Legitimate Social Purpose and South Korea’s Support for Entrepreneurial Finance Since the Asian Financial Crisis

ABSTRACT

There has been a marked rise in the breadth and depth of the South Korean state’s support of entrepreneurial finance since the Asian Financial Crisis. This article provides novel conceptual and empirically-grounded understanding of the phenomenon by answering two interconnected research questions: (1) does the government’s financial support of high-technology entrepreneurship in the Creative Economy Action Plan constitute continuity or change in the Korean state’s encouraging of entrepreneurial finance? and (2) what is motivating these efforts? Making use of interview data and policy document analysis, we argue that Creative Economy efforts represent continuity of entrepreneurial finance support, especially since the Asian Financial Crisis. In answering the second question, we argue that legitimate social purpose has propelled Post-Asian financial crisis South Korean policy-makers to strive to diversify the sources of economic activity and job creation away from chaebols while simultaneously embedding the chaebol in the growing entrepreneurial ecosystem. The legitimate social purposes have input legitimacy via fit with employment and diversification aims and output legitimacy gleaned from the perceived positive performance of the entrepreneurial ecosystem.

KEYWORDS:

• South Korea
• developmental state
• social purpose
• legitimacy
• financial policy
• innovation
• entrepreneurship

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes on contributors

Dr Robyn Klingler-Vidra is a Lecturer in Political Economy at King's College London. Her research focuses on entrepreneurship, innovation and venture capital policy in East Asia. She is the author of The Venture Capital State: The Silicon Valley Model in East Asia (Cornell University Press, 2018).

Dr Ramon Pacheco Pardo is Reader in International Relations at King's College London and KF-VUB Korea Chair at the Institute for European Studies of Vrije Universiteit Brussel. His research interests include South Korea's and East Asia's political economy and international relations, North Korea's foreign policy and Europe-East Asia relations.

ORCID

Ramon Pacheco Pardo http://orcid.org/0000-0001-9502-3915

Notes

1 Hereafter Korea.

2 For Ruggie (1982) ‘legitimate social purpose’ informs the norm-based (social) objectives upon which economic policy is predicated.

3 Interview with the Manager of CCEI Seoul and Assistant Secretary to the President, responsible for Science and Technology, 20 June 2017, Seoul.

4 For a complete detailing of the eight components of the Action Plan, see Pacheco Pardo and Klingler-Vidra forthcoming.

5 We make this point considering two inputs; first, our interviews with policymakers across a range of ministries and second, based upon our reviews of official documents and communiques from these various entities. Given the length of this article we refer to policymakers broadly, but cite specific interviews where possible to indicate the source of a particular expression.

6 Interview with Ministry of SMEs and Start-ups department manager, 25 August 2017, Daejeon.

7 Interview with Policy advocate and team leader for Korea Startup Ecosystem Forum, 20 June 2017, Seoul.

8 Interview with the Head of an accelerator and entrepreneurial policy advisor, 21 June 2017, Seoul.

9 Interview with National IT Promotion Agency manager, 22 June 2017, Pangyo.

10 The aim of supporting chaebol innovation, which we heard throughout our fieldwork in 2017, lies in contrast to some scholars’ findings that state support of start-ups was meant to achieve the ‘balanced growth’ aims, without chaebol interference (see Thurbon 2016, for example).

11 Interview with Startup co-working space and accelerator manager, 21 June, 2017, Seoul.

12 Interview with Ministry of SMEs and Start-ups department manager, 25 August 2017, Daejeon.

13 Interview with Startup co-working space and accelerator manager, 21 June 2017, Seoul; interview with Ministry of SMEs and Start-ups department manager, 25 August 2017, Daejeon.

14 Interview with Centre for Creative Economy & Innovation manager, 20 June 2017, Seoul.

15 Interview with Assistant Secretary to the President for Science and Technology Policy, 20 June 2017, Seoul.

16 Interview with Ministry of SMEs and Start-ups department manager, 25 August 2017, Daejeon.

17 Interview with KVIC manager, 25 August 2017, Seoul.

18 Interview with Seoul Business Agency investment manager, 23 August 2017, Seoul.

19 Interview with Centre for Creative Economy & Innovation manager, 20 June 2017, Seoul.

20 Interview with KVIC investment manager, 25 August 2017, Seoul.

21 Interview with Seoul Metropolitan Government agency director, 23 August 2017, Seoul.

22 Interview with general manager of a start-up accelerator and co-working space, 21 June 2017, Seoul.

23 Interview with Winshok Choi, Policy advocate and team leader for Korea Startup Ecosystem Forum, 20 June 2017, Seoul.

24 Interview with the Head of the Korean branch of an international facilitator, 23 August 2016, Seoul.

25 Interview with the Head of the Korean branch of an international facilitator, 23 August 2016, Seoul.

26 Interview with the General partner of a Seoul-based accelerator, 23 August 2016, Seoul.

27 Interview with the Director of a Korean facilitator, 9 September 2016, Seoul.

28 Online interview with Seoul-based entrepreneur, 19 November 2016.

29 Interview with the Programme Manager of a Korean connector, 9 September 2016, Seoul.

30 Interview with Assistant Secretary to the President, responsible for Science and Technology, 20 June 2017, Seoul.