In the Past 15 Years, Only 4 Innovative Korean Companies: Samsung Electronics, LG Electronics, Hyundai Motor, Kia

[Asia Economy Reporter Suyeon Woo] Over the past 15 years, among the 167 global innovative companies selected by Boston Consulting Group, only four were Korean companies. This highlights the need to establish an institutional environment in Korea that can foster the emergence of new innovative companies.

On the 6th, the Federation of Korean Industries (FKI) announced that among the 'Top 50 Most Innovative Companies' selected annually by Boston Consulting Group (BCG) since 2005, only four were Korean companies. Over the past 15 years, a total of 167 companies have been selected at least once as innovative companies by BCG. By country, the United States had 82 companies, the United Kingdom 12, Germany 12, Japan 11, China (including Hong Kong) 10, France 5, and Korea 4. Among Korean companies, Samsung Electronics was selected every year (15 times), LG Electronics 8 times, Hyundai Motor Company 4 times, and Kia 2 times.

Distribution of Innovative Companies by Country According to Boston Consulting Group / Source: Federation of Korean Industries

To identify the characteristics of innovative companies, FKI selected the top 500 global companies by revenue as a comparison group. The comparative analysis revealed that the average assets of the 50 companies selected as innovative companies this year were half (0.5 times) of the average assets of the top 500 companies, but their revenue was 1.2 times higher, operating profit 1.8 times higher, and employment 1.4 times higher. Although innovative companies were relatively smaller in size, they showed superior management performance in revenue, operating profit, and job creation.

Furthermore, innovative companies were more active in research and development (R&D), capital investment, and mergers and acquisitions (M&A) than the top 500 global companies, and their productivity was also higher. The R&D intensity (R&D expenditure as a percentage of revenue) of innovative companies was 10.0%, which is 2.9 times higher than that of the top 500 companies (3.5%). Innovative companies spent 22.0% of their cash holdings on capital investment, which is 2.2 times the level of the top 500 companies (10.0%).

Over the past five years (2016?2020), the average number of M&A deals by innovative companies was 10.7, which is 2.2 times the average of the top 500 companies (4.8). Labor productivity, measured by operating profit per employee, was also 1.3 times higher in innovative companies ($61,000) compared to the top 500 companies ($47,000).

FKI emphasized the need to increase tax credits for R&D and capital investment and to ease regulations that hinder investment and M&A to enable the emergence of new innovative companies in Korea. Additionally, since three of the five companies newly entering this year’s global innovative companies list are in the bio and pharmaceutical industries, focused support for promising industries is also necessary.

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