Chapter 5: The Engine of Catch-Up: Big Conglomerates
5. The engine of catch-up: big conglomerates 1. INTRODUCTION This chapter investigates the engine of export-oriented catch-up in the context of small ﬁrms versus big conglomerates (chaebols) on the basis of the experiences of Korea and Taiwan. Big conglomerates dominate the Korean economy as do smaller ﬁrms (that is, the so-called small and medium-sized ﬁrms) the Taiwan economy. This chapter attempts, ﬁrst, to identify the factors that cause such diﬀerences between the two countries and, second, to investigate their eﬃciency implications. This chapter will present a set of hypotheses that may be tested empirically. My objects are to inspire an analytic framework that enhances our understanding of the engine of catch-up under diﬀerent market conditions, and also to provide a crude guide for policy and institutional arrangements to improve a country’s performance in catch-up. In order to make the messages simple and clear, I will amplify the diﬀerences between Korea and Taiwan, although their diﬀerences may be just matters of degrees. Big conglomerates have served as the engine of growth in Korea. The Korean government has promoted the concentration of economic power in the hands of a small number of conglomerates. The conglomerates in Taiwan are much smaller in size and organizationally very diﬀerent from their Korean counterparts. In Taiwan, large enterprises that manufacture steel, petrochemicals, and so on are mostly owned and operated by the government and supply their products mostly to domestic markets. On the other hand, small ﬁrms have been, on...
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