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Revival of Entrepreneurship, Key to Tackling Slow Economic Growth [The GEC+, #1]
Revival of Entrepreneurship, Key to Tackling Slow Economic Growth [The GEC+, #1]
  • By Jung Suk-yee
  • August 25, 2016, 09:30
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The average annual growth rate of the South Korean economy is failing to exceed 3% and its slow growth is continuing along with low consumer prices, despite the South Korean government’s expansionary monetary policy and the Bank of Korea’s key interest rate cut, with global economic growth estimates falling one after another. Besides, demographic problems such as a low fertility rate and the rapid aging of the population are dragging down the growth rate of the South Korean economy as well. Under the circumstances, pessimism and frustration are hanging heavy on the youth in the society.

External conditions are far from favorable, too. Both the Republican and Democratic presidential candidates are resorting to trade protectionism in the United States while Europe, China and Japan are working on economic stimulus plans to accelerate the global economic war.

Experts advise that the key to the South Korean economy’s sustainable growth overcoming such challenges lies in defiant entrepreneurship, which enabled it to achieve a miraculous economic development with little natural resources for the past five decades.

“The biggest crisis of the South Korean economy is a prolonged low growth, in which employment and growth do not create a virtuous cycle any longer, and entrepreneurship and political leadership matter the most in this situation,” said Lee Yong-hee, guest professor at the Technology Management, Economics and Policy Program of the College of Engineering of the Seoul National University. Earlier, he worked for the Ministry of Finance and Economy, the predecessor of the Ministry of Strategy and Finance, for more than 30 years.

“South Korea experienced a compressive and rapid economic growth led by the manufacturing sector and it has yet to join the ranks of advanced economies,” he went on to say, continuing, “Recovery of growth potential based on revival of entrepreneurship will be a way to deal with the current situation in which economic think tanks both at home and abroad are estimating the potential growth rate of the South Korean economy at 1% or so.”

Korea Trade-Investment Promotion Agency (KOTRA) president Kim Jae-hong echoed by saying, “The economic growth of the past will never repeat itself and South Korea has to find a new momentum in the form of entrepreneurship turning crises into opportunities.” The KOTRA is an organization dedicated to assisting in the business of South Korea small and medium-sized enterprises in global markets.

Ongoing innovation on the part of enterprises as a major constituent of the national economy and entrepreneurship based on the notion of creative destruction proposed by J. A. Schumpeter are two of the prerequisites for the improvement of economic fundamentals and future growth potentials. Mr. Schumpeter said that those capable of innovation are entrepreneurs, defining entrepreneurship as the adventurous spirit, creative thinking and tenacity that form its foundation.

The late Apple CEO Steve Jobs, Google cofounder Larry Page, Facebook founder Mark Zuckerberg and Xiaomi founder Lei Jun created worldwide sensations based on the innovation and entrepreneurship. The list also includes the late Hyundai Group chairman Chung Ju-yung, who won a shipbuilding contract with a single 500 won bill 50 years ago to lead the growth of his shipbuilding company to global number one and completed a huge seawall for the reclaimed land in Seosan City, South Chungcheong Province by thinking out of the box and using an abandoned oil tanker.

Softbank founder Masayoshi Son is a renowned innovator, too. Back in 1981, he established Softbank with a starting capital of 100 million yen and only two employees. Since then, he has overcome daunting challenges to turn his company into one recording 108 trillion won in annual sales. However, he still says he has accomplished nothing. His tireless entrepreneurship is truly astonishing.

Fourth Industrial Revolution and Entrepreneurship Education 

Masayoshi Son says entrepreneurship is not innate but acquired. As a matter of course, what South Korea needs now is more of innovative entrepreneurs like him.

Although education of pioneering entrepreneurship should be at the center of the structure of education as a whole, that in South Korea is scheduled to be made compulsory in as late as 2018 due to the lack of awareness. On the contrary, European countries have recommended such education starting from primary education since as early as 2006 based on the Oslo Agenda.

It is said that more than 50% of the youth in South Korea rush to civil service examinations because of a distorted compensation system. In the United States, top-tier college graduates’ number one choice is startup and this is because of the presence of a social safety net allowing them to have a second chance. In South Korea, however, that safety net is insufficient, and thus job seekers flock to secure jobs such as civil servants and teachers. “The young generation in South Korea will make a challenge once a compensation system and a safety net for innovators are established, and then the way will be open to the position of a winner in the fourth industrial revolution,” said Lee Min-wha, professor at the Korea Advanced Institute of Science and Technology (KAIST) and director of the Korea Creative Economy Research Network.

According to the World Economic Forum, the fourth industrial revolution can be defined as an era of technological innovation in which industrial and technological boundaries are blurred among digital, biotech, physics and many more based on the accomplishments of the third industrial revolution. In that era, the industrial focus is to be shifted from manufacturing based on large-scale investments and mass production to knowledge-based technological convergence.

In the fourth industrial revolution, corporate management will be led by robots and artificial intelligence and humans do not have to be engaged in usual corporate management. In that era, innovation will be the sole value creator while the importance of traditional organization management is reduced to a significant extent. This is why the significance of innovative entrepreneurship is highlighted in the era of the fourth industrial revolution.

At the same time, problem recognition capabilities rather than problem-solving abilities are being underlined as an attribute suitable for the entrepreneurship for the era of the fourth industrial revolution. “With the society changing so fast, enhancement of capabilities to recognize new problems is extremely important,” Korea Entrepreneurship Foundation (KEF) director Nam Min-woo explained, adding, “Entrepreneurship should start from recognizing new problems instead of the viewpoint that it is merely a virtue of entrepreneurs.”

In his book titled Managing in the Next Society, Peter F. Drucker praised South Korea as one of the countries with the most vibrant entrepreneurship in the world. According to him, South Korea had nothing that can be called industry and it was wreckage from the Korean War 40 years ago but the country is currently on top of the world in more than 20 industries including shipbuilding.

For South Korea to become a leader of the fourth industrial revolution, a new paradigm of economy rapidly emerging now, more cultivation of entrepreneurship is required along with a social atmosphere and government policy in favor of startups and venture businesses.

In this context, the Small and Medium Business Administration (SMBA), the KEF and the Global Entrepreneurship Network hold the Global Entrepreneurship Congress Plus (GEC+) DAEGU on August 25 and 26 at the EXCO Convention Center located in Daegu City. The purpose of the congress is contribution to creative economy and cultivation and dissemination of entrepreneurship.