The author examines the effect of Confucian cultural and institutional influences on the economic development of South Korea. He suggests that culture influences the institutions that societies adopt to minimize the cost of transactions among the decision units of the society, and thus must be considered in explaining economic development. The relationship in Korea between the public and private systems is described as a partnership. Lee connects the efficiency of the institutions of government-business relationship to the impact of the Confucian cultural foundation. The government-business relationship in Korea is described as a quasi-internal organization, with the government in the role of senior partner and large private enterprises as junior partners. The acceptance of the quasiinternal organization in Korea is attributed to both government authority and cultural conditioning.