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Problems and Legal Solutions related to the Fair Transaction of Subcontracting System of High Potential Enterprises in Korea

  • DONG-A LAW REVIEW
  • 2014, (62), pp.591-626
  • Publisher : The Institute for Legal Studies Dong-A University
  • Research Area : Social Science > Law

Jeong-Ku PARK 1

1숙명여자대학교

Accredited

ABSTRACT

This paper is concerned with problems and legal solutions of the subcontracting system in Korea. The business environment related to the subcontracting system in Korea has recently changed by global competition. The subcontracting system between the Large Enterprises and Small and Medium Enterprises(SMEs) including High Potential Enterprises(HPEs) has continued to change from vertical cooperative relationship into horizontal cooperative relationship: strength of competitiveness, open subcontracting transactions, enlargement and specialization of subcontracted company etc. Some survey research about the subcontracting system of the KOSDAQ listed enterprises in Korea shows that the KOSDAQ listed enterprises are composed of different companies: SMEs(75.4%), HPEs(19.5%), Large Enterprises(4.0%) etc, and it also shows that current Korean subcontracting system has many problems. Large Enterprises have abused their dominant positions in transactions with SMEs including HPEs and have practiced unfair transactions like unfair reduction of subcontract payment, revocation of subcontracting after verbally ordering, stealing of technology in transactions with SMEs including HPEs etc. It also shows that the unfairness of subcontracting trasactions is getting worse in 2. and 3. subcontracting transaction. To solve this problem, it is necessary to establish new efficient subcontracting system. Collaborative subcontracting based on ‘Faith’ and fair transactions between Large Enterprises and SMEs including HPEs are necessary to solve problems of the subcontracting system. In order to achieve this, it should be emphasized not only the role of Large Enterprises as prime contractor and the core competency of SMEs including HPEs as subcontractor but also the legal system for fair subcontracting system. The SME policies and the HPE policies of the government will encourage SMEs and HPEs to increase their competitiveness for the growth in the global economy. The government should establish the fair subcontraction system between Large Enterprises and SMEs including HPEs.

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