Is Political Connectedness a Paramount Investment After Liberalization? The Successful Leveraging of Contingent Social Capital and the Formation of Cross-Border Strategic Alliances Involving Korean Firms and Their Global Partners (1987-2000)

One of the main challenges for firms in emerging economies is in overcoming weak legal institutions at the macro level that stifle the broad sharing of technological and financial resources across firm boundaries. The literature has previously shown that cross-border strategic alliances are a valuable means of securing scarce technology and finance for emerging economy firms. It is an open research question how firms in emerging economies can best gain access to cross-border knowledge and financial resources in the wake of widespread political and economic liberalization. One branch of the literature has argued that firms in emerging economies should focus their post-liberalization investments on marketing and R&D, and dramatically reduce their resource and time investment in securing political connectedness, whereas another part of the literature has argued that political connectedness is still of paramount importance even after deep liberalization. This paper shows through a natural experiment between Korean firms and their cross-border alliance partners that ongoing investments in political connectedness are one of the most economically and statistically significant determinants of access to cross-border alliances. This finding holds even after the time of deep liberalization involving Korea’s membership in the WTO and OECD. The economi