Paradigm shift for K-start-ups to be competitive

I hope that Korean start-ups’ steps toward globalization serve as a promising paradigm shift for the country to return to the age of growth.

Kim Young-taeThe author is a professor and head of the Center for Science-based Entrepreneurship at the Graduate School of Innovation and Technology Management at KAIST.

The latest economic news makes me think that the gloomy outlook — zero or negative growth without a revolutionary change — would become reality. How did we come to this age of absence of growth and how can we get out of the stagnant growth and move to the age of growth?

The “mimicking-based capitalism” — in which smart government officials quickly incorporated advanced systems and diligent entrepreneurs pioneered the global market through imitation and application — no longer works. Now, it seems to be the key obstacle. With rapid technological innovation and social changes, the world is more complicated and has greater uncertainty. But the country’s methods of training people and distributing resources remained the same as decades ago without any substantial changes. According to the Organization for Economic Cooperation and Development (OECD), industrial and corporate policies of the past — mostly focusing on how to reduce transaction costs — have shown limits in a new world of complication and uncertainty. Today’s world has dramatically shifted to the “age of start-ups” to create symbiotic ecosystems for new high-growth businesses. The trend of economic start-ups will only accelerate as the advancement of AI technology, above all, has made various decision-making more efficient.

This “start-up economy” is a constantly changing new order and a complex system based on unconventional interactions among economic players and a self-organizing process to adapt to the rapidly changing environment. The complex system is different from the past, when the logic of the more the better worked.

Start-up entrepreneurs themselves are the people who are good at entrepreneurial methodologies of quick trial and error and learning by defining problems and testing hypothesis. Therefore, it is difficult to derive the qualitative results of the start-up ecosystem only with the government’s hasty policy to input resources.

Let’s look at the case of “start-up accelerator” in Korea. The accelerators in the U.S. — such as Y-Combinator and Tech Stars — are programs which allow successful venture businessmen to nurture new start-ups with their funds, experience and network. They can serve as “start-up factories.”

Under the Venture Investment Promotion Act in Korea, one can register as an accelerator if they have more than 100 million won ($75,614) in capital and professional workforce. Since the system was introduced in 2017, 421 accelerators are raising 5,152 start-ups across the country as of the end of February 2023.

But the problem is that most accelerators rarely have global capabilities though the number of accelerators and start-ups have increased rapidly on the surface. In reality, many are accelerators by appearance only. The Tech Incubator Program for Start-ups (TIPS)” also aims to nurture local start-ups targeting the global market. But there are no outstanding global success cases except for its contribution to the birth of unicorns focusing on the domestic e-commerce market.

The risk factors of growing uncertainty can be opportunity factors if creativity and agility are displayed. In the end, agility and a bottom-up approach are the key to responding to the rapid changes and high uncertainty in the novel complex system.

By nature, the start-up ecosystem is all about creativity and an agile response to complexity. The ecosystem calls for the combination between a probabilistic thinking that tolerates diversity and trial and error and a systemic thinking that can understand the whole that exceeds a combination of parts. Only then, long-term qualitative growth of the start-up ecosystem can be achieved, away from the hasty government intervention.

President Yoon Suk Yeol’s visit to Boston on the sidelines of his summit with U.S. President Joe Biden in April could serve as an opportunity for Korean start-ups to enter the global start-up ecosystem through cooperation between high-tech industry innovation clusters in Korea and America. I hope that Korean start-ups’ steps toward globalization serve as a promising paradigm shift for the country to return to the age of growth.

Translation by the Korea JoongAng Daily staff.