Social trust in business and its socioeconomic effects in Korea

Chapter 8 examines social trust in business as well as its determinants, effects, and enhancement in Korea. Trust in business, which affects the economy and society through various channels, is seriously low in Korea. The Korean business sector has developed two distinctive groups of enterprises: a large number of SMEs and a limited number of conglomerates (chaebol). SMEs have stagnated over time, while chaebols have expanded and diversified through the financial incentives and institutionalised privileges provided by the government as part of its industrial policy. Chaebols have become the dominant economic force and were a critical culprit of the1997 crisis, after which they were forced to undertake reforms. The main causes of low trust in business include: economic power concentration in chaebols, poor corporate governance, unfair chaebol-SMEs relationships, and business corruption. To prevent business corruption, illicit intra-group transactions of chaebols should be prohibited. The most critical elements for raising trust in business are a strong political will and public support.