بهره وری اقتصادی ساختار چند محصولی: شواهد از شرکت های مسکونی سازی کره ای

The Korean housebuilding industry has been subject to structural changes since the 1980s. One of the key features is that housebuilding firms have become diversified into a range of businesses and as a result display multi-product structure. This paper examines the efficiency of the multi-product structure of Korean housebuilding firms. For the analysis, translog cost functions were estimated using data for 201 building firms for the 3 years 1993–1995. The empirical results indicate that medium-size building firms enjoy increasing returns to scale, whereas large firms experience constant returns to scale. Korean building firms exhibit significant economies of scope in their diversification activities. Large firms have the greatest economies of scope. These results are consistent with cost efficiency for the multi-product structure of Korean housebuilding firms. The estimated optimum scale suggests that many large firms should expand only through diversification.

The Korean housebuilding industry has undergone steady growth concurrently with general economic development since the 1970s. The industry has grown particularly rapidly since the mid-1980s and has experienced significant structural changes. Approximately 70% of new construction has been built by the private sector since the mid-1980s. Most of the private output has been produced by large-scale firms that the Korean government certified, and not by small-scale housebuilders which had dominated the industry before the 1980s. In addition, apartment houses comprise 70–80% of total new construction, whereas the single detached house was the most popular type until the beginning of the 1980s. Another important feature is that housebuilding firms have diversified by extending into a range of businesses unrelated to their own industry (Kim and Park, 1996). Even small firms which have recently entered the business are involved in various other businesses. The emergence of large firms in the housebuilding industry since the 1970s is not confined to Korea and is found in other countries as well (Ball, 1996; Ball et al., 1988; Cough, 1988; Grebler, 1973; Lambert, 1990). Housebuilding firms in industrialised countries have begun to involve themselves in various businesses through the diversification strategy since the 1970s (Ball, 1983 and Ball, 1988; Gillies and Mittelbach, 1962; Hasegawa and Shimizu Group, 1988; Hillebrandt and Cannon, 1990). Kim and Park (1996) observe that most of the active housebuilding firms are carrying out more than one business besides housebuilding. Their main business is either housebuilding or other construction, but they are also involved in other businesses such as land development, property management (rental and sale), and other unrelated business (such as shopping centre development and rental, and restaurant business). There are distinctive differences among different sized firms. Large firms are mainly those that started business in other construction and have emerged into housebuilding business since the 1980s. They are very large scale in terms of numbers of employees, total sales, and capital. Typically, medium and small firms are those which started their business in housebuilding as speculative housebuilders. Cho (2000) found that when we consider only direct production costs, housebuilding is more profitable than the “other construction” activities. However, large firms return relatively higher profits than small- and medium-sized firms, which are more involved in the profitable housebuilding business. One possible reason is that small firms incur relatively higher overhead costs, including interest and other financial costs. This suggests that large firms may be achieving economic efficiency from the large-scale, multi-activity nature of their business. This paper examines the economic efficiency of the diversified product structure of Korean housebuilding firms. The plan of this paper is as follows: Section 2 reviews the implications of the economies of scale and economies of scope in the housebuilding industry. Section 3 introduces the form of the model for estimating the cost function of multi-product firms. Economies of scale and economies of scope are derived from the function. Section 4 outlines the variables to be included in the model, data sources, number of observations, and the estimation method. Section 5 contains the estimation results which address whether or not the multi-product structure is economically efficient. Optimum scales of firms’ business are also derived from the results. Section 6 contains a summary and discussion.

Research on diversification has been actively carried out since the 1970s, as diversified business groups increasingly dominated private-sector industrial and service activity in many of the world’s economies. Much research has focused on the nature and efficiency of diversification at business group level. In Korea, several studies have examined the efficiency of diversified business groups since the mid-1980s. However, there has been little investigation of the efficiency of the multi-product structure at the firm level. The present study is the first to investigate whether or not building firms’ multi-product structure that evolved during the rapid growth period is cost efficient. The empirical results presented here are consistent with cost efficiency, and we conclude that Korean housebuilding firms can achieve cost efficiency from the multi-product structure. Korean firms exhibit increasing returns to scale over an important range of firm sizes. However, economies of scale do not provide a sufficient raison d′être for diversified building firms. We suggest that one factor driving the diversification of Korean building firms into other business is economies of scope. If positive scope economies did not exist, the multi-product building firms would do better if broken up into several specialised firms without any increase in cost. The economies of scope provide the incentive for firms to expand the range of their businesses. The sharing of industry technological knowledge across building work would appear to be a strong motive for diversification between housebuilding and other construction activities. The estimated scope economies may be used as information for firms’ decisions to further diversify. The estimates have important implications. First, the Korean government’s policy to encourage large construction firms to participate in the housebuilding industry is well founded. Cost efficiency may have contributed to the high and rapid growth of the housebuilding industry in the 1980s and 1990s. Second, taking into consideration the fact that most of the Korean building firms are diversified into various related and unrelated businesses, these results suggest that the diversification of Korean housebuilding firms is a cost efficient strategy. Third, the results presented here suggest that a very large scale is not necessarily optimal. The medium-size firms achieve significant scale economies as well as scope economies, while the large firms do not enjoy increasing returns to scale even though they are achieving greater economies of scope. These results also suggest that the medium-size firms have some efficiency advantages over the large firms. The large firms exhibit quite a substantial difference in business scale from that of the medium and small firms. The average size of the large firms (790,000 million won) is about four times greater than that of medium-size firms (180,000 million won). The results suggest that the current scale of Korean housebuilding firms may be larger than is optimal. More clearly, they also suggest that the large firms should consider other approaches rather than simply further expansion of business scale. The Korean housebuilding industry has recently experienced another re-structuring process, as part of the Korean economy’s experience of tremendous structural change along with the Asian Financial Crisis at the end 1990s (Ministry of Construction and Transportation, 1995). Several large building firms went bankrupt, some of which survived and have since grown further. Further research is needed on these successful building firms in terms of their nature, business scale, and strategy.