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학회지논문 목차 LIST |
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- Hea-Jin Lim (IBK)
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[논문다운받기]
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Despite of the conflicting debates over the government intervention in credit markets, public credit guarantee programs have become more popular over the past decades. However, empirical findings show that government has an important role to play in funding and management, but less so in use of risk-based pricing, risk assessment and management mechanism. In this backgrounds, this study analyzes the macroeconomic reasons for the ratio of non-performing loans to public credit guarantee funds using an econometric model estimated with time series data from 1999Q1 to 2008Q2. To this end, unit root test, co-integration test and error-correction model are employed. Empirical results show that the loan loss ratio of public credit guarantee funds has a significant short-and long-run relationship with the macroeconomic variables including oil price, GDP growth rate, and interest rate, etc. These results can be used as quantitative information for risk management of public credit guarantee funds in Korea.
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- Chan Young Hur (Hannam University)
- Hong Ki Lee (Hannam University)
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[논문다운받기]
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The industrial environment has changed radically over the last some decades, with technology, market conditions and customer requirements changing at an unprecedented speed and in directions that have been difficult to foresee. Related this issues, the problem of how organizations can successfully deal with unpredictable, dynamic, and constantly changing environments has been a prevailing topic both in industry and academia for a few decades. Against these new competitive conditions, many firms have started re-orienting their distinctive competencies, adopting different practices and tools to improve their competitiveness such as automation and flexible manufacturing systems, concurrent engineering, total quality management. Recently research on how organizations cope with uncertainty and change are focused term of agility. The notion of the agile workforce has been discussed as central to creating the agile organization, which achieves superior environmental responsiveness in contexts of turbulence and change. Previous agility research has focused overly on the organization, paying scant attention to the workforce.
The purpose of the paper is three fold. Firstly, this paper reviews the concept, attributes, frameworks, and approaches of workforce agility based on existing academic literature, and suggest how workforce agility approaches can be evolved from related terms such as flexibility and adaptivity. Also, there is summarized the researches on the relationship between workforce agility and firm’s performance. Secondly, this paper studies empirically to examine how the workforce agility impact upon the firm’s performance in small and mid enterprises. Finally, this paper suggests some implications and enhancing practices of workforce agility for firm’s performance.
In a changing business environment, the agile workforce faces uncertainty and is expected to provide fast response to unexpected events. An agile workforce is also expected to effectively take part in any collaborative environment whether it cross-functional project team, collaborative ventures with other companies, or a virtual organization. The employed workforce in an AM environment utilizes flexible technologies and infrastructure that supports change and requires higher cognitive demands. In order to provide suggestions concerning improvements in controls and equipments, the operator has to be familiar with the equipment technology. This in turn will require acquisition of new knowledge, accelerated learning, and JIT delivery of training. The information, communication, and mobile technologies from one hand will support and enhance the workforce ability for speedy action and operational flexibility, but from other it also increases the cognitive demands and the time pressure.
The concept of agility, which was originated in manufacturing research by the Iaccoca Institute, soon became a focal reference for manufacturing systems studies. Organizational agility has been defined as the successful exploitation of competitive bases (speed, flexibility, innovation proactivity, quality and profitability) through the integration of reconfigurable resources and best practices in a knowledge-rich environment to provide customer-driven products and services in a fast changing market environment. At the heart of the agility concept are the notions of adaptability and flexibility. For organizations to adapt speedily and to respond flexibly, they need to deploy new technology and IS, capitalize on knowledgeable and empowered employees, integrate business processes, adopt virtual forms of organization, cooperate internally and externally, achieve mass customization of products and services and integrate the supply chain. To approach the concept of workforce agility requires understanding adaptive organization and flexible organization.
The idea of adaptive organization has originated from the contingency approach in organizational research which is based on the main premise that organizational effectiveness can be achieved by fitting the characteristics of the organization to contingencies that reflect the situation of the organization. In order to maintain effectiveness, the organizations have to adapt over time to fit changing contingencies. The environment, organizational size, and organizational strategy are considered as main contingencies that shape the organization. Organizational flexibility is considered as the organization’s ability to adjust it’s internal structures and processes in response to changes in the environment. Several different taxonomies of the organizational flexibility have been proposed in the literature. The most commonly used taxonomy distinguishes numerical, functional, and financial flexibility. The prevailing body of research on organizational flexibility was focused on the investigation of the numerical and financial aspects of flexibility and labor market flexibility.
The reviewed theories and research suggest that flexible and adaptive organizations are characterized by clarity of purpose and low levels of formal regulation in respect to job description, work schedules, and overall organizational policies. These organizations have fewer power differentials design best fit stable environments with low rates of change. In such environments, the high-level management possesses the appropriate amount of knowledge to make decisions and organize the work.
Agile manufacturing has been positioned main stream among the literatures on workforce agility and, most of the literature on agile manufacturing discusses only strategies and techniques. Few papers address the conceptualization and development of an integrated view of the agile enterprise concept. However, several agile manufacturing frameworks based on the different definitions and approaches can be found in the literature. The review of some agile manufacturing frameworks was made below in order to identify main elements and attributes of agile enterprise.
In the past, it was believed that agility and responsiveness of flexibility strategy can be achieved through sophisticated technologies such as computer-integrated manufacturing. However, recent research findings showed that manufacturing flexibility depends much more on people than on technologies. In other words, the demands of AM also led to a conclusion that agility cannot be achieved without leveraging of employee’s knowledge and skills that related closely workforce agility. It is widely believed that workforce agility may provide wide range of benefits such as quality improvement, better customer service, learning curve acceleration, economy of scope and depth.
This paper designs five hypotheses that workforce agility attributes constructed intelligence, competencies, collaboration, culture, IS suggested from Breu et. al.(2002) impact on firm’s performance such as sales volumes, market share, profit. Intelligence included that responsiveness to changing customer needs and responsiveness to changing market conditions. Competencies included speed of developing new skills and competencies, speed of acquiring the skills necessary for business process change, speed of innovating management skills, speed of acquiring new skills. Collaboration included effectiveness of cooperating across functional boundaries and ease of moving between the projects. Culture means Employee empowerment for independent decision making, and IS is support of the IT infrastructure for the rapid introduction of new IS.
To test hypotheses empirically, the data was gathered from 583 SMEs located on 35 Industrial Complex in Korea. The results of analysis as follows: First, intelligence, competencies, IS has significant positive impact on the firm’s performance, but not significant collaboration and culture. Second, competencies constructed speed of acquiring new skills and speed of innovating management skills has the highest effect on the firm’s performance.
The results of this paper suggest some implication that to enhance firm’s performance through workforce agility need to powerful leadership of CEO about focus on learning and training employee to promote and change for proactivity, adaptability, and resiliency competencies as workforce enhancing behavior strategy.
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- In-Chul Na (Hanyang University)
- Sung-Kyoo Kim (KODIT)
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[논문다운받기]
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This paper addresses whether the level of cash holdings(CASH, hereafter) is useful in predicting loan defaults for unlisted SMEs in Korea. While the necessity of incorporating liquidity measures in predicting a business failure is emphasized in almost all the models developed for that purpose, the prime measure of liquidity, CASH, is rarely considered both in academe and in practice. Research findings of two papers are instrumental in launching this study. One is Altman and Sabato(2007, A&S hereafter), which replace working capital ratio with CASH as a liquidity proxy in their model to assess credit risk for U.S. SMEs. The other is Na and Kim(2008, written in Korean), which suggest that Korean SMEs with higher level of cash holdings tend to possess characteristics of operationally and financially more sound firms.
The main claim of this paper is that CASH would have a robust negative relation with the probability of loan default, which is the incidence of business failure in this study. To see if the claim comes across as an empirical regularity, this paper initially examines the sign and the significance level of CASH in the model (model 1 in Tables 5～7) that utilizes five financial ratios including CASH as proposed in A&S.
Since there is a possibility that CASH would not be ed in a model which starts from a different set of financial ratios, this paper collects variables from diverse sources of established provenance. This is the approach taken in Xu and Zhang(2009). While they predict business failures of Japanese listed firms with variables suggested in Altman(1968), Ohlson(1980), and distance-to-default literature, this paper predicts business failures of Korean unlisted SMEs with variables from five sources：Altman's model as modified for SMEs by Begley et al.(1996), Ohlson(1980), Beaver et al.(2005) which employed Shumway(2001)'s estimation method, distance-to-default practice, and finally A&S. A total of 19 variables are collected from these sources. The estimation is proceeded in two phases. Firstly, the final version of the estimated model whose classificatory performance is at least comparable to A&S's should include CASH as one of its predictors. Secondly, CASH in that model (model 6 in Tables 5～7) should display significantly negative coefficient.
With limited ability to capitalize on the direct provision of funds from capital market, SMEs continuously solicit loans from financial institutions to stay in business and to support their growth activities. They can only secure new loans by maintaining good credit standings. When a firm defaults any part of its current loan portfolio, opportunity for tapping funds will vanish away and viability as a sustainable entity will shortly be challenged. Loan defaults can occur at any point in time during the year. Time lapsed from a specified starting point -survival time- is continuous by nature. The probability for a firm to survive up till it defaults a loan may best be estimated by the proportional hazards regression or the Cox regression. In the case of listed firms, this probability measured on a timely basis will be estimated by variables capturing up-to-date information from capital market where their securities are traded, as well as by financial ratios.
Risk analyses of unlisted SMEs, however, can not benefit from continuous supply of information from capital market. They generally rely on annual financial statements. A much confronted setting in practice is the one in which a loan officer predicts a business failure within an upcoming year with currently available set of financial ratios for the firm. Survival time is reduced to an observation of failure event for the year in concern. When continuous durations are grouped into occurrences of failure events during regularly spaced intervals of time, their probabilities can properly be assessed by the complementary log-log transformations of the event probabilities according to Kalbfleisch and Prentice(2002). In our complementary log-log regression, the response variable is expressed, quite literally, as log[-log(1-p)], where p stands for the probability that a failure occurs in a specific year. When the set of explanatory variables includes year dummies, regressing the response variable on this set is tantamount to estimating parameters of the proportional hazards regression(Allison(1995, 1999), Beck et al.(1998)). This regression is referred to as Clog-log regression in the literature.
Data is extracted from the database maintained for and used in rendering guarantees by Korea Credit Guarantee Fund (KODIT). Quasi-population of this study is 98,816 observations for the years 2001 through 2006 from 31,592 unlisted SMEs with total assets of at least ￦1 billion and annual sales of at most ￦60 billion(approximately US$50 million equivalents). Their fiscal years end at the end of December and their industries encompass manufacturing, construction, wholesale, retail, or services other than of financial nature. Roughly 30% of the quasi-population (29,644 firm/years) is ed as an estimation sample and 30% again of the remainder in the quasi-population (20,751 firm/years) is ed as a holdout sample, while stratified random sampling technique is applied to keep default ratio in each sample at 5.5%, the most current five-year average figure for newly issued guarantees by KODIT to the unlisted SMEs.
When the estimation sample is partitioned into two groups, i.e. default firm/years and non-default or solvent firm/years, CASH in the former group is significantly lower than that in the latter group with a t-statistic of -12.18. Further, the classification result of univariate logistic regression is about 56% concordant with the actual default status. These results reported in (Table 4) hint at potential importance of CASH in distinguishing delinquent accounts from active ones.
The five variables including CASH identified in A&S are all significant and all their coefficients have the expected signs in a Clog-log regression applied to the estimation sample. Specifically, a higher level of CASH is found to be associated with a lower probability of default. For comparison purpose, concordant % is reported in (Table 5). A&S (model 1) obtains 72.4%, which is an improvement of about 4% points over the result reported in a contemporary study which employs the same database. Model 6 is the final version of stepwise Clog-log regressions. The result reported in (Table 5) shows that a total of seven financial ratios are ed to be effective in estimating loan defaults. All of them are correctly specified in terms of the signs of the coefficients and their levels of significance. While model 1 and model 6 are different in their fine details, they share certain common features. On such feature to be noticed is the consistently significant role of CASH in estimating defaults for unlisted SMEs. A preferred measure of discriminatory power under the Basel II regime is AUC(area under the ROC curve) which combines the model's records of Hit Rates and False Alarm Rates. The figures for AUC seem to suggest that model 6(75.1%) performs slightly better than model 1(73.1%).
When the models 1 and 6 are estimated with industry dummies as exhorted in Chava and Jarrow(2004), the dummy variable for construction firm/years registers significance. Noticing this result, separate estimations of each model are performed for construction sub-sample and for non-construction sub-sample. Results of industry-specific regressions shown in Table 6 also support the importance of CASH in estimating default probabilities.
The estimated coefficients from each model are applied to the holdout sample with 20,751 firm/years and to its industry-specific sub-samples. Validation results are satisfactorily in concert with the estimation results. (Table 7) supports the claim that CASH exerts systematic influence in predicting defaults. All these pieces of empirical evidence seem to collaborate in evincing the usefulness of CASH in predicting loan defaults of unlisted SMEs in Korea.
This study does not claim that CASH should be regarded as one of the predictors for business failures for all classes of firms. It is instead an attempt to recognize, at least in assessing the credit risk for unlisted SMEs, the importance of CASH, which had not been attended to until A&S ascertained its proper role.
One of the caveats of this study is the lack of qualitative characteristics represented in the models examined. An interesting remedial extension would be the study which endeavors to see if the role of CASH in predicting business failure of SMEs is replicated in a setting where financial variables are competing with reasonable proxies for qualitative characteristics linked to business sustainability. |
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- Min-Shik Shin (Kyungpook National University)
- Soo-Eun Kim (Kyungpook National University)
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[논문다운받기]
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The purpose of this paper is to explore the relations between financial constraints and dividend smoothing of innovative small and medium sized enterprises(SMEs) listed on Korea Securities Market and Kosdaq Market of Korea Exchange. The innovative SMEs is defined as the firms with high level of R&D intensity which is measured by (R&D investment/total sales) ratio, according to Chauvin and Hirschey (1993). The R&D investment plays an important role as the innovative driver that can increase the future growth opportunity and profitability of the firms. Therefore, the R&D investment have large, positive, and consistent influences on the market value of the firm. In this point of view, we expect that the innovative SMEs can adjust dividend payment faster than the noninnovative SMEs, on the ground of their future growth opportunity and profitability. And also, we expect that the financial unconstrained firms can adjust dividend payment faster than the financial constrained firms, on the ground of their financing ability of investment funds through the market accessibility. Aivazian et al.(2006) exert that the financial unconstrained firms with the high accessibility to capital market can adjust dividend payment faster than the financial constrained firms.
We collect the sample firms among the total SMEs listed on Korea Securities Market and Kosdaq Market of Korea Exchange during the periods from January 1999 to December 2007 from the KIS Value Library database. The total number of firm-year observations of the total sample firms throughout the entire period is 5,544, the number of firm-year observations of the dividend firms is 2,919, and the number of firm-year observations of the non-dividend firms is 2,625. About 53%(or 2,919) of these total 5,544 observations involve firms that make a dividend payment. The dividend firms are divided into two groups according to the R&D intensity, such as the innovative SMEs with larger than median of R&D intensity and the noninnovative SMEs with smaller than median of R&D intensity. The number of firm-year observations of the innovative SMEs is 1,506, and the number of firm-year observations of the noninnovative SMEs is 1,413. Furthermore, the innovative SMEs are divided into two groups according to level of financial constraints, such as the financial unconstrained firms and the financial constrained firms. The number of firm-year observations of the former is 894, and the number of firm-year observations of the latter is 612.
Although all available firm-year observations of the dividend firms are collected, deletions are made in the case of financial industries such as banks, securities company, insurance company, and other financial services company, because their capital structure and business style are widely different from the general manufacturing firms. The stock repurchase was involved in dividend payment because Grullon and Michaely (2002) examined the substitution hypothesis between dividends and stock repurchases. However, our data structure is an unbalanced panel data since there is no requirement that the firm-year observations data are all available for each firms during the entire periods from January 1999 to December 2007 from the KIS Value Library database.
We firstly estimate the classic Lintner(1956) dividend adjustment model, where the decision to smooth dividend or to adopt a residual dividend policy depends on financial constraints measured by market accessibility. Lintner model indicates that firms maintain stable and long run target payout ratio, and that firms adjust partially the gap between current payout rato and target payout ratio each year. In the Lintner model, dependent variable is the current dividend per share(), and independent variables are the past dividend per share() and the current earnings per share(). We hypothesized that firms adjust partially the gap between the current dividend per share() and the target payout ratio() each year, when the past dividend per share() deviate from the target payout ratio().
We secondly estimate the expansion model that extend the Lintner model by including the determinants suggested by the major theories of dividend, namely, residual dividend theory, dividend signaling theory, agency theory, catering theory, and transactions cost theory. In the expansion model, dependent variable is the current dividend per share(), explanatory variables are the past dividend per share() and the current earnings per share(), and control variables are the current capital expenditure ratio(), the current leverage ratio(), the current operating return on assets(), the current business risk(), the current trading volume turnover ratio(), and the current dividend premium(). In these control variables, , , and are the determinants suggested by the residual dividend theory and the agency theory, and are the determinants suggested by the dividend signaling theory, is the determinant suggested by the transactions cost theory, and is the determinant suggested by the catering theory. Furthermore, we thirdly estimate the Lintner model and the expansion model by using the panel data of the financial unconstrained firms and the financial constrained firms, that are divided into two groups according to level of financial constraints. We expect that the financial unconstrained firms can adjust dividend payment faster than the financial constrained firms, because the former can finance more easily the investment funds through the market accessibility than the latter.
We analyzed descriptive statistics such as mean, standard deviation, and median to the outliers from the panel data, conducted one way analysis of variance to check up the industry-specfic effects, and conducted difference test of firms characteristic variables between innovative SMEs and noninnovative SMEs as well as difference test of firms characteristic variables between financial unconstrained firms and financial constrained firms. We also conducted the correlation analysis and the variance inflation factors analysis to detect any multicollinearity among the independent variables. Both of the correlation coefficients and the variance inflation factors are roughly low to the extent that may be ignored the multicollinearity among the independent variables. Furthermore, we estimate both of the Lintner model and the expansion model using the panel regression analysis. We firstly test the time-specific effects and the firm-specific effects may be involved in our panel data through the Lagrange multiplier test that was proposed by Breusch and Pagan(1980), and secondly conduct Hausman test to prove that fixed effect model is fitter with our panel data than the random effect model.
The main results of this study can be summarized as follows.
The determinants suggested by the major theories of dividend, namely, residual dividend theory, dividend signaling theory, agency theory, catering theory, and transactions cost theory explain significantly the dividend policy of the innovative SMEs. Lintner model indicates that firms maintain stable and long run target payout ratio, and that firms adjust partially the gap between the current payout ratio and the target payout ratio each year. In the core variables of Lintner model, the past dividend per share has more effects to dividend smoothing than the current earnings per share. These results suggest that the innovative SMEs maintain stable and long run dividend policy which sustains the past dividend per share level without corporate special reasons.
The main results show that dividend adjustment speed of the innovative SMEs is faster than that of the noninnovative SMEs. This means that the innovative SMEs with high level of R&D intensity can adjust dividend payment faster than the noninnovative SMEs, on the ground of their future growth opportunity and profitability. The other main results show that dividend adjustment speed of the financial unconstrained SMEs is faster than that of the financial constrained SMEs. This means that the financial unconstrained firms with high accessibility to capital market can adjust dividend payment faster than the financial constrained firms, on the ground of their financing ability of investment funds through the market accessibility. Futhermore, the other additional results show that dividend adjustment speed of the innovative SMEs classified by the Small and Medium Business Administration is faster than that of the unclassified SMEs. They are linked with various financial policies and services such as credit guaranteed service, policy fund for SMEs, venture investment fund, insurance program, and so on.
In conclusion, the past dividend per share and the current earnings per share suggested by the Lintner model explain mainly dividend adjustment speed of the innovative SMEs, and also the financial constraints explain partially. Therefore, if managers can properly understand of the relations between financial constraints and dividend smoothing of innovative SMEs, they can maintain stable and long run dividend policy of the innovative SMEs through dividend smoothing. These are encouraging results for Korea government, that is, the Small and Medium Business Administration as it has implemented many policies to commit to the innovative SMEs.
This paper may have a few limitations because it may be only early study about the relations between financial constraints and dividend smoothing of the innovative SMEs. Specifically, this paper may not adequately capture all of the subtle features of the innovative SMEs and the financial unconstrained SMEs. Therefore, we think that it is necessary to expand sample firms and control variables, and use more elaborate analysis methods in the future studies.
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- Ja Won Gu (Seoul School of Integrated Sciences and Technologies)
- Yun Cheol Lee (Hankuk Aviation University)
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[논문다운받기]
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Research affecting corporate performance or concerning competitive advantages is being conducted in a variety of areas related to organizations and management strategy. These research deal with management factors from a comprehensive perspective, and makes suggestions as to which management factors have significant impact on corporate performance and what strategic implications high-performing corporations show compared to under performing corporations. In addition, some recent researches perceive factors of subject, environment, and resources as a basis of strategies for securing dynamic competitive advantages. However, most of such research on comprehensive mechanism is confined to particular themes for explaining internalization or theoretical research without a basis of empirical research. Even in case an empirical research is conducted, they are limited in the sense that they fail to explain and present the factors of subject, environment, and resources and mechanism factors from a comprehensive point of view.
This study intends to conduct an empirical research on mechanism factors with regards to how the subject of business management at the center of a corporation’s decision making process s the resources that need to be invested for corporate activities under specific environments, how the subject coordinates the timing and target of such resource input, and how such a process is generated and expanded within the corporation. Through this research, we expect to overcome the limits of existing research up to a certain level by verifying whether each of the factors significantly affect corporate performance, based on comprehensive approach to the existing ser-M framework. Moreover, we plan to contribute to developing factors for analysis of mechanism factors by presenting feasibility of the measurement criteria for mechanism factors.
This study conducted empirical test using 150 firm level samples to analyze the effect of firms' performance which is derived from subject, environment, resource, and mechanism factors-ing, learning, and coordinating. And also these mechanism factors which are provide integrated concept of subject, environment, and resource components. In terms of the subject factors, results showed that there is no significant effect for firms' performance. However, the strength of competitive environment makes significant effect to the firms' performance. The resource factors were analyzed have strong effect to the tangible and intangible business performance. In terms of ing mechanism, the ion for business partners or new business was negative effect to the firms' performance. Learning mechanism factors were useful components to get high performance for tangible business records. It means that the knowledge creation, acquisition, diffusion, and management activities are one of the most important sources of competitive advantage. Coordinating mechanism factors didn't have effect on the tangible business performance, and internal coordination factors were analyzed that it can make effect on the intangible business performance.
Verification of our supposition through the analysis led to rejection of the hypothesis that the subject factor will impact corporate performance.
This is in line with the existing research, and supports the conclusion asserted by authors of the existing research that most of the small-and-medium-sized venture companies in Korea have a horizontal communication structure, and ion and ution of strategy is carried out by agreement among managers rather than authority of the CEO. Considering the fact that more than 80% of the research samples of this study are small-and-medium-sized venture companies, the result is convincing. However, such a conclusion is not suitable for generalization, as there are research showing that subject factor does have meaningful impact on corporate performance. The hypothesis regarding environment was partially supported. In terms of quantitative performance, the factor had positive correlation with performance as the environment became more uncertain and as the competition became fiercer, but the qualitative performance regarding the stability of business management perceived by the manager was the higher as the corporation’s competitive environment was more stabilized. This implies that as the competitive environment is more stable and less fierce, the factor has meaningful effect on both the qualitative and quantitative business performance, and a comprehensive interpretation of such results shows that the hypothesis on the environment factor was partially supported as the supposition should be dismissed for quantitative performance and accepted for qualitative performance. The hypothesis on the resource factor was partially supported. Securing capable managers and team members and resources needed for sales and marketing strongly affects qualitative and quantitative business performance, while securing Capital Expenditures and funds does not impact corporate performance from the managers’ point of view but only impacts the quantitative business performance.
The hypothesis on ion mechanism was not supported. Among the ion mechanism factors, ion of suppliers and new businesses had negative impact on the stability of management as perceived by the managers. We can also conclude that the hypothesis on learning mechanism was not supported.
This is said to be meaningful in quantitative performance model with only the mechanism factors, but in a model into which all of the factors were incorporated, the factor did not have meaningful impact on qualitative nor quantitative performance. However, this is only a comprehensive interpretation for verification of the suppositions, and the learning mechanism regarding the process of establishing business plans, and generating, absorbing, and spreading new knowledge would have meaningful impact on a corporation’s quantitative performance. The hypothesis on the coordination mechanism can be said to have been partially accepted. As the analysis in this research shows, the stability of business management perceived by the corporation’s manager is very much impacted by the coordination factor for resolving problems within the organization or mediating among the team members.
This study includes several implications for research as well as business fields. First contribution, in terms of research methodology, this study linked up the existing ser-M framework with firms’ performance researches in order to overcome the limitation of ser-M framework which is hard to measure for empirical analysis. And also, this contribution can be understood suggest more integrated analysis framework against the existing partial research factors of ser-M framework.
Second, results from this study based on mechanism-based view, we presented partly for the perspective of mechanism that how the firm s and uses their valuable resources to adapt its’ surrounding competitive environment. Furthermore, in terms of learning mechanism, this study indirectly implies that the firm’s competitiveness can be obtained while manage and diffuse the knowledge of members within the organization.
Third, for the top management team, this study gives the direction that how to identify what are the important determinants of performance and how to manage of subject, environment, resource, and mechanism factors to achieve business performance
Aside from the three implications presented herein, there are limitations to this research as illustrated in the below. First, the core of the ser-M framework is that the factors of subject, environment, and resources mediate through mechanisms to have meaningful impact on corporate performance.
However, this study fails to present a method for verification of this assertion. Second, this study fails to reflect the difference in the size and environment of each company in accordance with the stages of growth and conducted empirical research instead, potentially incurring criticism on the rigorousness of the research results. Third, we admit that the samples in this research are mostly corporations in urban regions such as Seoul and Gyeonggi Province, and more than 80% of the samples are small-and-medium-sized venture companies, while the medium-sized companies between large corporations and SMEs are relatively small in size, which may lead to problems in generalization of the results. Furthermore, by industries, the IT industry accounts for 46%, while manufacturing industry accounts for 20%, and consulting industry accounts for 12.7%, meaning that the research does not include the overall industries but specialized in particular sectors.
In addition, in ion of the mechanism factors, accepting the factors used in this study as the criteria for measuring mechanism would be deemed unreasonable. This leaves room for disputes as there have not been sufficient empirical researches based on mechanism presenting method to secure qualitative competitive advantage. To overcome such limits, we suggest the following directions for future research. First, a more detailed classification of the factors of subject, environment, resources, and mechanism may be conducted. Second, through verification of mechanisms’mediation effects, an empirical research may be conducted regarding the assertion that the mechanism factors explain subject, environment, and resources from a comprehensive perspective according to the ser-M framework. Despite many limitations of the research, we hope to provide entrepreneurs with perspective as to the areas on which corporations should concentrate their management efforts, and provide a stepping stone to researchers for an expanded research model development.
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- Min Choul Kim (Hoseo University)
- Hyun Hee Ki (Hoseo University)
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[논문다운받기]
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Investment is commitments of resources made in the hope of realizing benefits that
are expected to occur over a long period of time in the future. Investment
decisions may be tactical or strategic. A tactical investment decision generally
involves a relatively small amount of funds and does not constitute a major
departure from what the firm has been doing in the past. Strategic investment
decisions may involve large sums of money and may also result in a major departure
from what the company has been doing in the past.
In this paper, we examine how small and medium-sized firm values are influenced by
new strategic investment. Firm strategic investments include both intangible assets
and tangible assets input. Intangible assets are defined as identifiable non-
monetary assets that cannot be seen, touched or physically measured, which are
created through time that are identifiable as a separate asset. Intangible assets
are typically expensed according to their respective life expectancy. Tangible
assets are distinguished from intangible assets such as trademarks, copyrights, and
Goodwill, and natural resources. Also includes accounts receivable of a concern.
Tangible and intangible assets are recorded separately on the balance sheet.
Physical assets are depreciated over their useful life; intangibles are amortized.
This study interprets value of accounting information of intangible and tangible
assets that has become common in a balance sheet using Ohlson Model.
Ohlson(1995) has proposed to redefine the Stock Dividends through the assumption on
clean surplus relation and to differentiate the surplus into such components as
normal surplus and excess surplus, thereby developing a valuation model that
integrates the surplus, book value and stock dividends together.
According to prior study, Wi(2006) analyze the relationship between the success of
R&D project about new contents and firm value in small and venture business, As a
result, he found statistically significant average abnormal returns(AAR) at event
day. And the meaningful average cumulative abnormal returns (ACAR) are observed
during event period. and Kim and Shin(2006) examined the value relevance of R&D
expenditures using a regression model. Empirical analysis has been performed for
non-banking venture firms listed over KOSDOQ. Kim and Kim(2006) examined whether
new investments in long-term operating assets have predictive power for future
abnormal earnings. They are motivated that investments in long-term operating
assets such as intangible assets are likely to generate positive net present
values, provided that firms management rationally makes capital budgeting
decisions. Jung(2004) investigated the effect of technology outsourcing on the
value of the firm in Korea. The result shows that the technology outsourcing in the
high growth industries gives positive effects on the value of the firm.
However, prior researches have primarily focused on R&D. Therefore, we investigate
the empirical relation between firm value and tangible as well as intangible assets
investments. And we test the investment opportunity hypothesis that growth
industries gives positive effects on the value of the firm.
Acceptance of a large strategic investment will involve a significant change in the
company's expected profits and in the risks to which these profits will be subject.
The future success of a business depends on the investment decisions made today.
Managers are generally aware of this is indicated by the requirement that important
investment decisions must be approved by the chief operating utive. In spite of
this fact, the procedures used to help management make investment decisions are
often inadequate and misleading.
Capital budgeting is a many activity that includes searching for new and more
profitable investment proposal to predict the consequences of accepting the
investment, and making economic analysis to decide the profit potential of each
investment proposal. In fact, the generation of positive net present values is
theoretically equivalent to the generation of future abnormal earnings. Thus firm's
new investments in long term operating assets are likely to affect future abnormal
earnings.
This research hypotheses were as follows.
Hypothesis 1 : The tangible assets investment will increase the firm value.
Hypothesis 2 : The intangible assets investment will increase the firm value.
Hypothesis 3 : The investment in the high growth industries gives positive effects
on the firm value
In order to test these hypothesis, we 952 small and medium-sized firms during 2003
～2007 periods from KISVALUE program. The initial sample for this study was the
1098 firms but we exclude 146 firms with financial business, issues for
administration, non fiscal year in December, missing data observations.
We establish the following empirical basic regression models to examine our
hypothesis.
model 1：=
model 2：=
where V is firm value as the sum of market value of common stock. ; BBV is book
value except capitalized R&D costs; RD is research and development costs; RDC and
RDE are capitalized R&D costs and R&D expense; BREV is total revenue except R&D
expense; INV is tangible assets investment ; Y is control variable by year. To
eliminate the effects of scale, we normalize the firm value, R&D costs, total
revenue, tangible assets investment by the book value. The variables included in
the model are chosen on the basis of the results of previous studies.
(Table 2) shows summary the descriptive statistics for the main variables used in
our analysis. It shows that the means of firm value, intangible assets investment
and tangible assets investment are 1.253, 0.018 and -0.027. The standard deviation
of firm value, intangible assets investment and tangible assets investment are
6.232, 0.063 and 0.900. (Table 3) reveals correlation coefficients among the main
variables for the whole sample period. Firm Value is positively significant with
R&D but is not significant with tangible assets investment.
(Table 5) presents the results from the regressions of model 1. Those are
summarized as follows : The R&D variable has a significant at 1% level and positive
coefficient of 12.02. It implies that the R&D investment affect firm value. On the
contrary, the tangible assets investment(INV) variable is not significant (Table
6). reports the results from the regressions of model 2. we can find that the
coefficient on capitalized R&D expenditure(RDC) is positive and significant at 1%
level and the coefficient on non-capitalized R&D(RDE) is positive and significant
at 5% level. But the coefficient on INV is not significant. Thus, we can accept the
first hypothesis that the R&D investment will be related to firm value but we can't
accept the second hypothesis that the tangible assets investment will be related to
firm value.
For testing the investment opportunity hypothesis, we establish the following
empirical model 3.
model 3：=
where D is the control variable of the high growth industries. and are the
coefficient of the R&D and tangible assets investments in all industries. and are
the coefficient of the R&D and tangible assets investments in the high growth
industries. Table 7 indicate that is not significantly positive and is not
significantly negative.
Our primary findings are summarized as follows：First, R&D investments is
positively related to the value of the firm but tangible assets investments is not
related to the value of the firm. Second, capitalized R&D expenditure is
statistically significant at 1% level and non-capitalized R&D investments are
statistically significant at 5% level. Third, according to the test of investment
opportunity hypothesis, there is no differences of two industries.
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- Jai-yong Park (Kyunghee University)
- Gu-moon Jeong (Song-Do Technopark)
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[논문다운받기]
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This study investigates empirically the presence and the magnitude of the narcotic effect in the use of consulting services by small and venture businesses, and the moderating effect of many contingency factors. An investigation is made regarding whether companies that have utilized consulting services are more inclined to resort to the service again than companies that have no such experience. And the investigation continues to find, if it is true, the factors beneath the phenomena that cause such a kind of so called narcotic effect. In order to achieve the research purpose, a rather extensive body of literature on venture business, as well as on consulting services, are examined with an intention to construct a relevant theory. From that theory are driven diverse hypotheses, and many related indices that are used in medical sciences, psychology, and labor economics are studied and examined to draw a set of index that can be utilized to look into the potentially narcotic behavior shown by venture businesses in the use of consulting services.
A thorough examination of existing literature on theory and practice of narcotic effect, and quite a few studies that have examined the behavior of firms and entrepreneurs leads to conception of diverse hypotheses. More specifically, this study has set forth the following hypotheses.
Hypothesis 1：Small venture businesses will reveal narcotic effect in the use of outside consulting services. That is, a company that has utilized such service more in the past will tend to resort to it again more than a company that has no or less of such experience. This is to say, dependence upon outside service is habit forming.
Hypothesis 2：Narcotic effect in the use of outside consulting service is larger among craftsmen venture companies than among opportunists venture companies. The main rationale for this hypothesis is that opportunists are more familiar with business skills and tend to use it with more ease on their own.
Hypothesis 3：Narcotic effect in the use of outside consulting service varies across growth stages. Growth stages are composed of 4 phases including entrepreneurial stage, early growth stage, late growth stage, and maturity stage. The rationale for this hypothesis is that the degree of possession by companies of requisite skills and importance of diverse managerial skills and techniques vary across diverse phase of life-cycle of a business.
Hypothesis 4：Narcotic effect in the use of outside consulting service is greater among large companies than among small companies. Size matters in many aspects of business operation. As business gets larger, the complexity in the composition of its technology, core or non-core, gets higher and higher, so that many professionals and specialists are more in demand.
Hypothesis 5：Narcotic effect in the use of outside consulting service is greater among companies that have experienced longer and more frequent outside help. This is a logical expansion of narcotic effect in many other areas than business operation. Virtually all of habits are more easily and stably formed with long and frequent repetition of behavior.
Hypothesis 6：Narcotic effect in the use of outside consulting service varies across the diverse areas of consulting. Some skills are harder to learn or come by than other skills, and so some consulting services are more repetitively borrowed from outside until it becomes a near habit.
Data for this study were collected from 183 small and venture business that have utilized consulting services at least once. Among 183 companies are 123 manufacturing companies comprising 67.2% of the total samples, and they are followed by retailers comprising 19.6% of the total. Firms in the data set reveals, on average, 3.39 times of consulting service recipient experience during the six years time period under investigation. The most frequently received services are in the realm of tax and accounting. Actually 45.4% of companies in the data set have appeared to have at least once requested and received outside consulting service in that area. Next in the magnitude was general management (31.88%), followed, in turn, by marketing and production (62%, 79% respectively).
Findings of this study are; First, Armitage-test from 2002 to 2007 about the existence of the narcotic effect confirms that there is narcotic effect in the use of consulting services. Second, narcotic effects in craftsmen establishment appear bigger than in opportunists establishment. Third, narcotic effect in the early growth stage and the latter growth stage appears to be bigger than in establishing stage. In case of maturity stage, the narcotic effect appear to decline slightly. Fourth, narcotic effects among large firms was bigger than among the rest. Fifth, narcotic effect has a significant correlation with the length of consulting period. Last, with regard to consulting area, tax accounting and production management appear to have higher dependence compared with business management and marketing. But satisfaction with consulting services does not show a systematic relationship with the size of narcotic effect.
Findings of this study that venture businesses are showing narcotic tendency in the use of outside consulting services bear implications, both negative and positive. From positive perspective, it can be interpreted as a good habit. With a habit, no delay is allowed in the use of good things. No wasting of time in making decision, and immediate and voluntary invitation and utilization of desirable and fruitful consulting to reap the best in a most efficient way. The more and the faster, the greater is the benefit. On the contrary, a negative perspective can be applied to predict a bad effect on the operation of businesses. Heavy reliance on the outside resource may deprive the opportunity of the company to develop and maintain requisite skills inside the business, and the situation can become worse when that kind of reliance is habit forming. If a company falls in a habit of depending on outside helpers it may lose a chance to enhance its core competency as it increases its dependency. Managers are to decide whether or not a certain skills are to be sought after outside of the companies to the benefit of the company. Also, they have to consider whether their decisions are rational or habitual. As is pointed out above, it should be remembered a habit can be good or bad.
Limitation of this study must be recognized and suggestion for the future research is in hand. There are 360 thousand small and medium companies in Korea out of which only 183 companies are examined in this study. Such a small size of the data set severely restricts the possibility of generalizing the findings of the study. Further, it should be noted that only the companies in the metropolitan area of Seoul are included in the sample. There are many discrepancies among companies in Seoul and other areas. Thus, it should be taken into consideration when the findings are applied in the population of small and medium businesses located in other areas. More endeavors are required in the study of the concept of narcotic effect. Actually most research are done in the areas of medicine, alcohol, gambling. Narcotic effect is a concept that must distinguish itself from addiction. One is mostly social, it is to be noted, while the other is individual phenomenon. Narcotic effect that can be observed among large companies should also be studied. Measurement problem regarding narcotic effect also calls for more attention. Armitage test that is used in this study does not provide an objective way of measuring the magnitude of narcotic effect.
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- Kwan-Hee Yoo (Korea University)
- Kwang-Bok Hue (Shingu University)
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[논문다운받기]
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People are an important source of organization and crucial to the business' ultimate success or failure. It is obvious when you look at the most representative organization, corporation, people conduct most of essential functions in the organization such as production, marketing, personnel management, accounting, and financing. It is also true in other types of organizations such as army and SMEs. Lately, approach to assessing performance appraisal of the general-level promotion in Korean army has been an issue and therefore, study for personnel appraisal system is needed.
This study describes and compares the performance evaluation system in Korean army and U.S. army to address similarities and differences along with other issues and solutions that can be applied to performance appraisal system in SMEs to improve their performance evaluation system. Performance evaluation is one of the effective tools to manage officers in army which results in improved quality of life and increase morale at work.
The Korean army performance evaluation requires different skill sets by expertise and rank such as commander, staff, instructor, and professor. The Korean army evaluation report comprised essentially five parts：part I. Profile, part II. performance record, part III. achievement and ability evaluation, part IV. temperament assessment, and part V. overall evaluation. Among those five parts, achievement and ability, temperament assessment, and overall evaluation hugely depend upon a rater.
In the achievement and ability evaluation(part III), there are four different skill sets are required by expertise as described below：1. Report for commander is comprised of preparation for warfare, education and training, and management of a military unit and the others. 2. Report for staff is comprised of staff activity and duty accomplishment ability. 3. Report for instructor and professor is comprised of education activity and duty accomplishment ability. There are two raters in the achievement and ability evaluation. They assign grades on a absolute scale in letters, A through E, within subject area and leave any additional comments. In the temperament evaluation(part IV), there are two criteria, work temperament and work behavior. In overall evaluation(part V), first rater and second rater assign final grade in letters by reviewing the results from achievement and ability and temperament evaluation, and second rater is required to leave the overall feedback.
The U.S. army is different from Korean army in terms of performance evaluation system. U.S. army starts their evaluation by assembling the rating chain and it is comprised of rated officer, rater, intermediate rater, and senior rater. There are three different officer evaluation support forms by rank, DA form 67-9-1, DA form 67-9-1a, and DA form 67-9, and they are for field grade including major and higher rank, company grade including second lieutenant, first lieutenant, captain, and warrant officer, and all ranks respectively.
There are five parts in DA form 67-9-1 to be filled：part I. name, rank, and organization of rated officer, part II. name, rank, and position of rating chain, part III. comments from the face-to-face counseling and follow-up, part IV. duties and responsibilities, major performance objectives, and major contributions of rated officer, and part V. rater comments and intermediate rater comments.
There are also five parts in DA form 67-9-1a：part I. instructions for initial face-to-face counseling, part II. seven army values, attributes, and skills as a leader, part III. development action plan, part IV. authentication to verify the contexts in parts II and III, and part V. developmental assessment record for achievement, in-progress area, and not demonstrated area.
The form for all ranks, DA form 67-9, consists of seven parts：part I. administrative data including the name, rank, and branch, part II. authentication to verify that an officer has reviewed completed parts 1 through 7, part III. duty description, part IV. army values, professionalism and leadership doctrine that cab be answered yes and no by an evaluator and army physical fitness test APET, part V. performance and potential evaluation to evaluate the rated officer's performance by checking one of the boxes for outstanding, satisfactory, unsatisfactory and other, part VI. intermediate rater's comments, and part VII. grade by a senior rater by checking one of the boxes for above center of mass, center of mass, below center of mass-retain, and below center of mass-do not retain.
There was no significant difference between criteria for the performance evaluation system of Korean army and U.S. army; however, there were some differences when it comes to the process. First of all, performance evaluation system of Korean army does not allow the rated officer access to the evaluation results. In addition, since rules for the performance evaluation system of Korean army have been changed frequently, it is relatively confusing than the system of U.S. army who has the consistent rules and outlines. Secondly, the performance evaluation system of U.S. army requires face-to-face counseling and therefore, raters could have enough time to review and think through the support form before the main performance evaluation process. Third, since a relatively small percentage of the rated officers in Korean army has a chance to get promoted to upper grades, there is a negative impact such as reducing service will. Fourth, U.S. army includes skills and other related knowledge as the personal development and special ability in their performance evaluation system, while Korean army somewhat limit the criteria for the personal development.
From those differences, we can drive the following implications. First of all, Korean army needs to consider using the support forms like U.S. army does to limit evaluator's personal feelings in the evaluation process. Second, rated officer should be allowed to review the performance evaluation. It can lead to the two-way communication system between the rated officer and the rater for the fair performance evaluation eventually. Third, the upper grade rate should be increased at least three times more and as high as five times more. It should be noted that the performance evaluation is rather to encourage the rated officer than discourage them. Fourth, to avoid arbitrary decision during the evaluation process, more than two senior raters should be involved.
In conclusion, there are at least four implications that can be applied to personnel management and personnel appraisal system of SMEs. First, to evaluate the employees fairly, middle manager should be involved in the process to advance the whole performance evaluation system to more on-site basis. Secondly, by allowing the employees to have an access to the evaluation results, employees can be motivated for better performance and higher productivity. Third of all, by providing a form for the career development, employees and employers can have effective and efficient communication tool to be used in the evaluation process. Lastly, by emphasizing the importance of education and training, the volunteer-based personal development should be encouraged in the performance evaluation system in the reengineered personnel appraisal system.
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- Yong-Hwan Noh (Seoul Women's University)
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[논문다운받기]
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Trend of consolidation and soundness-oriented fund’s operation in Korean banking sector has been intensified after the financial crisis of 1997 and with the introduction of 'Bank for International Settlements treaty' (Basel II) accord in 2008. Commercial financial institutions in Korea exhibit transactional credit management, meaning that they tend to give short-run management loans to blue-ribbon company and leading firms. Under Basel II, financial institutions also must secure appropriate capital for risky assets. Considering this financial market situation, it seems that commercial banks' risk evasion maneuver would decrease providing loans for newly establishing enterprises and risky, but potentially innovative 'small- and medium-sized enterprises' (SMEs).
In spite of their pivotal role in creating new employment and economic value added in GDP, SMEs in Korea have been suffered from financial shortage. Korean SMEs accounts for 99.9% of all enterprises (3 million SMEs), 87.5% of all employees (10.8 million employees), and 49.4% of production. Many promising SMEs in Korea, however, do not have collateral or credit history when they apply for loans to commercial banks. In particular, commercial banks' lending to SMEs exhibits procyclical behavior over business cycle. Lending to SMEs is decreased in recession phase; while increased causing excess investment and promoting bubble in expansion phase. After the Asian financial crisis of 1999, actually, the co-movement between Korean financial institutions' loans to SMEs and business cycle has been intensified.
In order to alleviate the financial market distortion for SMEs faced limited access to financial institutions, it is argued that the government support via timely policy financing is inevitable. Government intervention facing financial market failure can be occurred mainly via direct loans, grants, and indirect loan guarantees. While direct loans and grants directly offer to the targeted recipients via government agency or the government itself in place of banks, loan guarantees requires the participation of three parties: the government agency, the borrower and the commercial banks. In this sense, current Korean government's supports for SME financing include Bank of Korea's aggregate credit ceiling loan, government's policy loan, and credit guarantee system. Among them, the credit guarantee system is a financial intermediary designed to enable promising SMEs without enough collateral to obtain funds and make smooth headway in the financial or business transaction
Organizations providing credit guarantee service, which include Korea Credit Guarantee Funds, Kibo Technology Fund, and 16 regional Credit Guarantee foundations, are established to complement SME financial market failure. Credit guarantee was an important tool to support SMEs in financing during a financial crisis. The total amount of credit guarantee had been increased from 1998 in order to overcome the Asian financial crisis; as the economy recover from the recession, however, it had been steadily decreasing since 2004. The credit guarantee balance ratio contrast to the GDP had been decreased from 7.9% of 2001 to 4.9% at the end of 2007.
The recent financial crisis emerged in the U. S. quickly pushed the global economy into a deep recession. The downturn has also affected Korea. Due to the decrease in exports and the drop in domestic consumption, many SMEs are suffering from liquidity shortage. Under the unstable financial market situation, commercial banks are reducing their loans to SMEs, thus further exacerbating the credit crunch of SMEs. In response to this situation, Korean government has taken bold steps such as aggressive interest rate cuts and fiscal stimulus to support financial markets. Many special guarantees were implemented to stabilize the financial shortage of SMEs and restore the financial market. Various special guarantees were provided for SMEs experiencing difficulties due to the fluctuating financial markets. The credit guarantee balance has been expanded from the second half of 2008 in response to the financial crisis and subsequent recession. Public credit guarantee institutions devised temporary higher credit line, wider coverage ratio, prompt guarantee support, rollover of existing guarantees and son on. Hence the outstanding SME loans for 18 domestic banks in 2008 rose by KRW 52.4 trillion to amount to KRW 422.4 trillion, backed by the government's intensive support for SMEs.
In this paper, I analyze whether a credit guarantee program can be devised as an economic mechanism that assists SMEs for their financial stability. Introducing empirical models with time-series data, I investigate the relationship between various business indicators and the supply of credit guarantee. In addition, I analyze whether the increase of credit guarantee induces banks' lending to firms. Financial structure in Korea has an impact on business cycles. Business cycles may be amplified by financial market imperfections. Empirical results support that the procyclicality of Korean banks' lending to SMEs is substantial. I also find that the transmission channel of credit guarantee system in Korea is an efficient method of easing adverse reactions against the deepening of business fluctuation associated with procyclical behavior of financial institutions via increasing banks' lending to firms. Credit guarantee can be used to smooth out economic fluctuations in economic activity: the supply of credit guarantee expands during the economic recession and contracts when the economic situation is relieved.
The spread of global financial crisis emerged in initially 2007 and its resulting credit squeeze has affected the behavior of financial institutions. Against the tightened credit market, Korean government and Bank of Korea have aggressively injected emergency funding into the market to relieve business fluctuations. While the short-term challenges are focusing on recovery from the financial crisis, it is a challenge now to us on how to deal with excess liquidity and potential asset inflation. It is also time for organizations providing credit guarantee service to stimulate sound credit transactions through the efficient management, while maintaining the role of SMEs' driving force. But it seems that it is not easy to reduce the level of credit guarantee in the short run.
This paper is divided into four sections, including the introduction. In section 2, I briefly discuss the financial conditions of SMEs, and Korea's credit guarantee system. In section 3, I empirically analyze the effect of credit guarantee on the business indicators using both aggregate and micro level time-series data. The last section concludes the paper with providing policy recommendations to mitigate procyclicality problem of commercial financial markets.
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- Jong-Gook Kim (Small and Medium Business Administration)
- Seungkyu Park (Korea Research Institute for Local Administration)
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[논문다운받기]
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Concerning the lagging regions of a country, a term which refers to regions in which economic activities remain at a poor level and whose degree of financial self-reliance is low, they constitute a policy issue that should be settled regardless of the state of a country’s development. The development of a lagging region requires an abundance of financial resources and involves composite factors. Thus, it is important how efficiently the issue is settled. In Korea, many efforts have been made to settle the issue since the 1970s, with considerable results. However, many regions still remain as lagging regions. This study intends to present a desirable policy direction concerning the aim of having SMEs and plays a crucial role in the recovery of the economic vitality of such regions by examining their economic level and the characteristics of the management activities of SMEs in such regions.
In this study, lagging regions are defined as bottom 20 percent of the country’s cities and Guns based on the arithmetic mean of financial self-reliance rank from 1997 to 2008 by comparing level of financial self-reliance rank. Thus, 77 cities and Guns are found to fall into this category. Their average level of financial self-reliance stands at 14.5%, compared to 40.6% for non-lagging regions. An analysis was conducted based on a 24-item (including the management status and the composition of employees) questionnaire survey of 200 SMEs ed from those located in seven lagging regions by means of sampling. In consultation with 30 researchers specializing in SMEs and 30 public officials working in lagging regions, policy priorities were checked, using the Analytic Hierarchy Process (AHP)technique, concerning 29 programs designed to provide support to SMEs.
According to a trend analysis using a time series concerning the number of mining and manufacturing SMEs with five or more employees in the period ranging from 1993 to 2007, their number decreased from 14,759 (or 20.0%) in 1993 to 6,642 (or 5.6%) by 2007 in lagging regions. In non-lagging regions, their number increased from 59,197 (80.0%) to 111,176 (94.4%), recording an increase of 187.8%. As for the number of employees working for mining and manufacturing SMEs in lagging regions, it decreased from 23.4% in 1993 to 4.6% in 2007, recording an 80.3% decrease over 14 years. As of 2007, the number of employees working for mining and manufacturing SMEs in lagging regions, stood at 127,000, compared to 2,657,000 in non-lagging regions. In the 2000s, the percentage of employees working for SMEs in lagging regions14 s14overed at about 4.7%, without dropping notice iny. Looking at the produing anvalue of mining and manufacturing SMEs in lagging regions, it dropped from 52.6 trillion won or 26.7% in 1993 to 3.5% by 2007. The production value of mining and manufacturing SMEs in non-lagging regions jumped from 73.3% to 96.5% in the same period. The ratio of the total amount of added value in lagging regions dropped from 26.8% in 1993 to 3.4% by 2007.
A 16-item questionnaire-based survey was conducted on 200 SMEs in seven lagging regions concerning their management status, difficulties and composition of employees. Their opinion on the current status of the economy was gloomier (61.0%) than that of average SMEs (42.1%). Nonetheless, 78.0% of SMEs in lagging regions said that they would continue to stay in the business, while only 7.5% of them appeared to consider moving to another region of business or closing the business. Concerning the location of business, 93.5% of them said that they would continue to stay in their present location, while 6.5% of them appeared to consider moving to another region. As for employees’ age, those in 20s and 30s amounted for 46.7% of the total number of employees, while those in 40s and 50s amounted for 48.7% and those aged 60 or over 4.6%. Compared to the average age for employees at all the SMEs, the percentage of those aged in 40s and 50s in lagging regions was 2.7%p lower and the percentage of those aged 60 or over was 3.3%p higher. Concerning employees’ academic background, those in lagging regions showed 5% lower percentage than the average employees working for SMEs in terms of the number of holders of high school or college diplomas. As for employees who worked at the same workplace for more than ten consecutive years, those in lagging regions showed only half the figure of those in non-lagging regions. According to the survey, the sectors suffering the greatest shortage of workers were simple manual work (38.0%) and skilled work (29.5%). When it came to employee welfare facilities, 71.9% and 72.6% of those in lagging regions had no in-house cafeteria and dormitory, respectively.
Looking at the major systems adopted for SMEs in lagging regions in Japan, a major series of measures taken in that country include the Law on Emergency Measures for Depopulated Regions (1970); the Law on Special Measures for Promoting the Development of Depopulated Regions (1980); the Law on Special Measures for Revitalizing Depopulated Regions (1990); the Law on Special Measures for Vitalizing Depopulated Regions (2000); the Law on the Promotion of SME’s Utilization of Local Resources (2007) and the Law on the Promotion of Business Activities through Collaboration between SMEs and Those Engaged in Agriculture, Forestry and Fishing (2008). Such laws guarantee preferential measures for lagging regions, including administrative, financial and fiscal support as well as tax reduction or exemption.
As for the U.S., starting in 1977, the U.S. Small Business Administration designated lagging regions as “Historically Under-utilized Business Zones,” and obliged government ministries and public institutions to purchase products made by SMEs in such regions on a preferential treatment basis. Starting in 2008, it adopted the “Emerging 200 Initiative program,” which was designed to help SMEs in economically disadvantaged regions to enhance their management abilities.
We asked 30 relevant experts and 30 public officials to present their opinions on the priority of necessary measures concerning SMEs in lagging regions, based on 3 categories (namely, administrative and financial support, management control, and technological development), 8 divisions, and 29 sections, using the AHP technique. The experts pointed to the following as their priority items: the lowering of interest rates and the provision of policy funds on a preferential basis (0.159) the establishment of an exclusive fund for SMEs in lagging regions (0.138) the mitigation of regulation, with corporate characteristics taken into account (0.055); the supply of a technological development fund (0.054) and the simplification of finance-related investment procedures (0.051). The following items are found to be placed low on the priority list: support for design development (0.005), support for marketing (0.007), and support for participation in overseas expos (0.008). As for the priorities set by public officials in lagging regions, they include the establishment of an exclusive fund for SMEs in lagging regions (0.135); the lowering of interest rates and the provision of policy funds on a preferential basis (0.102) the mitigation of regulation, with corporate characteristics taken into account (0.069); the mitigation of regulations on the expansion of existing facilities, including factories (0.069) and the simplification of the administrative procedure at local administrative units (0.056). The following items are found to be placed low on the priority list: employee education/training (0.002) consulting support (0.003) and support for design development (0.005). Results of AHP show highly significant value of CI(Consistency Index) and CR(Inconsistency Ratio) of survey which is below 0.1. This means that the rank of priority shown by experts and public officials based on reliable pairwise comparison.
Concerning a desirable policy direction for the development of SMEs in lagging regions, it is necessary to establish an efficient support network that will prevent dual investment through a proper division of roles between the central and local governments and key economic actors, and to put necessary measures into action in the relevant regions accurately by fixing SME priorities of policy requirements to minimize inefficient use of resources.
Also, priority should be placed on the establishment of a business network in which primary, secondary, and tertiary industries are organically linked so that SMEs can play the role of stable users of local resources. A strategy should be implemented to develop and sell products with high added value in regions whergy shre is cooperation between the producers of local resources, the SMEs that use them, and the relevant research and support institutions. Speche Ssupport,Ssuch as assistance with technological development,n between the producers of loc, and the supply rodworkers, should be peen ded to businesses participating in the relevant peejects using such local resources. It is also necessary to peen de management resources to products with high addedand help them build their management capabloc, ans. It central and local governments need to work toge shr to thsp and s to lend to them, operate speche Speegrasarfor the supply rodand s through betweecess rodcghdit guarantees, and g in thiority to peeducts made by products with high addedin their purchr p rodnecessary supplies. AedJapan and the U.S. hrve done, it is necessary to enact a pertinent wwnee.g. “Speche SLwwnon the Development of SMEs in lagging regions”) with t parim of hrving such measures uted stably and efficiently. The central government should provide support to local administrative units that carry out the relevant plans on their own.
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- Byung-sun Cho (IBK)
- Bong-hyun Cho (IBK)
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[논문다운받기]
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The Korean government has put lots of efforts on reforming regulations, but it does not still have much less influence on the industry field in small and medium enterprises(SMEs).
The results of analysis show that the regulations reduce the investments and affect the management of corporations. For instance, the management regulations affect moderately such industries as working environments, human resources, and labors. But they have the most severe effect on the investment in plant and equipment.
The result indicates that if regulations are not improved, a number of SMEs consider cutting down, shutdown, overseas transfers, or sale of their business. Therefore, it comes out that what most of the SMEs request is to reduce such regulations as complicated administrative procedures (red tapes).
While appropriate regulations lead to desirable economic development of our society, excessive regulations disturb the corporations’ profit pursuit, deteriorate the entrepreneurship, and disturb creativity. SMEs’ weak countermeasure ability toward regulations and excessive regulations make serious damages to them. As a result, these adverse factors result in cost increase, investment shrinking, and reluctance to launch new businesses of SMEs.
To strengthen the competitiveness of SMEs, epochal regulatory reform is most needed through the idea of conversion. Current positive regulatory approaching method, ‘Prohibited in principle, allowed in exceptional cases,’ should be transferred to negative method, ‘Accepted in principle, prohibited exceptions.’ We should make a good environment for corporation-friendly management by reducing unnecessary regulations, and encouraging the creativity and challenge of SMEs.
Continuous and institutional regulatory reduction must be provided instead of partial and temporary regulatory reform by government. The SMEs’ efforts are important in itself. It is the right times that voluntary efforts to overcome regulations are most needed to avoid the passive actions past traditional purpose of the business.
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- Dae-Chul Jang (KAIST Business School)
- Min-Seok Cha (KAIST Business School)
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[논문다운받기]
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This study uses game theory to examine cooperation strategy within the business ecosystem. To gain a better understanding of the effects of cooperation strategy, unilateral demand and acceptable relationships rather than coexistence of large firms and small and medium enterprises (SMEs) should be the focus of scholarly attention. To this end, game theory was employed to simulate cooperative relationships between large firms and SMEs as asymmetric partners. This research classifies normal cooperative and asymmetric relationships and shows balance through optimizing cooperative profits in microeconomic situations with game theory as a theoretical basis. Primarily, this research aims to resolve the collective Prisoner’s Dilemma of SMEs in Korea. In relationships with large firm(s) and the government, small-and medium-sized firms are forced to lower prices to compete rather than being encouraged to build competence for the future. From the standpoint of large firms, harsh price competition in the market may force them to pass the burden to the SMEs as supplier(s). Moreover, large firms use their power over SMEs to exploit the margin in the value chains. This exploitation strategy might be efficient in the short-term because of reduced transaction costs; however, this exploitative strategy is ineffective at building competence along the value chain. From the perspective of the SMEs, this exploitative behavior on the part of large firms ruins the margin for future investment and erodes their trust in the large partners. For this reason, cooperation strategy can be an alternative for a large firm that occupies a position of power in transaction and development. If we assume that the relationship between the large firm and SMEs represents a coordination game, this dilemmatic situation can be analyzed and explained. Or, at the very least, we can use the data to propose a method for improving the situation.
This research is grounded in the theoretical research on altruistic behavior and cooperative strategy or activity. This phenomenon has been studied in diverse disciplines from social science to game theory in economics (Bshary and Bergmuller, 2008). In this study, we have combined a socio-cognitive approach with game theory to reveal the mechanism behind exploitation vs. cooperation. This research is distinctive in the body of literature related to game theory because few studies on the asymmetric relations between transactions as part of the Prisoner’s dilemma exist. Although it is a coordination game between two players, the decisions and pay-offs becoming increasingly complicated in this dilemmatic situation.
This research expects cooperative behaviors like sharing profits and joint investments in development will bring higher pay-offs to the partnerships between asymmetric players because a stream of research suggests this possibility (e.g., Axelrod and Hamilton, 1981; Kreps et al., 1982). Yet we question the effectiveness of the exploitative strategy. Many large firms are locked in a myopic vision of short-term pay-offs that prove detrimental in the long-term. Moreover, developing a reciprocal relationship enables each partner to receive direct and indirect benefits over time (cf. Nowak and Sigmund, 2005; Fosco and Mengel, 2007).
The logic is that large companies can improve their own profits by treating the weak partners well. This research can be extended to real world decision-making on how much to invest in the co-development of competence with SMEs. This study can accommodate the role of institutions like regulatory agencies, which have the power to move to the optimal point in transactions. Furthermore, this research can contribute to improved quality of relationships between firms, especially from the SME side. The game-theory approach offers concrete principles of relationships between large firms and SMEs. Moreover, this research context is particularly anew in prisoner’s dilemma game so that this research can be meaningful in game theory in return.
Using modeling and analysis, this study arrives at four conclusions: (1)“Although large firms can have competitive advantage with cooperative relationship with SMEs, there comes asymmetric relationships between large firms; that is, one firm uses market strategy and the other use supply chain strategy if difference between the cost of relation building and the future benefit is not significant.” (2) “When quantity of SMEs’ supply is smaller than the demand of the large firm, the product price of large firm is influenced by market price, and when quantity of SMEs’ supply is larger than the demand of the large firm, the product price of the large firm is influenced by supply price of SMEs.” (3) “If demand for the product decreases in recession, support to supplier can be strategic choice considering the future benefit from it. That is, there needs more cooperative relationship in more recessive economy.” (4) “From a large firm’s perspective, technological support to SME is an effective strategy when the level of SME’s technology is relatively high.”
This research interprets the optimum level of cooperative strategy and demonstrates its practical implications. Through this research, four implications about cooperative relationships with the medium-sized firms were part of the preliminary results. Followed by the supply price of the market, the supply cost of medium-sized firms, and market scale, the different results are presented. Moreover, because some SMEs have powerful technology, large firms have incentives for choosing beneficial cooperative strategies with SMEs during a recession. This result will lead us to find the optimum level of coordination for large firms and SMEs in more practical stands through game theory. This paper addresses cooperation between large firm and SMEs with game theory. A critical problem occurs when a partner reduces investment resulting in lack of information and rationality with opportunity loss. In the long-term, making an investment in relationship-specific assets will have numerous benefits and enhance competitive advantage for both players. However, both players are usually focused on short-term market strategy and are unable to consider the benefits and advantages in the long-term. This is framed by the cost and amount of production, business cycle, and level of competence. Our analytic approach has shed light on players’ decision-making processes related to cooperation, especially in light of the market volatility during a recession. Finally, we propose alternative cooperation strategies between large firms and SMEs as well as how to successfully implement these strategies. Directions for future legislation and coordination are also suggested.
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- Seong-Min Hong (Science and Technology Policy Institute)
- Sun Mi Chang (Wonkwang University)
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[논문다운받기]
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At this paper we tried to find out the characteristics of knowledge-based service sector in small and medium enterprises in Korea. And we also identified the factors which promote technology innovation activity in these sectors. Knowledge-based service industry is related to knowledge factors-R&D activity, ICT, and skilled labor force, etc-among the activity of supporting firms' production. There are 15 industries, including telecommunications, financial services, professional service etc.
Knowledge-based service is core industry which plays an important role in economic growth in 21st century. Recently the share of knowledge-based service sector in GDP is rapidly increased. In the representative knowledge based industry, telecommunication, finance insurance and business service industry, the share of production in GDP is increased to 24.6% in 2007 from 20.6% in 2000.
Bart van Ark(2004) classified service industries into four innovation pattern-1) Supplier dominated, 2) Innovation in services, 3) Client-led and 4) Innovation based on their linkages or interactions between suppliers of inputs(equipment, capital, human resources and so on), service firms and clients(end users or intermediate users). We classified the 1,375 Korean knowledge-based service SMEs into these four patterns based on their industries. For the empirical analysis we used the ‘Technology Innovation Survey in Service Sectors' which conducted by STEPI in 2006. It provide a lot of information about innovation of 2,498 firm in service industry. It include the product, market, R&D, technology innovation, source of innovation, joint R&D activity, acquisition of technology, network, government support, problem in innovation, non-technological innovation activity, innovation cost and protection, result of technology innovation, etc. We drew out 1,375 SMEs which belonged to knowledge-based service industry.
It took several decades before the variety in service innovation was recognised. This can partly be explained by the fact that a major part of innovation studies was for a long time focussed almost exclusively on manufacturing industries and technological innovation. The Pavitt(1984) provided four archetypal innovation trajectories or patterns i.e. ‘supplier dominated’, ‘scale intensive’, ‘specialized suppliers’ and ‘science based’. Although originally aimed at describing technological trajectories at firm level, the Pavitt classification is mostly applied at the sectoral level leading to some generalizations.
Services have mostly been classified categorically as supplier dominated, suggesting that most service firms do not have an autonomous innovation function. Only during the 1990s, and thanks to the increased use of ICT in services, this passive image of service innovations has been corrected. Bart van Ark, Lourens Broersma and Pim den Hertog(2003) use the suppliers of inputs (equipment, capital, human resources and so on), service firms and clients (end users or intermediate users) interact. The influence that the client firm/organization or final consumer exerts on the innovation process gradually increases from pattern 1 to pattern 4.
Pattern 1, supplier-dominated innovation; services innovations (as a rule technological innovations in the form of new technical equipment) are largely based on basically technological innovations as supplied by hardware manufacturers. These innovations from external suppliers are disseminated and implemented by service industry users, who in turn satisfy the needs of their clients. There is little scope for user industries to influence the actual product supplied by the supplier. But the adopting firm often has to bring about some organizational changes in order to be able to use the innovation-to adapt its organization, train its employees, etc.-and to offer more a efficient and higher quality service as a result.
Pattern 2, innovation within services; the actual innovation and implementation is initiated by and takes place in the service firm itself. Such innovations may be technological, non-technological, or (in many cases) a combination of the two. Typical examples of this pattern involve a new product, product bundle, or delivery system, that is developed by the service firm itself, and implemented throughout the organization, possibly with ‘innovation support’ from outside. These are typically the sort of innovations that have been overlooked in the statistics because of their more conceptual nature rather than hardcore development activity.
Pattern 3, client-led innovation; the service firm innovates on the basis of specific needs that are articulated by its clients. While, in a sense, every successful innovation is a reaction to a perceived market need, for some service innovations this is more explicit than for others. In some cases the demands are expressed by segments of mass markets. In many other cases the influence may come from a single client, as is often the case in business services. For instance, a client may propose to a training firm that it facilitates its face-to-face sessions with computer-based aids.
And the last pattern 4, innovation through services; the service firm influences the innovation process that takes place within a client firm. The provider of intermediate services may provide knowledge resources that support the innovation process in various ways. Here especially the role of knowledge based services towards their clients can be referred to.
In Korea SMEs, the highest proportion(55.6%) of knowledge-based service sector is 'Innovation through services' type which include industry code 721, 722, 730, 741, 742, 743 and 744. On the whole this type of service support other firm's innovation activity with it's own products(services). And the innovation activity of SMEs in this category is most vigorous. The most peculiar innovation pattern is 'Supplier dominated' type which include industry code 640, 871. In this pattern there is also outstanding in the viewpoint of product standardization, ICT investment, etc.
We employ the regression model to identify the factors which promote technology innovation activity. The dependent variables are R&D expenditure for innovation and the number of innovation. And we used five kinds of independent variables-firm specific, product specific, market specific, innovation activity, and innovation environment variable.
Regression result showed that the main factors that facilitate innovation activity of knowledge-based service sector SMEs is turned out ICT investment-proxy of product specific variable- and total innovation cost, joint research experiences-proxies of innovation activity variable. So the supporting policies for the knowledge-based service sector might be focused to promote the overall innovation cost and ICT investment and to establish the infrastructure for joint research networking.
We issued five suggestion to promote innovation activity in knowledge-based service industry. First, most of all there need the policies to reinforce the linkage between main manufacturing industry and knowledge-based service industry to vitalize the innovation of knowledge based service sector. Second, it is essential to increase governmental R&D expenditure to promote innovation of SMEs. Third, the main factor for innovation in service industry is related to IT technology and equipment, so the support for IT equipment investment is required. Forth, there need to develop expert man power in knowledge-based service sector. Lastly, it is important to establish the infrastructure for facilitating innovation and reduce the cost for innovation focused on SMEs.
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