Kim In-Ho Stephen
Emeritus Professor of Hanyang University
Republic of Korea
Chaebol Structure refers to a conglomerate of businesses that emerged in South Korea in
early 1960s and have led the Korean economy since then. Chaebol Structure can be
characterized as being owned by the founder뭩 family and managed by the professionals to
make the most of the merits of ownership and management, differently from that of the
western style to call for the separation of ownership and management.
Chaebol were formed in 1960s-1970s by the founders who had, in common, an unyielding
character with 멻urry-hurry mind and hungry spirit, with organization(s) composed of well
educated, energetic manpower, as it were not highly qualified. Chaebol followed the
government뭩 export-oriented economic and industrial policies, which were in good match
with the world economic trends then; fully ripened mass economy age, Vietnam War and
Middle East boom. Chaebol Structure, after being formed, started to lead the Korean
economic development through the innovation strategy of 멹rom imitation to innovation� to go
with some public R&D institutions established by the government then.
In early 1980s when US� manufacturing industries were collapsed, the 2nd generation who
took over the style of the founder뭩 leadership and entrepreneurship were able to adapt to
the declining trend of US manufacturing industry by such expansion strategies as the
horizontal & vertical integration, and related & unrelated diversification during 1980s-1990s.
As a matter of course, these styles of Chaebol뭩 expansion (called octopus� expansion)
sometimes aroused a public criticism on it socially or politically. Yet Chaebol Structure, after
possessing the manufacturing-based businesses, continued to expand their business
domains and to enhance their businesses through the innovation strategy of 멹rom
incremental innovation to radical innovation� and to manage the diversified business portfolios in a manner of 멵entralized decision-making by owner CEO and decentralized
execution by professionals.�
However, Chaebol Structure should be reformed late 1990s when there was the Asian
financial crisis. Twelve among thirty Chaebol who were lack of innovative capabilities or
proper strategic approaches, or had poor management could no longer stand and eventually
In 2000s, Chaebol who overcame the financial crisis have also been in a trouble under a
social anti-mood for free enterprise systems. In spite of such challenges, Chaebol Structure
have highly contributed in changing the Korean economy from trade debtor to trade creditor,
thanks to the change of exchange rate system by the government and their manufacturingbased
business portfolios. Accordingly Chaebol have also become more stable and solid
financially and socially.
The Wall Street meltdown 2008 ultimately caused by the imbalances between rapidly
declining manufacturing industries and boosting services, and between dwarf of real
economy and mammoth of money derivatives economy, has brought about global economic
crisis, giving heavy impacts on all over the world. Chaebol Structure also could not avoid the
impacts of that crisis, yet the crisis turned out to be a chance for Chaebol Structure to get
their businesses more upgraded and to reinforce preparing the leadership of the 3rd
generation, thanks to their manufacturing-based business portfolios equipped with a more
intensified 멹rom incremental innovation to radical innovation� strategy, and business domains
confined to within real economy rather than money economy by the laws not to permit for
Chaebol to enter money-oriented business fields.
In short, Chaebol Structure have been working as the most powerful driving forces in
developing the Korean economy, having greatly contributed to becoming Korea as one of
G20 in 2010. And the emergence and evolution of Chaebol Structure demonstrate that no
firm will be successful and sustainable unless it meets customer needs at every stage of
needs evolution through innovation to make customers have willingness to pay (WTP).
Keywords: Ownership & management; from imitation to innovation; national innovation
system; hurry-hurry mind; from incremental innovation to radical innovation; centralized
decision-making and decentralized execution
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