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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 9: Overview and Conclusion

A New Institutional Economics Perspective of the Chaebol

Sung-Hee Jwa


It has been consistently argued throughout this book that the chaebol is an evolutionary outgrowth of the Korea-specific economic environment that includes her unique institutional setting. In Korea, economic institutions have been critical in shaping the formation and growth of the chaebol. The survival of a firm, or any other economic organization for that matter, is dependent upon the decisions that it makes upon considering a set of choices subject to certain constraints. That is, a firm will survive only if its choices turn out to be in a winning set given the constraints it faces. These constraints, broadly speaking, include market variables determined by relative prices as well as policy variables as depicted in neoclassical economic theory. More importantly, they involve the institutional factors such as government policy, laws and regulations, customs, tradition and even culture. Such an institutional environment not only affects the types or sets of choices available to the firm but also determines the outcome of the firm’s ultimate choices. In this sense, the genesis and evolution of Korea’s economic organizations are a product of the Korea-specific economic and institutional environment, and for that matter, the chaebol is not an exception. The book begins with an introductory chapter that briefly describes both the evolutionary and new-institutional economics perspectives adopted in this book. Chapter 1 also defines the chaebol as multi-product firms composed of smaller subsidiaries with the purpose of maximizing group benefits, and introduces what is known as the chaebol problem. The chaebol problem further evaluated...

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