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Chaebols and firm dynamics in Korea

A new EBRD Working Paper (number 227)

June, 2019

By Philippe Aghion, Sergei Guriev, Kangchul Jo

We study firm dynamics in Korea before and after the 1997-98 Asian crisis and pro-competitive reforms that reduced the dominance of chaebols. We find that in industries that were dominated by chaebols before the crisis, labor productivity and TFP of non-chaebol firms increased markedly after the reforms (relative to other industries). Furthermore, entry of non-chaebol firms increased significantly in all industries after the reform. Finally, after the crisis, non-chaebol firms also significantly increased their patenting activity (relative to non-chaebol firms). These results are in line with a neo-Schumpeterian view of transition from a growth model based on investment in existing technologies to an innovation-based model.Read paper

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The Working Paper series seeks to stimulate debate on transition in the EBRD regions.