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Research Monograph

Study on the Enhancement of the Small and Medium-sized Enterprises (SMEs) Policy in Korea

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SUMMARY This research monograph is a comprehensive study of Korea's Small and Medium-sized Enterprises (SMEs) policy. The goal is to propose policy measures for improving the effectiveness and efficiency of SME policies to achieve tighter alignment between SME policies and Korea's national economic strategies.

To this end, we first conducted a rigorous computation on the shares of SMEs in the Korean economy by utilizing the Economy Census 2010 dataset, a population survey dataset of the Korean business sector in 2010 which includes information of enterprises as well as establishments. We found that basic SMEs-related figures currently used by policymakers and scholars may be seriously biased (Chapter 1 and 2). We then reviewed the current definition of SMEs to conclude that the current definition is too wide, resulting in highly heterogeneous businesses covered by the SMEs policies and conse- quently undermining its effectiveness. This was followed by a systematic review of the existing SMEs-related programs and the systems of classification, coordination, delivery and evaluation of SMEs policies (Chapter 1). We also performed in-depth analyses, including the analysis on the profitability differences between the big enter- prises and the SMEs, the estimation of the enterprises distribution function by a non-parametric estimation method to find evidence for the so-called "Peter Pan Syndrome" and the estimation of the probability for enterprises to grow or exit under a steady-state assumption on the cross-section dataset (Chapter 2). Finally, using an in-depth case study of the SMEs policy evaluation, we analyzed the effectiveness of the financial assistance programs for the SMEs by merging the financial dataset of enterprises with the government financial assistance records for the SMEs. From the merged dataset, we found little evidence that the programs were strategically targeted (Chapter 1). The findings also indicate that financial assistance programs for old enterprises under some conditions could be rather ineffective, which implies that redistribution of the fund to younger enterprises may enhance the efficiency of the programs (Chapter 3).
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