An institutional analysis of production strategy and social institutions in the Korean machine tool industry in comparison in Japan and Germany

The current production strategy (product strategy, technology policy, and corporate labor policy) and its corresponding social institutions (industrial relation and vocational training systems) in the Korean machine tool industry were studied and compared with those in Japan and Germany. In comparison with Japan, the Korean production strategy until the mid-1980s was characterized by a low price product strategy, heavy reliance on imports of foreign technologies, and a repressive corporate labor policy under management-dominated industrial relations. State labor policy, repressing the demands of workers for trade unions and collective bargaining, created a social and political environment to encourage a repressive corporate labor policy. In contrast to the corporatist regulation of training by the state, employers, and unions in Germany, in Korea the vocational training system was exclusively state-dominated.; The coherence of production strategy and social institutions in the Korean machine tool industry underwent serious disturbances since the late 1980s. A dramatic rise in industrial conflicts, led mainly by blue collar employees, fundamentally threatened the price competitiveness of Korean machine tools. Another challenge to the production strategy is the noticeably declining ability of managers to control work performance of blue collar employees. Both challenges from labor significantly threatened the institutional stability of management-dominated industrial relations and repressive corporate labor policies. Furthermore, a wave of industrial conflict forced the state to retreat from repressive control of labor, at least formally. Finally, the effectiveness of the state-dominated vocational training system in Korea was thrown into question since firms showed little interests in skills generated outside the workplace. Since production strategy and social institutions are mutually reinforcing, comprehensive reforms are called for to reestablish a sustainable institutional equilibrium.