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The Expansion of Global Value Chains and Industrial Policy Implications in Korea

Author Kim Inchul, Kim Youngmin, Park Yangshin Date 2016.12.26 Page
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?1. Necessity of Research

 

The recent trend in global industry has been a shift toward globalization of technology and production networks, and in particular the rapid expansion of global value chains (GVCs). Changes in the global economic environment as a result of GVC expansion and intensification have resulted in an increased tendency for company and industry performance and competitiveness to be determined by a company’s position and role within that chain, rather than through trade between states as in the past. South Korea in particular is a case in which export-driven development strategies resulted in rapid economic and industry growth, and the role and importance of the external sector has grown over time. What position a company or industry occupies within a GVC may thus be expected to become a crucial determinant of future economic and industry growth and development. It is therefore essential to increase understanding of the current status, characteristics, developments, and prospects of GVCs as a chief factor in changes to the global economic environment, and to establish measures for continued economic industry growth and development through industry policies linked to various sectors, including internal and external trade, investment, interindustry linkages, market structure, competition structure, entrepreneurship, and local economies. 

 

GVC development has resulted in not only technology and production but also the policy environment becoming too complex for simple, uniform policy responses. The growing tendency for economic performance to be determined not solely by the individual efforts of stakeholders but by collective efforts throughout the domestic and overseas production process has resulted in increasing uncertainty over policy tools and targets and an inability to predict their effectiveness. Moreover, specialization of production factors and value chains in the production process has compounded the importance of interlinkages between these factors and among chains. As a result, the role of industry policy in reflecting structural changes in the production process and establishing and supporting efficient linkages between these areas is more important than ever before. The situation calls for an analysis of the various policy issues resulting from GVC expansion in terms of several industry policy aspects, as well as the proposal of effective policy alternatives.