Entrepreneurship
The Korea Economic Research Institute (KERI) said on January 27 that Korea’s Entrepreneurship Index is on the decline. According to the institute, the index fell from 150.9 to 66.6 between 1976 and 2013 and was as low as 63.3 in 2009. It explained that a decline in the public sector index affected the overall index and the decline in the public sector index was because of a rapid fall in bill passage ratio, which is a yardstick for political entrepreneurship, since 2000.
The Entrepreneurship Index is based on the seven sub-indices including the ratio, the others being the number of businesses employing at least 10 persons per 100,000 population, labor force participation rate, export growth rate, ratio of businesses with at least 300 employees, ratio of facility and R&D investment to GDP and competition rate of level 9 public employee examinees.
During the period, the number of businesses hiring 10 or more people showed a constant increase but the ratio of businesses with at least 300 employees fell. “This seems to be at least partly because the Korean government revised the Fair Trade Act in 1987 in order to tighter restrictions on larger corporations and provide more assistance and protection for smaller firms,” said Hwang In-hak, KERI senior research analyst.
“The drop in the ratio implies that existing enterprises are losing their will to grow themselves,” he continued, adding, “Although the average size of corporations can become smaller as a result of an increase in structural efficiency following technological development, the size is too small in Korea and this is affecting productivity improvement and job creation.”