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The Evolution of Large Corporations in Korea

A New Institutional Economics Perspective of the Chaebol

Sung-Hee Jwa

Controversy still looms large both in public and academic circles as to the role of large corporations in sustainable economic growth. In this book, the new-institutional economics perspective is adopted to clarify and answer some of the most critical questions relating to the behaviour of large corporations in Korea, or the chaebol, and the role and impact of institutions on their behaviour.
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Chapter 3: Critical Review of the Traditional Perception of the Chaebol Problem

A New Institutional Economics Perspective of the Chaebol

Sung-Hee Jwa


1. INTRODUCTION This chapter provides a critical review of the traditional perception of the chaebol problem. According to the prevailing view, economic concentration is cited as one of the most notorious features of the chaebol. Specifically, economic concentration has been conceptualized as consisting of aggregate concentration, market concentration, and conglomeration stemming from various business practices such as excess diversification and ownership concentration.1 This traditional perception of the chaebol problem has become the basis for current regulatory policies that identify both economic and social problems as arising from economic concentration and aims to remove them comprehensively. In this chapter, we will first examine what is referred to as the chaebol problem as defined by the traditional perception, and then shed new light on the problems presented by the traditional perception itself. 2. MONOPOLIZATION OF ECONOMIC RESOURCES AND AGGREGATE ECONOMIC CONCENTRATION In Korea, a particular controversial chaebol issue is the alleged ‘excessive’ influential position of a few powerful decision-makers (specifically, the chairmen of the chaebols) over major economic resources. We argue that care must be observed so as not to be overwhelmed nor misguided by the prevailing and, at times, groundless anti-chaebol sentiment among the public. Rather we should try to be objective about the chaebol in a scientific and objective manner. We begin by discussing the general trend of economic concentration in Korea and compare this to other countries. This should provide us with some objective conclusions about the legitimacy of the so-called chaebol problem in Korea. 2.1 Aggregate Concentration Trend...

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