Study On Polarization Between Korean Large Companies And SMEs

This study was based on the background of the formation of large companies in Korea,and the widening gap between large and small businesses as the economy developed.The analysis confirmed that the number of small and medium-sized businesses in Korea accounts for 99%t of all companies and that they play an important role in the Korean economy as they account for about 80% of all employment.On average,however,wages are falling to around 62% of large companies,and non-regular workers of SME’s are found to have poor conditions at 50% of the non-regular jobs of large companies.As a result,the nation’s young generation has confirmed that SME’s are struggling with labor shortages,preferring large companies and stable state-run companies.In addition,large companies were analyzed to be more efficient in certain areas as a result of analyzing efficiency through Data Envelopment Analysis(DEA)based on data related to the growth,productivity and gains and losses of companies provided by the Korea National Statistical Office.As noted in the text,large companies have shown relatively high productivity due to higher wages per unit of production.However,from the overall inefficiency,small and medium-sized businesses have shown more variables,making them inefficient.From this perspective,it is analyzed that Korean policy makers need to lift the vertical link between large companies by supporting the technological advancement of SME’s and need institutional and financial support until they begin to stabilize them for a while.In a closer look at the growth process and analysis results of large companies,we examined the reasons for the polarization between large and small Korean companies and the current structure of large enterprises.As noted in the text,the analysis results are intended to draw conclusions in five categories.First,we looked at how Korean companies have historically been able to realize economies of scale by monopolizing the business sector and secondly,the polarization of large and small companies,and thirdly,Germany and Japan,which have similar economic structures with Korea.Fourth,efficiency of large and small businesses was compared through efficiency analysis based on data on growth of large and small businesses and their gains and losses provided by domestic statistical agencies.Lastly,I would like to make a policy proposal based on what this study suggests and the findings of the study,considering how large and small companies can grow together in a comprehensive conclusion.First,the process of accumulation of capital and the birth of Koreancompanies are Japanese colonial rule and the Pacific War,Japan is on the Korean Peninsula through a lot of logistics companies on August 15,1945,and in defeat.(land,mines,factories,stores,securities,cars,ships,machine,housing,)property between leaving no man’s property was left.The U.S.military government followed by Rhee Sung-man’s administration,which partially imputed the enemy’s property to government property,and delivered much of it to individuals.The problem was that the price of the fire was sold much lower than the market price(free price),and it was extremely unfair in the process of selling,where expediency,illegality and lawlessness prevailed.In other words,the legacy of some vested interests can be seen as the starting point for the polarization between large and small businesses,with economies of scale monopolized by natural monopolization.In the process of discharging from the government,large-scale construction sites,such as the U.S.Forces Korea(U.S.Forces Korea)were given the opportunity to grow into a leading company by increasing market control and easily owning projects.Later,the Park Chung-hee administration accelerated its exclusive economy by winning a five-year economic development project with a private contract.In addition,the company was able to identify cases of illegal internal transactions conducted by conglomerates(unfair transactions such as job creation)and unfair subcontracting,which led to rapid growth by entering the market easily under the legal expediency of affiliates.Second,Korean SME’s have the lowest wage levels in the world as of 2014,which is 52.5 %of large companies.In addition,the ratio of wage sector to value added by the COSIS’s data base to 43.78% for large companies and 71.86% for SME’s as of 2016 can be interpreted as meaning that most small businesses spend on labor.As of 2015,the employment rate of large and small businesses was 90.2% for small businesses and 9.8% for large companies,but the number of working days was higher than the average of 21.2days for small and medium-sized enterprises.Of Korea`s total exports of $495.5 billion as of 2016,exports of SME’s topped $99.5 billion,about 20%.In terms of the number of small and medium-sized enterprises and the cost of employment,employment as of 2015 accounted for about 87.88% of the total employment population,but its share in export volume is poor.In other words,exports can be recognized as the size of large companies and sub-contractors.In 2016,43% of large companies and 71% of small and medium-sized businesses made up of their profits,and the larger the value,the less liquidity the company has.In other words,the liquidity of large companies is around 57%,while the liquidity of SME’s is 29%t,which makes it possible to realize the polarization between large and small businesses.Third,in foreign cases,German SME’s account for 46.7% of the total value added production of German economy and 34.3% of German companies’ total sales.In addition,the ratio of corporate tax to SME’s is 55.2% higher than that of large companies,while the operating profit ratio of small and medium-sized German companies is around 7% and 4%against Germany.Fourth,technology statistics based on basic data on growth,production,and gains of companies provided by the Korea National Statistical Office for general comparison of large and small businesses and the results of an empirical analysis for comparing efficiency of 4%to small businesses.In addition,the labor income distribution rate,in percentage of the total corporate employee compensation and operating surplus,was more than 80% for SME’s,far lessthan 60% for large companies,showing a gap of about 30%.This can be seen as a case where large companies are able to take into account management aspects and identify aspects of employees’ negligence in their welfare.Meanwhile,as for profit and loss of the current term,the company generated about 93 trillion net profit as of 2016,and the SME’s earn about 42 trillion won,less than half of that of the larger companies.In the DEA Efficiency Analysis,the efficiency analysis based on 2015 and 2016 as a decision making unit(DMU)showed that the year 2015 was all analyzed more efficiently than the year 2016.In addition,in terms of efficiency of large and small businesses,large enterprises were analyzed more efficiently than small businesses,which were found in the above technical statistics and efficiency analyses,while the SME’s contributed relatively little to the national economy.This could interfere with the sustainability of companies,and the innovative management of individual companies should be made to help stable growth through the government’s policy and financial support,as seen in the case of Japan.Finally,we looked at the potential for social and economic problems caused by the polarization between large and small companies that want to address this paper and the impact of large and small companies on the Korean economy.Historically,Korea has seen economic and military situations in which it achieved short-term high-speed economic growth through planned economy with some companies under government control,starting from small and economically.While such large business-oriented economic policies may be positive,the bankruptcy of a parent in vertical hierarchy and sub-contract structure will be directly transferred to its associates in the face of the1997 financial crisis and the 2008 financial crisis.It also served as an empirical proof that the structure of the export-driven economy is vulnerable to the external economic crisis.The economic structure also accelerates economies of scale,discouraging fair competition as well as reducing the competitiveness of SME’s,which are responsible for 80% of the nation’s employment,due to the weakening of the economy.The DEA Efficiency Analysis analyzed separation of large and small businesses.In the efficiency analysis of large enterprises,both decision-making units recorded "1" that could not be ranked,making both their annual output oriented efficiency analyses more efficient.SME’s ranked first in 2016 rather than in 2015,making them more efficient in 2016.The overall conclusion of this study was that Korea was born with a large enterprise-oriented policy in the economic development process,expanding the size of large companies,while smaller firms showed a stronger entry barrier,but the gap in employment structure,income and corporate efficiency,still narrowed.On the other hand,as mentioned in the research process,Korea’s employment and the proportion of individual firms were identified in a paradoxical situation,which is mostly taken up by SME’s.These indicators suggest the need for small businesses to foster protection.