21COE, University of Tokyo

MMRC Discussion Paper No.65

MMRC
DISCUSSION PAPER SERIES

MMRC-F-65

Competition and Cooperation between Korea
and Japan: A Business Perspective

Hwy-Chang MOON
Professor of International Business and Strategic Management
The Graduate School of International Studies
Seoul National University
January 2006

21COE, University of Tokyo

MMRC Discussion Paper No. 65

Competition and Cooperation between
Korea and Japan: A Business Perspective

Hwy-Chang MOON
Professor of International Business and Strategic Management
The Graduate School of International Studies
Seoul National University

January 2006

Abstract
This article studies the possibility of cooperation between Korea and Japan, using
analytical frameworks in both competitiveness and cultural perspectives. The
empirical results show that Korea and Japan are not in a competitive relationshipand that there are several ways for cooperation between the two countries. This
article further demonstrates that the two countries can complement their culturaldifferences and reinforce their national competitiveness structures.

Keywords
Korea, Japan, Cooperation, Culture, DDD Model, OUI Model1

Hwy-Chang Moon

Introduction
With an increasing global trend of forming regional economic blocs, the importance ofcooperation among the countries in Northeast Asia, especially that between Korea and Japan has long
been discussed without much success. In order for Northeast Asia to be in a better economic positionin comparison to other economic blocs, cooperation between Korea and Japan is imminent. This must
be based on correct analyses with appropriate frameworks that can incorporate fundamental variablesof national competitiveness.
This article studies the possibility of cooperation between Korea and Japan through rigorous
analytical frameworks in both competitiveness and cultural perspectives. After analyzing bothcompetitiveness and cultural determinants, the article suggests ways of cooperation between Korea
and Japan through simultaneous consideration of both perspectives. Therefore, this article is morecomprehensive than other existing studies in analyzing the relationship between the two countries.
Several studies in the past have emphasized the importance of cooperation between Korea andJapan. For example, after analyzing trade patterns between Korea and Japan, Koh et al. (2003)
proposed the formation of a free trade agreement (FTA) between the two countries. Concerning the
economic cooperation among Korea, Japan, and China, they suggested that FTA between Korea andJapan should be established before the access of China to the FTA, because China might have a goodenough incentive to join the FTA between Korea and Japan.
Lee (2004) studied the possibility and the effects of FTA among China, Korea, and Japan. They
showed that the creation of this FTA would bring benefits not only to trade-related areas, but also toother areas such as customs cooperation, the IT sector, science and technology, and the environment.
Similarly, based on the analysis of international input-output tables, Lee and Okamoto (2002) foundthat the industrial structure of Korea and Japan is deeply interdependent, especially in the electronics
industry. Cheong (2004) also suggested the creation of FTA among China, Korea, and Japan toincrease economic benefits in production, trade, and economic welfare.
However, these existing studies do not look at the whole picture of competitiveness and thus do
not provide comprehensive analyses. Any approach, used to determine the fundamental relationshipbetween the two countries should be based on a strong analytical framework of national
competitiveness. This article will first suggest an appropriate analytical model of competitiveness forthis purpose and then another model, i.e., the cultural model, to complement the competitivenessmodel. After related empirical tests, some useful implications will be derived.

2

Competition and Cooperation between Korea and Japan: A Business Perspective

THE COMPETITIVENESS MODEL
The Diamond Model
Traditional trade theorists have considered capital, labor, and natural resources as sources ofnational competitiveness. In reality, however, there are many counter examples that go against what
traditional theorists have argued. Criticizing the conventional model, for being at best incomplete andat worst incorrect, Porter (1990) introduced the diamond model in his book, The Competitive
Advantage of Nations. As the title implies, this book was meant to replace The Wealth of Nations(Smith, 1776).
In this book, Porter argues that national prosperity is created, not inherited. Thus, his model isdynamic. In addition, this model is comprehensive because it creates a single model by incorporating
the production factor conditions that most traditional theorists have employed, along with otherimportant variables to explain national competitiveness. Therefore, the explanatory power of the
diamond model is revolutionary.
The diamond model is composed of two parts: indigenous and exogenous variables. The
indigenous variables are Factor Conditions, Firm Structure, Strategy and Rivalry, Related andSupporting Industries, and Demand Conditions. The exogenous variables are Government andChances.
Factor Conditions measure the factors of production necessary to compete in certain industries,
which are further divided into two subcategories of basic factor conditions such as natural resources,
climate, and population, and advanced factor conditions such as skilled labor, technology, andknow-how. Firm Structure, Strategy and Rivalry represent the national environment in which
companies are created, organized, and managed, as well as the nature of domestic rivalry. Related
and Supporting Industries test competitiveness of industries related to a given industry or supplierindustries. Demand Conditions show the nature of the domestic market for its size and sophistication.

Previous Studies Evaluated by the Diamond Model
Koh et al. (2003) approached the relationship among Korea, Japan and China through theanalyses of market share, ESI (Export Similarity Index), RCA (Revealed Comparative Analysis), andTSI (Trade Specialization Index), using the data from world trade statistics by the UNCTAD, Asia
International Input-Output Table by the Institute of Developing Economies, and the Direction ofTrade Statistics by the IMF. This is clearly a trade-oriented approach to the relationship between thetwo countries, which falls under the Demand Conditions of the diamond model.
3

Hwy-Chang Moon

In their study of economic cooperation among China, Korea, and Japan, Lee (2004) covered suchfields as trade and investment, customs cooperation, IT, science and technology, transportation,energy, and environment. Although this study is surely more comprehensive than other studies, it still
misses some important variables to comprehensively estimate the relationship between the countries
when evaluated by the diamond model. Trade and investment, and customs cooperation are elementsof Demand Conditions. The IT sector, science and technology, transportation, and environment areunder Related and Supporting Industries. Only energy falls under Factor Conditions and there is novariable for Firm Strategy, Structure, and Rivalry.
Lee and Okamoto (2002) empirically tested the industrial relationship between Korea and Japan,
using import coefficients and production inducement coefficients. They then studied the direction of‘trade creation effects’ and the changes in trade dependency ratios. In the perspective of the diamondmodel, these elements are under Factor Conditions and Demand Conditions.
Cheong (2004) emphasized economic benefits in population, production, GDP, and trade as arationale for the creation of FTA among China, Korea, and Japan. Population and production,
however, are variables of Factor Conditions, and GDP and trade are those of Demand Conditions.
Therefore, their study considered merely half of the whole picture.
As shown in Table 1, previous studies on the relationship between Korea and Japan have focusedon a limited number of determinants of the diamond model, resulting in biased and incomplete
analyses. For a more complete understanding of the relationship between the two countries, we needa more comprehensive model that incorporates all important variables.

Table 1. Previous Studies on the Relationship between Korea and Japan
Firm Structure,

Related andStrategy,

Supporting

and Rivalry

Industries

FactorDemandConditions

Conditions

Lee and Okamoto (2002)

◎

·

·

◎

Koh et al. (2003)

·

·

·

◎

Cheong (2004)

◎

·

·

◎

Lee (2004)

O

·

◎

◎

◎: main, O: sub

4Competition and Cooperation between Korea and Japan: A Business Perspective
The Dual Double Diamond Model
Although Porter’s diamond model is a revolutionary enhancement in explaining national
competitiveness, the model is not free from criticism and has been extended in two directions (scopes
and sources) of national competitiveness. The first was an incorporation of multinational activities
through the introduction of the double diamond model (Rugman, 1991; Rugman and D’Cruz, 1993;
Moon, Rugman, and Verbeke, 1998; Dunning, 2003). While the variables of Porter’s diamond model
are useful when analyzing a nation’s competitiveness, the model has a narrow focus which is limited
only to home-base. The second extension to Porter’s original model was the addition of humanfactors through the proposition of the nine-factor model (Cho, 1994; Cho and Moon, 2000). Porter’s
diamond model is mainly designed to explain the sources of national competitiveness possessed by
the economies of advanced countries, but is limited when explaining the levels and dynamic changesof economies in developing countries. The human factors in the nine-factor model drive the national
economy by creating, motivating, and controlling the four physical factors in Porter’s diamondmodel.
A good theory should be comprehensive enough to capture all of the important explanatory
variables. Although the double diamond model and the nine-factor model enhance Porter’s diamondmodel in terms of the source and context of competitiveness, they are not integrated into a single
model. In order to analyze and explain national competitiveness more thoroughly, this article
incorporates both of these extensions into an integrated model, i.e., the Dual Double Diamond (DDD)model.
Figure 1 illustrates Porter’s diamond model and its extensions. The horizontal axis shows theextension to the diamond model in terms of the sources of national competitiveness. The vertical axis,on the other hand, demonstrates the extension with regard to the scopes of national competitiveness.
The sources (physical/human factors) and scopes (domestic/international contexts) interact with eachother to determine a nation’s competitiveness.
The two extensions double the original single diamond in two distinct ways. Model 2 in Figure 1
introduces a new diamond of human factors as an extension to sources of national competitiveness.
On the other hand, Model 3 doubles its original diamond as an extension to scopes of national
competitiveness, from a domestic context to an international context. Thus, the integration of these
two extensions into a single framework results in a dual double diamond. At the lower right handcorner of Figure 1 is the DDD model, encompassing the previous extensions. The DDD model
considers both physical and human factors in both domestic and international contexts, and5

Hwy-Chang Moon

consequently, provides a more comprehensive explanation for national competitiveness than othermodels.

Figure 1. Extensions to the Diamond Model
Sources of National CompetitivenessDomestic Context
Int’l Context

Scopes of National CompetitivenessPhysical Factors

Human Factors

Model 1: The Single Diamond

Model 2: The Nine Factor

Porter (1990)
Porter (1998)
Porter, Takeuchi& Sakakibara (2000)
Porter (2003)

Cho (1994)
Cho & Moon (2000)

Model 3: The Double Diamond

Model 4:
The Dual Double Diamond

Rugman (1991)
Rugman & D’Cruz (1993)
Moon, Rugman& Verbeke (1998)
Dunning (2003)

The Cultural Model
Traditional Models in Explaining Cultural Differences
Cultural phenomena had been thought to be independent from other social fields for a long time.
Scholars, however, have recently come forth with various cultural models on the cultural phenomenathat influence diverse aspects of the society, recognizing that cultural differences affect national andbusiness competitiveness. Although several models (Hofstede, 1983; Schein, 1992; Hall and Hall,
1990; Hampden-Turner and Trompenaars, 1997) have already been established to explain thefundamental differences in culture among nations, they are not satisfactory and thus need to berevised.
Perlmutter (1969) first presented variables focusing on the primary attitudes among international
executives, which consist of three variables - ethnocentricity (home-country orientation),polycentricity (host-country orientation), and geocentricity (world-orientation). Trompenaars and6Competition and Cooperation between Korea and Japan: A Business Perspective
Hampden-Turner (1998), on the other hand, presented seven fundamental dimensions of culture universalism vs. particularism; individualism vs. collectivism; neutral vs. affective; specific vs.
diffuse; achievement vs. ascription; time (sequential vs. synchronous); and environment (internal vs.
external control). These variables influence the way people live and work in different environments.
Hall and Hall (1990) also introduced an interesting cultural model in which they defined culture in
the contexts of time and space into three categories – high-low context; time orientation; andinterpersonal space.
Hofstede (1997) suggested a more comprehensive cultural model with five dimensions. The first
dimension, Individualism vs. Collectivism, refers to the relationship between the individual andothers. The second dimension, Power Distance, focuses on the inequality that exists between people
within a society. Uncertainty Avoidance, the third dimension, denotes the extent to which individuals
within a culture feel threatened by uncertain or unknown events. The fourth dimension, Masculinity
vs. Femininity, determines whether a society is assertive or modest through gender. The fifth
dimension, which has been newly added to the original model, is Long-term Orientation vs.
Short-term Orientation. A long-term (future) orientation embodies traits such as perseverance andthrift (saving), while a short-term (past and present) orientation involves respecting tradition andfulfilling social obligations. Table 2 describes the previous studies on culture and their variables.

Table 2. Studies on Cultural Models and Their Variables
Hall and
Perlmutter

Trompenaars andHofstedeHall(1969)

Hampden-Turner(1997)(1990)(1998)

Ethnocentrism

Context

Individualism vs. Collectivism

Universalism vs. Particularism

Polycentrism

Time

Power DistanceIndividualism vs. Collectivism

Geocentrism

Space

Uncertainty Avoidance

Neutral vs. Affective

Long-term Orientation vs.
Specific vs. Diffuse
Short-term Orientation
Masculinity vs. Femininity

Achievement vs. Ascription
Time (Sequential vs. Synchronous)
Environment(Internal vs. External Control)7

Hwy-Chang Moon

Although Hofstede’s model covers most of the cultural variables in the previous models (e.g.,
Hall and Hall 1990, Trompenaars and Hampden-Turner 1998), this model also has some problems.
According to Moon and Choi (2001), Hofstede’s model misses Perlmutter’s (1969) EPG Profile. In
addition, there are some overlapping and unsuitable dimensions in Hofstede’s model. Moon and Choi
(2001) thus argued that Hofstede’s model needs to be restructured to yield a better measurement of
cultural diversity, by adding a dimension corresponding to “openness,” and fixing the overlap in thefive dimensions.

The OUI Model
Excluding Masculinity vs. Femininity and Short-term vs. Long-term Orientation, andincorporating Power Distance as an attribute of Individualism, the Hofstede model can be abridged
into two dimensions: Individualism and Uncertainty Avoidance. In addition, a new dimension,
Openness, needs to be added for a correct understanding of cultural differences. The Openness
variable is particularly useful in understanding the changing competitiveness of East Asian countries.
Because the new model has three variables, i.e., Openness, Uncertainty Avoidance and Openness, it
is called the OUI model.
Each of these three variables is further classified into two sub-variables to allow for a more
precise conceptualization and accurate measurement of culture. Individualism is measured by how
much Reward is given with respect to Responsibility and vice versa. Uncertainty Avoidance isassessed by Disciplinism, which emphasizes rules, laws, and standards, and Frontierism, which
accentuates challenge, originality, and investment. Openness consists of two elements:
Aggressiveness and Attractiveness. Aggressiveness is the tendency to push home country values
abroad, and Attractiveness is the willingness to accept foreign values and cultures. For further
information, refer to Moon and Choi (2001).

DATA AND METHODOLOGY
Data
For the empirical analysis, data was selected from the IPS National Competitiveness Research(IPS 2005), published by the Institute for Industrial Policy Studies. The report covers 66 countries
and collects data for 275 criteria comprising physical and human factors in both domestic andinternational contexts. Table 3 shows the list of criteria in the report. The national competitivenessindices of Korea and Japan are calculated by eight factors comprising the DDD model. Factors are
8Competition and Cooperation between Korea and Japan: A Business Perspective
calculated as an average of 23 sub-factors, and sub-factors are also calculated as an average of thecriteria under each sub-factor. Among the 275 criteria, 212 are selected to calculate the national
competitiveness index. The unselected criteria are used for informative purposes.

Table 3. List of Criteria for the Calculation of National Competitiveness Index
Main Factors
FactorConditions
Business
Context

Physical
Factors
Related &Supporting
Industries

DemandConditions
Workers

Human
Factors

Politicians &Bureaucrats
Entrepreneurs
Professionals

Number of Criteria

Sub-factors

Total

B. I.

Input

Energy Resources

6

0

6

Other Resources

17

8

9

Strategy & Structure

5

0

5

Global Mindset

5

0

5

Business Culture

7

0

7

Foreign Investment

29

18

11

Transportation

10

1

9

Communication

11

1

10

Finance23

023

Education

10

1

9

Science & Technology

9

2

7

Cluster Development

3

0

3

Overall Living Environment

16

1

15

Demand Size

22

11

11

Demand Quality

8

0

8

Quantity of Labor Force

10

4

6

Quality of Labor Force

6

5

1

Politicians

11

0

11

Bureaucrats

39

7

32

Personal Competence

6

0

6

Social Context

5

0

5

Personal Competence

7

0

7

Social Context

6

0

6

*B. I.: Background Information
For the OUI model, three proxy variables are chosen for each of the six cultural sub-variables.
For Individualism, the sub-variables are Responsibility and Reward. The proxies for Responsibility
are job description and individual roles, corporate governance, and the relationship between laborand management. Whether or not job description and individual roles are clear is critically important
to define each person's responsibility. In the individualistic society, each individual is responsible for
one's conduct for personal independence. In a corporate governance of well-defined responsibility,each employee and employer can be faithful to one's own duty by maintaining a cooperative
relationship between labor and management. The proxies for Reward are reward system, firm's
decision process, and professional's compensation. The system will inspire if reward is based on
performance rather than seniority; if professionals are appropriately compensated; and if the firm's
decision process is transparent.

9

Hwy-Chang Moon

As for Uncertainty Avoidance, Disciplinism and Frontierism are chosen as sub-variables. Specificelements of Disciplinism include public order, bureaucracy, and bribery and corruption. A society ishighly disciplined when public order and bureaucracy are well maintained; and bribery andcorruption are not common. Innovation and creativity, entrepreneur's core competences, and ability to
seize opportunities are sub-variables for Frontierism. Traits that challenge undeveloped fields can beobserved by whether innovativeness and creativity are highly appreciated in the society and whether
entrepreneurs have differentiated core competences to take a big step forward.
Finally, Aggressiveness and Attractiveness are chosen as sub-variables of Openness. Three
proxies for Aggressiveness are international changes, global standards, and new ideas. A firm's quick
adaptation to the international changes and global standards, as well as accepting new ideas, areimportant factors for having or showing determination and energetic pursuit of business goals. Equal
treatment, professional job's openness and the inward foreign investment promotion policy areproxies for Attractiveness. Whether foreign and domestic firms are equally treated, and whether
professional jobs are open to foreigners are important criteria for encouraging the inflow offoreigners. Likewise, the policy of inward foreign investment promotion is an important element tomeasure the degree of openness of a country. The cultural variables, together with sub-variables andproxies are summarized in Table 4.

Table 4. Cultural Variables
Cultural Variables

Sub-variables

Proxy Variables

Job description and individual role
Corporate governance
The relationship between labor and management
Reward system
RewardFirms' decision process
Professional's compensation
Public order
Disciplinism
Bureaucracy
Bribery and corruption
Innovation and creativity
Frontierism
Entrepreneur's core competences
Ability to seize opportunities
International changes
Aggressiveness Global standards
New ideas
Equal treatment
Attractiveness Professional job's openness
The inward foreign investment promotion policy
Responsibility

Individualism

Uncertainty
Avoidance

Openness

10Competition and Cooperation between Korea and Japan: A Business Perspective

Methodology
While productivity is the internal competence of an organization, competitiveness is anorganization’s relative competitive position compared to its competitors (Moon and Peery, 1995).
Therefore, in order to find the fundamental relationship between Korea and Japan, we need toanalyze the national competitiveness of the countries and to understand the relative position of thecountries from the viewpoint of each other. For this, cluster analysis is used to analyze thecharacteristics of objects with distance between them.
Cluster analysis is a statistical technique that classifies objects into clusters according to thecharacteristics of the objects. Objects in the same cluster share significant homogeneity, while there
is significant heterogeneity among objects in different clusters (Hair et al., 1998). In this study, weapply K-means clustering in non-hierarchical clustering techniques to the 23 sub-factor variables of
66 countries in the world and classify the countries into three categories of A, B, C in accordancewith the competitiveness of the countries. We define the relationship between Korea and Japan ascompetitive in a certain sub-factor, if the result of cluster analysis shows that Korea and Japan are in
the same category in the sub-factor. If not, they are in a cooperative relationship.
To perform a statistical test on the overall relationship between Korea and Japan using the resultsfrom the cluster analysis, we use the cross-tabulation analysis. The cross-tabulation analysis shows
the overall relationship between the two countries by calculating the number of sub-factors in which
the two countries are in a cooperative or competitive relationship, respectively.

RESULTS
Competitiveness Perspective
Table 5 shows the results of the k-means cluster analysis of eight factors in both Physical Factors
and Human Factors of the DDD model, with the competitive positions of Korea and Japan. Eachcountry is classified into three competitiveness groups of A, B, and C, according to the results of
K-means cluster analysis of 66 countries in the world. Cluster A is the group of countries with highcompetitiveness; Cluster B with middle competitiveness; and Cluster C with low competitiveness. In
the ‘K-means cluster analysis’ column, data are arranged in the order of ‘Cluster mean square’, ‘Error
mean square’, ‘F-Value’, and ‘Sig.’. Dotted lines in the ‘Graph’ column represent the results ofcluster analyses of 66 countries in each factor. Korea and Japan show a cooperative relationship in
Related and Supporting Industries, Politicians and Bureaucrats, and Entrepreneurs.

11

Hwy-Chang Moon

Table 5. Cluster Analysis in Physical and Human Factors
Rankings

Graphs( Low -- Competitiveness Rankings -- High)K-means
Cluster
Analysis
66

44

22

CompetitivenessGroup

Relationship

Korea

Japan

Korea

Japan

57

39

C

C

Comp.

32

22

B

B

Comp.

22

14

B

A

Coop.

18

1

A

A

Comp.

61

42

C

C

Comp.

32

19

B

A

Coop.

11

35

A

B

Coop.

17

15

A

A

Comp.

1

2402.749
8.298

FC
289.563

K

0.000

J

7494.13335.042

BC
213.861

K

0.000

J

6668.287
21.118R&S
315.762

K

0.000

J

3697.231
12.638DC
292.556

K

0.000

J

1898.745
18.632

W
101.907
0.000

K

J

11837.238
56.616

P&B
209.081

K

0.000

J

9272.622
46.211E
200.657
0.000

J

K

11832.199
41.536

P
284.8700.000

KJ

In ‘K-means cluster analysis’ column, data are arranged in the order of ‘Cluster
mean square’, ‘Error mean square’, ‘F-Value’, ‘Sig.’.
Dotted lines in ‘Graph’ column represent the results of cluster analyses of 66
countries in each factor.
K: Korea, J: Japan
12

Competition and Cooperation between Korea and Japan: A Business Perspective

To analyze the relationship between the two countries in more detail, the same method is applied
to the 23 sub-factors and the results are described in Table 6. The ‘Graph’ column and three statisticalfigures other than ‘F-values’ are omitted because of space limitation. Although no conspicuous
pattern is found, there are 10 sub-factors in which Korea and Japan are in a cooperative relationship.
In the remaining 13 categories, two countries are in a competitive relationship.

Table 6. Cluster Analysis of 23 Sub-factors
Rankings
Main Factors

Sub-Factors

F-Value

Competitiveness
RelationGroupship

Korea Japan Korea Japan
FactorConditions

**

53

44

C

C

Comp.

**

49

26

C

C

Comp.

**

22

27

A

A

Comp.

**

32

21

B

A

Coop.

Business Culture**

246.428

34

18

B

A

Coop.

Foreign Investment

171.729**

45

27

C

C

Comp.

Transportation

114.677**

22

4

B

B

Comp.

Communication

323.684**

6

12

A

A

Comp.

Finance249.204**

23

6

B

A

Coop.

**

41

38

B

B

Comp.

**

13

1

A

A

Comp.

**

43

30

B

B

Comp.

**

29

28

B

B

Comp.

**

20

3

B

A

Coop.

**

14

3

A

A

Comp.

**

42

55

B

C

Coop.

**

60

13

C

A

Coop.

**

40

21

C

B

Coop.

**

30

18

B

A

Coop.

**

8

31

A

B

Coop.

**

21

52

A

B

Coop.

**

18

13

B

B

Comp.

**

18

15

A

A

Comp.

Energy Resources
Other Resources
Strategy & Structure

Physical Factors

Business
Context

Related &Supporting
Industries

Global Mindset

Education
Science & Technology
Cluster Development
Overall Living
Environment

DemandConditions

Demand Size
Demand Quality
Quantity of Labor Force

248.313208.749
182.267
239.171

271.255
185.709149.806
282.876
142.592
196.425
144.265

Workers

Human Factors

Quality of Labor Force
Politicians&
Bureaucrats

Politicians
Bureaucrats
Personal Competence

168.769210.305190.818179.793

Entrepreneurs
Social Context
Personal Competence

104.780
115.145

Professionals
Social Context

233.812Using the results of cluster analysis on 23 sub-factors, we conduct cross-tabulation analysis tofind out the overall relationship between Korea and Japan. As cross-tabulation analysis is a statistical13

Hwy-Chang Moon

technique that assesses the relationships between nominal variables, it is useful to apply thistechnique to the analysis of the relationship between two countries with nominal variables(cooperation or competition) on 23 categories. If the results of the analysis show significant
relationship, two countries are in a competitive relationship because the countries have similar
distribution of 23 sub-factors.
Table 7 shows the results of cross-tabulation analysis. Results from both the Pearson Chi-Square
test and the Likelihood Ratio test yield a significance level of greater than 0.05, which does not allow
us to reject the null hypothesis. Thus, we conclude that Korea and Japan are not in a competitive
relationship, although there are more competitive than cooperative cases as shown in Table 6.

Table 7. Results of Chi-Square Tests
Asymp. Sig.
Value

df
(2-sided)Pearson Chi-Square

9.26

4

0.06

Likelihood Ratio

8.67

4

0.07

Number of Valid Cases

23

·

·

Summarizing the analysis of Korea and Japan in a competitiveness perspective, we can findneither a competitive nor cooperative relationship. However, the following analysis from a cultural
perspective suggests how the two countries can cooperate to enhance their competitiveness.

Cultural Perspective
The OUI indices of Korea and Japan are calculated as shown in Table 8, using proxies listed inTable 4. In Openness, Japan shows a higher index than Korea. In sub-variables of Openness, Korea ishigher in Aggressiveness, while Japan is higher in Attractiveness. On the other hand, Korea is higher
than Japan in Uncertainty Avoidance because Korea is much stronger in Frontierism, while Japan isbetter in Disciplinism. In Individualism, the index of Japan is higher than that of Korea because
Japan scores very high in Responsibility compared to Korea.

14

Competition and Cooperation between Korea and Japan: A Business Perspective
Table 8. National Competitiveness Indices of OUI Model
Country

Main Factors

Sub Factors

Openness

AggressivenessAttractiveness

Korea

56.56

59.89

53.22

Japan

61.50

48.94

74.06

Frontierism

Disciplinism

Uncertainty
Avoidance
Korea

67.15

80.29

54.01

Japan

59.48

51.79

67.17

Individualism

Responsibility

Reward

Korea

55.50

38.62

72.39

Japan

64.80

63.88

65.72

The same method applied to the cluster analysis in the competitiveness perspective is employedin the cultural analysis. The variables in the cluster analysis are classified into three groups of A, B
and C, respectively, using the OUI indices of 66 countries in the world. The results are described inTable 9. The competitiveness groups of each variable in OUI are calculated by concatenating thecompetitiveness groups of sub-factors. For example, in Uncertainty Avoidance, Korea is in group A
in Frontierism and in group B in Disciplinism, while Japan is in group B in Frontierism and in group
A in Disciplinism. As the competitiveness groups in Uncertainty Avoidance are calculated byconcatenating the competitiveness groups in Frontierism and Disciplinism, the competitiveness groupof Korea in Uncertainty Avoidance is AB, while that of Japan is BA.

15

Hwy-Chang Moon

Table 9. Cluster Analysis of Cultural Variables
Competitiveness Group
Main Factors

Sub-Factors

Relationship

Sub-Factors

Main Factors

Korea

Japan

Korea

Japan

Aggressiveness

B

B
BB

BA

Complementary

Attractiveness

B

A

Uncertainty

Frontierism

A

B
AB

BA

Complementary

Avoidance

Disciplinism

B

A

Reward

A

B
AC

BB

Complementary

Responsibility

C

B

Openness

Individualism

By comparing the competitiveness groups, we can figure out the relationship between Korea andJapan in a cultural perspective, as shown in Table 5. As described in the main factors column of thecompetitiveness group in Table 9, not a single group in all three OUI variables between Korea andJapan is the same. Therefore, Korea and Japan are in culturally complementary positions. In otherwords, Korea and Japan can work together by providing the cultural aspects the other lacks.

CONCLUSION
This article considered both competitiveness and cultural perspectives to suggest ways in which
Korea and Japan can cooperate with each other. This is difficult and blurred when only acompetitiveness perspective is considered. In a competitiveness analysis, Japan is stronger than
Korea in Related and Supporting Industries, while Korea performs better in Entrepreneurs than Japan.
On the other hand, in a cultural perspective, Korea is better in Frontierism, while Japan is stronger in
Disciplinism.
Based on these analyses, Korea and Japan can work together. Japan may help Korea with its hightechnologies in such areas as R&D, which is an important Related and Supporting sector, and Korea
can enhance the entrepreneurship of Japan with its strong Frontierism, which is an element of
Entrepreneurs. Considering this kind of cooperation, the relationship between Korea and Japan is not
one-way traffic, such as technology transfer or leakage from Japan to Korea, but mutually beneficial
interactions.
Previous studies on the relationship between Korea and Japan have focused on the limited

16

Competition and Cooperation between Korea and Japan: A Business Perspective
number of factors comprising national competitiveness, thus inevitably resulting in biased analyses,
compared to the diamond model. This article applies the diamond model to the analysis of national
competitiveness and the OUI model to understand the cultural characteristics. Contrary to what has
been widely understood, there is no clear evidence that Korea and Japan are in an economicallycompetitive relationship. In addition, the two countries can establish a cooperative system bycomplementing cultural differences, which would bring significant benefits to both countries.
This article employs the cluster analysis technique in which the variables comprising national
competitiveness and cultural characteristics are grouped into 3 clusters. Further classification of eachcluster would result in a more accurate analysis of the relationship between Korea and Japan, which
may be a good topic for further studies. The two countries can also cooperate in the fields where they
are competing with each other. Two conditions can be suggested for this possibility. One is when
there exist very large economies of scale which cannot be fully exploited by one party. The other iswhen a significant level of absorptive technological capabilities for learning, thereby a certain levelof competitive position, is needed for an efficient cooperation. While these are interesting topics for
future studies, these studies will also support cooperative rather than competitive nature of businessbetween the two countries.

REFERENCES
Cheong, I. K. (2004), 2003 Studies on a China-Japan-Korea FTA, Seoul: KIEP. (In Korean)Cho, D. S. (1994), “A Dynamic Approach to International Competitiveness: The Case of Korea”,
Journal of Far Eastern Business, 1(1): 17-36.
Cho, D. S. and Moon, H. C. (2000), From Adam Smith to Michael Porter, Singapore: World
Scientific.
Dunning, J. H. (2003), “The Role of Foreign Direct Investment in Upgrading China’s
Competitiveness”, Journal of International Business and Economy, 4(1), 1-13.
Hair, J. F., Anderson, R. E., Tatham, R. L and Black, W. C. (1998), Multivariate Data Analysis(5th edition), Upper Saddle River, N.J.: Prentice Hall.
Hall, E. T. and Hall, M. R. (1990), Understanding Cultural Differences: Germans, French, andAmericans. Yarmough, Maine: Intercultural Press, Inc.
Hampden-Turner, C. and Trompenaars, F. (1997), “Response to Geert Hofstede”, International
Journal of Intercultural Relations, 21(1): 149-159.
17

Hwy-Chang Moon

Hofstede, G. (1983), “The Cultural Relativity of Organizational Practices and Theories,” Journal ofInternational Business Studies, 14(2): 75-89.
Hofstede, G. (1997), Cultures and Organizations: Software of the Mind, New York: McGraw-Hill.
IPS (2005), IPS National Competitiveness Research 2005 Report, Seoul: IPS and IPS-NaC.
Koh, I. D., Lee, J. H., Cho, B. K. (2003), Trade Pattern among East Asian Countries and its
Implication for Korea-China-Japan Trade, Seoul: KDI. (In Korean)Lee, H. B. and Okamoto N. (2002), Analysis of Industrial Interdependency among Japan, China,
and Korea: Application of International Input-Output Table, Seoul: KIEP. (In Korean)Lee, J. C. (2004), Current Status and Future Direction of Economic Cooperation between China,
Japan and Korea: Related to a Possible CJK FTA, Seoul: KIEP. (In Korean)Moon, H. C. and Peery, N. S. (1995), “Competitiveness of Product, Firm, Industry, and Nation in a
Global Business”, Competitiveness Review, 5(1): 37-43.
Moon, H. C., Rugman, A. M. and Verbeke, A. (1998), “A Generalized Double Diamond Approachto the Global Competitiveness of Korea and Singapore”, International Business Review, 7:
135-150.
Moon, H. C. and Choi, E. K. (2001), Cultural Impact on National Competitiveness, Journal ofInternational and Area Studies, 8(2): 21-36.
Perlmutter, H. V. (1969), “The Tortuous Evolution of the Multinational Corporation,” Columbia
Journal of World Business, (4): 9-18.
Porter, M. E. (1990), The Competitive Advantage of Nations, New York: Free Press.
Porter, M. E. (1998), “Clusters and the New Economics of Competition”, Harvard Business Review,76(6): 77-90.
Porter, M. E. (2003), Malaysia's Competitiveness: Moving to the Next Stage, Kuala Lumpur,
Malaysia (Presentation slides).
Porter, M. E., Takeuchi, H. and Sakakibara, M. (2000), Can Japan compete?, Cambridge,
Massachusetts: Perseus Publishing.
Rugman, A. M. and D'Cruz, J. R. (1993), “The Double Diamond Model of International
Competitiveness: The Canadian Experience”, Management International Review, 33: 17-39.
Rugman, A. M. (1991), “Diamond in the Rough”, Business Quarterly, 55(3): 61-64.
Schein, E. H. (1992), Organizational Culture and Leadership. San Francisco: Jossey-Bass Publishers.
Smith, A. (1776) (1937), “An Inquiry into the Nature and Causes of the Wealth of Nations”, inCharles W.E. (Eds.), The Harvard Classics, New York: P.F. Collier & Son Corporation.
18

Competition and Cooperation between Korea and Japan: A Business Perspective
Trompenaars, Fon and Hampden-Turner, C. (1998), Riding The Waves of Culture: Understanding
Cultural Diversity in Global Business, New York: McGraw-Hill.

19