SMALL AND MEDIUM-SIZED ENTERPRISES IN THE REPUBLIC-OF-KOREA - IMPLICATIONS FOR THE DEVELOPMENT OF TECHNOLOGY-INTENSIVE INDUSTRIES

Korea's miraculous growth and meteoric rise as a newly industrializing economy have carried with them considerable costs. Initial reliance o n Korean large business groups, the chaebol, was an appropriate policy choice for creating competitive advantage through economies of scope for the export market. However, the neglect of the small and medium-si zed industrial sector and resulting weak backward linkages with parts industries have become a burden on the performance of these same big b usinesses. This issue is particularly critical because Korea must make a transition into more knowledge- and technology-intensive industries in the face of a rising real wage level. This paper examines how the underdevelopment of the small and medium-sized industrial sector under mined the overall efficiency of the Korean economy, in terms of added costs and low quality of final products produced by big businesses, th us hindering Korea's transition into more technology-intensive industr ies.