Import Substitution Model: An Annotated Bibliography of Research

This annotated bibliography explores the Import Substitution Model, drawing from a selection of scholarly sources. It includes details on the scope, methodology, data, and main arguments presented in each source. The bibliography covers research articles, books, and policy papers, providin...Read More

Running head: ARTICLE REVIEW
ARTICLE REVIEW
Name of the Student
Name of the University
Author’s Note

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Discussion
This paper provides huge scope to the researcher as it provides an overview about how
growth policy integrated by Korea helps to enhance development of the economy. The paper
also provides huge scope to the MNCs in Korea to analyse the significance of technological
innovation in the business. The main argument offered in this paper is that whether growth
policy adopted by the Korean government helps to enhance GDP of the nation. I addition,
this study also reflects whether technological innovation enhances business growth of MNCs
in Korea. The usual research work that is being published about this topic is new trends of
technological innovation in the MNCs of Korea and superior economic growth policy of this
nation. The areas that are needed to be explored for this study are improvement in business
operations owing to technological innovation and the economic performance over the past
few years and challenges faced by the nation while implementing growth policy.
The study firstly reflects on the superior economic growth policy adopted by Korea. In
fact, this country now serves as the framework for export –orientation development strategy
which multilateral institutions are mainly urging on other nations. 1Recent facts reflects that
Korea enjoys low inflation, high growth and equal income distribution at the time when other
developing nations are economically stagnant. The main drive behind this is the policy that
facilitated to cope up with weaknesses. This nation is the huge debtor which has overcome
debt issue with a vengeance. One of the major characteristics of Korean economy is
increasing share of exports in gross national product (GNP) and changing composition of
trade. In the last twenty years, this nation has moved from product exporter to net importer of
goods. Moreover, the policies adopted by Korea have created upsurge in performance in
trade. During the past few years, the GDP (gross national product) of Korea has increased at
high rate and thus has been placed among the top developing nations.
1 Marcus NOLAND, 'Korea's Growth Performance: Past And Future' (2012) 7 Asian Economic Policy Review.

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Currently, union activity as well as labour unrest have not been main problems in Korea.
The policy adopted by Korean government has facilitated to bring about equality in
distribution of income, which in turn helped to avoid labour issues. In addition to this,
improvements in income distribution of this nation led to outcome of strong employment
growth and decreasing unemployment. The support of government policy for Korea’s growth
goes beyond wage restraint and education. In particular, these policies adopted by Korean
government have sustained financial stability by not permitting money financing deficit and
real exchange policy which sustained profitability of traded products. 2The policies adopted
by Korea do not represent laissez faire approach, which means intervention in form of
subsidies, credit allocation and trade restrictions is pervasive. Industrialization strategy in
Korea that started as pure import substitution with the aid of financing trade gap, expanded to
involve export promotion. This nation had exhausted possibility of huge growth through
import substitution of nondurable consumer products as well as intermediate inputs. Korea
has also used licensing as well as tariffs to create sheltered market for development of infants.
As the industries have developed, this nation has turned towards world market by credit,
exchange rate and subsidy policy.
From the five year economic development plans, Korea identified that technology is an
essential factor that enables a sector to produce for world market. However, the government
of this nation made huge effort to adapt as well as adopt foreign technology. One of the main
pillars of this nation’s science and technology development policy has been refining ability to
recognize proper foreign technology, select and adapt it accordingly. The last element in this
nation’s growth policy success is the globe economic environment. This country’s exposure
to the world’s economic environment differs from that of other developing nations. Due to
such difference in the economic environment, this nation has made fiscal as well as external
2 C. K. Yoo, M. Gopinath and H. Kim, 'Trade Policy Reform, Productivity Growth And Welfare In South
Korean Agriculture' (2012) 34 Applied Economic Perspectives and Policy.

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adjustment. Wage policy has been considered as mainstay of this nation’s performance of
trade. The restraint of huge rise in wage in face of external shocks has facilitated this nation
to attain rapid as well as efficient adjustment. However, the labour relations recently have
been varying rapidly.
The superior growth of Korea during the last few years has been the outcome of not any
single policy but of several policies adopted at varied times. During the prevail of surplus
labour and high unemployment, the government of this country opted for the support of
labour- intensive sector and also pushed the education programs on huge scale. When
competitive edge in this sector started to be threatened, the support mainly switched to
chemical sectors. Apart from this, when excessive misallocation and government intervention
became apparent, the Korean government relaxed few control over this economy. In fact,
they played vital role in structural adjustment. When the Korean economy had become
complex for the central management, they yielded huge control on it. Thus, implementation
of new growth policy led to liberalization of trade as well as capital markets and
improvement in the economy.
This article also deals with technological innovation, which is considered as the main
factor in growth and development of MNCs in Korea. This paper is in the light of current
developments in role of developing technological capabilities in evolution and competitive
emergence of MNCs in Korea. By challenging the reliability as well as validity of product
lifecycle model can be linked to revisiting aspect. 3Few researchers provide explanation of
innovative capacities of MNCs in Korea by extending its framework of product life cycle
framework. The framework of technological change reflects that third world companies have
wider scope for innovation. This model of technological change mainly suggests that
enterprises from the developing nations including Korea have huge capacity to follow
3 (Eprints.bbk.ac.uk, 2018) <http://eprints.bbk.ac.uk/19220/1/19220.pdf> accessed 12 July 2018.

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independent technological course. This can be either by means of foreign technology
adaptation, technological creation and other techniques that are usually used in developed
nations. There are five kinds of manufacturing technology of MNCs such as- production
execution functions, connection establishment functions, capital goods provision, skill
transfer functions.
According to view of product lifecycle, this form of technological change is not taken
into account as innovation has been seen basically in form of creation of new commodities in
high income nations. The industries as well as products becomes standardized as the sector
matures and location of manufacture shifts from the nation of primary innovation. In fact,
competition in price has become more vital relative to the product differentiation as barriers
in entrance declines, sectors becomes highly competitive and commodity standardization
proceeds. The MNCs in Korea are mainly based in standardized commodity industry with
low commodity differentiation and R&D expenditures. Few researchers are of the view that
the MNCs of tis nation have several advantages which come from integrating foreign
technology to situation of smaller plants and firm size. 4 They have also pointed out that
descaling of this new technology in production of traditional goods and utilization of
resources as inputs in production process amounts only to limited innovativeness on the part
of MNCs as these activities are confined to the end of product life cycle.5 The different kinds
of innovation used by emerging multinationals needs empirical investigation which looks at
creation of technology than sphere of research. Owing to this technological change, the
companies based in the emerging markets have gained innovative capacity which is not
copied by affiliates of MNCs in developing countries including Korea. It has evident from
few facts that the MNCs in Korea have integrated new technologies for innovating disruptive
4 Yuandi Wang, Dylan Sutherland and Lutao Ning, 'A Dynamic Comparative Analysis Of International
Innovation Networks In Emerging Market Mncs' (2014) 21 Industry and Innovation.
5 Heather Berry, 'Global Integration And Innovation: Multicountry Knowledge Generation Within Mncs' (2013)
35 Strategic Management Journal.

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products particularly to address the consumer requirements and preferences. This has led to
success in business and improvement in business performance. Product lifecycle model is
more vital in relation to other factors to explain why enterprise in developed nations retain
comparative advantage. 6An extended product lifecycle framework better describes existence
of emerging multinationals pursuing world’s strategies whose strengths mainly derive from
that operating at technology frontier as well as strong brands. Two other trends are closely
associated to varying innovation nature in emerging markets. The MNCs in advanced
economies whose innovation subsidiaries and R&D units in emerging nations are succeeding
to undertake frugal innovation. The reverse innovation procedure also takes place since
technological advancement to initial innovation for meeting specific requirements of the
emerging markets forced growth of the business opportunities. The enterprise in Korea
require business system and product innovation for leveraging business opportunities. 7The
MNCs in Korea has adopted several strategies for increasing their competitiveness in the
market. The product life cycle impacts the strategies which the companies adopt for beating
relentless competition from other MNCs. This involves developing of business framework to
overcome obstacles, emphasising scope economies, customizing goods and services for
meeting local requirements and gaining low- cost labour as well as training in- house for
overcoming shortages of workers.
Methodology
Different methods was adopted for conducting this study which includes- research approach,
research design, research philosophy, data collection method.
 Descriptive research design is used for this study.
6 Marco Zeschky, Bastian Widenmayer and Oliver Gassmann, 'Organising For Reverse Innovation In Western
Mncs: The Role Of Frugal Product Innovation Capabilities' (2014) 64 International Journal of Technology
Management.
7 Kamaruddin Abdulsomad, 'The Transformation Of Multinational Corporations (Mncs) From An Innovation
Perspective: Some Notes On The Theories Of Mncs' (2013) 29 AI & SOCIETY.

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 The research approach used for this study is deductive approach
 The research philosophy used in this research is positivism philosophy
 Both secondary and primary data collection method is used for this study. The
secondary data is collected from articles, journals etc while the primary data is
collected from surveys, observations.
 The usual method used for doing this research is qualitative method. The data is
collected from with the help of survey questionnaire procedure.
Critique and Reflection
The Philippines growth policy is slightly different from that of Korean growth policy.
The Philippine nation mainly focuses on high growth which is sustained, reduction on
poverty and mass employment. The nation integrates new policy as that of Korea which
mainly focuses on good governance, sustainable economic growth, improving the quality of
people’s life, enhancing social cohesion as nation. Recent evidences also reflects that even
though Philippine FDI outflows lags behind few of its ASEAN nations, there are rising
number of transnational enterprise that are investing abroad for new technologies.
Technological innovation has also brought about several changes in the MNCs of this nation
as that of Korea. There has been huge development in MNCs of Philippines and thus this led
to the expansion of market in this nation. Overall, technological innovation positively
influences the MNCs of Philippines as that of Korea.
Conclusion
From the first article, it can be concluded that the government of Korea plays vital
role in integrating new growth policy in the nation. Proper growth policy helps to enhance
economic development of Korea. It has been evident from the second article that
technological innovation has huge significance in the success of emerging MNCs in Korea.

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Moreover, it also helps the MNCs in Korea to enhance growth in business and expand their
business globally.

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References
(Eprints.bbk.ac.uk, 2018) <http://eprints.bbk.ac.uk/19220/1/19220.pdf> accessed 12 July
2018
Abdulsomad K, 'The Transformation Of Multinational Corporations (Mncs) From An
Innovation Perspective: Some Notes On The Theories Of Mncs' (2013) 29 AI & SOCIETY
Berry H, 'Global Integration And Innovation: Multicountry Knowledge Generation Within
Mncs' (2013) 35 Strategic Management Journal
Dornbusch, Rudiger, et al. "Korean growth policy." Brookings Papers on Economic Activity
1987.2 (1987): 389-454 < https://core.ac.uk/download/pdf/6252386.pdf>.
Filho W, R SantosE Mirra, 'Innovation Systems And Sustainability: An Approach For
Regional Clustering And Mncs Subsidiaries' (2012) 9 World Review of Science, Technology
and Sustainable Development <
https://www.inderscienceonline.com/doi/abs/10.1504/WRSTSD.2012.044787>
NOLAND M, 'Korea's Growth Performance: Past And Future' (2012) 7 Asian Economic
Policy Review
Tolentino, Paz Estrella. "Technological innovation and emerging economy multinationals:
the product cycle model revisited." International Journal of Technology Management74.1-4
(2017): 122-139.< http://eprints.bbk.ac.uk/19220/1/19220.pdf>
Wang Y, D SutherlandL Ning, 'A Dynamic Comparative Analysis Of International
Innovation Networks In Emerging Market Mncs' (2014) 21 Industry and Innovation. <
http://dro.dur.ac.uk/13684/1/13684.pdf>
Yoo C, M GopinathH Kim, 'Trade Policy Reform, Productivity Growth And Welfare In
South Korean Agriculture' (2012) 34 Applied Economic Perspectives and Policy<

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file:///C:/Users/LAPTOP~1/AppData/Local/Temp/GopinathMunisamyAgriculturalResourceE
conomicsTradePolicyReform.pdf>
Zeschky M, B WidenmayerO Gassmann, 'Organising For Reverse Innovation In Western
Mncs: The Role Of Frugal Product Innovation Capabilities' (2014) 64 International Journal of
Technology Management<
https://www.researchgate.net/profile/Oliver_Gassmann/publication/264818269_Organising_f
or_reverse_innovation_in_Western_MNCs_The_role_of_frugal_product_innovation_capabili
ties/links/577a6b8508ae213761c9b753/Organising-for-reverse-innovation-in-Western-
MNCs-The-role-of-frugal-product-innovation-capabilities.pdf>