ĐẠI HỌC QUỐC GIA HÀ NỘI TRƯỜNG QUẢN TRỊ VÀ KINH DOANH --------------------- CHUNG HYEKYO THE OVERSEAS EXPANSION OF SOUTH KOREAN SMALL AND MEDIUM-SIZED ENTERPRISES FOR CONTINUOUS GROWTH SỰ MỞ RỘNG RA NƯỚC NGOÀI CỦA CÁC DOANH NGHIỆP VỪA VÀ NHỎ HÀN QUỐC ĐỂ PHÁT TRIỂN LIÊN TỤC LUẬN VĂN THẠC SĨ QUẢN TRỊ KINH DOANH HÀ NỘI - 2022 ĐẠI HỌC QUỐC GIA HÀ NỘI TRƯỜNG QUẢN TRỊ VÀ KINH DOANH --------------------- CHUNG HYEKYO THE OVERSEAS EXPANSION OF SOUTH KOREAN SMALL AND MEDIUM-SIZED ENTERPRISES FOR CONTINUOUS GROWTH SỰ MỞ RỘNG RA NƯỚC NGOÀI CỦA CÁC DOANH NGHIỆP VỪA VÀ NHỎ HÀN QUỐC ĐỂ PHÁT TRIỂN LIÊN TỤC Chuyên ngành: Quản trị kinh doanh Mã số: 8340101.01 LUẬN VĂN THẠC SĨ QUẢN TRỊ KINH DOANH NGƯỜI HƯỚNG DẪN KHOA HỌC: PGS. HOÀNG ĐÌNH PHI HÀ NỘI - 2022 DECLARATION The author confirms that the research outcome in the thesis is the result of author’s independent work during study and research period and it is not yet published in other’s research and article. The other’s research result and documentation(extraction, table, figure, formula, and other document) used in the thesis are cited properly and the permission(if required) is given. The author is responsible in front of the Thesis Assessment Committee, Hanoi School of Business, and the law for above-mentioned declaration.
Hanoi, August 2022 Chung Hyekyo i ACKNOWLEDGEMENT While studying at HSB, it was a precious process to realize my lack and fill it up. I would like to express my deep gratitude to Industrial Bank of Korea (IBK) for giving me such a valuable opportunity, and I will share my prized experience at IBK in the future. Also, I am so grateful to Professor Dr. Hoang Dinh Phi for teaching me a lot and generously helping me write my thesis.
The period of studying in Hanoi was a very difficult time due to spread of COVID-19. I really appreciate my family for trusting and following me to Hanoi during such a time. If it weren’t for my family, I wouldn’t have completed this thesis. Hanoi, August 2022 Chung Hyekyo ii TABLE OF CONTENT DECLARATION.
iii TABLE OF CONTENT. vi LIST OF TABLES. vii LIST OF FIGURES. Small and medium-sized enterprises (SMEs).
Growth of SMEs. Factors necessary for growth of SMEs. Overseas expansion of South Korean SMEs. The relationship between overseas expansion and sales of SMEs.
The relationship between overseas expansion and employment of SMEs. Proposed research model. RESEARCH DESIGN AND METHODOLOGY. Independence of observations.
Industrial property rights. Independence of observations. Data analysis procedure. The generation of overseas sales or not.
The establishment of overseas branches or not. Impact on total sales growth. The generation of overseas sales and total sales growth. The establishment of overseas branches and total sales growth.
Impact on employment growth. The generation of overseas sales and employment growth. The establishment of overseas branches and employment growth. Independence of observations.
Pearson correlation coefficient. Variance inflation factors. General situation of SMEs. CONCLUSION AND SUGGESTIONS.
Conclusion and implication. Limitation and directions for future research. 51 v ABBREVIATION ADJ ADJusted ASEAN Association of South East Asian Nations DF Degrees of Freedom EU European Union OECD Organization for Economic Cooperation and Development R&D Research and Development SE Standard Error SIG Statistical Significance SMEs Small and Medium-sized Enterprises STD Standard US United States VIF Variance Inflation Factors vi LIST OF TABLES Table 2.1: Scope of SMEs in Each Country .1: Descriptive statistics of industrial property rights .2: t-test of industrial property rights .3: Descriptive statistics of total assets .4: t-test of total assets .1: Descriptive statistics of case with overseas sales .2: Descriptive statistics of case without overseas sales .3: Descriptive statistics of case with overseas branches .4: Descriptive statistics of case without overseas branches .5: Hierarchical regression result of case with overseas sales and total sales growth .6: Hierarchical regression result of case with overseas branches and total sales growth .7: Hierarchical regression result of case with overseas sales and employment growth .8: Hierarchical regression result of case with overseas branches and employment growth .9: Independence of observations .10: Pearson correlation coefficient result .11: Tolerance of overseas sales .12: Tolerance of overseas branches .13: Variance inflation factors of overseas sales .14: Variance inflation factors of overseas branches. 39 viii LIST OF FIGURES Figure 2.1: Proportion of employees in SMEs .2: Research Conceptual Model .5 Durbin-Watson test formula .6 Correlation coefficient formula .8 Variance Inflation Factors formula .9 Data analysis procedure .1: Role of SMEs in Korea’s Economy .2: Number of Unicorn Startups by country.
Research Rationale The economy of South Korea has grown rapidly in such a short period of time that it could not be found in the world. After the war, compressed growth centered on large enterprises in a state where no industrial base was established is now evaluated as a successful policy enough to be benchmarked by many developing countries. In a situation where the national economy had to be quickly reconstructed after the war, industrial policies centered on large enterprises were an inevitable choice. The core of the industrial policy centered on large enterprises is the ‘Trickle-down effect’, which benefits economic players such as small and medium- sized enterprises (SMEs) and households through the expansion of consumption and investment by fostering large enterprises.
However, it is now no longer possible to expect this ‘Trickle-down effect’ by large enterprises. This is because, in the era of the 4th industrial revolution, as the boundaries between industries have become ambiguous, it has become important to strengthen the competitiveness of individual companies rather than industrial units. In fact, Cho (2017) said that the system of large enterprises has served as a useful factor in the compressed growth process of the Korean economy, the priority of large enterprises has no choice but to be structured. In the end, business opportunities of SMEs were reduced and the growth structure was distorted.
In addition, past experiences have confirmed the disadvantage that industrial unit policies centered on large enterprises are vulnerable to crises in themselves. At the time of the 1997 Asian financial crisis, Korea, which has a high proportion of large enterprises in the national economy, was also more affected than countries that did not. According to Chung (2017), each shock such as a financial crisis have a significant impact on the volatility of the entire economy, and not only the direct effect of each shock but also a large part of the ripple effect was caused by large enterprises. In Korea, the expression ‘Too big to fail’ is commonly used to describe 1 large enterprises.
It means it is too important to the economy to allow for bankruptcy. This expression also implies an emphasis on economies of scale. Large enterprises that have grown in size have a huge impact on the national economy, so even if management becomes difficult, they can expect help from the government. In fact, as many large enterprises grow in size and their influence on the national economy grows, they pursue a stable and conservative management direction rather than continuous innovation, which eventually resulted in them not being able to secure competitiveness in the global market.
However, it is true that large enterprises have played a major role in achieving economic development in Korea, and it cannot be denied. So, it is necessary to improve the situation in which a small number of large enterprises monopolize through policy support to create fair competition conditions for SMEs to become middle market enterprises and also to grow into large enterprises. As the situation has changed a lot from the past, it is necessary to seek the coexistence of large enterprises and SMEs, and share their roles. And that is why the author has chosen the master thesis title: ‘The Overseas Expansion of South Korean SMEs for Continuous Growth’.
Research Objectives There are three main objectives of this research: (1) First, First, the thesis’ author reviews the theories about growth of SMEs and synthesize the theoretical framework for continuous growth of SMEs. (2) Second, the author uses the theoretical framework to assess the situation of Korean venture firms as of 2020. (3) Third, the author proposes overseas expansion as solutions for enhancing continuous growth of Korean SMEs. Entrepreneurs who run SMEs ultimately want their business to grow, but the direction and purpose of growth may be different.
For example, the goal may be to 2 secure the highest level of technology, or it can be aimed at maximizing returns. In addition, it can also dream of raising SMEs like large enterprises, and sell its stake by increasing the value of the company. Despite these differences, they have one thing in common that they want the company to eventually develop into a more positive position than it is today. By studying the growth of SMEs from various perspectives, it is possible to reconsider the meaning of growth and clarify the purpose of growth.
It is intended to promote the continued growth of SMEs by understanding what is necessary for the growth of SMEs identified in this way. This is worth considering not only for those who simply want to start a small business or for those who are currently running a SME, but also for organizations such as the government, local governments, and public institutions, or universities and research institutes, in the process of establishing various support systems for SMEs. In other words, if various factors necessary for the continuous growth of SMEs are found, they can be applied to various policies for SMEs as well as being utilized in their business management. Abundant research on the growth of SMEs will eventually result in promoting the growth of SMEs.
And it is important not only to list the academic contents, but also to present practical ways to do it. From that point of view, the value of overseas expansion will be examined as an action plan to achieve the growth of SMEs. Fostering SMEs does not mean regulating large enterprises. It is necessary to build a growth ladder for SMEs to grow into middle market enterprises and middle market enterprises to grow into large enterprises again.
Then, a virtuous cycle structure will be formed naturally to create a business ecosystem, also a strong and sound economic foundation will be completed. If such a foundation is established, the fruits of growth may be evenly distributed to workers through fostering SMEs. Research Scope This study used the data of the ‘2020 Survey of Korea Venture Firms’ 3 conducted by the Ministry of SMEs and Startups in Korea. The ‘2020 Survey of Korea Venture Firms’ used in this study was published in December 2020 and was prepared based on the results of a sample survey of 2,500 companies.
The ‘Survey of Korea Venture Firms’ is an annual survey that corresponds to the nationally approved statistics strictly managed by the Korean government in accordance with relevant laws, and is widely used as basic data for research in Korea in recognition of public confidence. Research Methods In order to find out the value of overseas expansion as a method for continuous growth of SMEs, this study will first review various research data related to SMEs, growth of SMEs, factors necessary for growth of SMEs, and overseas expansion of SMEs. Several studies related to SMEs include research data from various countries as well as Korea. After that, it continues to assess the situation of SMEs’ overseas expansion by using the actual data from the ‘Survey of Korea Venture Firms’.
The reason why the data of the ‘Survey of Korea Venture Firms’ was used during the research is the venture firms that are the subject of this survey fit well with the subject of this study.