State-firm Coordination and Upgrading: Reaching the Efficiency Frontier in Spain and South Korea’s Skill-, Capital-, and Knowledge Intensive Industries

Date: 

Thursday, February 7, 2019, 4:30pm to 6:30pm

Location: 

Thomas Chan-Soo Kang Room (S050), CGIS South Building, 1730 Cambridge Street

Kim Koo Forum on Korea Current Affairs
2.7 KKF Poster

Angela Garcia Calvo
Fellow at Harvard Kennedy School of Government and Marie Curie fellow at the Department of Management, London School of Economics and Political Sciences

Dr. Angela Garcia Calvo is a Fellow at Harvard Kennedy School of Government and a Marie Curie post-doctoral fellow at the London School of Economics and Political Sciences. She works in the field of comparative political economy. In particular, she is interested in how economic institutions are constructed and what is their effect on production structures and growth.

Her current research investigates how interactions between large firms and governments change over time and their role in shaping economic transformation in two late industrializing economies: Spain and South Korea.

She holds a PhD in Political Economy from the London School of Economics and Political Sciences (2014), an MPA in Political Economy from the John F. Kennedy School of Government, Harvard University (2008), an MBA in Decision Sciences, Managerial Economics and Business Strategy from the Kellogg School of Management at Northwestern University (2006), and a BA in Law and Economics from the University of Deusto (1997).

In addition to her academic work, she has worked for the Organization for Economic Cooperation and Development, the UK Department for Business Innovation and Skills and the Spanish Economic office, on issues including regulation, telecommunications policy, and international business.


Chaired by Carter Eckert, Yoon Se Young Professor of Korean History, Harvard University

Abstract:
Generating sustainable economic development and reaching advanced economy status depends on the ability of countries to host local, globally competitive firms in skill-, capital-, and technology intensive industries. However, in the last four decades, very few countries have managed to do so. How did they reach the efficiency frontier? And what types of institutional structures supported the process? Explanations based on firm competition and upwards movement within global value chains underestimate the difficulties of reaching the highest echelons of the global division of labor. Alternative arguments based on state activism are anchored on the institutional configurations that enabled a few Asian economies to industrialize in the pre-1980s era.

This research project uses evidence from Spain’s and Korea’s transformation since the mid-1980s to ask whether state activism remains necessary to foster economic transformation at high levels of complexity and if so, what types of transformational strategies are likely to be effective and whether they are equifinal. Spain and Korea provide fertile ground for this analysis. The two countries’ rapid industrializations in the 1960s and 1970s transformed two poor backward economies with scarce natural resources into industrialized ones. By the 2010s, both countries hosted globally competitive firms in some skill-, capital-, and knowledge-intensive industries. However, they did so through different strategies. Spain undertook a horizontal or cross-sector approach under which firms in complex services such as banking and telecommunications reached the efficiency frontier while manufacturing capacity declined sharply. By contrast, Korea pursued a vertical or product-based upgrading strategy consisting of moving upward within the value chains of existing manufacturing sectors such as electronics and motor vehicles while most services remained underdeveloped and underperforming.

The project uses evidence from detailed qualitative case studies of three industries: information and communication technologies, banking, and the automotive industry, to argue that state-firm coordination is still a critical feature of economic transformation. However, coordination has shifted from classic hierarchical structures to no-hierarchical models in which states and firms exercise control over their decisions and develop mutually agreed-upon working rules that enable them to reach beneficial outcomes. Such agreements may be articulated through a variety of institutional configurations depending on the identities, capabilities, backgrounds and specializations of firms and national governments, and on the nature of external linkages or interactions with other nations leading to alternative pathways to upgrading. These pathways will likely provide support for different patterns of production specialization.  The project therefore confirms the need for activist states to support economic development even at high levels of complexity and engages with on-going debates regarding the role of states in shaping production structures and economic transformation in a global economy

The Korea Institute acknowledges the generous support of the Kim Koo Foundation.