This paper is focusing on the change in market structure and industrial R&D during the economic crisis that occurred in 1997. Especially, ‘technological opportunity’, the industrial specific characteristic, is the key factor to explain the difference in degree and direction of changes between industries.
The economic crisis in 1997 maximized the ‘selection effect’ that drives out inefficient firms from a market. This fact could be verified by observing the increased market concentration. However, this increase in market concentration was preserved just in a short period showing that the effect of economic crisis on market structure was temporary.
When it comes to R&D, the economic crisis stimulated the innovative efforts of firms by intensifying competition. The R&D intensity rapidly increased after the crisis. In addition to this, the statistical significance of ‘technological opportunity’ variable explaining R&D intensity level also increased while that of ‘appropriability’ variable decreased after the crisis. This tells that R&D has become essential activity to survive in the market regardless of the appropriability. Especially, these patterns were prominent in high-tech industries
The effects of the IMF crisis on R&D were more remarkable in small-sized firms than big enterprises. During the crisis, restructuring was mainly focused on dissolving big companies and the government implemented a series of policies to foster the venture business so that small-sized firms could get a chance to raise their own competence. As a result, the proportion of small-sized firms’ R&D increased and this fact can be verified by observing the increase in R&D concentration.
