“We found that there is a limitation in the growth of bigger companies in promoting growth of SMEs, and at the same time there is a weakening bond between the two groups.” (image: KobizMedia/ Korea Bizwire)
SEOUL, Feb. 23 (Korea Bizwire) – Trickle-down effects from major South Korean businesses, creating a flow of benefits to smaller companies, are becoming less perceptible.
In a report announced Wednesday by the Korea Small Business Institute, researchers said that “there’s now very little trickle-down effects between big companies and SMEs,” based on a statistical analysis of economic ripple effects.
“Instead, there’s a deepening sense of decoupling between the two,” the researchers said.
This could also indicate that Korea’s big corporations have a smaller influence on the economy than do SMEs, officials noted, adding that the employment inducement coefficient for SMEs is currently at 9.7, higher than large companies at 5.5, demonstrating the higher economic contribution in terms of employment resulting from smaller businesses.
Similarly, another statistical analysis, which measured the business relationship between larger companies and their subcontractors, also showed the waning trickle-down effects on secondary and tertiary subcontractors.
“After analyzing the effects on primary, secondary, and tertiary subcontractors, we discovered that major companies only had a noticeable impact on primary subcontractors, with the effects significantly weakened for secondary and tertiary contractors,” they said.
“Through various statistical analyses, we found that there is a limitation in the growth of bigger companies in promoting growth of SMEs, and at the same time there is a weakening bond between the two groups. There’s a need for an economic system where the more economically active majority plays a central role.”
By Kevin Lee (kevinlee@koreabizwire.com)
