Contents

Ⅰ. INTRODUCTION

Ⅱ. THEORETICAL FRAMEWORK

 CONCEPT AND ORIGIN OF TRUST

 LINKAGE BETWEEN TRUST AND ECONOMIC DEVELOPMENT

Ⅲ. SUBCONTRACTING RELATIONS BETWEEN THE LES AND THE SMES IN KOREA

 THE LEs AND THE SMEs IN KOREA'S GROWTH

 CHARACTERISTIC OF SUBCONTRACTING PRACTICES

Ⅳ. INSTITUTIONS AND TRUST BUILDING

 CAUSES OF THE LACK OF TRUST IN SUBCONTRACTING RELATIONS

 TRUST BUILDING THROUGH INSTITUTION

Ⅴ. CONCLUSION

Abstract

This study is designed to explore the link between trust and economic development by focusing on the subcontracting relations between the large enterprises (LEs) and the small and medium enterprises (SMEs) in Korea. In this study, trust is regarded as a product of institution rather than a reflection of culture. The institutional view of trust is interested in creating the level of trust when there is none. Korea grew fast under a lack of trust before it faced the 1997 economic crisis. During the mass production period, cheap price rather than trust was the most important factor for surviving international competition. However, during the reflexive manufacturing period, the issue of trust plays a crucial role in increasing innovation and efficiency. One of the reasons for the recent economic bottleneck could be attributed to the lack of trust between the LEs and the SMEs. Trust and law are compatible, and the latter may contribute to developing and strengthening the former. To raise the level of trust in subcontracting relations, monitoring and sanctioning systems need to be established. Establishing an institutional framework requires a genuine interest match among the government, the LEs, and the SMEs.