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KIET Monthly Industrial EconomicsKIET Korea Institute for Industrial Economics and Trade

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Influence analysis of supportive policy of industrial complex and its implications

Author Wonvin Rhee Date 2017.05.17 Issue No

The Korean government has supported supply of industrial complex development in order to strengthen the competitiveness of regional economy via an industrial cluster. The government has also implemented various supportive policies to promote management activities of firms. The government has been financially supporting industrial complex, because it has believed that there would be better performances in terms of productivity or profitability compared to firms located outside of the complex by getting external effects such as effects of aggregation of firms inside the complex. In this regard, this paper strives to verify the effects of supportive policies through the analysis of DID. After the analysis, policy of supportive projects in the industrial complex seemed to have been effective because firms inside the industrial complex, which are policy beneficiaries of supportive projects, have had higher return on net sales than firms outside of the industrial complex. Above all, it is estimated that the effects of entering industrial complex is big, in regard to middle-level technology industries, which are major industries of Korean economy. The effects of moving into the complex are bigger when sizes of firms are smaller.

Besides, the industrial complex that is older than 20 years has bigger effects from supportive policy. Therefore, in regard to a direction of supportive policy of industrial complex, it seems better to increase the ratio of supportive policy for stepping up the competitiveness of old industrial complex rather than making new complex. In addition, in order for firms in the industrial complex to achieve positive profits, it is necessary to continuously maintain policy effects that happen from moving into the industrial complex. Therefore, policy feasibility of supportive projects of industrial complex, and continuous and right-sized support will allow firms in the industrial complex secure independency in the market.