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A Study on Compilation and Analysis of Korean SME’s Input Output Table

Author Jin-Myon Lee et al. Date 2014.12.29 Page 178
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This study is the last of the three annual series, 「Compilation of SMEs IO for Cooperative Growth of Large Enterprises and SMEs」, which started in year 2012 and ends in year 2014. This basic goal is to compile applicable SMEs IO and to perform analysis based on its input-output structure. In year 2014, the last of annual series, by taking advantage of the first and second round studies, we performed investigation on actual transactions between large enterprises and SMEs, and compiled SMEs IO distinguishing domestic transactions table and import table.

Industry classifications of this research is primarily based on classification system of the Bank of Korea, but focused on industries where dividing large enterprises and SMEs has implication.
Aggregating basic 384 sectors, we handled 70 industries(two primary industries, 39 manufacturing, 4 SOC sectors, and 25 service sectors) and distinguished large enterprises and SMEs.

Compilation of SMEs IO in year 2010 is composed of six steps. First, we build a product-by-industry table by using Survey of Business Activities. Second, we adjust input side by compiling commodity-output table of SMEs after reorganizing result of Survey of Business Activities in firm level. Third, we adjust output side by using product-by-industry table. Fourth, we adjust final demand part by using export and import share of SMEs data in Korean trade statistics. Fifth, we make transactions table that depicts input-output structure of large enterprises and SMEs by balancing each sector. Lastly, we make import transactions table by applying import coefficients of national IO table by the Bank of Korea. These series of process used supplementary statistics, “Survey on Sales and Buying of SMEs”, and this played an important role of making more precise SMEs IO. Also, we showed that analysis using input coefficients of SMEs IO table is economically meaningful by testing HS conditions.

Policy implications based on analysis of economic structure of large enterprises and SMEs, and intput-output relations between Korea and Japan are as follows. In manufacturing sector, first, job creation in manufacturing sector is weakening and corresponding policy measures are required. Second, there are persistent imbalance between large enterprises and SMEs, and exports are still heavily dependent on large enterprises. Production inducement of SMEs surpass large enterprises, and policies that expands expenditures and investments of SMEs are needed. Third, value-added inducement of large enterprises in manufacturing is the lowest and import inducement coefficients are the highest, which implies high dependency of large enterprises to foreign intermediate goods. Hence, system making cooperation between large enterprises and SMEs should be provided.

In service sector, first, method that can expand production and value-added by reflecting characteristics of industrial structure that is centered around domestic market is needed. In the case of SMEs in service sector, shares of intermediate demand and private demand were much higher than that of large enterprises, which implies possibility of promoting growth of SMEs by expanding domestic market. Second, policy measures to increase productivity of service sectors and high quality jobs are needed since employment is being centered around service sectors.

Finally, for future SMEs IO compilation, first, consistent cooperation with Bank of Korea is required since SMEs IO tables depend on national IO table by Bank of Korea. Second, research panel comprising industry and market specialists should be formed to overcome difficulties in analysis and to make the sample representative.