The textile industry is a traditional pillar industry for both Korea’s and China’s economy. The textile industries in both countries hold the pivotal status in the world. The Korean textile industry especially has the more and more obvious influen...
The textile industry is a traditional pillar industry for both Korea’s and China’s economy. The textile industries in both countries hold the pivotal status in the world. The Korean textile industry especially has the more and more obvious influence on the world market. This thesis will compare the competitiveness in the textile industry between Korea and China, in which we will investigate textile firms from the two countries. The thesis will use Porter’s Diamond Model to illuminate the differences of competitive strategy in the textile industry between the two countries, the origin of the differences, and the different influences on the competitiveness.
Although there are many researchers who focus on Porter’s Diamond model to compare the competitiveness between the two countries, they polish up Porter’s single Diamond model to a double Diamond model (Rugman, 1991; Moon et al., 1998; Dunning, 2003). They simply modify the Porter’s Diamond model; change the government variable from exogenous to endogenous, since the government is the main factor for a nation’s competitiveness (Cho, Moon, and Kim, 2008). They are devoted to macroeconomic comparison, and they do not pay attention to the firm level competitiveness which determines the industry’s competitiveness. Other studies explore the factors which deeply influence the firm level competitiveness (Grant, 1991; Jassim, 2001), but they ignore the Diamond model. However, this study wants to extract the results from antecedents, absorb their advantage, and implement them into the Diamond model at microeconomic level.
The thesis attempts to outline the competitiveness of the textile industry in the two countries by currently looking closely in these specific area: the textile firms across the Yangtze River Delta (YRD) region in China and the firms in Daegu, Korea. Because these two areas are famous for their textile industries, both of them possess textile industry clusters. The empirical data used in this study will be collected through a questionnaire survey in these two areas. The sample contains 248 firms situated in these areas, and the data are up to December 2006.
The thesis will examine the firms’ productivity to proxy the firms’ competitiveness. It will use factors according to Porter’s Diamond model, but will modify Porter’s Diamond model, change the macroeconomic factors into microeconomic factors, and will change the factor of role of the government from exogenous accidental in Porter’s model to essential similar to demand market in the new model. The “chance” factor in the Diamond Model is eliminated in this study because it is very difficult to collect data. This study would get implication from the generalized double diamond model (Moon, Rugman, & Verbeke 1998) to compare competitiveness between the two countries, will use modified double Diamond Model to compare five firm level factors influence productivity in textile industry competitiveness between the two countries. We call this modified model as Modified Double Diamond Model, abbreviation is MDDM.
The study will use multiple linear regressions to find out the main factors which influence the competitiveness, and will use an independent sample T test to compare the difference between the two countries. Also, the study classifies the population into three groups according to streams (upstream, middlestream, and downstream) as well as sizes (small size, middle size1, middle size2), and uses ANOVA and the independent sample T test to compare the differences of factors and productivity within each country and between countries.
The empirical results suggest that the competitiveness of both enterprise and industry depend on a firm’s internal factors, the firm’s internal factors obviously influence productivity in the two countries, and internal resources include the firm’s resources and firm strategies, and organizational structure. The external environment of the firm includes demand markets, related supporting industries, and the role of government. The external factors only influence competitiveness, but they can not determine it. Particularly government supporting in China is much higher than that in Korea. Nevertheless, in measurement, the industry competitiveness between the two countries is not statistically significant different, the main reason is that the difference of the firm internal factors is not very big. Another reason is that the two countries are classified into different groups according to the results of the cluster analysis from prior research; Korea is classified into the intermediary medium group, while China is in the intermediary large group. A nation’s competitiveness is more meaningful when it is assessed among nations with similar characteristics competing in similar industries because competitiveness implies a relative position among competitors in the same competitive group (Cho, Moon & Kim, 2008).
The results of this empirical research are useful to businessman in the two countries. It suggests that the external environment factors of firm’s always change, but the important focus is on the enterprises’ internal factors, which include a firm’s resources, organizational structure, and its improvement in order to achieve high productivity. Through employment training high productivity of Korean textile firms can be reached. In addition, through the education of employees with regard to computer and internet usage related information can be obtained to positively influence productivity in China. Another internal factor is organizational structures; if the firm takes advantage of cooperation among workers, the firm’s organizational efficiency (e.g. information transfer speed) can exceed its competitors, and the firm workers will have a better understanding of the company’s management, thereby complying with management policy. Thus, this firm can achieve high productivity. The results suggest that the government gave less support to the exporting of textile industry because it is relatively useless for improvement of competitiveness. Among the industries the government can serve as a guide and coordinator to preserve traditional formats, style and characteristics, and to enhance research and development abilities to develop competitiveness based on the technology.
There are three main findings in this study. It shows the useful and practical applications of the Modified Double Diamond Model (MDDM). The firm’s internal factors obviously influence competitiveness, and the comparison results show that different internal factors influence competitiveness differently between the two countries. Among the external factors, the two countries face the same degree of competition with the same businesses in the international market and this kind of intense competition influences productivity negatively. Thus, we must encourage competition but avoid excessive competition.
This study consists of five parts: a) introduction on the purpose and scope of the study, b) illustration of the status and perspective of the textile industry in Korea and China, c) information about the basic theory of the study, and a literature review, d) explanation of the basic hypothesis and methodology and exhibition of the results, and e) drawing out of the conclusion, and details of the significance and some of the limitations of the study.
Future research on the industry competitiveness can use MDDM to compare the competitiveness between two or more countries with regard to many other industries. In this study, we focus on the manufacturing industry, which is similar to the textile industry. The subject of the further study can focus on another industry, such as the automobile industry, service industry, entertainment industry and so on. Also, future research can be performed for the service industry. For this kind of study, we can use white collar productivity instead of blue collar productivity. We can use MDDM to compare the competitiveness of the service industries between the two countries to find out the origin of the differences and point out the path to improvement. Future research on the competitiveness of the textile industry will focus on using the factor “chance” which is mentioned in Porter’s Diamond model. This study focuses on static analysis, so further study will be performed for a dynamic situation.
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