Case | HBS Case Collection | October 2007 (Revised May 2008)

Transforming Korea Inc: Financial Crisis and Institutional Reform

by Laura Alfaro and Renee Kim

Abstract

South Korea, as one of the Asian "tiger" economies, transformed itself into the world's 11th largest economy and major exporter by 1996, emerging from being one of the lowest income countries in the region back in the 1960s. Yet one year later in 1997, Korea was swept up in the Asian financial crisis and sought a record $58 billion bailout from the International Monetary Fund. The crisis exposed fundamental weaknesses in the Korean economy, from bad loans to reckless growth policies pursued by large conglomerates. Sweeping reforms took place and the Korean economy rebounded quickly. Yet as Korea approached the 10-year anniversary of the crisis, the nation found itself pondering whether it had implemented enough institutional and structural reforms, or whether more had to be done, such as searching for a new economic development model to ensure its future.

Keywords: Development Economics; Financial Crisis; Governing Rules, Regulations, and Reforms; Business and Government Relations; South Korea;

Citation:

Alfaro, Laura, and Renee Kim. "Transforming Korea Inc: Financial Crisis and Institutional Reform." Harvard Business School Case 708-007, October 2007. (Revised May 2008.)