Republic of Korea
Strongly focused on technology and innovation, the Republic of Korea is the world’s most research and development-intensive and second most innovative economy. More...
Strongly focused on technology and innovation, the Republic of Korea is the world’s most research and development-intensive and second most innovative economy. Korea is a global leader in ICT and an advanced information society. The economy ranks second globally in the ICT Development Index, has the world’s fastest internet, and the highest level of high broadband uptake. Korea is also the world’s seventh largest exporter with three conglomerates, Samsung, Hyundai, and LG, comprising over 30% of the economy’s GDP.
Despite these impressive figures, opportunities for female entrepreneurs and women in business remain limited. The ratio of male to female entrepreneurs in Korea is 5:1, meaning that for every five male entrepreneurs, there is only one female entrepreneur. The Total Early-Stage Entrepreneurial Activity (TEA) rate—an indicator that describes the percentage of the working age population about to or having just engaged in entrepreneurial activity—further underscores the gender gap in entrepreneurship. In Korea, men’s TEA rate is 10.3%, while women’s is just 2.3%. This is a much more significant gender gap than is found in most innovation economies. Further, while 36% of enterprise owners are women, over 93% of those women run small businesses that are concentrated in the service and retail industries. Men dominate higher-earning industries, including in manufacturing, construction, and ICT. In 2013, just one percent of corporate board members in Korea were women, the lowest rate in the region.
The World Economic Forum’s 2014 Global Gender Gap Index further underscores women’s economic participation as a problematic area. Korea ranks 117 out of 142 countries surveyed and its rank in “economic participation and opportunity” is particularly low at 124. While the economy has experienced impressive growth over the past five decades, changes in women’s roles have not kept pace. The work culture in Korea involves long hours and unpaid networking obligations after work (over 90% of working men spend over 40 hours per week at work). This leaves little flexibility for working women trying to balance family and work lives. While Korea has similar numbers of male and female graduates, a 2011 OECD survey ranked Korea last out of all OECD countries in employing female graduates. A 30% employment gap persists between men and women, the fourth widest gap in the world. Retention is also a major issue, with large numbers of Korean women leaving their jobs in their early 30s and returning later to only part-time work (27.7% of women in Korea work part-time, much higher than the OECD average). Although the law allows for maternity leave, many women are pressured not to take it. In response, many women in their 20s and 30s choose work over family, which has affected birth rates in Korea. For the last three years, Korea’s birth rate has been the world’s lowest, according to the U.N. World Health Organization. Women’s reluctance to enter the workforce could also be explained by the significant wage gap. Women in South Korea make 38% less than men, the most significant gap in the developed world.
In addition to work-family imbalance, female entrepreneurs in Korea face other issues affecting their ability to thrive in the workforce. Women’s businesses are highly underrepresented in trade. The exports of female entrepreneurs represented less than 1% of Korea’s total exports in 2004. The OECD and ILO have both reported that specific barriers female entrepreneurs face include high failure rates largely due to management problems; lack of business networks; limited access to capital; hesitation in seeking expert advice; and business services obtained at the regional rather than national level.
In addition to such specific barriers, the overall entrepreneurial environment is under pressure to reform. Korea’s discontinuation of business rate is 3.2%, higher than the 2.7% average of other innovation-driven economies. Primary problems include diminishing profit and difficulties accessing finance as well as burdensome administrative fees, including a set-up cost of at least $1,000.
Government officials are well aware of these constraints on businesses, and on female entrepreneurs in particular. South Korea’s current and first female president, Park Geun-hye, made women’s rights a foundation of her campaign, promising a “woman’s revolution,” and noting childcare as a high-priority issue. The government has taken steps to support retention of women in the workforce, create family-friend workplaces, and support working mothers. In 2014, the budget for the Ministry of Gender Equality and Family’s budget was increased expressly to strengthen childcare support.
More generally, the government has worked to foster a supportive business environment for entrepreneurs. The 2012 Global Entrepreneurship Monitor report found the role of government in promoting entrepreneurial activities in Korea is looked on favorably, highlighting business owners’ satisfaction with steps the government is taking to address problematic areas. For example, the government has been developing technology incubators and service/commercial infrastructure. The government has also been developing policy to make it simpler to start a business. Among other positive effects, this has led to a decrease in the number of steps and the number of days needed to start a firm. Various government entities including the Small and Medium Business Administration, the Ministry of Gender Equality and Family, the Ministry of Employment and Labor, and Public Procurement Services have assisted female entrepreneurs in locating funding, expanding into export, using mentors, and accessing procurement information.
Business networks in Korea provide a range of opportunities for businesswomen to connect across sectors and for Korean and expatriate women to connect. Specific events enable targeted networking among women in similar business positions (e.g., CEOs, inventors, venture businesses). There is a strong emphasis on providing opportunities for female entrepreneurs to develop technology skills and integrate ICT into their businesses. A 2013 study of conditions for working women in Korea observed that “One network that Korean women find impossible to replicate is the one men form during their compulsory army training. The lifelong friendships developed during conscription often provide them with very useful resources when they first enter the workforce and way beyond.” Thus, business networks for women in Korea are all the more important, as they compensate for critical differences in the social expectations and experiences of men versus women.
Networks that support women’s access to capital and assets:
Networks that support women’s access to markets:
Networks that support strengthened capacity and skills for women in business:
Networks that support women’s leadership, voice and agency:
Networks that support women and innovation and technology:
Korea’s private sector has an array of initiatives that champion women’s entrepreneurship and business environments supportive of women. These initiatives are largely done with other private sector actors or with government agencies. Still, there is room for more corporate initiatives, including by the Republic of Korea’s largest employers, to strengthen women’s economic participation. Private initiatives that support women’s economic empowerment emphasize research that can support advocacy. Technology is also a major focus, its use for e-learning and in promoting innovative use of technology among SMEs run by women.
Initiatives that support women’s access to capital and assets:
Initiatives that support women’s access to markets:
Initiatives that support strengthened capacity and skills for women in business:
Initiatives that support women’s leadership, voice and agency:
Initiatives that support women and innovation and technology:
In 2014, the World Bank’s annual Doing Business report ranked the Republic of Korea’s business climate an impressive 5th out of 189 economies surveyed. Notwithstanding this strong showing, the government is mindful of the need for a business environment more supportive of women. Government support for women entrepreneurs includes targeting state procurement opportunities for women, nurturing promising woman-dominated industries, and increasing funds for skilled women’s start-ups.
Domestic law mandates that the status of women’s businesses must be surveyed every other year. This has largely been undertaken by the SMBA and the Korea Women Entrepreneurs Association (KWEA). The surveys have helped the government identify challenges faced by women entrepreneurs. Realizing the constraints of work-life balance on women’s careers, the government is now focusing on helping women keep their jobs or stay economically viable during their childbearing years.
With respect to the business environment at large, government action falls into three areas: (1) helping SMEs start and expand businesses, including through education and training, access to finance, strengthened human resources, and assistance in accessing overseas markets; (2) building the capacity of SMEs to use technology; and (3) targeting services to microenterprises. The Korean government is also is committed to developing “e-Government” services, including digitizing information on administration and public agencies to ease interaction across government agencies and with civil society.
The government has long emphasized the continued technological innovation of SMEs. “Technological innovation,” in this case, refers to a system in which technology is used, generated, and dispersed across the economy. Approximately 20% of the government’s R&D budget is allotted for SME technology development. This push is also evident in the government’s Korean Small Business Innovation Research (KOSBIR) program, is a government-wide effort to support the technological innovation of SMEs. Under this program, since 1998, 16 agencies and 6 government investment institutions have been encouraged to channel 5% of their R&D budget to SME development. In addition, the Korea Technology and Information Promotion Agency for SMEs supports efforts to integrate innovative technologies into Korean SMEs.
Recognizing that finance is often a concern in a company’s ability to develop and expand, the government has developed a number of programs to facilitate access to finance, including the Korea Credit Guarantee Fund (KODIT) and the Korea Technology Credit Guarantee Fund (KOTEC), both which provide financial support to businesses. Further, the government’s Korea Venture Investment Corp finances venture capital firms that invest in SMEs to foster the economic development of the SME and venture sectors.