South Korea: Unleashing The World's Entrepreneurial Powerhouses

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This post contains sponsored advertising content. This content is for informational purposes only and not intended to be investing advice.

South Korea is a fascinating paradox. On one hand, it’s a world leader in many measures of innovation, including research and development. Yet, on the other hand, entrepreneurship in South Korea is stifled – despite the clear ambitions of small-scale businesses to grow and thrive. And why is that the case?

It’s because in South Korea, innovation is highly concentrated in large-scale businesses – including massive chaebols like LG, Hyundai and Samsung. This is skewing the figures and distorting the reality. The OECD reports that South Korea’s entrepreneurial ventures are largely made up of small businesses, concentrated in low-productivity sectors like retail and food/beverage, which never grow beyond the small scale. 

This means that there is enormous latent potential for South Korea to build a strong second-tier economy, based on the efforts of smaller scale entrepreneurs. In this article we’ll explore the reasons for the current state of innovation in South Korea, and introduce a new platform that could revolutionize the country’s entrepreneurial activity.

Among the Asian Tigers, South Korea roars loudest.

According to the 2020 Global Entrepreneurship Index, South Korea is top of the pack in the Asian region, with a score of 54% for its entrepreneurial environment. It’s closely followed by Singapore and Japan, scoring 53% and 52% respectively. China is ranked fourth with 41%. 

However, as we’ve mentioned, these numbers are not the whole story. The high R&D intensity that helped South Korea become a global leader in information and communication technologies emerged from a historically ‘top-down’ innovation system. This system promoted close collaboration between government, industry, and universities – which led to the establishment of large industrial groups known as ‘chaebols’.

Chaebols were owned and controlled by South Korean individuals or families. The government pushed the chaebols to invest heavily in R&D, while simultaneously shielding them from competition. With increased R&D intensity focusing on applied knowledge, chaebols were driven towards new heavy industries – including petrochemicals, car manufacturing, shipbuilding, and consumer electronics.

The vital role of SMEs in South Korea

Historically, South Korea has one of the highest rates of necessity-driven entrepreneurial activities. That is, entrepreneurship occurring because there are no other available work options. However, over the past 10 years, there has been a slow but steady increase in the rate of improvement-driven opportunity entrepreneurship – meaning entrepreneurship motivated by the desire for independence or an increased income. It’s this type of entrepreneurial activity that’s the key to strengthening the country's economic base – and as a result, South Korea’s future.

 Ten years ago SMEs represented 99.9% of enterprises and accounted for 86.8% of employment in South Korea. And most of them stayed small. Over the next five years, only 0.01% of small companies grew into medium-sized companies. The lack of growth in the SME sector reflects the low levels of innovation at this level of the economy. 

Empowering entrepreneurship in South Korea is crucial to increasing productivity levels in the small business sector. It will allow the country to challenge incumbents, stimulate competition, generate higher-wage employment outside the chaebols, and exploit the technological or commercial opportunities neglected by established companies.  

The 3 barriers to entrepreneurial activity

1. Negative perceptions

It might be surprising to discover that less than 40% of working age adults in South Korea view a career in entrepreneurship positively. Market regulation in South Korea is among the most stringent in the OECD. This means legislative barriers to entry are high, particularly in comparison to competitors in the region – such as Indonesia – where these barriers are virtually non-existent. Those restrictions also lead to high expectations of failure for new ventures.

2. Marginalised demographics

Despite a couple of well-intentioned government initiatives to promote entrepreneurship in women and under 30s, compared to other OECD countries, these groups are still largely underrepresented in South Korea’s entrepreneurial landscape. This is essentially leaving a goldmine of talent and skills untapped. 

Only 56.2% of women in Korea are employed, and many women withdraw from work when they have children. Workplace culture and social expectations can still pressure women to withdraw from the labour force, and it can be difficult for mothers to resume their careers. This deprives the South Korean economy of the immensely valuable experience, insight and expertise that women can – and do – contribute in other nations. 

As for young people, in South Korea they tend to see a role at a large corporation as the most desirable career path. In contrast, in many other OECD nations, university graduates in science, technology, engineering and maths (STEM) see getting into a start-up venture as the Holy Grail.

3. Lack of entrepreneur funding.

It’s a refrain heard everywhere but Shanghai and Silicon Valley; lack of access to finance is a major barrier to developing a culture of entrepreneurship. The same goes in South Korea. 

In recent decades, South Korean government financial support has been substantial – but it has focused on the traditional debt financing model. So although equity investment is rising, funding of start-ups remains limited. The government accounted for 30.3% of venture capital funds in 2015. In the same year 68.9% of the total venture capital investment went to firms more than three years old, and 26.7% to firms more than seven years old. There is clearly a need for a significant increase in Early Stage funding of viable new ventures under three years old. But currently, there’s no mechanism to deliver it.

As every entrepreneur knows, bank style lending is ill-suited to the high-risk profile that many Early Stage ventures come with. If they’re to acquire the investment they need to thrive, South Korea needs a funding ecosystem better suited to the needs of Early Stage entrepreneurs.

That ecosystem is the Dacxi Chain. 

The Dacxi Chain is the world’s first tokenized global equity crowdfunding platform. 

Right now, it’s incredibly difficult for entrepreneurs to get the right amount of funding at the right time. On the other side of the coin, it’s also too hard for insightful investors to find opportunities to invest in new ventures at the Early Stage, where hyper growth in value happens. 

The Dacxi Chain solves both of those problems simply and efficiently. The Dacxi Chain will connect entrepreneurs with the right investors; people from anywhere around the world, who understand the product and the opportunity it presents. 

How does the Dacxi Chain work?                                

The Dacxi Chain uses tokenization and blockchain technology to create digital versions of a company shares. Rather than holding a company’s shares, investors own tokens that represent ownership. Every transaction is recorded on a blockchain database, so no other means are required to verify ownership.

Tokenized crowdfunding has enormous potential for both entrepreneurs and Early Stage investors. It will provide:                                     

  • A massive global audience, with investment opportunities offered worldwide
  • An informed audience who understands the potential of the opportunity
  • The ability for people anywhere in the world to invest in small amounts
  • Simple investment management 
  • Asset liquidity (because tokens can be sold on exchanges).

Unleashing South Korea’s potential with the Dacxi Chain

The Dacxi Chain’s global tokenized crowdfunding system will give South Korean entrepreneurs the ability to raise more money, more quickly – from the right investors, from anywhere in the world. 

This will unleash South Korea’s extraordinary potential for new entrepreneurial ventures, which are currently struggling to succeed against a paradoxical backdrop of one of the most successful innovation-based economies in the world. It could also see an increase in new entrepreneurs from previously underrepresented demographics – particularly women and young people.

The Dacxi Chain is blind to gender, age, race, colour, culture and location. It brings fairness and equality to the potentially vast global crowdfunding market – a market that, if operating efficiently, IBM estimates to be worth $1 trillion. In South Korea and around the world, the Dacxi Chain is the key to making it happen.

Further reviews:

For the latest information on Dacxi Coin and the Dacxi Chain global tokenized crowdfunding platform, visit dacxicoin.io. You can download the Lightpaper, and join the Dacxi Coin telegram community. For media enquiries please contact pr@dacxi.com 

This post contains sponsored advertising content. This content is for informational purposes only and not intended to be investing advice.

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