Why do businesses comply with the government's stabilization measures and put their limited resources into production even when economic conditions are less-than optimal? Why does the state restrain itself if it has enough power simply to confiscate the wealth of its citizens? These questions are important to explain the remarkable economic growth of South Korea. Borrowing the theory of credible commitment from rational-choice institutionalism, I explain how, why, and when businesses invest and the government constrains itself.; This dissertation contributes to the theoretical and empirical refinement of the theory of credible commitment. Theoretically, it adds bureaucratic delegation to the set of theoretical components for testing. Also, the impact of each independent component on private investment is tested. Empirically it uses quantitative data rather than nominal (or categorical) data for testing. Further, this dissertation distinguishes itself by extending its investigation for specific individual industries.; The evidence shows that the Korean government provided credible commitment consisting of the government's delegation, monitoring and punishment in the IT sector, the shipbuilding industry, and the financial sector. In response, private investors voluntarily put their limited resources into production even during economic downturns. However, when the government did not provide credible commitment in sunset industries such as textiles and agriculture, private investors withheld investment.
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