chapter  4
14 Pages

SME productivity and export promotion policies in Korea 1

ByInchul Kim, Youngmin Kim

This chapter highlights export promotion in the SME sector as a legacy of Korea’s state-centered development trajectory. It argues that given the relatively small size of the Korean domestic market, a key prerequisite to the growth of Korean SMEs is expansion into global markets. SMEs, however, lack many of the basic capabilities needed to enter foreign markets, including information about these markets. Recognizing these problems, the state has created an export promotion framework reminiscent of the developmental state in the SME sector, setting quantity-driven export targets. This chapter shows that the Korean state has provided a great deal of export promotion support for its SMEs, spending more per capita supporting SMEs than any other country in the world. Despite such support, few Korean SMEs survive in global competition, reflecting their dearth of global capabilities and the ineffectiveness of export promotion policies. Kim and Kim, however, find a silver lining. The few Korean SMEs that survived for three years in global markets accelerated their growth rate, demonstrating that it is possible for SMEs to build the capabilities needed to succeed overseas on their own with enough perseverance.