The Rise of Digital Companies and Strategies: Case Studies in the U.S. and Korea

This article is related to research conducted as part of the collaboration between KIET and GVCC. The article was published in the March/April 2019 KIET Industrial Economic Review, Volume 24, Issue Number 2, p. 14-21.

The Digital Economy, Global Value Chains and Asia

This joint report by the GVC Center and KIET builds on recommendations from the first project to explore opportunities in technology-related services. This report: describes and defines the digital economy, provides a case study that illustrates how Industry 4.0 impacts the capital equipment GVC and provides analysis of the activities taking place in different countries including the US, China, India, Singapore and Korea. To identify entry and upgrading opportunities in this field, 28 company case studies of global information technology (IT) lead firms were completed to identify common strategies of existing global leaders.

The Digital Economy & Global Value Chains: Implications for Korea

Presentation by Duke-GVCC in Seoul, Korea on December 4, 2018 at the KIET-Duke GVCC seminar on Upgrading Globalization for Innovation Growth: Expansion of Digital Companies in GVCs and its Implications. The presentation provides an overview of the results of our recent project KIET on the digital economy and GVCs.

Korea in Global Value Chains: Pathways for Industrial Transformation

The Korea Institute for Industrial Economics & Trade (KIET) commissioned a global value chain study to Duke University Global Value Chains Center (Duke GVCC). The goal of this study is to analyze the country’s participation in specific global industries to identify broader lessons for Korea’s future ambitions for industrial transformation.

To do so, we examine Korea’s participation in two major industrial sectors: electronics and shipbuilding. Together, these two industries comprise 30% of exports, account for over half a million semi- and skilled jobs and a substantial share of the country’s R&D spending. They provide two distinct perspectives for Korea’s participation in GVCs. On one hand, electronics products are targeted to the consumer market, technologies are rapidly changing and profits are derived from bulk production for mass consumer markets, and control over marketing and branding. Shipbuilding, on the other hand, is very capital-intensive, ships have long life cycles, and production is highly concentrated in three countries. In both industries Korea has established a global leadership position in a select number of final product categories and key component products by continually investing in process and product upgrading coupled with strong R&D investments.

Global Value Chains, Industry 4.0, and Korean Industrial Transformation

Presentation by Gary Gereffi for the Korea Institute for Industrial Economics & Trade (KIET) focused on Global Value Chains in Korea. The objective of the collaboration was to identify upgrading opportunities for the Korean economy using a global value chain (GVC) perspective. The presentation highlights Korea’s position in GVCs, key findings from the research and a global perspective on GVCs.

Chapter 5: GVCs, Industrial Transformation and Opportunities for Korea

Having built its economy on a strong manufacturing base, Korea is now at a crossroads and must redefine its growth drivers for the future. Its strong commitment to process and product improvement have seen steady gains in productivity and output in the past. However, its manufacturing sector is coming under growing pressure on two fronts. In labor-intensive operations, Korea increasingly competes with lower cost countries which are building up their capabilities, particularly China and others from Asia, while, in capital- and knowledge-intensive stages of the chain, Korea is up against the world’s most advanced industrialized countries – the US, EU and Japan, which are all rapidly innovating, defining brand new industries, and ramping up new production technologies that will shape the future of manufacturing itself.

Traditional development paradigms would suggest that, to survive these challenges, Korea aim to move out of manufacturing and into services. With an underperforming services sector, this provides a somewhat pessimistic outlook for Korea’s future. It also presents policymakers with an overwhelming task as the “services” sector is broadly defined and covers a very wide range of activities, including everything from construction to finance and insurance and tourism, drawing on a wide range of skills and other capabilities and requiring a considerable transformation of the economy. The global value chain (GVC) paradigm, however, suggests that the country leverage its existing strengths in manufacturing to lead its upgrading into services, while at the same time, consolidating its leadership as a production technologies specialist. Korea has established a formidable leadership in its manufacturing chains to date based on strengths in science and technology, manufacturing and an emphasis on applied research and development (R&D). By identifying future sources of value in these manufacturing GVCs, Korea can pursue a much more targeted approach to drive the development of a stronger services sector while focusing on the highest value manufacturing segments.

This study analyzed Korea’s participation in two of its leading manufacturing sectors: electronics and shipbuilding.

Chapter 4: Korea and the Shipbuilding Global Value Chain

Shipbuilding in Korea has been a lynchpin of industrial development, national security, and source of employment and foreign exchange for the country since the 1970s. From relatively humble beginnings in 1972, when Korean national economic development plans identified shipbuilding as a key industrial sector for development, the big three Korean shipbuilding firms, Hyundai Heavy Industries, Samsung, and Daewoo have become dominant firms in the global shipbuilding industry, producing sophisticated commercial vessels for customers around the world. Today, the shipbuilding industry contributes about 2% to Korea’s GDP (OECD 2015), directly employs approximately 200,000 workers, particularly in rural areas, and makes up between 7-8% of total exports (KOMEA 2016). Shipbuilding is routinely among the top three most valuable Korean export industries, competing with automobiles and electronics for the top spot (KOMEA 2016).

This chapter investigates the shipbuilding value chain and Korea’s position in the regional and global industry.

Chapter 3: Korea and the Electronics Global Value Chain

This report uses the Global Value Chains (GVC) framework to analyze Korea’s participation and leadership in the electronics global value chain. As one of the most highly traded industries, it provides significant insight into how countries engage in global chains. As Korea’s major export industry, the country’s performance in the electronics GVC can provide important lessons for how Korea may be able to leverage its leadership, using Industry 4.0 trends to drive industrial transformation of its economy.

Chapter 2: An Introduction to Korea’s Economy

This chapter reviews the policies that impact industrial development in Korea across all industries, and examines how the country’s approach to economic development has evolved over the past few decades. The review included identifying key stakeholders, trade, industrial and labor-related policies and programs.

Chapter 1: Global Value Chains and Economic Development

The GVC framework has been developed over the past two decades by a global network of researchers from diverse disciplines in order to understand the phenomenon of globalization. This chapter outlines how this tool addresses economic development issues.