industry of Taiwan was in the early stage of rapid development,
numerous small-scale family firms were established in suburban areas.
Families set up crude plants around or even in their dwellings, bought
the necessary mechanical equipment, received orders from large-scale
factories nearby, and provided them with products or semiproducts,
thus becoming satellite plants to big factories. Such networks of
guanxifor production enabled small or medium-scale firms to operate
without huge amounts of investment, to accept orders beyond their
own capacity for production, and to transfer parts of jobs to other
firms within their networks, thus reducing capital and management
risk to a minimum (Vogel, 1991 ). Most workers in such plants are
family members or relatives. They generally work hard in the name of
familism. The profits thus earned are mostly controlled by the head of
the family, and the most important resources are allocated according
to the need rule. In order to maximize the productivity of the plant
and to accumulate wealth for the family, all members of the family
must do their best and take only what they need from the profits.
When such family businesses are successful and demand for their
products outstrips supply, owner-managers are urged to hire employ-
ees from the labor market outside theguanxinetwork. During the
era of rapid development of the export-processing industry in Taiwan,
it was common for small plants to evolve into medium or large
businesses with dozens or hundreds of employees within two or three
years. However, the organizational pattern for most medium or small
plants is still the family enterprise. Top managers in the organization
are usually the owners of the enterprise. They generally prefer a
paternalist or autocratic style of management, frequently assign family
members to occupy such important positions as financier or accoun-
tant, and rarely tell subordinates about the policy of the organization
in a definite, clear manner. The delegation of authority to staff
is limited, and the division of power and responsibility is usually
ambiguous (Negandi, 1973 ; Redding, 1988 , 1990 ; Silin, 1976 ).
Managers and subordinates in family enterprises may frequently
encounter the struggle between Confucianism and Legalism. On the
one hand, employees and staff may ask the owner-managers to set
up formal regulations for manpower policies, personnel selection,
job design, job evaluation, promotion, and compensation and then
to exercise strict discipline in executing these regulations. On the other
hand, because strict adherence to regulations restricts the abuse of
134 Kwang-kuo Hwang