The Effect of Segment Portfolio and R&D on Financial Performance: Evidence from Korean and Japanese Chemical Firms

• DOI: 10.35373/kmes.22.3.7
• Publication Date: 2020-04-27T06:23:33Z
• Authors: Kichul Hong; Kwangho Park
• Keywords: Restructuring; Consolidation; Chemical industry

The Korean chemical industry has been one of the heavy industrial sectors to boost economy during past three decades. In early 2010s, firms faced significant challenges due global overcapacity and rising competition from China Middle East countries. current downturn comes internal factors on strategic choice, not business cycle. September 2016, Ministry Trade, Industry Energy recommended necessity cutting production four items - Terephthalic acid(TPA), polystyrene(PS), synthetic rubber(SBR) PVC. Meanwhile, in 1959, Japan, known as Triad with US Western Europe controlled industry. However, by 1990s, emergence growth companies based Korea, Taiwan China, Japan struggled through a lost decade that continued into 2000s. Although Japanese have lagged behind West adjusting new realities, many already taken steps increase their competitive advantage restructuring, consolidation research. level change inevitably requires company fundamentally rethink its strategy model. What is value for sustain advantages under uncertainty associated infection point (SIP)? A SIP critical period which major threats well opportunities come about. This paper addresses this key question examining following issues. Firstly, our study diagnoses whether Korea confronts basis adapted seven forces model consisting market five framework traditional analysis complementors nonmarket technology government regulation. Secondly, we examine different adaptation strategies between most profitable non-profitable light segment portfolio R&D using case studies. Lastly, conduct an empirical classify groups application cluster analysis. Segment are interest independent variables because they linked creation, whereas operating income, dependent variable external signal indicate each firm`s financial performance. data set used descriptive statistics DART (Data Analysis, Retrieval Transfer System) annual reports 44 2000 2016. Our results show there exists gap income among groups, i.e. high performance group makes diversifying value-added specialty materials strong capability. consists specialized materials. no firm was found there. findings suggest called process transformation improve enhancing in-house capability acquiring business. order step out pending crisis, should shift paradigm market. signals timing change. Transformation involves rapidly radically changing strategy. task top management recognize ambiguous conflicting SIP, adapt develop Their resolve must be followed changes resource allocation. It expected can applied other industries, e.g. shipbuilding, automobile steel underpinned Korea`s growth.