Toward fair competition

Entrepreneurship is important because it guides creativity and innovation. But what will a businessman do, when his small company grows into a mid-size business and then faces an increase of billions of won in corporate tax while government benefits are reduced and government supply channel is blocked? The businessman will likely pay more attention to adapt to the current system, than winning a competition in a market with creativity and innovation. In fact, he will concentrate on splitting up the company into small affiliates.

In Korea, majority of the workforce is working for small companies, while relatively low numbers of workers are employed by larger firms. And yet, the economic power is focused on the few conglomerates, while many small firms are hiring about a half of the workforces. This is the outcome of our market economy and policy.

At the early stage of the economic development, the government directly supported talented companies to nurture them into global conglomerates. At the same time, various policies to support small companies were implemented. Policies were also executed for shared growth of conglomerates and small firms. It was a unique outcome of the compressed growth and subsequent process of healing.

But the system and policies should have changed their paradigm around 1980s to meet the economic and social changes. The government should have changed its policy from directly supporting companies to strengthening competitiveness of economic infrastructure. Particularly, a “good market” should have been created.

A fair market is the most important. Fair competition is the basis of creativity and innovation. The more a market is unfair, the more small companies become controlled by large companies. In such a market, lobbying replaces creativity and innovation.

Illegal trading among affiliates of conglomerates takes away the businesses of small and mid-size firms and damages the industrial ecosystem. Independent companies cannot compete against affiliates of conglomerates on the equal level. Education and consulting businesses, various service industries, programming, advertising, logistics, food catering, golf, construction and real estate management industries are such examples.

Completely shutting down supply channels to the government when small companies grow is also a discrimination. It is giving a penalty to successful small companies. Fair competition allows entrepreneurship to book and saves economy. Employment and growth are also depending on it.

by Kim Seung-il, Head of the High Potential Enterprises Research Institute