Internationalisation of Korean industry: A study of the performance of the plant and construction industry

Since the mid-1970s, Korea has adopted an export-led economic policy based upon the development of her heavy chemical industry to make her export industry more competitive. The essence of this policy was to continue with steady export growth and to maintain its status as a Newly Industrialised Country (NIC). In this respect, it was thought that the pursuit of plant and construction exports could significantly contribute to a sustained export performance and the growth of the national product. The internationalisation of the plant and construction industry was assumed to have certain implications for Korea's export performance. This study attempts to investigate differences between Korean and non-Korean firms and between plant and construction firms in terms of: (a) firm characteristics; (b) success and failure among tenders; (c) risk management; (d) contract strategy; and (e) international competitiveness. The study has been undertaken by means of sociological and organisational analysis from an overall national level down to the firm level. A more deductive macro level approach has been pursued to diagnose the Korean export environment in terms of its international competitiveness and technological competence. While the investigation has involved general sociological, economic and technological considerations, more emphasis has been given (a) to the failure of the industry to achieve a higher level orders for plant and construction exports and (b) to an estimation of the international competitiveness of the industry and its ability to achieve a sustained export performance. The empirical work of the study was carried out at the country and industry level and involved the choice of a sample of 62 firms (29 plant and 33 construction firms) in 12 countries. Resorting to data obtained through questionnaires, interviews and documentary sources, an inductive approach has been employed to examine the export performance of these firms and the implications for Korean firms. The findings of the study indicate that, in general, Korean firms have been inferior to non-Korean firms in terms of technology, tender and contract strategy, risk management and competitive strategy. These disadvantages would have been lessened had government export and industrial policy and corporate strategy been accompanied by adequate policies in the field of: (a) improving the technological level; (b) enhancing productivity; (c) adjusting industrial structure; (d) cultivating small and medium-sized enterprises; (e) making advances into overseas markets; and (f) improving governmental support systems. The research has shown that successful tendering for plant and construction exports can best be explained by: (i) cooperation with importing countries (i.e. joint-ventures and consortia membership); (ii) the quality of bids (i.e. meeting delivery date, after-sales services, product quality and experience of the tender process); (iii) relationships with importing countries (close political and cultural ties); (iv) willingness to meet incidental conditions imposed by importing countries (e.g. demands for favourable and competitive credit terms and a commitment to high local procurement ratios); and (v) price competitiveness.