The Formation and Change of Hyundai Production System: An Institutional Perspective

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Abstract:

This study aims to explain the evolutionary process of Hyundai’s production system. We adopt an institutional perspective to explain the dynamic growth of Hyundai Motor Company, focusing on its production system that is composed of technological and organizational factors. Hyundai Production System as an institution has been formed and changed with changes in actors’ coalitions.

Since Hyundai pursued a strategy of technological independence in the early 1970s, it has developed its own production system in which engineers took a leading role. By the late 1980s Hyundai Production System had consolidated its developmental trajectory, based on the low dependence on skill formation, because Hyundai management could not be sure about the results of investment in education and training for its laborers under the adversarial labor relations.

After the employment restructuring in the late 1990s, Hyundai’s coalitional base was fixed as the coalition between the management and the regular laborers, excluding the irregular laborers and suppliers. Since the 2000s, the early success of Hyundai’s transplants in foreign countries has shown the efficiency of Hyundai Production System, because transferring production system is relatively easy with low dependence on skill formation. Hyundai’s case is clearly contrasted with Toyota’s, because Toyota has experienced much difficulty with transfer of its production system that is based on high dependence on skill formation.