Geoscience Reference
In-Depth Information
12.5.2 Network Linkages
The case summary above provides evidence that network linkages became progres-
sively deeper and broader over the cluster history beginning at or shortly after take-
off
circa
1970. Today there are deep vertical linkages to robust supply chains within
each of the
chaebols
with recent foreign investments in shipbuilding infrastructure
and cooperative relations in China, Viet Nam, Brazil, Norway and Romania (Shin
and Hassink
2011
). However, horizontal networking across the major
chaebol
companies of Hyundai, Daewoo and Samsung has remained minimal with most
cooperation focused on addressing problems that face the whole industry such as
the impact of heavy regulation in some countries constraining Korean market entry.
To the extent
chaebol
cooperation has occurred it has been indirect and through
membership in non-profit trade and promotion organizations. Very little direct
cooperation has occurred. The status of evolution and recent network linkages in
general appear to place the shipbuilding cluster in middle of the Exploitive Expan-
sion stage.
The strategy from the beginning has been one organized around the three
chaebols
. This has been the general strategy of South Korean development planning
since the 1960s which has had a heavy industry focus that included shipbuilding.
This strategy worked well until the late 1980s and 1990s when market conditions
for large but relatively simple ships (oil tankers, LNG carriers) faded. In the late
1990s the large conglomerates as well as the whole Korean economy was nega-
tively impacted by the Asian economic crisis. The
chaebols
were forced to restruc-
ture and in the case of Daewoo to uncouple its shipbuilding division to achieve debt
reduction and in turn the acquisition of many new projects, and a demonstration that
it could manage multiple large orders as well (Shin and Hassink
2011
). In short, the
crisis created many financial challenges which led to restructuring and the devel-
opment of several new companies or the rolling up of medium sized but relatively
inefficient companies into new more efficient and entrepreneurial ventures, e.g.,
STX Group. The resulting strategy was to create more competition and to restruc-
ture the former lead companies into models that were more efficient and innovative.
Restructuring resulted in reinvigorating a cluster that was trending toward Exhaus-
tion. As such it resulted in a reengineering of the cluster and moving it back into the
earlier Exploratory Expansion Stage. At the same time the network linkages that
grew in the earlier stages still existed and could also be redesigned and redirected to
facilitate more rapid movement toward agreement on new best practices and
standardization. Consequently, by the late 2000s the shipbuilding cluster can also
be viewed as in the Exploitive Expansion stage.
As described above the shipbuilding cluster in Korea is dominated by several
chaebols
which dominate the structure of the industry. While there are several
medium sized companies that to some extent build ships or major parts of ships,
they generally provide inputs to the larger shipbuilding companies. Beneath this
“top heavy” structure are many small companies that are for the most part tied or
linked to one of the
chaebols
. From the take-off until the late 1990s the value chain
remained top heavy. In the late 1990s renewal of the cluster's formation of new
