The purpose of this study is to assess and evaluate why the Korean economy could not take a clear stand on globalization in the 1980s, which is when major developed countries began to consolidate their production functions in East Asia.
One of the major factors in Korea’s rapid economic growth was the national strategy to export products with a cost advantage to the markets of developed countries. However, in the globalized economy, national competitiveness is measured by how attractive the country is to overseas investment. In this sense, Korea’s economy had little appeal given its higher production costs compared to developing countries, as well as its relatively weak knowledge creation system.
By this definition, Korea began to lose competitiveness in all U.S. industries in the 1970s. A restructuring of all industries in the 1980s, alongside increasing industrial globalization and the emergence of a new industry, that is, the IT industry, brought about a very different and new industrial structure. Today, new businesses are governing the market, and their characteristics are quite different from their predecessors, which were integrated vertically along value chains – from finished products to parts and components. The older models feature partitioned value chains and specialization in specific activities. These new generation businesses, however, are able to specialize in their core competence activity through globally integrated production networks.
In their search for partners for their East Asian production networks during the latter part of the 1980s, Korea was apparently a strong candidate. However, Korea failed to cozy up to these new IT companies since Korea’s electronics firms were concentrated in conventional technology products with exclusive and closed ties between large and small firms. In contrast, Singapore, which had endeavored to attract foreign investment early on, and Taiwan, which had an abundance of small parts and components markers with a high level of production technology and skill, could easily be selected as production bases for American IT firms in Asia. Singapore not only induced foreign investments, but also proceeded to relocate low technology production processes to neighboring countries such as Malaysia and Thailand so that is own production base could be rearranged into a high-value added industrial structure that could accommodate its rapidly rising wages. In the late 1980s, Taiwan proceeded to relocate much of its production facilities to mainland China in an effort to counter rising wages. Taiwan also sought partnerships with American-Taiwanese venture-business entrepreneurs in the IT industry.
동아시아의 글로벌 생산네트워크와 한국의 혁신정책 방향(Global production network in East Asia and its implications for Korea’s innovation system)
|Series Title; No||정책포럼 / 2004-03|
|Subject Country||South Korea(Asia and Pacific)|
|Subject||Industry and Technology < General|
|Holding||KDI; KDI School|