This chapter will examine the evolution of chaebols. Chaebols are creatures of their political, economic, and cultural environments, all of which changed dramatically in the last half century. This chapter will focus, in particular, on chaebols' relationship with the government, which shaped the environments that chaebols faced. From 1945 to 1980, the government helped chaebols grow by subsidizing them and protecting their domestic markets. After the government deregulated the economy in the 1980s, chaebols financed their growth internally. We will highlight how chaebols, especially the five largest ones, responded to changes in the government's policies, and identify how chaebols altered their growth strategies.

THE DEVELOPMENT OF CHAEBOLS IN KOREA

Inception of Chaebols after World War II.

Korea was once called the country of the morning calm by westerners. Despite being invaded incessantly by China, Mongolia, and Japan, Korea maintained its independence until the early twentieth century. At that time, Japan, which industrialized early, won its wars against China and Russia and annexed Korea in 1910. During the Japanese occupation, the Japanese government allowed Koreans to own only agricultural and mining concerns and small businesses, while Japanese trading companies controlled all other businesses in Korea. There were, however, some families who built businesses during this period. Sung-Soo Kim established Samyangsa, a spinning and a sugar-producing factory, and once owned a small bank. Hueng-Sik Park established a paper manufacturing company, ran a department store, and traded with China and Southeast Asia. Those indigenous business activities, however, remained small.