The USA Journals Volume 03 Issue 05-2021
79
The American Journal of Political Science Law and Criminology
(ISSN
–
2693-0803)
Published:
May 31, 2021 |
Pages:
79-85
Doi:
https://doi.org/10.37547/tajpslc/Volume03Issue05-13
I
MPACT
F
ACTOR
2021:
5.
952
‘
ABSTRACT
In fact, the development of startups plays an important role in shaping the national innovation system
of the country, further increasing the share of innovation in the economy, creating new types of
goods, works and services. Although there is no separate law in our country directly regulate the
activities of startups, there are dozens of laws that indirectly cover this area. It is natural that the
existing legal framework in this area will serve as a legal regulator in the development of startups in
the country and the formation of a national innovation system.
Today, the models of developed countries in the legal regulation of innovative activities are used as an
example by many developing countries. The national model of innovative development of the Republic
of Korea is one of them.
KEYWORDS
Startup, Startup Company, innovation, legal regulation, crowd funding, venture, technology transfer,
business incubator and accelerator, creative economy, Chaebol, initial public offering (IPO).
INTRODUCTION
It is important to study the experience of the
Republic of Korea in the development and
financing, commercialization of scientific
developments, startup projects and innovative
ideas. Up to date, the Republic of Korea was
Organizational, Legal And Financial Approaches To Improving
Startup Support Mechanisms: On The Example Of The
Republic Of Korea
Khursanov Rustam Kholmuratovich
Candidate Of Legal, Acting Associate Professor Of Civil Law, Tashkent State University Of Law,
Uzbekistan
Copyright:
Original
content from this work
may be used under the
terms of the creative
commons
attributes
4.0 licence.
The USA Journals Volume 03 Issue 05-2021
80
The American Journal of Political Science Law and Criminology
(ISSN
–
2693-0803)
Published:
May 31, 2021 |
Pages:
79-85
Doi:
https://doi.org/10.37547/tajpslc/Volume03Issue05-13
I
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2021:
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one of the world's leading countries in terms of
investment in research, development and
technology (R&D) in relation to GDP
1
.
The Republic of Korea has established a state-
level innovative economic policy, according to
which an effective mechanism of state
regulation of innovative development is being
implemented. Government regulation of
innovation
development
includes
the
improvement of innovation infrastructure,
various sources of funding for innovation,
including through venture capital, the
emergence of new startups and the
development of a set of regulations governing
this sphere.
These parameters allow the Republic of Korea
to become one of the most developed
innovative countries in the world in a short
time. The creation of a sufficiently flexible and
efficient system of public-private partnership in
South Korea has also paved the way for the
stabilization of innovations
2
.
The idea of developing an innovative economy
in the Republic of Korea is not new idea itself,
the first innovative development program was
adopted
in
1999 - called "Vision 2025". The program
outlines the tasks on scientific and technical
development of the Republic of Korea until
2015. It was also planned that by 2025, Korea
should be competitive in research and
development at the G7 level. At the same time,
special attention was paid to the quality of
1
https://www.nsf.gov/statistics/2016/nsb20161/#/repor
t/chapter-4/cross-national-comparisons-of-r-d-
performance
2
Leshakova N.P. State regulation of innovative
development of the Republic of Korea. Russian
technology,
living
standards,
level
of
environmental pollution and the development
of innovations in medicine.
As one of the first practical steps in the
development of innovation, the Korean
government launched the Techno park
Development Project in 1997. In 1998, the
Korean Association of Techno parks (KTA) was
established, under the auspices of which six
techno parks were established and merged
3
.
In 2013, the modern stage of development of
economic policy of the Republic of Korea has
begun. Since then, the Korean government has
focused on raising funds for small and medium-
sized business development, new business
projects in the field of information and
communication technologies, and as a result
adopted a "creative economy" program as part
of innovative development at the state level.
The creative economy is mainly characterized
by supporting the participation of citizens in
the creation of new goods, works and services
through the creation of startups, the
development of venture entrepreneurship, the
establishment
of
cooperation
between
industry and higher education. Through this
program, the Korean government has
guaranteed the right of all citizens with
innovative ideas or unique technology in the
country to establish a new structure. As a
result, the system of
"startup - study and profit
- tax collection - reinvestment"
has fully been
Journal of Innovation Economics. 2017; 7(2):161–
174 (in Russ.)
3
Sean Connell. Building a Creative Economy in
South Korea: Analyzing the Plans and Possibilities
for New Economic Growth. Korea Economic
Institute of America, 2013
The USA Journals Volume 03 Issue 05-2021
81
The American Journal of Political Science Law and Criminology
(ISSN
–
2693-0803)
Published:
May 31, 2021 |
Pages:
79-85
Doi:
https://doi.org/10.37547/tajpslc/Volume03Issue05-13
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implemented in the country
4
. There are 17
innovation centers in the country, which
operate in each region and major cities.
Regarding to lawyers and economists, the
essence of the new industrial revolution with
the growth of the technological component of
production, the Internet things and artificial
intelligence will be the integration of digital,
physical and biological industries. At the same
time, the most difficult issues related to the
development of social norms and relevant
normative documents, as well as the
development of legislation in this area will
remain important
5
.
In Korea, an excellent legal framework has
been created in the context of the
development of key sectors of the economy
through innovation and further improvement
of startups. In particular, from 2012 to 2015, the
country adopted about 130 special documents
regulating
the
activities
of
ministries,
innovation agencies and research institutes.
Key regulatory documents have been adopted
to ensure the growth of the creative economy,
for instance:
1.
Model Law on Intellectual Property (2014);
2.
Special
Act
"On
Support
for
the
Development of Research Zones" (2013);
3.
Act "On the creation of an effective
ecosystem for the launch of new business
projects and venture organizations" (2013);
4
Lee J.-W. The Republic of Korea’s Economic
Growth and Catch-Up: Implications for the People’s
Republic Of China. Working Paper Series ADBI.
April
2016.
(571):28–30.
Available
from:
https://www.adb.org/sites/default/files/publication/18
3353/adbiwp571.pdf
5
Klaus Schwab. The Fourth Industrial Revolution.
World Economic Forum, 2016. 1944835008,
9781944835002
4.
Law on the Regulation of Artificial
Intelligence (2017)
6
.
In addition to the legislative framework, new
state structures have been established to
influence institutional support for state
regulation of the innovative economy. In
Korea, the state structure of governance and
innovation development has been reformed to
improve coordination between ministries and
government agencies. The following changes
were made as part of the reforms:
The Ministry of Science, Information and
Communication Technologies and the
Ministry of Future Planning (MSIP) was
established;
In 2017, the Ministry of Small, Medium
Business and Startups was established
(Minister of SMEs and Startups);
The powers of the Ministry of Trade,
Industry and Energy have been expanded
(Ministry of Trade, Industry and Energy,
MOTIE). These newly established ministries
are key players in the development and
support of the country's "creative
economy"
7
.
The responsibilities of the Ministry of Science,
Information and Communication Technologies
and Future Planning in the implementation of
innovative infrastructure include:
Formation, coordination and evaluation of
the strategy for the implementation of the
6
Leshakova N.P. State regulation of innovative
development of the Republic of Korea. Russian
Journal of Innovation Economics. 2017; 7(2):161–
174 (in Russ.)
7
Leshakova N.P. State regulation of innovative
development of the Republic of Korea. Russian
Journal of Innovation Economics. 2017; 7(2):161–
174 (in Russ.)
The USA Journals Volume 03 Issue 05-2021
82
The American Journal of Political Science Law and Criminology
(ISSN
–
2693-0803)
Published:
May 31, 2021 |
Pages:
79-85
Doi:
https://doi.org/10.37547/tajpslc/Volume03Issue05-13
I
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2021:
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creative economy in the field of creative
economy and education;
Coordination of national policy for the
development of science and technology;
Evaluation of the effectiveness of science
and technology development policy;
Adherence to safety measures when using
new technologies and nuclear energy;
Provision
of
infrastructure
for
telecommunications and new industries;
The activities of the Ministry of Trade, Industry
and Energy have been supplemented with the
following powers:
Formation, coordination and evaluation of
policy for the development of research in
the industrial sector;
Development of the regional innovation
system;
Support for the commercialization of new
technologies;
Encourage private investment in research;
Expanding
global
cooperation
in
technology transfer and development.
The main tasks of the newly formed Ministry of
Small and Medium Business and Startups are:
Creation of a convenient system for the
formation
of
firms
and
startup
companies;
Development of a solid foundation for
the development of small, medium-sized
businesses and startups;
Overcoming the shortage of manpower
for small and medium-sized businesses
and startups;
Strengthening the capacity of micro-
entrepreneurs and ensuring cooperation
8
Leshakova N.P. State regulation of innovative
development of the Republic of Korea. Russian
between large companies and small,
medium-sized businesses and startups.
The full launch of the "creative economy" also
includes tax incentives for financing new
startups and innovative projects, guarantees of
their state support and other financial
instruments. In 2015, tax reform aimed at
stimulating the national economy, developing
small and medium-sized businesses and
startups, and simplifying the tax system was
carried out:
a.
Restrictions on the use of net operating
losses of up to 80% for large companies;
b.
The term of the tax credit was extended for
another 3 years;
c.
The tax rate for investments in R&D and
energy-efficient production has been
reduced;
d.
To encourage the expansion of M&A deals
for startups to master new technologies, a
10% deduction from the corporate income
tax of the acquiring company has been
introduced
8
.
Since 2013, the Korea Development Bank has
been the main source of government funding
for the "creative economy." To finance
projects related to the development of
innovations and startups, the Development
Bank of Korea has partnered with the Industrial
Bank of Korea to set up a $ 72.3 million Global
Partnership Fund, which serves as a strategic
investor for venture funds.
A crowdfunding system
has been created to
finance small projects of small and medium
enterprises,
startup
companies,
online
financing by an unlimited number and number
of investors and the launch of new startup
Journal of Innovation Economics. 2017; 7(2):161–
174 (in Russ.)
The USA Journals Volume 03 Issue 05-2021
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The American Journal of Political Science Law and Criminology
(ISSN
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2693-0803)
Published:
May 31, 2021 |
Pages:
79-85
Doi:
https://doi.org/10.37547/tajpslc/Volume03Issue05-13
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projects. That is, the practice of rapid
capitalization of investments in the financing
of startups through this system was
introduced, and the following new aspects
were introduced:
An exchange for small and medium-sized
businesses and startups was established
only (
KONEX Korea New Exchange
);
Developed processes for concluding M&A
agreements for startup companies;
There is a procedure for holding events to
inform the parties about the activities in
the field of M&A.
The Business Incubator Institute is also actively
involved in the development of startups and
effective research in Korea. They typically offer
startups the following opportunities and
guarantees. In particular, the release of
startups less than 5 years from the date of joint
liability for joint obligations, exemption from
unsatisfactory
credit
history,
the
establishment of a fund to restart the startup
project, as well as the introduction of
corporate adaptation programs.
Within this system, there are several online
platforms that inform stakeholders, take
various measures to promote the ideas of the
"creative economy", provide information on
convenient tools for the development and
financing of small and medium enterprises.
1.
CrowdNet
- information on large-scale
fundraising and cheap lending;
2.
K <Startup
- basic information on
government support for new projects;
9
Kim E. The impact of family ownership and capital
structures on productivity performance of Korean
manufacturing firms: Corporate governance and the
«chaebol problem». Jurnal of the Japanese and
International Economies. 2005; 20(2):209–233.
3.
Corporation Investment Information Plaza
- supports the exchange of information
between prospective companies and
investors;
4.
TIPS
- Support promising high-tech projects
in Korea and bring them to the
international market.
The government has set up a $ 480 million
Future Fund to develop small and medium-
sized businesses and startups, which has
approved $ 220 million for investment in new
startup projects and $ 260 million for the M&A
sector.
The development of a creative economy means
the state’s close cooperation with the largest
transnational corporations (cheboli) of the
Republic of Korea. Chaebol are a group of
independent firms and large financial and
industrial groups that belong to specific
families and are under their administrative and
financial control
9
.
According to the plan of the Creative Economy
Program, Chaebols will be the main investors
and
participants
in
the
program
of
development of techno parks and regional
innovation clusters. The main activities of large
corporations in this program are the financing
of innovation centers, the development of
ideas and new projects, support for startups
and the provision of practical assistance in
sharing research results. It is known that in
Available
from:
publication/222672874_The_impact_of_family_own
ership_and_capital_structures_on_productivity_perfo
rmance_of_Korean_manufacturing_firms_Corporate
_governance_and_the_chaebol_problem
The USA Journals Volume 03 Issue 05-2021
84
The American Journal of Political Science Law and Criminology
(ISSN
–
2693-0803)
Published:
May 31, 2021 |
Pages:
79-85
Doi:
https://doi.org/10.37547/tajpslc/Volume03Issue05-13
I
MPACT
F
ACTOR
2021:
5.
952
Korea, the share of the 5 largest chaebols in the
GDP of the Republic is 45 to 60%
10
.
It is clear that the deepening of cooperation
between universities and industry is also an
important factor in supporting scientific
research. Because a number of innovation
centers are established based on or near large
research institutes or universities. For example,
the Korea Institute of Industrial Technology
(KITECH) has offices in 8 of the 17 centers
11
.
According to Venturein statistics, in 2015, there
were more than 30,000 companies operating
in South Korea that could be classified as high-
tech startups, and more than 10 venture
investors are members of the Unicorn Club,
which brings together startups worth more
than $ 1 billion.
It should be noted that the role of the state in
the development of the creative economy and
innovation in Korea is growing. Over the past 3
years, a legislative framework for innovation
development, a system of state institutions
regulating and supervising the development of
innovations, as well as 17 centers for the
development of creative economy and
innovation have been established.
CONCLUSION
In order to centralize and improve the state
policy to support startups, taking into account
the experience of the Republic of Korea, it is
necessary to establish a special state div for
small, medium-sized businesses and startups.
The main powers of the state structure are to
create a convenient system for the formation
10
Chang M.H. The role of chaebol in the economic
development of South Korea. South Korea's modern
economy: challenges and prospects. 2017. pp. 23–45
11
Hultberg P., Calonge D.S., Kim S.-H. Education
policy in South Korea: A contemporary model of
of firms and startups; developing a solid
foundation for the development of small,
medium-sized
businesses
and
startups;
overcoming the shortage of manpower of
small and medium-sized businesses and
startups; strengthening the capacity of micro-
entrepreneurs and ensuring cooperation
between large companies and small, medium-
sized businesses and startups. It is also
necessary to further revitalize the system of
grant programs and consulting programs by
qualified experts to finance startup companies
at different stages.
At the same time, it is expedient to develop a
roadmap
for small
and
medium-sized
businesses, startups on the organization of
special stock exchanges. This roadmap should
provide for the simplification of the system of
concluding contracts through the issuance of
securities owned by small and medium-sized
businesses, startups and their placement on
the stock exchange.
In conclusion, the innovative system of the
Republic of Korea combines the state
investment policy in the field of research with
business strategies based on the requirements
of the world market. It might be better the
Korean experience should be applied in
Uzbekistan as well.
REFERENCES
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https://www.nsf.gov/statistics/2016/nsb20
161/#/report/chapter-4/cross-national-
comparisons-of-r-d-performance
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Leshakova N.P. State regulation of
innovative development of the Republic of
human capital accumulation? Cogent Economics &
Finance.
2017;
5(1):1–16.
Available
from:
https://www.tandfonline.com/doi/abs/10.1080/23322
039.2017.1389804 (in Eng.)
The USA Journals Volume 03 Issue 05-2021
85
The American Journal of Political Science Law and Criminology
(ISSN
–
2693-0803)
Published:
May 31, 2021 |
Pages:
79-85
Doi:
https://doi.org/10.37547/tajpslc/Volume03Issue05-13
I
MPACT
F
ACTOR
2021:
5.
952
Korea. Russian Journal of Innovation
Economics. 2017; 7(2):161–174 (in Russ.)
3.
Sean Connell. Building a Creative Economy
in South Korea: Analyzing the Plans and
Possibilities for New Economic Growth.
Korea Economic Institute of America, 2013
4.
Lee J.-W. The Republic of Korea’s Economic
Growth and Catch-Up: Implications for the
People’s Republic Of China. Working Paper
Series ADBI. April 2016. (571):28–30.
Available
from:
https://www.adb.org/sites/default/files/pu
blication/183353/adbiwp571.pdf
5.
Klaus Schwab. The Fourth Industrial
Revolution. World Economic Forum, 2016.
1944835008, 9781944835002
6.
Leshakova N.P. State regulation of
innovative development of the Republic of
Korea. Russian Journal of Innovation
Economics. 2017; 7(2):161–174 (in Russ.)
7.
Leshakova N.P. State regulation of
innovative development of the Republic of
Korea. Russian Journal of Innovation
Economics. 2017; 7(2):161–174 (in Russ.)
8.
Leshakova N.P. State regulation of
innovative development of the Republic of
Korea. Russian Journal of Innovation
Economics. 2017; 7(2):161–174 (in Russ.)
9.
Kim E. The impact of family ownership and
capital
structures
on
productivity
performance of Korean manufacturing
firms: Corporate governance and the
«chaebol problem». Jurnal of the Japanese
and
International
Economies.
2005;
20(2):209–233.
Available
from:
https://www.researchgate.net/
publication/222672874_The_impact_of_fa
mily_ownership_and_capital_structures_o
n_productivity_performance_of_Korean_
manufacturing_firms_Corporate_governa
nce_and_the_chaebol_problem
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Chang M.H. The role of chaebol in the
economic development of South Korea.
South
Korea's
modern
economy:
challenges and prospects. 2017. pp. 23–45
11.
Hultberg P., Calonge D.S., Kim S.-H.
Education policy in South Korea: A
contemporary model of human capital
accumulation? Cogent
Economics
&
Finance. 2017; 5(1):1–16. Available from:
https://www.tandfonline.com/doi/abs/10.1
080/23322039.2017.1389804 (in Eng.)
