successful Korean Companies Toward guidelines for people-oriented business leaders. Suk Jean K ang.

(3) Promotion Committee: Chairman: Prof. Dr. T.A.J. Toonen. University of Twente. Promotor: Prof. Dr. J.W.M. Kessels. University of Twente. Members: Prof. Dr. P.J.C. Sleegers. Prof. Dr. A.J. Groen . Prof. Dr. D-S. Cho. Prof. Dr. H. van den Bosch. Prof. Dr. C.P.M. Wilderom. University of Twente University of Twente Seoul National University Open University University of Twente. ISBN : 978-90-365-3934-0 Copyright © 2015, by Suk Jean Kang Cover art: Suk Jean Kang All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the author. E-mail: kang-ceoconsult@hanmail.net.

(4) Leadership, Organizational Culture, Knowledge Productivity and Value Creation in Four Successful Korean Companies Toward guidelines for people-oriented business leaders. DISSERTATION. to obtain the degree of doctor at the University of Twente, on the authority of the rector magnificus, prof. dr. H. Brinksma, on account of the decision of the graduation committee, to be publicly defended on Wednesday 9th of September 2015 at 16.45. by Suk Jean Kang born on 25th of May 1939 in Sangju, Korea.

(5) The promotor prof. dr. J.W.M. Kessels has approved this dissertation.

(6) Preface and acknowledgements. Value creation is widely recognized as one of the top priorities for businesses and institutions and therefore is the most important objective and responsibility of leaders. In today’s knowledge-based society, understanding what leadership characteristics can create a knowledge-productive organizational culture and contribute to meeting corporate objectives of value creation is important for business leaders and also for academics. This study was intended to increase that understanding. The origins of the conceptual framework of this study emerged during my experience as chairman of GE Korea for 20 years, where I gained an in-depth understanding of the importance of value creation. While working closely with Jack Welch, then chairman of GE, I became interested in developing a knowledge-productive organizational culture. This study explored the relationships between leadership characteristics, organizational culture, knowledge productivity, and value creation through an empirical analysis of four leading Korean companies that achieved high value creation and sustainable growth over a long period, especially the research period (2000-2010). In this study, I used both qualitative analysis, collecting data from selected interviews with CEOs, executives, and managers of the four leading Korean companies, and also quantitative analysis, using survey data collected from a larger sample of members of those companies in order to enhance the reliability of the empirical research findings. In order to share the research findings with business leaders in various fields, and also to reduce the gap between academic approaches and today’s fast-progressing business environment and management practice, I developed guidelines for business leaders, based on the research findings and in cooperation with 30 respected business leaders in Korea. Despite the abundant research literature exploring the relationships between leadership characteristics and organizational culture, studies on the role of knowledge productivity related to value creation are sparse. Therefore, it took considerable time to develop the conceptual framework further and to design a feasible research method. Despite these difficulties, I continued to strive toward a clear goal with the following mission: to develop a new approach, to clarify the relationships between the four main factors, and to reduce the gap between academic studies and practical business management in today’s fast-changing knowledge economy. My hope is that readers of.

(7) this study will benefit from my efforts. After I retired from GE where I spent 30 years, I had the opportunity to help CEOs in leading their businesses by offering advice and support, while also lecturing at the Graduate School of Business of Ehwa Womans University in Seoul as an invited professor. At that time, Prof. Dong-Sung Cho, dean of the Graduate School of Business at the Seoul National University, organized a dinner meeting with me and Prof. Joseph Kessels, dean of TSM, the Business School at the University of Twente in the Netherlands, who was visiting Seoul by the invitation of Prof. Cho. At the dinner meeting, we discussed various subjects of business management, including the GE case. To answer their questions as to how at that time GE had become the company in the world with the highest value creation, net profit and market value, I described the people-oriented, non-bureaucratic, and knowledge-productive open organizational culture of GE, and the specific leadership style of Jack Welch, then chairman, who created that innovative organizational culture, respecting organization members and their knowledge and ideas. While explaining the GE case, I found myself drawing on the paper placemat at the dinner table a framework of the relationships between leadership style, organizational culture, and productive utilization of creative knowledge of the organization members, the characteristics of GE management related to value creation. This drawing eventually became the sketch for the conceptual framework of this study. My dinner companions strongly recommended that I engage in further academic study to elucidate this concept of the relationships among the various constructs. This is how I decided to start this research project at the University of Twente and how Dr. Joseph Kessels, professor of Human Resource Development, guided my academic research. It has been a wonderful adventure of more than seven years. I sincerely appreciate the efforts of both Prof. Joseph Kessels and Prof. Don Sung Cho who motivated me to start this PhD program and continuously encouraged and guided my research. I would also like to thank Prof. Chul-Ho Shin, vice president of Sungshin University, who guided and advised me about research methods during the research period. I would like to express my sincere appreciation to my most admired former colleague and friend Mr. Jack Welch, former chairman of GE, whose successful management and leadership style became the model for the conceptual framework of this research (pp. 28-32). I also would like to express my thanks to my former colleagues Mr. Paolo.

(8) Fresco, former vice chairman of GE and chairman of Fiat, and Mr. William Conaty, former senior vice president and CHRO (chief human resources officer) of GE for their time and effort in helping me write about the GE case. They both spent most of their working lives at GE and have an in-depth understanding of GE’s management, leadership, organizational culture, and value creation. I am very grateful to the management of LG Electronics and the LG Group, Samsung Electronics and the Samsung Group, Shinhan Bank and the Shinhan Finance Group, and the WoongJin Group who accepted and supported my empirical research on their companies. Thanks also to all the executives and managers who participated in my interviews and completed the surveys. During the past seven years of my research at the University of Twente, I spent so much time with my colleagues and friends in the departments of Behavioral Management and Social sciences (BMS) at UT and TSM Business School. I express my thanks to all of them: Ivo Matser, Asad Malekzadeh, Vin Morar, Tjeerd Hobma, Carola Bouwens, Rachel Liedenbaum and many others. I also sincerely express my appreciation to those respected business leaders who contributed to the processes of developing “Guidelines for business leaders” by reflecting on my research findings and sharing their own experiences and knowledge of how to lead businesses. I am greatly indebted to Dr. Eun-Soo Lee and Dr. Young-Sam Cho for their support for my research on the case studies and the analyses of the various research data. Finally, thanks to my beloved wife, Seung-Yeon Lee, and my family members who understood and supported my academic study in the Netherlands, where I spent a lot of time completing the study. My PhD dissertation seems to be just the beginning of my in-depth understanding into the fields of knowledge productivity and value creation. I am grateful to all who supported me in this research endeavor.. Suk-Jean Kang Enschede, The Netherlands September 2015.

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(10) Table of Contents. Chapter 1. Introduction to leadership, organizational culture, knowledge productivity, and value creation 1.1 1.2. 1.3 1.4. 1.5. Introduction··························································································································1 Research background···········································································································2 1.2.1 Challenges for today’s business leaders·······························································5 Problem statement and research questions·······································································5 Relevance of the research·····································································································6 1.4.1 Academic relevance·······························································································6 1.4.2 Practical relevance································································································7 1.4.3 Relevance for society·····························································································7 Research activities················································································································7. Chapter 2. L iterature review and exploration of the main concepts related to leadership, organizational culture, knowledge productivity, and value creation 2.1 Introduction········································································································································9 2.2 Leadership···········································································································································9 2.3 Leadership and organizational culture··························································································13 2.4 Knowledge and knowledge productivity························································································15 2.5 Leadership and knowledge productivity························································································19 2.6 Organizational culture and knowledge productivity··································································· 21 2.7 Knowledge productivity and value creation··················································································23 2.8 Leadership and value creation·········································································································24. 2.8.1 Leadership, corporate reputation, and image································································25. 2.8.2 Leadership and corporate social responsibility····························································25. 2.8.3 Leadership and employee satisfaction············································································26. 2.8.4 Leadership and corporate sustainability········································································27. 2.8.5 Leadership and financial performance··········································································28. 2.9 Toward a conceptual framework of the relationships among leadership, organizational culture, knowledge productivity, and value creation·········································28. 2.9.1 GE case·······························································································································29. i.

(11) 2.9.2 Conceptual framework·······················································································32. 2.9.3 Relationship between leadership and value creation·······································34 2.10 Research questions···········································································································36. Chapter 3. R esearch design and methodology: case studies of four major Korean companies 3.1 Introduction························································································································39 3.2 Development of research instruments: quantitative and qualitative analyses············39. 3.2.1 Quantitative analysis: development of survey questionnaire·························40. 3.2.2 Exploratory factor analysis and reliability test················································51. 3.2.3 Confirmatory factor analysis·············································································57. 3.2.4 Qualitative analysis: development of interview guidelines·····························60. 3.2.5 Variables related to value creation····································································62 3.3 Case studies on leadership, organizational culture, knowledge productivity, and value creation in four Korean companies································································63. 3.3.1 Selection criteria··································································································63. 3.3.2 LG Electronics·····································································································63. 3.3.3 Samsung Electronics···························································································63. 3.3.4 WoongJin Group·································································································64. 3.3.5 Shinhan Bank······································································································64 3.4 Designing guidelines for business leaders·······································································64. Chapter 4. Findings from the case studies: LG Electronics 4.1 4.2. 4.3. 4.4. ii. General overview················································································································65 Quantitative analysis of survey data················································································67 4.2.1 Demographic characteristics·············································································67 4.2.2 Relations among key variables···········································································69 Qualitative analysis of interview data··············································································70 4.3.1 Leadership style···································································································70 4.3.2 Organizational culture·······················································································76 4.3.3 Knowledge productivity·····················································································80 4.3.4 Value creation······································································································82 Conclusion of LG Electronics case study·········································································87.

(12) Chapter 5. Findings from the case studies: Samsung Electronics 5.1 5.2. 5.3. 5.4. General overview················································································································91 Quantitative analysis of survey data················································································93 5.2.1 Demographic characteristics·············································································93 5.2.2 Relations among key variables···········································································95 Qualitative analysis of interview data··············································································96 5.3.1 Leadership style···································································································96 5.3.2 Organizational culture·····················································································103 5.3.3 Knowledge productivity···················································································107 5.3.4 Value creation····································································································109 Conclusion of Samsung Electronics case study·····························································113. Chapter 6. Findings from the case studies: WoongJin Group 6.1 6.2. 6.3. 6.4. General overview··············································································································119 Quantitative analysis of survey data··············································································121 6.2.1 Demographic characteristics···········································································121 6.2.2 Relations among key variables·········································································123 Qualitative analysis of interview data············································································124 6.3.1 Leadership style·································································································124 6.3.2 Organizational culture·····················································································130 6.3.3 Knowledge productivity···················································································133 6.3.4 Value creation····································································································134 Conclusion of WoongJin Group case study···································································137. Chapter 7. Findings from the case studies: Shinhan Bank 7.1 General overview··············································································································143 7.2 Quantitative analysis of survey data···············································································145. 7.2.1 Demographic characteristics············································································145. 7.2.2 Relations among key variables·········································································147 7.3 Qualitative analysis of interview data············································································148. 7.3.1 Leadership style·································································································149. 7.3.2 Organizational culture·····················································································154. iii.

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