Research Reports
A Study on the Development of Local-Based Industry
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AuthorPark, Seokdoo
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Publication Date2004.12.01
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Original
ABSTRACT
The purposes of this study are to explore the potential of development of local-based industry as a means of local economic development and to find the ways to assist it. The term local-based industry is conceptually defined as "a collaborative production and marketing system of local SME groups within a certain area that is based on local endowment and labour and on social division of labour among the enterprises." This study found that 33 local counties in Korea have the industries producing 22 commodities and that there are about 3,150 companies in total.
Four case studies have been done in order to identify their current situation and problems. From consecutive interviews with local government officials and the profession, it found that the local-based industries have potential for creating new demand and markets through the development and innovation of traditional technology. However, due to their small or micro size of business, it is important to survive that they themselves should have collaborative works and then form a close network among them. Moreover, it is also essential to provide them with financial assistance by a flexible policy support system specific to each local area and industry.
The term local-based industry has not been used by government policies but included in SMEs support policies. These have tried to help the SMEs by ways of providing monies for their investment and reducing texes. Since the monies must go for the SMEs through commercial banks, however, it is almost impossible for the small businesses that are not able to give enough securities for the loan to get access to the monies. The tex reduction is more favorable to those moved from cities than those in operation already in rural areas. Therefore, it is necessary to establish a support system that directly give benefits to all businesses of a specific sector in a certain area.
Finally, this study suggest six main tasks to develop the local-based industry in Korea: ① promoting inter-firm collaborative works; ② improving competitiveness to cope with global competition; ③ modernizing the production and marketing methods; ④ diversifying the products to enlarge the market demand; ⑤ establishing combined industry for regional economic development as a whole; ⑥ forming industrial cluster with intra-region collaborative system. In order to achieve these, the central government should enforce various kinds of support systems and planning process in local regions with legislation. Moreover, local governments should not only set up research and development centers for industrial clusters but also conduct some schemes to promote various kinds of collaborative works between the enterprises. With a long-term development plan, it should have quality management systems for regional products and make a focus on training and development of human resources.
Researchers: Seok-Doo Park, Tae-Yeon Kim
E-mail address : sdpark@krei.re.kr
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