Transforming into Fashion Firms or Multi-Country Suppliers? Accounting for Varied Firm Trajectories in the Deindustrialising Korean Apparel Industry

Abstract

This paper compares across two groups of Korean garment firms’ varied development and patterns of integration into the global economy in the deindustrialising Korean apparel industry. Although each group, both with histories as export suppliers, developed into fashion lead-firms or multi-country suppliers, current literature on firm upgrading provides little help in explaining the varied post-industrial trajectories of these firms. This paper bridges global value chains/global production networks (GVC/GPN) literature with institutionalist literature to highlight the importance of differential market embeddedness and organising logics in patterning how firms respond to changing global conditions.

Acknowledgements

The author would like to thank the anonymous reviewers for JDS, colleagues at the NUS@GPN centre, Kurtuluş Gemici, Feng Qiushi, Xiaohong Xu, Manjusha Nair, and George Radics for helpful comments and suggestions on previous drafts and presentations of this research.

Disclosure statement

No potential conflict of interest was reported by the author.

Notes

1. In 2015, the top six chaebol fashion firms accounted for 30 per cent of the domestic market sales (US$8 billion) and employed almost 9000 workers domestically.

2. In 2015, the top four firms each netted over US$1 billion in gross sales, and an additional dozen netted over US$100 million. The top 17 firms employed 7214 people in Korea and 315,827 worldwide.

3. It is not the main purpose here to adjudicate between the relative strengths and weaknesses of these theories. See Hamilton and Biggart (1988), Hamilton and Shin (2015) for in-depth discussion.

4. The empirical section relies on six interviews the author conducted with executives, managers, merchandisers, and designers of Korean fashion firms between 2014 and 2017. Each interview lasted around one hour.

5. In custom bonded production, imported parts or raw material undergo processing and are re-exported without payment of duty. Chun-woo-sa was the first Korean trading company to export garments under this production model in 1961. The company secured orders from Hong Kong and Japanese trading firms, and invited technicians from these countries to transfer the necessary knowledge to fulfil orders (Chosun Weekly, 2015).

6. Segye Mulsan (1964), Shinseong Tongsang (1968), Taepyeongyang Mulsan (1972), Taehwa (1973), Shinwon (1973), and Youngone (1974) are examples of surviving OEMs.

7. The Export-Import Bank of Korea. http://211.171.208.92/odisas.html.

8. Statistics Korea (http://kostat.go.kr) reports that large manufacturing facilities with 50 to 1000 workers employed 37 per cent of the nation’s garment workers in 1993. By 2005, the large facilities employed only 16 per cent of the workforce, owing to greater offshoring of large factories, whose total declined from 875 to 317.

9. Since the 1990s, fast-fashion firms have set worldwide standards for fashion production and retailing with speed-to-market approaches, in which trendy designs are available for a low price. Adopting the lean retailing model, companies such as Zara produced more than 10,000 designs annually, and introduced products to stores every two to three weeks, amounting to 18 seasons each year, in comparison to the conventional four. Based on real-time production, the QR system allowed quick discontinuations of unpopular designs, and continuous reorders and replenishments of best sellers (Taplin, 2014).

10. Lecaf (1986), Pro-specs (1988, Gukje), Parkland (1988, Taehwa), Mercoledi (1989, Yoolim), and Unionbay (Shinseong, 1990) are examples.

11. The most notable success case is Shinseong Tongsang. The company gradually reduced its OEM share to 50 per cent and carved out a domestic market for its brand. In 2015 it netted US$600 million as Korea’s 10^th largest fashion and apparel firm.

12. In comparison to Taiwanese and Hong Kong counterparts, Korean suppliers are more vertically integrated, with stronger upstream raw material capacities. Korean suppliers have also played more critical roles in establishing production networks across Latin America and South Asia, in comparison to counterparts that concentrated operations in Asia.

Additional information

Funding

This work was supported by the National University of Singapore [FASS Startup Grant (WBS: R-111-000-150-133)];