Despite the sluggish global demand and economic downturn caused by COVID-19, Korea’s so-called ‘hidden champions,’ the small and medium-sized companies with world-leading technology in their fields of expertise, are paving the path to export recovery, Chung Hye-seon, a researcher of Korea International Trade Association (KITA) said.
“Korea’s export market structure was long criticized for its reliance on large, established companies and the limitation of quantitative growth. However, the growth of the ‘hidden champions,’ the backbone of the Korea’s business ecosystem, is expected to provide much needed boost to the export market,” Chung said.
Medium-sized companies accounted for 17.7% (2019) of Korea’s total exports, and through continued technology development, they accounted for more than 20% of exports in ‘new industries’ such as next-generation semiconductors, biotechnology, robotics, aviation and drones.
Breaking it down by country, medium-sized companies’ share of exports to China is decreasing while the share of exports to developed countries--such as the United States and the EU--and ASEAN countries increased and diversified thanks to technological advantage. This trend is a heavy contrast to large companies that still display heavy reliance on China.
It was found that medium-sized companies who had been successful in overseas markets based on their technological expertise, have steadily invested in R&D regardless of their sales performance, sharing the belief that technology is the key to gaining competitiveness.
In particular, successful companies developed their products based on their own technology since foundation, and put in a huge effort to commercialization such as product concept and design so that the technological advantage can lead to actual increase in sales.
However, medium-sized companies’ ratio of R&D investment to sales is lower compared to large and small businesses, and the closed R&D methods centered on only the company’s development can slow down growth in the future. In order for medium-sized companies to overcome such shortcomings and become world-class hidden champions with pioneering technology, much policy support is needed, such as R&D related tax deduction.
“Along with the support from the government, companies themselves must build the engine for continued technological development through open innovation and external networks,” Chung added.