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Comparative Analysis Of Plant Dynamics By Size: Korean Manufacturing

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  • INHA OH
  • ALMAS HESHMATI
  • CHULWOO BAEK
  • JEONG-DONG LEE

Abstract

The Korean economy severely suffered from the Asian financial crisis, and is well known for rapid recovery in the years following. However, the recovery was mainly due to successful restructuring by a limited number of large-sized enterprises (LSEs). The small and medium sized enterprises (SMEs) are still suffering from the depression. The crisis and subsequent unequal size related recovery patterns have aggravated the pre-crisis gap between LSEs and SMEs. In this paper, the total factor productivity (TFP) of the South Korean manufacturing industry is calculated, at the firm level, and comparative analysis is performed by size classes. The sources of the TFP growth are decomposed into various effects related to entry, exit, and survival of firms. Additional survival analyses are used to investigate internal and external determinant variables for the survival of LSEs and SMEs. The results indicate that the exit of SMEs with higher productivity rates represented a major problem in Korean manufacturing, particularly in the post-crisis period. Non-selective government support for SMEs appears to have caused disorder in the SME sector.

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Bibliographic Info

Article provided by Japanese Economic Association in its journal Japanese Economic Review.

Volume (Year): 60 (2009)
Issue (Month): 4 ()
Pages: 512-538

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Handle: RePEc:bla:jecrev:v:60:y:2009:i:4:p:512-538

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References

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  1. Heshmati, Almas, 2000. "On the Growth of Micro and Small Firms," Working Paper Series in Economics and Finance 396, Stockholm School of Economics.
  2. David H. Good & M. Ishaq Nadiri & Robin C. Sickles, 1996. "Index Number and Factor Demand Approaches to the Estimation of Productivity," NBER Working Papers 5790, National Bureau of Economic Research, Inc.
  3. Jahyeong Koo & Sherry L. Kiser, 2001. "Recovery from a financial crisis: the case of South Korea," Economic and Financial Policy Review, Federal Reserve Bank of Dallas, issue Q IV, pages 24-36.
  4. Bee Yan Aw & Sukkyun Chung & Mark J. Roberts, 2002. "Productivity, Output, and Failure: A Comparison of Taiwanese and Korean Manufacturers," NBER Working Papers 8766, National Bureau of Economic Research, Inc.
  5. Disney, Richard F & Haskel, Jonathan & Heden, Ylva, 2000. "Restructuring And Productivity Growth In UK Manufacturing," CEPR Discussion Papers 2463, C.E.P.R. Discussion Papers.
  6. Sanghoon Ahn & Kyoji Fukao & Hyeog Ug Kwon, 2005. "The Internationalization and Performance of Korean and Japanese Firms: An Empirical Analysis Based on Micro-data," Discussion papers 05008, Research Institute of Economy, Trade and Industry (RIETI).
  7. Wolfgang Keller & Stephen R. Yeaple, 2003. "Multinational Enterprises, International Trade, and Productivity Growth: Firm-Level Evidence from the United States," Working Papers 2003-06, Brown University, Department of Economics.
  8. Chin Hee Hahn, 2004. "Exporting and Performance of Plants: Evidence from Korean Manufacturing," NBER Working Papers 10208, National Bureau of Economic Research, Inc.
  9. Jovanovic, Boyan, 1982. "Selection and the Evolution of Industry," Econometrica, Econometric Society, vol. 50(3), pages 649-70, May.
  10. Katariina Hakkala, 2006. "Corporate restructuring and labor productivity growth," Industrial and Corporate Change, Oxford University Press, vol. 15(4), pages 683-714, August.
  11. Chin Hee Hahn, 2000. "Entry, Exit, and Aggregate Productivity Growth: Micro Evidence on Korean Manufacturing," OECD Economics Department Working Papers 272, OECD Publishing.
  12. Erol Taymaz, 2005. "Are Small Firms Really Less Productive?," Small Business Economics, Springer, vol. 25(5), pages 429-445, December.
  13. Eric Bartelsman & Stefano Scarpetta & Fabiano Schivardi, 2003. "Comparative Analysis of Firm Demographics and Survival: Micro-Level Evidence for the OECD Countries," OECD Economics Department Working Papers 348, OECD Publishing.
  14. Sanghoon Ahn, 2001. "Firm Dynamics and Productivity Growth: A Review of Micro Evidence from OECD Countries," OECD Economics Department Working Papers 297, OECD Publishing.
  15. Gregory, Gary & Harvie, Charles & Lee, Hyun-Hoon, 2002. "Korean SMEs in the Wake of the Financial Crisis: Strategies, Constraints and Performance in a Global Economy," Economics Working Papers wp02-12, School of Economics, University of Wollongong, NSW, Australia.
  16. Audretsch, David B. & Santarelli, Enrico & Vivarelli, Marco, 1999. "Start-up size and industrial dynamics: some evidence from Italian manufacturing," International Journal of Industrial Organization, Elsevier, vol. 17(7), pages 965-983, October.
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Citations

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Cited by:
  1. Yunhee Kim & Jeong-Dong Lee & Almas Heshmati, 2009. "Analysis of Pay Inequality and its Impacts on Growth and Performance in the Korean Manufacturing Industry," TEMEP Discussion Papers 200902, Seoul National University; Technology Management, Economics, and Policy Program (TEMEP), revised Jan 2009.
  2. Inha Oh & Jeong-Dong Lee & Almas Heshmati & Gyoung-Gyu Choi, 2009. "Evaluation of credit guarantee policy using propensity score matching," Small Business Economics, Springer, vol. 33(3), pages 335-351, October.
  3. Almas Heshmati & Hyesung Kim, 2011. "The R&D and productivity relationship of Korean listed firms," Journal of Productivity Analysis, Springer, vol. 36(2), pages 125-142, October.
  4. YoungGak KIM & ITO Keiko, 2013. "R&D Investment and Productivity: A comparative study of Japanese and Korean firms," Discussion papers 13043, Research Institute of Economy, Trade and Industry (RIETI).
  5. Heshmati, Almas, 2013. "The Effect of Credit Guarantees on R&D Investment of SMEs in Korea," IZA Discussion Papers 7851, Institute for the Study of Labor (IZA).

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