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Sectoral systems of innovation and productivity catch-up: determinants of the productivity gap between Korean and Japanese firms

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  • Moosup Jung
  • Keun Lee

Abstract

This article attempts to identify the determinants of total factor productivity (TFP) catch-up by Korean firms compared with that of Japanese firms. The degree of catch-up is measured in terms of the TFP gap between each Korean firm and the industry average of the Japanese firms in each sector. Regressions are then employed to establish the determinants of the TFP gap or catch-up. These determinants are classified into two groups: sectoral- and firm-level variables. Sectoral-level variables, drawn from the sectoral innovation system literature, test the hypothesis that catch-up is more likely to occur in certain sectors than in others. It is found that TFP catch-up by Korean firms is more likely to occur in sectors where technologies are more explicit and easily embodied in imported equipment. This discovery helps explain why the TFP of Korean firms is now close to, or even higher than those of Japanese firms in the electronics sector, and why TFP gaps still remain after some catch-up in the automobile sectors associated with more tacit knowledge regimes. Second, the degree of the sectors' top firm dominance is positively related to the TFP catch-up, implying that catch-up is more likely to occur in sectors with more monopolistic market structures. It is also shown that firms in a monopolistic market structure should be subjected to the world market discipline to attain better performance in the productivity catch-up. Third, sector-level variables only affect international TFP catch-up, whereas firm-level variables determine intranational catch-up. Important results remain consistent in some robustness tests using different proxies for sectoral variables and catch-up as measured in labor productivity, as well as in the results obtained from using period average variables rather than yearly variables. Copyright 2010 The Author 2010. Published by Oxford University Press on behalf of Associazione ICC. All rights reserved., Oxford University Press.

Suggested Citation

  • Moosup Jung & Keun Lee, 2010. "Sectoral systems of innovation and productivity catch-up: determinants of the productivity gap between Korean and Japanese firms," Industrial and Corporate Change, Oxford University Press, vol. 19(4), pages 1037-1069, August.
  • Handle: RePEc:oup:indcch:v:19:y:2010:i:4:p:1037-1069
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    File URL: http://hdl.handle.net/10.1093/icc/dtp054
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    1. repec:spr:scient:v:98:y:2014:i:1:d:10.1007_s11192-013-1120-7 is not listed on IDEAS
    2. Hidemichi Fujii & Kazuma Edamura & Koichi Sumikura & Yoko Furusawa & Naomi Fukuzawa & Shunsuke Managi, 2015. "How enterprise strategies are related to innovation and productivity change: an empirical study of Japanese manufacturing firms," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 24(3), pages 248-262, April.
    3. repec:eee:respol:v:46:y:2017:i:7:p:1284-1298 is not listed on IDEAS
    4. Bellone, Flora & Kiyota, Kozo & Matsuura, Toshiyuki & Musso, Patrick & Nesta, Lionel, 2014. "International productivity gaps and the export status of firms: Evidence from France and Japan," European Economic Review, Elsevier, vol. 70(C), pages 56-74.
    5. Lee, Keun & Kim, Byung-Yeon & Park, Young-Yoon & Sanidas, Elias, 2013. "Big businesses and economic growth: Identifying a binding constraint for growth with country panel analysis," Journal of Comparative Economics, Elsevier, vol. 41(2), pages 561-582.
    6. Binz, Christian & Diaz Anadon, Laura, 2016. "Transplanting clean-tech paths from elsewhere: The emergence of the Chinese solar PV industry," Papers in Innovation Studies 2016/29, Lund University, CIRCLE - Center for Innovation, Research and Competences in the Learning Economy.
    7. Liu, Xiaohui & Hodgkinson, Ian R. & Chuang, Fu-Mei, 2014. "Foreign competition, domestic knowledge base and innovation activities: Evidence from Chinese high-tech industries," Research Policy, Elsevier, vol. 43(2), pages 414-422.
    8. Fassio, Claudio, 2014. "Sectoral Systems or Distance-to-the-Frontier Effects in Innovation? A Comparison of Three Medium-Technology Sectors in Germany, Italy and Spain," SEP Working Papers 2014/3, LUISS School of European Political Economy.
    9. Lechevalier, Sébastien & Nishimura, Junichi & Storz, Cornelia, 2014. "Diversity in patterns of industry evolution: How an intrapreneurial regime contributed to the emergence of the service robot industry," Research Policy, Elsevier, vol. 43(10), pages 1716-1729.
    10. Hu, Mei-Chih & Hung, Shih-Chang, 2014. "Taiwan's pharmaceuticals: A failure of the sectoral system of innovation?," Technological Forecasting and Social Change, Elsevier, vol. 88(C), pages 162-176.
    11. repec:bla:pacecr:v:22:y:2017:i:4:p:533-553 is not listed on IDEAS
    12. KIYOTA Kozo & MATSUURA Toshiyuki & Lionel NESTA, 2016. "Understanding the Cross-country Productivity Gap of Exporters," Discussion papers 16019, Research Institute of Economy, Trade and Industry (RIETI).
    13. LEE, Keun & CHOO, Kineung & Yoon, Minho, 2013. "Comparing the Productivity Impacts of Knowledge Spillovers from Network and Arm’s Length Industries:Findings from Business Groups in Korea," IIR Working Paper 13-15, Institute of Innovation Research, Hitotsubashi University.
    14. 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).
    15. Chung, Moon Young & Lee, Keun, 2015. "How Absorptive Capacity is Formed in a Latecomer Economy: Different Roles of Foreign Patent and Know-how Licensing in Korea," World Development, Elsevier, vol. 66(C), pages 678-694.

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