Changing Performance of Business Groups over Two Decades

Technological Capabilities and Investment Inefficiency in Korean Chaebols

Bibliographic Data

ID4783676
AuthorsKineung Choo (Korean Intellectual Property Office), Keun Lee (0000-0002-0403-6348, Seoul National University), Keunkwan Ryu (Seoul National University), Jungmo Yoon (0000-0002-6686-4739, Claremont McKenna College)
Year2009
Volume57
Issue2
Pages359-386
Publication date2009-01-01
Peer ReviewedYes
Open AccessNo
TypeARTICLE
VenueEconomic Development and Cultural Change (JOURNAL)
Journal identifiersISSN: 0013-0079 • E-ISSN: 1539-2988
PublisherUniversity of Chicago Press (PUBLISHER • US)
DOI10.1086/592837
OpenAlexW2033587559
LanguageEN
Citations received4
References cited40

This article differentiates itself from the large volume of existing literature on business groups, such as Korean chaebols, in several aspects. First, it uses productive efficiency rather than financial efficiency as a performance measure. Second, it defines chaebols in three alternative ways and checks whether the results are robust. Third and most important, it explains the sources of the post‐crisis change in the performance of Korean chaebols in terms of technological capabilities and investment inefficiency. This study finds that chaebols have become more efficient than non‐chaebols in the post‐crisis period compared with the pre‐crisis period, that inefficiency in investment has always been critical in determining productive inefficiency, and that after the 1997 financial crisis Korean chaebols have improved their performance by reducing investment inefficiencies and enhancing technological capabilities. The results of this study are consistent with the often‐acknowledged advantages of business group firms: first, technological capabilities can be shared among affiliated firms; and second, technological capabilities can be combined with project‐ or entry‐execution capability. This article also shows that, with globalization and liberalization, technological capabilities have emerged to be more important in recent years than in the past when what was more important was exploiting market imperfections and artificial rents

Business · Chaebol · Corporate governance · Economic rent · Economic system · Economics · Financial crisis · Financial system · Globalization · Industrial organization · Inefficiency · Investment (military) · Liberalization · Macroeconomics · Market economy · Microeconomics · Production (economics) · Productive efficiency · Technological change · Corporate Finance and Governance · Finance · Firm Innovation and Growth · International Business and FDI

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