'Economic Backbone' Mid-sized Companies' New Hiring Down 30%... R&D Investment Increases

Sung Yun-mo, Minister of Trade, Industry and Energy (third from the right), attended the 'Ministry of Industry-Mid-sized Companies Federation Chairman's Faith Meeting' held on the 15th of last month at the Palace Hotel in Seocho-gu, Seoul, and is seen cutting New Year's rice cake with member company chairmen, including Kang Ho-gap, Chairman of the Korea Federation of Mid-sized Enterprises (third from the left). Photo by Kang Jin-hyung aymsdream@

[Asia Economy Reporter Moon Chaeseok] The scale of new hires by mid-sized companies, the backbone of the economy, has shrunk by nearly 30%. However, companies' investments in research and development (R&D) and efforts for technological cooperation with universities and research institutions have expanded.

On the 10th, the Ministry of Trade, Industry and Energy announced the results of last year's "Mid-sized Companies Survey," conducted from July to September last year on 1,400 mid-sized companies in collaboration with the Korea Federation of Mid-sized Enterprises (KFME).

The surveyed companies' R&D investment in 2018 was 8.0422 trillion won, an 11.1% increase from 7.2 trillion won the previous year.

Mid-sized companies plan to increase their R&D investments. The R&D investment plans disclosed by mid-sized companies were 8.4 trillion won last year and 8.7 trillion won this year. The proportion of R&D investment plans relative to total investment plans also expanded from 24.9% in 2018 to 26% last year and 27% this year.

Experience in industry-academic cooperation with universities and research institutes also increased. In 2018, 15.9% of companies responded that they had experience in industry-academic cooperation with universities and research institutes, a 3.5% increase from 2017.

The participation activities were in the order of research and technology development (71.6%), education and training (26.2%), and human exchange and information sharing (18.6%).

Among mid-sized companies, 17.4% pursued new businesses. Manufacturing companies (26.6%) were more active than non-manufacturing companies (11.5%), and export companies (29.4%) were more active than domestic companies (10.6%) in pursuing new businesses.

The Ministry of Trade, Industry and Energy announced plans to prepare customized policies for new business creation by mid-sized companies. The "2nd Basic Plan for Growth Promotion of Mid-sized Companies (2020-2024)" is expected to be announced in the first quarter.

However, the scale of new hires by mid-sized companies decreased. In 2018, 180,392 new employees were hired, a 28.8% decrease from 253,952 in 2017, returning to the level of 2016, which was 200,102.

In the 2017 survey disclosed last year, companies hired an average of 63.6 new employees per company but had 59.6 employees leave. In 2018, companies hired an average of 40.4 new employees, but turnover statistics were not released.

Mid-sized companies still showed reluctance toward business succession due to burdens such as inheritance and gift taxes. As of 2018, only 6.7% of mid-sized companies responded that they were engaged in business succession. 82.9% of all mid-sized companies said they had no plans for business succession.

In last year's survey, 69.5% of mid-sized companies responded that excessive inheritance and gift taxes threaten not only the continuity of management rights but also the survival of the company.

Meanwhile, according to the "2018 Mid-sized Companies Statistics" announced by Statistics Korea last month, the number of mid-sized companies in 2018 was 4,635, an increase of 167 from the previous year. Although they account for only 0.7% of all profit-making corporations, they were responsible for 15.7% of sales, 13.8% of employment, and 16.3% of exports.

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