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Diminishing role of young manufacturing plants as drivers of growth

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Title Diminishing role of young manufacturing plants as drivers of growth
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Material Type Videos
Author(English)

Korea Development Institute

Publisher

[Sejong] : Korea Development Institute

Date 2018-08
Subject Country South Korea(Asia and Pacific)
Language English
File Type Link
Subject Industry and Technology < Manufacturing
Holding Korea Development Institute
License

Abstract

In order to foster future growth engines, major countries around the globe are formulating strategies to integrate cutting-edge technology with the manufacturing industry. And, at the center of the strategies are creative and innovative young firms. Young plants have played a key role in production and job creation in Korea’s manufacturing. However, the industry is now aging with the share of young plants dropping by almost 50% in the last 20 years. So, is this to blame for the industry’s shrinking competitiveness? KDI conducted an analysis to examine the impact of young plants on the productivity growth of manufacturing. After dividing manufacturing plants into young plants under 5 years old and old plants over 6, it was found that although young plants created less value-added than their older counterparts, their contribution to aggregate productivity growth was the same. Unfortunately, the growth in Korea’s manufacturing productivity is on a downward spiral, and the diminishing productivity growth of young plants, in particular, is a major factor. To identify the sectors that are facing lower productivity growth, plants were classified according to their technology intensity.