Engine of Export-Oriented Catching-Up: Small Firms

Big conglomerates dominate the Korean economic as do small firms the Taiwan economy. I characterize Korea as a relatively low-trust society with a pro-chaebol policy bias, and Taiwan as a relatively high-trust society with an anti-big-conglomerate policy bias. I content that the differences between Korea and Taiwan in size structure of firms reflect the divergent responses of entrepreneurs to different, "semi-permanent" socio-political conditions that determine the costs of market transactions among firms. It may be desirable to change the size structure of firms, but I maintain that the possibility of actual change in the size structure is rather limited. [F14, L11]