Political economy is a key determinant to industrial competitiveness. Korean political economy produced concentrated structure of industries, large firm organizations and price-oriented firm strategies. Even though these conditions were important Korean competitive advantages in the 1960s and 1970s, these are not appropriate Far development of high-tech industries. Unless structure of industries becomes more flexible, it will be difficult to expect competitive high-tech industries in Korea. The case of semiconductor industry illustrates this point. The flexible industry structure in the U.S. and Japan has been the key for their successes in this industry. On the other hand, most European countries lack this flexibility and have not been successful as much. Korean semiconductor industry, despite huge investment and the enormous growth, lacks the capacity for technological innovation. This technological problem is a result of the structural vulnerability which has been induced by Korean Political economy.