In this paper, we examine how SMEs can come up with the growth problem when they face with myopic inertia problems in business ecosystem. We argue that although R&D capabilities in short-term may lead SMEs to low firm performance, they can overcome the inertial behaviors by enhancing market resilience. We propose that, in order to sustain their growth, SMEs need to be equipped with a capacity that responds well to market turbulence in business ecosystem. With structural equation model, we test our theory using data that cover the innovation, export, and firm performance of 3,600 SMEs in Korea. A negative relationship is presented between R&D capabilities and firm performance and a firm’s market resilience plays a mediating role on such a negative relation. Furthermore, we found that there are four types of cycles in business ecosystem among Korean SMEs and suggest how each cycle is formed and how SMEs can move to virtuous cycle.

In this paper, we examine how SMEs can come up with the growth problem when they face with myopic inertia problems in business ecosystem. We argue that although R&D capabilities in short-term may lead SMEs to low firm performance, they can overcome the inertial behaviors by enhancing market resilience. We propose that, in order to sustain their growth, SMEs need to be equipped with a capacity that responds well to market turbulence in business ecosystem. With structural equation model, we test our theory using data that cover the innovation, export, and firm performance of 3,600 SMEs in Korea. A negative relationship is presented between R&D capabilities and firm performance and a firm’s market resilience plays a mediating role on such a negative relation. Furthermore, we found that there are four types of cycles in business ecosystem among Korean SMEs and suggest how each cycle is formed and how SMEs can move to virtuous cycle.

This paper investigates the cost structure in the Korean defense industry. Managers in the defense industry tend to have incentive to manage earnings because the costs incurred in the production process of defense articles are reimbursed. With the emphasis on labor costs (especially direct labor costs) as a means of earnings management, this research focuses on labor costs among the cost components of manufacturing costs and examines the cost structure of the defense industry. After examining the institutional characteristics of the Korean defense industry, such as defense article contracts that are favorable to the reimbursement of costs and computation methods that emphasize labor costs (Ratios, profit rate), this paper directly compares the labor costs of between the defense sector and the commercial sector of defense industry firms.
We find that in the defense industry of Korea, the ratio of direct material costs and indirect production costs to the total manufacturing costs of the defense sector is lower than those of the entire defense industry firms as well as the commercial sector, whereas the ratio of direct labor costs of the defense sector is higher than those of the entire defense industry firms as well as the commercial sector. These findings indicate that the incentive to automate production is low in the defense sector and that labor costs are the primary component of the cost structure. From the regression analysis using labor costs, direct labor costs, and indirect labor costs in order to compare the cost structures between the defense sector and the commercial sector, we document that the labor costs ratios (direct labor costs ratio, indirect labor costs ratio) of the defense sector are statistically significantly higher than those of the commercial sector. We also found that the coefficients of direct labor costs ratio are larger than those of the indirect labor costs ratio. These findings imply that the direct labor costs ratio is a core component in the composition of the cost structure of defense industry firms.
This paper enlarges related literature by comparing costs structures between defense sector and commercial sector of defense industry using detailed costs data limited in prior studies. It also contributes to academics as well as practices by providing direct evidence that managers of defense industry have strong incentive to adjust costs structure using labor costs in order to get more reimbursed from the government.

We examine the effect on firm value (Tobin’s Q) of donation expenses for KOSDAQ-listed companies that incur losses or whose sales consecutively decrease. We also investigate the influence of donation expenses on firm value not from the viewpoint of improvement of the company image, but from the viewpoint of managers’ pursuit of personal benefit.
We use data from firms listed on the KOSDAQ, which are mostly small and medium-sized enterprises (SMEs). Due to their weaker financial structure than those of major companies, SMEs are relatively less likely to make uncompensated donations that are irrelevant to their own businesses for the purpose of advertisement. In addition, SMEs in which sales decrease or that incur business losses may be having financial difficulty; in this situation, donations may be made either for the purpose of fulfilling corporate social responsibility, or for improvement of the company image. Therefore, when financially weak SMEs make donations despite their unstable business situation, they may do so for the purpose of pursuing managers’ personal interests. Hence, in this study, we analyze the relation between the ratio of donations to sales and firm value for KOSDAQ-listed companies that record losses, and we also investigate the relationship between the ratio of donations to sales and firm value of companies in which sales are decreasing.
Our empirical results show that the ratios between losses incurred and annual donation expenses is significant and negative. Thus, as the amount of the donation increases, firm value decreases. By contrast, the ratio between donation expenses and sales is significant and positive (+). Hence, corporate donations made by profit-generating companies affect firm value positively (+), but donations made by companies incurring loss affect firm value negatively. In addition, in companies that record decreasing sales for two consecutive years, the relationship between corporate donations and firm value is significantly negative. Therefore, donations made by companies with consecutively decreasing sales are evaluated negatively in the market.
This paper has two contributions. First, this study proved that donation expenses of KOSDAQ-listed companies incurring losses and those with decreasing sales, many of which are SMEs, have a negative (-) signaling effect on firm value. Second, this study also proved that among SMEs with low business status, managers may make donations as a method of pursuing their own personal profit.

In the race of economies pitting against each other, some have managed to rise above the competition not by responding to others’ actions but by creating a new condition that will reshape the industry in their favor. For the past few decades, Korea has been able to achieve constant growth (Bae and Rowley, 2004; Dana, 2007; Waechter and Ratten, 2007). To cope with unstable environments, Korea has chosen to continually design technological and organizational architectures aside from simply innovating new products.
The Healthiness of Business Ecosystems Index (HeBEx) conceptualized a model for measuring business health, and also operationalized it. This study used HeBEx as a basis of comparison for Korea, Germany, and Japan. Based on the results, this research points out the strengths and weaknesses of the Korean Economy, and suggests some courses of action towards achieving sustainable growth.
As Korea’s economy has turned into a low-growth economy, Korea needs to find new growth engines for sustainable economy development. Taking cue from Germany and Japan, Korea needs to focus on the development of advanced technology, and accelerate commercialization of R&D outcome.