Limits of Small and Medium Enterprise Promotion Policy

Abstract

So far I have examined patterns of industrial transformation and variation of industrial policy by applying the coalition approach in the international, intersectoral and intrasectoral aspects. The discussion has focuses primarily on explaining successes and the relationship between the government and the LEs. This chapter shift the focus towards explaining the weakness of the SMEs and evaluating the effects of government policy on the development of the SMEs in the Korean economy by specifically examining SME promotion policies and the interaction of the LEs with the SMEs. In particular, I compare the Korean case with the Japanese case in which there were many SME promotion policies that contributed to the development of viable SME sectors, unlike the case in Korea. I also explain how the coalitional framework could be transformed to a favourable institutional framework as in Japan or to an unfavourable institutional framework as in Korea. The comparison is a useful way of understanding why SME policies have met with only limited success despite there having been so many, especially since the 1980s.