Over the past few years in Korea, SMFs have shown a
greater tendency toward competition and technological
development, on the one hand, and large firms have strengthened
their cooperative relationships with SMFs on the other.
Moreover, the government has supported these efforts with
various policies. This trend has become more marked as Japan,
the largest supplier of parts to Korea and important competitor
with some Korean exporters, has appreciated the yen. Under
these circumstances, SMFs need to be reexamined not as objects
of protection and promotion but as an engine for impoving the
industrial structure and international competitiveness of the
Korean economy. Throughout this paper, the functions of SMFs
that are complementary to and synergic with-- not subordinate
and antagonistic to--large firms have been emphasized.
The horizontal relationship between SMFs and large firms is
important primarily in the context of a domestic market, while
their vertical relationship becomes more important for an export
market. In any case, SMFs and large firms can grow together
as technological development and market expansion act
synergically. The direction and speed of growth will be
determined by the strength of interfirm rivalry, overall potentials
of the national economy, and social and institutional conditions.
The relationship between SMFs and large firms will evolve
toward the promotion of mutual benefits as an optimal response
to changes in the competitive environment. As the competitive
strength of SMFs is cultivates through competitive efforts in
technology, management, marketing and other business activities,
it can neither be molded nor enforced by legal means.
When it comes to the issues of SMFs, the instinct to
protect the weal tends to dominates, despite the emphasis on
free competition. Combining a warm heart with a cool mind,
however, the basic policy towards SMFs should be to promote
the competitiveness of the strongest firms through free
competition, and then assist the vanquished firms in a reasonable
way. For this purpose, unfit SMFs should be encouraged to
switch their business areas and retrain and relocated released
labor, while unfair practices of large firms against SMFs are
properly regulated. Economic efficiency and social equity can
then be harmonized, achieving balanced growth in the long run.
At the same time, even if the market is competitive, the SMF's
relative performance depends greatly on the level of technology
and manpower of the economy as a whole, and will be further
promoted by efficient financing and information flows. The
existing policy for SMFs should be reviewed form this
standpoint and then reformulated form a broader and more long
term perspective, rather than on the piecemeal and partial basis
of considering only SMFs.