Journal of Strategic Management Studies

Journal of Strategic Management Studies

Divergent governance patterns of large business groups: a comparative analysis of south korea’s chaebols and Iran’s institutional mega-holdings

Document Type : Research

Author
Nabi Omidi
Associate Professor, Department of Management Payame Noor University (PNU), Tehran, Iran
10.22034/smsj.2025.539696.2182
Abstract
Introduction:
Large Business Groups (LBGs) have often acted as engines of growth and development in many emerging economies, yet their performance has been markedly different and divergent. While some models, such as South Korea’s Chaebols, have become symbols of successful transition to industrial and technological development, other models, like Iran’s institutional mega-holdings, face significant challenges in productivity, innovation, and competitiveness, despite their vast resources. This research poses the central question: what are the roots of this performance divergence? The main proposition of this study is that this difference is less a product of variations in operational management practices and more a result of the institutional architecture and the prevailing logic of the political economy in each context. In other words, the “rules of the game” that shape ownership structure, control patterns, grand strategies, and the nature of state-business relations are the primary determinants of whether these firms follow a developmental or a rent-seeking path. Accordingly, the principal objective of this research is to conduct a deep, root-cause comparative analysis of two contrasting models of LBGs: South Korea’s Chaebols as a successful archetype of developmental enterprise and Iran’s institutional mega-holdings as a case of rent-seeking and challenged enterprise. This study seeks to dissect the institutional dimensions of these two models to explain how different historical and political contexts have led to the formation of divergent governance structures and, ultimately, to contradictory economic outcomes. The final goal, beyond explanation, is to provide a practical reform framework for policymaking concerning the structural and functional reform of institutional mega-holdings in Iran.
Methodology:
This research employs a qualitative approach based on comparative-historical analysis. This methodology is highly suitable for comparing complex social phenomena that have evolved over time and within different contexts. To achieve a deep, multi-level analysis, the study’s analytical framework focuses on three levels: (1) comparative structural analysis, (2) contextual analysis (institutional-historical), and (3) policy-oriented and prescriptive analysis. To analyze the causal and historical processes that led to the formation of these two models, the process-tracing technique is utilized. This technique allows the researcher to identify and reconstruct the causal chains between independent variables (such as state structure and industrial policies) and dependent variables (such as the performance of LBGs) over time.
Results and Discussion:
The Chaebols and Iran’s institutional mega-holdings are fundamentally divergent across four key dimensions:1. Ownership and Time Horizon: Ownership in Chaebols is highly concentrated and family-based. This structure, while creating strong incentives for long-term wealth accumulation, minimizes the classic agency problem and allows founders to undertake high-risk, strategic investments with a long-term horizon. In contrast, ownership in Iran’s institutional mega-holdings is institutional-public and dispersed. These firms are often owned by quasi-governmental non-profit organizations, pension funds, or state-owned investment companies. This structure has led to the emergence of a multiple agency problem, where appointed managers are accountable not to a single owner but to multiple political and bureaucratic power centers, resulting in a short-term outlook focused on maintaining their positions.2. Control and Decision-Making: Control in Chaebols is personal, charismatic, and highly centralized in the hands of the chairman and the founding family. This ensures speed, decisiveness, and coherence in strategic decision-making. In Iranian institutional mega-holdings, control is bureaucratic, political, and decentralized. Key decisions are the product of complex bargaining among influential institutions and political lobbies, leading to sluggishness, incoherence, and the prioritization of political considerations over economic logic.3. Strategy and Business Logic: Chaebols pursued a coherent strategy based on export-oriented synergy. By focusing on selected industries and competing in global markets, they were driven toward technological learning and productivity enhancement. In contrast, Iran’s institutional mega-holdings have primarily gravitated towards unrelated diversification and operate in monopolistic or quasi-monopolistic domestic markets. The absence of external competitive pressure has eroded the incentive for innovation and efficiency.4. State-Business Relations and Discipline: The relationship between Chaebols and the Korean developmental state was one of disciplined cooperation. The state provided extensive financial and credit support, but this support was strictly conditional on export performance. This disciplinary mechanism prevented support from turning into rent. In Iran, this relationship has largely taken the form of rent-seeking collusion. The mega-holdings use their political influence to obtain monopolies, cheap credit, and special privileges, without being held accountable for their performance. These divergences are the product of two different historical trajectories: Chaebols arose from a goal-oriented national development project disciplined by the rigors of the global market, whereas Iran’s institutional mega-holdings are the product of domestic political transformations, flawed privatization, and their embeddedness in a rentier political economy lacking external discipline.
Conclusion:
The results indicate that the transition of Iran’s institutional mega-holdings from an inefficient, rent-seeking model to a developmental one requires deep institutional changes and a decisive political will to restructure these enterprises. Reforms merely at the corporate management level are insufficient. Accordingly, the research proposes a three-dimensional reform framework as a practical solution to transition Iran’s institutional conglomerates from a “corporatism for survival” to a “corporatism for development” model. These solutions include: 1) establishing a ‘National Development Pact’ to shift from unconditional to performance-based support; 2) creating a ‘Developmental National Wealth Fund’ to reform the ownership structure and establish a specialized buffer between the state and corporate management; and 3) designing ‘alternative disciplinary mechanisms,’ such as managed competition, to simulate competitive pressures in the absence of global market discipline. The novelty of this research lies in presenting an integrated analytical framework that traces the roots of the conglomerates’ performance divergence not at the managerial level, but at the level of their institutional architecture and the logic of the governing political economy.
Keywords
Chaebol
South Korea
Governance divergence
Institutional mega-holdings
Iran
Subjects
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Journal of Strategic Management Studies
Volume 17, Issue 66
Summer 2026
Pages 273-291

  • Receive Date 06 August 2025
  • Revise Date 09 October 2025
  • Accept Date 11 November 2025