Empirical Analysis of the Effect of an Evidence-Based Policy for a Wicked Problem—Lessons Learned from the South Korean Industry Policy History for the Structural Reform of Subcontracting Practice in the Software Industry

The highly concentrated and stratified subcontracting structure, which successfully led to efficient production and excessive exports in South Korean manufacturing industries, represented by automobiles and heavy machinery, had difficulty replicating the same success in the software industry. In 2016, the government put a policy to reform the subcontracting structure to simplify the hierarchy and promote horizontal collaboration. We discuss the impact and implications through panel difference-in-differences analysis from 2013 to 2018 based on integrated dyadic transaction and financial data of 2,665 South Korean local software firms. Our research confirmed the effectiveness of the industrial structure reform policy. In our assessment of evidence-based policymaking, we focus on the often-overlooked perspective of the subcontractors. By comprehensively synthesising various industrial structure theories, the present study found that the optimal subcontracting collaboration structure differs according to the characteristics of industries. Also, designing evidence-based policies, even for wicked problems involving conflicting stakeholders, can obtain the expected outcomes if the policy-makers secure good evidence and support intermediary organisations such as cooperatives and associations.