Korea Enterprises Federation report on open innovation
Large firm-startup cooperation remains at early stage
Startups call for follow-on investment, market access support
Government urged to help open initial sales channels through public demand
Amid growing calls that cooperation between large South Korean companies and startups remains stuck at an early stage — largely confined to research and development — a new report is urging the government to help startups break into initial markets through public procurement and to strengthen incentives for large firms that invest in startups outside the Greater Seoul area.
The Korea Enterprises Federation released the findings Monday through a report commissioned from Cho Won-kyung, a professor in the economics department at Sejong University, titled "Measures to Promote Open Innovation for a Large Firm-Startup Coexistence Ecosystem and Regional Innovation."
Cho said that while open innovation partnerships between large companies and startups are spreading, they remain concentrated at the early stage.
A survey of 58 startups with open innovation experience — allowing multiple responses — found that 56.9 percent had engaged in proof-of-concept collaboration and 43.1 percent in R&D, both early-stage activities. By contrast, far fewer had experience at later stages: 25.9 percent had worked on commercialization and just 10.3 percent on scaling up.
A separate survey of 159 newly founded startups found that their most desired areas of collaboration were investment attraction (31.7 percent), securing customers (28.5 percent), joint R&D (27.6 percent), commercialization (26.8 percent) and proof of concept (16.3 percent).
When asked about policy support, an overwhelming 59.1 percent said they most needed help with follow-on investment, commercialization funding and market access after open innovation partnerships.
The report said the ecosystem must move beyond simply expanding the volume of open innovation and build a virtuous cycle in which collaborative results carry through to later stages. To that end, it proposed three key reforms: opening initial sales channels through public demand, reorganizing regional collaboration hubs and strengthening open innovation incentives.
First, the report proposed that the government introduce a process in which it solicits challenges and startups submit solutions, helping them secure public procurement as a sales channel beyond the proof-of-concept stage. The idea is to launch pilot projects quickly by drawing on existing R&D and procurement budgets across government ministries.
The report also advised designating consortiums of local governments, anchor companies, innovation centers and technoparks as "regionally led open innovation special zones," with central government matching funds channeled into them.
In addition, it proposed replacing blanket deregulation of external investment and overseas investment limits for corporate venture capital arms operated by large conglomerates with a "region-linked incentive" system tied to the share of investment directed at companies outside the Greater Seoul area. Under the arrangement, large firms would receive tax benefits while startups and their regions would gain access to growth capital.
Jung Chul, the Korea Enterprises Federation's chief research officer and head of its entrepreneurship center, said the focus must shift from expanding the quantity of open innovation to improving the sustainability of collaboration. "We need to build a solid institutional foundation that allows large companies and startups to grow together while also embracing the innovation capacity of regions," he said.
joze@heraldcorp.com
