Korean Manufacturing Industries Research Articles

Innovation patterns and firm performance under industry maturity: manufacturing industries in South Korea

Although innovation patterns under industry life cycle have been investigated for decades, the impact of change in innovation patterns on firm performance has yet to be fully uncovered. This study empirically verifies the impact of product and process innovation on firm performance by considering industry maturity through hierarchical regression analysis using data from the Korean manufacturing industry. Two different measures for firm performance are utilised: innovative product sales and total sales. The results show that both product and process innovation have positive effects on innovative product sales, and industry maturity negatively moderates the positive effect of product innovation on innovative product sales. However, the moderating effect of industry maturity on the relationship between process innovation and innovative product sales is not significantly verified. Moreover, although the direct effect of product and process innovation on total sales is not significantly verified, total sales tend to decrease as the industry matures. Industry maturity positively moderates the effect of process innovation on total sales, while the moderating effect of industry maturity on the relationship between product innovation and total sales is not significantly verified.

Greening the Supply Chain: Drivers and Outcomes in the Korean Manufacturing Industry

This research investigates the determinants of green supply chain management (GSCM) adoption and its impact on organizational performance, while considering the potential moderating factors influencing GSCM adoption. Despite the growing prevalence of GSCM practices among Korean firms, the factors driving their adoption have not received sufficient attention. To bridge this gap, the study uses structural equation modeling, integrating stakeholder theory and resource-based theory to explore how green entrepreneurial orientation (GEO), institutional pressure, and relational capital affect GSCM adoption. Additionally, the study explores the effects of GSCM implementation on competitiveness and economic performance. Drawing data from a sample of 213 Korean manufacturing firms, the PLS-SEM analysis highlights the significant influence of GEO, institutional pressure, and relational capital on GSCM adoption. Additionally, the study emphasizes the positive impact of GSCM implementation on firm competitiveness. These findings provide valuable insights for enhancing sustainability in supply chain management and are applicable to similar context countries such as Taiwan, China, Japan, and the Netherlands.

An Analysis on the Determinants of the Wage Gap by Education and Income Inequality in the Korean Manufacturing Industry

Purpose - The purpose of this paper is to explore determinants that have a great impact on the wage gap of labors by education(wH /wL), and which factors lead to the extension of this and promote income inequality among workers in the Korean manufacturing industry since the 1990s.
 Design/Methodology/Approach - Based on human capital theory, labors are divided into highly-educated and low-educated labor. The effective labor function was established as a form of the CES function. The estimation equation consisting of the labor ratio by education(LH / LL), technical progress, and globalization can be derived as factors affecting the wage gap by education. Based on this estimation equation, an empirical analysis was implemented to analyze the wage gap factors of labors. A fully-modified ordinary least square was used as the method of estimation.
 Findings - In the Korean manufacturing industry, the absolute wage gap by education expanded while the relative wage gap narrowed due to an increase in LH / LL. It also expanded due to the effect of exogenous factors such as technical progress and globalization. Since the international financial crisis, the effect of LH / LL has decreased, and those of technical progress and globalization have increased, widening the relative wage gap which strengthens income inequality among workers.
 Research Implications - Currently, the wage gap by education has widened in the manufacturing industry, and income inequality has become a social issue. Under the de-manufacturing industrial structure, there are policy implications to promote technical progress that can create employment by expanding investment in the service industry and increasing the productivity of low-educated labor.

코스피 상장 제조기업의 2000-2019년 재고수준 변화에 대한 고찰

Purpose This study investigates whether the inventory levels of Korean manufacturing firms increased or decreased from 2000 to 2019. We also explore the relationship between inventory levels and firm performance. Design/methodology/approach We use panel data on KOSPI-listed firms in the manufacturing industry. We measure days in inventory as a proxy for inventory levels, and firm performance is measured by return on assets, return on sales, and EBITDA ratio. The panel data regression method is employed in our analysis. Findings We find that days in inventory of Korean manufacturing firms significantly increased from 2000 to 2019, especially for raw materials and finished goods inventory. In addition, while days in inventory of large- and medium-sized firms were less than those of small-sized firms, the change in days in inventory of large- and medium-sized firms was positively significant over time. Moreover, the increase in days in inventory was more prevalent among industries related to foods, clothes, chemicals, and transportation. Finally, we show that the days in inventory are negatively related to firm performance. Research implications or Originality While the Korean manufacturing industry has enormously grown over the last 20 years and managing inventory is critical in the manufacturing industry, our findings counter-intuitively show that the days in inventory of the Korean manufacturing industry had been gradually increased. We speculate that the increase in days in inventory is due to the Korean manufacturing firms’ heavy reliance on global supply chains.

FDI or International-Trade-Driven Green Growth of 24 Korean Manufacturing Industries? Evidence from Heterogeneous Panel Based on Non-Causality Test

Manufacturing, as an energy-intensive industry, plays a major role in economic growth. Its green growth is the focus of national planning for sustainable development, especially for a country such as Korea, which has a scarcity of fossil energy of its own. While internationalization has brought Korea scarce energy, serious carbon emissions have become a pressing issue. It is still necessary to explore the relationship between globalization and green growth in manufacturing. Thus, our paper aims to observe their relationship by using 24 manufacturing industries from 2011 to 2019. Through the panel Granger non-causality test and the Dumitrescu–Hurlin test, we find that imports and inward foreign direct investment (FDI) causes green growth at the overall manufacturing level, but their causality relationships exist in different industries. The green-growth causality relationship of inward FDI mainly exists in capital-intensive and internationally competitive manufacturing industries (manufacture industries of basic metals; furniture; food products; coke, briquettes, and refined petroleum products; and chemicals and chemical products, except pharmaceuticals and medicinal chemicals). Furthermore, the green-growth causality relationship of imports primarily exists in the fossil-energy-consumption-intensive manufacturing industry (manufacture industries of motor vehicles, trailers, and semitrailers and coke, briquettes, and refined petroleum products). Furthermore, in our regression analysis, we find that only inward FDI robustly promotes the Korean manufacturing sector’s green growth; the positive effect is in the range from 0.005 to 0.009. Though the parameter estimates are positive and significant for FDI, they are close to zero, suggesting very limited positive effects that are close to almost zero. Conversely, imports have no significant impact, which we speculate is related to the import structure of Korea. Hence, the Korean manufacturing development model suggests that developing countries with similar country characteristics need to develop and guide the formation of capital-intensive and competitive industries. Additionally, it is imperative to decarbonize energy-intensive industries and to work on renewable energy development and diffusion. Finally, it is essential to introduce various green monitoring mechanisms to reduce carbon emissions. The government needs to strengthen its support for research and development of innovative technologies to reduce carbon emissions as well as promote the development of environmental and energy-saving related professional service enterprises.

AI-Smart Factory: Design and verification of Korean SME AI smart factory using level diagnosis system

This paper presents a new AI-based smart factory construction model for SMEs based on the Korean manufacturing industry and proposes an effective construction process that implements the informatization, automation, and intelligentization characteristics of smart factories. The Korean AI-based smart factory construction process starts with the accumulation of digital information by attaching sensors to the manufacturing processs, and then creates a customized AI model for the company through cloud accumulation of sensor data and big data analysis through CNN techniques. The Korean SME Smart Factory is an AI-based smart factory through AHP analysis and smart factory level diagnosis system, which is a construction process, which means a consumer-oriented intelligent factory that combines next-generation digital technology and manufacturing technology beyond the existing level of factory automation (FA). Various products can be produced on one production line, and modularization is expected to change from mass orders to individual flexible production systems. The transition to smart factories is expected to dramatically improve the productivity of manufacturing, as well as realize energy savings and a more human-centered work environment. By monitoring and controlling manufacturing sites in a virtual space, it is expected to facilitate factory management and lead to improved quality and cost competitiveness. Keywords: AI Smart Factory, Level Diagnosis System, Korean SMEs, AHP Analysis

The Effects of Shareholding of the National Pension Fund on Environmental, Social, Governance, and Financial Performance: Evidence from the Korean Manufacturing Industry

With the growing number of environmental, social, and governance (ESG) problems, many companies have begun to implement more sustainable business practices. In the midst of this change, institutional shareholders declare and adopt socially responsible investment procedures, which is a way of engaging in investor activism. Despite the growing interest in investor activism following the introduction of the stewardship code, little attention has been paid to how socially responsible investment practices of institutional investors affect the non-financial value of the pillars of environmental, social, and governance as well as financial performance, including short-term accounting (ROE, ROA) and long-term market performance (Tobin q). The current study examines whether the national pension fund (NPF), the world’s third-largest Korean pension fund, can increase the ESG performance of investee firms in addition to accounting and market performance through institutional investors’ shareholding. This study, by applying path analysis, attempts to explore the relationship between the NPF’s socially responsible investing, ESG, and the financial performance of the investee firms. This research offers evidence that ESG performance acts as a moderator or a mediator between NPF’s shareholding and financial performance.

ISO 14001 certification and industrial decarbonization: An empirical study

Voluntary environmental programs have proven to be a viable tool of pollution abatement, supplementing the command-and-control approach and market-based policies such as emissions trading and taxes. These voluntary initiatives aim to achieve pollution reduction through several channels, including procedural changes, raw material changes, product and packaging redesign, and innovation in pollution control technologies. The ISO 14001 standard is such a voluntary program; first introduced in 1996 by the International Organization for Standardization (ISO), it has steadily grown since and has been widely adopted by organizations around the world. In this paper, we empirically study the effects of the ISO 14001 standard on carbon emissions using a panel dataset of Korean manufacturing firms. As the largest contributor to the warming of the earth's atmosphere, carbon emissions are the focus of national and international efforts to curb climate change. The Korean manufacturing industry is responsible for about 40% of greenhouse gases in the country and has experienced rapid growth in ISO 14001 certified facilities. Our econometric results indicate that ISO 14001 certification spurs a significant reduction in carbon emissions among certified firms, after accounting for its potential endogeneity with an instrumental variable strategy. The empirical results suggest that wider ISO 14001 certification among carbon-intensive industries can be a credible pathway to help achieve the Korean government's goal of cutting domestic carbon emissions by 37% by 2030.

생산-개발부서 통합과 고객만족의 관계에 관한 연구

Given that the small and medium-sized enterprises (SMEs) are working in an increasingly competitive business environment with limited resources, manufacturing flexibility can be a vital source of a competitive advantage. Thus, having strong attention to manufacturing flexibility as a good means for improving the competitiveness of SMEs in the Korean manufacturing industry, this study investigates 1) the relationship between cross-functional integration (CFI), manufacturing flexibility, and customer satisfaction and 2) the role of a cross-functional team (CFT) made up of employees from different functional departments. From a large-scale sample of 504 SME data, this study empirically confirms that a higher level of integration between manufacturing and R&D tends to improve manufacturing flexibility, which ultimately increases customer satisfaction. Moreover, even when manufacturing-R&D integration is insufficient, forming a CFT secures a high level of manufacturing flexibility, which implies that a CFT officializes the need for the concentration and orchestration of a firm's diverse competence and helps to cultivate capabilities for enhancing the organizational performance.

Corporate environmentalism and international trade: Evidence from industry‐level data

AbstractWe explore the role of ISO 14001 certification in stimulating increased exports for certified firms. The rationale for the study is that certification conveys an important market signal that the certified firm's production process adheres to internationally accepted standards of environmental quality. That is, the perceived credibility of ISO 14001 certification lowers informational barriers about the environmental attributes of the certified firm's products, especially in foreign markets, boosting exports. We put this proposition to an empirical test using the gravity trade model and a panel of South Korean manufacturing industries exporting to 176 countries over the 1988–2015 period. Our results show that ISO 14001 certification generates a robust positive push effect for South Korean manufacturing exports. We further find that this effect varies based on the level of economic development of the destination market, with a more pronounced impact of certification on exports to high‐income countries than to middle and lower income countries.

Barriers to external knowledge search for innovation: empirical evidence from the Korean manufacturing industry

PurposeThis study focuses on resolving empirical inconsistencies in the relationship between external search breadth and innovation performance. Based on research on the knowledge-based view and innovation barriers, three internal barriers that weaken the effectiveness of external search breadth are discerned: information, rigidity and financial barriers.Design/methodology/approachFor empirical analysis, the Korean Innovation Survey 2016 of manufacturing firms was utilized. This study defines innovation performance as the number of patent applications and new product introduction that are analyzed through zero-inflated negative binomial and logistic regressions, respectively.FindingsThe empirical analysis showed three findings. First, external search breadth has a positive relationship with the number of patent applications but not with new product introduction. Second, financial barrier weakens the positive association of external search breadth with the number of patent applications. Third, the interactions of external search breadth with the three internal barriers are negatively related to new product introduction.Originality/valueThis study makes two theoretical contributions. First, by examining barriers to external knowledge search, this research helps identify potential bottlenecks in this search. Second, the study reveals that the effectiveness of external search breadth may have a boundary in firm innovation by showing that this search affects patent application and new product introduction differently.

The role of agility in responding to uncertainty: A cognitive perspective

This research investigates the impact of external environment, cognitive factors, and behavioral dimensions in the context of implementing supply chain agility. It applies social cognitive theory to establish a link between various environments including business uncertainty and supply chain disruption risk, cognitive factors such as supply chain agility self-efficacy, trust, and supply chain cooperation, coordination, and communication attitude, and actions such as implementing supply chain agility as well as behavior to explain the decision-making process in implementation. Based on the survey data collected from 254 supply and purchasing managers in the Korean manufacturing industry, AMOS software with structural equation method was used for data analysis Our results support the concept that business uncertainty reduces self-efficacy in supply chain agility although both business uncertainty and supply chain disruption risk boosted trust in the supply chain as well as buyers’ positive attitude toward supply chain cooperation, coordination, and communication. The concept of supply chain agility, self-efficacy, trust, and supply chain cooperation, coordination, and communication attitude have a positive impact on firm performance. Supply chain agility, self-efficacy, and trust in suppliers positively affects implementation of supply chain agility as well as firms’ financial, operational, and supply chain performance. This research provides meaningful insights for considering external environments and cognitive factors while making decisions in implementing supply chain agility.

The effectiveness of public R&D subsidy on SMEs’ innovation capability and catch-up in the Korean manufacturing industry

ABSTRACT This study investigates the effect of R&D subsidy associated with R&D projects on the productivity and internal capacities of Korean manufacturing small- and medium-sized enterprises (SMEs). It also addresses the difference in effectiveness attributed to the characteristics of such projects. We constructed distinctive firm-level panel data combining the National Science and Technology Knowledge Information Service and Korea Enterprise Data databases and used stochastic frontier analysis with multivariate matching techniques. The results reveal that subsidised R&D projects did not help Korean SMEs in improving productivity and efficiency. Compared with the control group, which had similar external features, beneficiaries showed worse productivity growth as well as efficiency changes. Moreover, the effects of R&D subsidies differ depending on project characteristics. Specifically, the amount and period of R&D subsidy had a positive effect on catch-up but a negative effect on SMEs’ innovation capacity. These results demonstrate the need for renovating the current support system for SMEs’ R&D activities in Korea.

The Effect of Performance Feedback on Firms’ Decision to Form an International Strategic Alliance and Performance in the Korean Manufacturing Industry

Purpose – International strategic alliance has been regarded as a strategic decision made by firms’ managerial problems and ensure performance growth. From the perspective of the proactive behavior for changing strategies in a global market, this study aims to identify whether performance feedback influences firms’ decisions to pursue strategic alliances. This study examines the effects of performance feedback on performance when firms use strategic alliances. Design/methodology – To analyze the impact of performance feedback on forming an international strategic alliance, this study adopt the concept of performance feedback to develop a research model and our hypotheses. Thus, this study used a two-stage least squares unbalanced panel data analysis with random effects. This study is based on 24,543 observations from Korean manufacturing firms from 2007 to 2016. Findings – The results show that firms pursue the formation of strategic alliances more actively, if their past financial and R&D performance are lower than their aspiration level, based on the result of performance feedback. An in split sample analysis for examining the effect of a firm’s technology sophistication based on the OECD’s classification, negative innovation performance discrepancy has positive effects on the probability of international alliance in high-tech and medium-high-tech industries. Financial performance also improves when a firm decides to form a strategic alliance based on the results of performance feedback. Originality/value – This research extends recent efforts to better understand the effect of performance feedback on firms’ performance when they use strategic alliances. These findings suggest that the CEOs and managers of firms should consider the performance feedback perspective when deciding to pursue a strategic alliance to improve performance. In other words, the decision-makers in a firm must analyze and consider various complex variables inside and outside the firm and expand such subjects of examination to more complex and dynamic factors.

Is carbon neutrality feasible for Korean manufacturing firms?: The CO2 emissions performance of the Metafrontier Malmquist–Luenberger index

To achieve carbon neutrality, the Korean government has promoted regulatory policies on the transition toward a carbon free economy in 2050. Unfortunately, these policies face strong complaints from industries with respect to losing international competitiveness owing to extra cost burdens. Is it feasible to achieve a carbon neutral economy with these regulatory policies? This study tries answering the question by evaluating the CO2 emissions performances of the Korean manufacturing industry for feasible solutions toward a carbon neutral economy. For this purpose, we adopted the metafrontier Malmquist–Luenberger (MML) index to reflect group heterogeneity at the technology level. Forty subsectors of manufacturing industrial data were collected from 2012 to 2017, which were classified under four technological levels: high, middle-high, middle-low, and low. The CO2 emissions performance showed a poor effect from the policies, with an overall 0.8% deterioration (−0.8%) in the CO2 emissions. Under the group heterogeneity, the middle-high and middle-low technology groups showed a significantly slower upward trend, implying that the environmental regulatory regime did not have a strong effect on these groups. To obtain a feasible solution for this fine tuning, MML decomposition was implemented in the second stage. As the efficiency change is the main driver that influences the CO2 emissions performance, the Korean government should encourage the catching-up effect in industries via a green cultural revolution, as well as provide strong incentives to avoid negligible performance in the innovation effect, supported by more market-oriented emissions trading schemes (ETSs).

Aggregate Productivity Growth and Firm Dynamics in Korean Manufacturing 2007–2017

We study aggregate productivity growth of the Korean manufacturing industry for the 2007–2017 period after the Great Recession. We find the nature of such growth was quite different for two measures of productivity. For labor productivity, most of growth comes from productivity changes among surviving firms while, for TFP, most of the productivity growth comes from that of new entrants. We observe interesting industry dynamics, as exiting firms contributed positively to aggregate productivity growth, which suggests that the market had gradually eliminated firms of lower productivity in this period. Using the dynamic Olley and Pakes (1996. The dynamics of productivity in the telecommunications equipment industry. Econometrica, 64, 1263–1298.) decomposition, we find that a substantial productivity growth after the Great Recession was due to market share reallocations between firms, but this between-firm contribution has reduced since the recovery. Our industry sector level analysis also demonstrates that there has been heterogeneous productivity growth patterns and components across manufacturing sectors. Finally, we speculate that the wage level also plays a role as a moderating or accelerating factor for different productivity growth paths among surviving, entering, and exiting firms.

An analysis of the effects of occupational accidents on corporate management performance

Occupational accidents in a workplace not only cause serious physical and/or mental damage to workers, but also have significant impacts on the corporate management performance through compensation costs for the victims, suspension of production, decline of corporate image, etc. Based on the corporate-level panel data of the Korean manufacturing industries established by merging the workplace-level occupational accidents data into the financial statements data, this study analyzes the quantitative effects of occupational accidents on corporate performance using econometric techniques. According to the analysis result, the increase of occupational accidents reduces sales per employee, operating profit per employee, the ratio of operating profit to sales and sales growth rate by a statistically significant level. To be specific, 1% increase of the occupational accidents rate reduces the sales per employee by about KRW 12.15～14.31 million, the operating profit per employee by about KRW 2.11～2.47 million, the ratio of operating profit to sales by 1.11～1.21%p, and the sales growth rate by 0.45～0.71%p.

우리나라 제조업 에너지 효율 변화의 요인 분석

본 연구는 2000∼2016년 기간중 우리나라 제조업의 에너지 효율 변화에 미친 요인들과 그 영향의 정도를 LMDI 분해법으로 추정한다. 특히 제조업을 에너지 고집약, 중집약, 저집약 등 3개 그룹으로 나누어 LMDI 다계층 모형을 활용하였다. 그 결과 분석기간 중 구조변화 효과와 에너지 집약도 효과는 제조업 에너지 집약도 개선에 기여한 것으로 나타났다. 그룹 별로는 에너지 저집약 그룹, 중집약 그룹의 에너지 효율이 크게 개선된 것으로 나타났다. 반면 에너지 고집약 그룹은 효율 개선 정도가 미미하였다. 따라서 향후 제조업부문의 에너지 효율화 정책은 에너지 집약산업에 초점을 두는 것이 바람직할 것으로 평가된다. 또 본 연구는 연구방법론상에 있어서 다계층 모형과 단일계층 모형간의 관계를 규명하고 그룹 내부 효과와 그룹간 효과를 구분하여 파악할 수 있음을 보였다.

A Comparative Analysis of Corporate R&D Capability and Innovation: Focused on the Korean Manufacturing Industry

In order to improve innovation performance, it is necessary to analyze a series of processes that are connected to innovation performance, as well as R&D input. Since industrial characteristics affect innovation performance, the differences between corporate R&D capabilities in the industrial sector should also be considered. This study verified the effect of R&D capabilities and absorptive capacities on innovation using a structural equation model for Korean manufacturing companies, and analyzed in-depth the relationship between capability and performance of high- and low-tech sectors through multi-group analysis. The results show that internal and external R&D capabilities had a positive effect on absorptive capacities, and potential absorptive capability had a positive effect on realized absorptive capacity. In addition, internal R&D capability and realized absorptive capacity had a positive effect on innovation, and the mediating effect of absorption capacities could be identified. As a result of industry sector-specific analysis, the latent mean of internal R&D capability and innovation of the high-tech sector were higher, and the path coefficient of the high-tech sector from the internal R&D capability to potential absorptive capacity and innovation performance was more strongly identified than those of the low-tech sector. Based on the results of this study, we would like to present policies for the development of firm’s R&D capabilities by the industry sector.

Multiple Goals, Attention Allocation, and the Intention-Achievement Gap in Energy Efficiency Innovation

Although improving energy efficiency has many benefits, including not only reducing pollution and climate change but also enhancing productivity and competitiveness, many firms still do not adopt energy efficiency innovation. In this study, we suggest inadequate attention allocation as a barrier to energy efficiency innovation, making firms fall into the intention-achievement gap when they simultaneously pursue multiple innovation-related goals. Due to limits in attention resources, competing innovation goals are likely to divert the firms’ focus of attention away from energy efficiency innovation, making them fail to achieve as much as they had initially intended. In addition, we argue that organizational innovation and government dependence will mitigate the attention dispersion effect of multiple goals by enhancing attention capacity and redirecting attention focus, respectively. We empirically examined our hypotheses in the context of Korean manufacturing industries between 2011 and 2013, using the Korean Innovation Survey 2014 data, and found supports for all hypotheses. In particular, we found that even a small increase in the diversity of innovation goals leads to a substantial likelihood of the intention-achievement gap and that organizational innovation and government dependence help to close the gap, but to a limited extent. Finally, theoretical contributions and practical implications are discussed.