Author : Kayoung Park(Korea Institute for Industrial Economics and Trade), Jinmyon Lee(Korea Institute for Industrial Economics and Trade)

<Abstract>

This study examines how the effects of smart factory policy are transmitted and redistributed across firm sizes through production networks. We distinguish policy-related effects into investment expenditure effects and operational effects, and apply a demand-driven input-output model and the Ritz-Spaulding (RS) model to a firm-size-disaggregated input-output table. The results show that investment expenditure effects are distributed relatively evenly between large firms and small and medium-sized enterprises (SMEs) in terms of output and value added, while substantial spillovers also accrue to large firms through upstream supply chains. In contrast, operational effects on output, value added, and employment are concentrated in SMEs, whereas the effects on large firms are transmitted indirectly through production networks. These findings indicate that the incidence structure of industrial policy may vary depending on the channels through which policy-related effects arise and the structure of production networks. Accordingly, policy design should take into account not only the intended target firms but also the propagation pathways embedded in production networks.