Articles

Estimating Regional Efficiency of Korean Manufacturing Industries Using Data Envelopment Analysis: A Technological Innovation Perspective

Ho Lee, Chan-Young Hong

Abstract

In the 1970s and 1980s, Korea achieved rapid economic growth through intensive investment especially in the Seoul metropolitan area and the southeastern part of the nation. The concentration of capital, however, caused some side-effects in regional disparity in social overhead capital and industry development. As a result, the government has had to deal with the policy issue of balancing regional development as its main concern. One of the issues derived from the main concern is anxiety whether the mitigation of intensive investment would be harmful to economic efficiency, which is the principal research interest of this article. Under the assumption that innovation efficiency of regional firms positively influences economic efficiency of the region, this paper compares the regional technological innovation efficiency among the provinces in Korea based on the innovation activities of regional firms. Data envelopment analysis (DEA) measures the relative efficiencies of the regions and finds where resources are over-invested. The concept of technological regime is used as a control variable to exclude environmental differences of each province. The results show the resource imbalances of the provinces, which means innovation efficiency can be increased by relocating resources in the right place, and, in turn, economic efficiency can be raised. It also implies that the innovation policy needs to be differentiated by regional technological regime.

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