Knowledge Management and Transfers between North and South Korea at the Kaesong Industrial Complex

Jeffrey L. Gower, University at Buffalo - SUNY

Abstract

The countries of North Korea and South Korea entered into an agreement in 2002 to develop a Special Economic Zone in the Kaesong Industrial Region of North Korea. The resultant Kaesong Industrial Complex, or KIC, was designed to attract South Korean investment and supply South Korean firms with inexpensive North Korean labor to be directed with South Korean management, in return for hard currency payment of land rents and employment for North Korean workers. Other KIC competitive advantages include proximity to the Seoul consumer market and a workforce that speaks a common language. However, North Korean labor had little experience with high-technology machinery, and initially began manufacturing very low-technology, labor intensive goods such as cookware and watches. North Korean governmental concerns slowed management’s efforts at knowledge management and transfers, placing barriers between management-worker interactions. Recently, the North relaxed many of these restrictions, and by several anecdotal accounts, knowledge transfers is increasing at many firms. This paper looks at the knowledge management and transfers at the KIC, and its future as knowledge management is implemented.