Premium
INDUSTRIAL POLICY AND MARKET STRUCTURE: KOREAN AUTO ASSEMBLY
Author(s) -
AUTY RICHARD M.
Publication year - 1996
Publication title -
tijdschrift voor economische en sociale geografie
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.766
H-Index - 55
eISSN - 1467-9663
pISSN - 0040-747X
DOI - 10.1111/j.1467-9663.1998.tb01574.x
Subject(s) - scope (computer science) , business , industrial policy , industrial organization , auto industry , market economy , comparative advantage , market power , international trade , economics , international economics , automotive industry , computer science , engineering , monopoly , programming language , aerospace engineering
Mass production technology began to confer comparative advantage in auto assembly on newly industrializing economies (NIES) in the 1980s, but the economies of scale and scope of the firm remain significant. Most NIE entrants face home markets which are still too small to support a single world scale firm. Their entry into auto assembly was premature and it has created pressure to prolong state support for the ‘infant’ sector. This, in turn, has led to policy capture, the Achilles heel of industrial policy, which can result in substantial welfare losses. Korea suggests that the maturation of auto assembly may proceed faster if governments confine themselves to promoting domestic assemblers through strategic alliances with global firms, using anti‐trust mechanisms to prevent abuses of market power.