Practical Challenges and Policy Implications of Korea’s Delivery Price Indexation System

Purpose: This study examines the implementation challenges and policy implications of Korea’s Delivery Price Indexation System, which mandates price adjustments in subcontracting based on fluctuations in raw material prices. The system aims to protect SMEs from unilateral cost burdens in supply chains. Design/methodology/approach: The research is based on focused group interviews (FGIs) with 37 firms participat-ing in the indexation system, along with a legal review of relevant Korean statutes and comparison with international cases from the U.S., Australia, and FIDIC standards. Findings: Despite legal enforcement, the system faces four key challenges: (1) informal contracting practices that prevent written indexation agreements, (2) lack of incentives for ordering companies, (3) suppliers’ fear of retaliation for requesting price adjustments, and (4) limited effectiveness of the current adjustment mechanisms. These factors hinder the realization of the system’s intended benefits. Research limitations/implications: The study reflects the early-stage implementation and focuses on a relatively small sample of firms. Nonetheless, it provides critical insights for policymakers seeking to improve institutional design and enhance business adoption of the system. Originality/value: This paper offers one of the first field-based evaluations of the Delivery Price Indexation System in Korea. By identifying practical obstacles and proposing actionable policy recommendations, it contributes to improving fair-trade practices and sustainable partnerships between large companies and SMEs.