The company survival is highly related with the growth and development of a city since it could create a large number of jobs and lead the influx of the population, in turn increasing the overall income level and solving an issue of population finance...
The company survival is highly related with the growth and development of a city since it could create a large number of jobs and lead the influx of the population, in turn increasing the overall income level and solving an issue of population finance. The economy of Busan is currently being led by small/medium export-oriented industries. In case of such industries, they are more likely to get influenced by global economy recession of the day since they are more vulnerable to changes in the external environment due to their small-scale businesses. Therefore, it should be the time to contemplate the company survival for each industry in consideration of the nature of Busan economy and direction of industrial policies of major developed nations along with South Korea.
In this study, with data on companies that have gone out of business in Busan of rhe Korea Chamber of Commerce and Industry, which collects information on companies that have registered the closure of business at the National Tax Service, survival rates and determinants of survival periods of the city industry have been empirically analyzed. For the analysis, various variables including general features, economical features and locational features of companies have been adopted. In addition, it aims to reveal spatial differences between city industry types with the analysis of spatial features of a region in which companies that have gone out of business are distributed,
First, in the city industry, it was shown that there is a spatial difference in companies that have gone out of business by industry type. In case of a manufacturing industry, it has the highest spatial auto-correlation, but a construction industry has the least spatial influence. Especially, a manufacturing industry was revealed to get influenced by companies that have gone out of business in neighboring areas, and areas in which companies that have gone out of business are relatively densely located around the western Busan. In the western Busan, the Sasang Industrial Complex, a representative industrial area of Busan, is situated. However, due to insufficient infrastructures and deterioration of facilities, a number of manufacturing companies are now out of business or moved to other areas. Thus, it would be required to work on this deteriorated industrial complex.
Second, among determinants of the survival period of a company that has gone out of business, variable that are related with company nature and economical features are almost similar throughout industries, but there are significant differences in spatial features between industry types.
In the company nature, the survival rate gets lower with the smaller scale of a business. Also, it was shown that companies situated in the western Busan are shown to survive longer than companies in the eastern Busan, but opposite in a manufacturing industry. In variables of economical features, every variable was shown to be significant. Thus, it could infer that the economical condition is a critical factor for the survival period of a company. In case of location features, factors of the survival period of a company are significantly varied by industry. Especially, a construction industry did not show to get influenced by locational features since this industry gets mostly influenced by economical conditions. Also, the survival period of a company that could easily access to roads or adjacent to the center of a city with a large transient population seems to be longer.
Third, the survival rate of a company was shown to decrease with an increase in the business operation period of the company. Especially, the survival rate is decreased dramatically when the business operation period reaches 120 months (10 years). Among types of industries, the survival rate of a manufacturing industry is the highest, followed by a construction industry and a service industy. On the other hand, a manufacturing industry was analyzed to have the highest survival rate over time comparing to other types of industries. As can be inferred from this fact, it would be reasonable to assume that a manufacturing industry acts as a driving force for leading a growth in Busan since it has the highest survival rate.
There is clear indication that the survival rate of a manufacturing industry is the highest in Busan, in turn acting as a driving force for a growth in Busan, and the local economy of Busan could secure the stabilized foundation upon development of a manufacturing industry. On the other hand, even though a service industry is the largest industry sector in Busan, its survival rate was shown to be the least. It might be due to that a service industry of Busan mostly consists of low value added service industries including food & lodging industry, retail industry and self-employ industry.
Even if a service industry develops along with the development of a city, it is essential to secure a manufacturing industry at a certain degree in order to develop a productible service industry. Recently, a relationship between a manufacturing industry and a service industry has been strengthened. Because of such industrial trends, it might be beneficial to promote the integration of a manufacturing industry and a service industry, raising the efficiency of overall industries.
The industrial prospect, which has been announced by a few research institutes and financial institutes, are not that bright because of global economy recession, withered consumption sentiment, rise in raw material costs, and others. However, what all the healthy small/medium companies have in common is that they are always in preparation for any changes in the market and customer needs with their outstanding technical skills. Thus, for continuous survival of a city industry, companies should always analyze a business environment as well as economical and social conditions and prepare themselves for those.
Since a company has a major influence of the economy of a city, a local government always put the attraction of companies on the top of its priority list for development and growth of the local economy. A decrease in the survival period of a company would result in decreases in the no. of jobs and deteriorate the economy resilience and subsequently, deteriorate the potential growth. Therefore, there should be additional efforts on extension of the survival periods of the existing companies, contributing to the local economy.