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Entrepreneurial bureaucracy?

Published: 15 Jul. 2015, 04:01

Recently I met with an executive at a major corporation.

“It wasn’t easy setting up the Creative Economy Innovation Center. Too many cooks can spoil the broth. We didn’t have discretion to decide anything, from where to invest to when to open. The government pressed us to allocate more money, and at the last minute, the Ministry of Science, ICT and Future Planning insisted that it would announce the project itself, although it was ours. It claimed credit since the president was interested.”

He continued, “Local governments are also eager to take credit with our money. Local media made demands. After all the investments we made, we were criticized for not contributing enough. In some places, there were requests to change the sponsoring company. But not many people know about the creative economy center. All they can remember is the photo in the newspapers. It is truly regrettable.”

I could assume how things are going from his story. The Ministry of Science, which is in charge of creative economy initiatives, seems to be pushing large corporations to produce. Companies are not completely pleased, but do their best to show sincerity to the government. Samsung and SK set up two creative economy center sites, Samsung’s in Daegu and North Gyeongsang Province and SK’s in Daejeon and Sejong. The local governments welcome their input.

The creative economy center is a project that the Park Geun-hye administration is promoting to revitalize the business environment for start-ups in collaboration with conglomerates and local governments. The conglomerates provide the funds and the government provides administrative services to nurture venture companies. Since last fall, 14 centers have been established, and three are in preparation, in Seoul sponsored by CJ, in Ulsan by Hyundai Heavy Industry and in Incheon by Hanjin. President Park is passionate about the project, attending nearly all of the opening ceremonies.

The government is right about seeking a breakthrough for a creative economy from start-ups. There are 10 million college graduates, while there are only six million high-quality jobs. It is not likely that more of these jobs will be created. Jobs need to be “created” from start-ups or people have to go abroad to make money. It is enviable that two-thirds of new jobs in the United States are at start-ups.

It is a bureaucratic idea to allocate regions to conglomerates to set up the creative economy centers, but at least something has been done. It is far better than wasting time on debating the concept of a creative economy. The government might have been frustrated earlier as it spent the whole year of 2013 operating an online site named Creative Economy Town. Last year, local governments were left with the job, and when it didn’t work out, conglomerates were recruited in September. The launch was delayed significantly.

In order to avoid criticism as a show-off, the creative economy centers need to be refined. Strictly speaking, it does not make sense that conglomerates nurture venture start-ups, unless it is an internal project. Conglomerates are organized, stable and extensive. But new ventures are all about challenges and innovation. The two don’t go together by nature.

So the conglomerates seemed unprepared to help the new firms. They are packaging their involvement by including a creative economy center in previously arranged investment plans. Some companies already struggling with large deficits have had a hard time setting up the assigned creative economy center. And the central and local governments are riding alone. Can entrepreneurs display their creativity here? Once a start-up relies on the government and conglomerate sponsors, it is no longer very entrepreneurial.

And the combination of conglomerates and start-ups may turn out to have an unfair power dynamic. For now, government influence will prevent that, but once the government involvement is relaxed or the administration changes, conglomerates may snatch technologies and ideas. Many conglomerates are struggling to find a new growth engine, and when they spot a promising venture, they may be tempted to take it over.

Fragmentary or overly uniform policies and funds have their limits. To make the creative economy centers successful, an environment for fair competition should be provided. In the United States, major corporations acquire successful ventures for a fair price. The entrepreneurs can take on a new challenge with the money and the culture became soil to nurture Apple, Google and Amazon. The government’s job is to create the environment. The start-ups should not be swept up by conglomerates, failed entrepreneurs should be given a second chance, the heavy tax on stock option should be revised to attract talent to start-ups, and universities should be able to help student ventures. There’s a lot to do other than setting up creative economy centers.

JoongAng Ilbo, July 13, Page 32

*The author is an acting editor-in-chief of the JoongAng Ilbo.

by Ko Hyun-gon