Elvin Toffler wrote in his book Third Wave that the information revolution defies any prediction about the future, yet the pressure for the change is on the rise. As a result of the development of information and communication technology, information is now handled and processed by a greater number of people and variety of fields than ever before. This, in turn, has led to a shift in the paradigm of information production and consumption, meaning that previous economic growth models are no longer valid. Under such circumstances, economic prosperity can only be enjoyed by those that successfully adapt.
Today’s Korean economy is under similar pressure. Innovation-oriented companies such as Google, Amazon, Twitter and Facebook are leading the creation of new added value in the global economy, yet Korea is still dependent on economic growth led by a small number of big businesses. There is no doubt that the growth model presented the country with the “Miracle of the Han River” during the past five years. However, it has accelerated the concentration of economic power and exacerbated the wealth divide between major corporations and small firms. Furthermore, the decreasing employment capacity of chaebols is posing a social problem as they continue to move production facilities out of the country.
This is why the Korean economy has to move from an industrial economy focusing on labor and capital input towards that of a creative economy revolving around innovative technologies and brilliant ideas. The creativity of individuals and enterprises needs to be better utilized in order to create jobs, new markets and business opportunities.
For the realization of a creative economy, young people with novel ideas should be allowed to freely start up and grow their own firms; confident in their future growth. Outstanding human resources can turn their attention towards small firms and venture companies only when they are convinced that they can become giants. In this vein, the establishment of industrial ecosystems promoting the growth of nascent firms is key to the concept of a creative economy.
However, the reality is not that optimistic. Small and mid-size enterprises (SMEs) in Korea cannot benefit from such support and also have to face diverse regulations due to dichotomous corporate policy characterized by so many restrictions on big businesses and the protection of SMEs once they fall out of their category. As a result, more than a few small-sized firms are opting to stop growing.
To deal with the problem, the Park Geun-hye administration is setting up the ‘Ladder of Hope for the Growth of SMEs’. At the same time, it has torn down the barrier between the promotion policy for small firms and enterprises of middle standing, while giving total decision-making rights to the Small and Medium Business Administration (SMBA).
The SMBA worked with related authorities and came up with measures for better venture financing ecosystems in May, followed by productivity enhancement plans for SMEs the following month in an effort to expedite the advent of a creative economy. The purpose of these plans is to renovate the industrial sector by improving venture and start-up infrastructure.
Furthermore, the organization is to announce a master plan, named the ‘Ladder of Growth for Mid-size Enterprises’, so that more small firms can grow to this level. Specifically, it will abolish regulations on mid-size enterprises in an attempt to encourage the growth of tiny ventures, while helping with R&D, employment and overseas market penetration in order to speed up globalization. In the long-term, the plan will contribute greatly to the government’s efforts to nurture SMEs into the driving force of a creative economy.
Just as important are the endeavors of companies themselves. As Peter Drucker said, entrepreneurs are in the constant pursuit of innovation, adapting to changes by making use of them. Only those creating new opportunities through innovation and challenge will be allowed to enjoy future prosperity in the present era of creativityoriented economy.
Seong Yoon-mo is the director of the SME Policy Bureau of the SMBA.