Performance and strategic changes of SMEs in the Korean electronic parts industry 1990- 2001: A dynamic strategic group approach

This study empirically examined the patterns and performance consequences of strategic changes of SMEs in response to environmental changes, based on longitudinal data from 102 Korean electronic parts SMEs for the period from 1990 to 2001. Using the dynamic analysis of strategic groups in the Korean electronic parts SMEs, this study found that four to five different strategic patterns (subcontractor, production-focus, market-focus, innovator, and marketdiversified groups) emerged depending on the periods, and there were significant performance differences among them. For instance, the innovator group outperformed other strategic groups, while the subcontractor group had the lowest performance level in terms of ROS. The production-focus group, which exhibited a relatively higher performance level in the early 1990s, gradually deteriorated in profitability in the late 1990s. As a result, a substantial number of SMEs (25% of sample firms on average) have attempted to shift their strategic configurations with different performance consequences. These results imply that given the rapid technological development in the industry and changes in the global production network with the emergence of Chinese competitors, Korean SMEs should focus on technological innovations for maintaining their competitive position by relentlessly enhancing their technological development capabilities rather than production capabilities. Based on these findings, policy and strategic implications for strengthening SMEs in the Korean electronic parts industry are proposed.