Structural Features and Firm Dynamics in Korea's General Machinery Industry

초록

This study explores firm dynamics triggered by exogenous market shocks within the Korean general machinery industry in order to assess the impact of these shocks on productivity growth. The main findings are as follows: 1)vertically integrated with capital-share (VI) firms with extensive business durations showed resilience within the VI structure in the wake of market exogenous shocks, demonstrating their competitiveness by leveraging stable supply chains and reduced transaction costs, despite the presence of agency costs; 2) non-VI (NVI) entrants significantly boosted the productivity growth of the industry and their NVI structure in the midst of market exogenous shocks, showcasing their exceptional productivity capabilities as independent entities within the general machinery industry and its NVI structure.; 3) during the 2010 sharp economic bounceback and the 2020 economic depression, self-selecting VI firms transitioning to a NVI structure significantly increased productivity growth of the NVI structure; 4) sluggish technical progress for the VI structure and a substantial technical retrogression for the NVI structure hindered productivity growth of the entire general machinery industry. 5) Overall, the VI structure outperformed in terms of technical progress and business duration, with VI firms having a greater competitive edge than their NVI counterparts. These findings support the advantageous position of the VI structure in the general machinery industry. Therefore, timely remedies to restore and activate the industry’s growth potential through similarly efficient resource allocation must be implemented to contribute to economic growth for the country.

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