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Fueling the next boom: policies for promoting corporate spinoffs in Korea

Author Yang, Hyunbong Date 2021.04.26 Issue No 106
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● As the global economic environment is evolving amid the protracted COVID-19 pandemic, minimizing the pandemic’s impact on the sluggish economy and boosting economic sustainability will require yet another boom of corporate spinoffs in Korea. This was the case in the early 2000s, when many venture companies were created.

 

● A survey of 202 spinoff companies conducted by KIET found that most of the founders of those early startups were people in their early 40s who leveraged their past work experience, lacked access to private venture funds, and had limited knowledge of and low utilization of startup support programs.

The average age of spinoff founders at the time of the launch of their ventures was 43.4 years old, with the majority of founders holding master’s or doctoral degrees (41.6 percent) and tapping into their corporate experience in technology- or research-related fields (58.4 percent) to pursue their ventures outside the incubator organization.

- Factors that affect founders’ decision to start a business include their past work experience (86.6 percent), education (three percent), upbringing (two percent), and vocational training (one percent).

In the early days of spinoff enterprises, most funding was sourced from government support (35 percent), followed by bank loans (21.4 percent), financial support from the parent company (20.1 percent), and venture funds such as angel or venture capital (8.9 percent).

- Respondents rated their awareness of, utilization of, and satisfaction with corporate spinoff support programs with scores of 3.7, 3.8, and 3.7 points, respectively, on a scale of one to five.

- The survey also found that, when it comes to the operation and utilization of the government’s corporate spinoff support scheme, there is still a shortage of programs available for would-be founders and insufficient financial and tax benefits for incubator parent companies.

 

 Going forward, the promotion of corporate spinoffs and subsequent creation of quality jobs will require careful selection of and focus on the potential beneficiaries of startup support policies (promotion of technology/knowledge-based startups), promotion of positive perception of spinoffs (more mid-caps and SMEs incubating internal spinoffs instead of large corporations being the major incubator organizations), provision of systemized support programs, and improvement of the efficacy of corporate venture incubation programs.