<p>The economic crisis of 1997 provided Korea with a rare opportunity to overhaul a government-business risk partnership that had become increasingly dysfunctional under liberalization and democratization. Well before the opening of capital markets in the 1990s, liberalization and democratization led to significant changes in Korea’s developmental state model. While expectations for government protection against large bankruptcies remained strong, institutional reforms and credible market signals (e.g., large-scale corporate failures) designed to replace weakening government control with market-based discipline were not introduced in the pre-crisis period. The weakening of investment discipline since the late 1980s served as the underlying cause of the 1997 economic crisis</p>