Transferring Production Systems: An Institutionalist Account of Hyundai Motor Company in the United States

Abstract

Our goal in this article is to explain how South Korea's Hyundai Motor Company successfully transferred its production system to the United States. When a production system is transferred to another country, it is modified under the influences of different institutional environments. The key to the success of Hyundai Motor Manufacturing Alabama, Hyundai's transplant in Montgomery, Alabama, is found in Hyundai's relatively low dependence on skill formation and high reliance on numerical flexibility of its production system relative to its Japanese counterparts. While Japanese automakers had difficulties transferring their production system to their US transplants, Hyundai did not because its production system did not require highly skilled labor. Alabama's flexible labor market and the absence of labor unions enabled Hyundai to more efficiently utilize the numerical flexibility of production workers than was possible at its original plant in Korea, which suffered from adversarial labor relations. This case study casts doubt on the convergence model of technology and globalization, because it shows varieties of production systems developing under different institutional environments.