1 Long-Term Performance of the Business Groups: The Case of Chaebols Before and After the Crisis in Korea

anonymous referees and the editors of this journal. Editorial assistance from Hayoung Kim is also appreciated. Keunkwan Ryu appreciates the hospitality of the ISER at the Osaka University where he worked on a part of the paper during the Summer of 2003. This work is supported by the Korea Research Foundation (Grant: KRF-2001-041-C00243). 2 This paper differentiates itself from the large volume of existing literature on business groups, like the Korean Chaebols, in several aspects: first, it focuses on productive efficiency rather than financial efficiency as a performance measure; second, it defines Chaebols in three alternative ways and checks whether results are robust; third and most importantly, it explains the sources of the long term and post-crisis change in the performance of the business groups in Korea with focus on technological capabilities and investment inefficiency. No matter which definition of Chaebols we adopt, this study consistently finds that Chaebols were inferior to non-Chaebols during the pre-crisis period, that they have become superior to non-Chaebols in the post-crisis period, and that inefficiency in investment ha