The chaebol are the large, conglomerate family-controlled firms of South Korea characterized by strong ties with government agencies. There were family-owned enterprises in Korea in the period before 1961 but the particular state-corporate alliance came into being with the regime of Park Chung Hee (1961-1979). Park modeled this arrangement on the zaibatsu system which developed in Japan during the Meiji Era. There were significant differences between the zaibatsu and the chaebol, the most significant of which was the source of capital. The zaibatsu were organized around a bank for their source of capital. The chaebol in contrast were prohibited from owning a bank. The Park regime nationalized the banks of South Korea and could channel scarce capital to industries and firms it saw as necessary for achieving national objectives. The government-favored chaebol had special privileges and grew large. This gave the impression of economic success for the chaebol that was not always valid. In some cases chaebol grew not because they were profitable but merely because they could borrow vast funds.
In recent years there has been the growth of mid-sized corporations which are outside of the chaebol arrangement. For example, Appeal Telecom was started by a former employee of Samsung, Lee Ga Hyoung. Appeal Telecom is manufacturing and marketing cell phones and has risen to the top in its field.
There was a joke in South Korea back in the 1990s. It went like this:
What would employees of the mighty Korean conglomerates -- the so-called chaebols -- do if they were accidentally confronted by a fearsome bear while strolling through the forest?
Hyundai employees would club the bear to death without hesitation. Daewoo would call its Chairman Kim Woo-jung and await his command. Samsung would hold a meeting -- with the bear still in front of them -- to discuss how to proceed. LG would wait for Samsung's response, and then do the same.
Many spin-offs of the joke still exist today, and it shows how deeply the chaebols are embedded in the South Korean consciousness. Though Daewoo Group -- most famous for its line of cars -- is now defunct, the other conglomerates are still very much living, breathing parts of the world's 13th-largest national GDP. Chaebols are quite numerous, but the largest -- dubbed the \"Big Four\" by the South Korean press -- are Hyundai Motor Company, SK Group and perennial rivals, Samsung and LG.