The Korea Development Institute (KDI), a national research institution, has suggested that the performance of the 'World-Class 300' project, which aims to enhance the capabilities of small and medium enterprises (SMEs), is negligible and should be shifted to a mode providing tailored consulting and networking. This recommendation is due to the fact that direct subsidy-oriented support policies have not shown significant effects in terms of productivity, sales, etc.
On the 19th, Kim Min-ho, a research fellow at the Korea Development Institute (KDI), presented the KDI Focus 'Path to Champion: Options for Transition in Support Policies for Small and Medium-Sized Enterprises.' The report includes an analysis of the effects of policy fostering national champion corporations and suggestions for policy improvement.
Korea's representative national champion corporation fostering policy is the 'World-Class 300' project. This project has been conducted by providing subsidies to a selected few corporations with an annual budget exceeding 50 billion won since 2011.
However, comparing the performance of supported and non-supported corporations from 2011 to 2018, it was found that the effects of the support project were insignificant in terms of sales and added value.
The revenue growth rate of supported corporations three years after the policy support was found to be only 7% compared to non-supported corporations. Researcher Kim explained, 'It suggests the possibility that subsidies were provided to corporations with low growth potential or those that did not significantly need funds, rather than to those desperately in need of investment for productivity improvement or growth promotion.'
KDI pointed out issues with the method of selecting a few corporations for subsidy support, including: ▲ a lack of government information to select eligible corporations ▲ the risk of corporations focusing on lobbying and rent-seeking rather than productive activities to benefit from support ▲ market competition distortion caused by selective support.
Researcher Kim advised, 'There is a need to transition the major operational methods and support means of the national champion corporation fostering policy to a 'bespoke action model,' which helps corporations solve the challenges they face.' The bespoke action model refers to establishing individual corporations' growth strategies and evaluating if the organizational functions align with such strategies. It is a method that supports corporations in directly addressing the challenges they encounter.
KDI specifically pointed out the need to select corporations with high effectiveness of support by centering on directors with ample scale-up experience or expertise in the corporation selection process. In the process of planning and performing support, it suggested operating the project by assigning a director to each corporation to provide one-on-one tailored advice and services within a set period.
Researcher Kim stated, 'Directors play the role of exclusively advising corporations, which can strengthen accountability through corporation selection,' and 'A pool of experts with corporation scale-up experience can also be publicly formed and managed.'
Furthermore, 'The main function of the support project is to organize a network,' he noted, 'Through networks, investors can be connected with accelerators to provide capital and consulting, and it can support the use of private consulting services such as initial public offerings according to corporations' demands.'