South Korea’s entrepreneurial heritage is probably one of the global economy’s best kept secrets. Many observers contend that the Korean economy has been primarily driven by authoritarian governmental policies and the hierarchical management of large business conglomerates (chaebols), based on Confucian cultural traditions which emphasize scholarship, hard work, and loyalty, not of value creation and innovation through business entrepreneurship.1
In contrast to these widespread perceptions, however, there are strong indications that business entrepreneurship has played a decisive role throughout all stages of Korea’s rapid transformation from a pre-modern and desperately poor agricultural economy to a highly sophisticated global manufacturing and technology powerhouse. Entrepreneurship can be fundamentally understood as activities which are related to the discovery, evaluation, and exploitation of opportunities.2 Various studies have shown that Korean business leaders have been highly proficient in identifying growth opportunities and exploiting them effectively, thereby decisively contributing to rapid industrialization, steep technological progress, and the swift globalization of Korean firms.3
In consideration of these strongly contrasting views, we will subsequently elaborate more specifically on both perspectives in this opening chapter: the widespread view that the Korean business system is mostly built on hierarchically managed conglomerates and interventionist government policies, and the alternative view that Korean economic development has been primarily based on and continues to be driven by business entrepreneurship. Thereafter, we will provide an overview of the contents of subsequent chapters. Overall, we are analyzing entrepreneurship in Korea in this book both from a historical, evolutionary perspective and from a contemporary viewpoint to gain an in-depth and comprehensive understanding of what are its specific features, why it has been so effective for advancing industrialization, globalization, technological progress, and economic wealth creation, how it has evolved over time, and what needs to be done to sustain it in the rapidly changing business environment of the twenty-first century.
Korea: a non-entrepreneurial country?
Historically, Korea in the Chosun period has been assessed to be the most Confucian country in the world. The five cardinal relationships of Confucianism, which were strongly emphasized in Korea during the Chosun dynasty (1392–1910), prescribe obedience and loyalty: all subjects show follow the King, sons their fathers, wives their husbands, younger brothers their elder brothers, and junior friends their senior friends.4 Moreover, Confucianism emphasizes the virtue of scholarship, not of business activity and entrepreneurship. Consequently, scholar-administrators (yangban) constituted the highest social class during the Chosun dynasty, followed by farmers and artisans.5 In contrast, merchants were the lowest social class, as generating income through commerce was not seen as a valuable way of living.6
Korea’s transition into modernity, which began in the late nineteenth century, was highly turbulent. Following initial modernization efforts which met only modest success, Korea was colonized by Japan in 1910 and subjugated to foreign control until the end of the Second World War in 1945. Immediately thereafter, the country was divided into a Northern half, which fell under Soviet influence, and a Southern half, which fell under American influence. A few years later, the Korean peninsula was devastated during the Korean War which lasted from 1950 to 1953. As a result, Korea was one of the poorest countries in the world when being measured by income per capita in the 1950s. Its population was barely surviving even with American food aid and development aid.7 Moreover, these support policies as well as Korean economic policies in general were widely perceived as a failure, resulting in gloomy assessments of the country’s economic situation and future perspectives by the early 1960s. For example, the Chairman of the US Senate Foreign Relations Committee stated in 1961 that “on all counts except literacy, Korea remains today a country still in a very early stage of development, deficient in the preconditions for sustained economic growth.”8
Belying such predictions, Korea became a stunning economic success story. Its annual per-capita income increased by approximately 400 times, from US$ 79 in 1960 to US$ 31,754 in 2019. Merchandise exports accelerated even more steeply: they increased by 17,000 times, from US$ 33 million in 1960 to US$ 562 billion in 2019.9 Furthermore, Korea is now home to some of the world’s largest multinational enterprises. For example, Samsung Electronics is not only the global market leader in memory chips, but also one of the two largest vendors of mobile phones.10 Hyundai-Kia Group is one of the world’s largest automobile producers.11 LG Group has become a globally leading manufacturer of high-tech products such as digital displays and electric car batteries.12 These and other Korean business groups and firms have not only been rapidly growing, but they are also highly profitable.13 In summary, Korea has been transformed from a desperately poor and underdeveloped East Asian backwater to a rich, fully developed, and highly dynamic global manufacturing and technology powerhouse within only half a century. The Korean economic miracle, often being labeled the “Miracle on the Han River” after the name of the main river flowing through Seoul, is outstanding even within East Asia, where many countries achieved rapid growth and development in recent decades.
However, Korea’s economic miracle has not been widely associated with entrepreneurial activity. Instead, effective industrialization policies by successive military regimes between the 1960s and the 1980s and the outstanding work ethic of diligent Koreans have been frequently identified as the miracle’s major driving forces.14 Regardless of various studies which have analyzed the remarkable advances of Korean companies and business groups and the entrepreneurial behavior of their founders,15 the emergence of large business groups is often primarily seen as the outcome of governmental policies which nurtured the development of these groups, not as the result of entrepreneurial activities by Korean business leaders.16 Specifically, it has been suggested that owners of business groups were either coerced by the government into investments or took opportunistic advantage of governmental incentives for specific types of business activities and strongly relied on the imitation of foreign products and technologies when scaling up their operations.17 In addition, investment projects have been implemented by leaders of business conglomerates in a strongly authoritarian and almost military-style manner, leaving little room for bottom-up initiatives.18
Furthermore, global studies on cultural values have found that Korean professionals feature a higher degree of uncertainty avoidance than their counterparts in most other countries.19 In other words, managers and employees in Korea appear to feel strongly threatened by uncertainty or ambiguity. Such low risk tolerance indicates an unsupportive environment for entrepreneurship, which is inherently accompanied by taking a high amount of risk. Entrepreneurship research considers risk-taking as one pillar of entrepreneurial orientation, alongside pro-activeness and innovativeness.20 None of these three attributes appears to have been highly valued in Korea.
In summary, there are various reasons why the role of entrepreneurship in Korean economic development could be perceived as relatively minor and unimportant. First, Korean cultural traditions, which have strong roots in Confucianism, emphasize vertical human relationships and obedience to senior individuals,21 and thereby do not encourage entrepreneurship, which tends to be driven by creativity, independence, flexibility, and individual initiative.22 Second, top-down policies by authoritarian military governments and the development of large business groups have been frequently emphasized in research on Korea’s industrialization. For example, a major work on this topic has been titled “Big Business, Strong State”.23 Third, risk aversion appears to be high among Korean professionals, indicating conservative attitudes which do not support entrepreneurship. Overall, these observations suggest that Korea does not offer a supportive environment for nurtur...
