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Management reports, briefs issued by Samsung Economic Research Institute

Platform: A Way to Catalyze Innovative Start-ups

Platform: A Way to Catalyze Innovative Start-ups

LEE Seung-Hwan, KIM Chang-Wook, PARK Sung-Min, KO Deok-Ki

Sept. 23, 2013

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In Korea, individuals often start their own business out of necessity. Now, as the nation seeks to join the ranks of advanced economies, one of the drivers for a breakthrough would be to encourage and support innovative start-ups, businesses that are high value-added, knowledgeable and tech savvy without necessarily being high-tech ventures. There is nothing to preclude innovation in lodging and food, the typical common small-scale businesses that Koreans launch.

Innovation-driven start-ups tend to flourish in advanced economies to spearhead economic expansion. They have much better chance of surviving and creating jobs compared to start-ups that aim at making ends meet to maintain living standards. This is an important distinction that underscores the need to encourage and assist innovativeness in Korea. The nation's per capita GDP is US$30,000 (by purchasing power parity). Yet, 53.4% of new business owners say their motivation is to sustain a living.

The main obstacle for new businesses in Korea is that the owner has to directly oversee or handle too many matters, such as production, distribution, etc. Moreover, the owner has to supply most of the initial resources. The failure rate is high due to costs, inadequate financing, low number of participants and the extended time to develop technologies.

Start-up platforms can help mitigate the difficulties by supporting rapid product development and execution. Platform generally refers to tangible and intangible structures that are designed for multiple tasks and can be used in different business environments. This paper defines a start-up platform as a "tangible and intangible base that can be used in various start-up activities."

A person starting a business can use platforms to reduce costs and risks, allowing capital to be concentrated on core capabilities. Platforms help generate and evaluate business ideas and produce a prototype, eliminating inefficiencies. They also can provide high-tech equipment, thus reducing the time and cost for product development, and link external financing and expertise to a new business owner.

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