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Performance and Challenges of Purchasing Policies Regarding SMEs’ Public Technologies and Challenges

Author Jiseung Hong, Seogil Hong, Changyong Han Date 2016.02.01 Page 30
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In order to realize the “creative economy” currently promoted by the government to create decent jobs and secure stable basis for growth, innovative technology development is essential. However, in terms of small and medium sized enterprises (SMEs) who play a leading role in realizing creative economy, due to recent sales slump in Korea and abroad and deepened anxiety for the future they prioritize development of technologies whose sales market can be easily secured and it gets difficult to have creative innovation enabling another leap forward. Moreover, with regard to creative innovation, the likelihood of success in development is uncertain and even if it is successful, it is highly likely to fail to enter into market at the initial stage because of unstable features of products, lack of trust toward SMEs and concerns over post product management if problems occur.
Since the mid-1990s, the Korean government has promoted various facilitation policies through various government agencies such as the small and medium business administration, the public procurement service and the ministry of commerce and industry with an aim to stabilize management using huge purchase volume of the government and public institutions and to facilitate technological innovation. Recently, in order to improve effectiveness of technological innovation of private companies, the government has reinforced demand-side policies through public procurement while escaping from existing supply-side policies such as providing subsidies for R&Ds.
However, it is considered that roles and functions of public procurement are still not enough to facilitate technological innovation of SMEs. As of 2014, out of 111 trillion won worth of purchasing volume of the entire public institutions including the government, SMEs represent 78 trillion won but purchasing amount of products made by technological development is just 2.6 trillion won.
In addition, when the public agencies purchase products made by technological development, in many cases the features of the product do not include significant technological innovation with enormous external economic effect or do not required in the country and the products can be improved gradually or can be easily copied by competitors, so there is a gap between the purchase and the original purpose of demand-side innovative policies.
In fact, the biggest hurdles that hinder the achievements of public technology procurement policies of the government are implicit problems of various players participating in the transaction and structural problems occurred by correlations or the mismatch of policy demands and policy response.
Therefore, as this year is the third year of promoting creative economy, it is required to check the effectiveness of public technology procurement policies of the government to identify whether the policy achieves success or not and it is needed to make measures for improvement preemptively so that it would be able to figure out restraints of policy achievement and issues to improve effectiveness in the future. However, despite of increasing importance of the public procurement policies for innovation, there are not enough empirical studies and it is required to conduct studies based on various approaches.
Thereby, in order to facilitate innovate technological innovation with high risks in development and commercialization, this study tries to derive policy measures to form an initial market for products made by technology development and to strengthen the role of reference market through enormous public procurement of the government, in terms of ‘building an creative technological innovation ecosystem with a virtuous cycle’ which is a key strategy in realizing creative economy. To this end, this study would look into current state of major polices operated by government to spur public procurement of products with new technologies; and evaluate the adequacy for SMEs who would be the beneficiary of the policies; and suggest measures for improvement in the future by analyzing best practices of advanced countries in the EU.