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Government-Led Restructuring of Firms' Excess Capacity and Its Limits: Korean Big Deal Case
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- Authors
- Issue Date
- 2002-04
- Citation
- Seoul Journal of Economics, Vol.15 No.2, pp. 295-320
- Keywords
- Excess capacity ; Strategic interaction ; Industrial Policy
- Abstract
- Based on the statistical analysis of a panel data composed of 26 Korean Big Deal-related firms' financial information over the sample period of 1988-98, this paper rigorously examines which factors determine the scale of excess capacity. The statistical analysis in this study demonstrates that a firm's strategic decision to maximize profits subject to the constraints existing in its business environment may be a rational behavior at the firm level even if it may bring about excess capacity at the industry level ex-post. Statistical results imply that government-led resource allocation, such as the "Big Deals," has limits in its function and effectiveness because government can not ex ante control firm's strategic behaviors.
- ISSN
- 1225-0279
- Language
- English
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