Analysis of Korea's innovation ecosystem fostering policy

Abstract

Chapter 1 This paper addresses two primary questions: (1) Which city among the non-metropolitan areas of Korea has successfully cultivated a venture ecosystem? (2) What factors have contributed to the success of this region in attracting and nurturing venture companies? Through an examination of data pertaining to the accumulation of venture companies across various local governments and the corporate attraction within the Venture Promotion District—a prominent government-led venture support system—it is evident that Pohang City stands out as the most successful among non-metropolitan cities in Korea. Additionally, insights gleaned from expert interviews shed light on the following factors: (1) The pivotal role played by the presence of a world-renowned engineering university in Pohang City, (2) the implementation of policies aimed at fostering synergies between venture companies and established local corporation, (3) the proactive stance of public officials in response to diminishing administrative powers, and (4) the strategic anticipation of future industries through the establishment of special regulatory zones. This study is significant in its contribution towards identifying novel pathways to success for localities grappling with population decline and economic challenges.

Chapter 2 To analyze the effectiveness of Korea's innovative company support policy, the PSM-DID method was employed to companies that benefited from two new policies - regulatory free zones and prospective unicorn projects- introduced by the Korean government since 2019. The findings revealed a higher sales growth rate for prospective unicorn businesses, where government support was limited to loan guarantees, compared to businesses in regulation-free zones that received more government support. In other words, the growth potential of prospective unicorn companies that had prior investment from private venture capital was greater than that of companies in the regulatory free zone system, which was implemented as a political initiative linked to regional development. These results can be interpreted as evidence supporting the superiority of Israel's SME policy philosophy, in which the government assists companies selected by the private sector.

Chapter 3 Asian countries are strategically adjusting their immigration policies, transitioning away from focusing solely on regulating low-skilled individuals towards actively attracting high-skilled talent. This shift is driven by the challenges of population decline and aging demographics within these nations. These policies aim to attract young, talented individuals who can make significant contributions to long-term economic growth and foster a vibrant innovation ecosystem. Korean venture companies show interest in hiring foreign talent, perceiving it as beneficial for growth and cost-effective. However, having a large workforce or high revenue doesn't guarantee openness to hiring foreigners, suggesting policy targets shouldn't focus solely on big companies. Preferences lean towards foreign talent with bachelor's or master's degrees, less than 10 years of experience, and salaries below KRW 100 million. Hiring reluctance exists for those with doctoral degrees or over 10 years of experience, indicating the need for government support to attract such high-level talents. Additionally, companies face challenges with the current visa policy, suggesting the need to benchmark Singapore's practices and reevaluate Korea's visa policy with input from corporate support ministries