This study aims to examine the government’s ongoing industrial policies and present the future policy direction. A review was first conducted of the relevant 2017 budget under the Ministry of Trade, Industry and Energy (MOTIE) and Ministry of SMEs and Startups (MSS)—key competent authorities in major industrial policies. The industrial support budget was classified into eight categories according to the policy purpose: startups, enhancement of human resources, facilities, R&D, sales channel, business change, infrastructure and support agencies? And, using statistical data on MOTIE’s budget for corporate support within its R&D support programs, the effectiveness of the support policies was analyzed. Recommendations on the goals and principles for industrial support policies are presented based on the results in order to upgrade the Korean economy’s innovation capabilities. Additionally, the current problems in the support policies for R&D, startups and sales channels and the ideal policy direction are addressed.
MOTIE allocates approximately 76 percent of its budget on R&D, infrastructure and support agencies while the lion’s share of MSS’ budget is spent on support for infrastructure and startups. Data combining the 2017 industrial support budget of both ministries show that infrastructure (27%) received the largest support, followed by R&D (23.5%), startups (14.3%) and facilities (10.6%). Moreover, roughly 1,448.2 billion won (10%) was assigned to support agencies. To analyze the effectiveness of MOTIE’s R&D projects, data was compiled on companies that undertook projects estimated at over 100 million won in 2010-2012. The result shows that MOTIE’s support policy on corporate R&D had a positive impact on TFP, sales and employment, with new firms being more affected.
For the future, Korea’s industrial policies should aim to establish a solid industrial foundation for innovative growth in response to a rapidly changing global economy. Specifically, policy goals should center on support for the advancement of productivity in order to upgrade innovation capabilities and ultimately create quality employment. To that end, the following principles are recommended based on relevant theories and empirical analyses.
A clear distinction must be made between industrial policy and welfare policy. And, focus must be placed on sectors that have market failures and expected positive externalities. When planning industrial policies, the demand side as well as the production side must be taken into account. Policy designs must be comprehensive as to not incur a crowding-out effect on the private sector, and targets should be selected with caution to prevent moral hazard. In addition, systemic ex-post evaluations and a reflux mechanism are needed. For the evaluation system, industrial policies need to be classified according to goal, target and tool. A reflux system should be constructed, thereafter, so that the evaluation results are appropriately applied to make improvements. Finally, questions as to whether the effects can be maintained even after the policy expires should be taken into consideration.
Based on these goals and principles, this study also addresses the current issues and policy direction of the support for R&D, startups and sales channels—elements that are believed to significantly affect the fostering of innovative firms. R&D support is a key policy for enhancing the innovation capabilities of firms that are essential to the sustainable growth of the Korean economy. Analysis of the R&D support budget shows that programs vary widely in target and content but also have numerous elements that are difficult to discern. The positive impact from MOTIE’s R&D support is clearly evident, with firms who receive support exhibiting increases in their TFP, sales and employment rate. However, to further enhance the effectiveness of support, efforts must be made to optimize the government’s R&D implementation mechanism. This study recommends US case studies including the ‘Small Business Innovation Research (SBIR)’ and ‘Small Business Technology Transfer (STTR)’ as examples to explore solutions to the pending problems in Korea’s mechanism. Also, to improve the system for R&D support, a full-scale review should be conducted on procedural aspects such as selecting the research theme; R&D implementation methods; researchers; evaluation and rewards; and means to disseminate outcome.
In order to seamlessly transition into an innovation-driven economy, Korea needs the active participation of technology startups, rather than subsistence businesses. However, there currently exists a notable discrepancy between reality and ideal in terms of the current condition of startups and impact of support policies. Indeed, despite the government’s continued efforts to expand relevant support, the share of rapidly-growing new firms has been subpar. This implies that support programs are not focused on fostering highly productive technology startups and hence, little consideration is given to business type. The government has earmarked over 2 trillion won for the support of startups, and as such, a shift in focus is needed—from the quantity of a budget increase to the quality—by enhancing the effectiveness of policies. Excessive government support could prompt moral hazard and a crowding-out of private capital, resultantly hindering the progress of the financial market. To prevent such problems, startup support funds should gradually be privatized and the role of the private financial sector in support programs reinforced. Accordingly, case studies on ‘Yozma,’ the Israeli government-owned fund which was eventually privatized are suggested. In addition, the government must evolve from providing just financial support to including education and consultation, which could contribute to the rise of better-prepared technology startups.
Support for sales channels carries the risk of moral hazard due to the overlapping and/or similar issues present in support programs. For instance, numerous programs all designed to assist SMEs’ entrance into overseas markets are in operation not only under the two competent ministries (MOTIE and MSS) but also under several others. This naturally leads to problems such as overlapping or prolonged support from various programs, thus necessitates a reexamination of the feasibility of the support programs. To enhance the effectiveness of the support for sales channel, this study recommends three points to consider. Beneficiaries should be selected with more discretion to prevent moral hazard. Also, similar programs need to be integrated and performance evaluated. And finally, programs should be redesigned to help incorporate SMEs into the global value chain. To do so, government procurement policies must be overhauled to purchase quality products and services produced by SMEs as the government purchases themselves can serve as an important guarantee of quality.
한국 산업지원 예산의 성과와 정책방향
세종 : 한국개발연구원
|Subject Country||South Korea(Asia and Pacific)|
|Subject||Economy < Financial Policy
Industry and Technology < Manufacturing