Development of a Comprehensive Entrepreneurship Index for Korea and Its Implications

Since liberation, the Korean economy has risen into the ranks of the world’s top 10 economies on the strength of robust entrepreneurship, achieving rapid growth and overcoming repeated crises. Recently, however, low growth has become structural, deepening investment contraction and employment stagnation, while anti-business sentiment and accumulated regulations have constrained innovation.

Against this backdrop, weak youth entrepreneurship, barriers to scale-up, and the growth limits facing small and medium-sized firms and mid-sized firms have become increasingly pronounced, underscoring the need to develop a Korean entrepreneurship index that can objectively assess entrepreneurship and be used to improve policy. Existing international indicators, such as GEM, do not adequately reflect Korea’s institutional and cultural particularities, making an independent index framework necessary.

This study defines entrepreneurship on the basis of three theoretical pillars: Knight’s judgment and responsibility under uncertainty, Schumpeter’s creative destruction and innovation, and Kirzner’s alertness to opportunity discovery.

Based on this framework, it designed a Korean entrepreneurship index system composed of five sub-indices and 10 detailed indicators: investment, labor, production, institutional environment (regulation), and attitude. Investment includes facility, overseas, foreign, and R&D investment; labor includes jobs and productivity; and production includes the number of firms and the all-industry production index. Regulation is measured using the Korea Innovation Survey and the OECD Product Market Regulation inverse index, while attitude reflects the results of the Global Entrepreneurship Monitor (GEM) survey.

The sub-index analysis shows that investment has repeatedly fallen sharply during crisis periods such as the foreign exchange crisis, the global financial crisis, and COVID-19, and has recently shown signs of stagnation. Labor has seen a long-term increase in the number of employed persons, but productivity improvement has been weak, leaving the overall labor index range-bound.

The production index has risen gradually but remains weak overall. Regulation shows a divergence: international comparisons indicate improvement, while domestic firms’ perceived regulatory burden has worsened. The entrepreneurship attitude index declined for a prolonged period after 2008, rebounded after 2016, but has recently stagnated in the low 50-point range.

This study calculates four broad versions of Korea’s composite entrepreneurship index: 1 (investment + labor + production), 2 (investment + labor + production + attitude), 3 (3-1 investment + labor + production + regulation 1 + attitude), and 3-2 (investment + labor + production + regulation 2 + attitude). For Composite Index 1, the period for which all relevant indices and indicators—including investment, labor, and production—are available runs from 2000 to 2024, yielding a 25-year time series.

The results show that Composite Index 1 (including investment, labor, and production) has a statistically significant positive correlation with economic growth. A significant correlation is also confirmed for Composite Index 2 (Composite Index 1 plus attitude), supporting the view that more active entrepreneurship is associated with higher economic growth. By contrast, Composite Index 3 (Composite Index 2 plus regulation) does not secure clear statistical significance due to limited data, but it does allow a qualitative interpretation that worsening perceptions of domestic regulation constrain entrepreneurship.

These findings indicate that weakening entrepreneurship lies at the root of the Korean economy’s loss of dynamism. Accordingly, multidimensional reforms are needed in areas such as education and talent development, scale-up and the investment environment, labor market reform, regulatory innovation, improvement of the tax and inheritance tax systems, and the creation of a more supportive social atmosphere.

In particular, entrepreneurship should be strengthened in the formal curriculum, and a culture that turns failure into a learning opportunity should be fostered. Financing at each stage of growth and private venture investment should be expanded, and a labor market centered on jobs and performance should be established. Regulations should be shifted to a negative regulatory system to enhance predictability, and excessive tax burdens should be eased to encourage long-term investment.

In conclusion, Korea’s entrepreneurship index is more than a simple quantitative indicator; it is a tool for diagnosing the level of entrepreneurship, which is closely linked to economic growth. For the Korean economy to break out of low growth and lay the foundation for sustainable growth, restoring entrepreneurship and undertaking comprehensive institutional reform are essential. Entrepreneurship must be reaffirmed not merely as a matter of startup policy, but as a core value that determines the nation’s future competitiveness and social prosperity.

I. Introduction

1. Background of the discussion on entrepreneurship

2. Purpose of the study

II. Analysis of the concept of entrepreneurship and index development

1. The concept and components of entrepreneurship

2. Development of Korea’s entrepreneurship index

III. Current status and implications of Korea’s entrepreneurship index

1. Current status and trends by sub-index of Korea’s entrepreneurship index

1) Investment index

2) Labor index

3) Production index

4) Institutional environment (regulation) index

5) Attitude (positivity) index

6) Overall synthesis of the sub-indices

2. Current status and trends of Korea’s composite entrepreneurship index

3. Implications: the entrepreneurship index and economic growth

IV. Policy recommendations for enhancing entrepreneurship in Korea

1. Education and talent development

2. Scale-up and improvement of the investment environment

3. Labor market reform and improvement of labor productivity

4. Regulatory reform

5. Tax reform

6. Creating an overall supportive social atmosphere and comprehensive institutional reform

References

[Appendix] Korea’s annual composite entrepreneurship index and GDP growth rate (real)

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Original title: 우리나라 기업가정신 종합지수 개발 및 시사점

Author: Gwang yong Go

Date: 2025-10-21

Source: https://www.cfe.org/bbs/bbsDetail.php?cid=report&pn=1&idx=28217