Technology SMEs Facing Identity Crisis... Inno-Biz Companies Stagnant for 3 Years

[Asia Economy Reporter Eun-gyeol Lee] The growth of technology-based small and medium enterprises (SMEs) has noticeably slowed amid economic growth rates and manufacturing sector downturns. An analysis of the status of technology-innovative SMEs (Inno-Biz companies) on the 2nd revealed that while the number of Inno-Biz companies surged to 14,600 within three years by increasing by an average of 3,500 annually from 2005 to 2008, it has remained around 18,000 over the past three years.

The number of Inno-Biz companies reached 18,091 in 2017, then slightly increased to 18,093 in 2018 and 18,303 in 2019. Notably, among the companies newly certified as Inno-Biz last year, 19.2% were new certifications, while 80.8% were renewals, indicating that most existing companies maintained their certification. Inno-Biz certification must be renewed every three years. The average business age of all Inno-Biz companies has increased annually and currently stands at about 18 years, showing a lack of influx of younger companies.

Inno-Biz companies are SMEs with more than three years of business experience that possess technological competitiveness and growth potential in their respective industries, certified and fostered by the government. Among Inno-Biz companies, 75% operate in manufacturing, accounting for 82.5% and 45.8% of World Class 300 companies and KOSDAQ-listed mid-sized companies, respectively, excluding large enterprises. Since 2001, the government has introduced the Inno-Biz certification system to build a ladder for startup companies to scale up (grow and mature SMEs) into mid-sized companies, providing various financial and tax benefits and preferential treatment in support projects.

Despite receiving considerable benefits, the stagnation in growth indicates that manufacturing startups have slowed sharply. Last year, manufacturing showed the worst average operating rate and inventory ratio since the global financial crisis. There are also complaints that government support has focused on IT-centered startups and venture sectors despite poor business conditions. The Ministry of SMEs and Startups, the main government department, allocated 415 billion KRW for smart factory projects, a core support program for manufacturing companies this year, whereas the fund for venture investments, the Korea Fund of Funds, was 800 billion KRW, highlighting greater emphasis on venture support. About a decade ago, when the number of Inno-Biz companies surged, the then Roh Moo-hyun administration established a plan to nurture 30,000 Inno-Biz companies and provided focused support.

An SME industry official said, "Although the government emphasizes innovative growth, it seems to have little interest in innovation growth in manufacturing," adding, "Support for manufacturing startups and scale-ups, which form the industrial foundation, is also important." An official from the Inno-Biz Association stated, "The slowdown in growth is partly because more than 10,000 Inno-Biz companies are concentrated in the Seoul metropolitan area," and added, "To discover innovative companies in local regions, we will expand certification education nationwide and train professional consultants." The association plans to increase the number of Inno-Biz companies to 22,000 by 2022.

A Ministry of SMEs and Startups official said, "It is true that the overall budget for startups and ventures is larger, but support for manufacturing companies’ scale-up, such as smart factories, manufacturing data centers, and R&D grants, has also increased significantly," and added, "We will provide more active support through communication and promotion."

This content was produced with the assistance of AI translation services.