Political Economy of the Polarization of LEs-SMEs Industrial Structure in Korea

Abstract

The purpose of this study is to analyze the polarization of the LEs (Large Enterprises)-SMEs (Small-Medium Enterprises) industrial structure in Korea within the context of political economy. The SMEs began increasing in terms of numbers, production, and value added beginning in the 1980s. This resulted from the rise in self-employment following increased unemployment, rapid liberalization and structural adjustment since democratization. The LEs and SMEs had interacted with each other through the subcontracting relationship. By applying the new institutional approach to this study, three factors can be suggested as institutional context for either the limited success or failure of SMEs policies: SMEs exclusion from a winning political coalition, the absence of a political role of interest groups for SMEs, and the exploitative subcontracting relations between the LEs and the SMEs. The state did not put forth real efforts to prohibit the exploitative subcontracting system and to pursue a productive discourse.