Why did small and medium-size businesses become dependent on South Korean chaebol?

The dependency of small and medium-size enterprises on chaebol in South Korea is rooted in the government’s industrialization strategy that began in the 1960s. To transform the nation from an agrarian society into an industrial power, the government prioritized large-scale projects and provided extensive support to these family-controlled conglomerates.12

As the government funneled resources and support toward the chaebol to drive export-oriented growth, it became increasingly difficult for smaller, privately managed industries to secure financing. Consequently, many of these smaller firms were forced to operate as subcontractors for the chaebol, creating a structural dependency.2

Critics argue that this cooperative relationship between the state and the chaebol fostered an unfair playing field for smaller enterprises and led to the concentration of capital in the hands of a few economic giants. While this model is credited with the "miracle on the Han River," it also created significant economic imbalances that remain a subject of ongoing reform efforts.31