Less than 40% of Korean startups last three years

By Choi Sung-jin

When entrepreneurs start a business, they dream of a company that can last a hundred years. In reality, however, it is hard for a startup to continue for a hundred months.

That was the conclusion of a survey of about 2,400 manufacturing companies by the Korea Chamber of Commerce and Industry.

In the survey “How businesses perceive the low-growth era and cope with it,” 48.9 percent of respondents said, “Our present profit sources are on the decline.”

Asked how long their businesses will be able to survive if they fail to cope with changing environments at home and abroad, the manufacturers said 8.4 years on average. By industry, the electronics sector’s presumed survival period was shortest at 6.5 years, followed by automobile’s eight years, steel-machinery’s nine years, oil refining’s 10 years and textile’s 15.9 years.

“Even if Korean companies develop new technologies, markets and competitors are changing more rapidly than the technological development, making it hard for the domestic firms to catch up,” the KCCI report said. “As long as they are bent on coping with short-term customer demands while avoiding making long-term innovations, they can’t help but be buried by the market’s commoditization.”

The survey, while assuming changes in markets, local and foreign, are occurring at 100 miles per hour, asked what the adjustment speed of the participating businesses was, and the answer was 74 mph on average.

Assuming that the “improvement of competition” in 2008 was 100, the respondents said the current level is 90, meaning competition has intensified. Labor market flexibility has fallen to 94.1 and the easing of corporate social responsibility has dropped to 96.5. Conditions of business regulations and capital financing rose to 105 and 103, respectively, improving from the global financial crisis.

As factors for corporate survival, the respondents cited four things -- fusion (24.8 percent), low cost and high quality (17.2 percent), social contribution (13.3 percent) and creative talent (13.2 percent).

Although Korea’s traditional industries have entered the mature phase, they can increase their sales to sufficient levels through fusion, 66 percent of the respondents said.

“In order to realize fusion appropriately, CEOs should learn about it ahead of others,” said Professor Shin Hyeon-han of Yonsei University, also an advisor to the KCCI. “They should have an eye that can instantly discern a swift horse.”

As future promising industries, the manufacturers pointed to energy-environment (34.4 percent), bio-health (21.5 percent), ICT and fusion (19.2 percent), ICBM (Internet of Things, cloud computing, big data and mobiles) (15 percent) and high value-added services (9.4 percent).

Asked what the government should do for industrial innovation, they cited the creation of an environment for the injection of venture capital into uncertain future industries (48.8 percent), followed by regulatory innovation (46.2 percent) and development of creative talent (31 percent).

“Korean startups’ chances of lasting for three years remain at 38 percent, quite low compared with 25 OECD countries surveyed,” said Lee Dong-keun, standing vice chairman of the KCCI. “If the domestic businesses are bent on seeking short-term profits driven by the slump, they will lose their places in global markets. And this is why revolutionary ideas are so valuable.”