Effects of Firms’ Strategies to Drive Productivity Growth in Korea’s Textile and Apparel Industries

This paper estimates the extent to which strategies of firms in Korea’s textile and apparel industries influence technical progress and productivity growth by applying a fixed effects stochastic frontier production model to a firms’ panel data set for the 2006-2009 period. The results indicate that VI show greater positive effects of the level of outsourcing on TFP growth than non-VI (NVI). Firms maintaining NVI over the whole sample period and those showing a change from NVI to VI show much higher TP than those maintaining VI and those showing a change from VI to NVI imply that NVI outstrip in driving technological innovation. Firms staying in business over the whole sample period show much greater technical progress than those that fail. In addition, firms with incentive schemes are more likely to show sustained technical progress and TFP growth than those without such schemes. Further, firms with technology strategies are less likely to show technical progress than those without such strategies. The results provide important insights into how specific strategies of firms in Korea’s textile and apparel industries can be implemented to promote technical progress and productivity growth.