Korea Must Learn to Nurture Start-ups

      June 26, 2015 13:47

      China is home to 15 unlisted start-ups valued at more than US$1 billion, but in Korea there are only two -- online commerce company Coupang and smartphone app provider Yellow Mobile.

      Analysis by U.S. venture capital database CB Insights shows China has the second largest number of start-ups worth more than $1 billion, including smartphone maker Xiaomi and drone manufacturer DJI.

      The U.S. is No. 1 with 69.

      China asserted its presence after the 2008 global financial crisis in terms of start-ups specializing in smartphone apps, 3D printing, drones and technologies related to the Internet of Things.

      Korea, meanwhile, has a superb Internet infrastructure and a high penetration rate of smart devices, which should enable start-ups to tap into overseas markets. But Korea has yet to see a truly global start-up like Xiaomi.

      The main culprit is the reluctance of major Korean conglomerates to develop innovative new products and simply focus on improving existing ones. Decades of dominance by major conglomerates, known as "chaebol," has created a barren business landscape for start-ups.

      The Park Geun-hye administration has set its sights on fostering a "creative economy" and setting up research centers in major cities in partnership with major conglomerates. But innovative businesses are not created simply by setting up spiffy offices and throwing money at them. Korea must create an ecosystem where chaebol no longer choke innovative start-ups to death.

      All the government needs to do is to protect start-ups from bullying by big businesses and allow them to grow. If Korea loses to China in the race to create truly innovative start-ups, its economic outlook is bleak.

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