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Seoul Journal of Economics
[ Article ]
Seoul Journal of Economics - Vol. 29, No. 1, pp.1-42
ISSN: 1225-0279 (Print)
Print publication date 29 Feb 2016
Received 21 Oct 2015 Revised 23 Dec 2015 Accepted 01 Feb 2016

Comparing the Management Practices and Productive Efficiency in Korean and Japanese Firms: An Interview Survey Approach

Keun Lee ; Tsutomu Miyagawa ; Young Gak Kim ; Kazuma Edamura
Professor, Department of Economics, Seoul National University, Seoul, Tel: 82-2-880-6367, Fax: 82-2-886-4231 Kenneth@snu.ac.kr
Corresponding author, Faculty of Economics, Gakushuin University, 1-5-1 Mejiro, Toshima-ku, Tokyo, 171-8588, Japan, Tel: 81-3-5992-2257, Fax: 81-3-5992-1007 19990230@gakushuin.ac.jp
Associate professor, School of Economics, Senshu University, Tel: 81-44-900-7979, Fax: 81-44-900-7849 ykim@isc.senshu-u.ac.jp
Research Fellow, the 2nd Theory-Oriented Research Group, National Institute of Science and Technology Policy, Tel: 81-3-5775-2651 edamura@nistep.go.jp

JEL Classification: D21, L23, M11, M12, M15, M51

Abstract

In this study, we conduct interview surveys on management practices in Japanese and Korean firms following the study of Bloom, and Van Reenen (2007). The average management scores in Japanese firms are higher than those in Korean firms, and human resource management is positively associated with firm performance. When a Korean dummy is added as a shift term in regressions with the merged sample, its coefficient is negative, implying that Korean firms have low efficiency. However, when the cross terms of the Korean dummy are added with capital and labor, the significance of the shift term disappears. This observation entails that any efficiency difference between the two countries does not come from a technical efficiency (shift term) but from a factor efficiency (marginal productivity of labor and capital). One robust result of this study is that a high output elasticity of capital is observed in Korean firms, whereas a high output elasticity of labor is noted in Japanese firms despite the high capital ― labor ratios in the former. One interpretation of this puzzle is that Japanese firms have pursued the optimization of labor uses and have been relying on labor-saving growth in the face of labor shortage and aging and that Korean firms have relied on capital for growth, continuously renovating and updating their capital, thereby recording a high capital productivity in contempt of aggressive labor.

Keywords:

Factor efficiency, Intangible assets, Management practices

Acknowledgments

This paper is a revised version of the Research Institute of Economy, Trade, and Industry (RIETI) Discussion Paper 10-e-013 and has been presented at various occasions, such as the 2015 Seoul Journal of Economics Symposium, a seminar at RIETI, the Comparative Analysis of Enterprise (Micro) Data Tokyo Conference held in October 2009, a seminar at Waseda University, and a workshop at Gakushuin Univeristy entitled “Intangibles, Innovation Policy, and Economic Growth.” We would like to express our gratitude to Professors Mitsuhiro Fukao, Haruo Horaguchi, Masahisa Fujita, Kyoji Fukao, Kozo Kiyota, Jeong-Dong Lee, Jonathan Haskel, Hideaki Miyajima, Masayuki Morikawa, Min-Jung Kim, other participants of these meetings, and the members of the project entitled “Research on Intangible Assets in Japan.” at RIETI. We are also grateful to Professors Takizawa and Kawakami for their excellent research assistance. The interview survey was supported by Japan Center for Economic Research and Nikkei Inc. The first author acknowledges the support by the Korean government through the National Research Foundation of Korea (NRF-2013S1A3A2053312).

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