Evaluation of Korea’s Material, Parts, and Equipment Industry Support Policy and Its Implications

Abstract

This paper provides an overview of Korea's competitiveness-strengthening policy for materials, parts, and equipment (PME policy), which was implemented in response to Japan's export regulations on strategic materials in 2019. The study conducts empirical analysis and case studies to evaluate the policy's effects and derive policy implications. Specifically, panel data from 2,165 companies, including policy beneficiaries and non-beneficiaries, are collected for the period from 2017 to 2021. Using a two-way fixed effects (TWFE) model, the analysis reveals positive policy outcomes in terms of profitability, employment, and patent registration for the policy beneficiary companies. The paper proposes policy improvement measures, such as upgrading through the restructuring of the PME policy, expansion of PME technical workforce, and tailored support based on company characteristics, including R&D support. Furthermore, the study discusses the establishment of an effective data management strategy and a continuous policy performance evaluation system. However, due to data limitations, only four specific support policies were analyzed, and the small number of companies studied is a limitation of this research.