One of the major changes in the current global business environment is that
the global value chains (GVCs) of just a few multinational enterprises (MNEs)
conduct most of the global business activities. These GVCs are structurally
subdivided and regionally dispersed as a result of these MNEs’ new strategies,
which are influenced by the globalization, liberalization and deregulation of
nations and enterprises, the development of transportation and telecommunication
technologies, and the growth of emerging market economies. The
process of such globalization is further accelerated by the decreasing costs of
coordinating international division of labor activities and simultaneously provides
threats and opportunities not only for multinational enterprises, but also for small
and medium enterprises (SMEs).
Small and medium enterprises (SMEs) can secure financial stability, increase
productivity and enter the global market by participating in GVCs of the MNEs.
However, SMEs require higher levels of financial and managerial resources and
face more global competition to successfully participate in GVCs. Due to the
many opportunities and threats to SMEs that come with participating in GVCs,
appropriate government policies providing protection and support are needed for
SMEs in developing, emerging, as well as developed markets (OECD, 2007;
UNCTAD, 2010).
The purpose of this study is to examine the political and strategic implications
of supporting the participation of Korean SMEs in GVCs through detailed
analyses of the current global competitiveness and industrial revealed
comparative advantages (RCAs) of Korean SMEs. While previous studies on this
topic exist, this study differentiates itself in three main ways. (1) This is the
first time trade in value added(TiVA) is used to analyze Korean SMEs’ industrial
competitiveness. (2) The methods of Korean SME participation in GVCs are
classified by domestic and foreign production, of which competitiveness is
measured by domestic value added and foreign direct investment, respectively.