Business groups and product variety in trade: evidence from South Korea, Taiwan and Japan

We analyze the impact of market structure on the trade performance of South Korea, Taiwan and Japan. South Korea has many large, vertically-integrated business groups known as `chaebol', whereas business groups in Taiwan are smaller and more specialized in the production of intermediate inputs....

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Bibliographic Details
Published in:Journal of international economics 1999-06, Vol.48 (1), p.71-100
Main Authors: Feenstra, Robert C., Yang, Tzu-Han, Hamilton, Gary G.
Format: Article
Language:English
Subjects:
Business group
Comparative analysis
Conglomerates
Diversification
Economic theory
Enterprises
Exports
Japan
Market economies
Product differentiation
Product quality
Product variety
Production diversification
South Korea
Studies
Taiwan
Trade
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Summary:We analyze the impact of market structure on the trade performance of South Korea, Taiwan and Japan. South Korea has many large, vertically-integrated business groups known as `chaebol', whereas business groups in Taiwan are smaller and more specialized in the production of intermediate inputs. We test the hypotheses that a greater presence of business groups leads to less product variety but higher product quality, using data on exports from these countries to the United States. We find that Taiwan tends to export a greater variety of products to the US than Korea, and this holds particularly for final goods. In addition, Taiwan exports higher-quality intermediate inputs, whereas Korea exports higher-quality final goods. A comparison with Japan is also presented, which has greater product variety in its sales to the US than either Taiwan or Korea, due to its larger size.
ISSN:0022-1996
1873-0353
DOI:10.1016/S0022-1996(98)00024-5