Entrepreneurship in Korea and Supporting Measures for Startups

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1 Entrepreneurship in Korea and Supporting Measures for Startups November 21, 2014 Dr. Seong Bong Lee Professor of Business Management, Seoul Women's University

2 Trends of Entrepreneurship in Korea by Economic Indicators Entrepreneurship index by the Bank of Korea = growth rate of manufacturing companies + (real investment growth rate GDP growth rate) + R&D growth rate of private sector Entrepreneurship index by Samsung Economic Research Institute = growth rate of all companies + real growth rate of capital investment + export growth rate

3 Trends of Entrepreneurship in Korea by GEM Survey Results GEM(Global Entrepreneurship Monitor) s : TEA(Total Early-stage Entrepreneurial Activity) Country Germany Taiwan USA Spain UK Italia Japan China France Finland Korea

4 Survey Items 태동기창업활동비율 Nascent Entrepreneurship Rate 초창기소유경영활동비율 New Business Ownership Rate 초기창업활동 Early-Stage Entrepreneurial Activity(TEA) 안정기소유경영활동비율 Established Business Ownership Rate Contents 기업설립후 3 개월미만의신생기업비율 Percentage of population who are currently a nascent entrepreneur, i.e., actively involved in setting up a business they will own or co-own; this business has not paid salaries, wages, or any other payments to the owners for more than three months 기업설립후 3 개월이상 42 개월미만의신생기업비율 Percentage of population who are currently a owner-manager of a new business, i.e., owning and managing a running business that has paid salaries, wages, or any other p payments to the owners for more than three months, but not more than 42 months 태동기창업활동과초창기소유경영활동의합산비율 Percentage of population who are either a nascent entrepreneur or owner-manager r of a new business (as defined above) 창업후 3 년 6 개월이후현재소유경영활동비율 Percentage of population who are currently owner-manager of an established business, i.e., owning and managing a running business that has paid salaries, wages, or an any other payments to the owners for more than 42 months 사업중단비율 Business Discontinuatio Rate 지난 1 년동안사업이중단된비율 Percentage of population who have in the past 12 months discontinued a business, 생계형창업활동비율 Necessity-Driven Entrepreneurial Activity: Relative Prevalence 기회추구형창업활동비율 Improvement-Driven Opportunity Entrepreneurial Activity: Relative Prevalence 초기창업활동중생계형창업활동의비율 Percentage of those involved in early-stage entrepreneurial activity (as defined above) who are involved in entrepreneurship because they had no other option for work 초기창업활동중기회추구형창업활동의비율 Percentage of those involved in early-stage entrepreneurial activity (as defined above) who (i) claim to be driven by opportunity as opposed to finding no other option for work; and (ii) who indicate the main driver for being involved in this opportunity is being independent or increasing their income, rather than just maintaining their income

5 Indicators in GEM 2013 Global Report in Selected Countries Country 태동기 창업활동 비율 Nascent Entrepreneurship Rate 초창기 소유경영 활동비율 New Business Ownership Rate 초기창업 활동비율 Early Stage Entrepreneurial Activity 안정기 소유경영 활동비율 Establishe Business Ownership Rate 사업중단 비율 Business Discontinuation Rate 생계형 창업활동 비율 Necessity- Driven Entrepreneuria l Activity 기회추구 창업활동 비율 Improvement- Driven Opportunity Entrepreneuria l Activity Korea Japan China Singapore Taiwan Germany France Finland Netherlands USA Israel

6 Relationship between GDP and TEA Source: Jung(2013, p. 54)

7 Relationship between GDP and Types of Start-ups Source: Jung(2013, p. 55)

8 Supporting Measures for Startups in Korea Korean Government s Policy Framework of Supporting Measures for Startups Financial Supporting Agencies Reinvestment Startup Idea Creating Groups Start -ups Market for Evaluation of Startups Performances Startup Supporting Agencies in General Re-challenge

9 1. Fostering Talented Entrepreneurs (100 Million Korean won) Category Entrepreneurship Education Programs SMBA: Startup Academy(69.5), Youth Business School(45), Graduate School for Startups(9), Senior Startup School(23) MOE: University Startup Education(15), Startup Education within LINC Program(115) Competitive Exhibition SMBA: Superstar V(17), CE for Venture and Startup(11) MOEL: CE for Social Venture(7)

10 2. Startup Supporting Programs (100 Million Korean won) SMBA: Promising Youth Startup Academy(253.9), Startup Leading University(402), Tailored Startup Promotion(500), Startup Supporting with Package Supporting for Startups Leading Venture Companies(75), Promotion for Technology Based Startups by Researchers(20.5), Supporting for Creative One Man Business(50), Smart App Development Promotion(170), Startup Supporting in Well-Being Business(11), One-Stop Supporting for Startups by the Disabled(10.9) MCST: Promotion for Venture Companies in Game Industry(0.4) Establishing Infrastructure for Startups Supporting Startups for Global Market Re-challenge Support SMBA: Service Center for Making Prototype Products(61), Business Center for Creative One Man Business(60), On-line Supporting for Establishing Startup(13), Business Incubators for Startup(255), Business Plaza for Seniors Startups(14.2) MoE: Business Incubators for Startups in Environment Industry(16) SMBA: Supporting Youth Startups for Global Market(20) MSIP: Supporting Startups for Global Market(105), Business Incubators in Silicon Valley(0.7), Global K-Startups(2) SMBA: Supporting for Re-challenging SMEs(17) MSIP: Supporting for Re-challenging with Cooperation of Successful Venture Companies(10)

11 3. Financial Supports (100 Million Korean won) Category Programs Soft Loans Equity Investments SMBA: Loans for Youth Startups(1,600), Loans for Startups (12,700), Loans for Startup R&D Activities(1,313.6) MOTIE: Loans for Startup in Abadonded Mine Area(20) SMBA: Fund of Funds(12,216), Job Creation Fund(2,270), Angel Investment Matching Fund(1,400), Fund for Creative Economy (6,000) MOTIE: Death Valley Fund(250) FSC: Growth Ladder Fund(20,000)

12 4. Market for Evaluation of Startups Performances Category Programs Disinvestment Capital Market FSC: Korea New Exchange(KONEX) M&A Promotion SMBA: M&A Matching Fund for SMEs and Startups

13 Evaluation on Entrepreneurship in Korea Great contribution of first-generation entrepreneurs to economic development in Korea Three reasons for recent declining trends of entrepreneurship in Korea Imbalance between risks and rewards Strong perception for unfair game rule Stability seeking tendency

14 Evaluation on Supporting Measures for Startups in Korea Strong support with various programs Financial support: Loan->Equity Reducing risk burdens Complicated supporting measures Low effectiveness and efficiency due to too many small supporting measures Too much focusing on starting-up process rather than focusing on enhancing capabilities of entrepreneurs or establishing fair competition order

15 Policy Recommendations for Promotion of Entrepreneurship and Startups in Korea Innovation in education system Future youth entrepreneurs with critical thinking capability, leadership, physical strength, and global mind Establishing fair competition order for creative destruction Control of unfair behaviors of dominant large companies Ongoing company restructuring Invigorating M&As Selection and focus in startup supporting measures Economies of scale in supporting measures Careful selection of promising startups and fully supporting them

16 THANKS