Changes in Economic Environment, Learning, and Dynamic Capabilities in Korean Firms

Abstract

Korean firms (chaebols) faced increasing global competition as Korea became a member of the WTO and OECD, and the world economy continued to globalize. These changes in the economic environment led to a Korean economic crisis that caused Korean firms to transform. This paper investigates factors that contributed to the economic crisis and examines Korean firms' learning and innovations based on knowledge learned from the economic crisis. Some Korean firms' financial resource selection and deployment were ill-prepared for the changes in the economic environment (global competition); these firms were dissolved as the economic environment drastically changed. Other Korean firms learned the importance of multiple factors: managers' awareness and adaptabilities to changes in market conditions, corporate core competency and capability, managers' investment decisions, and principles of corporate management. Many Korean firms increased competitiveness by making changes in their competitive mindset and adopting new business practices after the economic crisis. Emphasis on competence-creation and globalization, the most prevalent changes, made Korean firms competitive.