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Home»Startups»Japan and South Korea innovate on Silicon Valley model through conglomerate-startup ties
Startups

Japan and South Korea innovate on Silicon Valley model through conglomerate-startup ties

prosperplanetpulse.comBy prosperplanetpulse.comJune 30, 2024No Comments5 Mins Read0 Views
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We all know how Silicon Valley works: brilliant people with great ideas are disrupting entire industries: Uber and public transportation, Tesla and car manufacturing, even Microsoft and the workplace itself. The old incumbents are unwilling and unable to adapt, so they disappear and are replaced by the companies of today and tomorrow. That’s the way tech hubs work.

However, that’s not the case everywhere.

The Silicon Valley model is inextricably linked to the US economic model and would be very difficult to replicate elsewhere: Silicon Valley excels in some aspects of cutting-edge technology, but it lost its manufacturing advantage a long time ago.

Policymakers around the world are tweaking Silicon Valley’s ideas to better suit the unique characteristics of their own economies and establish their own unique advantages in key global markets.

Take Japan and South Korea for example. In both countries, Japan series Or Korean Financial conglomerate. Officials in Tokyo and Seoul do not understand what it means for a new company to disrupt and eliminate a hugely successful international company.

Instead, the government wants startups to collaborate with large corporations such as Hyundai, Samsung, SK, Sony, Toyota, etc. This is an example of David vs. Goliath, an open innovation model where SMEs and large corporations collaborate with government support. This approach can help policymakers innovate in the design and manufacturing of tomorrow’s technologies.

The conglomerates and their affiliated companies are often criticized for stifling competition, but policymakers in Japan and South Korea do not want to go against the conglomerates that have helped make their countries the world’s richest and most innovative economies.

The soon to be published book ” Start-up capitalism, We studied how both Japan and South Korea have sought to foster collaboration between emerging and large corporations. Government support for this “David and Goliath” relationship has endured frequent changes of government in both countries and is now part of the economic fabric of both countries.

But why is this the case?

First, startups have access to expertise, mentorship, and sales channels that would be difficult to develop on their own: Managers at conglomerates like LG and Nissan have decades of experience in their core business areas; startup founders generally do not, relying instead on connections from VC backers or their own personal networks.

Programs such as the K-Startup Grand Challenge, spearheaded by the Ministry of Small, Medium and Startups in Seoul, and J-Startup, led by the Ministry of Economy, Trade and Industry in Tokyo, help bridge these resource and access asymmetries. Large companies participate in these government programs as judges, coaches and potential partners for startups. In this way, the Japanese and Korean governments act as intermediaries between entrepreneurs and large conglomerates. (The U.S. policy approach is instead to support only startups.)

Participating in these programs also gives Japanese and Korean startups access to capital and, in many cases, an exit strategy. Seoul and Tokyo pump billions of dollars of taxpayer money into supporting entrepreneurs through agencies like the Korea Venture Investment Corporation and the Japan Finance Corporation. Connecting these startups with conglomerates and affiliated companies that might not otherwise know about their ideas and products makes it easier for larger companies to decide whether to invest in small businesses.

So startups clearly benefit from working with conglomerates. But what do larger companies gain from this?

The second advantage of this open innovation model is that series and Business conglomerate They gain access to new ideas and products. Several policymakers in Japan and South Korea told us they are concerned that their nation’s big companies will follow the same path as Motorola and Nokia, once innovation powerhouses that were left behind. Working with startups is one way big companies can develop new products and improve existing ones.

Ultimately, Japan and South Korea want startups and large corporations to work together to improve their economies. They believe startups are the engines of innovation and the growth of quality jobs, and large corporations will help these SMEs achieve that.

Conglomerates also provide the manufacturing capacity needed to produce future technologies at scale. Silicon Valley long ago outsourced production of key technologies, such as semiconductors, to other countries. Bringing this manufacturing capacity home, which provides quality jobs and contributes to the talent pool, is a key objective of the US’s multi-billion dollar CHIPS Act.

Indeed, this model of startups working with large corporations seems to be now being adopted in other parts of the world: in the AI ​​field, Microsoft is working with smaller partners such as OpenAI with ChatGPT and France’s Mistral. Amazon and Google are both investing in developers such as Anthropic, and large Chinese tech companies are also buying large stakes in Chinese AI startups. Both the Biden administration and the von der Leyen Commission are promoting collaboration between startups and large corporations as part of their respective industrial policies.

The Japanese and Korean models of startup-corporate collaboration are set to become more widespread as governments move away from laissez-faire liberalism and toward industrial policies and economic nationalism — in other words, closer to the policies that Tokyo and Seoul have long supported.

Silicon Valley isn’t dead, but its startup capitalism is no longer unique.

The opinions expressed in Fortune.com editorial articles are solely those of the authors and do not necessarily reflect the opinions or beliefs of the authors. luck.

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