Academic journal article Seoul Journal of Economics

Comparing the Management Practices and Productive Efficiency of Korean and Japanese Firms: An Interview Survey Approach

Academic journal article Seoul Journal of Economics

Comparing the Management Practices and Productive Efficiency of Korean and Japanese Firms: An Interview Survey Approach

Article excerpt

(ProQuest: ... denotes formulae omitted.)

I. Introduction

In 1997, Japan and Korea both suffered from financial crises and successive deep recessions. However, the recovery processes adopted by these countries vary. The Japanese economy was stagnant for a long time because of large non-performing loans, but the Korean economy recovered rapidly. Korean firms correspondingly outperformed Japan firms in some competing industries, such as electric machinery and electric devices (Fukao et al., 2008). Using the framework introduced by McGrattan, and Prescott (2005, 2010), Miyagawa, and Takizawa (2011) conducted growth accounting and determined that the labor productivity gap between Japan and Korea after the financial crises was caused by the difference in accumulation in intangible assets and in TFP growth. Chun et al. (2015) specified that all types of capital accumulation in Korea have overcome those in Japan.

Many studies have determined that at the firm level, Korean firms are rapidly catching up with Japanese firms in terms of productivity and market shares in several sectors. Jung, Lee, and Fukao (2008) noted that although the productivity of Korean firms was as low as half of that of the Japanese firms in the mid-1980s, Korean firms were able to substantially catch-up on average within the 10% range in the late 1990s. Jung, and Lee (2010) asserted that sectoral- and firm-level factors (e.g., innovation capability and export orientation) are both responsible for the productivity convergence, with explicit knowledge-oriented sectors, such as IT, showing a faster catch-up than other sectors. Joo, and Lee (2010) compared Samsung and Sony in terms of the various indicators developed through patent data, including citations. These researchers concluded that Samsung caught up with Sony in the mid-2000s in terms of market capitalization and sales volume but its technological catch-up in terms of patent count, quality, mutual citations, and so on happened as early as the mid-1990s. Most extant studies only consider the tangible aspects of firms often reflected in standard financial statements or patent application data to explain the catching up between Korea and Japan although many diverse can be involved. Aoki (2010) emphasized that the organizational architecture of firms is a major driver of corporation systems in each country. The current study aims to expand the previous studies at the firm level, examining additional intangible aspects, including the management practices of firms in Japan and Korea.

Empirical studies conducted in the first half of the 2000s identified the role of intangible assets in economic performance. When the IT revolution started in the mid-1990s, many economists and policymakers assumed that the rapid development of the IT industry and IT investment accelerated the economic growth of the US. Therefore, many advanced countries supported the IT industry and encouraged IT investment in their own countries. However, the gaps in rates of economic or productivity growth between the US and other advanced countries have remained intact even in the early 2000s. Since then, many economists have focused on the complementary role of intangible assets in productivity growth and posited that without these assets, IT assets do not contribute to productivity growth at the firm and aggregate levels.1

Corrado, Hulten, and Sichel (referred to as "CHS" hereafter for brevity) (2005, 2009) estimated the investment in intangible assets at the aggregate US economy level and classified such assets into three categories, namely, computerized information, innovative property, and econ- omic competencies. Following the study of CHS (2009), many researchers in other advanced countries tried to estimate intangible investmen t.2 Comparing the estimation results in Japan with those in the US and the UK, Fukao et al. (2009) and Pyo, Chun, and Rhee (2011) identified the characteristics of intangible investment in Japan and Korea. …

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