The Korean Mobile Phone Industry: The Government’s Role

It has been widely agreed that the Korean government played a critical role in the successful development of the CDMA-based mobile handset business. The Korean government had been often criticized for being several steps behind the private sector in high tech industries. In the case of the CDMA-based mobile phone business, the Korean government led the development and commercialization of the CDMA-based mobile handset. And yet, its role may need to be carefully examined to see if its initiatives have generated fruitful outcomes over the long haul and its interventions were rather excessive.

After the Asian financial crisis, the Korean government considered information communication technology products to be a new growth engine. In line with this view, the Korean government deliberately supported the growth of the mobile phone industry. The Korean government had developed policies and provided institutional infrastructure for the CDMA-based mobile phone business. The Korean government even played the market shaping role by providing not only financial contribution but also legal and political measures to ensure a huge domestic market.

The case of the Korean mobile phone industry development demonstrates that governments may need to consider there is a limit to what governments can do in nurturing a new industry development. Despite good intentions, excessive government’s interventions can hamper a free market system over the long haul. Most importantly, dissonance between market-friendly approach and state-driven economic development strategy may need to be recognized at the later stages of industrialization. Then, a significant question can be raised as to what role should the Korean government have played in the mobile handset industry?

Note: A complete analysis on this topic is available upon request if you are willing to review and comment on my draft (depending on your background and interests).