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[GEM 2018] S. Korea on the Way to Improve Start-up Ecosystem
2016/2017 Survey Results
[GEM 2018] S. Korea on the Way to Improve Start-up Ecosystem
  • By Yoon Yung Sil
  • January 29, 2018, 04:00
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Changes of the weight of opportunity-driven startups of South Korea.
Changes of the weight of opportunity-driven startups of South Korea.

 

The Ministry of Small and Medium-sized Enterprises and Startups (MSS), Korea Institute of Start-up and Entrepreneurship Development (KISED) and Korea Entrepreneurship Foundation (KEF) announced the results of the Global Entrepreneurship Monitor (GEM) 2017 conducted by the Global Entrepreneurship Research Association (GERA).

The GEM, a not-for-profit international study, that analyzes correlation between entrepreneurship and national economic growth, was initiated in 1999 and South Korea has been participating in the project since 2008, except for 2014.

The GEM 2017 was conducted with 54 participating countries across the world and categorized their economic regions into five element-driven countries, 25 efficiency-driven ones and 24 innovation-driven ones for comparison.

According to the survey of Adult population Survey (APS), South Korea ranked 21st among 54 countries in terms of the total early-stage entrepreneurial activity (TEA), 8th in the opportunity-driven startups and 23rd in the necessity-driven startups (small businesses for livelihood). 

Among 24 innovation-driven countries, South Korea took 4th place in opportunity start-ups, 4th in necessity-driven startups and 4th in the TEA. It is encouraging to see a steady growth in the percentage of opportunity-based start-ups, which entrepreneurs pass up an opportunity of employment and start a business to seek out a new opportunity, as well as an improvement in entrepreneurial attitude indexes. South Korea’s key indicators of entrepreneurial attitudes are constantly improving. The nation came in at 35th place in fear of failure, 38th in start-up opportunity recognition and 20th in start-up intention.

Although South Korea has been categorized as an innovation-driven country, it has had a low motivational index, which divides the ratio of opportunity-driven startups by the ratio of necessity-driven startups, unlike other countries. With the rise in opportunity-driven startups that create a high value and the improvement in entrepreneurial attitudes that affect an entrepreneurship activity, however, South Korea seems to have started creating a sound startup ecosystem like other advanced countries.

GEM 2017 Execution Method

Based on a single survey of 2,000 adults aged 18 to 64 and more than 36 experts in 54 participating countries for 30 days from June 11 to July 10 in 2016, the GERA calculated the ratios of the TEA, opportunity-driven startups and necessity-driven startups and entrepreneurial attitudes.

The TEA displays the participation rate of those who have started a new business or been running an enterprise for less than 42 months among the 2,000. The ratio of opportunity-driven startups refers to those who have seized a good opportunity, started a business to get higher income or are working independently among TEA respondents. The ratio of necessity-based start-ups refers to those who said they have started a business because they have no other option among TEA respondents.  

S. Korea’s Current Situation Compared to 54 Participating Countries

According to the survey of adults, the ratio of opportunity-driven startups rose, while that of necessity-driven startups dropped. The index of entrepreneurial attitudes also improved. The percentage of respondents who are in the early stage of entrepreneurial activity of less than 42 months ranked 21st with 13 percent in 2017, nearly doubled from 52nd with 6.9 percent in 2013. The percentage of opportunity-driven startups grew 13.2 percent points from 51 percent in 2013, taking 29th place among 60 countries, to 64.2 percent in 2017, coming in 8th among 54 countries.

As the percentage of the opening of small business for necessity-driven startups in South Korea decreased 14 percent points from 36 percent in 2013 to 22 percent in 2017, moving down 11 notches from 12th to 23rd, the nation’s startup ecosystem is changing to that in advanced countries which have a high percentage of opportunity-driven startups. 

According to the survey of experts, South Korea has excellent policies and support systems for startups but needs to improve in social and cultural norms and legal infrastructure environments. 

The government’s policy to support business starters took 4th place among 54 countries with the score of 5.8 out of 9, while the government’s start-up support programs came in at 18th place with the score of 4.9 out of 9.

The openness of market in South Korea ranked 3rd with the score of 7.1 out of 9, up 17 notches from the 20th a year earlier. On the other hand, the nation’s commercial and legal infrastructure took 52nd place with the score of 3.9 out of 9 and general entrepreneurship training programs ranked 47th place with the score of 3.9 out of 9, showing an urgent need for improvement.

South Korea’s capital accessibility came in at 36th place with the score of 4 out of 9, internal entry regulations at 49th with the score of 3.4 out of 9 and schools’ entrepreneurship education at 35th with the score of 2.9 out of 9, falling short of the average of 54 participating countries.

As the government’s aggressive technology startup activation policy has helped startup environments and entrepreneurial attitudes continuously improve, the structure of South Korea’s startup ecosystem is turning into that of advanced countries with the increase in opportunity-driven startups and the decrease in in the opening of small businesses for livelihood.

Comparison to Other 27 Innovation-driven Countries

South Korea has jumped up to be No.4 among 24 innovation-driven countries as its opportunity-driven startups ranked 8th with a 64.2 percent ratio in 2017, up 13.2 percent points from the 16th with a 51 percent ratio in 2013.

The nation’s necessity-based start-ups also took 4th place among the 24 countries as its percentage fell 14 percent points from the 1st with 36 percent to the 23rd with 22 percent in 2017. 

The TEA ranked 4th as its percentage grew from the 16th with 6.9 percent in 2013 to the 21st with 13 percent in 2017.

South Korea ranked among the highest innovation-driven countries as its entrepreneurial attitude indexes, which affect the percentage of opportunity-driven startups including a fear of failure, startup opportunity recognition and startup intention, have constantly improved since 2011. The ratio of the fear of failure has been continuously improving from the 7th with 42.2 percent in 2013 to 38.1 percent in 2015, the 25th with 31.5 percent in 2016 and the 19th with 32.2 percent in 2017. The percentage of respondents who said there would be a good opportunity to start a business over the next six months took 16th place with 35.3 percent in 2017, up from the 25th with 12.7 percent in 2013.

The percentage of respondents who said they have the necessary capability to start a business dropped 17.7 percent points from 28 percent in 2013 to 45.7 percent in 2017.