This paper investigates the propensity of developing countries to purchase imported machinery rather than indigenously produced machinery at a lower price, based on the purchase of looms for textile weaving in South Korea. The results confirm that it is the differences in prices paid and received as well as the varieties made by the different producers that lead to the choice of different technologies. The factors that influence choice of machinery include: purchase price, varieties that may be produced, required inputs, firm size, market characteristics, and government policy. Machine level data from firms pertaining to technological relationships using different machines are particularly important to this study. The study describes the Korean situation: (i) large producers have monopolized the production of luxury fabrics, (ii) large-scale producers tend to be inefficient due to their reliance on imported automatic technology, which is due to government policies favoring capital imports, (iii) smaller producers compete a great deal amd are little affected by government policies, (iv) smaller producers tend to be more efficient. In sum, a complex tangle of government policies distorts Korea's textile sector considerably.