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An Analysis of Corporation-SME Polarization

Joo-hoon Kim

No 16, KDI Focus from Korea Development Institute (KDI)

Abstract: The growing productivity gap between large corporations and SMEs stems from work force cuts, not increased levels of value added by larger companies. They are using their superior bargaining power to organize a division of labor between companies that allows for both high productivity and high wages. - It is difficult to concur that large corporations are enjoying higher growth rates than SMEs. - The performance of SMEs as a group (as opposed to individual SMEs) was higher than expected. - The gap [between corporations and SMEs]has grown because the former have had higher rates of increase in their wage rates since the foreign exchange crisis. - In the pre-crisis period, wage rate increases at large corporations were kept in check by equipment investments to substitute for workers. - Why did staff cuts take place at large corporations? - The reason for corporations' superior bargaining power is their control of channels for communicating with the market. - Evenly distributed support has the effect of offsetting competitiveness improvements at SMEs and confounding their development of bargaining power vis-àvis large corporations.

Date: 2012
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