Beyond the Chaebol? The Social Purpose of Entrepreneurship Promotion in South Korea

ABSTRACT

The global diffusion of entrepreneurship promotion, motivated by policymakers’ desire to drive innovation, job creation and economic growth, is increasingly ubiquitous. As part of this trend, South Korea, an archetypal developmental state, has provided growing support to entrepreneurial activities in the 20 years since the Asian Financial Crisis. The motivation – and resulting form – of Korea’s policies is nevertheless unique among developmental states. In this article, we explain its distinctiveness by arguing that Korean entrepreneurship promotion is motivated by tripartite social purposes: (permanent) job creation, economic diversification and chaebol competitiveness through the injection of the innovation capacity of start-ups. Making use of interview data and policy document analysis, we show that policymakers design entrepreneurship promotion according to these three social purposes. We conclude with a critical analysis of the policy shift, asserting that start-ups offer a distinct set of social risks when conceptualised as a provider of steady jobs.

창업진흥의 세계적인 확산은 혁신 도모, 일자리 창출, 및 경제 성장을 이루기 위한 정책입안자들의 동기에 비롯하여 점점 더 보편화 되어가고 있다. 이러한 추세에 따라전형적인 발전국가인 대한민국은 아시아 금융 위기 이후 지난 20년간 창업 활동에점차 증가하는 지원을 제공해왔다. 대한민국의 정책적 동기 및 이에 따르는 결과는발전국가 중에서도 유의미하다. 본 글은 이러한 특수성에 대해 논하고자 한다. 대한민국의 창업진흥은 세 갈래의 사회적 목적: 일자리 창조(정규직), 경제적 다각화, 그리고 재벌의 경쟁력 도모를 두고 있으며 이를 위해 스타트업의 혁신 능력을 제고해왔다. 인터뷰 자료 및 정책 문서 분석을 통하여 본 글은 정책입안자들이 위 세가지 사회적 목적을 기반해 창업진흥을 설계했음을 보여주고자 한다. 결론에서는 정책적 변화를 비판적으로 분석하며 스타트업이 안정적인 일자리를 제공하는 수단으로 개념화될 경우 이에 따르는 특수한 사회적 위험부담이 있음을 주장한다

KEYWORDS:

• South Korea
• developmental state
• social purpose
• employment
• industrial policy
• innovation
• entrepreneurship
• chaebol

Notes

1. We invoke the term “social purpose” in line with the way John Ruggie conceptualised the term in his seminal (1982) article on embedded liberalism.

2. See Andreoni (2016) on the policy change as the result of Korea reaching the technological frontier.

3. China’s entry into the WTO in 2001 and free trade agreements (FTAs) involving ASEAN also had a profound effect on developmental states. Countries – including Korea – that for a long time had relied on low labour costs for their export-led growth found it more difficult to rely on labour-intensive industries (Wade, 2003). Korean chaebol, Japanese keiretsu and other conglomerates and companies of all sizes quickly shifted production towards China as soon as it joined the WTO. Outsourcing was further compounded by FTAs between China, Japan and Korea on the one hand and ASEAN on the other, as well as by the ASEAN Free Trade Area. By 2008, there was a network of FTAs linking ASEAN and the three leading Northeast Asian economies (Athukorala, 2011). In the case of Korea, chaebol increased investment in both China and ASEAN while slowing down or even reducing investment at home. Indeed, the share of jobs in the Korean economy directly linked to chaebol has steadily declined since China joined the WTO (Ministry of SMEs and Start-ups, 2018).

4. These policy efforts prompted the “first start-up boom” in the late 1990s. But other than the phenomenal success of firms such as Naver and Daum, the energy of the first start-up boom was abruptly curtailed by the Dotcom crash in 2000. As a government official from that period recalls, to a large extent there was no clear government strategy underpinning this boom, thus its vulnerability to the Dotcom crash (Interview, former central government official, 23 August 2017, Seoul).

5. Both the Park and Moon governments have involved chaebol in their start-up policies. A case in point is the regular meetings held by the Ministry of SMEs and Start-ups – as well as the agency that preceded it – involving government officials, start-up ecosystem players and chaebol to discuss policies to support entrepreneurs (Interview, Director at Ministry of SMEs and Start-ups, 25 August 2017, Daejeon).

6. Distribution of central government, local government and chaebol contributions based on interviews with authors, Director General of the CCEI Seoul, 20 June 2017, Seoul, and Director at Ministry of SMEs and Start-ups, 25 August 2017, Daejeon.

Additional information

Funding

This research has been supported by grants provided by King’s College London Department of European & International Studies and Department of International Development.