Graduate School of Business

An overview of the ecosystems fostering innovation and startups in the United States, China, and Germany and the ingredients for similar success in Korea specifically and elsewhere in general was the topic in December at the second Yonsei Venture, Innovation and Startup Program (YVIP) Global Conference. The YSB and the YVIP were hosts for the program sponsored by Amorepacific and the National Economic Advisory Council.

"This is an era of entrepreneurship," said Management Professor Dong-Youb Shin, director of YVIP steering committee, in introducing the theme of “The Entrepreneurial Ecosystem” at the opening session of the conference. Young-Ho Eom, dean of the Yonsei School of Business, welcomed all attendees and said, "I hope this will help create a worthwhile relationship."

Jong-Haak Hong, minister of the government’s small- and medium-sized enterprises (SMEs) and startups program, emphasized the need for an open innovation model that can help wean venture companies from a closed innovation model focused on large companies. To this end, he urged universities to build infrastructure and make it available to the general public. Lastly, Yong-Hak Kim,president of Yonsei University,  pointed out that although many of the necessary ingredients for startups are in place — innovative ideas and manpower, capital and venture capital, national and local government support —  the missing ingredients are entrepreneurship, venture spirit, and an ecosystem that connects them all into a system greater than the sum of its parts that nurtures startups and helps them flourish.

In his keynote speech, Salvatore Zecchini, chairman of the Organisation for Economic Co-operation and Development (OECD) Working Party on SMEs and Entrepreneurship, emphasized that each country should not try to build its own Silicon Valley but should instead consider its own unique features. He also added that government's role is so limited that it cannot create an ecosystem of startups on its own but can only work on relieving congestion in the process. Furthermore, he argued that a virtuous circle should be established in which entrepreneurs themselves reinvest in the environment so that subsequent entrepreneurs can continue to emerge.

After Zecchini’s speech, a panel of international experts described an ideal ecosystem to foster innovation and startups and evaluated the current Korean system against this ideal. Panelists were William P. Barnett of Stanford University (USA), who has led startup innovation centers at some of the world's leading universities;  Xudong Gao of Tsinghua University (China), Michael Woywode of the University of Mannheim (Germany), and Ji-Hwan Lee of the Korea Advanced Institute of Science and Technology (KAIST).  Also participating in the discussion were Professor Young-Choon Kim of Korean’s Ulsan National Institute of Science and Technology (UNIST), Sung-Joo Bae, associate professor of operations management, and Joon Han, professor  of sociology, both of Yonsei University, and Sang-In Park of Seoul National University, all four of whom are scholars of Korea’s efforts in creating a startup-innovation ecosystem.

Professor William Barnett, who led the presentations in Session 1 of the conference’s four sessions, said, "Although humans are poor in predicting, they are excellent at postrationalizing situations. There are many cases in which nonconsensus ideas have surpassed predictions and become huge successes.. For companies such as Apple, Google, Facebook, and POSCO [a Korean steelmaker] to continue to emerge, maintaining an environment where breaking the consensus idea is available is essential.” Professor Young-Choon Kim of UNIST said that cultural change is needed in Korea because its government-led ecosystem results in companies that lack diversity and an environment that fails to foster innovation.

In the second session, Professor Xudong Gao pointed out that although research institutes contributed greatly to the growth of a company's business in China, efforts to simplify procedures were a key component. This trend is especially evident from the standpoint of latecomers who follow advanced countries such as China and Korea. In the end, the argument is that the startup ecosystem should be understood as a system. Associate Professor Sung-Joo Bae said, "Korea is tops in the relative costs of research and development to GDP, but this is mostly public expenditure, including the government.” He also argued that there are both advantages and limitations to the reverse evolution models adopted by Japan, Korea, and China to catch up with Western countries and that the Chinese examples illustrate that this model remains valid.

In the third session, Professor Woywode of the University of Mannheim explained, "Given Germany's successful Heidelberg innovation ecosystem, building collaborative relationships of universities, corporations, government, and startups within local clusters was a success factor." He added that such an environment would provide good conditions for the launch of new industries. However, he added that the rate of starting a new company is so low that it is becoming difficult for existing companies, even though they are healthy, to find new growth engines.

According to Professor Ji-Hwan Lee of KAIST in the last session, Korea’s startup ecosystem is heavily influenced by the government, and the economic and social values needed for the establishment of the ecosystem remain unsettled. Professor Sang-In Park of Seoul National University also emphasized that the government's role should be changed from a mediator to a facilitator. “It needs to create a field that facilitates fair competition and establishes a punitive compensation system and motivates innovation."