Korean Entrepreneurship: The Foundation of the Korean Economy

Korean Entrepreneurship

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Korean Entrepreneurship The Foundation of the Korean Economy Edited by

T. Youn-ja Shim (Theresa Y. Shim)

KOREAN ENTREPRENEURSHIP

Copyright © T. Youn-ja Shim (Theresa Y. Shim), 2010. All rights reserved. First published in 2010 by PALGRAVE MACMILLAN® in the United States – a division of St. Martin’s Press LLC, 175 Fifth Avenue, New York, NY 10010. Where this book is distributed in the UK, Europe and the rest of the world, this is by Palgrave Macmillan, a division of Macmillan Publishers Limited, registered in England, company number 785998, of Houndmills, Basingstoke, Hampshire RG21 6XS. PALGRAVE MACMILLAN is the global academic imprint of the above companies and has companies and representatives throughout the world. Palgrave® and Macmillan® are registered trademarks in the United States, the United Kingdom, Europe and other countries. ISBN: 978–0–230–10707–6 Library of Congress Cataloging-in-Publication Data Korean entrepreneurship : the foundation of the Korean economy / T. Youn-ja Shim, editor. p. cm. Includes bibliographical references and index. ISBN 978–0–230–10707–6 (hardback) 1. Entrepreneurship—Korea, South—History. 2. Business enterprises—Korea, South—History. I. Shim, T. Youn-ja (Theresa Youn-ja) HB615.K674 2011 338'.04095195—dc22 2010020037 A catalogue record of the book is available from the British Library. Design by MPS Limited, A Macmillan Company First edition: December 2010 10 9 8 7 6 5 4 3 2 1 Printed in the United States of America.

Contents

List of Tables and Figures

vii

Foreword

ix

Acknowledgement

xv

1 2 3

4 5

6

7

8

9

Korean Politics and the Spirit of Entrepreneurship Wayne Le Cheminant Korea Inc.: Building Pre-Entrepreneurship in Korea T. Youn-ja Shim (Theresa Y. Shim) The Infusion of American Entrepreneurship in the Early Republic of Korea T. Youn-ja Shim (Theresa Y. Shim) Value Systems, Entrepreneurship, and Changing Society David Choi The Effects of Family Values on Entrepreneurship in East Asian Countries In Hyeock Lee and Yongsun Paik Social Entrepreneurship in Korean Education: American Jesuits Open Sogang College John P. Daly, S. J. Teaching English—A Major Opportunity for Entrepreneurship John P. Daly, S. J. Entrepreneurial Opportunities in Cyberspace: Korea and the United States Judith N. Martin and T. Youn-ja Shim (Theresa Y. Shim) Entrepreneurial Leadership of Korean Companies in the Global Market Yongsun Paik and In Hyeock Lee

1 17

43 67

91

113

133

149

179

Contributors

203

Index

205

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List of Tables and Figures

Tables 4.1

Contrasting values

72

4.2

Changing views toward business and entrepreneurship

86

7.1

Total dollar amount the Korean Government allocates to education

134

9.1

Korean SMEs and internationalization

181

9.2

Internationalized Korean SMEs and entry mode

182

9.3

Internationalized Korean SMEs and regional strategy

182

9.4

Internationalized Korean SMEs and industry segmentation

182

9.5

Internationalized Korean SMEs and founders’ age

183

9.6

Internationalized Korean SMEs and founders’ major

183

9.7

Internationalized Korean SMEs and founders’ education

183

9.8

Internationalized Korean SMEs and CEOs’ age

184

9.9

Internationalized Korean SMEs and CEOs’ major

184

9.10 Internationalized Korean SMEs and CEOs’ education

184

9.11 Internationalized Korean SMEs and financial networks

185

9.12 Internationalized Korean SMEs and technological network

185

9.13 Internationalized Korean SMEs and R&D investment

186

9.14 Internationalized Korean SMEs and Intellectual Property Rights

186

viii

LIST OF TABLES AND FIGURES

Figures 5.1

An institutional-based view of firm strategy

8.1

Social types: Average times spent on social networking sites, October 2009, hours per user

165

Who will be my friend? Social networking sites, total unique visitors, October 2009

167

8.2

94

Foreword

The entrepreneurial values of self-driven, risk-taking, creativity, and innovation have been pillars not only of the U.S. economy but also of other developing countries that are trying to learn from the United States in their attempt to catch up to the wealth of America. We agree that such individualistic entrepreneurial values have contributed to the creation of American capitalism, but we often overlook how political systems and fundamental societal cultural values have influenced and sometimes dictated the initiation of entrepreneurship and its progress in other parts of the world, such as in the newly risen economic superpowers in Asia: China, Japan, and Korea. In this book we attempt to examine the discursive and sociopolitical practices of Korean leaders and entrepreneurs, how those practices have worked as the foundation for the development of entrepreneurship even before they were introduced to Western concepts of entrepreneurship, and how fundamental societal cultural values promoted and sometime hindered their entrepreneurial opportunities down the road. We selected Korea as a subject for several reasons. Within fifty years, Korea has emerged from centuries of poverty and the devastation experienced in the Korean War (1950–1953) to become one of the rising forces of the global economy along with neighboring Asian countries, including Japan, Singapore, Taiwan, and now China. As Michael Schuman points out in his recent book, The Miracle, “In only thirty years, Koreans transformed a nation poorer than Liberia, Zimbabwe, and Iraq into a member of the rich countries’ club, the Organization for Economic Cooperation and Development” (Schuman, 2009, p. xxiii). Korea, the country, often associated by America with the TV series MASH, the Korean War, and the adoption of Korean orphans, is now known as the world’s most wired country with the highest broadband penetration and with one of the world’s best-educated populations. Some Westerners have called the transformation of the Korean economy a miracle. Presidents Park Chung-Hee (1961–1979) and Lee Myung-bak (2007–present), however, have refused to accept the idea that Korea’s economic transformation is the result of a miracle, but rather have claimed

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that it is the result of many years of great hardship, sacrifice, national effort, and the commitment by Koreans to stand on their own feet. This came about through the collective drive of the highly hierarchical structure of the government that permitted clean, quick decisions, the citizen’s traditional value of respect for authority and their willingness to participate in a national quest for economic development, and the visionary and selfdriven entrepreneurs. As Schuman points out, “Korea’s economic boom was far more than just a route to wealth. It defined the nation’s purpose, engendered a sense of pride and confidence rarely matched in Korea’s five thousand-year history” (Schuman, 2009, p. xxiii). This book is a collection of research papers and stories listing the various factors that have impacted the foundation of Korean entrepreneurship and its creation of wealth by examining the historical environment, fundamental cultural values, and changes the Korean people have made thanks to the vision of the political leaders with regard to the country’s modernization and economic development. We often recognize political leaders who have been responsible for economic development and policies, especially in Asia where they have created a unique government-led economic development model, but we often give less credit to those entrepreneurs who recognized the nation’s leaders’ vision and were willing to develop their innovative ideas that would contribute to the common good. The nine chapters are organized as follows. In Chapter 1, Wayne Le Cheminant explores the salient points of Korean political history, particularly of the past century, and, more specifically, looks at how these events led to the specific conditions in which the Korean people find themselves today. At the end of his chapter, he speculates as to how these events, in particular, democratization and financial reform, may have contributed to what can be called an entrepreneurial spirit. In Chapter 2, T. Youn-ja Shim goes on to describe the big picture of South Korea’s economic modernization process focusing on the stories of how the nation’s economic system, known as Korea Inc., was created. This was a unique business model that developed the foundation of South Korea’s economic modernization. She begins with the story of President Park Chung-Hee who was the driving force behind Korea, Inc. and was also responsible for the creation of the giant family-run conglomerates (Schuman, 2009), resulting in the creation of the current inequality of wealth distribution. Shim then explains how the government, the early pre-entrepreneurs who became conglomerates, and civil society working together made it possible for President Park to serve as CEO of Korea Inc. through stories of the developing relationships between Park, civil society, and the leading entrepreneur in Korea, Chung Ju-young, the founder of the Hyundai Group.

FOREWORD

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In Chapter 3, Shim continues to reveal how the first generation of entrepreneurs, particularly American-educated technocrats in the 1960s, rose to the top of the social ladder and how they practiced their entrepreneurial opportunities by playing the traditional Korean value of the importance of human networks with their advanced education from the United States. Through the story of one such successful early entrepreneur, Lee Chu-yong, who is considered the pioneer of computer education in South Korea and has contributed greatly to the computerization of the Korean government and banking systems, Shim provides a picture of how the early entrepreneurs contributed to the nation’s economic modernization while establishing American-influenced entrepreneurship. In Chapter 4, David Choi provides the background and facts associated with South Korea’s entrepreneurial economy. He examines some of the most fundamental values of Korean culture that are in conflict with those of entrepreneurship, and then looks at the development of entrepreneurship in South Korea to see how its growth has affected the people’s values systems and their perspectives on various groups’ roles in society. He concludes his chapter by discussing how Korea’s experience with entrepreneurship and its impact on society compares to entrepreneurship in the United States. In Chapter 5, In Hyeock Lee and Yongsun Paik investigate characteristics of entrepreneurial family firms across three East Asian countries: Korea, China, and Japan. They suggest that the entrepreneurial family firms in the three countries exhibit similar characteristics depending on the unique combination of formal and the surrounding informal institutional constraints in each country. In addition, they assess the effects of Confucianism on the role of family in the process of the creation of their firms and identify hierarchical relationships, paternalism, seniority, and preservation of group harmony as common characteristics of the entrepreneurial family firms. In Chapter 6, the story of the foundation of Sogang University is told. The university originally intended to be a small liberal arts college, was established shortly after the Korean War in 1960, and was modeled after the Jesuit universities in America. Later, the plan changed and it became a big university through the acculturation process. The critical role that American education played in the Korean education system and its contribution to the implementation of the economic development of South Korea is often underestimated. This was particularly important in a country that has always honored education and placed scholars on the top of the social scale, but during the first half of the twentieth century, Korea suffered a significant downgrading of education during Japanese colonization and then, soon after liberation, suffered the heavy toll of the Korean war. Korea was eager to change and was ready to accept American education

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systems. In this chapter, John P. Daly, S. J., who served as the second president of Sogang University (1963–1975), explains how he learned to be a change agent in order to adapt American educational ideals to the Korean culture by transforming his own culture. In Chapter 7, Daly, explains what English language education means to Koreans and to their society. The influence of American education and popular culture has been deeper in Korea than in other neighboring countries, perhaps because of their gratitude to Americans for their liberation of Korea from 36 years of Japanese colonialism and for their assistance to South Korea during the Korean War. As a result, English education has always been one of the focal points of school curriculums and afterschool programs in South Korea even though in recent years some antiAmericanism has developed among the younger generation. This story is told in relation to the pioneer of English education and social entrepreneur and philanthropist, Y. B. Min, founder and chairman of YBM Si-sa-yong-o-sa (Si-sa English Institute) and the International Communications Foundation. Daly explains Y. B. Min’s original idea of teaching English to business executives as a learning process of understanding language in context—the social and political world of the United States in the 1960s and 1970s—and has continued to create innovative ideas to promote English education for students and businessmen/women. Today Y. B. Min’s international network of schools, testing services, and publications is a Korean conglomerate. The J. P. Morgan investment firm in their April 2005 newsletter referred to Y. B. Min as. “Lord English.” In Chapter 8, Judith Martin teams with T. Youn-ja Shim to provide a picture of new media around the world, focusing especially on social networking sites in the United States and in Korea. They discuss the important role culture plays in online social interaction and show that while social networking around the world may reflect universal needs for information sharing, friendship development/maintenance, and expressions of self-identity, the ways in which these needs are met by social networking sites and search engines reflect local cultural preferences. For example, still influenced by the old tradition of the blurring of self identity and group identity, how Koreans conduct their social networking does not significantly affect how they connect with society; this is unlike networking in the United States, where there is a distinct demarcation between self identity and group identity. Martin and Shim then examine how young computer-savvy entrepreneurs draw out the complexity of the social and cultural lives of peoples in the United States and Korea and develop entrepreneurial opportunities in cyberspace. They point out that these entrepreneurial enterprises (e.g., Facebook, Cyworld, Naver, etc.) often reflect culture-specific

FOREWORD

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preferences and are founded on business models that do not necessarily translate well into other countries. The chapter concludes with an examination of specific social networking sites and search engines in Korea and the United States describing the local and global successes and challenges of each entrepreneurial project. In Chapter 9, Yongsun Paik and In Hyeock Lee examine how the global economy can benefit from entrepreneurship in general. Then, they continue to address the major issues and concerns of how small- and medium-sized enterprises (SMEs) will be able to take advantage of business opportunities in the global market to survive in competition with large conglomerates, such as the chaebols, and what the capabilities are for large conglomerates to encourage entrepreneurship and creativity. Paik closes the chapter by asking us, “Will the traditional style of Korean management leadership be effective enough to bring success from the global competition?” It is our hope that these stories and research papers show how the foundation of entrepreneurship developed in Korea and how the work of the entrepreneurs, whether it was President Park Chung-Hee or the morerecent technocrats with startups on the Internet, contributed to South Korea’s amazing economic growth in the past fifty years. The entrepreneurs that we have selected are only a sample of the thousands of talented Koreans who have devoted their time and talents to Korea’s development, economically and socially. March 31, 2010

T. Youn-ja Shim (Theresa Y. Shim) References

Schuman, M. (2009). The miracle: The epic story of Asia’s quest for wealth. New York: Harper Collins.

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Acknowledgement

As Director for the Center for Asian Business at Loyola Marymount University, I am most pleased that the Center was able to initiate the publication of this second book about Korea following our earlier book, Changing Korea (2007). As a young Jesuit priest some fifty years ago, Africa was my first choice of where I hoped to be sent as a missionary, so I was disappointed when our province was assigned Korea as a mission with a mandate to open a school, but I still volunteered. From the moment I arrived at Kimpo airport in 1961, I fell in love with Korea, especially with the Korean people. The country was totally ruined by the Korean War, but their warm hospitality and their genuine welcoming of us American Jesuits somehow helped me see this devastated country as my beautiful, new home for the next twenty years. In the early years I witnessed how the Korean people worked together to reconstruct their nation after the devastation of the long years of the Korean War. They all were willing to sacrifice themselves to make a better society and to improve their children’s lives through education and hard work; the good of the nation came before individual goals. I had the privilege of meeting great leaders and pre-entrepreneurs in the early days of the Republic of Korea such as Park Chung-hee, president, and Chung Ju-young, the founder of Hyundai. I am also grateful that I was in the position to be able to hire great faculty members who contributed to the nation’s process of building the framework of the Korean economy and its infrastructure. Now in my visits to Korea in recent years, I continue to notice, beginning even with taxi drivers from the airport, how all citizens want to be part of making Korea better, not only for today, but for future generations. I am impressed by their hard work, their aggressive behavior—blunt at times in foreigners’ eyes—and I believe these qualities of the Korean people will continue to produce great entrepreneurs. As a Jesuit with belief in the power of education, I know that Korea has been and will be a scholarly society, which is their greatest asset.

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ACKNOWLEDGEMENT

I want to acknowledge, first of all, the many donors who have made this book possible, especially Y. B. Min and his son, Sunshik Min, the Moon family, and the Chung family. Then I wish to thank all of the contributors, Wayne Le Cheminant, David Choi, In Hyeock Lee, Judith Martin, Yongsun Paik, and especially, T. Youn-ja Shim (Theresa Y. Shim), editor, for her passion to introduce Korea and Koreans who have contributed to Korea as it is today to the rest of the world. She was also responsible for the first book from the Center, Changing Korea. I also wish to acknowledge the encouragement of Dr. Dennis Draper, Dean of the College of Business Administration at Loyola Marymount University, who is deeply committed to providing all LMU students with a deeper knowledge and appreciation for the Asian people and their cultures. Finally, we owe a deep sense of gratitude to Marki Hackett, the Program Coordinator for the Center for Asian Business, for her commitment to working with the text of this book. March 31, 2010

John P. Daly, S. J.

1

Korean Politics and the Spirit of Entrepreneurship Wayne Le Cheminant

T

he political saga of South Korea is a long and complicated one, with many struggles and pitfalls interspersed with surprising success stories (see D. K. Kim, 2005; Pratt, 2007; Breen, 1998; and Oberdorfer, 2001). It is always difficult to assess the spirit of a nation or to characterize a “people” in one way over another. Ascribing certain characteristics to the Korean people is fraught with danger because Koreans, as with all people, have a vast array of differences and characteristics that make each person unique and each lived experience different from another (Breen, 1998). That being said, it is also the case that the collective experience shared by a group of people also shapes the playing field in which we find ourselves today. The political experience that has shaped South Korea has been fraught with a host of tragic events and many hard-won victories. This chapter seeks to explore the general salient points of Korean political history, particularly over the last century, and, more specifically, to look at how these events moved the Korean nation and people to the specific conditions in which they find themselves today. At the end of this chapter, I speculate as to how these events, in particular democratization and financial reform, might contribute to what can be called the entrepreneurial spirit. Before exploring the salient points of Korean political history, I think it is useful to explain what I mean by entrepreneurial spirit so that we might read through Korean political history with a view toward how these events may have shaped the thing that we call an entrepreneurial spirit. We should define what is meant by “entrepreneurial conditions.” One way to define the term is to say that it refers to conditions in which people can use their creativity and hard work to bring about both economic growth and social

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prosperity. While there are many problems with ascribing any particular economic indicator and collective trait to determine why economic conditions improve in one place over another, it is, I think, still possible to generalize about this in a way that is helpful. For example, the fact that South Korea rebounded so spectacularly after the Korean War while North Korea has been mired in dismal economic and social conditions is, for many social scientists, an example of how institutions play a key role in the creation of economic and social outcomes (see Przeworski, et al., 1990). For many, the Korean peninsula is a useful laboratory for examining how institutions work because the Korean people were a relatively homogenous group prior to the Korean War. Once different institutions—an authoritarian capitalism in the South and a dictatorial communist regime in the North—were set in place, one could see how these institutions led to different political and economic outcomes. The South has flourished and the North has been on the verge of collapse for a couple of decades. However, there are many exogenous factors that must be considered when analyzing why one country has succeeded and the other has failed. For example, the United States was as a key benefactor of the South in addition to being the initial market for South Korean goods when its nascent economy was trying to establish itself after the war; whereas, North Korea had less reliable backers in terms of economic support (Detrio, 2002). Likewise, natural resources, outlets for export, educational systems, access to the international community and international organizations, population size, and many other factors play a role in the success or failure of any country. Despite the various factors that lead to the collective success of a country and the difficulty that is often associated with how to untangle the most important factors, I believe that it is possible to look at the political history of South Korea and ascribe something that we call an entrepreneurial spirit to the country. In order to talk about the creation of entrepreneurial conditions in South Korea, several factors should be considered: 1. Availability of creative individuals; 2. Resources and capacity to provide the goods and services that people demand; 3. Flexibility to change and adapt as market conditions move and shift; 4. A political structure that allows points 1–3 to take place. In many ways South Korea has had the capacity to be a great entrepreneurial nation for many years. It has one of the most literate and highly trained workforces in the world. It is also the case that South Koreans are

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extremely interested not only in their individual success but also in the success of their families and country. South Koreans also work extremely hard. However, for a long time, South Koreans had to work in conditions that were not conducive to entrepreneurship. I think that we should distinguish between entrepreneurship and hard work. It might be the case that most, if not all, entrepreneurs work hard, but it is not the case that all hard workers are entrepreneurs. An entrepreneur is someone who has a vision to achieve an end that meets market demands and the freedom and flexibility to actualize that end. As we shall see, after the Korean War, the South Korean government chose an economic and political path that was highly structured and intensely centralized. Most of the wealth and the access to creating opportunities was concentrated in the hands of a relatively small minority of power elites. Those who were educated, generally speaking, used their training in government roles or to work for large conglomerates. Much of this was designed to help strengthen South Korea so that it could fend off another attack from the North. Policy planners believed that only centralized control could achieve this. In many ways the path toward economic liberalization and democratization was long and complex. Bruce Cumings writes that, after Japanese occupation and even after the Korean War, “Korean society had no base for either a liberal or democratic party as Americans understood it; the vast majority of the population were poor peasants, and a tiny minority held most of the wealth: landowners who traced their genealogies and their landholdings back centuries constituted the base” of the ruling class in Korea (2004, p. 15). The move toward economic liberalization and democratization had to move through various governmental policies that allowed for large conglomerates (chaebols) to hold the vast majority of the wealth, authoritarian regimes, military coups, and political corruption. While South Korea has become an economic giant over the last 40 years, it has generally been perceived as a haven for large corporate conglomerates. These large corporations have worked hand in hand with the authoritarian regimes that have dominated the South Korean landscape from the Korean War until the 1990s. One of the problems with the political structure that propped up and encouraged the dominance of the chaebols is that it simultaneously stifled creativity. From an individual decision-making position, one might question the sanity of trying to enter a market with no viable political connections and that is dominated by conglomerates that have millions of dollars to spend on advertising, saturating the market with goods, and buying political influence. Koreans were willing to buy into the authoritarian regimes so long as they delivered on the astonishing economic growth that was seen from the 1960s until the late 1980s. This is not to say that there has not

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been persistent resistance to the various regimes. There has been perpetual resistance, particularly among students and certain sectors of the industrial labor force, such as shipbuilding. However, the financial elites, well-connected families, and the population at large never really sought open and outright rebellion against the authoritarian regimes (S. H. Kim, 2000). South Korea’s rapid and amazing economic growth has been a source of great pride for most Koreans and most policies were premised on the idea that the sacrifice of individual liberty, including entrepreneurial opportunities, was the most important goal (pp. 105–37). Despite the historic sense of needing to do one’s duty for the sake of the greater good, there have been gaps opening up that allow for individuals to start taking advantage of this newer entrepreneurial spirit. Something that we must understand is that economic growth in and of itself does not necessarily equate to entrepreneurial conditions. The conditions where individuals can take initiative, use their creativity, and find new ways to open markets is set through the tone and policies of the government regime, even if it means allowing individuals and businesses freedom to explore new avenues of enterprise. Entrepreneurial conditions mean that individuals can follow their own aspirations and creativity in ways that not only benefit themselves but also the society at large. There are several requirements for what might be called entrepreneurial conditions: 1. Freedom. By freedom we mean choice. People have to have the opportunity to find where their skills best fit into a market or system of economics. If the government regime continually marshals resources for its own needs or mandates certain types of enterprise, the chance for entrepreneurial conditions to flourish is severely diminished. The greater role of democracy in South Korea certainly has something to do with this. South Korea did not have its first open election in the modern era until 1987. As Breen writes, “Candidates violated spending limits [as well as committing other violations]. But by the standard of previous elections, this one was an improvement. The claim that Roh had won through fraud fell flat in the face of the opposition split. In the end, it was the procedure, not the personalities that was important. There had been for the first time a peaceful transfer of power through a reasonably democratic election. Until now, democracy had been imitated. Now its form was in place. Over the next decade the focus would be on developing the substance in terms of fairer elections, individual rights, and a democratization of the culture” (p. 221). This change helped lead to what Sunhyuk Kim calls policy advocacy. He writes that Korean society eventually

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changed from “protest against political authoritarianism to policy advocacy . . . In the past, its [civil society] purpose was to challenge, oppose, and even overthrow the authoritarian regimes. Now, civil society must engage, affect, monitor, check, and control the state by articulating and promoting new visions and developing and presenting new policy prescriptions” (S. H. Kim, p. 148). 2. Oversight. Often pundits decry oversight as being essentially and necessarily evil. However, this is to misunderstand what governmental oversight is. First, it does not mean central planning. It means that the key players in an economy know that they are accountable to the polity at large. Likewise, the key players also have assurances of predictability and stability, to the degree that such a thing can be assured. This allows them to make decisions with the notion that taking chances for future earnings, looking for new opportunities, and marketing new ideas is something that is plausible. Likewise, having oversight benefits all players in an economy because it does not allow any single or small group of actors to manipulate the market. One of the things that we will note from the effects of the East Asian economic crisis is that it showed South Korean leaders the need to open up the market to various forms of competition while simultaneously showing the desirability of having more transparency in the market place. Transparency is impossible without oversight. There is still significant evidence that South Korea suffers from a great deal of corruption both in business and in government. For example, the Berlin based Transparency Index placed Korea forty-third out of 180 countries in terms of transparency in business and twenty-fifth out of 30 OECD countries. Likewise, nearly half of Koreans think that corruption will worsen. Transparency International Korea’s Secretary-General Kang Seong-gu said, “The society’s leaders have ceaselessly committed major acts of corruption, while the number of minor acts of corruption committed by members of the general public has declined” (see T. J. Kim, 2007). 3. Opening markets. This can be a sensitive subject in today’s globalizing market place as leaders are often under pressure to protect the domestic job market. Also, there is an added sensibility to many in Asia in that opening markets might smack of imperialism in new clothing. Domestic players fear that outsiders might come in and dominate the markets and squeeze out domestic workers, business, and that the benefits of such efforts will be transported elsewhere. In South Korea this fear is particularly strong as it has struggled for the entire twentieth century to assert its identity as a strong sovereign nation. If one considers the fact that South Korea was occupied by

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Japan from 1910 until the end of World War II and then suffered through the Korean War from 1950 to 1953, it seems fairly reasonable that South Koreans would hope to find a sense of autonomy. Despite the fear of foreign domination, there are several ways to deal with ensuring that a local economy benefits from opening its markets: (1) mutual agreements that take on a variety of shapes. For example, domestic firms work in partnership with foreign firms, a certain number of qualified domestic workers will be required to be hired, a certain amount of profit could be required to be reinvested in the local economy, and so forth. (2) Specialization. A state can seek to specialize in a variety of ways. In South Korea, for example, the idea that the state should be a high-tech player was decided by the government in the mid 1990s. This decision has given South Korea a comparative advantage over other states in that South Koreans now are educated and have the capacity to be players in the technology market of today. In conjunction with reform policies that also opened the market in the mid-1990s we should expect that this would be an area of entrepreneurial growth for South Korea. (3) Allowing for firms to fail is also important. In countries with strong labor unions, such as South Korea’s industrial sector, this idea is something of an anathema. However, by having policies in place that allow for firms to fail, reorganize, and move into new markets and opportunities, the workforce and market become more nimble. Again, policies set in place in the mid 1990s in South Korea have made this a reality. (4) Allowing for numbers 1 and 3 does not mean that workers will be taken advantage of. In fact, when South Korea was authoritarian, workers had far less rights, were less mobile, and had to concede to the demands of firms at almost every turn. Generally raucous and violent riots during the 1980s and early 1990s were the only way to gain any headway with large chaebols, and even these were not usually successful. While far from perfect, open markets with governmental oversight seem to provide more freedom and flexibility for both workers and firms. The fact that workers have more opportunities to move because they are more skilled and educated gives firms an incentive to treat workers fairly. Likewise, the fact that chaebols do not receive inordinate protection from the state and can dominate markets with little effort means that they will have to find ways to stay competitive in the market. There are still aspects of South Korean political life that could stultify growing EC. First, Cold War politics still plays a strong hand in South Korea in a way that most countries cannot and were never able to understand. The very

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fact that North Korea looms over the horizon is something of which every politician in South Korean must be cognizant. Simply put, the political realities of a potential failure of the North Korean regime could be a catastrophe for the South. Also, given the fact that both North and South still see the Korean peninsula, at the end of the day, as something that should be a unified political entity, also plays into the political calculus of both sides. Resources must be committed to the ready defense of South Korea, and yet, for entrepreneurial conditions to really thrive, extreme militarism and authoritarianism should be discouraged. South Korea must walk a fine line. There are also other remnants of Cold War politics that play into the political game in South Korea. The fact that the United States stepped into the Korean War conflict as the lead state in the UN effort to turn back the forces of North Korea is something that resulted in the U.S. military coming and staying. To this day there are some 30,000 U.S. troops stationed in South Korea. Koreans have ambivalent feelings about the presence of the United States in their country (Cumings, 2004; Oberdorfer, 2001). South Koreans, a very independent-minded people who also find great interest in national solidarity (the term by which most South Korean refer to South Korea is “uri nara,” or “our country”), are probably more split along generational lines on the issue of the role of the United States in South Korea than on any other issue. Breen writes, “Unification is the stated goal of both sides [North and South Korea]. An innocent traveler may wonder, then, why has it not happened? When asked this, Koreans of north and south tend to blame others—foreign powers, political leaders. In fact, the answer lies in the meaning of the division” (p. 244). It appears that the answer to discovering this meaning, at least in the South, has to do with how Koreans perceive their country. Those who are older tend to be nostalgic for a unified Korea and those who are younger tend to desire reunification only if it makes Korea stronger in the long run, but are hesitant to undertake the obligations necessary for such reunification to take place without the semblance of some promise of success. Older people still remember the Americans coming to the aid of South Korea during the Korean War and then sticking by it during the reconstruction period. Younger people take the presence of U.S. troops as a de facto occupation and wonder why the 30,000 troops do not just leave to go elsewhere. A Brief Overview of Korean History In order for us to understand the current conditions of South Korea, it is useful to look at some of the relevant movements and events of the recent past. While the Korean peninsula has long been a land of many interesting

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movements of both people and culture, its history over the last one hundred years has been nothing short of spectacular. If one considers the difficulties that the people of Korea have suffered, it is hard to imagine how they have managed to make themselves into such an amazing success story. Y. I. Chung writes, Economic development is a complicated and multifaceted process involving the entire spectrum of human life and its economic, political, social, technological, and cultural environments. To achieve rapid and sustained economic growth, a developing country must overcome many obstacles, which result from a complex set of internal and external forces. Economic development, therefore, involves the right mixture of all the necessary ingredients: the will to develop; the requisite quality of labor; appropriate changes in human skills, attitudes, values, and institutions; and solid economic structure. Economic development also entails the transformation of a society over a long period of time, which enables a society to overcome its obstacles and achieve economic progress . . . Not only has South Korea met this challenge, but it far exceeded the goal.” (2007, p. 3; see also E. M. Kim, 1999)

For the purposes of this rather brief discussion, we will examine the development of South Korea from the time of its colonization by Japan. South Korea was officially annexed by Japan from August 1910 to August 1945. The government of Japan during the Meiji restoration sought to expand its territorial holdings, and the Korean peninsula seemed to be a logical extension of this desire, as both Japan and China had long-held interests in Korea. Initially, the Meiji government (1868–1876) sought the independence of Korea so as to eliminate Chinese claims on the peninsula (see Meyer, 1993). The Korean government was well aware that “its independence depended upon maneuvering in the competition for control [of the Korean peninsula] between China, Russia, and Japan” (Jansen, 2000, p. 441). Once Japan had removed the threat of Russia in the beginning of the twentieth century and had made inroads in its interests in China, it faced no serious competition for its interests in Korea (pp. 414–55). It was during this period that the South Korean economy began to modernize as it became an integral part of the Japanese empire (Chung, 2007, p. 7). The Koreans often refer to this period as the “forced occupation.” The Japanese moved quickly to reform Korean statutes to make all foreign relations with Korea go through the hands of the Japanese government, and Japanese citizens could freely purchase land in Korea from 1905, five years before the annexation period (Han, 1980, pp. 450–63). These initial changes brought about the beginnings of social change in Korea, from various violent outbreaks to reform in education, primarily through the

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rise of Christian schools that admitted students regardless of class or ability to pay (p. 457). Eventually, the Japanese government used a variety of means to gain control over the land, the people, and attempted to eradicate a culture. The Japanese government seized land for nonpayment of taxes, established hegemony over commerce and finance, and used the Korean people and its resources for the benefit of Japan (pp. 460–70). In general, Japanese rule in Korea was considered harsh and oppressive. They often imprisoned, killed, or tortured Koreans who did not comply with their wishes. The annexation period had a lasting effect on Korean-Japanese-U.S. relations. For example, one of the primary reasons why Kim Jung-Il came to power and was in a position to make himself a favorite of the Soviet Union was due to his role as a guerrilla fighter against the Japanese. Likewise, the Koreans long saw the U.S. failure to intervene on their behalf against the Japanese during the Treaty of Portsmouth as a betrayal. Don Oberdorfer writes, “Japan’s paramount political, military, and economic interests in Korea were codified in the Treaty of Portsmouth (New Hampshire), in which President Theodore Roosevelt played peacemaker and dealmaker between Japan and Russia, and for which he was awarded the Nobel Prize. With no opposition in sight, Japan occupied Korea in 1905 and annexed it outright as a Japanese possession in 1910. Japan then ruled as the harsh colonial master of the peninsula until its defeat in World War II” (p. 5). Unfortunately for Korea, the end of World War II and the Japanese occupation of the peninsula was not the end of its troubles. Though much of the economy was modernized and governmental institutions were strengthened during Japanese occupation, much of that benefit was lost. In fact, the Koreans would suffer what many felt was a “second American betrayal” and that was the division of the Korean peninsula at the end of World War II. Though the Cairo Declaration of 1943 between the United States, Britain, and China had declared that “Korea shall become free and independent,” that was not to be the case (Oberdorfer, pp. 5–6). It was only during the last week of World War II that the Soviet Union declared war on Japan and marched into Manchuria and eventually into the Northern half of Korea. The Soviet Union had managed to march to the 38th Parallel, stopped, and Korea became a divided country with two “temporary” zones of occupation. This put the Korean peninsula into the middle of the Cold War as these zones of occupation became “the sites of two antagonistic Korean regimes based on diametrically opposed principles and sponsors” (p. 7). The pain of these decisions would be felt in the most violent and harsh manner at the outbreak of the Korean War on June 25, 1950. The Cold War, in many ways, forced South Korea to play a role in the geopolitical struggle that did not encourage democracy. It really should come as no surprise, then, that Korea’s democratic development has only

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occurred relatively recently. The United States was content with fostering authoritarian conditions during the Cold War. We must remember that the United States occupied southern Korea in 1945, and it established a military government that was, ironically enough, based in the former executive mansion of Japanese governors. On September 8, 1945, General John R. Hodge, the U.S. commander in charge of Korea, launched his war on Communists in the southern zone of Korea. Hodge warned as early as 1946 of an attack from the North, but by then Korea was already entangled in the realities of the Cold War. The American command was too poorly equipped to move Korea into anything resembling a democracy as no one knew anything of Korean history, the language, or culture. As Bruce Cummings writes, The problem was that Korean society had no base for either a liberal or a democratic party as Americans understood it; the vast majority of the population were poor peasants, and a tiny minority held most of the wealth: landowners who traced their genealogies and their landholdings back centuries constituted the base of the KDP [Korean Democratic Party]. (2004, p. 15)

South Korea had a difficult time establishing a stable polity under Syngman Rhee, who sought to unify Korea prior to the war. The problem of Korean reunification was taken up by the United Nations Committee for the Unification and Rehabilitation of Korea (UNCURK). Despite various measures and attempts from the United States and from the Syngman Rhee government, the Russians excluded UNCURK from moving into North Korea to monitor the political situation and thwarted attempts at reunification in 1948. In fact, in that same year, in defiance of the UN resolution, the People’s Republic was established in the North and almost immediately started with guerilla raids on the South and made massive military preparation for the eventual invasion that would take place two years later. The South was having a difficult time as “communist-inspired strikes and riots were frequent, and so much money had to be spent on maintaining public order that shortages of essential goods and inflation followed” (Han, 1980, p. 505). A closer reading of the Korean War makes one realize the stakes that the various powers had in Korea. The Soviet Union saw a reliable and steady puppet regime to counterbalance the United States’ presence in Japan and South Korea; China sought to make inroads into fighting against the United States through its alliance with North Korea. In fact, Mao Tse-Dung saw the Korean war as an important test for the fledgling Chinese Communist nation, and those who fought against the imperialist Americans were seen as heroes. The Chinese people

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made all the contributions that they could in an attempt to thwart supposed American imperialism in Korea (see Chang and Halliday, 2006). Chang and Halliday write, “For Stalin, the greatest attraction of a war in Korea was that the Chinese, with their massive numbers, which Mao was eager to use, might be able to eliminate, and in any case tie down, so many American troops that the balance of power might tilt in Stalin’s favor and enable him to turn his schemes into reality . . . Stalin said, ‘Should we fear this [war]? In my opinion, we should not . . . If a war is inevitable, then let it be waged now, and not in a few years’ time . . .’ Mao repeatedly spelled out this potential to Stalin, as a way of stressing his usefulness” (p. 353). In short, this left the South Korean government unprepared for militarily, institutionally, and for the invasion commenced by North Korean troops in June of 1950, socially. The result of the three years of war, which had much ebb and flow, was that the demarcation of the North and South stayed where it had been when the war began, at the 38th Parallel. However, the devastation that resulted from the war was virtually incomprehensible. Poverty and hunger abounded. The entire infrastructure was devastated, and the economy was in a shambles. The first president elected in the postcolonial era was Syngman Rhee, who established the First Republic of Korea. He was a staunch ally of the United States. He was an ardent anticommunist and led South Korea through the war, though his efficacy is in question (see Brazinsky, 2007). He eventually resigned in 1960 after pressure from a disputed election. His strong-handed ruling style was one that would dominate Korean politics until the 1990s. He helped to centralize both the political and economic planning that characterized Korean politics through this time. After Rhee’s resignation, a leftist administration, under Yun Po Sun, took over and ruled in an exceptionally ineffective manner (see S. S. Kim, 2003). Continued political unrest and mounting financial difficulties lead to the fall of the Second Republic of Korea. The overthrow of the Second Republic by a military coup lead by Park Chung-hee was a seminal event in the modernization of South Korean politics and its economy (see B. C. Lee, 2005). Despite promising that military leaders would not run for election, Park did so and was elected president in 1963. Among the reforms that Park lead through strong authoritarianism was the normalization of relations with Japan, the solidification of what has come to be known as developmental policies for the economy, and granting more powers to chaebols to help in the creation of government policy. He also quashed protests concerning his strongarmed ruling tactics, declaring national emergencies several times, such as in 1972, 1974, and 1975. He also saw the passing of a new constitution in

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1972 that gave him control over the parliament. In effect, he dismantled any pretensions of democracy and jailed hundreds of dissidents. He was eventually assassinated in 1979, which led to the dissolution of the Fourth Republic. This period of time was marked by increased dissatisfaction of the polity at large with authoritarian rule. Eventually Chun Doo-whan took power in a military coup and declared martial law (Armstrong, 2006). The protests over Chun’s ascension to power culminated with the Kwangju Massacre in 1980. As Sunhyuk Kim writes, “The decision [by Chun] to extend martial law to the entire country was meant to be the finale of a multistaged coup that started with the military revolt in 1979. However, civil society groups did not surrender easily” (p. 67). Kwangju was the hometown of a well-known dissident, Kim Dae-Jung. Various groups in the city of Kwangju demanded his release from prison and soon the entire city was caught up in the spirit of protest. Eventually the military moved in, and nearly two hundred people were killed during the brutal suppression of the demonstrations. Kim writes, “The Kwangju uprising symbolized the last and the most fierce battle between those civil society groups that advocated democratic transition and the military hardliners who preferred a reversion to the status quo ante” (p. 67). The Chun regime, or the Fifth Republic, was marked by similar policies of its immediate predecessor. The government continued with its ardent anticommunist policies; suppression of leftist groups, student organizations, and labor unions; state-run developmental policies; close ties with the United States; and promotion of an export-driven economy, lead by the economic power of the chaebols. Eventually Chun decided that he would step down and thought to turn power over to one of his close colleagues and collaborators in the military coup of 1979, Roh Tae-woo. Eventually, public outcry led to elections in 1987 that Roh won, probably because of the opposition split of Kim Dae-jung and Kim Young-sam. Since 1987 South Korea has experienced several peaceful elections and transitions of power. In 1992 Kim Young-sam was elected president, and this marked the first time that a civilian had risen to the office of president in over thirty years. Later, both Chun and Roh were indicted and found guilty of massive corruption while in office. Both were later pardoned. Kim Dae-jung, a well-known dissident and political outsider in many ways, assumed the presidency in 1997. He was perhaps best known for his “Sunshine Policy,” which sought to engage the North in a variety of talks and policy initiatives. Unfortunately, corruption still seemed to be a problem for those in power. Roh Moo-hyun was elected to the presidency in 2004. Charges of corruption dogged him throughout his term in office. Eventually, he would be formally investigated and he committed suicide in May of 2009.

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Though the above details concerning some of the salient events in Korean political life are brief, they help to elucidate one of the earlier points that I hoped to make—freedom and democratization for Koreans has been a long and difficult struggle. The realities of the Cold War were also used by the various regimes, particularly the Park Chung-hee regime, to oppress the citizens of South Korea. He ruled with an iron fist and acted in such a way that he always moved national political interests, which may have been identical with the political realities of his regime. Various policies were enacted to protect Korean markets until the early 2000s, further strengthening the chaebol dominance of the domestic work place, and Korean political and economic life resembled something of an iron triangle—business, politics, and various other players sought to insulate the status quo from change (see Y. I. Chung. 2006; and Islam and Chowdhury, 2000). What I hoped to show through the very brief encounter with Korean political life is that democracy and the very conditions that might allow for an entrepreneurial spirit were hard fought. We would be remiss if we did not discuss, albeit briefly, the idea of the developmental state as it was practiced in Korean politics and business. Many attribute the rise of the Korean miracle—its rise from ashes after the Korean War to become an economic powerhouse—to the ability of the state to implement strong developmental policies. This developmental policy included highly coordinated efforts by the Korean government and business elites to move the Korean economy forward (Minns, 2001). The sacrifice of democratization and social freedoms were justified by the need to strengthen the economy (Song, 1994). Interestingly enough, there are many who take examples such as South Korea, and then use the idea that authoritarianism might be a road toward economic success. It is loosely the model that the U. S. government used in analyzing China’s potential for democratization, moving forward toward social freedom, and economic growth (World Bank, 1993). South Korean economic growth was used by many to justify developmental policies that were backed by authoritarian regimes. It may not always be the case that long-term success can be sustained by authoritarian regimes. Something that thinkers, business leaders, politicians, and analysts need to look out for is the idea that short-term economic success might be nothing more than a will-o’-the-wisp, luring investors into an economy and foreign governments to support the regime, when in the long term there is much to be desired. It seems that in the long term, governments that legislate and support ideas such as transparency, education, citizen participation, economies that benefit local workers, and the like are much more likely to have markets that are stable and productive over the long haul. In many ways, the South Korean regime was lucky that

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it had markets and a willing labor force for such a long period of time. The authoritarian tactics used in South Korea would not have been, and have not been, tolerable in other places (Farrell, 2006). South Korea, one might argue, is currently in the midst of making these changes so that it will not slide back into authoritarian rule at any point in time and will continue to be a desirable place to do business (B. K. Kim, 1998). John Minns writes, “The history of South Korea shows . . . that the developmental state has a use-by date imprinted on its basic mechanism. An amended conception of the South Korean model needs to integrate the early period of rapid growth and relative state autonomy with the later phase of reorientation of state economic strategy and the usually slower growth that results as that autonomy is eroded” (pp. 1038–39). What we see taking the place of the state autonomy, where it can run the show—civically and economically—are increased competition and freedoms for the polity that should strengthen the economy and South Korea’s future in the process. Conclusion It is always difficult to predict how a country will do in the future. There are so many variables, both endogenous and exogenous, that play a role in any country’s fate—individual actors, foreign policy, the price of natural resources, government policy, the mood of the polity, wars, disease, population, education, and so forth. South Korea seems to have shorn up its civic policy in a way that should be desirable for those who consider themselves to be entrepreneurs. There is increased civil freedom. The market in Korea is slowly opening up. Foreign businesses are allowed to set up shop now more than at any time in the past. South Korea is trying to flex its muscles, to some small degree, in the international community, particularly with regard to economic planning, policy, and development. Perhaps the most significant change in South Korea is that authoritarian regimes seem to be a thing of the past. It is almost impossible to imagine South Korea’s slide back into antidemocratic/authoritarian rule. The result of the changes is that South Korea has one of the most technologically advanced and educated polities in the world. It now seems as if its government and economic policies are catching up. References Armstrong, C. K., ed. (2006). Korean Society: Civil Society, Democracy, and the State. New York: Routledge. Brazinsky, G. (2007). Nation Building in South Korea: Koreans, Americans, and the Making of Democracy. Chapel Hill: The University of North Carolina Press.

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Breen, M. (1998). The Koreans: Who They Are, What They Want, Where Their Future Lies. New York: St. Martin’s Press. Chang, J., and J. Halliday, (2006). Mao: The Unknown Story. New York: Anchor Books. Chung, Y. I. (2006). Korea under Siege, 1876–1945: Capital Formation and Economic Transformation. Oxford: Oxford University Press. ——— (2007). South Korea in the Fast Lane: Economic Development and Capital Formation. Oxford: Oxford University Press. Cumings, B. (2004). “Decoupled from History: North Korea in the Axis of Evil,” Inventing the Axis of Evil. New York: New Press. Retrieved from http:// catalogue..nla.gov.au/Record/3117746/Details?lookfor=author%3A%22Cumings %2C+Bruce%2C+1943-%22&max=14&offset=4. Detrio, T. (2002). Strategic Partners: South Korea and the United States. Honolulu: University Press of the Pacific. Farrell, D. (2006, January/February). “India Outsmarts China,” Foreign Policy 152: 30. Fehrenbach, T. R. (2001). This Kind of War: The Classical Korean War History. Potomac Books. Halberstam, D. (2007). The Coldest Winter: America and the Korean War. New York: Hyperion. Han, W. K. (1980). The History of Korea. Honolulu: East-West Center Press. Islam, I., and A. Chowdhury (2000). The Political Economy of East Asia: Post-Crisis Debate. Oxford: Oxford University Press. Jansen, M. B. (2000). The Making of Modern Japan. Cambridge: Harvard University Press. Kim, B. K. (1998). “Korea’s Crisis of Success,” Democracy in East Asia, ed. L. Diamond and M. F. Plattner, pp. 113–32. Baltimore: Johns Hopkins University Press. Kim, D. K. (2005). The History of Korea. Santa Barbara, CA: Greenwood Press. Kim, E. M., ed. (1999). The Four Asian Tigers: Economic Development and the Global Political Economy. New York: Academic Press. Kim, S. H. (2000). The Politics of Democratization in Korea: The Role of Civil Society. Pittsburgh: University of Pittsburgh Press. Kim, S. S. (2003). Korea’s Democratization. Cambridge: Cambridge University Press. Kim, T. J. (2007, September 26). “Transparency International Says Korea’s Corruption Worsens,” Korean Times, retrieved from http://www.koreatimes. co.kr/www/news/include/print.asp?newsIdx=10820. Lee, B. C. (2005). Developmental Dictatorship and the Park Chung-Hee Era: The Shaping of Modernity in the Republic of Korea. Seoul: Homa and Sekey Books. Meyer, M. W. (1993). Japan: A Concise History. Lanham: Rowman and Littlefield. Minns, J. (2001). “Of Miracles and Models: The Rise and Decline of the Developmental State in South Korea.” Third World Quarterly 22, no. 6: 1025–43. Oberdorfer, D. (2001). The Two Koreas: A Contemporary History. New York: Basic Books. Pratt, K. (2007) Everlasting Flower: A History of Korea. London: Reaktion Books.

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Przeworski, A., M. E. Alvarez, J. A. Cheibub, and F. Limongi (1990). Democracy and Development: Political Institutions and Well-Being in the World, 1950–1990. Cambridge: Cambridge University Press. Song, B. N. (1994). The Rise of the Korean Economy. Oxford: Oxford University Press. World Bank (1993). The East Asian Miracle: Economic Growth and Public Policy. New York: Oxford University Press.

2

Korea Inc.: Building Pre-Entrepreneurship in Korea T. Youn-ja Shim (Theresa Y. Shim)

Introduction Over the centuries, researchers, especially from Western academia, have studied business entrepreneurs extensively. They have analyzed their purposes in action, in risk taking, and in growth. They have explored the entrepreneur’s “personal-value orientation” and “internal locus of control” and searched for clues to explain the entrepreneur’s propensity to seek out opportunities (Bornstein, 2007, p. 92). Business entrepreneurs and the conditions they thrive in have been thoroughly studied, including how their purpose and talents have been nurtured by Western value systems of capitalistic individualism, their social environment, government policies, and a wide range of business institutions. The conceptualization of entrepreneurship, however, is a product of reified or inertial values, customs, and the social environment in which the entrepreneurs are living. With this view, we need to pay more attention to entrepreneurs from the other side of the world (i.e., the East) and their orientation when we take into account the new rising economic powers, such as China, Japan, and Korea. These countries adopted Western capitalism based on their existing frame of reference, which was a government-led and export-focused economic system, not only during their countries’ economic modernization but also in their recent success of wealth creation. Klein and Cukier recently pointed out that the economic transformation of Asia counts as one of the most phenomenal developments of the

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twentieth century. In the 1960s, South Korea’s GDP matched Sudan’s, and Taiwan’s was about equal to that of the soon-to-be-independent Belgian Congo. By the 1990s, both Asian countries boasted living standards that rivaled those in the West (2009, p. 10). It seems that China and Japan will be the second and third largest economies in 2010, and some have predicted that China will overtake the United States in 2020. This chapter attempts to portray some of the political and cultural understandings that created a push-and-pull relationship between the political leader President Park Chung-Hee (1916–1979) and the first generation of entrepreneurs in making choices and taking action during the early economic development and industrialization of South Korea. The chapter is organized as follows: the first part provides the background and behind-the-scenes stories that had an impact on the creation and operation of “Korea Inc.” by a strong leader—President Park. It explains how Park utilized the Confucian value of respecting hierarchy/authority to create and execute the unique economic development model that served to bring together his collective energies and that of the early entrepreneurs, and then to bring together these entrepreneurs and civil society to achieve the needs of the country at that time. It goes on to show how Park’s selection of technocrats—mostly American-educated—for important posts impacted the motivation of the citizens to devote themselves to education as a means of achieving a longedfor “social status.” The second part of this chapter tells the story of how two visionaries, President Park and Chung Ju-young, one of the early industrial entrepreneurs and the founder of the Hyundai Group, worked together to achieve many of Park’s planned goals for Korea Inc. Value Systems and Entrepreneurship Confucian cultural values such as self-reliance, respect for hierarchy, and devotion to education are often recognized as the key to the economic success of the original Asian Tigers—Japan, Korea, Taiwan, Hong Kong, and Singapore—which are all countries steeped in Confucian values (Schuman, 2009). At the same time, we also recognize that each of these countries transformed those Confucian values differently based on their interpretation of their political and cultural systems in response to their needs. For example, in Korea, credit needs to be given to President Park and his ability to articulate the meaningful common threads that both citizens and entrepreneurs could identify as common goals that needed to be accomplished. The Confucian value of “respecting hierarchy/authority,” however, has played an important role in the execution of economic modernization plans. And this value continued to be an essential element

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of Korean business practices even until the late 1990s (Shim, Kim, and Martin, 2008). The system of politics—the government-led economic development model of partnering between political strongmen and entrepreneurs— should not be discounted (Schuman, 2009). Asian governments, following the early Japanese economic development model of the role of state planners, have often selected industries that will contribute to the nation’s export-led economy. Korea was no exception in following this path and adopted the Asian model of capitalism with a government- and export-led economic development model. We can see, however, that Korea designed a unique economic development plan and was open to adapting policies. When we consider the close nurturing relationship between the entrepreneur’s orientation and his creation of values, and government policies and the social environment, it is important to reflect how early entrepreneurs, those who were shaped by a traditional value system of “respecting hierarchy” and whose country has imported and adopted capitalism in the process of economic modernization, have shaped and transformed their orientation and the purpose of entrepreneurship, sometimes for a collectivistic purpose and sometimes for personal gain. Just as culture and environment differentiate the practice and process of doing business, so too the opportunities to become an entrepreneur often differ in collectivistic and individualistic societies and also differ with relation to the time in which the entrepreneur lived. For example, one way of becoming an entrepreneur in Korea in the 1960s was often through responding to the nation’s collective goal of modernization. But, as Western capitalism and individualism matured in Korean society, we see a gradual tendency among entrepreneurs to move from market-driven personal motivation to efforts toward the collective good of the nation. Especially after the 1997 economic crisis and in the process of the IMF bailout implementation, there were fundamental business paradigm shifts, such as from lifetime employment to performance-based employment, from working for a big chaebol to a job with personal control and freedom, independence, and self-ownership. The fast-growing and changing technology of recent years also opened doors for young entrepreneurs to tap into this evolving market to explore their innovative ideas (Interview: Man-Lip Choi). Creative entrepreneurs from the younger generation have risen as a new prestigious social class while also enjoying freedom in their career choices (Shim, Kim, and Martin, 2008). As a consequence, we can identify common traits in these young Korean entrepreneurs that Western scholars have recognized in entrepreneurs, such as creating values in the marketplace, creativity, and innovation.

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Korea Inc. and CEO Park Chung-Hee It is hard to deny that a country’s president reflects the core of the identity of the country and the spirit of his or her time as well as being a public figure who steers the course of history during his or her tenure. There are different evaluations of President Park Chung-Hee, and some see him as a dictator, leader, or general. His name, however, comes up whenever Korea faces economic hardships, such as Korea’s need to borrow money from the IMF or IRRD (Hong, 2005), or when the Koreans are looking for a national leader during presidential campaigns. No Korean wants to recall the dark age of military dictatorship, but ironically, they remember Park as a symbol of a strong leader who saved the country from poverty with vision, hope, and sacrifice with his dictatorship (Hong, 2005; Schuman, 2009). Reflecting on Korean history, especially from 1961 to 1979 when President Park was in power, the image of a strong-willed leader embodied by President Park was a product of the cultural and political landscape of the Confucian authoritarian relationships between superior and subordinates that Koreans have lived with for centuries, resulting in their deep respect for authority/hierarchy. Park is remembered for his ideology of leadership, his firm conviction and his unswerving will and commitment to achievement, and eventually for managing the Republic of Korea as a corporation, Korea Inc. (Hong, 2005; Schuman, 2009). During Park’s regime, the average Korean salary increased by 12 times the original amount, the GNP of Korea Inc. rose by 166 points, and Korea became the seventeenth largest economy in the world from being the seventy-second (Hong, 2005). However, President Park, according to his personal barber, lived a most humble life (The Maeil Kyungje Shinmun, 1977). The collar of his undershirt was worn out, and his shirt even had several small holes, and he wore his belt until the belt hole became so big that even a pencil could go through the hole (Hong, 2005, p. 258). It will be helpful to understand the philosophy behind Park’s blueprint of Korea Inc. and his plan to establish an “export-led economy” to meet the nation’s need. It will also be interesting to consider how pre-entrepreneurs (who are now chaebol leaders) and citizens perceived and responded to his leadership and authority in a cultural context. In 1997, the annual average per capita income for Koreans passed the $10,000 mark, but when President Park came to power in 1961 through a military coup, it was only $82.00 (Hong, 2005; Interview: Chu Young Lee), making Korea one of the poorest countries on earth. It had no natural resources, and while 80 percent of the Korean economy depended on agriculture and their main food supply was rice, 75 percent of the land was mountainous and unsuitable for farming. And due to the climate and the lack of scientific knowledge, Korea harvested only one

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crop a year, which drove the people to extreme poverty. As a consequence, Koreans have suffered from a shortage of food for centuries. The season from February to June, when barley thrashing comes to an end, saw a great number of farmer families subsist on grass and tree bark. They lived at a starvation level, and newspapers frequently reported family suicides with large headlines. The period from rice transplanting to barley thrashing was called the “barley fast” or spring famine, until the rice was harvested in the fall. The 36 years of Japanese colonization in the early twentieth century followed by the Korean War also took away any opportunity the Koreans might have had for self-sufficiency. Park understood the pains of the spring famine as much as anyone as he came from a poor farmer family, and he understood that the nation had to respond to these urgent needs and develop a society with a policy of equal welfare. He believed that the government had to initiate concrete economic plans and actions as well as lead a modernization process with spiritual aspects (The Maeil Kyungje Shinmun, 1997). His approach to modernization was holistic; on the one hand, he developed several stages of the five-year economic development plans for economic modernization, and on the other hand, he inaugurated the Sae-Ma-Ul movement (The New Village Movement) as a philosophy of self-help / self-motivation (The Maeil Kyungje Shinmun, 1977, pp. 58–60). Whenever he, his cabinet, and the pre-entrepreneurs who were directly involved in the Five-Year Economic Development Plans faced hardships, he urged them, “Do not betray our people,” or, “Let’s help our people cultivate confidence with ‘We too can do it.’” The First Five-Year Economic Development Plan Park announced the first Five-Year Economic Development Plan (1962–1966) in order to cast off backwardness and lay the foundation for a self-reliant national economy, to eradicate starvation so that all Koreans could afford three meals a day, and to develop basic infrastructure, such as electricity, telephones, and transportation systems. Originally an average annual growth rate of 7.1 percent was targeted, but the first Five-Year Plan achieved an average annual growth rate of 8.3 percent (The Maeil Kyungje Shinmun, 1977, p. 32). However, since the first Five-Year Plan was designed by military personnel who had participated in the coup with Park, the execution was not as smooth as they had planned. As a consequence, in 1963, the total national dollar reserves dropped to $93 million, and the government faced bankruptcy (Hong, 2005, p. 56). Park acknowledged that he and his administration with its military background had limited knowledge about economic development.

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Park had earlier formulated economic modernization plans, but he realized that he lacked knowledge on how to execute them. He invited two of Korea’s top businessmen to be executives of Korea Inc., Lee Byung-Chul, founder of the Samsung conglomerate group, and Chung Ju-Young, founder of the Hyundai conglomerate group, to utilize their business experience to implement his blueprint for the nation’s economic development. Before Park announced the first Five-Year Economic Development Plan, he met Lee Byung-Chul to get his advice. Lee was in Japan when the military coup of May 16, 1961, took place. Soon after Park took power, the Supreme Council for National Reconstruction announced a set of regulations aimed at cracking down on illicit wealth, and Lee was on a list of 11 people who had accumulated illicit wealth (The Maeil Kyungje Shinmun, 1977, p. 33). Eventually Lee decided to return to Korea and announced that he would turn in all of his accumulated wealth to the country. Soon after Park and Lee met, Lee submitted his plan for industrial development. He advised the president that the only way Korea could survive and develop a new economy was to borrow money from advanced countries such as the United States and Germany. In November of 1961, a group of businessmen headed by Lee Byung-Chul went to America to meet businessmen willing to provide loans for projects, such as factorybuilding. But American businessmen were hesitant to invest in Korea because they saw that there was little chance of Korea repaying the loans. However, the group of businessmen headed by Lee Chung-Lim who went to Germany were able to contact several of the world leading companies, such as Demag, Krupp, and Siemens, and they succeeded in getting loans from Germany for $25 million. The Ministry of Commerce soon got another loan from Germany for $37 million. These two foreign funds made it possible for Korea Inc. to start industrializing the Korean economy (Hong, 2005). This was also the birth of the close relationship between government and civil society, a prime example being the chaebols, in the process of the nation’s economic development and projects. The main goal of the first Five-Year Economic Development Plan was to establish the basic infrastructure of industrialization and to manufacture exportable products. The establishment of the Wool-san Industrial Complex was the first project Park had planned to achieve this goal. In early 1962, the government announced the blueprint of the Wool-san Industrial Complex, focusing on constructing a steel mill, electric plants, refineries, fertilizer plants, and the production of heavy machinery. In May of that year, the government received prospective investors from the United States headed by General Van Fleet who had led the UN forces during the Korean War. Behind the scenes was Lee Byung-Chul, who had initiated and facilitated their involvement in the Wool-san heavy chemical industrial

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complex. When the American investors arrived in Wool-san, they noticed there was nothing but empty sand fields and barley farms even though they had heard that the complex had already had a foundation-laying ceremony early in 1962. General Van Fleet persuaded the American businessmen to invest in Korea because of the reputation Koreans had for hard work, endurance, and sincerity. Delegations of Koreans emphasized the benefit of the Wool-san location, which was close to large cities that would provide an ample workforce and close to harbors that made shipping easy. On May 25, 1962, Lee Byung-Chul and General Van Fleet issued a joint statement announcing the American businessmen’s commitment to invest in the Wool-san industrial complex. Exports as the Lifeline Korea not only had a long history of suffering from poverty, but also had been mostly destroyed during the Korean War. After the war it had been divided along ideological lines into South and North with Western democracy and communism, respectively. Park was a dictator but showed that he had the welfare of the Korean people in mind through his commitment to his policies and his management skills (The Maeil Kyungje Shinmun, 1977, p. 48), not for his personal wealth or for his own career success (Hong, 2005). Park and his followers (cabinet members and businessmen) believed that developing an export industry was the only way that Korea could get out of poverty and become an independent nation. In order to access the international import and export markets, Park recognized the importance of joining the General Agreement of Tariff and Trade, GATT (The Maeil Kyungje Shinmun, 1977, p. 43). By becoming a member of GATT, Korea would be able to import and export duty-free and would have the same credit-payment method as GATT members. The problem was that Korea was, at that time, one of the poorest countries in the world, and it was not an easy task to get two thirds of the votes from the GATT member countries, which was a requirement to becoming a GATT member. The emergency task force team was sent to Geneva, Switzerland, where the GATT international conferences were held. The Korean delegations stayed in a very inexpensive hotel for five months to persuade and negotiate with members of the GATT. However, the Korean government was so poor that the task force team did not even have enough money to buy three meals a day, and it was not possible to approach the GATT members freely to establish networks without any money. Finally, the task force team asked the Korean government to send them money to develop social connections with the GATT members. After President Park heard this request from his aides, he told them to advance his salary and send it to the task

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force team—Korea was that poor. Funding had to be made available for the manufacture of export goods, but Korea could not even sustain itself even for a day without foreign assistance. The situation and capacity of the Korean business industries was no better than the government situation. Until the May 16 coup in 1961, there was no accurate census data to provide relevant information to establish plans and directions. In 1963, two years after the May 16 coup, the government held the first industry census since Korea was liberated from Japanese colonization after World War II. According to the census data, there were 18,297 manufacturing businesses, and among them, 229 manufacturers were relatively defined as big businesses, and 18,068 were categorized as medium and small businesses. However, the capacity and sales volume even of those 229 businesses that were defined as big businesses were not as competitive as the medium and small businesses in advanced countries (Hong, 2005, p. 46). There was some opposition to Park’s efforts to liberate the nation from poverty which were manifested in political games (The Maeil Kyungje Shinmun, 1977, p. 3); however, the desperate situation of the nation also provided an opportunity for Park to reposition himself as CEO of Korea Inc. To use the limited resources efficiently to achieve the collective common goal of a self-sufficient national economy (The Maeil Kyungje Shinmun, 1977, p. 51) and to rise from poverty, he handpicked and hired a few businessmen who would implement government plans and projects (Interview: Joanne Lee, Chun Sung-bin; Shim, Kim, and Martin 2008) as executives of Korea Inc. Park and his handpicked businessmen worked together with the dictum that “exports alone promise a way to economic self-reliance” and regarded “exports as the yardstick to measure the sum of our national strength” (The Maeil Kyungje Shinmun, 1977, p. 54). Not only were Park’s key cabinet members and his handpicked entrepreneurs, such as Lee Byung-Chul and Chung Ju-Young, committed to following the CEO’s orders, but the entire civil society also participated in the process of getting out of poverty at both the personal and national level either voluntarily or forcefully. Here are some stories in which we can witness how strong Park was as a leader and how his followers (and the citizens) contributed to the modernization of Korea, especially through exports. On May 11, 1964, Park appointed Park Choong-Hoon as the minister of commerce, but his actual responsibility was to serve as the executive director of enhancing and exercising export strategy. At his appointment ceremony, Park Choong-Hoon asked the president to be his commander in his assignment of enhancing the export industry and requested his support and encouragement. President Park in response asked his newly appointed minister of commerce what his export goal in dollars would be (Hong, 2005, pp. 63–67). For the president

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it was important to confirm and encourage the cabinet, businessmen, and the general public about the importance of “exports as the yardstick” (The Maeil Kyungje Shinmun, 1977, p. 54). Considering that the total exports of Korea in 1963 were $86 million, the Minister of Commerce made a commitment for an export goal of $100 million for 1964. He not only made his commitment to the president to meet the export goal of $100 million, but he also encouraged his staff and businesses to go for the target of $120 million. The commerce minister further declared that he would announce to the public that the goal of $100 million exports had been met by November 1964, one month before the deadline of December 31, and he pushed his staff and the Korean businesses who were involved in any way with exports, including dock laborers, to meet the goal by the end of November so that he could keep his promise to the president. On November 30, 1964, Korea finally made the goal of $100 million in exports, but there were only 30 days left to meet the extra goal of $20 million he and his staff had targeted internally. To meet just the $100 million goal, they had sold everything they could think of, for example, blankets and pig furs that would be needed for soldiers’ winter parkas, using the three months available until winter to manufacture new stock. Park Choong-Hoon demanded and encouraged his staff and all personnel who were involved in the export business to work seven days a week, and everybody was part of his effort to meet the $120 million export goal. Finally, at 10:00 p.m. on December 31, 1964, Park Choong-Hoon received a report that the total payment of exports in the amount of more than $120 million had been deposited to the proper accounts, and he reported this news to President Park who had also been waiting for his report late in the evening in his office. They met not only the goal but also showed 39.3 percent growth compared to the previous year. The number also helped to achieve the goal of the first Five-Year Economic Development Plan two years earlier than planned. There were 12 countries, including Korea, in 1964 that had $100 million in exports, such as Iceland, Guatemala, Costa Rica, and Tunisia. Later, in 1977, Korea exceeded $10 billion in exports, but the other 11 countries who had met the $100 million export goal earlier did not meet this higher goal (The Maeil Kyungje Shinmun, 1977, p. 67). The first Five-Year Economic Development Plan brought to Koreans the notion, “We can also do it!” and continued to be a source of energy, moving the Korean economy forward. The second Five-Year Economic Development Plan took ran from 1967 to 1971, followed by the third Five-Year Economic Development that ran from 1972 to 1976. Park not only controlled the nation’s projects and regulations, but was also directly involved in the execution of plans as CEO of Korea Inc. He handpicked

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ministers and technocrats, mostly scholars who had received their higher education in America, and businessmen who could carry out the projects, and he then ordered them to accomplish the nation’s goals for the modernization of the Korean economy by focusing on exports. Government ministers and businessmen not only followed his orders as executives for Korea Inc., but the people of Korea were also willing to sacrifice their self-interests to meet the common goal of getting out of poverty. Other contributors who were dedicated to the export-focus economy were young girls who worked at Gu-ro, an industrial complex located in a suburb of Seoul. In 1964, Park developed nine industrial complexes in or near Seoul, including Gu-ro, Bu-pyung, and Ju-an, to accelerate exports. Most of the workers in the assembly lines were young women, 15 or 16 years old, who had received only an elementary-school education. They came from farm families who had never received a formal education. They were some of the poorest people in Korea at that time. These young women used to live in shacks with five or six other workers and worked 13 to 14 hours a day. The major products of these factories were radios, wigs, nail cutters, lightbulbs, and textiles. With their labor, Korea was able to exceed its target of $100 million by $20 million dollars (The Maeil Kyungje Shinmun, 1977, p. 115). The migration of this population who worked in these industrial complexes, mostly for the chaebols’ companies, also influenced the urbanization of Korea. In 1967, Korea’s exports reached $300 million, and in 1970, finally beyond its dreams, exports exceeded $1 billion (Hong, 2005, p. 115; Kim, E. M., 2007). The historical event of earning $100 million in exports from nothing awakened the Koreans to the fact that they “could,” if they worked hard together. They then devoted themselves with this new spirit to the projects and plans President Park and his administration had planned. For example, 3,500 nurses and miners volunteered to work in Germany to earn foreign dollars. The reason Park sent them to Germany was because the Korean government had borrowed $30 million from the German government in 1962 and had not been able to repay the loan. To repay the debt the German government asked Park if Korea could send nurses and miners to work for them. Most Germans avoided working in the mines, and they were also short of nurses. Beginning in 1963 for 15 years after that, Korea sent 79,000 miners and over 10,000 nurses to Germany. Most of the miners who went to Germany were not professional miners, and many of them were college graduates. These Korean miners, nurses, and technicians brought Korea $120 million in foreign exchange (The Maeil Kyungje Shinmun, 1977, p. 75). But 65 miners, 44 nurses, and 8 technicians lost their lives and were not able to return to their homeland and to their families.

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Another price Koreans paid for economic development and the nation’s welfare was the dispatch of Korean soldiers to the Vietnam War. In 1964, President Park received a request from President Johnson to build a hospital in Vietnam and then to send tae-kwon-do instructors, and finally, to send soldiers to help the Americans who were facing difficulties in the war. Park’s two major concerns were casualties and financial support. The debate about sending Korean forces went on among cabinet members and civil society, but in the end it was decided to dispatch soldiers taking into account the help received from America during the Korean War and America’s commitment to deliver armaments to the Korean army. He also knew his country was dependent on American aidas the one of the major resources for economic development, so it was impossible for him to say no. During the eight years and eight months that Korean soldiers were stationed in Vietnam, Korean companies, including Hyundai, Dai-rim construction, Kyung-nam enterprise, San-whan enterprise, Hanjin, and Boo-heung, were also willing to take risks to get business opportunities in Vietnam. For example, from 1965, the U.S. Army needed to build a base in Harbour City where their army supplies were docked, but most foreign companies from America, Australia, France, and Singapore were making difficult progress due to the dangers of the war. Hyundai took the job and finished it within an unexpectedly short time with only one ship. All of the Korean companies and enterprises who were actively working as construction companies and as suppliers for the U.S. Army earned more than $1 billion, and many of the companies later became conglomerates. Soldiers also sent $300 million home to their families. With that money, Korea was able to develop their defense forces and the heavy chemical industries. As a result, South Korea in 1976 finally had a defense equal to that of North Korea (Hong, 2005). But most of all, it was an opportunity for the modernization of Korean companies in terms of quality and resource management to meet the demands of the U.S. Army. During the Park era from 1961 to 1979, exports were stressed as the way to economic self-reliance. There is no doubt that an export-focused economy has contributed to Korea’s current position among the top ten economies worldwide; ironically, however, Park’s direction that “exports alone are a means to achieve a nation’s economic strength” has hindered Koreans from understanding the globalization process as a two-way street: exporting goods also includes providing deregulation for foreigners to invest in and to share in the Korean market (Interview: Jo Anne Lee; Interview: Lee Sang-Hyun). As a result, Korean businesses, in general, have long been reluctant to outsource (Interview: Lee Sang-Hyun), and they have difficulty in compromising (Interview: Choi Man-Lip).

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Another unfortunate Korean business practice until the 1997 Asian economic crisis was businesses borrowing money “as much money as possible” without considering their repayment capacity. When loans were not available from banks, the businesses often expected government subsidies, which were considered free money, or they sought private loans, which in most cases had interest rates two or three times higher than the bank rates. From the beginning of economic modernization in the 1960s and 1970s, the government relied on foreign loans for economic development, which the government then allocated to the governmentplanned industries and to selected businessmen to carry out their projects. But there was no adequate process for the repayment of such loans. The government also distributed funds to banks so they could provide loans to certain businesses for their specific purposes or plans, but the borrowers paid little attention to their capacity for repayment. Dr. Nam Duck-Woo, one of Korea’s best-known economists, who contributed so much to the establishment of today’s modern Korean economy, remarked after his appointment as Minister of Finance in 1969, “As a professor of economics I taught that higher interest rates discourage loans, but this principle is not practiced in Korea.” The indiscreet business practice of borrowing “as much money as possible” without considering the repayment capacity also contributed to the focus on chaebols as the foundation of the Korean economic development infrastructure, and as a consequence, to the rise, or sometimes fall, of the chaebol groups during the 1997 financial crisis. Park’s government-led economic development plans that provided direct financial assistance to the nation’s projects have been loosened but are still noticeable today in the Korean government business-development plans, such as in the selection of industries it wishes to promote. Whenever a new president takes power, the industries being promoted and focused on will also change, following by the government’s direct involvement in providing assistance with financial burdens, especially for middle and small businesses and even for entrepreneurs. For example, Kim Dae-Joong’s presidential term (1998–2003), saw the need for promoting content businesses, especially in the technology and media industries. In 2001, the KOCCA (Korea Culture and Contents Agency) was established to develop and promote the culture industry and to assist it in responding to the rise of communication devices and the importance of the role of media products in promoting culture and lifestyles in the new globalization era. As a result, we saw the rise of young entrepreneurs who opened doors in social media enterprises, such as Cyworld, which opened in 1999 and grew at an unbelievable rate so that in February 2005 they were able to attract 13 million members (Shim, Kim, and Martin, 2008, p. 126). The next president, Noh Moo-Hyun, who was elected through an Internet campaign targeted

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at the younger generation who had grown up with computers, continued Kim Dae Joong’s efforts and expanded the promotion of content businesses, especially in the entertainment industries and Internet businesses. KOCCA soon started to provide free-of-charge domestic and overseas training programs for professionals working in the media industry, especially, movies, television, music, games, and the mobile industries. The agency selected participants for the programs. They provided and have been providing entrepreneurs and artists with financial assistance, including expenses involved in R & D related to business development in these areas. Another example of government involvement occurred in late 2008, following the rising popularity of Korean cuisine among foreigners in the global market places, when the Korean government announced “an effort to make Korean one of the world’s most famous cuisines-and increase export opportunities for the country.” The move included encouraging the renovation of Korean restaurants overseas by making low-interest loans available to restaurant owners and paying consultants’ fees (Chung, J., 2009). As a consequence, when Koreans face economic difficulties, business owners and entrepreneurs often expect the government to lead economic development and look for government funding to initiate new businesses (Interview: Jo Anne Lee; Interview: Lee Sang-Hoon). Philosophy of Self-Help (p. 58–60): Sae-Ma-Ul Undong (New Community Movement) The unswerving devotion of President Park to the development of the nation during his regime of 18 years springs not only from the awareness that “we ought to do it,” but also from the conviction that “we can do it too,” as advanced countries had. The start up of the Sae-ma-ul Undong (The New Community Movement) and the administration reform drive since 1970 reflected his belief in the importance of self awareness and in the philosophy of self-help. In Park’s perspective, the Korean people were endowed with a vast potential and refulgent wisdom, but such potential and wisdom was often subdued and not put to best use because of a long history of persecution by neighboring countries and starvation (The Maeil Kyungje Shinmun, 1977, p. 87). Park as president and CEO believed in the need to press and guide people into a spiritual revolution, and he tried to translate the spirit of the May 16, 1961, revolution into action through Sa-ma-ul Undong. With reinforcement from the Korean cultural heritage of Confucian collectivism, he emphasized the importance of eliminating self-centered thinking in the road to economic development for the sake of the country’s future. Also by practicing Confucian authoritarianism, he also demanded the sacrifice of self interest for economic self-reliance both

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on the community and national level. Park addressed a conference of provincial governors in March 1972: “We must eliminate once and for all an extremely self-seeking way of thinking that I have to live well regardless of what may happen to others. There is no one who can live well if the nation falls” (The Maeil Kyungje Shinmun, 1977, p. 88). Another statement that he made underlining his commitment to a spiritual revolution and social justice can be found in an admonition addressed primarily to students and opposition circles bent on demonstrations and to public officials accused of irregularities. There still remains much to be cleared and renovated. We should not stop halfway and relapse into the old state. The battle against irregularities should be carried on until they are completely uprooted. (Park, 1977)

Originally, regional community development was initiated by advanced countries acknowledging the need for community development in the economic development of third world countries. The UN is the leading organization worldwide involved in this movement. England had earlier developed this type of program for the improvement of local economies in their colonies in Africa. Before the UN adopted these programs, the Ford Foundation in America supported such programs passionately, and America used this concept for local communities of Native American Indians and African Americans. In 1958, a local community-development program was adopted in Korea at the suggestion of United States Operations Mission (USOM), focusing on the economic development of farming villages, but the result was not significant because it was designed without considering local ways of thinking and the cultural background (Kim, Y. M., 2003, p. 14). For example, even though agriculture was the main economy in Korea until the May 16 revolution, most intellectuals and educated people avoided farming for a living, in part because of their desire to secure better opportunities for their children’s education in big cities (preferably in Seoul, the capital), and as a consequence, to achieve a higher social status. As a result, there was a shift of the population to the large cities, especially to the capital city, making it difficult to identify potential leaders, change agents, or other related human resources from the farming areas. The common purpose of local community-development programs is to help the community identify local human resources and the availability of local and outside financial resources that they might utilize for improving the standard of living and also for developing innovative thinking and leadership. Hence, this program was developed to focus on teaching locals how to improve local economic development by identifying environmental

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conditions and financial resources. Since the common goal of the local group is to improve the local economic status, locals should have enough human resources and also be able to identify financial resources or receive financial support from international and national government funds distributed to the local community. This program was also designed to satisfy the needs or the purposes of financial providers, so the local community had to achieve financial independence in order to pursue the next projects and not continue to depend on financial support from outsiders. Hence, community development involves understanding the local cultures and social systems if its ultimate goal is economic independence of the local community. Park’s community-development program was a little different from Korea’s previous program from USOM. Korea had just become independent in 1945 from 36 years of Japanese colonization, and the country was ruined completely during the three years of the Korean War up until 1953. The Sae-ma-ul movement focused on “self-reliance” for exterior environmental improvement for the development of the common good that required collective group efforts and work, such as improvement of roads, restructuring banks, improvement of the public water system, construction of community centers, and playgrounds, and replacing straw-thatched roofs with tiles. Therefore, Park’s motivation for “self-reliance” emphasized group conformity rather than individual independence or success. Korea was known as the most Confucian country in Asia until the late twentieth century, and Confucian values of authoritarianism, hard work, accepting the inequality of power distribution, sacrificing the self for the collective good, and respecting seniority were widely accepted (Pye, 1985; Shim, Kim, and Martin, 2008). Traditionally, three farming villages formed one local community, the local community leader was elected by seniority, and the people did not complain about providing group labor (Kim, Y. M., 2003, p. 42). However, in certain places where the traditional community-leader system was practiced, the local government made new laws in which those who did not participate in community projects would be fined. Korea is now no longer under a centralized political system, but a provincial system in which the citizens enjoy their independence from the central government and their competition with other provinces. It seemed that Park’s Sae-ma-ul movement contributed to the transformation of the Korean political system to a certain degree from a central system to the current provincial system. Park was determined to set an example that Heaven helps those who help themselves, and tasks were performed under such catchphrases as “Increased Production, and Export and Construction (1965),” “Year of Hard Work (1966),” “Year of Progress (1967),” “Fight While Working, Working While Fighting (1968),” and “National Defense on the one Hand; Construction on

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the other (1970).” These expressions point to the main goal of the year (The Maeil Kyungje Shinmun, 1977, p. 62). However, it is also interesting to note that people throughout the nation accepted Park as a figure with the Confucian notions of power and authority, and followed his orders. The nature of power differs profoundly from culture to culture (Pye, 1985; Shim, Kim, and Martin, 2008). Pye (1985) maintains: Of all social phenomena, power is one of the most sensitive to cultural nuances; its potentialities and its limitations are always constrained by time and place . . . so the phenomenon of power cannot be understand without to the cultural context within which it exists. (Preface VIII).

Until late in the twentieth century, in accordance with the notion of power as something achieved and thus deserved, it was believed in Confucian societies that the government should be ruled not so much by laws as by superior men, defined by certain personal status (and often by certain features of personality), who then defined and expanded their roles as political rulers, and whom the people accepted as political leaders and identified them with the state system (Pye, 1985; Shim, Kim, and Martin, 2008). Park was firmly convinced that the sae-ma-ul movement should be established as a spiritual revolution and as motivation for social justice in order to achieve national prosperity and equality of social welfare, hence independent provincial economies would be the foundation of the nation’s future prosperity. The sae-ma-ul movement was first proposed in April 1970 to carry out in earnest a movement to develop rural villages into new communities. As years passed, the movement grew to cover every nook and corner of the country. Based on “self-help, self-reliance, and cooperation,” the movement was one that pursued an affluent life as well as “practical philosophy for modernization.” Ultimately, it grew into “a pan-national movement for a great leap forward for the modernization and unification of the fatherland” (The Maeil Kyungje Shinmun, 1977, p. 36). In the initial years, the movement placed priority on the development of farming and fishing villages, but later, it gradually spread to urban areas and industrial plants and at the same time was being sublimated into a spiritual movement. This can be evaluated as an epoch-making national movement (The Maeil Kyungje Shinmun, 1977, p. 36). The image of a strong-willed leader, as shown by Park, is a product of the accord between the beliefs of self-help, “we, as a group, can do it,” and “Heaven helps those who help themselves.” President Park’s advocacy of self-help was widely accepted and upheld as the only way to make the

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country a welfare state. It thus was the cornerstone upon which Park’s entire philosophy stood. “If we go to work armed with a strong commitment to self-reliance and unyielding courage, if we save what we have, produce more and more, then we will be able to make up the leeway of the last 20 years” (The Maeil Kyungje Shinmun, 1977, p. 58). Park’s promise and assurance as leader liberated the people from the shackles of poverty and accelerated modernization by liberating the people from the fetters of backwardness, but he said it should be done by “we” and be based on the Korean cultural traditions of collectivism and conformity. Industrial Entrepreneur: Chung Ju-Young and His Vision All start-up businessmen can not be entrepreneurs, and all business owners do not engage in entrepreneurship. Entrepreneurs create values in the marketplace or in society with creativity and innovation. Entrepreneurs are not satisfied with the current status or products they see in the markets and have a strong desire to create and to renew the values of the products and markets and, ultimately, to provide satisfaction to consumers or to society as a whole. Many scholars have defined entrepreneurs as sharing common traits of character: independence, a desire for self-achievement, and risk-taking (Chung, D. Y., 2007). Entrepreneurs see opportunities where others do not, and take action to make opportunities for new businesses by creating new infrastructures and identifying possible resources that are required in the process of achieving their goals. They have a strong belief in themselves, are self-disciplined, and enjoy their desire for creation and innovation that will lead to creative destruction (Chung, D. Y., 2007, p. 55). Here is the story of Chung Ju-Young, who was selected by The Times, November 2006, as one of the most distinguished entrepreneurs in Asia for the past 60 years. We can not only identify the traditional Confucian values in him from the beginning of his business practice, such as “respecting authority” and “hard work,” but we also continue to find the value-chain of entrepreneurship, such as, risk-taking innovation and creating value, through the history of the creation of the Hyundai conglomerate. Chung Ju-Young, founder and president (later CEO) of Hyundai, was born in 1915 as the first son of a poor farmer. He had six brothers and two sisters. He ran away from home four times, the first time when he was 16, with the dream of getting out of poverty and getting away from the responsibilities of being the first son. When he was 19 years old he ran away for the fourth and final time, and he worked as a dock worker and construction site laborer until he started his own business with a rice delivery store when he was 23. He learned Chinese from his grandfather, but the only formal education he received was in elementary school. He was influenced

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by Confucian education by his grandfather and by his parents who were diligent and hardworking. After the Korean War, he educated himself through his business experiences in construction projects with the U.S. Army and in running an auto repair shop. He saw opportunities to expand his vision and technical skills. Then, from 1965, his eyes opened and he aggressively bid on overseas construction projects. He became directly involved, first, in purchasing and developing construction equipment and materials, then, in directing construction projects like a general in wartime. He determined to complete every project undertaken before the deadline to save construction costs and to develop creditability for his company. Like other Korean conglomerates, Hyundai has always been owned by the Chung family. Looking back on the Korean economic system, the founders of the big businesses that became conglomerates were the pioneers of entrepreneurship in Korea. They saw business opportunities and used the traditional values of the family system as means to achieve them while working with the authorities. In the early Republic of Korea, especially, the relationship between business owners and employees was that of a collective family group who shared the same destiny. As a consequence, the traditional Confucian practice of authoritarianism was accepted as normal, and ownership and management were not clearly separated. Chung, as a person with a Confucian education, believed that his responsibility as the first son was in pursuing and protecting the prosperity of the family (Kim, Y. Y., and Han, K. A., 2008; Chung, D. Y., 2007). However, unlike most Koreans who had lived with a dream of getting scholarly status, he chose to chase his dream as a businessman in order to fulfill his family responsibilities. It was not hard to notice the fundamental qualities of an entrepreneur in Chung (Chung, D. Y., 2007). First, he refused to work for someone else; he wanted independence. He believed that no one else could advise him or provide him with business opportunities. He considered it dangerous to believe that any external power would help him for personal and business success. The only way one could grow was though one’s continued efforts and positive thinking. From an early age he labored as a dock worker, construction laborer, and rice deliverer. But he always thanked his parents for the lessons of diligence he learned from them, and he believed that it was this inheritance that helped get to where he did (Chung, D. Y., 2007, p. 260). Second, he had visions about markets and the ability to create new markets. There is a difference between one who has a vision and one who takes action on the vision. He had the drive to take risks to follow his vision and create new markets. He said that a business grows by creativity, not by power or external help (Chung, D. Y., 2007). From 1957 to 1965, he aggressively participated in bidding for construction projects for the

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American Eighth Army that had been stationed in South Korea after the Korean War. His company did major construction projects for the army and constructed runways for the air force, and then was the first Korean construction company to get bids from nations outside of Korea, such as Thailand, Vietnam, Guam, Alaska, Australia, Indonesia, and Papua New Guinea, from the late 1960s. He emphasized pioneering opportunities in overseas markets to his executives to promote exports supporting President Park’s efforts for the nation’s economic development. Another action Chung initiated was when he visited the Yokohama and Kobe shipbuilding yards and Kawasaki heavy industries in Japan. He realized that Korea needed to build shipyards in order to expand overseas construction, and he had them made. He became the founder of Korean heavy industries. Third, he had a strong sense of responsibility in keeping his promises and respecting contracts even when he lost money because of inflation and unexpected construction costs. He believed that time was gold, meeting the deadline he promised to clients was critical, and that self and businessdiscipline was essential. During his waking hours, he believed that time should be used for production, and he was the first person to arrive at the construction sites for the projects he directed. Fourth, he had a philosophy on the value and use of money. He said that the value of money was not “how much we have” but “how we use it” and “what we use it for.” From the beginning of his business career, when he was still young and his business had not yet become a conglomerate, he maintained a humble and simple lifestyle. His mother and his wife used to deliver simple homemade lunches to the construction workers until the late 1960s. He told his top managers to play tennis rather than golf in consideration of the cost of golf. He never smoked because he thought smoking cigarettes was an empty production of ashes. But he also said that when money is used where there is value and cause, the amount of spending for the value should not be calculated (Chung, D. Y., 2007, p. 261). In the 1970s, the Hyundai organization snowballed into becoming one of the major Korean conglomerates. The construction-focused business expanded into other major industries such as Hyundai Auto, the Ulsan shipyard, and Dan-yang Cement. Infrastructure and management teams had to change when they faced external environmental changes. The old management teams who were involved in the early days of Hyundai were replaced with young, talented executives. One of the most well known of those young executives was Lee Myung-bak who became president of the Republic of Korea in 2008. He also came from a very poor family and had worked for Hyundai and Chung Ju-Young when Hyundai was expanding its business overseas and becoming a conglomerate. President Lee

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described Chung’s character as persevering and innovative, with a pioneer spirit that was decisive, modest, and humble (p. 29). Lee went on to explain the relationship between Chung Ju-Young, the business owner, and his employees: “The boss just ordered his company executives what he wanted in terms of his business ideas and plans, and he demanded that they follow the boss,” reflecting his education in Confucianism and his top-down authoritarian management style (p. 26). “The relationship between business owner and employees was also rooted in uye-ri” (p. 27) and demanded ownership and loyalty to the owner and the owner’s company. Shim, Kim, and Martin (2008) explain uye-ri: The concept of uye-ri was derived from the Confucian tradition which stressed ethical behaviors and actions in government (Kim, S., 2003). According to Yum (1987), uye-ri can take on several related meanings: (1) justice, righteousness, and morality; (2) fulfilling obligations and remaining loyal/faithful; and (3) maintaining relationships that center around uye-ri (i.e., being responsible for keeping a relationship ethical and just). Uye-ri is not only required to be a lawful citizen, but it is also a prerequisite to be part of the Korean in-group—Uri (our). Honesty and loyalty are needed to form tight bonds between members of the in-group, especially between family members, friends, and co-workers. (p. 76)

At the same time, if Chung saw a person’s ability and commitment to the company, he often took a risk and promoted the young talent (Lee, 1995). In Korea, seniority was very important for human resources management, especially in the area of promotion. Chung continued to stay involved in human resources management directly and appointed young executives, sometimes without consideration of seniority in a company where promotion along seniority lines had been the common practice at that time. President Lee wrote in his autobiography that when working at Hyundai, he always thought he was the owner of the company, and company’s money was his money (p. 132). Lee recalled that Chung respected his sense of ownership, hard work, and passion in his work. Unfortunately, after Chung’s golden years from the Park regime to the late 1980s when his business kingdom expanded like a giant balloon, he was not able to see the need for changes in human resources management, and as a consequence, he continued to manage his company by controlling rather than seeking opportunities to capitalize on the individual abilities or potential of his employees or to educate them so that they could inherit his entrepreneurial philosophy while maintaining his family centered management style. Even after Hyundai became a global company, he used to love to refer to

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his company as “uri (our) Hyundai,” emphasized the community spirit of the Confucian family system, and maintained a centralized communication system centered on him as a commander-in-chief. Another Confucian influence on Chung’s business practice was his commitment to collective sacrifice for the nation. Here are two instances in which we can see Chung’s philosophy of serving his country in his response to President Park’s plans for the construction of the Kyung-boo freeway and the shipbuilding industry in Korea. President Park began planning the constructions of freeways in Korea when he was visiting America in 1964. It was the first time he had seen a modern freeway, and it made a deep impression on him. Then, during his visit to Germany in 1964, he was most interested in the autobahn. Fortunately, the head of protocol for his visit to Germany was an expert on freeway construction, and he presented Park with a map of the autobahn and its services. Soon after he returned from Germany, he studied the possibility of constructing the freeway that would connect Seoul with Pusan, located at the end of the Korean peninsula in the south. The freeway construction was actually part of the first Five-Year Economic Development Plan. In May 1967 he announced the construction plans for the Kyung-boo freeway and the reasons for its importance were as follows: (1) it would connect four provinces, Seoul, Kyung-gi, Choong-chung, and Kyung-sang, and improve the transportation system; (2) 81 percent of total domestic traffic was between Seoul and Pusan; (3) the road system between Seoul and Pusan at that time had reached the maximum limit to handle interstate commerce and traffic; and (4) this freeway would improve port facilities by connecting Korea’s two major harbors, Pusan and Inchon. However, construction plans were delayed because the cost was equal to the total Korean government budget for two years. Then the president called in Chung Ju-Young, president of Hyundai at the time, who had experience in constructing a freeway in Thailand. Park explained the need for the Kyung-boo freeway, and the two started to discuss how they could finish this project with the least cost within the shortest time. Since it was the first big government project and neither the ministry of finance, the ministry of construction, nor the office of the City of Seoul, had any ideas even on calculating the accurate cost of such a big construction project that was the first of its kind in Korea, so the calculations were between $18 and $68 million, and $38 million for Chung Ju-Young’s estimation. Eventually Park followed Chung Ju-Young’s estimate of $38 million and the final budget was $33 million (Chung, D. Y., 2007). The construction plan was divided into four sections from Seoul to Pusan, and four construction companies, Hyundai, Sam-whan, Dai-rim, and Sam-bu, were selected to construct each section.

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One of the best-known Korean social and cultural norms, the “Bal-li Bal-li (quick! quick!)” way of doing things, interestingly began during the construction of this freeway. It was a slogan Hyundai chose to use to encourage the construction workers. It was used successfully as a tool to save construction costs and boost the morale of the workers, and it was a response to authority and to the needs of the nation, even though the “Bal-li Bal-li” principle later became a hindrance for quality control in economic development plans and in the production process (Shim, Kim, and Martin, 2008). Hyundai was responsible for the section from Seoul to Osan. At the start of construction, Chung Ju-Young commuted by an old army jeep, and later stayed with construction workers in the field to conduct and direct the construction to meet the deadline the president had ordered. 75 percent of Korea is mountainous, so tunnels were necessary; some collapsed and new tunnels had to be made, and the costs were increased as well as the number of construction-worker deaths. For Chung, making money or saving on construction costs was not an issue, but meeting the deadline was. In order to finish the project “Bal-li bal-li,” Hyundai built a cement plant at the construction site that produced a quick-drying concrete. Hence, from the beginning of Park’s five-year plan for the country’s modernization process until now, bal-li bal-li has been used in meeting government deadlines for the completion of construction projects, from bridges and the subway system to the Inchon International Airport, and even more recently, in changing the national television broadcasting system from analog to digital. Sometimes speed was more important than attending to minor details involved that affected the quality of the work (Shim, Kim, and Martin, 2008, p. 22). On July 7, 1970, the 428 kilometer freeway was completed, two-and-ahalf years after the construction began. Nine million workers were involved, and 77 lost their lives. The total cost was only one-tenth of the cost of the Domai freeway in Japan. Park recognized the directors who were involved in this project with medals, citing their efforts and congratulating all of the participants at the opening ceremony for their accomplishment and commitment. A second example shows how President Park and Chung Ju-Young worked as a team to run Korea Inc., developing and creating a shipbuilding industry without any existing infrastructure, skills, or money. When Korea joined GATT in 1967, export opportunities became widely available. Although Korea had earlier focused on light industry for exports, Park understood that light industrials goods, such as textiles, shoes, and food, could be produced without major funding or skill but had their limits in earning dollars, so he wanted to develop heavy industries and

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electronics. The construction of a shipyard was his first interest because he saw the need to build ships for the following reasons: (1) they would be a means of defense against North Korea; (2) ship construction would create new jobs, which was the first priority since the unemployment rate was over 40 percent; (3) shipyard construction would also lead to subsidiary businesses such as shipping companies, steel mills, and other heavy industries. Hence, construction of a shipyard was the main project for the third Five-Year Economic Plan. Chung Ju-Young also had a plan to build a shipyard in 1971 during the second Five-Year Economic Plan and had purchased land in southern Korea for this purpose. He first visited Japanese shipyards to ask for technical support and funding, but they refused his request because of the lack of experience Korea had in entering this industry. Park invited Chung Ju-Young and asked him to develop the project with the vice prime minister. The first step for initiating construction was to identify sources of funding or get firm orders for the first ships. Chung contacted and visited the Barclays bank in England, and at first, they refused to consider funding because neither Korea nor Hyundai had any record of building a shipyard. Before Chung flew to England to visit Barclays, President Park had told him, “Do not return to Korea unless you have shipbuilding orders” (Interview: Chung Jae-kwon). When Chung visited the Barclays the second time, he explained that Korea had a record of building turtle shaped ships even in the early sixteenth century, and he showed the CEO the 500 won Korean note with a print of the turtle ship, the first iron-clad ship in the world. Chung then joked with the CEO of Barclays that he had just received a PhD from Oxford for a doctorate dissertation he had written on the blueprint for the construction of a shipyard. The CEO finally promised Chung a loan, but only if he was able to get orders for ships. Chung then met Aristotle Onassis’s brother-in-law in Greece, and received orders for two 260,000-ton ships. Rinobas told Chung that he was taking a gamble in ordering ships from him, but continued to say that he was investing in Chung’s risk-taking and self-drive, along with his strong sense of passion. Rinobas paid Chung 140 million won as a deposit. The order from Rinobas provided Hyundai a foundation on which to build what is now the world’s number one shipbuilding company. I started out primarily to examine how traditional cultural values influenced the development of Korea Inc. in the earlier stages of the nation’s modernization in the 1960s and 1970s. Considering the fact that Korea imported capitalism from the West, it is makes sense to look at the importance of cultural roles in this importing process, such as the Korean cultural understanding of what the government’s role is supposed to be, who owns and distributes the power to change, and the social environment

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that pushes one to achieve and, sometimes, to survive. It seems that the development of capitalism in Korea was transformed through the dialectical relationships between a strong leader, on the one hand, and the collective efforts and hard work of domestic entrepreneurs such as Chung Ju-young and the Korean citizens, on the other, to meet the needs of the country at that time. The self-awakening of the national consciousness that had been stressed during the Park era was reiterated to arouse a keener sense of mission. Industrialists and financiers entrusted with the “social instrumentality of enterprise” were called upon by President Park to “put public interest before private interest, practice thrift and industriousness, serve to fulfill social responsibilities before promoting individual benefits and maintain humility and dignity as community leaders” (The Maeil Kyungje Shinmun, 1977, p. 61). Ironically, most of Park’s handpicked businessmen, who were called upon to contribute their personal entrepreneurship to the nation’s common good, now became the heads of the mighty chaebols—the world-class family owned conglomerates. As a consequence, President Park’s intention to create a society with equal opportunities for all seemed to have ended with the ill-balanced class system between the rich and the poor and between growth and distribution that we now see in Korea today. Conclusion What has recently made Korea jump to the forefront of the global economy from being one of the poorest countries in the 1960s? As Schumann points out (2009), theories on economic development tend to leave out the human element. Perhaps the hardest thing for Americans to understand, when they see how fast Koreans (and East Asians as well) recovered from the 1997 financial crisis and now from the current global financial recession, is the attitude to overcome hardships at the collective level when the nation faces difficulties with a “we can do it together” spirit and the past experience of “the state has to lead.” Foreigners often say that the economic development achieved by Koreans during the modernization process was a miracle. We, however, believe it was not a miracle, but rather the fruit of the collective efforts and sacrifice of a strong leader and the Korean citizens (Lee, 1995; Schuman, 2009) during the 18 years of Park’s powerful administration. We need to pay attention to how both parties, President Park and the citizens of the Republic Korea, performed a miracle by running a country as a corporation and brought about a great turning point in history.

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References Amsden, A. H. (1989). Asia’s New Giant: South Korea and Late Industrialization. New York: Oxford University Press. Bornstein, D. (2007). How to Change the World: Social Entrepreneurs and the Power of New Ideas. New York: Oxford University Press. Chung, D. Y. (2007). Asan, Chung Joo-Young’s Gi-up-ga Jung-shin-gha Chang-up Jung-shin [Chung Joo-Young’s entrepreneurship and leadership]. Seoul, Korea: Samyoungsa. Chung, J. (2009, March 7). The New Hot Cuisine: Korean— Why Its Flavors are Cropping up Everywhere from Haute Cuisine to Fast Food. Wall Street Journal, p. W7. Chung, Y.-I. (2007). South Korea in the Fast Lane: Economic Development and Capital Formation. New York: Oxford University Press. Hong, H. S. (2005). Ju-sik-whe-sa Dai-han-min-kuk, CEO Park Chung Hee [Korea Inc., CEO Park Chung]. Seoul, Korea: Kukil Media. Kim, C. S. (2001). Moon-wha-reul Al-myun Kyung-young jul-ryak-I sun-da [Knowing culture values is the basis for management strategies]. Seoul, Korea: Ilchokak. ——— (2007). Kimchi and IT: Tradition and Transformation in Korea. Seoul, Korea: Ilchokak. Kim, E. M. (1997). Big Business, Strong State: Collusion and Conflict in South Korean Development, 1960–1990. Albany: State University of New York Press. ——— (1999). The Four Asian Tigers: Economic Development and the Global Political Economy. New York: Academic Press. Kim, S (2003). Korean cultural codes and communication. International Area Review 6: 93–114. Kim, S. H. (2007). Computer Euisa, Ahn Chul-Soo, Nei-goom-ae Mi-chu-ra [Computer Doctor, Ahn Chul-Soo, Following Your Dream]. Seoul, Korea: msdmedia. Kim, Y. Y., and K. A. Han (2008). Asan eui kum, Asan eui Passion, Sunggon-ul nun-eu [Asan’s Dream and Passion, Beyond Success]. Seoul, Korea: Miraechulpankiwhek. Kim, Y. M. (2003). Sae-ma-ul Woon-dong Youn-ku [New community Movement Research]. Seoul, Korea: Gohunchulpanbu. Klein, B. P., and K. N. Cukier (2009, July/August). Tamed Tigers, Distressed Dragon: How Export-Led Growth Derailed Asia’s Economies. Foreign Affairs, 88(4): 10. Lee, M. P. (1995). Sin-wha-neun upda [There is no miracle]. Seoul, Korea: Kimyoungsa. Park, C. H. (1977). Park Dae-tong-nyong Yondo Kija Whoegyon [New Year press conference, January 12, 1977 / President Park Chung-Hee]. Korea Policy Series, 30. Seoul: Korean Overseas Information Service. Pye, L. W. (1985). Asian Power and Politics: The Cultural Dimensions of Authority. Cambridge, MA: The Belknap Press of Harvard University Press.

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Schuman, M. (2009). The Miracle: The Epic Story of Asia’s Quest for Wealth. New York: Harper Collins. Shim, T., M-S. Kim, and J. N. Martin (2008). Changing Korea: Understanding Communication and Culture. New York: Peter Lang. The Maeil Kyungje Shinmun (1977). The Road to National Survival: Korean President Park Chung Hee’s Leadership Philosophy and Action Programs. Seoul, Korea: The Maeil Kyungje Shinmun.

Interviews Choi Man-Lip: First Korean exclusive agent and president of Korean branch, Fairchild. Chung Jae-kwon: President and CEO, Seoul Convention & Visitors Bureau. Chun Sung-bin: Former Dean, College of Business Administration, Sogang University. Joanne Lee: President, Star Communication. Lee Ju-Yong: Chairman, KCC Information & Communication. Lee Sang-Hyun: President and CEO, KCC Information & Communication.

3

The Infusion of American Entrepreneurship in the Early Republic of Korea T. Youn-ja Shim (Theresa Y. Shim)

Introduction We often hear how individualistic capitalism has influenced the rise of entrepreneurs in the twentieth century; and the core values or qualities of entrepreneurs, such as risk-taking, focus and discipline, self-drive, and an opportunistic mindset, are recognized not only among successful American entrepreneurs but also among entrepreneurs worldwide. However, we pay less attention to understanding how history and society influence the creation of entrepreneurs and how successful entrepreneurs react and respond to history and the social environment according to their perceptions of themselves in the cultural context. For example, in the 1960s and 1970s, when Korea had not been exposed to Western individualistic capitalism and Korean society was used to living with the Confucian value of the importance of group memberships, and when the nation shared the common goal and pressing need for economic modernization, we can identify a more conscious social and nationalistic approach to entrepreneurship even among the early American-educated Korean entrepreneurs. However, the young entrepreneurs of the late 1990s were more exposed to Western individualistic entrepreneurial values of independence, free choice, competition, and self-achievement as compared to those of the early Republic of Korea in the 1960s and 1970s when society demanded and valued highly educated technocrats and economists who could contribute to the nation’s economic development.

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This chapter will attempt to show how the Korean political and cultural environment, especially during the Korean economic modernization process, helped to develop a symbiotic relationship between the government and civil society, and the push-and-pull relationship between higher education and the nation’s economic development, ultimately influencing the development of nationalistic entrepreneurs as a new social class. It will go on to introduce who the American-educated Korean entrepreneurs were in the 1960s, and what an American education meant to Korean society at that time. Through the story of Lee Chu-Yong, who received his higher education from an American university and became an entrepreneur, we can identify the characteristics of early entrepreneurs in the Republic of Korea and reflect on the political and cultural environment they experienced in their pursuit of entrepreneurship. Lee was not only representative of the old bourgeoisie but also as someone who transformed the old bourgeois class to create a new rising class of self-motivated entrepreneurs. His entrepreneurship did not create innovative ideas or start anything new but was driven by self-confidence and passion in his belief that his education and work experience in the American computer industry could contribute to the nation’s economic modernization process, which did ultimately lead to the nation becoming one of the leading countries in the second industrial revolution that began with computers. The Rise of Technocrats as a New Social Class Most observers agree that Korea’s spectacular progress in modernization and economic growth since the Korean War were due largely to the Korean people’s age-old obsession with education by society as a whole and their willingness to invest a large amount of resources in education (Education in South Korea, n.d.). During the Lee dynasty, from the twelfth until the early nineteenth century, however, the door to formal education was limited to those who belonged to the higher scholarly classes in the traditional social caste system. This period was followed by 36 years of Japanese colonization (1910–1945) when Koreans were prohibited even to speak Korean in formal situations. The Japanese educational policy after 1910 was designed to turn Koreans into obedient colonial subjects and to teach them very limited technical skills (Education in South Korea, n.d.). Hence, the adult literacy rate was just at 22 percent in 1945, the year Korea was liberated from the Japanese. The literacy rate has continued to grow thereafter to 87.6 percent by 1970, 93 percent by the 1980s, and is now at 99.8 percent. According to a 2005 study of OECD member countries, some 97 percent of Korea’s young adults complete their high school education (ibid.), and most of them go on

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to either academic degrees in colleges/universities or occupational colleges (equivalent to community colleges in America). “The ever-increasing frenzy for education and the extent of Korean educational attainment are most evident in the number of doctoral degree holders. By 2001, Korea had a total of 90,983 doctoral degree holders—meaning almost 1 in 500 Koreans held doctorates” (South Korea: Educational System—overview, n.d.). Unlike America, where changes to the political system do not affect the role and power of the central government, which has always been strong due to its foundation on the distribution of power among the three branches of the federal government—the executive, the legislative, and the judiciary—Korea enjoys a provincial system, even though it is only half the size of California. Education has been controlled by a centralized Ministry of Education ever since the term of the first president of the Republic of Korea, Syngman Rhee (1948–1960). However, the systematic development of a centralized educational system began in the 1970s under the regime of President Park Chung-Hee. After his military coup of 1961, he repeatedly emphasized the importance of education for modernization. Park, as a former schoolteacher, realized that promoting education for human capital was as important as economic development. He also noted the shortage of technocrats and scientists, who would be necessary for the nation’s industrialization process. According to the 1964 survey the Park administration conducted to identify the number of graduates from elementary school who went to junior high school for the first time in Korean history, 301,323 of elementary school graduates, less than half of 617,554 nationwide, entered junior high school; the other half could not due to financial difficulties. President Park, who stressed education in accordance with Korean realities after the declaration of the state of national emergency on December 6, 1971, proposed “education based on national identity” at a meeting of education leaders for total security held on March 24, 1972 (The Maeil Kyungje Shinmun, 1977, pp. 34–35). Park keenly understood and took advantage of Korean society’s motivation and willingness to invest in education that came from an awareness of the importance of education inculcated from the Confucian value placed on scholarly status. Park first allocated resources to education during the economic development process, and the Ministry of Education became responsible for the administration of schools, setting enrollment quotas for all level of schools, the certification of schools and teachers, the approval for university presidents’ appointments, enforcing a national curriculum, and other basic policy decisions. By the 1980s, the Ministry was even able to spread resources far more evenly than how they were in the United States. With the central government’s direction and direct involvement, Korea was the first country in

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the world to provide high-speed Internet access for every primary, junior, and high school (Education in South Korea, n.d.). The result of Park’s promotion of education across the country was the hastening of the breakup of the traditional class/caste system that was an indicator of status. From the beginning of the economic modernization process, Park recruited technocrats and scientists who had received their education mostly in American universities for important government posts and government-affiliated agencies. American-educated scholars with PhDs were also guaranteed respected careers as professors. As a result, those highly educated technocrats and economists not only claimed much of the credit for Korea’s economic success, but they also formed the rising new social class made up of scientific professions, which were perceived as the most prestigious (Education in South Korea, n.d.). Some of those with entrepreneurial mindsets returned to their homeland with the knowledge they had gained from their Western education and to attempt American business practices at home. The traditional esteem for the educated man, originally accorded to the Confucian scholar as the cultured generalist, has now been extended to scientists and technocrats, and the pre-entrepreneurs. People became aware that social status was no longer inherited, and achieving higher education was the new means to getting government posts, jobs in universities, or in big companies, and that becoming a doctor or lawyer or an Americaneducated capitalistic pre-entrepreneur would bring about a change in their social class. Both government and individual household expenditures on education reflect the traditional esteem held for the educated person in Korean society. From the beginning, government expenditures on education have been generous even when Korea was poor. In 1975, it was 220 billion won, the equivalent of 2.2 percent of the GNP, or 13.9 percent of the total government expenditure. By 1986, education expenditures had reached 3.76 trillion won, or 4.5 percent of the GNP, and 27.3 percent of government budget allocations (Education in South Korea, n.d.). Korea R&D and higher-education spending as percentage of GDP is the highest in the world followed by the United States, then Japan, Germany, France, and Britain, according to the Organization of Economic Co-operation & Development. Individual households have also been willing to invest heavily in education, with most middle-class households allocating 25–35 percent of their total household income on their children’s after-school private education since the 1980s. Koreans in general have long believed that power and status can be achieved by education and hard work, and now, in a capitalistic society, also by wealth (Shim, Kim, and Martin, 2008). This notion has pushed the button that accelerated the education fever in Korea.

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The Koreans who went to America We can distinguish five groups of Koreans who went to America from the 1950s to the 1970s. The first group consisted of sons and daughters of ministers whose churches had established relationships with American churches that were willing to sponsor their children church youth leaders. Most of these families had originally come from North Korea where Christianity had been widely accepted from the early twentieth century. Most of the Christians who fled to South Korea after the Korean War went there for freedom to practice their religion and to escape Communist persecution. They valued Christianity and were longing to experience Western culture, but they also had lived with the Confucian traditions of hard work, self-reliance, and dedication to education. Since they had experienced what it was like to leave their homeland, their properties, and sometimes even their families, they had become very independent. Furthermore, although South Korea was still part of the North Korean’s country, it was not their home, and it was psychologically easier for them to leave South Korea and migrate to America compared to those whose roots were in Seoul, and who represented the traditional middle-class city and the capital. The second group was the so-called “elite,” who came mostly from the relatively well-off families and who had received an education from top-ranked schools and universities. These students came to America to pursue higher education and advanced degrees. In general, the ultimate goal of both these groups was to get advanced or doctorate degrees so that they could find teaching positions at the university level. Graduate and doctoral programs were not available in the 1960s in Korea, so getting an advanced degree from an American university was a ticket that guaranteed a university teaching position. Even though they generally came from either well-off families by Korean standards at the time or were children of Protestant missionaries, few could afford the relatively high tuition fees at U.S. universities. And although some received a monthly stipend from their families in Korea, who had to make considerable sacrifices in order to send money to their sons and daughters abroad, it was not enough to live on. Almost all of the students who were able to get scholarships from U.S. universities left for America with one-way airline tickets and without any funds they could count on. They depended on part-time jobs, such as washing dishes, waiting tables in restaurants, or picking oranges. Since Korean society had maintained social class distinctions between the merchants and the scholarly class for over five centuries, most of the students had never experienced blue-collar jobs, but their experience and expectation that status could be achieved by education motivated and

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encouraged these young elites to explore the new Western world of study and research, and they would later brag about the “work” and experience gained from their hardships. The third group was the families of the women who had married American soldiers or workers at the U.S. army camps during and after the Korean War. Unlike the group who migrated from North Korea, the public in general did not accept them socially even though they were born and raised in South Korea. Korea is a homogenous country, and intermarriage with foreigners, especially with GIs who were generally perceived as belonging to a lower class in America, was not acceptable. Most women who married American GIs at that time were more than marginal members of society; rather they simply did not exist within family circles, in-group memberships, and society as a whole. Korea as a traditionally collectivistic culture tends to make greater distinctions between ingroups and out-groups than other countries, and their boundaries with out-groups are firm because of the importance attached to relationships between the self and the in-group (Matsumoto, 2002), such as family and certain group memberships. The rigidity of these distinctions (Kohls, 2001, Shim, Kim, and Martin, 2008) is notable in Korean culture. As a consequence, belonging to a certain group or to a certain class provides an emotional security blanket. If a family member has committed something society perceives as “bad” or “wrong,” it was not only that member’s problem, but it was a problem for the whole family. So for members of this third group, America was a possible solution and an opportunity for a better life. At the same time, those Korean women, most of whom came from the poorest families in Korea, also shared the strong Confucian sense of taking care of the family’s collective welfare. After they settled in America, they started to invite their siblings and parents even though they were ostracized by the societal value system and suffered pressure from their in-laws. The fourth group includes most of the Koreans who came to America in the 1970s after the United States opened the door widely for immigrants. Many were siblings of those who came to study and had already settled in the country. They were invited by their siblings to join their family circles, but the greater motivation of most of the families who came to America at this time was to provide better opportunities for their children’s education that would not be hindered by after-school educational experiences in Korea. Such after-school programs were and are still voluntary in Korea, but social pressure and parents’ sense of duty to their children’s education have made them unavoidable. From the 1990s, after the Korean economy became prosperous, the desire of Koreans to immigrate to the United States dropped dramatically.

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The last group we mention here are parents with handicapped children. Until the late 1980s, there was no proper school system available for the disabled of any age in Korea because society as a whole did not accept anybody with physical disabilities in schools or workplaces, or even in marriage. Also, parents of disabled children were ashamed of having disabled children and often hid them as a family secret. When a family decided to send their disabled child to the United States, they often operated two households: the mother moved with her disabled child while the father remained in Korea. As described in a later chapter in this book, Sogang University was the first university to accept handicapped students in the early 1960s; one was a boy with the tip of his finger missing and the other was a crippled girl (Chang Young-Hee studied for a doctorate in English in the United States and returned to teach full time at Sogang and became a noted writer. When she passed away in 2009 with cancer, the whole country mourned). Early American-Educated Korean Pre-Entrepreneurs It was common for Korean students who had received a higher education in America in the 1950s, 1960s, and even in the early 1970s to hesitate to return to Korea. In the 1950s and early 1960s, there was a clear race discrimination against blacks in the United States, but it was less visible against Asians and against Koreans in general as most were students at universities or graduates. There were only a few Asians on American campuses, and their presence both on the campuses and in society was not as noticeable as it is today. From an American perspective, unlike the historical relationships between whites and blacks, Korean students were just outsiders who had recently suffered through the terrible Korean War and depended on American generosity. From the Korean students’ perspective, racism was outside the realm of the real world back home. Even though they had experienced being treated badly while working at restaurants, cleaning restrooms, or picking oranges or strawberries as part-time student workers, they were committed to overcoming their hardships because they believed that their education in America would open doors for them and their families by providing opportunities such as job security and perhaps a higher social status when they eventually return to Korea. They were also pushed by the pressure of their Korean cultural heritage of “responsibility” to their in-group members, especially to their parents who had sacrificed so much to send them to America. At the same time, Koreans studying in the United States saw no career opportunities to utilize their American education and saw no hope to maintain even the poverty-level lifestyle they had in America back home since the

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three-year Korean War (1950–1953) had destroyed much of the country and the country was so poor, its modernization process still in the early phases. Faced with these circumstances, many chose to stay in America to work, with the exception of two groups: those who had been offered teaching positions in Korea and the pre-entrepreneurs who saw market opportunities in Korea where they could use their work experience in American companies. Some 80 percent of Michigan University graduates in the 1960s, for example, returned to Korea. Some wanted to fulfill their responsibility toward their family for the sacrifices made; some saw opportunities to contribute their American education to the country’s modernization or to Korean higher education; and some of these graduates who worked at American companies and had no immediate plans to return to Korea faced unfair business practices, such as the glass ceiling in promotional practices, even with a proven record of competitive ability compared to Americans (Lee, 2007), which pushed them to look for entrepreneurial opportunities in Korea. English proficiency also could have been a hindrance to their pursuing careers in America. “Language is, as Potter and Linton (1985) have put it, constitutive of what it represents. Our words act to represent things in our worlds, albeit not directly, and in that representing actually bring the ‘things’ about” (Penman, 1994, p. 18). Hence, it often represents cultural lifestyles. There is a significant difference between speaking English and understanding a conversation in context. Chu-Yong Lee (interviewed) said that he had been able to memorize whole textbooks, and Man-Lip Choi (interviewed) and Andre Minn (interviewed) said the same. Speaking comprehensive English in context, however, was not easy for them because their lives and social experiences in America were so different from what they had been in Korea. Hence, even surviving as a waiter was not easy because they were not familiar with varieties of food and the cooking methods, such as differences in cooking eggs—scrambled, easy-over, sunny side-up, hard boiled, or poached! Compared to students who studied science or math, the hardships for students who studied liberal arts at that time were more than double (Lee, 2007, p. 73). The teaching method at that time in Korea, because of the influence of Japanese education during the 36-year Japanese colonization period, was lecture based, and students memorized their textbooks. In this context, students believed that authority (the teacher) should be correct and the textbook always had the right answer. They had no experience of applying their learning to various situations or presenting alternative answers based on their environment and life experiences. Hence, some Korean students studying in America, especially in the 1950s and 1960s, and even in the early 1970s, were charged with plagiarism. They made the mistake of copying other scholar’s claims that

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they had memorized when writing their essays or of copying excerpts from textbooks they had memorized when responding to questions that ask for explanations. From an American perspective, they could be seen as being dishonest, but from the perspective of Koreans who were accustomed to believing that “authority is right and has answers,” they were simply assuming that the answers of authors of textbooks were the right answers and that the authors were authority figures. They had no alternative way of thinking about presenting their own answers (Lee, 2007, p. 73). We can identify several common traits in Koreans who received an American education, especially in the ones who returned to Korea as professors or pre-entrepreneurs. First, they believed that they were representing Koreans and their family name, and they had a strong collectivistic pride. They studied hard and worked hard to “save face” for all Koreans and for their own families. In the 1950s and 1960s, there were very few Asian students on American campuses, and often there might have been only one Korean student (Lee, 2007, p. 33). A long history of living with a Confucian work ethic sometimes helped these students to get grades good enough to maintain their scholarships. Some professors acknowledged that they worked harder than other students, but added that their English skills prevented them from fully comprehending the class materials and suggested that they do extra work to make up for this shortcoming. Second, they built self-confidence through working at leading American companies and by competing with Americans, whose country was the super power in the international political scene and economy. They realized that they could compete with anyone if they could prove themselves and succeed in leading American companies. Third, advanced degrees from America and work experience at American companies brought these Koreans to the top of the social ladder in Korea. American-educated scholars were hired for important government posts or for teaching or administration at leading Korean universities. Some returned as expatriates for American companies, and others returned as exclusive agents for American products, and these were Korea’s preentrepreneurs. They saw opportunities for developing business by utilizing their label, “American-educated businessmen,” which also helped them to establish human networks and achieve their desired social status. Even through they were dispatched as company representatives to branch offices in Korea, their salaries were equivalent to the salaries of entry-level managers in the U.S. in most cases, which were high enough to put them into one of the richest groups in Korea. Some also received free rent and a company car with a driver. Since they received salaries in American dollars, they benefited from the highly fluctuating exchange rate for foreign

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currency. As a result of their economic status, they made top prospects for marriage matchmakers regardless of their family roots that had been so important in the old Confucian social system. Their proficiency in English also helped those with entrepreneurial minds to see opportunities for new business ventures. One of the most successful early woman entrepreneurs is Joanne Lee. While working at Cho-sun Hotel as the director of public relations after returning from America, she soon noticed that she was spending most of her time helping foreign hotel guests with secretarial work, such as arranging meetings and trips and helping with translations for business negotiations. When she notified the hotel of her intention to leave it to set up an office for these niche clients, the hotel realized that they also needed her as much as the hotel guests and provided space for her to run her own business while she continued to serve as the director of public relations. Fourth, these American-educated Koreans had the desire and the sense of obligation to respond to the nation’s collective goal for modernization. The common denominator of the Confucian-influenced countries is this sense of obligation , such as the obligation to country, to parents, to family name, to siblings, to in-groups, and to superiors. Unlike the younger generation in Korea today that has been raised with the values of capitalistic individualism, the American-educated students from the late 1950s to the 1970s strongly believed in and valued personal sacrifice for the nation’s collective good based on the Confucian philosophy of duty. We can identify the value of collectivism even in the grammar structure of the Korean language, which reflects the “we” culture. “I” is often skipped in a sentence, and based on the context of the sentence, an answer can be made without using “I.” A Story of a Pre-Entrepreneur: Lee Chu-Yong The story of Lee Chu-Yong is aimed at illustrating the consistency of the early Korean entrepreneurs in maintaining their social purpose and wealth creation even as their Korean cultural practices were being transformed by the influences of Western entrepreneurialism. Lee was one of the American-educated elites who became an entrepreneur. Korea had just begun to work on economic modernization, and American-educated preentrepreneurs were in demand everywhere, from government to academia to pre-chaebol groups. Instead of choosing a stable job such as teaching in a university, which was the most desirable position at that time for Koreans, Lee made the choice to be an independent entrepreneur. Lee was the founder and is now Chairman of KCC Information and Communication, but he is better known as the pioneer of access to

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information technology (IT) in Korea and for his contributions to the modernization of the Korean IT industries. He was not one of those preentrepreneurs handpicked by President Park during the modernization process, nor is his company known worldwide as a conglomerate like Samsung or Hyundai. All the same, in his story, one can identify an altruistic bent as he created culturally defined human networks meant to foster the common good, and one can also identify a singular ambition that translated in practical terms into abundant personal wealth. In Lee’s endeavors, we can also see the special qualities needed to become an entrepreneur within the perspective of Western scholars: risk-taking, self-discipline, independence, and passion for a cause. He can be classified as a social entrepreneur given that his mission represented “the first step in the process of developing discovered entrepreneurial opportunities into concrete social outcomes” (Dees, Emerson, and Economy, 2001). He initiated and helped to develop the computerization of various projects for the Korean government, such as the Kim-po airport entry, the election voting system, the railroad transportation ticketing system, the defense forces, the banking industry, the shipbuilding industry, the government IT systems, and the media industry. Further, his computerization projects provided access to educational resources for young Koreans, helping them to gain the technological know-how to lead Korea to the forefront of IT business and technological self-reliance in today’s fiercely competitive global market place. Since the computer industry was unknown to many Koreans until the 1960s and 1970s, only entrepreneurs like Lee, with his experience and knowledge of the benefits of the computer industry, had the prescience to see, and subsequently act upon, the opportunities he saw for Korea in the computer age. His early Korean upbringing and his experiences living and working abroad gained him entry to different cultural environments that undoubtedly helped him to see opportunities and become aware of the possibilities of applying his acquired knowledge to something different and socially significant (Dees, Emerson, and Economy, 2001, p. 73). Unlike President Park and Chung Ju-Young, Lee came from a relatively well-off bourgeois family and belonged to the elite class. He graduated from the prestigious Kyung-gi High School. Kyung-gi High School graduates were considered to be the brains in Korea until 1975, when the Korean government abolished the high school entry examinations. The dream of most Korean parents until that time was for their children to attend Kyung-gi High School (K) and Seoul National University (S) to achieve the “KS mark.” The KS mark guaranteed a graduate top job opportunities and the possibility of marrying into a prominent Korean family with all of the concomitant benefits of money, status, and connection. Moreover, the KS mark not only brought graduates membership into the elite/power

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circles of society in general, but it also brought the whole family a step up in their social status. The competitive environment among these Korean students in top-ranked high schools inured them to discipline and steeled their ambitions. After graduating from Kyung-gi High School, Lee was admitted to Seoul National University. However, Lee left Seoul National University prior to graduation and embarked upon a journey to America where he matriculated to Arkansas State University before finishing his undergraduate and graduate studies at the University of Michigan. Lee’s proficiency in English undoubtedly encouraged him to study in America. What is more, Lee’s proficiency in English was the exception rather than the rule in Korea during the 1950s and 1960s. Indeed, despite the fact that English was taught in the high schools, most high school students were not able to achieve even a fundamental verbal proficiency in English. Furthermore, Lee’s journey to America was also encouraged during the time he worked for the U.S. army as an interpreter during his high school days. This opportunity provided him the chance to get to know Lieutenant Cambridge, who helped him gain admission to American higher-education institutes. For Asians, in general, the name value and renown of a university holds more social value than its educational quality (Shim, Kim, and Martin, 2008). Korean parents, in particular, dreamed of having their children attend a well-known private university in the Eastern part of the United States, such as one of the Ivy League schools. From Korean parents’ value perspective, small liberal arts colleges and state universities did not bestow an acceptable level of social capital and, so, would not be accepted unless this were the only alternative. Lee’s parents were no exception, and they pushed their son to transfer to a bigger and more famous university. Lee’s first admittance to an American university was Haverford University, which was one of the colleges his advisor recommended. However, Lee’s father refused to let him attend Haverford since that he had never heard of it. Upon graduation from the University of Michigan, and notwithstanding the fact that he graduated in the top 20 percent of his class, Lee could not find gainful employment. Alternately, 95 percent of Lee’s graduating class was hired immediately upon graduation (Lee, 2007, p. 81). He approached his professor about his lack of employment prospects, and his professor recommended him to the Social Science Research Center where he was able to get a job as a computer operator and then programmer while he continued to attend graduate school. While Lee studied economics in university, his work at the Social Science Research Center provided a new direction to his career and was the incentive for his becoming a selfproclaimed computer missionary to Korea.

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Upon finishing graduate school, Lee was hired by IBM as the first Korean employee. His job responsibility was in program development for the diverse projects of companies IBM was involved with at the time: a milk company, the IRS, Pittsburgh Steel, and insurance companies. Brought up with the Confucian ethic of hard work and self-reliance, Lee was known to be hard working, efficient, productive, and a strict disciplinarian when it came to his responsibilities as a supervisor. In 1962, IBM asked him to work on a project in Denmark. He accepted the offer. He started to study the language, subleased his apartment to his friend, and even sold his car. Then, at the last minute, IBM cancelled the contract with the Danish government because there was a conflict between the government request and the availability of IBM’s human resources. The incident left Lee feeling indignant at the way the whole affair was handled. Indeed, the supervisor simply notified him that the project was cancelled, and Lee’s personal losses were never mentioned nor considered. Lee confronted his supervisor for what he considered an unfair practice and requested that his supervisor compensate him with a trip to Korea, all expenses paid. His supervisor at first hesitated because, as he said, he had no official reason to pay these expenses. Persevering, Lee told his supervisor that it was his job to take care of the matter. Lee was ready to defend his position now at all costs and especially in light of the fact that he had been rejected for promotion several times and had experienced inappropriate business conduct from this supervisor. Lee’s confrontation with his supervisor worked, and he received a one-month leave with pay in order to visit Korea. Little did Lee know, but his unplanned return to Korea would prove pivotal in catapulting his career in a new direction. When he visited Korea in 1962, he did not plan to leave IBM and return to Korea permanently. Rather, he was checking the possibilities of becoming the RCA exclusive agent in Korea so that he could respond to his father’s demand to return. In the 1960s and 1970s it was a wish for many Korean pre-entrepreneurs, and especially those who were American university graduates, to obtain an exclusive agency from a prominent American company because they saw opportunities to apply their American experience and knowledge to the Korean market. Further, such a placement would guarantee a financial safety net and social ladder. Hence, Lee contacted Professor Ackley, his former professor at Michigan who was working at the time for President Johnson’s administration, to check the possibility of his obtaining the exclusive agency for RCA computers. Professor Ackley’s recommendation made it possible for him to get the agency for RCA (Lee, 2007, p. 182). During his visit to Korea, he discovered, much to his chagrin, that the computer industry was only incipient in Korea. He realized that his plan

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to be the exclusive RCA agent was premature. To be sure, the Korean government offices were using the IBM key-punch system that was used during World War II by the America army. He saw the opportunity to bring IBM computers to Korea considering the size of the Korean army and President Park’s Five-Year Economic Plans. Instead of reporting this idea to his direct supervisor, Lee circumnavigated his marketing report directly to the CEO. With the assistance of a fellow University of Michigan alum, Lee prepared a letter explaining the potential of the Korean market. About two months later, he received a letter from the CEO informing him that the vice president in charge of the Pacific Rim area would be visiting Korea (Lee, 2007, pp. 118–20). During Lee’s visit to Korea his unfailing faith and unshakable confidence drove him to realize that he could bridge the gap between Korea and the Western world by helping Korea adopt new technology. He was the first representative of IBM in Korea for two years before he was called back to New York. However, he finally realized it was time to return to Korea to pursue his passion and utilize his experiences at IBM to ameliorate the Korean nation’s economic development. Furthermore, his stepping around his supervisor in order to write directly to the CEO about the need for IBM computers was perceived as insubordination by his supervisor. Lee’s unintentional breach of American business protocol seemed to have caused an irreparable breach, for in the wake of this supervisor being promoted, Lee was denied placement in his supervisor’s management position. Lee felt that he had reached the “glass ceiling.” To be sure, his challenges to his lack of promotion were summarily and routinely met with such excuses as his lack of English proficiency and with the intended disarming excuse that IBM needed his skills in the department and position that he currently held (Lee, 2007, pp. 176–78). Characteristics of Lee’s Social Entrepreneurship Success Some clear characteristics of Chu-Yong Lee’s success as an entrepreneur in the creation of his business illustrate the mix and match of the historical and cultural effects of his upbringing and the lessons he learned through his working experience at IBM. First, we can identify his philosophy toward daily life as we often do from business or social entrepreneurs. One such trait was his attitude that life is lived moment to moment. He remarked in his interview, “One must do one’s best to make the best out of each passing moment.” Being raise with the Confucian value of “hard work” and with his work experience at IBM, he learned not to waste his time. He was living to fulfill his dream of establishing the information system in Korea, but instead of dreaming,

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he spent every moment of his available time connecting with people who could buy his idea, offer support, and make his ideas a reality. Another trait that made him a successful social entrepreneur was his confidence, his belief in himself, his passion for the social purpose, and his highly competitive spirit. In his biography, he distinguished between superiority and confidence. He said that confidence welcomes challenges, but the sense of superiority is just an emotion. Again he was thankful for this lesson he had learned from IBM. He had been proud to attend Seoul National University, the top-ranked university in Korea, but he was not really confident about himself. IBM hired only the elite who graduated from the top-ranked universities. During orientation, they were told, “Since you are hired through our interview process, we believe that you are the elite we are looking for.” The traditional Confucian work ethic of hard work, experienced in the competitive environments of a prestigious high school and Michigan University, was embedded in his soul without a doubt. He said that the price he paid in working for IBM helped him do his best in whatever he did with a positive attitude, and he believed that nothing was impossible if he worked hard (Lee, 2007, p. 190). This helped him build confidence. His ability to see how his experience and knowledge could create a market and at the same time serve the larger society also contributed to his success. When he returned to Korea from the United States, he was an expert complier of the computer program “Koball” and the use of databases. He found opportunities where his expertise could contribute to Korean economic development plans and projects from the 1960s to the 1980s, and he became a pioneer in the key-punch business and the computerization of the major government systems. Understanding the cultural meaning of human relations is critical in any business process, especially in the Confucian-influenced countries that value such relations as fundamental to social systems. Lee understood the cultural values of human relations that were behind the rules of the games and the meaning of social networks in cultural contexts—who will hold the key to decision making or influence in bringing plans to reality, and how to make connections. Consequently, he was able to be flexible in negotiating with different cultural groups or organizations. For example, Lee described in his interview, that he found he had to include in his business proposals and deals with a Japanese company, “some kind of rebate,” or to take care of them in one way or other, a “reciprocal favor,” when he worked on a computerization project for the Japanese Patent department. He found this was also true when working on various computerization projects in Korea even though one cannot even think about a rebate in the United States. He explained it as the “Asian Flavor.” He also said that he

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learned that in order to sell computers to the government in Korea in the 1970s and 1980s, he had to promise 10 percent of the total sales amount for political contributions. He said he was not familiar with this at first, but he learned how it worked after he had been in Korea a short time, and he honored their cultural business practices. Another different business practice he experienced between Americans, Norwegians, and the Japanese was that Americans and Norwegians were willing to share technology they had developed or innovated and provided opportunities for Korean companies to transform this technology to fit Korean situations, but the Japanese never shared their technology and rather sold completed products and continued to provide maintenance service for the products. Another example of cross-cultural differences in the decision-making process between Japan and the United States, comes from the interview with Lee: In the United States everything must be logical. Before a decision is made, the presentations must go through a rational thought process approved by the decision makers. On the other hand, in Japan, the most important features of decision making are who do you know, what your background is, and who your references are. In the United States, once the decision is made, the person in charge shoots the ball like a basketball player. But in Japan, they just pass it to each other. There is an endless passing game, so to speak. In other words, nobody wants to take responsibility or to be blamed. Americans are willing to take chances and face challenges. On the other hand, the Japanese do not want to take risks. The important thing to know when you are doing business with the Japanese is that you must know the person who holds the key, the person in charge. For example, if I had not known Director Honma, I probably would not have been able to open a patent office. He was the person who held the key. If I had contacted some other director, it would not have been possible (to get the project for the computerization of the patent office). Another cultural phenomena Lee explained in his interview was the difference between Korean and American perceptions regarding the name value and status of a company when one is making decisions or is in the process of purchasing. In the 1960s and 1970s Koreans did not know much about computers, and the name value of the company was important in making purchase choices even though they had tried to find the best product for their needs. People were more concerned about how big the company was and its rank among other companies manufacturing computers and what kind of IBM machine they had in their office rather than the quality and specifications of the computer. Korea is now a world leader in technology, so the value of “how big” and “who made it” may not be as important as it used to be. However, the desire to possess the

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prestige and the best remains strong in Korean business practices and in daily life as well. Another practice Lee observed when he was working in the United States was that everything had to be in writing for validation. He experienced and came to understand that verbal promises his supervisor and the company made to him were just showing possibilities not commitments, so unless there was a written and signed contract, including even simple promises such as an extra vacation as a reward, things might not happen. Then, he later even requested in writing that IBM permit his wife to accompany him on a business trip; something that was not usually permitted at that time. In Korea, however, there were unwritten social rules that everyone understood based on noon-chi or nonverbal permission, (which, by the way, is also changing now in response to complicated social and business practices.) Koreans define noon-chi as “the sense of eye,” or “eye management.” Others think of it as “mind-reading.” This is a very important—and almost necessary—component of Korean communication and business practices (S. Kim, 2003; Shim, Kim, and Martin, 2008). As Samovar and Porter (2003) put it, noon-chi is used to discover another’s unspoken “hidden agenda,” paying close attention to the speaker’s nonverbal cues, “reading between the lines,” and finally responding appropriately given the context. Every culture has a type of noon-chi. In American culture it is more of an awareness of the situation, of being polite or using the proper etiquette. In Korea, noon-chi entails grasping the situation in a holistic manner. It is practiced in every aspect of Korean daily life to some extent for communicating and behaving in a socially acceptable manner that is appropriate to the situation (Shim, Kim, and Martin, 2008). As a result, in various business practices, there have been improvements since the late 1970s, but there are still several gray areas even though there are written guidelines in the company’s employee handbook, especially if the practices are not directly related to the work and projects, such as taking vacations, overtime pay, or rewards. Another difference he learned of in his early days was in the definition of “expert” by Americans and Koreans: When I first came back to Korea from the U.S., I was a computer expert compiler with the program called “Koball” and the database. But when reporters interviewed me they asked questions that they have taken from an article in a magazine or book, and if I didn’t know the answer, they looked at me as if I was some kind of idiot. You must specialize in your area to survive in the U.S., but in Korea you have to know a little bit about everything. In Korea, although you are not a specialist in any one area, you can still get by if you know a little about everything, but it doesn’t work that way in the U.S. If someone asks a question and you don’t know the exact answer,

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you just say, “I don’t know,” or, “It is not my area of specialty.” But in Korea even if you don’t know the answer you just pretend that you know it in order to maintain your reputation.

Korea has lived with the Confucian hierarchical system for centuries, and its impact was embedded across business practices until the late twentieth century. Lee said, until the 1980s, “if you knew people in high positions, there would be no problem.” Lee did a few government projects, and he found that the person in charge already had someone in mind to pick for the job regardless of the number of competitors or their qualifications. In this picture, who you knew in terms of authority was critical in doing business. Cultural norms of protecting and maintaining the interests of in-group memberships had to be orchestrated with reciprocal favoritism. Lee said, however, it is a little different now in Korea. These days the perception of an “expert” is also changing. In order to be recognized as an “expert,” one should know a little about everything related to the subject and be specialized in the area (interview). Lee added that the traditional hierarchical system is no longer relevant, and the perception of who has the power in decision making is also changing. In working with the government, it used to be top to bottom, but now it is bottom to top. Many decisions are made by employees not by the persons in high positions . . . There are many cases that did not go despite the fact that you knew people in high positions. Those cases will be under the scrutiny of employees. So now people in high positions do not want to make decisions.

In-group membership is still important in today’s Korea for individuals to claim their social status, but the younger generation relies less on human networks or in-group memberships. Performance and self-reliance are the keys today; the hierarchical system is breaking down. Lee was also fortunate in that his background allowed him to have access to various human networks. However, not all businessmen who are well connected are able to identify the right person and the right time for their ideas and plans. He said in his interview that he never wanted nor was he ever looking to build a relationship with someone. He had not planned to meet John Hansen, Professor Amos, or Professor Akley, but he understood the importance of the variability of human relations and emotions attached to his group memberships, especially with those who shared his experience of difficult times in America as students and the professors and alums at Michigan University who provided job opportunities for him. He, however, came from a relatively wealthy family, was well connected to the privileged class, and he was able to mobilize and persuade them to help his cause in certain contexts. His father was a respected landowner,

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philanthropist, and businessman. He graduated from prestigious schools. He married well. His wife’s grandfather was one of the most distinguished and respected scholars in Korea who wrote the Declaration of Independence in the 1919 movement during Japanese colonization. His wife’s father was also a medical doctor in a prestigious medical school. She herself graduated from Kyung-gi, also the leading girls’ High School and was a student at Ewha Woman’s University before her marriage. Lee said that his high school connections did not help him directly in his business of computer sales, but his background provided him with a wide range of human networks that he could draw from when he needed them, including those in the circle of the decision-making process for government and institutional investments. Since the reason for his work was for the collective good rather than for personal benefit, the people he contacted were willing to help him in most cases, especially those who graduated from Michigan University in Ann Arbor. In 1958, there were only 80 Korean students at Michigan University, and most of them returned to Korea and contributed to the development of the Korean economy (Lee, 2007, p. 79). Ann Arbor is very isolated, so it was hard for everyone who went there since most of them came from large cities in Korea. Lee noted, “The hardships that they went through together became a sort of common denominator for them.” One strong, common denominator we can identify among successful entrepreneurs is that they have a purpose or motive for the common good or social consciousness, such as “making our company the best in the world,” “making the best quality product in the world,” “making a better society,” or “improving the living standard.” We can find this motivation in the development of the Hyundai and Samsung chaebols. Lee was no exception. For Lee’s whole career, money had never been the purpose of doing business, rather it was to follow his passion. He said that what drove him was the unfailing faith that he would be “the pioneer computer missionary,” bridging the gap between Korea and the Western world by helping Korea adopt computer systems. While he was directing various projects, such as, the computerizations of the teachers’ union, or the banking and railroad systems, he worked for the sense of achievement, never renegotiating even if he was losing money. He noted that if he wanted to make more money, he would have started a cement factory rather than becoming a computer missionary. There was much more demand for cement during President Park’s Five-Year Economic Plans than there was for a computer missionary. Since Korean traditional society perceived status as power, Koreans believe that how they are seen by others is more important than their selfidentity. As a consequence, having one’s identity approved by others was often more important than one claiming his or her own identity. Hence, business organizations paid more attention to sales volume that would be

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seen by outsiders. But Lee added that he had never paid attention to how he or his company was seen by outsiders nor its sales volume. He has a philosophy in making and managing money. He believes that money can only be saved by not spending it, but when one sees valuable social causes, one should be able to spend bravely regardless of the amount. Even money can be a burden if we have more than a certain amount. He learned this lesson from his father and practiced it all through his life. Here are a few stories that taught him how to manage money. His father had been a landlord and had owned an orchard. Even though he was relatively well-off, he lived a very humble life and never wasted anything. He even smoked cigarettes sometimes that he had picked up from the street that people had thrown away half finished. One day, his father took him to the open market to buy a box of apples. At the time, a family who could afford to buy a box of apples was considered well-off. His father walked around eight times through the market to check the prices. Lee was only seven years old, and he wanted his father to finish the deal soon. He, as a son in a Confucian-influenced society, could not complain to his father, but he had an idea. He approached one of the merchants and gave him money asking the merchant to sell a box of apples to his father at a price lower than the original price so that his father would buy it. However, when his father heard the asking price from the merchant, he turned around to his son saying, “You must have given money to that merchant.” His father told him that he knew the wholesale price and that no merchant would sell apples under the price they paid from the orchards. The reason he had walked around eight times was to find the shop that offered the closest right price, not the cheapest. His father’s explanation shocked the boy and taught him a lesson he never forgot. Here is another story related to his father that has helped him remain humble. When he was attending Kyung-gi junior school and high school, his nickname was “go-muel” meaning the old or used one. In the 1960s until the mid 1970s, all Korean students wore school uniforms. There were registered school uniform tailoring stores for students from certain high schools. Instead of ordering custom made uniforms for him, his father used to shop at a store located in the nam-dai-moon (South Gate) open market filled with merchants selling various new and used merchandise targeting consumers who were looking for a lower price than department stores. Even though his father was well-off, he always bought his son’s uniforms, shoes, and clothing from a store selling used items. If he complained because his uniform or clothes or shoes were too big, his father would tell him that he would grow into them. When he was in the eighth grade, his father bought him a U.S. army jacket with a fur liner. It was so big for him, he could not wear it until he entered college. He continued to wear the jacket

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in America, and he brought it back when he returned to Korea. His father was so proud that he had done this instead of throwing it away. Lee was surprised when his father donated money he had saved for his whole life to Ul-san city to build a gymnasium. His father taught him that the important thing about money is how to spend it, not just to make it. His father used to say to him, “Don’t chase money, chase your dream.” His passion was to contribute to the development of the IT business in Korea. He was a computer missionary his whole life. Lastly, a common denominator we can find among successful preentrepreneurs in the early days of the Republic of Korea, including in President Park, CEO, Korea Inc., was the sense of duty to use their passion to contribute to the common good of the nation, awakening social consciousness for collective welfare. After Korea was liberated from the Japanese after World War II, and especially during President Park’s regime from the early 1960s to his announcement of the Yushin Movement (revitalizing reforms) in October 1972, there was a self-awakening of the national consciousness that stressed a keener sense of mission to fulfill social duties before promoting individual benefits. Lee also had a strong sense of duty to use his knowledge to serve the nation’s computerization projects, and a responsibility to his employees, to his family, to his father as an only son, and to his wife who believed in him and supported him. Throughout his whole life while he worked for the development of the IT industry and computerization projects in Korea, he followed the lesson he learned from IBM, and he never thought about making money or protecting his company’s benefits, his country always came first. When Lee returned to Korea, he believed that in order to avoid a second colonization from Japan, it was important to be ahead of Japan in the computer business, which could be seen as the second industrial revolution. Japan imported the first industrial revolution in the eighteenth century from Western countries and achieved its modernization faster than other neighboring countries. Lee imported and adopted the American programming system rather than importing the Japanese system. Since he was educated and had working experience in the United States, he saw “the downside of Japanese database system at that time and it seemed like the Japanese system was not the optimum system for Korea” (Interview: Lee Chu-Yong). Although it would have been easier to adopt the Japanese system because of their history of colonization and of the living experience of Japanese ways of doing business, he decided to rely on the U.S. system. He also said in his interview that he had the power to make that kind of decision. He also did not like the Japanese way of doing business, for example, not respecting Korean customers. To illustrate, when Fujitsu invested money and technology in Korea in the early 1970s, they did it through his

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company, KCC Information and Communication. But when Fujitsu left Korea, they did not give him any notice. When Fujitsu found out that he had decided to import the database system from the United States, they were disappointed. But he believed that his decision has made it possible for Korea to be where it is now when we consider the fact that the Korean IT is now equivalent to Japan’s. Conclusion We cannot ignore the contribution of the pre-chaebols and the early first-generation entrepreneurs in the Korean economic modernization era, especially the American-educated technocrats who grafted American education to the nation’s economic modernization process by introducing and recreating American entrepreneurial values such as creating, reinventing, and innovating ideas to respond to the needs of the nation by transmitting traditional values of the importance of scholarly status, group consciousness, and hard work. They were the new rising social class in the traditionally status-conscious Korean society, and at the same time, they were nationalistic pre-entrepreneurs who established the roots of American entrepreneurship in Korea. Lee Chu-Yong is retired from the frontline of management like other first-generation entrepreneurs. His son, Sang-Hyun Lee, now serves as President and CEO of the company his father started. He also earned the KS marks like his father with highest honors, and he has gone through long in-house training after he received his MBA from England before he took over the company. Both father and son believe that entrepreneurial characteristics such as risk-taking, independent thinking, and self-drive promote a propensity to develop innovation; however, the son has concerns that traditional Korean cultural values that have reinforced the idea of the common good could hinder the entrepreneurial spirit of risk-taking and creativity. He sees that the business world is changing and innovative ideas and the market should move people, while his father still believes that the needs of society and people move ideas. These different perspectives between two generations on how business should develop and be run can be found across the generations in Korea today. References “CEO, Chu-Yong Lee.” Global CEO (2007, November). Seoul: CEOBANK. Cho, J. E. (2009, April). Innovation index places Korea at No. 2, U.S. at No. 8. Korea 8(4): 15.

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Dees, J. G., J. Emerson, and P. Economy (2001) Enterprising Nonprofits: A Toolkit for Social Entrepreneurs. Hoboken, NJ: John Wiley & Sons. Education in South Korea (n.d.). Wikipedia. Retrieved April 7, 2010, from http:// en.wikipedia.org/wiki/Education_in_South_Korea. Kim, S. (2003). Korean cultural codes and communication. International Area Review, 6: 93–114. Kohls, R. (2001). Learning to Think Korean: A Guide to Living and Working in Korea. Boston, MA: Intercultural Press. Lee, C.-Y. (2007). Bansaegi Computer-wa Ham-gye-han Na-eui- In-seng [My life working with computers over the past half century]. Seoul: Jun-ja Shin-mun-sa. Matsumoto, D. (2002). The New Japan: Debunking Seven Cultural Stereotypes. Yarmouth, ME: Intercultural Press. Penman, R. (1994). Facework in Communications: Conceptual and Moral Challenges. In The Challenge of Facework: Cross-Cultural and Interpersonal Issues, ed. S. Ting-Toomey. Albany, NY: State University of New York Press. Samovar, L. A., and R. E. Porter (2003). Intercultural Communication—A Reader. Belmont, CA: Wadsworth. Shim, T., M.-S. Kim, and J. N. Martin (2008). Changing Korea: Understanding Communication and Culture. New York: Peter Lang. South Korea: Educational System—overview (n.d.). Retrieved April 7, 2010, from http://education.stateuniversity.com/pages/1400/South-Korea-EDUCATIONALSYSTEM-OVERVIEW.html. The Maeil Kyungje Shinmun (1977). The Road to National Survival: Korean President Park Chung Hee’s Leadership Philosophy and Action Programs. Seoul: The Maeil Kyungje Shinmun.

Interviews Andre Minn: Former Sr. Vice President, Samsung Electronics Co., LTD Choi Man-Lip: First exclusive Korean agent and president of the Korean branch of Fairchild Joanne Lee: President, Star Communications Lee Chu-Yong: Chairman, KCC Information & Communication Lee Sang-Hyun: President and CEO, KCC Information & Communication

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4

Value Systems, Entrepreneurship, and Changing Society David Choi

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ntrepreneurship has played a vital role in South Korea’s economic and technological development (Choi et al., 2008; Jung, 2002). Seldom discussed, however, is the potentially significant effect entrepreneurship has had in shaping the’ views and value systems in Korean society, especially since the late 1990’s. The changes in views and value systems among the Korean people are driven in large part by the country’s continued modernization and industrialization, but its vibrant entrepreneurial economy may be accelerating the pace. These changes, we suggest in this chapter, are likely to have a lasting impact on Korean society. The chapter is organized as follows: first, it provides the background and facts associated with South Korea’s entrepreneurial economy. Next, it describes some of Korean culture’s most fundamental values, followed by a discussion about how these Confucian values conflict with those of entrepreneurship. The chapter then examines the progression of entrepreneurship in South Korea to see how its growth has affected people’s values systems and their perspective on the various groups’ roles in society. Lastly, we briefly discuss how Korea’s experience with entrepreneurship and its impact on society might compare with that of the United States. The Rise of Korea’s Entrepreneurial Economy As mentioned in other chapters in this book, South Korea’s entrepreneurs and small and medium businesses have made significant contributions to the

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country’s economy. While big business (e.g., the chaebol groups) is generally considered the source of the “Korean miracle” of economic development, small and medium enterprises (SMEs), defined as enterprises employing fewer than 300 personnel, have served as the primary source of the country’s employment since the 1980s. By 2004, SMEs had contributed to 86.5 percent of South Korea’s total employment (Small Business Corporation, 2006). Deservedly so, the status of SMEs in South Korea has substantially increased, particularly since the country’s financial crisis of 1997–1999, which was widely attributed to mismanagement and corruption by large businesses. Today, the business community and policy makers in South Korea have recognized the importance of SMEs and entrepreneurial activity not only for job creation, but also for overall national competitiveness as they stimulate research and development, increase exports, and create wealth (Choi et al., 2008; Jung, 2002). Fueling the growth of SMEs and ventures of all types in Korea has been the country’s high enthusiasm for start-ups, not found in some of the leading Asian economies like Japan or Singapore. According to the Global Entrepreneurship Monitor (GEM) report prepared jointly by Babson College to measure start-up activities of nations in 2000, South Korea ranked seventh among 21 countries on nascent firm prevalence rate (the percentage of people preparing to start a new business) and first in new firm prevalence rate (percentage of employees who work for companies with less than a 42-month history) (Global Entrepreneurship Monitor, 2000). This 2000 survey showed that one out of 11 people worked for relatively young companies that were established within the last three-anda-half years. In addition, one out of 20 adult Koreans was involved in some kind of new business start-up. Interestingly, Japan was ranked last and second-to-last in these two indicators. In the total entrepreneurial activity prevalence rate that combined the two indicators mentioned above, Korea was ranked number two among 21 countries. This level of entrepreneurial intensity may not be surprising to researchers like Pye (1985) who has long observed that “boldness and audacity are also apparent in many aspects of Korean behavior and they are not afraid to change for self enhancement and for a better life for themselves and their children.” In the more recent GEM report published in 2005, Korea ranked sixth out of 41 nations between 2000 and 2003 in the overall entrepreneurial activity prevalence rate (Global Entrepreneurship Monitor, 2005). Interestingly, the success of entrepreneurs and the rising respect for entrepreneurship have been affecting more than just the economy. It may be changing society, by challenging the fabric of Korea’s value systems and altering how Koreans perceive such traditional values as discipline, teamwork, respect for authority, respect for hierarchy, and gender roles,

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among others. Ironically, some of these affected values were precisely those that were credited in the past for Korea’s economic success. For example, Koreans’ fierce teamwork and loyalty, critical enablers for the building of Korea’s chaebols, are being perceived as less relevant as increasingly more talented employees trained inside large corporations abandon their companies to start their own businesses. Moreover, age and experience, highly valued in Korea’s patriarchal society, are being viewed as less important in the minds of Koreans as increasingly more young entrepreneurs (often in their 20s) build innovative, technology-oriented companies and create substantial wealth. Entrepreneurship is also offering women professionals, who have faced glass ceilings in large organizations, opportunities to showcase their leadership talents—a phenomenon that is challenging the people’s basic assumptions about gender roles. Korea’s Culture and the Old Engine of Growth In order to fully understand and appreciate the current phenomenon, a closer (but brief) review of the foundational values of Korean culture is required. Described below are some of the values, most of them originating from Confucian social theory, that have shaped people’s beliefs and have been attributed to the past success of the Korean economy (H. C. Lee, 1999; Park et al., 2005; T. K. Park, 1997). Discipline. Hsun-tzu (also known as Xun Zi, ca. 300–230 B.C.) was a prominent Confucian scholar whose beliefs greatly influenced the practical application of Confucian teachings in China and Korea. Hsun-tzu focused his philosophical inquiries upon the instinctive desires and impulses of human beings. From his observations, Hsun-tzu felt that human beings, without the discipline of the structure provided by culture, became crude and uncouth, literally dangerous to society, when they responded only to their own innate desires and impulses. He asserted that all human beings could become virtuous through education and self-discipline. Even today, discipline in Korean society, whether in school or at Taekwondo classes, is strongly emphasized. In the professional world, sheer hard work and long hours at the office are highly praised. It is this focus on discipline that has aided in Korea’s economic development over the last five decades, as employees, from executives to factory workers, sacrificed countless hours and their personal lives for the betterment of their companies and the country at large. Teamwork. Group dynamics plays an integral role in the shaping of an individual within the Confucian society. Confucianism views each individual as a member of a group, not as an autonomous being. In a collective society, progress is achieved through the unified efforts of the group. The talented

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and aggressive individual who cannot subordinate personal interests to the collective cause is not well accepted because he or she breaks the harmony of the group. Individual actions are evaluated by their contribution to the betterment of the group and to group cohesion. Thus, it makes sense for Korean organizations to emphasize group-based values such as loyalty, harmony, cooperation, unity, conformity, and unquestioning acceptance of an organization’s norms, attitudes, and values as its most important principles (Park et al., 2005). This focus on teamwork has helped Koreans adapt quickly to the concept of large organizations and has allowed large corporations to benefit from having very committed employees. Hierarchy. Despite the importance of group dynamics, Koreans traditionally do not view human beings as independent persons of equal ability and talent. Most human relationships are seen as vertical. Historically, a hierarchy of duties and relationships was specified for everyone, from the king’s ministers down to the lowest-ranked individual. The observance of proper roles and relationships is still considered the defining point of a moral society. Social stability and harmony depend on the observance of these relationships. As these relationships and attitudes are hierarchical or vertical, so also are society and formal organizations. Modern-day Koreans are therefore more comfortable in social interactions when they can identify the appropriate ranking for members of the group within the prescribed rules defining senior and social status. Juniors (in age or otherwise) or subordinates have been taught not to raise questions to seniors or superiors, especially in public settings. In general, women and young people, regardless of talent and insight, are expected to serve at the bottom of the social hierarchy. In the past, the people’s ready and willing acceptance of hierarchy was rather useful for building the country’s large, hierarchical companies (chaebols). Stability. Traditionally, Koreans have believed that societal stability is essential for survival and progress. Ideally, stability should be maintained through harmonious social relations and not by external force. If there is a single condition that virtually all Koreans value, it is harmony in social interaction. The emphasis on maintaining “harmony” contradicts the individual-oriented Western society, which emphasizes individualism, self-reliance, and competition. In fact, for Koreans, the word “kae-in,” meaning “private” or “individual,” is actually a word with rather negative connotations, in contrast to the very positive connotations “individualism” has in English. Thus, it is not surprising to learn that “individual initiative” is generally not valued highly in Korea. Uniqueness and differences in ability, talent, and perspective are accepted as natural, but they must be balanced against group needs to avoid strife. Both sides suffer if one grows to exert strength over and dominates the other. In practical terms, people,

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especially the young and women, are discouraged from standing out or making noise. The above values have permeated every aspect of Koreans’ behavior in the family, at work, and in social interactions (Sonia, 2001). In general, people who are not disciplined or do not conform to team rules, hierarchy, or stability are considered “reckless” or “uneducated.” As a vestige of the traditional social structure, until recently, the best and the brightest commonly flocked to the civil service, the legal profession, or academia. When Korea’s successful modernization broke that spell, top college graduates entered business, but they preferred the prestigious career of progressing up a chaebol. Traditional values were reflected in the work organization through a subordinate’s loyalty to the superior (or to the company) and the latter’s benevolence and paternalism toward the former (H. C. Lee, 1999). According to H. C. Lee (ibid.), centralized authority, vertical hierarchical order, harmony among employees, diligence and hard work, and a seniority-based reward system are all closely related to traditional Confucian values. However, as he has also noted, Confucianism’s position as the basis for ethical values and social norms for Koreans has been steadily weakening. While Confucianism has contributed to the country’s rapid economic growth in the recent past, political and economic progress has also brought about changes within traditional Confucianism (H. C. Lee, 1999). According to Shim et al. (2008), Koreans are increasingly being influenced by Western individualism, which emphasizes individual independence and the value of individual autonomy. It is our belief that the growth of Korea’s entrepreneurial economy is further fueling and accelerating the adoption of Western values. Interestingly, entrepreneurship seems to offer a path of escape from traditional norms instituted in large organizations and society in general. Traditional Values in Conflict with Entrepreneurship Rapid Western-style industrialization has brought about tremendous cultural changes in recent years that have affected the Korean people’s values, attitudes, and behavior. Korean employers can no longer count on selfless hard work from their employees, whose traditional Confucian work ethics once delivered high commitment and performance. Workers’ loyalty to the company is weakening, the traditional family-like climate is disappearing, and in many Korean businesses there is deep distrust between management and workers (H. C. Lee, 1999). The changes are occurring not only at work but in society at large. For example, when it comes to respecting elders, a UNICEF poll of 17 Asian nations found

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that young Koreans held the least respect for their elders (Magnier, 2001). This was shocking news in Korea where honoring one’s seniors has been a cultural cornerstone. Nevertheless, it was consistent with past findings that young Koreans have been much more influenced by Western individualism than the older generations. For instance, an older study by Ingelhart (1997) noted that Korea had the greatest generation gap in a survey of 43 industrialized countries. However, it is the vibrant entrepreneurial engine, in particular, in addition to the overall industrialization process, which may be fueling and accelerating the social changes. In order to survive and prosper, Korea’s dynamic and growing community of entrepreneurs has adopted an alternative set of beliefs that seem to contradict or compete with the traditional values mentioned above. Their new core values center around such modern Western values as creativity, self-reliance, flexibility, and individual initiative (Stimpson et al., 1990). Of course, an alternative theory could be that those Koreans who exhibit this set of values have become entrepreneurs. In any event, Korean entrepreneurs have learned to appreciate the importance of these Western beliefs and have adopted them as core values in their business lives. It should not be surprising that these are the same norms or values widely attributed to successful entrepreneurs in the Western world as well (Kuratko and Hodgetts, 2007). Over the years, as stories of successful entrepreneurs have been shared with the public, aspiring entrepreneurs and the business community at large have also adopted these traits as keys to success. These entrepreneurial values are listed in table 4.1 and are compared against traditional Korean values discussed in earlier paragraphs. Note that the entrepreneurial values are, at least in certain respects, in partial or direct conflict with Korea’s traditional values. For instance, selfless and disciplined hard work was considered important in Korea in the past and served as a critical success factor for its professionals as they progressed through schools and large organizations. However, few professionals in Korea today believe that selfless hard work, obeying the orders of their supervisors, will lead to innovation or personal wealth. Korean entrepreneurs believe, as do their Western counterparts, that creativity, coupled with hard work, is more useful for exploiting new market opportunities. Table 4.1

Contrasting values

Traditional values

Entrepreneurial values

Discipline Teamwork/Loyalty Hierarchy Group Stability

Creativity Independence/Self-reliance Flexibility Individual Initiative

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The view toward teamwork and loyalty has also been changing. Although teamwork is also important for start-ups, Korean entrepreneurs have learned that they must first and foremost rely on themselves and their own capabilities. They have learned that they must stop viewing themselves as members of their organization and identify themselves first as individuals. While leaving or competing against a former employer might have been considered a betrayal in the past (Park et al., 2005), thousands of entrepreneurs who have done so have made it more acceptable. Moreover, younger Koreans have begun to question the relevancy of blind loyalty to their organizations. Many Korean professionals working in large organizations have witnessed the decline of slow, hierarchical structures. Consequently, they have begun to appreciate the flexibility and speed of smaller and flatter organizations that are found in modern entrepreneurial companies. Lastly, while Koreans have traditionally treasured group stability and consensus, entrepreneurs have over the years demonstrated that not much harm is done to society when people take individual initiatives to determine their own career path, take risks in the pursuit of a personal goal, and obtain significant personal reward in the process. As Shim et al. (2008) observed, “more than 50 years of Americanized dynamic, entrepreneurial, ‘level playing field’ spirit” has boosted Korean’s assertive individualism. Adding to the conflict between basic traditional values and entrepreneurship norms is the fact that the nature of entrepreneurship has been evolving, further increasing the need for the entrepreneurial traits mentioned above. As Flanagan and Lee (2000) observed, Korea’s “accelerating pace of change increasingly rewards innovation, and independent thinking, replacing hierarchic, deferential, and conformist norms, especially among the younger and better educated cohorts with egalitarian, individualistic, self-assertive norms.” To understand the evolving nature of entrepreneurship in Korea, we examine three major generations/models of entrepreneurs in the Korean economy over the last 50 years in the next section. These models do not only reflect the gradual changes of times, but may actively contribute to the changes in people’s fundamental values and norms. We pay special attention to the role of women and young entrepreneurs, whose successes may have a particularly strong impact on the country’s culture. Traditional Values and the First-Generation Entrepreneurs The chaebols and many of the larger corporations in South Korea were founded by the people we term “first-generation entrepreneurs.” Many of them began building their companies and industries shortly after

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Korea obtained independence in 1945 and/or at the end of the Korean War in 1953. While their accomplishments were remarkable, their methods were not rule-breaking or culture-changing by today’s standards—they did not need to be so. Given an environment with barely any economic foundation, these first-generation entrepreneurs, in large part, were successful in exploiting the existing social structure and traditional value systems of the Korean people. For example, few people believe that Chung Ju-Young could have turned around his little automobile-repair shop, opened in 1946, into the Hyundai conglomerate of today without his smart exploitation of “inmack” (or personal relationships with the country’s power brokers). The company’s initial capital was accumulated through Chung’s younger brother, Chung In Yung, who used his fluent English to obtain lucrative construction contracts from the U.S. military command in South Korea. Chung then solidified the firm’s dominant position by winning President Park Jung Hee’s personal confidence and favor. Chung became the president’s most trusted agent for executing many of the regime’s most ambitious investment projects, such as the Seoul-Pusan Expressway and the world’s biggest shipyard in Ulsan. Thus, Chung utilized his personal connections with the government and military command to begin and develop his business (Kirk, 1994). In another example, Kim Woo Choong took advantage of his personal ties with state power holders to enable the Daewoo group’s meteoric rise from a tiny textile-exporting company in 1967 to one of the top chaebols in less than a few decades. Chairman Kim’s father had been a respected teacher of President Park Chung Hee during his Taegu High School years, and this relationship became a significant factor in making the younger Kim a personal favorite of the former president. Moreover, Kim, himself a graduate of the elite Kyongki High School, a prestigious school of the intelligent and/or rich, was able to tap its connections. Cashing in on this personal network, Kim’s Daewoo recorded the fastest growth rate among all Korean firms in the 1970s. During that frenzied development decade, the group engaged in a series of cheap debt-financed investment sprees into heavy industries and general trading, taking over many bankrupt or mismanaged firms—according to President’s wishes. In return for lucrative monopolistic or oligopolistic investment licenses, huge tax breaks, and privileged access to bank credit, the entrepreneur generously contributed to the regime coffers (H. J. Park, 2002). Through the period of industrialization from the 1960s through the 1980s, the nation’s small-business owners were not necessarily less entrepreneurial than big businesses. They were no less tough, devoted, hard-working, and ready to take risks and seize business opportunities. They were willing to work endless hours for even a modicum of return

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and bear many privations to make something of their small businesses. However, what they lacked were comparable connections to powerful figures. What often distinguished chaebol entrepreneurs from ordinary small-business people was access to extremely profitable monopolistic product markets and government-subsidized loans and bailout funds. Thus, the areas of business that SMEs could engage in had to be less capitalintensive, more subsistence-driven, and thus less efficient and less profitable than those of larger enterprises. The Second Generation of Entrepreneurs The next generation of entrepreneurs was most active in the 1980s through much of the 1990s. What distinguished this generation of entrepreneurs from the first was better education, inclination (as well as capacity) for technology-driven niche market businesses, and ability to access the capital market as an alternative source of funding and profit. By 1983, almost half of all small-business owners had received a college education or more (H. J. Park, 2006). Although no systematic data on the earlier period are available, this reflected a significant improvement in educational attainment over previous decades. By the mid-1990s, Korea’s leading medium-sized businesses invested at least, if not well over, 3 percent of their sales on R&D. The 3 percent of sales spent on R&D often went a long way for small firms, as they tended to engage in a narrow range of businesses, exploit economies of scope, and focus R&D effort on specifically applicable technologies or concrete product innovations. Unlike the country’s first-generation entrepreneurs, the second-generation entrepreneurs leveraged the burgeoning capital market, rather than their family or government connections. The capital market provided significant financial resources to entrepreneurial firms that demonstrated their competitive advantage in a niche market. Promises of future profits and employee stock options provided a strong incentive structure for small firms to invest in long-term business strategies, technology-based product innovation, and market creation. By the 1990s, so-called small venture businesses had become a buzzword and a focal point in both public policy and private circles. Particularly noticeable was the growth of Korea’s overthe-counter KOSDAQ stock market for small and venture firms. SMEs that focused on R&D and technology-driven quality, niche market specialization, and productivity, saw their revenues and profits rise to new heights. For example, as of the late 1990s, Jinwoong controlled 65 percent of the U.S. market and 35 percent of the global market for tents, with annual sales of $400 million. Hongjin Crown, an unknown name in Korea, captured 40 percent of the motorcycle helmet market in the

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United States (H. J. Park, 2007). Daesung Metal, a rather obscure maker of nail clippers in Korea, had a 40 percent share of the global market (H. J. Park, 2002). Medison, a leading medical equipment company, was the world’s top manufacturer of low- and medium-priced ultrasound systems. Daeryung Precision made satellite video receivers (SVRs) and had a 25 percent share of the global market. Daeryung Precision’s founder, Lee Hoon, is a representative of the new cohort of entrepreneurs. Lee, son of a small-business owner, had majored in applied physics at Seoul National University (SNU) and obtained an MBA from Columbia University. In 1982, at the age of 34, against the advice of his peers, Lee started Daeryung Precision. Of the seven founding members, five were engineers engaged in R&D. Having started out as a small original equipment manufacturer for various North American companies, Daeryung had its ups and downs. Lee, however, believed that a technology-based niche market strategy would be particularly rewarding with the growth of the capital market in the future. Accordingly, he distributed 30 percent of stock shares to his six employees, and thereby sealed the bond among the founding members. The company was successfully listed on the stock market in June 1989. By 1998, Daeryung had 223 employees and earned about $217 million in sales and $1.7 million in profits. It enjoyed a 50 percent market share in North America, 25 percent in Europe, and 20 percent in the rest of its markets (H. J. Park, 2002). Mirae Industry, a semiconductor equipment manufacturer founded in 1983, is probably one of the most popular examples of new SMEs in Korea. Founder Chung Moon-Sool was 43 when he was forced to resign his post at the Korean CIA in the aftermath of the military coup in 1980. Figuring that “no late starter can become a chaebol in Korea without resorting to corruption, personal favoritism, or speculation,” Chung determined he would make products with a technological edge in an area of business where others were not engaged. Unfortunately, he went bankrupt in 1985 and seriously contemplated taking his own life. Chung spent the next ten years successfully producing test handlers for semiconductor products, eventually listing his company on the stock market in 1996 and paying off all his debts. With over 35 percent of 300 employees working in R&D, Mirae made an annual profit of about $5 million from $17 million in sales. In November 1998, along with two chaebol CEOs, Chung received a prestigious award from the Korean Employers’ Association, an honor rarely given to a small-business owner. Chung is often viewed as a “godfather” among young aspiring entrepreneurs (H. J. Park, 2002). Founders and managers of leading ventures acquired their current fame and status for the rather novel way they obtained their wealth—through the stock market listing and/or foreign direct investment (acquisition).

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One of the highly celebrated examples was Locus, a telecommunications equipment manufacturer. Founded in 1990 with only about $100,000 by Kim Hyung-Soon, a former doctoral student in Columbia University’s business school, Locus became Korea’s top manufacturer of computer telephony integration (CTI) systems in 1996 and sold a 38 percent share to Jardine Fleming Electra for $16 million in 1999. Once Locus was listed on the KOSDAQ in November 1999, the company’s market value reached $260 million. Another company that made news and caught the attention of virtually every businessperson in Korea was Jinwoong. Even though it was a labor-intensive manufacturing company that never had equity or direct financing, it sold 90 percent of its equity for $50 million to Warburg Pincus in 1999, making the founder a multimillionaire in the process (H. J. Park, 2007). In many ways, the second-generation entrepreneurs were rule-breakers. They showed that a highly educated person could resist joining conglomerates or the government in favor of a riskier entrepreneurial venture. Through their successes and failures, they helped make entrepreneurship a legitimate career choice in the eyes of many Koreans. Their success also demonstrated that one’s entrepreneurial effort could result in extraordinary personal wealth. Their stories further fueled monetary aspirations of entrepreneurs at a time when the Korean people were generally becoming increasingly materialistic. The Third and New Generation of Entrepreneurs The great upsurge of entrepreneurial activity in the late 1990s and early 2000s in South Korea can be attributed to four factors according to Jung (2002): (1) business opportunities, (2) business resources, (3) institutional factors, and (4) cultural factors. One important business opportunity during the period of 1999–2001 emanated from the Internet boom. Although the dotcom surge died down by the fall of 2000, the increase of newly registered corporations did not decline in the following years. South Korea continues to have one of the most advanced infrastructures in Internet and wireless communications, and the Korean people have shown a willingness to quickly adopt new devices and technologies such as mobile phones and the Internet. Jung (2002) notes that a key business resource made available for startups and SMEs in the late 1990s was the availability of middle-level and senior managers who were laid off as result of the IMF financial crisis. Laid-off workers and employees, who had resigned on their own, provided much needed human, financial, and knowledge resources for new ventures. The institutional factor was comprised of the incentives offered by the

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government. In contrast to a very restrictive policy toward large firms, the Kim Dae-Jung government in the late 1990s was keen on stimulating new business start-ups and promoting SMEs. A system of venture registration was introduced and various incentives were provided to those firms registered as “new business ventures.” Tax incentives were made available to individuals who invested in new ventures, and venture capital firms were also given preferential treatment by the government. Cultural trends also influenced the rise of entrepreneurship in South Korea. One such trend emanated from the 1997 IMF monetary crisis, which proved to be a watershed event for Korea. Shim et al. (2008) note that after the IMF financial crisis “Korea appeared to become a different society. Public attitudes surprisingly and dramatically shifted toward individualism from corporation/collectivism.” Lee and McNulty (2003) also observed a transition toward individualism after the crisis. In fact, the post-IMF venture boom may have been an example of factors that gave momentum to the promotion of individualism (Shim et al., 2008). Another related cultural trend was the rapid shift in value systems with regard to money and business—which still continues today. The Confucian value system had in the past considered commerce to be an occupation with low social esteem. However, as the values associated with capitalism became more prevalent, money has become accepted as perhaps the most important measure of success among ordinary people. For many years now, Korean college graduates admitted that they want to work for companies that will pay them the most amount of money (H. C. Lee, 1999). One of the most impressive entrepreneurial stories from this period is the rise of Park Dae-Yeon, founder and CTO (Chief Technology Officer) of TmaxSoft. His story is interesting for two reasons: first, he grew up in poverty in one of the poorest provinces in Korea (far from any sort of inmack), and second, he was a respected academic in a prestigious institution before he left to run a commercial enterprise, uncharacteristic of Korean scholars (N. Lee, 2008). Park was born as the eldest of six children into extreme poverty in Damyang, South Jeolla, and was almost sent off to be raised by another family because of serious concerns of there being a lack of food for all six children. After serving as an errand boy for a freight company, he realized the importance of education. Park took classes at night, graduated with honors, and eventually received a decent first job with a bank. From this initial opportunity, Park climbed the corporate ladder steadily and assuredly. Park then left Korea to attain his Bachelor’s and Master’s degrees from the University of Oregon, and a PhD in Computer Science at the University of Southern California in Los Angeles. He later returned to

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Korea as professor of Electrical Engineering at the Korea Advanced Institute of Science and Technology (KAIST). In 1997, he founded TmaxSoft and was the brainchild behind their JEUS and ProFrame products, all while still teaching at KAIST. The Korean government bestowed upon Park the following awards in recognition of his outstanding contribution to Korea’s software industry: the Ministry of Commerce and Industry Award in 1998, the Prime Minister’s Award in 1999, the Ministry of Science and Technology Award in 2005, and the Silver Tower Industry Medal of Honor in 2005. However, in 2007 he decided to step down from his role at the prestigious educational institute and devote all of his time to TmaxSoft’s continued growth. Now at age 52, Park is poised and ready to take TmaxSoft into direct competition with some of the world’s largest cell phone operating system software companies. Park is ready to show the world that TmaxSoft can take on industry giants like Nokia and Microsoft. TmaxSoft’s newest system offers middleware, database management, and an operating system, which only IBM and Microsoft can claim to have in their systems as well. TmaxSoft currently enjoys 35 percent of the local middleware market, and hopes to expand that figure both at home and abroad in the future. Park owes the innovation and success of the company to the opencommunication and creativity that all employees bring to the firm on a daily basis. Despite being the founder of the company, Park still enjoys speaking one-on-one with the company’s researchers several times a week in order to stir up new ideas and processes. Another noteworthy third-generation Korean Internet innovator is the charismatic 42-year-old CEO of Gmarket, Ku Young-Bae (N. Lee, 2008). In his case, he left a prestigious corporate job to start his entrepreneurial career. After graduating from Seoul National University in 1989, Ku began his career in the oil and natural gas exploration industry with the revered U.S.-based company Schlumberger. Ku quickly realized that he was in the wrong line of business, and set out into the unknown world of IT. Ku eventually evolved his business idea into Gmarket in 2000, which became an online auction and shopping mall. Gmarket was initially conceptualized around the functionality of the stock market. Buyers and sellers were matched up according to their proposed prices and products. The idea did not take off, and customer response was low. Ku had lost almost all of his initial investment of $1.8 million by the summer of 2003. Ku’s only option was to innovate, and quickly, in order to revitalize the business model toward customers’ needs. In October 2003, he launched Gmarket on its new open-market platform that was distinguished by an auction-based system. Much of Gmarket’s initial growth came from a focused approach toward fashion and clothing. Being innovative and

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flexible, Ku rewrote the online clothing business model by lowering sales commissions and raising commissions for those opening an online shop. Despite initial outcry and criticism, the move proved to be hugely successful, and by March 2005 Gmarket was experiencing 100,000 transactions per day. Gmarket went public on the U.S. NASDAQ in late 2006, and by the end of 2007 the company was garnering $223 million in revenue, supporting 13.7 million registered users, and employing over 400 employees. The site now hosts an array of online shops, ranging from electronics to furniture to automobiles (C. Lee, 2008). As the examples in the three generations illustrate, the nature of entrepreneurship is becoming more technology-intensive, innovative, and sophisticated. Some of the recent entrepreneurs have been successful in building world-class companies, while earning large financial returns for themselves, and have become the envy of other aspiring professionals. Some founded their companies to pursue their entrepreneurial dreams upon leaving their prestigious jobs in academia and large corporations. For Koreans who traditionally thought less of small businesses and commerce in general, the trend of respectable professionals entering entrepreneurial careers are opening their eyes to the relative prestige of professions. The widely told stories of entrepreneurs are continuing to shatter any remaining doubts that the Korean people may have about whether entrepreneurship is a worthwhile career (Jung, 2002). The Rise of Women Entrepreneurs One of the most noteworthy social developments in recent years has been the changing role of women in Korean society. Today, the number of college-educated women and men are almost equal, and more women are enrolled in traditionally male-dominated disciplines, such as business and engineering. One of the drivers, in our opinion, is the increased entrepreneurial success of women professionals. Increasingly more women are assuming entrepreneurial careers. It is estimated that about 33.9 percent of all business establishments in Korea were owned or headed by women (Jung, 2002). Many female entrepreneurs in Korea represent a frustrated class of women leaving their corporate jobs in search of an opportunity to showcase their skills. Most Korean women have experienced a glass ceiling that they felt they could not overcome within their respective organizations. Many of today’s women, particularly the younger generation, are seeking to start their own companies. Their entrepreneurial success is surprising male managers and changing their views on what women can accomplish in business.

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Chang Young-Shin, chairwoman of Aekyung Ind. Co. Ltd., is a pioneer and one of the best-known female executives. When her husband died in 1972, Chang took over control of the chemical conglomerate against the advice of her own family members and close friends. As the new top executive, she set the company on a brand new track to even greater success. Her immediate goal was to create a management style that improved the company’s culture, communication, and overall efficiency. Chang believed in a people-oriented approach to create greater long-term value for both Aekyung and the Korean economy as a whole. Training became a key priority for her company, and any employee that attended graduate school received full tuition reimbursement. Despite the initial hit that Aekyung felt after parting ways with the joint-venture relationship she had with Unilever Britain in 1993, the move proved to be a great long-term decision for Chang and Aekyung (Business Korea, 1999). Choe Yeong-Seon is also a remarkable story of a person who overcame gender discrimination at home and at work. Founder and CEO of Webbilling software company Addon Co., Choe broke out of her traditionalist role as a homemaker in order to pursue her dreams as an entrepreneur and capitalist. After her husband forced her to quit her position as a systems analyst at Unisys Korea Ltd. and stay at home with her new son, she divorced him in 1985 and set a new course for her career aspirations. She founded Addon in 1998 and developed the country’s leading card-reading hardware and software systems, security systems, and other RFID-based products. The company is also a distributor of similar transaction and security systems from Europe and Israel. Being a woman in a male-dominated business world, there were times when it was difficult to convince her business constituency that she was indeed the head of her company. Despite the hardship Choe herself faced as a woman, she expressively urges other young women to engage in entrepreneurial aspirations of their own. Today, she is a leading member of the Korean Venture Business Women’s Association (Moon, 2001). Another particularly poignant example is Sung-Joo Kim, founder of Sungjoo Group, a retail group that distributes Marks & Spencer, Yves Saint Laurent, and Gucci in South Korea. Her father, Kim Soo-Keon, was the founder and president of Daesung Industrial Corporation, a large Korean conglomerate of energy, oil and gas exploration, and auto parts. Frustrated by the fact that her brothers would receive the honor of managing the large corporation in the future instead of her or her sisters, Kim was determined to set out on her own successful journey. Despite disagreement from her traditionalist patriarchal father, she embarked for the United States to study at Amherst College in Massachusetts. She also studied at Yonsei University, the London School of Economics, and Harvard throughout her fruitful professional and academic career.

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With no financial or familial support from her father, Kim was determined not to give in to hardship and admit failure. She steadily built a career in management at Bloomingdales. After Bloomingdales, she ended up serving as translator and broker on a deal between her father’s Daesung Corporation and Bendix during the late 1980s. Both surprised and proud of the growth in his daughter’s professional skills, Kim Soo-Keon invited his daughter back to South Korea and offered to finance the retail operations for her start-up, the Sungjoo Group. In 1996, Sungjoo managed to out-negotiate the conglomerate Samsung for the Marks & Spencer retail operations contract. This initial deal gave her the momentum she needed to fully launch the Sungjoo Group and build a portfolio of high-end brands (Hall, 2008). In 2004, the Wall Street Journal dubbed her one of the “Top 50 Women to Watch,” and Asiaweek even marked her as one of the “seven most powerful women in Asia.” Sung-Joo Kim is an inspirational example of how modern women in Korean society are taking advantage of entrepreneurship to fulfill their career ambitions. The most well-known female entrepreneur in recent years may be Haan Kyung Hee (also known as Romi Haan). In 1998, she was a young wife and mother, frustrated and tired from always wiping floors. She could not understand why there was nothing on the market to safely clean the floor without breaking one’s back. In 1999, she pulled together $100,000 and started the Haan Corporation with the mission of alleviating the pain of this household chore. After three years in development, Haan Corporation released the Haan Floor Sanitizer. The patented technology used high temperature steam at over 212°F to loosen dirt and kill germs. Its water tank was coated with nano-sized particles that inhibited the cultivation of bacteria. This lightweight, cleaning dynamo also claimed to get out tough grease stains and old spots without effort and was even used on sofas, beds, and carpets, safely sanitizing anything in its path without harsh chemicals. Slowly, word of mouth spread and this cleaning dynamo began to move off the shelves. By mid-2004, the product was launched on LG Home Shopping, the leading shopping channel in Korea, where 10,000 units were sold in a one-hour show, making it one of the best-selling items in LG Home Shopping history. All of this helped to make the Haan Floor Sanitizer the leading steam cleaner in Korea. The corporation eventually earned a revenue of $100 million dollars in 2006 with an expanded product line that included garment steamers and steam vacuum cleaners. The company’s cleaning products have been sold in department stores, discount stores, and television shopping networks. They are also being sold in Europe, Japan, and China.

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Today Haan is CEO of a multimillion dollar company, and a well-known personality in Korea. In 2005, her biography “My Life, My Story” was published by Random House, Korea. Her widely publicized story has become motivation for many working women as well as housewives. The tide may be changing in Korea for women entrepreneurs. The government has begun to take notice of how entrepreneurship has broadened economic opportunities for women. In 2001, the Korean government spent approximately $3.8 million to promote entrepreneurship among women through programs such as seminars, training sessions, and incubation classes. Additionally in 2005, the Small and Medium Business Administration set up a $7.7 million venture fund, of which 70 percent was used to fund female-run firms. Female entrepreneurship may be one of the most noteworthy changes in the Korean business landscape. This emergence of Korean women as prominent members of the business community symbolizes a positive new position of influence for them in society. The Rise of Youth Entrepreneurs In a very important new development, young people in their twenties and thirties are sparking a vibrant new era of entrepreneurship in modern Korea. Even in the 1990s, it was very difficult for young people in their twenties to start a new business or be taken seriously as executives. But in recent years, young people have found it easier to succeed in business, particularly in IT-related industries because of their prowess with computers and technology. Consequently, Korean society, dominated and governed by older men in the past, has been forced to embrace young people as important actors and leaders in the Korean economy. As Jun Hajin, Vice Chairman of the Korea Venture Association, explains, “We have had more and more young entrepreneurs, and they are fueling the hope and drive of other young entrepreneurs” (Jun, H., personal communication, August 15, 2008). Nam-Ju Kim, the CEO of Webzen, has demonstrated that a young person without a college education can be both successful in business and widely accepted in society. Kim was 29 years old and only a high school graduate when he founded the company in April 2000 with his two partners, Ki-Yong-Cho and Kil-Saup Song, who were also in their twenties. Before founding Webzen, Kim and Cho were freelance game developers. Song, also only a high school graduate, was a game developer for a wireless telecommunication company. They all loved computer games. About 17 months after the company was founded in November 2001, the three partners were able to launch its flagship product, MU Online (W. Lee, 2006). They were widely praised as “whiz kids” and even compared

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to the founders of Yahoo! (Jerry Yang and David Filo) and Microsoft (Bill Gates). Later in 2004, the World Economic Forum recognized CEO Kim as one of Asia’s Global Leaders of Tomorrow. In May 2003, only two years after its start, Kim and the founders were able to list Webzen on the KOSDAQ. In December of the same year, the company also went public in the United States with the use of the American Depository Receipts (ADR), becoming the first Korean gaming company to be listed on the NASDAQ (N. Lee, 2006). Jeong Young Hee, founder and CEO of the leading game company Softmax, is both a woman and youth entrepreneur. She was 27 years old when she founded the company in 1993. Previously, she was manager of a software development team of a company that went out of business. She took her team with her and started Softmax to develop packaged software products. Jeong and her team started making entertainment software in 1994, when she was often met with criticism by the business community, partially because of her gender and partially because of her choice of industry—game development was not considered a respectable profession in the 1990s. Jeong and her company began to get its deserved recognition when SK Telecom became a strategic partner in 2000 and Softmax became a public company listed on the KOSDAQ in 2001. It became the first Korean game company to land a licensing deal with Sony for its PS2 Playstation console in 2002. Subsequently, the company introduced a series of online games in 2002 and mobile games in 2003. Today, Softmax is a well-known developer and publisher of computer and video games with 90 employees continuing the art of merging technology and entertainment. The company is best known for its War of Genesis series, Magna Carta series, and Tales Weaver products. Softmax’s ambitious vision today is to become one of the world’s top ten content creators. Entrepreneurship Changing Values and Roles As evidenced by the above case studies, the changing face of the Korean venture landscape, in combination with the country’s overall industrialization process, appears to be challenging people’s value systems. Whereas the traditional Confucian-style value system was compatible with the situations in large hierarchical organizations, they seem to be in conflict with the personality and belief systems needed to be successful in entrepreneurial careers. Furthermore, as the nature of entrepreneurship becomes increasingly more competitive and innovation-driven, Korean traditional values seem to be increasingly less practical.

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Today, a growing number of Koreans, particularly those in entrepreneurial careers, are questioning the value of traditional norms and are willing to adopt new ones. Discipline is being challenged as a primary success factor. Protocol and rank are slowly being outdone by fresh ideas and flexibility. Blind teamwork and loyalty is being replaced by an emphasis on self-reliance and independence. Korean managers are becoming more comfortable balancing group stability with individual initiatives. Some large corporations have also been forced to adapt. In response to the rising interest in entrepreneurial careers and the possibility of losing employees to venture firms, employers are providing more flexible, incentive-based compensation (Lee and McNulty, 2003). As a sign of the times, Korean parents are teaching their children to be more assertive for their own needs (Underwood, 2007). Furthermore, people’s perception of careers, commerce, and gender has been changing, as demonstrated in our case studies of second- and third-generation entrepreneurs. Table 4.2 provides a list of traditional views and compares it against newly developing/developed perspectives. For instance, no longer are the revered jobs only in academia, government, and large corporations. As noted in Shim et al. (2008), more Koreans, especially the younger generation, are now looking for opportunities as entrepreneurs rather than seeking jobs at the family structured large conglomerates. Today in Korea, few college students are excited about working in large corporations. Their role models are not government officials or executives of large corporations but entrepreneurs who have built exciting companies in industries of their choice. Starting and running a small business is now a widely acceptable career choice even among the older generation. Views toward business and money have also been changing. The financial success of the entrepreneurs and their newly gained social status are raising people’s respect for commerce. People’s perceptions of women as business executives are changing, as entrepreneurial careers have given women an opportunity to showcase their management capabilities. The emergence of new technologies has given young people similar opportunities. The perception of entrepreneurship has been changing, in part, as increasingly more respected people pursue it (academics and corporate employees), and as their financial earnings have more than impressed people. It has also helped that people have realized the positive impact that ventures can generate for the country’s economy. To emphasize, not all the changes in Korean values and perceptions are to be blamed on/credited to entrepreneurship. But there is little doubt that the rise in entrepreneurial activities has produced an effect. We should note that the dramatic changes in value systems and perceptions do not come without concerns by some people. For instance, many adults are

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Table 4.2

Changing views toward business and entrepreneurship

Traditional

Developing

Commerce is an occupation that deserves low social esteem.

Entrepreneurship is rewarding for the individual and society and should be encouraged.

Money should not be considered a useful measure of one’s contribution in society. The best jobs are found in academia, government, and large corporations. People should contribute to the country’s development, e.g., through academia and government jobs. It would be difficult for women to succeed in business, especially as executives. A young person needs years of training and experience in life to succeed in business.

Money can be an accurate measure of one’s success. The best academics and managers leave their jobs to pursue their personal dreams. People should follow their hearts and dreams. Large numbers of women can be successful in business as evidenced by successful women entrepreneurs. Young people can create great technologies and build innovative companies.

concerned that young people are more excited about playing video games or thinking about making money than studying. Some traditionalists are troubled that a majority of South Koreans in their 20s and 30s are so focused on their careers that they remain unmarried (Choe, 2007). Others worry about the low birth rates of Korean couples, now one of the world’s lowest, as more women are pursuing their careers (Choe, 2007). On the other hand, people point out that the country does not provide the right environment for entrepreneurship, in part because of its unpredictable political/economic system. Jun Hajin, Vice Chairman of the Korean Venture Association, warns, “So much of the country is still being run by government officials and large corporations. The very brightest still want to remain as employees of law firms and large corporations. This does not foster entrepreneurship and the needed social changes to compete effectively in the 21st century” (Jun, H., personal communication, August 15, 2008). Interestingly, there are scholars who are not at all worried about the rapid cultural changes. They view the changes as a sign of the times that are necessary for Korea’s continued advancement in economic and technological developments. Shim et al. (2008) also commented that “the extremely collectivist approach of solidarity” of the past “was not well suited to coping with the new era of globalization,” and that recently “Korea’s collectivist tradition has begun to move closer to individualism in the interest of the country’s economic progress.” In fact, Choi Chung Ok, a sociologist and youth expert with Kyonggi University, suggests that what

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the older generation frequently interprets as irresponsibility, disrespect, and frivolity may in fact be South Korea’s economic salvation. Parents frequently badger their children to study endlessly, to get jobs in giant manufacturing companies, and to stop playing video games, messing around with animation programs, and listening to Asian pop music. However, Choi says that young Koreans are picking up skills needed to survive as globalization seeps into Korea and very different service industries emerge. He explains, “Young Koreans are much smarter than their parents’ generation gives them credit for” (Magnier, 2001). What Korea may be searching for, according to Lee and McNulty (2003) is a new balance between traditional corporatism/collectivism and Western-style individualism to meet the demands of the contemporary global market. Indeed, it would be interesting if self-centered and materialistic (male and female) youth, with their disrespect to authority and interest in entertainment, turned out to be the needed foundation for a more entrepreneurial and stronger South Korean economy. Comparing the Korean and U.S. Experiences with Entrepreneurship Given the generalizations often made about Korean or American cultures (including in this chapter), one could come to an oversimplified conclusion about the differences between the Korean and American experiences with entrepreneurship. One might, for example, hastily conclude that entrepreneurship was always welcome or that it has not stirred any conflicts with people’s value systems in the United States. It should be noted that there are important similarities as well as differences between the two societies’ experiences. First, the United States has also been changing rapidly with time as a consequence of business and entrepreneurship—especially compared to many European countries. South Korea, of course, is not the only society undergoing cultural change as consequence of new trends in business and entrepreneurship. In the past, the United States, too, was a far more conservative society than it is today. Age and position in society used to be highly revered. Chaebol-like families played an important role in the economy, with such names as Rockefeller, Hunt, Whitney, Ford, just to name a few. They also had strong political ties that they exploited for business purposes. Moreover, it would be wrong to say that Americans do not respect discipline, teamwork, loyalty, hierarchy, and group stability—traits that many American organizations strongly value and work toward. Of course, even today, there are organizational hierarchies that can be found in the United States even among the most entrepreneurial organizations. Interestingly, this issue reflects a common misunderstanding

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among Koreans we spoke with over the years about the hierarchies and roles in U.S. organizations: Koreans often mistakenly think that because workers in the United States often call their boss by his/her first name, there is little authority on the part of the boss. In actuality, U.S. managers have tremendous authority including the ability to fire their employee— something that most Korean managers, other than those at the very top, do not have. Thus, some of the noted differences are not as significant as one might think. However, there is no doubt that while both South Korea and the United States went through similar types of experiences, South Korea has gone through much more dramatic changes. Koreans have had an extreme and perhaps unhealthy obsession with values such as loyalty, hierarchy, respect, and stability. Korea had no choice but to go through a set of drastic cultural experiences because its values were so inconsistent with commerce and entrepreneurship. In comparison, the United States never had to go through a long period in which commerce was poorly regarded. On the contrary, entrepreneurs there were respected and recognized from early on in the country’s history. America’s traditional values such as individualism and self-reliance were generally consistent with entrepreneurship. Overall, the United States, since its early days, had established a relatively favorable pro-business and pro-change culture that South Korea did not have until a few years ago. Thus, a big difference between the two countries is the vast cultural momentum South Korea had to overcome and the speed at which Korea had to adapt to the changing values. A strong similarity between the two countries is their people’s enthusiasm for entrepreneurship. Perhaps America was always about taking risk, with its early settlers being forced to travel over stormy seas. Even today, the entrepreneurial traits mentioned here, such as creativity, independence, flexibility, and individual initiative are regarded highly in America among entrepreneurs as well as large corporations. Although Koreans did not have to cross the Atlantic Ocean, they exhibit strong entrepreneurial tendencies as the GEM studies mentioned earlier have demonstrated. Koreans seem to have the passion and determination comparable to that of Americans. In both countries, some of the leading beneficiaries of increased entrepreneurial activity seem to be those who were often most marginalized. In South Korea, it may be the women and the younger professionals who are most passionate about entrepreneurship. In the United States, ethnic minority groups, such as those of Jewish or Asian American heritage, have been some of the most entrepreneurial. In Silicon Valley, a third to 40 percent of entrepreneurs are of Asian descent. In both countries, young people have quickly become the face of technology entrepreneurship.

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With increased adoption of entrepreneurial values by both cultures and globalization of business practices, the two are likely to become more alike. Indeed, Korea appears to be increasingly more American or “Western” with time in many aspects of its business and social behavior. As the pace of change increases and business increasingly rewards innovation and independent thinking, the social changes in South Korea will continue— and the two societies may look increasingly similar. References Choe, S. (2007, June 6). Traditional Korean Marriage Meets on the Internet. New York Times. Retrieved July 2009 from http://www.nytimes.com/2007/06/ 06world/asia/06korea.html?_r=1&scp=5&sq=Korea%20marriage&st=cse. Choi, D. Y., S. Elkinawy, and S. Wang (2008). South Korea’s Small & Medium Enterprises: Their Current State and Efforts Toward Globalisation. The Changing Face of South Korean Management. Routledge Working in Asia Series. In press. Flanagan, S. C., and A. R. Lee (2000). Value Changes and Democratic Reform in Japan and Korea. Comparative Political Studies 33: 626–59. Global Entrepreneurship Monitor (2000). Babson College, Babson Park, MA. ——— (2005). Babson College, Babson Park, MA. Hall, James (2008, April 19). Profile: Sung-Joo Kim. Telegraph.co.uk. Retrieved January 20, 2009 from http://www.telegraph.co.uk/finance/newsbysector/ retailandconsumer/2788489/Profile-Sung-Joo-Kim.html. Ingelhart, R. (1997). Modernization and Postmodernization: Cultural, Economic, and Political Changes in 43 Societies. Princeton, NJ: Princeton University Press. Jung, Ku-Hyun (2002). An Upsurge of Entrepreneurship in Korea and Its Possible Reasons. Prepared for Expert Workshop on Entrepreneurship in Asia: Creating Competitive Advantage in the Global Economy, Hong Kong, July 8–11, 2002. Kirk, Donald (1994). Korean Dynasty: Hyundai and Chung Ju Yung. Armonk, NY: M. E. Sharpe. Kuratko, D. F., and Richard M. Hodgetts (2007). Entrepreneurship: Theory, Process, and Practice. Mason, OH: Thompson. Lee, C. (2008, April 10). Troubleshooting Internet Auctions: Part Eight of a Series about Creative CEOs. JoongAng Daily. Retrieved January 25 from http://article. joins.com/article.asp?total_id=3105430. Lee, H. C. (1999). Transformation of employment practices in Korean businesses. International Studies of Management & Organization 28(4): 26–39. Lee, H. C., and M. P. McNulty (2003). Korea’s economic crisis and cultural transition toward individualism. Esri Discussion Paper Series No. 71. Tokyo: Economic and Social Research Institute Cabinet Office. Lee, N. (2008, March 14). The Rags-to-Riches Story of a Software Pioneer. Joong Ang Daily. Retrieved on January 25, 2009 from http://joongangdaily.joins.com/ article/view.asp?aid=2887390.

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Lee, W. (2006, July 23). Webzen Chief Predicts Best Year Yet in 2006. JoongAng Daily. Retrieved January 26, 2009, from http://joongangdaily.joins.com/article/ view.asp?aid=2755302. Magnier, M. (2001, November 25). Ethos of respect slowly seeping from youth of Korea, UNICEF poll shows many don’t respect elders. The Los Angeles Times. Retrieved on February 1, 2009, from http://articles.sfgate.com/2001-11-25/ news/17627171_1_korean-role-models-grand-national-party. Moon, I. (2001, November 26). Cracking Korea Inc.’s Glass Ceiling: Career Women Are Making Headway. Business Week. Retrieved February 2, 2010, from http:// www.businessweek.com/magazine/content/01_48/b3759149.htm. Onishi, N. (2005, August 21). South Korea, in Turnabout, Now Calls for More Babies. New York Times. Retrieved January 28, 2010, from http://www.nytimes. com/2005/08/21/international/asia/21birthrate.html. Park, Hun Joo (2002). Political Economy of Small Business in Korea. Journal of Contemporary Asia 32(1): 91–107. ——— (2006). The Perspective of Small Business in South Korea. KDI School Working Paper Series, 06–13. ——— (2007). Small Business’ Place in the South Korean State-Society Relations. Asia Journal of Political Science, 15(2), 195–218. Park, H., M. T. Rehg, and D. Lee (2005). The influence of Confucian ethics and collectivism on whistle-blowing intentions: A study of South Korean public employees. Journal of Business Ethics 58: 387–403. Park. T. K. (1997). Confucian Values and Contemporary Economic Development in Korea. In Culture and Economy: Shaping of Capitalism in East Asia by Timothy Brook and Hy V. Loung. Ann Arbor. MI: University of Michigan Press. Preer, Robert (2008, April 13). Start small when buying a steam cleaner. The Boston Globe. Retrieved January 29, 2010, from http://www.boston.com/business/ articles/2008/04/13/start_small_when_buying_a_steam_cleaner/. Pye, L. W. (1985). Asian Power and Politics: The Cultural Dimensions of Authority. Cambridge, MA: The Belknap Press of Harvard University Press. Shim, T. Y., M. S. Kim, J. N. Martin (2008). Changing Korea: Understanding Culture and Communication. New York: Peter Lang. Small Business Corporation (2006). Small and Medium Business Economy, April. Song, Y. H., and Christopher B. Meek (1998). The Impact of Culture on the Management Values and Beliefs of Korean Firms. Journal of Comparative International Management 1(1) (June 1998). Sonia, E. K. (2001). Korean Management. Business in the Asia Pacific. Stimpson, D., P. Robinson, S. Waranusuntikule, and R. Zheng (1990). Attitudinal characteristics of entrepreneurs and non-entrepreneurs in the United States, Korea, Thailand, and the People’s Republic of China. Entrepreneurship & Regional Development 2(1) (January): 49–56 Underwood, H. (2007). Living in Korea. Korean Culture. Obtained August 11, 2008 from http://www.seoulunionchurch.org/koreanculutre.htm.

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The Effects of Family Values on Entrepreneurship in East Asian Countries In Hyeock Lee and Yongsun Paik

Abstract In this chapter, we investigate characteristics of entrepreneurial family firms across three East Asian countries (Korea, China, and Japan), and suggest that these firms exhibit heterogeneous characteristics depending on the unique combination of the formal and informal institutional constraints surrounding each country. Further, we assess the effects of Confucianism on the role of the family in the process of their firm creation, and identify hierarchical relationships, paternalism, seniority, and preservation of group harmony as common characteristics of entrepreneurial family firms across the three countries. Several management issues they face are discussed. Introduction Entrepreneurship is a process of creating new companies by combining goods and services, and the people who create the new organizations in the process are referred to as entrepreneurs (Gartner, 1989, 1990, 2001; Aldrich, 2003). Entrepreneurs are understood as those with unique ideas and personal traits leading to the creation of new firms. And understanding how new opportunities are identified, developed, and exploited by them is the crux of firm creation (Venkataraman, 1997). New firms created by entrepreneurs are always subject to the liabilities of newness, which

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incur them a greater risk of failure than established incumbent companies, and result in additional firm-specific costs due to their relative lack of legitimacy (Aldrich and Fiol, 1994; Zimmerman and Zeitz, 2002). They need to implement effective entrepreneurial strategies to counteract the liabilities, for example, by building up interpersonal ties and/or interfirm networks, locating in clusters with related companies, and sometimes depending on the resources made available by local/central governments. In particular, family has been instrumental in overcoming these liabilities as entrepreneurs naturally prefer to embark on their business opportunities with someone they can trust. Confucian ethics regard family as the most fundamental unit, and the interests of the family take precedence over those of society and of other members of society (Chen, 2004). Under the influence of this concept, business owners tend to regard their business as the private property of the core family, and thereby are reluctant to share ownership with others. This view is still prevalent in China and Korea. The Japanese concept of family, however, is different, as it includes not only blood ties but also the concept of clan or household. Therefore, for example, production knowledge is regarded as the property of the network partners through a shared identity in the Japanese automobile industry (Dyer and Nobeoka, 2000). Such a difference in the concept of family is crucial to understanding the differences in ownership and management of entrepreneurial firms in East Asian countries. According to an institution-based view of firms, strategies of firms differ from country to country (Peng, 2002, 2003). Strategic choices by firms are inevitably affected by both formal (such as political rules and market contracts) and informal (such as cultural norms and socially accepted norms of behavior) contexts of a given institutional environment in different countries. This tendency is expected to be intensified in the entrepreneurial process of new firm creation, because entrepreneurial firms need to explore new ways of doing business to overcome the liabilities of newness. They need to develop a broader set of new formal and informal ties within a given institutional context than established incumbent firms (Peng and Zhou, 2005). Across different countries, this tendency will lead to differences in characteristics of the entrepreneurial process, the entrepreneurs who create the new firms, and the strategic choices made in the process. For example, political nimbleness and interpersonal harmony, called “quanxi,” have been important for successful entrepreneurship in China (Liao and Sohmen, 2001), whereas formal cooperative institutional relationships among business, academia, and government have encouraged knowledge transfers among entrepreneurs in Japan, leading to the successful creation of new firms there (Rowen and Toyoda, 2002). In Korea, most entrepreneurs were engaged in research institutes and educational institutions rather than

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having much business experience prior to their start-up ventures (Sung, Gibson, and Kang, 2003). The objectives of this chapter are threefold. First, we will discuss the institution-based view of firms and suggest a framework to categorize the different characteristics of the entrepreneurial process and entrepreneurs under different institutional contexts. After we position each of the three major countries of East Asia (i.e., Korea, Japan, and China) in each group of the framework, we will discuss the different characteristics of entrepreneurship across these three countries through a literature review. Further, we will assess the effects of Confucianism on the entrepreneurial process of firm creation to highlight the common characteristics that family firms possess. Challenging management issues facing the family firms will be discussed before concluding this chapter. The Institution-Based View of Firm Strategy Institutions are defined as “the humanly devised constraints that structure human interaction” (North, 1990, p. 3), where “regulative, normative, and cognitive structures and activities provide stability and meaning to social behavior” (Scott, 1995, p. 33). Institutions determine the nature and speed of strategic changes in firms in different institutional contexts, but they are also changed by the coevolutionary interactions among institutions, organizations, and strategic choices made by firms (North, 1990; Oliver, 1997; Carney and Gedajlovic, 2002; Peng, 2002; Peng and Zhou, 2005). Therefore, the interdependence between them is inherently dynamic, not static. The recent focus on institutions surrounding firms, strategic choices, and their performance is an important departure from an industrybased (Porter, 1980) and/or a resource-based view of firms (Barney, 1991) in the previous literature. An institution-based view of business strategy is now emerging as one of the strategy tripods for explaining strategy choice and firm performance in different countries (Peng, 2002; Peng, Wang, and Jiang, 2008). There are two main dimensions determining the current status of institutional contexts in different countries—formal and informal institutions. The formal institutions constrain firm behavior and strategy choice in an explicit manner through transparent political rules, government regulations, legal decisions, and individual market contracts, etc. (Peng, 2002). The informal institutions set, on the other hand, rather implicit constraints embedded in the culture, norms, cognitions, and ideologies of different countries (Scott, 1995; Peng, 2002). An insight elucidated by making this distinction is that whenever formal institutions are not sufficiently developed, the informal institutions will start to replace or

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complement the incomplete formal institutions (North, 1990; Peng, 2000). Therefore, there exists a close interplay between the two, in which they can be both substitutable and complementary with each other, leading to different strategic choices and firm performance, depending on different environmental contexts. By combining the two dimensions of the institutions, we can suggest a framework for explaining the different configurations between formal and informal constraints in different countries with a simple two-by-two matrix as follows. Quadrant 1 describes a situation where a country has strong formal institutions, but it has weak informal constraints. In this situation, it is expected that political rules are designed and implemented based on explicit consensus and agreements by individuals, and government regulations are usually transparent and predictable. Therefore, individual market contracts can be protected by enforceable legal decisions, minimizing the uncertainty and transaction costs accompanied by most transactions. Most of the developed countries (such as Japan in this chapter) can be positioned in this quadrant. Quadrant 2 is a situation where a country has neither strong formal or informal institutional constraints. Most of the underdeveloped countries Informal Institutional Constraints Weak

Strong

1

3

2

4

Strong

Formal Institutional Constraints

Weak

Figure 5.1 An institutional-based view of firm strategy

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can be positioned in this quadrant. Although there might exist unexplored underlying opportunities in these countries, they are usually regarded as being unpredictable and will likely be inefficient in designing and implementing effective strategies to exploit them. Quadrant 3 is the area where countries have both strong formal and informal institutional constraints. Most of the transactions in these countries are expected to depend on open, transparent, and predictable political, legal, economic, and administrative regimes. However, in order to facilitate the process and/or to achieve a deeply integrated relationship with counterparts of the transactions, understanding of the underlying cultural attitude, social and organizational norms, and the cognitive process of individuals in the country is also indispensible for the success of business strategies there. Therefore, both formal and informal institutions become complementary rather than substitutable with each other in this quadrant. Newly developed countries in Asia Pacific regions (such as Korea in this chapter) can be positioned in this quadrant. Quadrant 4 depicts the case where countries have a strong development of informal institutional constraints, but lack strong formal institutions. In this case, implicit relationships with counterparts become important for achieving the successful implementation of strategies based on mutual trust, face-to-face interactions, and similar ideological orientations. Since formal institutions do not function very well in these countries, strong informal institutions start to replace the weak formal institutional constraints resulting in substitutability between the two. Most of the emerging economies (such as China in this chapter) can be positioned in this quadrant. Depending on the circumstances and conditions in each country, it is likely that firms benefit from one type of institution more than the other type at a certain point in their developmental process. For example, although both dimensions are essential for the determination of institutional constraints of a country, informal institutions based on a person-toperson-relationship transaction (i.e., network-based strategy) seem more important in the early stage of development, whereas formal institutions with an impersonal rule-based exchange regime (i.e., market-based strategy) become more significant during the later stage of development of each country’s economy (Peng, 2003; Yang and Li, 2008). In East Asian countries, it should be noted that family is the most fundamental unit of society, and this is governed by its national culture. As Hofstede, Deusen, Mueller, Charles, and Business Goals Network (2002, p. 800) suggest, culture is “a substratum of institutional arrangements,” and it is regarded as one of the important factors determining informal institutions (Peng et al., 2008). Therefore, the family value of each country is affected by its informal institutional constraints, mediated by its unique

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national culture. For example, in the case of an emerging economy, such as China’s, there exist market uncertainty and regulations imposed by its government (Dieleman and Sachs, 2006), which make newly created businesses typically family owned and controlled thorough internal financing (Ahlstorm, Young, Chan, and Bruton, 2004; Yeung, 2002). However, as economies, such as Korea’s, evolve into newly developed ones, the personalized ownership structure via family starts to be replaced by a more impersonalized market-based transaction to control the uncertainty (Yang and Li, 2008) of formal institutions such as capital markets. On the other hand, when countries achieve the matured level of developed countries with formal and bank-centered capital markets, as in Japan, they will encourage new firms to control the uncertainty through tight business networks with suppliers beyond family members (Yeung, 2002; Bastos, 2001; Ibata-Arens, 2004). This has been strongly evidenced in Japanese automobile industries with the Toyota Motor Company as an example (Bastos, 2001: Dyer and Nobeoka, 2000). In the next section, we will discuss different characteristics of entrepreneurship across the three countries in more detail, highlighting the effects of family values on three fundamental issues in the entrepreneurial processes— transaction costs from creating new firms, resource scarcity and dependence, and the management of uncertainty leading to firm growth respectively. Institution, Family Value, and Entrepreneurship in East Asian Countries Transaction Costs, Asset Specificity, and Opportunism As was mentioned in the introduction, entrepreneurship refers to creating new organizations (Gartner, 1989, 1990, 2001; Aldrich, 2003). It aims to produce additional values to the economy, but its process is costly partly due to entrepreneurs’ resource scarcity. They need to purchase inputs to combine goods and services by paying transaction costs (Coase, 1937), such as searching for a supplier, negotiating a price for the inputs, and making an additional investment to facilitate the transaction. When the process requires a specialized investment that cannot be readily adaptable to other transactions, it will create asset specificity leading to opportunistic behavior on the part of partners who transact with the entrepreneurs (Williamson, 1973). This will incur additional unrecoverable costs on the part of the entrepreneurs. Emerging economies that depend on an informal institution suffer from higher transaction costs than developed economies that possess a stable formal institution (North 1990; Peng 2003) because the lack of

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formal legal systems increases the relative costs of relation-based contracts compared to rule-based legal contracts (Peng and Zhou, 2005). These costs become substantial especially when market imperfections exist, which encourage new firms to internalize the increased transaction costs by devising internal markets to acquire inputs (Chang and Hong, 2000). Therefore, entrepreneurial firms need to depend on informal personal ties with family members instead of market transactions under the prevalence of informal institutional constraints to reduce the unrecoverable transaction costs from the opportunism. Karra, Tracey, and Phillips (2006) suggest that altruism from the same family reduces the transaction costs in the early stage of new firm formation. Strong ties with family members have been referred to as a mechanism to decrease the risk of opportunistic behavior by offering a trust-based person-to-person relationship to both partners involved (Granovetter, 1985; Peng and Zhou, 2005). Chinese entrepreneurs have great concerns about trust due to the lack of a predictable and transparent legal enforcement system in China (Liao and Sohmen, 2001), and are linked together by their cultural uniqueness from the strong value they place on family (Peng, 2002). Liao & Sohmen (2001) suggest that this is why Chinese entrepreneurs feel most comfortable employing family members with minimal compensation in their newly created companies. A similar view is still applicable to nascent entrepreneurs in Korea, but with the development of formal institutions, including bank-centered capital markets, start-ups or entrepreneurs in Korea are not as dependent on family members as their Chinese counterparts are. Japan is a different story. Rowen and Toyoda (2002) suggest six major factors that supported the emergence of entrepreneurial firms in Japan—the rules of the game; the creation of a knowledge-sharing environment; the merit system; a social climate rewarding risk-taking; cooperative institutional relations among business, academia, and government; and a strong financial infrastructure—all of which are good evidence for the solidness of formal institutional constraints in Japan. Further, Japanese firms have been found to depend on the keiretsu network systems based on trust-building with a high level of asset specificity, but with reduced transaction costs under the stable formal institutional context (Peng, 2002; Rowen and Toyoda, 2002). The geographical proximity of the network system also contributes to the strong relationships between partners, keeping them from taking advantage of each other (Deeds and Hill, 1998). Resource Scarcity and Resource Dependence According to the resource-based theory of the firm, entrepreneurs should possess something unique for the creation of their new firms (Wernerfelt,

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1984; Teece, Pisano, and Shuen, 1997). However, they traditionally suffer from resource disadvantage compared to established incumbent firms due to the liabilities of smallness. Therefore, they need to overcome this disadvantage by creating access to the resources they need that other partners already possess. According to the survey by Masuda (2006), access to capital is the most important requirement for prospective entrepreneurs to start their own businesses. Blanchflower and Oswald (1998) demonstrate that the probability of being self-employed depends upon whether the entrepreneurial individual had an inheritance in the past. Liao and Sohmen (2001) also show that most entrepreneurs receive funding for their new business from personal savings and family, because they usually value the resources collected from their personal networks (Butler, Brown, and Chamornmarn, 2003). The institution-based view discussed in the earlier section points out that the extent of entrepreneurial firms’ resource dependence on family is determined by the formal and informal institutions of the countries in which they operate. Under the strong informal institutional contexts where the financial, legal, and regulatory institutions are not matured enough, as well as in emerging economies, the flow of capital is extremely inefficient compared to that in mature market-driven economies. This creates an incentive to develop internal capital markets with family members to reduce the risk of potential capital loss. Chinese entrepreneurs prefer the arms-length transactions for securing access to capital based on personalized relationships, quanxi, which have been identified as the basis of the strong competitive advantage enjoyed by Chinese entrepreneurial firms (Carney and Gedajlovic, 2003). As economies evolve from informal-based institutions to marketoriented formal institutions, however, entrepreneurial firms need to explore new resources by developing a broader set of ties through market contracts with outsiders beyond family members for raising capital (Peng and Zhou, 2005). In Korea, there were severe problems in the formal financial institution before the financial crisis in the late 1990s, which made Korea adopt measures to improve formal financial institutions later on (Chang, 2006). Sung et al. (2003) suggest that business incubators provide Korean entrepreneurs with access to their major resources, including capital, and that the Korean entrepreneurs rate their business plan as the most influential factor for their success and growth rather than the availability of financial support. On the other hand, Japanese entrepreneurial firms have been characterized by the central role of the bank and the ownership structure by a network of reciprocal shareholdings (not family members) in the process of their firm creation (Yoshikawa and McGuire, 2008).

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Uncertainty and Firm Growth Uncertain market conditions and unpredictable regulations imposed by the government will severely constrain the identification of new opportunities by the owners of small- and medium-sized entrepreneurial firms, acting as barriers to firm growth. As North (1990) pointed out, the uncertainty surrounding the organizations can be reduced by establishing stable institutions, or, alternatively, by matching institutional characteristics and organizations’ strategic choices (Peng, 2002). As was noted, emerging countries suffer from higher transaction costs than developed countries due to their lack of a stable formal institution to reduce uncertainty and to protect themselves from an arbitrary government (North, 1990; Peng, 2003; Carney and Gedajlovic 2002). Their dependence on informal ties with family members is to replace the formal institution, and it is a natural strategic choice to reduce the underlying uncertainty related to their business activities. Therefore, family members can serve as a good network asset of the small- and medium-sized entrepreneurial firms for the effective management of uncertainty leading to firm growth (Peng, 2002; Peng and Zhou, 2005). In this regard, the argument that Chinese entrepreneurs prefer tightly controlled family owned businesses is strongly supported (Carney and Gedajlovic, 2002). In the case of Japanese entrepreneurial firms, they usually manage the uncertainty by collaborating with their partnering suppliers based on the developed formal institution (Bastos, 2001). Japan, especially, has encouraged close interactions between universities and industry through successive deregulations raising the level of their transparency. Peng and Heath (1996) identify three major strategies for firm growth: generic expansion through hierarchy, mergers and acquisitions in markets, and network-building with partners. Among them, networking activities with the right partners have been indicated as the best way to guarantee firm growth and success, especially for entrepreneurial firms with little legitimacy (Liao and Sohmen, 2001; Lee and Tsang, 2001). The success of Chinese entrepreneurs has been explained by their informal institutional culture favoring closely controlled firms through networking with family members (Ahlstorm et al., 2004). To overcome the transaction costs incurred in the process of firm creation, entrepreneurial firms in emerging economies such as China strive to build a network based on interpersonal relationships to achieve firm growth (Peng, 2000; Chen, 2001; Peng, 2002). Therefore, the main focus of the Chinese entrepreneurial firms becomes the family unit, and their strategic objective is to maximize family wealth, which coincides with the family interests (Carney and Gedajlovic 2002). However, it should be noted that the same characteristics may prevent Chinese entrepreneurial

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firms from achieving more success in the future, because there exists a trade-off between getting additional funds to foster more growth and giving up their tight family owned control (Ahlstorm et al., 2004). On the other hand, Darby and Zucker (1999) found that 88 percent of the Japanese biotechnology entrepreneurial firms were spin-off companies from existing firms with connections to the previous parent firms. Sung et al. (2003) suggest evidence that the most important success factor to the growth of Korean entrepreneurial firms is their business plan followed by strong leadership and technical experts, with network activities as the least contributing factor. Influence of Confucianism on Family Firms in East Asia As mentioned earlier, in order to understand the emergence and development of entrepreneurship in East Asia, it is critical to recognize the concept and the role of the family. Asia is the place where the family business model reigns supreme. In 2004, the magazine Finance Asia estimated that families controlled 40 of the region’s 100 largest companies, while states controlled 38, and just 22 were widely held corporations per the norm in New York or London (Studwell, 2007). Confucianism has long served as the basic social and political value system in East Asia. A proper understanding of human relationships is essential according to Confucian philosophy (King and Bond, 1985; S. H. Lee, 2000; Oh and Kim, 2002). As a consequence, East Asian culture as a whole can be viewed as a “relationship culture,” and the family is the most important prototype of all social organizations (S. H. Lee, 2000; Redding and Hsiao, 1995). Specifically, Confucius instructs on how to handle the five cardinal relationships between king and subjects, father and son, elderly and youth, husband and wife, and between friends. Among these five principles, three are based on family membership (King and Bond, 1985). Confucianism emphasizes compliance with societal norms and to family/group expectations as the basis for proper human relationships in society (Fukuyama, 1995; Yum, 1987). According to Flynn (1999), relationships among family members represent an expressive tie in which the obligations between two individuals arise not from the transaction in which they are currently engaged but from their previously defined relationship. It is noteworthy that Confucianism mostly focuses on preaching on the appropriate relationships between the people you are already familiar with, such as father and son and among friends. Expressive ties are different from an instrumental tie in which the relationship exists only for the purpose of transaction, and both parties enter the relationship only to take advantage of it. For example, when

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you borrow money from your family members, no contract is drafted or signed in the Confucian society. One important aspect of expressive ties is that there are obligations which arise from a shared understanding of the relationship, which does not have to be renegotiated each time two people deal with each other (Flynn, 1999, p. 37). Accordingly, transaction costs will be substantially lower in family firms due to built-in trust among family members as discussed in the previous section. As Confucian values reinforce authority, hierarchy and harmony among employees in organizations (Chung, Lee, and Jung, 1997; H. C. Lee, 1998), family firms in East Asia generally share the following characteristics. Hierarchical Relationship At the risk of overgeneralization, decision making in family firms is typically highly centralized in the hands of the family owners. Family ties of obedience contain elements of authority. Top managers often make major decisions either unilaterally or in small groups. Even though the concentration of authority has resulted partly from the integration of ownership and management as seen in most Korean companies (Chen, 2004), this is also an attribute of the Confucian teaching of respect for authority (Paik and Sohn, 1998). Filial piety is the dominant rule; family members are taught to obey the wishes of the head of the family. Such a high respect for authority is often replicated in family firms in the form of well-defined organizational hierarchies. The decisions made by superiors are rarely challenged, at least in public, and are almost always accepted without question. In this type of organizational context, entrepreneurship is almost always driven by the family head or the owner of the company. The success story of Korean chaebols in the telecommunication businesses is a testimony to CEOs’ commitment of huge financial capital to research and development in the semiconductor industry. On the other hand, CEOs’ autocratic decision making could put the companies at high risk, ending up with an unfulfilled dream for an entrepreneur as illustrated by Samsung’s entrance into the auto industry. Not surprisingly, Hofstede (1991) found East Asian countries, including China, Japan, and Korea, to be among the cultures with large power distance where subordinates are expected to receive the instruction from their superiors and implement it. Paternalism Confucian philosophy expects top managers to reciprocate subordinates respect for authority by showing paternalism or empathy, not only for

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professional tasks but also for personal needs and feelings (Bae and Rowley, 2001; Kim, Sohn, and Wall, 1999; H. C. Lee, 1998; Paik and Sohn, 1998). In a startup company, it is not uncommon for employees to work for long hours without receiving an adequate compensation until the company reaches at least a break-even status. Showing seemingly unconditional support to the company is only possible due to an expectation that their hard work will be eventually paid off by the owner of the company who will take care of them like a father at home. Family firms in East Asia may be able to overcome many disadvantages as a new entrant partly due to such a symbiotic relationship between the owner and the employees, who believe that they are in the same boat. According to Hofstede’s study (1991), Japan was found to be a masculine culture while China and Korea were identified as feminine cultures. Feminine cultural characteristics are particularly strong in family firms in Korea. The Korean cultural ethos, called cheong, may be the best explanation for its feminine characterization. Cheong has no Western translation; it represents a mixed feeling that combines love, respect, affinity, and loyalty. It refers to lingering feelings attached to people, objects, places, or anything else individuals have come in contact with or experienced in their lives. Cheong is an emotional product that evolves gradually and historically from daily life. Sympathy and concern for others are two major characteristics of those who practice cheong. Such an emotional attachment often makes it very difficult for top management in the family firms to make decisions based on economic rationale or logical reasoning rather than personal relationships. However, cheong is different from the Western concept of altruism or charity, which implies a superior power relationship between giver and recipient. Korean givers of cheong equalize the power relationship by appearing to be unskillful or unsophisticated, projecting an image of personal weakness or tenderness (Paik and Sohn, 1998). Seniority Another striking cultural feature of family firms in East Asia is an emphasis on seniority. Confucianism values tradition, which is often translated as respect for experience and heritage. People are disciplined to respect the old and their experiences, demonstrating the precept of Confucian philosophy that age matters. Without exception, the elderly are given priority treatment over the young. An emphasis on seniority suggests that the standards for regulating status within the structure of a company do not follow the predefined properties of the job, but rather are based on the personal profile of each individual. Under this structure, the human resource management system

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gives more weight to personal attributes, such as academic achievement, length of service, and gender, than to the content of a job or the degree of responsibility assumed by the individual employee (Paik and Sohn, 1998). The culturally embedded seniority-based system has worked well for many family firms in East Asia until recently, when the region was hit by the financial crisis in late 1990s. It has been invaluable in creating and maintaining organizational stability and in facilitating organizational learning. However, the Confucian value of seniority in the organization may often be appreciated at the expense of the innovative ideas of young people who want to challenge the conventional wisdom of the older generation, which is the hallmark of entrepreneurship. Preservation of Group Harmony Harmony is the most important value for all family members. To protect harmony, Confucian philosophy also stresses smooth, constructive, and conflict-free interpersonal relations at almost any cost. Therefore, appearance is often considered to be more important than truth, since the former involves face, which one cannot afford to lose in public. Suggesting that East Asia is a shame rather than a guilt culture, Reeder (1987) emphasizes the role of society in controlling the behavior of the members of society. Under the Confucian tradition, people are taught to avoid an open violation of society’s norms at all costs. Social harmony is a highly respected value, violations of which are conditioned to bring shame, and eventually, exclusion from the rest of the society. Such a behavior is also expected in the organizational setting and a free expression of an individual feeling should be controlled so as not to disrupt group harmony. In an East Asian society where collectivism rather than individualism prevails, exclusion from the group is often feared more than any punishment (Paik and Sohn, 1998). Therefore, overemphasis on group harmony may discourage an individual from advancing new and creative ideas, which is a key ingredient of entrepreneurship. Key Management Issues Facing Family Firms Separation of Ownership from Management It is natural to expect that the owner’s family members together with their relatives will occupy the top management positions in family firms. This has been true not only in SMEs where the ownership is heavily concentrated in the hands of a few family members, but also in large conglomerates such

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as the chaebols in Korea. However, the ownership structure of the Korean chaebols is quickly changing. Over the past decade, major chaebols have continued to lose their share of ownership. For example, foreign investors now own a significant percentage of Samsung’s stock. The Lee family’s hold on their company will continue to reduce (Studwell, 2007). In Chinese SMEs, families not only own the company but also tightly control every aspect of management. In Japanese keiretsu such as Mitsui and Mitsubishi, as family ownership and business management have long been separated, the influences of the families on management do not exist. In stark contrast, ownership management is still prevailing in Korean chaebols despite the continued decrease in the share of the ownership. While they are in the process of giving professional managers more decision-making power, most families still hold the key management positions in the companies (Chen, 2004). McConaughy, Matthews, and Fialko (2001) and McConaughy et al. (1998) use the Business Week CEOs and Computstat data to present evidence that firm value is higher when ownership is concentrated in the hands of the founding family than when the ownership is concentrated but not in the hands of the founding family. Given the continued growth of many family firms in East Asia despite very little change in the family ownership, it appears that one can draw the same conclusion for many family firms in East Asia. Corporate Governance Corporate governance may not be an important issue for family firms as long as they are usually engaged in a single business as SMEs. However, as SMEs grow into large corporations, this becomes a very critical issue not only from the financial but also from the legal and ethical perspective. For example, the unique problem stemming from asymmetric information in family firms concerns the corporate governance issue, since CEOs or the top management tend to be both owners and managers. They are different from the hired managers who usually hold a small stake in the company. Managers with relatively large ownership stakes in diversified Korean chaebols often engage in expropriating the dispersed minority shareholders; the lack of transparency magnifies this expropriation. Similarly, an entrepreneur cares about both financial and nonfinancial rewards from projects, while an investor is only concerned about financial performance (Aghion and Bolton, 1992). This suggests that owner-manager firms such as chaebols have generic incentives to seek an expansionary policy unless there is a proper governance mechanism. Entrepreneurs eventually seek private gain at the expense of other shareholders, which is known as tunneling (Johnson et al., 2000; Lins, 2003). Lang and Stulz’s (1994) study

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also demonstrates that diversified firms have reduced the value of the firm compared to specialized firms (average firms in the same industry). Firms that expand mainly into similar activities can enhance their performance by sharing some of their existing skills and hence might have a competitive advantage in these activities. However, the recent restructuring efforts of Korean chaebols after the 1997 financial crisis resulted in considerable improvement in corporate governance by making it mandatory to have outside directors accounting for at least 25 percent of the total number of directors. More importantly, streamlining their businesses substantially reduced the room for rentseeking activities of many chaebols as the owner no longer had incentives to diversify into unrelated and unprofitable businesses. Succession Traditionally, family firms, whether they are large conglomerates or SMEs, hand over their businesses to their offspring, sons in particular. The Confucian effect on succession is generally positive as both founders and successors clearly expect that the business will stay in the family with children receiving equal shares (Chen, 1995). However, inheritance of business by their own family members has been increasingly subject to public scrutiny not only because of their qualification to manage the company but also because of corporate governance issues directly related to ethical business practices such as tax evasion. For example, Kun-Hee Lee had to step down from the chairmanship of the Samsung group as a result of a scandal involving his son in redistributing cross-shareholdings among group companies. The third generation tycoons of chaebols might be accepted culturally in Korea, but they have to prove themselves capable of managing their companies to the next level where they can compete with leading multinational corporations in the global market. Otherwise, their tenure at the very same company founded by their grandfather is at risk. As mentioned above, chaebols in Korea definitely want to maintain strong family control, and the best way is to use money that is not their own. This is how they control, as a whole, all the companies in the group when they probably own no more than 5 to 10%. The Lee family of the Samsung group has tightened its grip on its group by elevating the son of ex-chairman Kun-Hee Lee to chief operating officer. Similarly, the Chung family retains full operational control and decision-making authority for long-term strategic issues of the Hyundai group (Lucas, 2007). The variation in the concept of family across countries is crucial in understanding the differences in ownership, organization, and management of firms in East Asia. The Korean concept of family is strictly based on blood

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relationships (Chen, 2004). The concept of family is interpreted much more broadly in the Japanese corporate world and includes all the stakeholders who contribute to the growth of the company. Consequently, it is totally acceptable that non-family members inherit the business from the founding families since the succession of businesses is mainly determined based on ability and managerial competence. In East Asia, some of the expectations generated by membership of the same family may even extend to the ties between people from the same province, country, or region. In fact, firms in East Asia are a set of strongly connected nodes and may themselves become a node in a network. A group of companies may have such strong ties with each other that they constitute a node even though each part of the node is under different ownership (Flynn, 1999). As a keiretsu in Japan may be a node consisting of relatively equal connections, the influence of founding family members is nonexistent in large Japanese companies. In stark contrast, a chaebol in Korea may be a node in the economy and dominated network. The networks of companies surrounding the chaebol in Korea are a good example of a hierarchical network in which some members in the network are more dependent than others (Flynn, 1999). Chinese perception of family is more similar to Koreans than to Japanese. Conclusion In this chapter, we discussed different characteristics of entrepreneurship and/or entrepreneurial processes across three East Asian countries—Korea, China, and Japan. For this purpose, we introduced an institution-based view of business strategy, which is an important departure from the traditional industry-based and/or resource-based views of strategies in management and entrepreneurship. Simply put, the main characteristics of entrepreneurship across the three countries are shown to be heterogeneous depending on the unique combination of formal and informal institutional constraints surrounding them. For example, substantial volumes of previous literature argued that Chinese entrepreneurs try to minimize the transaction costs in the early stage of new firm creation by partnering with trust-based family members due to the lack of formal institutions. However, with the development of a formal institutional context, the emergence of entrepreneurial firms in Japan has been made possible based on its knowledge-sharing environment and the cooperative institutional relations among business, academia, and government. Regarding the resource dependence of entrepreneurs, Chinese entrepreneurs are shown to depend on the internal capital markets of their family members to raise funding. However, as economies evolve into those

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with market-driven formal institutions, entrepreneurial firms start to explore new resources of funding beyond their family members as have been evidenced in Japan, and in Korea, after the financial crisis. A similar argument can be applied in explaining how entrepreneurs in the three different countries deal with the uncertainty underlying the entrepreneurial process of firm creation to facilitate their firm growth as formal and stable institutions are developed. Further, we identified common characteristics of entrepreneurial family firms across the three East Asian countries by assessing the effects of Confucianism on the role of family in the process of their firm creation. Not surprisingly, Confucian values commonly shared by the entrepreneurs in Korea, China, and Japan reinforce the highly centralized decision making in the hands of the family owners (hierarchical relationship); family owners’ reciprocation of their subordinates’ respect for their authority through empathy (paternalism); employees’ respect for age and the experience that comes with age (seniority); and smooth, constructive, and conflict-free interpersonal relations (preservation of group harmony) in most of the family firms in the three countries. Our understanding of the main characteristics of entrepreneurial firms in the three East Asian countries, which are influenced by the interplay of formal and informal institutional contexts of each country and by the Confucian ethics regarding family, will give us insights on how to deal with challenging management issues facing the entrepreneurial family firms in the three countries, such as separation of ownership from management, search for appropriate corporate governance, and succession of family firms to their offspring. There is much to be done in investigating entrepreneurial characteristics of family firms across different nations, and we hope that other scholars join us in this discussion. References Aghion, P., and P. Bolton. 1992. An incomplete contracts approach to financial contracting. Review of Economic Studies 59(3): 473–94. Ahlstorm, D., M. N. Young, E. S. Chan, and G. D. Bruton. 2004. Facing constraints to growth? Overseas Chinese entrepreneurs and traditional business practices in East Asia. Asia Pacific Journal of Management 21(3): 263–85. Aldrich, H. E. 2003. Entrepreneurship. In Handbook of Economic Sociology ed. N. Smelser and R. Swedberg. Princeton, NJ: Princeton University Press. Aldrich, H. E., and M. C. Fiol. 1994. Fools rush in? The institutional context of industry creation. Academy of Management Review 19: 645–70. Bae, J. S., and C. Rowley. 2001. The impact of globalization on HRM: The case of South Korea. Journal of World Business 36(4): 402–29.

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Social Entrepreneurship in Korean Education: American Jesuits Open Sogang College John P. Daly, S. J.

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or the past three decades, scholars and researchers have tried to come up with complete definitions of social entrepreneurship. The field, however, continues to mix and match a range of terms to describe it, including nonprofit ventures, social enterprises, social purpose endeavors, corporate responsibilities, and social innovations (Light, 2005). The intention of this chapter is not to investigate the works of scholars in defining what the definitive conundrum of social entrepreneurship is, and when and where the term applies, but to provide evidence that social entrepreneurs existed even before researchers and scholars reached an agreement on the definitions of what they are. Actually, social entrepreneurs have existed throughout the ages. St. Francis of Assisi, founder of the Franciscan Order, would qualify as a social entrepreneur, having built multiple organizations that advanced changes in his field (Bornstein, 2007, p. 3). In the early twentieth century we continued to see many missionaries and educators at schools conducted by those missionaries in Asia who followed their passion in responding to social causes. Another religious organization, the Society of Jesus, better known as the Jesuits, was founded by Saint Ignatius of Loyola. In 1534, he and a few followers bound themselves by vows of poverty, chastity, and obedience. The group was approved as a religious order by the pope in 1540. The original intention of the Jesuits was to form a mission to convert the Muslims of Jerusalem, as missionary work among non-Christians has always been

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a high priority for religious groups. Within months of the order being founded, Ignatius sent his ablest associate, Francis Xavier, to work in the Far East, chiefly in India and Japan. In the 1580s, Jesuit astronomers like Matteo Ricci went to the China Court where their skill at clock-building and their scientific and technical knowledge won them respect and a hearing. It had not been the original intention of the Jesuits to become involved in schools, but popes, bishops, and laymen alike told them that schools were needed, and Ignatius accepted the argument. By 1556 three-fourths of the Jesuits not in training were engaged in schools. Some were schools for the Jesuits themselves, and many of their other pupils were children of the poor or the middle class (tuition was free). However, they made a special effort to enroll the children of kings, nobles, and others in power, learning from early missionaries who had worked with tribes that if you convert the chief, the others tend to follow his lead. Why is Ignatius Loyola placed with educators from Socrates to Dewey as one of the world’s great innovators of education? During the last nine years of his life, he opened 33 schools. Within a century, 300 Jesuit colleges dotted Catholic Europe, and two centuries later, Jesuits operated 740 schools. They were called the schoolmasters of Europe. Today Jesuit schools educate one-and-a-half million students with 90 colleges and universities in 27 countries and 430 high schools in 55 countries. The landmark achievement of Jesuits was to give order, hierarchy, structure, unity, and methodology to education. This chapter is my story, as a Jesuit priest, and as one of the pioneers who established a Jesuit educational institute in Korea, illustrating how we had to adjust our original strategies without sacrificing one of the missions of the Jesuits—serving God through education especially for underdeveloped countries. I want to show how culture effects and affects strategy planning and the process of making changes. I do not claim to be a social entrepreneur, but I reflect on my experience and that of my other American colleagues, some were Jesuits and some were laymen who were willing to participate in our new institute. Using the Jesuit educational system as a model, we advanced systematic changes by shifting perceptions and behavior patterns that were common in our American Jesuit colleges and universities. Along the way, my story examines how we actually made changes by analyzing the strategies of Korean organizational characteristics and cultural values in order to achieve the outcomes we intended. Again, this chapter does not attempt to illustrate or to examine conceptual works or theoretical formulations about social entrepreneurship planning and process, but rather it presents a case study or a story of the American Jesuits in the early days of the Republic of Korea, identifying how they “adopted a mission to create and sustain social value (not just

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private value), recognizing and relentlessly pursuing new opportunities to serve that mission, engaging in a process of continuous adaptation, and learning, and exhibiting heightened accomplishment to the constituencies served and for outcomes created” (Dees, 2001, p. 41). The History of Korean Higher Education The history of Korean higher education, which began in the late nineteenth century is the story of how foreign educators/missionaries adapted Western education to the Korean culture. For over 500 years during the Cho-sun period (1392–1910) Confucianism was accepted as the source of basic principles for national politics, ethics, and education. Prior to the nineteenth century, no formal education system existed, yet the ideas and practices of education were present. At that time, institutes were either state-run or private. The state-run institutes were for the privileged upper class, while the private institutes were for primary and middle levels of education. Education was considered a private matter for the general population, but a public matter for the ruling class. “The primary purpose of higher learning was to acquaint the students with Confucian philosophy and ethics through a course of study composed of Chinese classics” (S. Lee, 1989, p. 88). The state-run institutes prepared the young upper-middle-class men to prepare for the national examinations and enter government service. During the nineteenth century, with the first Korea-US treaty in 1883, several Western missionaries came to Korea, providing a positive influence on the development of Korean higher education. The first missionary, Dr. Horace N. Allen, arrived in 1884. In 1885 Dr. Allen and O. R. Avison opened the first modern hospital named Kwang hye-won (the National Hospital), teaching Western medicine. Later the hospital added a medical school. In 1886, Mary F. Scranton established the first girls’ school named Ewha Haktang, which is now Ewha Women’s University. In 1910 the first college department for girls opened with 15 students (S. Lee, 1989, p. 89). Another notable missionary was Dr. Horace G. Underwood, who published the first Korean-English and English-Korean dictionary. He also founded Choson Christian (Yonhi) College in 1915, which is now known as Yonsei University. These Western missionaries had a great regard for the Korean people and wished to build on their love of education. They introduced higher education in Hangul, the Korean language, removed the Chinese classics from the curriculum and arranged for Korean students to study in the United States. American missionaries are known for influencing the development of higher education in Korea in the following five ways: (1) democratic

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ideology of education; (2) equal opportunity for education; (3) education for women; (4) curriculum development; and (5) the institutional system of higher education (S. Lee, 1989, p. 90). All educational development efforts were brought to a halt during the Japanese occupation from 1910 to 1945. After the Japanese annexation in 1910, their colonial policy forced Koreans to stop the progress they were making in the development of their own educational system. There were extreme restrictions on education at this time and very few opportunities were given to Koreans. The previously established institutions administered by missionaries, such as Ewha School and Soong-sil Union Christian College, lost their college status under the Education Ordinance of 1911. This ordinance was promulgated to place education under Japanese control and to suppress the private schools. Keijo Imperial University was opened in 1924 by the Japanese regime as the only university in Korea while all other institutes were downgraded to three-year nondegree-granting institutions. The admission of Korean students at Keijo was restricted to approximately one-fourth of the total number of eligible students. Once Korea was liberated from Japanese colonization in 1945, Korean higher education was once again under Western influence, and the U.S. military made radical reforms in democratizing higher education. The military authorized a National Committee on Educational Planning (NCEP), whose task was to set up a new educational system and remove the traces of the Japanese colonial education (J. K. Lee, 2006). In 1946, Seoul National University (formerly Keijo Imperial University) was established. The NCEP reorganized and expanded Korean higher education, and a rapid transformation took place. The University of Minnesota assisted the new Seoul National University with exchange programs, and the University of Washington in St. Louis assisted in the development of Yonsei University’s College of Business. From 1945 to 1970, Korean higher education expanded from 19 schools with 7,819 students to 142 schools with 171,356 students (as cited in J. K. Lee, 2000). More growth was seen from 1990 to 1999, when higher education expanded even further from 258 schools with 1,691,681 students to 354 schools with 3,154, 245 students (ibid.). Jesuit Educators/Missionaries Shortly before the Korean War of 1950–1953, the Korean bishops petitioned the Holy Father in Rome to assign missionaries to open a Catholic college in Seoul. The Jesuits were assigned the task, and Jesuits from Japan came to Korea in 1954 to begin preparations.

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The Jesuits founded schools throughout Europe, and then began colleges and universities as missionaries in foreign countries. By the mid-twentieth century there were more than 90 Jesuit institutions of higher learning worldwide, including 28 in the United States. I first came to Korea in 1961 and served as president of Sogang University from 1963 to 1975. This chapter is my story of how the American Jesuits at Sogang from 1961 to 1978 not only adapted to the Korean cultural context, but how, in turn, they were able to make significant contributions and changes in the system that sparked changes throughout the national higher-educational landscape. It may be worthwhile to describe first how the Jesuits were assigned to start a Catholic educational institution in Tokyo 50 years earlier and how Sophia University came into existence. Jesuits go to Japan On October 18, 1908, three Jesuit priests—Fr. James Rockhill, an Englishman belonging to the Buffalo mission in America, Fr. Henri Boucher, a Frenchman from the Chinese mission in Zikawi, and Fr. Joseph Dahlmann, a German orientalist—arrived in Japan to establish a Catholic institution of higher learning in Tokyo, a mission entrusted to them by Pope St. Pius X and the Jesuit General Fr. Francis Xavier Wernz. Five years later, in April 1913, Jochi Daigaku, later known as Sophia University, opened its doors with Fr. Hermann Hoffmann as the first president (Milward, 1989, p. 55). Sophia was based on a European model of higher education that was standard at the time in Japan. Emphasis was placed on lectures and final examinations. Records were loosely kept, attendance was not mandatory, faculty were mostly part-time. From the beginning, Sophia had all the appearances of an international mission, but in 1920 after World War I, it was entrusted to the German Jesuit province (Milward, 1989, p. 59). After World War II, the Jesuit General in Rome asked each of the more than 60 Jesuit provinces to send two Jesuits to work in Japan; and as a result, many Jesuits came from at least 17 countries including the United States, Spain, Italy, Canada, France, etc. These volunteers first spent two years in language school, then were assigned mostly to Sophia. The foreign Jesuits on the faculty studied the Japanese language and culture and blended easily with the Japanese faculty in various departments of the university. They respected the hierarchical structure of the Japanese culture. There were no intercultural conflicts between the foreign Jesuits, Japanese Jesuits, and lay persons on the faculty. The education system at Sophia continued to be based on a European model. Several American Jesuits were

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on the faculty and even served as deans, but they accepted the European university system. The local Jesuit superior, known as the rector—always a Jesuit appointed by the Jesuit Superior General in Rome—served as chairman of the Sophia Board of Trustees and made all the important decisions for the university, while the president, who was more of a faculty manager, could be a Jesuit or layman (Fr. Robert Deiters, S. J., personal communication, November 2008). The Japanese kept the leadership after the war, and German benefactors, especially from the Catholic archdiocese of Cologne, supplied large grants to develop new facilities for the university. Jesuits go to Korea The origins of Sogang University in Seoul were somewhat different. At the end of World War II the bishops of Korea asked the Jesuits to start a Catholic study center or college, but the Korean War (1950–1953) interrupted this project. Fr. Bruno Bitter visited Korea twice after the war, then the Japanese provincial Fr. Pedro Arrupe made a special visit to study the feasibility of starting a university in Korea. He reported to the Fr. General that something should be done for the Catholics in Korea. In 1954, Fr. Theodore Geppert, a German Jesuit who had served at Sophia, was assigned to Korea to begin preliminary preparation for a new Catholic institute of higher education in Seoul. He contacted Sophia’s Korean alumni living in Seoul to look for property. Since Korea belonged to the German Jesuit Province of Japan, four Koreans had joined the Jesuit Japanese province. These Korean Jesuit priests returned to Korea at this time to help in the establishment of the new Korean Catholic college. Then on March 25, 1955, the Jesuit Superior General in Rome published a decree assigning South Korea to the Wisconsin Jesuit Province (Breunig, 1964). The Society of Jesus in the United States is divided into several provinces and each province is responsible for developing and staffing apostolic work(s) in a mission country (where the church needs outside support). In 1954, because of the growing number of Jesuits, the Missouri Jesuit province (comprising ten Midwest states) was divided into two provinces thus creating the new Wisconsin province (six states) with the assignment of South Korea as its mission. This was only one year after the end of the Korean War in which American forces had had the largest share of the fighting, at first with the North Korean army, then with Chinese forces, eventually resulting in the armistice of 1953. So Americans were welcomed in Korea.

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The first work assigned to the Wisconsin Province Jesuits was the proposed Catholic educational institution. Volunteers were called for and more than half of the 600 Jesuits in the Province answered the call. The first two American Jesuits sent to Korea in 1955 to work with Fr. Geppert were Fr. Ken Killoren and Brother Art Dethlefs. A residence was purchased in So-so-Mun Dong in downtown Seoul, and the first Jesuit community in Korea began. Other American Jesuits followed, joining the Korean American Jesuits already living there. Fr. Ken Killoren in 1957 was appointed by the Fr. General of the Jesuits in Rome for a six-year term as rector (superior) of the Jesuits living in Seoul and president of the new college. Funding was available through Jesuit organizations, such as the Jesuit Mission Office in Minneapolis, that raised money from thousands of benefactors keenly interested in Korea as this invitation to start a school came so soon after the end of the Korean War in 1953, which had seen the involvement of so many Americans troops. Additional annual subsidies came from the Propagation of the Faith Office, a Catholic funding agency in Rome for churches and schools in foreign countries. Later, Sogang received grants from both Germany—the Catholic relief agency, Misereor, and the Zentralstelle of the German government—and America—ASHA, the American Schools and Hospitals Abroad Agency, of the U.S. State Department. The first model for setting up the college brought from Japan in 1954 by Fr. Geppert was the European university system described earlier. However, after the American Jesuits were assigned to the Korean mission, the American Wisconsin Province Jesuit provincial, Fr. Leo Burns, decided that the new college should follow the American system of higher education, since the first Jesuits who would be coming to serve in the school would be Americans. In 1959 the dean of Marquette’s College of Liberal Arts was given a six months leave of absence to help develop Sogang. A favorite story of the early Jesuits was that the Dean typed Sogang’s first college bulletin (in English) by lamplight a week before Sogang opened, copying Marquette’s courses and course descriptions. Sogang College opened its doors officially on April 18, 1960, with six departments and 130 students. Three more American Jesuits arrived the following year, and Fr. Geppert returned to Japan that same year after more than five years in Korea. He devoted his great talents to purchasing a downtown residence for the Jesuits, then a suitable campus site, and then worked with the first American Jesuits to obtain the charter from the government and to welcome the other Jesuits as they arrived in Korea. The early Sogang alumni in recent years have honored Fr. Geppert as the “founder” of Sogang University, although Jesuit colleges and universities

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are considered founded by the Society of Jesus and individual Jesuits are not ordinarily singled out as “founders.” So Sogang College was originally expected to be an American-style university staffed by Jesuits with doctorates and trained in American universities. Although the request from the bishops had been simply to found a Catholic college, the Jesuits found they were simultaneously bringing American-style higher education to Korea. Attendance was taken, grades were recorded, and examinations were given during the semester. Korea had been a Japanese colony from 1910 to 1945, and higher education had been restricted to a few institutions. And the education theories and practices of Japan were used, which were more European, especially German, than American. So after the Korean War, the Koreans, now free from Japanese control, were eager to change their higher-education system. Sogang was greeted as a symbolic forerunner of the new American-style university (college). So, despite the small number of faculty and students, Sogang was watched, admired, and imitated. The first American Jesuits in Korea were quick to acknowledge their debt to the Americans Protestant missionaries who had founded schools in Korea. By fortunate circumstances Sogang’s campus in Seoul was close to Yonsei University, and it was also close to Ewha Woman’s University. These great pioneer Western-style universities became good neighbors and in later years established joint graduate programs and library catalogues with Sogang University. Although these universities were founded in the early twentieth century by Americans and had some Americans on their faculties, they followed Japanese educational systems and employed Koreans trained in Japan because Korea was still a Japanese colony. Sogang had the advantage of starting after World War II and the Korean War when Korea was once again a sovereign nation. It also had the greater advantage of being able to hire young Koreans returning to Korea with degrees from U.S. universities, who were comfortable with Sogang’s environment and new opportunities, such as better facilities and higher salaries. American Jesuits and Korean Traditions: 1960–1978 The Korean bishops had requested church authorities in Rome that a Catholic educational institute or institution be established in Korea. Sogang College, which opened its doors in 1960, was based on the 400-yearold educational traditions of the Jesuits, emphasizing a liberal education in a religious context, and it was also based on American educational principles and practices as described earlier. However, the Jesuits studying the needs for this new endeavor found that the patterns, traditions, and

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practices of Korean higher education were deeply embedded in Korean culture. The response of the American Jesuits was first to learn what these patterns and practices were, then to adapt their American or Western contributions to these, and in so doing, create a more effective model that in turn did have a widespread influence and did bring about changes in the Korean higher-education system. A culture is defined as the values and the worldview that have enabled a people to successfully adapt to their external environment and leads them to act and to process necessary change. Since strategy planning is the means by which firms seek to adapt to their environments, a link between culture and strategy appears likely (as cited in Bornstein, 2007). Furthermore, specific cultural values were found to account for some of the cross-cultural differences in the planning and its processes (ibid.). Perhaps the most important Korean traditional cultural value the Jesuits discovered early on was the deep desire of Koreans for education. With its strong historical Confucian influence, Korea was a society based on educational status. A university degree was the ticket to a higher social status. Professors were placed on the top rung of the social ladder. Shim, Kim, and Martin (2008) comment on this cultural norm: “Education is still one of the means of achieving the Confucian value of status, hierarchy, the virtue of elitism, ethical propriety, and security from dependency” (p. 17). Shim, Kim, and Martin go on to point out that Koreans, even today, spend an average of 40 percent of their household income for education to acquire personal status and wealth (p. 18). Shortly after I arrived in Korea in March 1961, I wrote a letter to my sister describing Korea, Seoul, and Sogang with this paragraph about the great desire Koreans had for education: Koreans are crazy about education, particularly college education. This desire to get an education at any cost has resulted in a great number of low grade diploma mills on the one hand, and on the other hand, hundreds of parents are sacrificing their land and homes and means of livelihood in order to send their children to school. (John P. Daly, S.J., personal communication, March 1961)

As the Jesuits sought approval for a charter for Sogang College, they learned quickly the degree to which the central government controlled and regulated all aspects of higher education, even to the smallest details. The role of government, especially the central government, was different from that of the United States. Americans think of government as a regulatory authority, but Koreans consider the role of government as one of control. The number of departments, the number of students to be admitted into

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each department, the size of classrooms, the number of library books required for each discipline, the size of the campus, the qualifications of the faculty and their promotion and titles, the appointment of the president—these and more elements—all needed the approval of the central Ministry of Education. Relationships with government authorities became important. Finally, all approvals were secured and Sogang opened its doors on April 18, 1960, to the students admitted through the first entrance examinations. They were Sogang’s first, but also first in another important sense. The best universities gave examinations first, and then those who failed could take a “second” entrance examination several weeks later in the so-called second tier of universities. Koreans also ranked universities by social classes, “first” meant “top quality.” So the qualified students who failed in the first examinations preferred to wait for a year and repeat the entrance process rather than go to a second-tier university. Since Sogang was new and unknown, it did not receive many applicants, so some faculty argued that Sogang should give these second entrance examinations. It was a practical American assumption that if Sogang chose to give the second examination it would pick up more qualified students from those who had failed the first examination at first-tier universities, such as Seoul National or Yonsei universities. Fr. Killoren as the first president took a risk and made the tough decision not to do this, and thereafter Sogang was considered in the first group of universities—the top group. Then we found another Korean tradition we had not expected. We had planned and had opened a small Catholic liberal arts college with six departments stressing quality. But our Korean colleagues frequently asked how soon Sogang would become a university. Size was as important as quality; nothing small could ever be great. To respond to this tradition, we changed our original goals and successfully secured government approval to open other colleges, including a graduate school, and as a result Sogang was granted a university charter in 1970. Probably the first visible sign of the American/Jesuit presence was the first building built on the campus in western Seoul on No-go-san, the “old lady” mountain. Fr. Killoren and the other early Jesuits designed and had constructed what would be a standard college building in the Midwest with a heating system and indoor plumbing, but for the Koreans passing by No-go-san as the building went up, it became a unique attraction. Koreans did not conduct classes during the winter because they had no adequate heating systems in their schools, and, of course, there could be no indoor plumbing as a consequence. Perhaps the first brave applicants for the entrance examinations were attracted by this new building as much as they were by the age-old Korean traditional love of learning.

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The day after classes began with 156 freshmen on April 18, 1960, the Jesuits learned another tremendously significant lesson about Korean students, their interest in politics. On April 19, 1960, student demonstrations toppled the government of President Syngman Rhee, and all universities nationwide including Sogang were closed for two weeks. American students would take up political demonstrations a few years later, beginning in Berkeley; however, while student political involvement in the United States was regional, it was nationwide in Korea. In the years to come, American Jesuits learned that student demonstrations were an essential element of student life. Students in Korea were the only group that had a voice, particularly during the dictatorial regimes that followed the Rhee administration. As a result, Sogang developed a new, required course on the history of democracy to help students understand the responsibilities as well as the freedoms of democracy. Korean students were the same age as American college students and had completed six years of elementary schooling, then three years of middle school, and three years of high school. It was somewhat comparable to an American primary and secondary education. One difference was the entrance examinations, “exam hell,” as it was referred to. Elementary school was for everyone, but entry to middle schools and high schools was limited, so selection was made by rigorous entrance examinations—so rigorous that students even went to special institutes to cram for the exams. Secondary-school students were required to wear uniforms, and their social lives were restricted. For example, they could not attend movies. So once they had passed the university entrance exams, they were really “kings of the hill!” Their goal had been achieved, and they felt proud. But though students were highly motivated, they also had little money, or rather, Korean families had little money. Korea was still a very poor country, still recovering from the Korean War. In 1961 the tallest building in downtown Seoul was the Bando Hotel—eight stories. I noted this in a letter written one week after my arrival: The city itself is something to see—lots of new buildings and construction work going on, but so much poverty. Thousands offering various services from little box stalls, 15 hours a day, seven days a week, and then sleeping in them. Whole families live in caves, packing boxes, tents, etc. But people seem well clothed and remarkably happy. (John P. Daly, S. J., personal communication, 1961)

I recall meeting an applicant for an office position at Sogang in my first year there who was smartly dressed with a white shirt and tie. Fr. Killoren pointed out that that was probably the man’s only shirt, but Koreans always tried to appear at their best no matter how poor they might have been.

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Tuition amounts, regulated by the government, were low by American standards but too high for many students and parents to pay, so Sogang offered two new “American” ways to help students, an installment plan to pay tuition in two or three payments per semester or by endowed scholarships. Our American benefactors responded with scholarships. When a group of them visited Sogang in 1970, the first lady, Madame Park, came to Sogang to open a one-day bazaar for fund raising. Her daughter had been admitted some months earlier into Sogang. One more point about student admissions surprised us: the treatment of physically handicapped students. At that time the entrance examination included a physical exam. If a student had any physical handicap, he could not be admitted. Sogang was the first to accept such students. One such student later became a well-known writer and professor at Sogang. I asked another student, whose sister had come to Sogang earlier, if he came because of his sister. He said no, he came because he could not enter Seoul National—the tip of one finger had been cut off accidentally when he was a child. Our students lived at home or in nearby boarding houses, so we found another surprise. With our background in American education, we assumed that one of the main qualities of a good college or university was the number of books we held in our library. Even before classes began we had asked our friends in American Jesuit colleges and universities if they could donate extra copies of books they had in their libraries. We also spent many hours ordering new books in our specialties. But we were surprised that our students, even the first Korean faculty, asked us how many seats or study places we had in our library. Students could not study in their small crowded homes, but came to the library to study. So they wanted seats rather than more books. Their textbooks and their class notes were enough for them, especially if they were in English. English Language Teaching One of the significant contributions American Jesuits made to the Korean higher-education system was in the methods of teaching English. After 35 years of Japanese colonization, when the Japanese language was required at all levels of education and even in daily life, and then after the Korean war and the emergence of American forces and American government reconstruction agencies in the 1950s, the Korean people were eager to learn English. In our first years in Korea, we found that there were only a very few native speakers of English teaching in Korean colleges and universities. Korean professors of English literature concentrated on teaching their

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students the correct ways to translate English literary works. I asked one of our Korean faculty members teaching the English novel how many novels he assigned for study during the semester. He answered that one was enough; he spent class time showing his students how to correctly translate the work. Teachers of conversation classes taught grammar while translating English dialogues into Korean dialogues. As a result, students knew grammar, read English relatively well, and could write, but the vast majority had almost no facility in listening to and speaking in English. Building on the Jesuit tradition of emphasizing the liberal arts, we stressed languages, history, philosophy, and theology when Sogang was founded. One of the first six departments approved in Sogang’s charter was the English Language and Literature Department for majors, but perhaps even more important, we required two years of English conversation and grammar for all of the students. And we had native speakers! In the first two or three years, the American Jesuit faculty taught all of the English sections in English and even the teacher’s instructions were in English. Students saw it as a disadvantage not hearing even one word in their own language. Somehow it worked! In a short time, Sogang became well known in Korea as the university in which to learn English—real English conversation—that could be used for getting a good job in a business where English would be necessary. In 1962 we established a volunteer program to recruit graduates of American universities to come to Korea to teach English to freshmen and sophomores. We provided transportation, housing with Korean families, and a small stipend. A year or two later a house was built on campus for the volunteers. Several stayed beyond their two-year commitment for which they had volunteered. In 1966 the American Peace Corps came to Korea and took over the work of the volunteers at Sogang. I set up the first language laboratory with tape recorders in Korea as soon as the first classroom building was completed in 1962. The following year, Fr. John Bernbrock, with a video camera and a new Ampex video recorder, began filming his own English conversation scenes around the city to use in the classroom. He and I received a grant from the Asia Foundation to study English teaching methods in Japan, Okinawa, Hong Kong, and Manila. The Korean Ministry of Education and the American Embassy funded a program at Sogang in 1963 to teach Korean high school teachers the newer methods of teaching English conversation with language laboratories and films and other media products. One of the U.S. State Department films in the early 1960s available at the American Cultural Center in Seoul was a documentary of a small town in the United States called “Small Town USA.” I found out that it featured my home town, Anamosa, Iowa. Naturally, the film was shown to all English

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conversation classes at Sogang, and I could point out some of my friends and neighbors in the documentary. Keeping Grades Another important contribution Sogang made to the Korean highereducation arena was in the field of posting grades and keeping student records. We Jesuits and our Korean lay colleagues on the faculty with their American university training taught using what we would call ordinary classroom practices commonly found in American classrooms. We assigned homework, gave occasional (sometimes daily) quizzes, and scheduled mid-semester examinations as well as the traditional final exam. The early students accepted these new methods though they knew they were not like the traditional teaching practices in other universities where the older Japanese-European traditions of simply offering lectures throughout the semester and then basing final grades on the one final examination were still used. The motto on the Sogang College badge had three Greek letters, IHS, signifying the name Jesus, and was jokingly referred to by the students as “International High School.” For failing students, a rarity for those admitted to Korean universities, Fr. Norbert Tracy, who served so many years as academic dean, issued a “Scholastic Warning” stamped in red on their report cards. Years later, alumni bragged about the “red warnings” they had received. Student Social Life The social life of Korean university students was also surprising for us Americans; the women and men students seemed to keep to themselves. I was told that there was a Confucian tradition that the sexes should be kept separated from childhood until marriage. Men and women students sat in different sections of the classroom, the women students (less than 25 percent of the enrollment) usually sat in front. Sundays were different. The Jesuits were nearly always invited to join students on day-long mountain climbs on the hiking trails in the mountains that surround Seoul. As both men and women students joined in these hikes, Jesuits were sort of chaperones, allowing them to socialize together. Of course, we enjoyed the hikes as much as the students since we came to know them on a casual level, and they told us of their own customs and traditions and of their own hopes and dreams. Sundays were a learning experience for all concerned. In the 1970s, of course, this changed, and students preferred going by themselves.

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Christmas and New Year’s Day were great times as the East met the West. Although the number of Catholic students was small, we offered a solemn midnight mass in our school auditorium. Then after mass we served duk-kuk (a traditional soup made with rice cakes) to everyone, and we all stayed and chatted until sunrise. On New Year’s Day, children honored their parents with the great bow and received a gift of money for their sign of filial respect. Students also show their respect for teachers by visiting them on New Year’s Day. The women students brought out their colorful Korean dresses. The Sogang Faculty The Korean lay men and women who joined our faculty in the early years were the secret of our early success. The majority had been trained in American universities, but they knew Korean traditions, and they helped us avoid mistakes in this ancient culture that was so new to us. One attraction Sogang offered to new faculty was a full-time salary. Most professors at other universities taught only part-time as universities did not have funds for many full-time faculty. Therefore, professors had to teach several courses in several universities. Sogang was fortunate in having funding from outside sources, and the Jesuits on the faculty served without salaries. Fr. Killoren asked the Sogang faculty to stay full-time at Sogang not only to teach their courses but also to counsel the students, and Sogang would pay them full-time salaries. He also told them there would be no bonuses—a practice common in schools and businesses—but would add the equivalent to their monthly salaries. They readily agreed as their monthly take home pay was bigger, but they gradually urged us each year to give one, then two, then four bonuses—as other schools and businesses did. One professor told me the reason. It seems professors always gave their monthly salaries to their wives as Korean women kept the household budgets, but the professors could keep the bonuses! Relation to the Government Sogang is proud of our early Korean faculty members who not only helped Sogang develop, but also were instrumental in Korea’s early economic development. A group of Sogang economists were involved in the development of the first three Five-Year Economic Plans for the government of President Park Chung-Hee. The first economist at Sogang was Dr. Kim Byong-kuk. In 1964 he proposed hiring a second economist, Dr. Lee Seung-yun, from Seoul National University. He and Dr. Lee had both

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received their doctorates from the University of Wisconsin. He was willing to move provided Sogang also hired Dr. Nam Duck-woo from Yonsei University, who had been conducting research with Dr. Lee. Dr Kim as well as Dr. Lee and Dr. Nam at that time were doing research for USAID (the U.S. Agency for International Development) on economic development plans for Korea. The first Five Year Development Plan had been developed under the previous administration of Chang Myun, but it first went into effect in 1962 (Dr. Lee Seung-Yun, personal communication, December 2007). It was found difficult to implement, so an Evaluation Committee was established that met monthly with President Park. Dr. Lee and Dr. Nam were appointed to this committee. These three Sogang professors were awarded grants to conduct research projects for the Korean government. In 1965, a close friend of Dr. Lee and Dr. Nam, Dr. Kim Mahn-jae, was added to Sogang’s economics department faculty. After they published The Scope of Monetary Policy: 1954–1965 in 1968, they were soon nationally recognized as the Sogang School of Economics (Nam, Lee, and Kim, 1968). This group of Sogang economists developed the second and third Five-Year Plans that guided the Korean government in the first years of their amazing economic development. They helped adapt the American economic system into the Korean culture. In 1969, Dr. Nam became minister of finance, then deputy prime minister, and later prime minister. Dr. Lee Seung-Yun also served as minister of finance. Dr. Kim Mahn-jae became chairman of POSCO, making it one of the world’s great steel mills. Dr. Kim Byung Kuk moved to the Philippines to become president of the Asian Development Bank. When I met Dr. Nam several months after he had become minister of finance, he told me with a big smile that the American economic principles he had been teaching for some years did not work in the real world, at least not in Korea. He used the example of raising interest rates to control borrowing as he had taught students in class, but in practice, Koreans just kept on borrowing! When the government established KAIST, the Korean Advanced Institute for Science and Technology, in 1971, President Park called upon Sogang again and appointed our Physics Department chair, Dr. Choh Soon-Takh, as president of the new institute. In 1970 President Park’s daughter, Geun Hye, enrolled at Sogang in the department of Electronic Engineering. After she had gone through the entrance examinations with flying colors and had been officially admitted, the president invited the Sogang administrators to a dinner in the Blue House. In the course of the dinner, Seoul traffic was discussed. One of the

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administrators mentioned that Sogang lacked buses for the faculty. The president pulled out a business card and wrote down BUS in English and put it back in his pocket. As we were leaving, Dr. Nam, then minister of finance, suggested I thank the president for the buses. I had no idea what he meant, I was not expecting the president to give us a bus. Two weeks later, two new deluxe buses were delivered to Sogang so that faculty could be picked up every day.

Appointment of the President The Ministry of Education had to approve the appointment of all college and university presidents. Although Jesuit appointments were made by the Jesuit Superior General in Rome, the designated appointee had to receive the government approval. Fr. Killoren served as the first president and was also the first rector or superior of the Jesuits from 1957 to 1963. His appointment had come from the Jesuit General in Rome and was limited to six years. Shortly before his term ended in June 1963, I received a letter from the General appointing me as president-rector effective July l for six years. We all felt bad for our seniors as they wanted Fr. Killoren to give out the first Sogang diplomas in 1964. Several years later the two jobs, president and rector, were separated, so I was able to continue as president for 12 years. I did resign voluntarily to the Chairman of the Sogang Board of Trustees in April 1975. This was the year that the United States gave up in Vietnam and evacuated all of the armed forces. It was a tense moment in South Korea as some felt North Korea might be encouraged to attack the South again and that the U.S. forces would also leave Korea. Our students nevertheless carried out demonstrations against the government, and the Ministry of Education gave us a list of eight student leaders whom we were to expel from the university. The deans and I felt this was unjust, but we had no choice, so we did expel the students. Then as a symbolic protest of our own, the deans resigned to me and I resigned to the Sogang Chairman. This news was published abroad, and one benefactor, Ed Dailey, president of World Airways, read about the resignation in a Saigon newspaper and when he visited Korea a few days later asked if there was something he could do so that I would resume the president’s position. Actually, at the urging of the Sogang Jesuit Chairman, Fr. Bachhuber, I withdrew my resignation the following day, and a short time later the deans withdrew their resignation, but we had a made a public protest. Incidentally, the eight students all were able to return to Sogang later and graduate. I did resign freely in July 1975, and I recall that shortly before I announced my resignation, I spoke with Prime Minister Kim Jong-pil to see if the

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government might approve another American Jesuit to succeed me. He assured me that the government would go along with the person Sogang and the Jesuits decided on, although he did urge me to continue. But I felt that I had served long enough, and I was pleased with the appointment of Fr. M. Delmar Skillingstad as the next president. He had served Sogang well as treasurer since coming to Korea in 1961. He became president in July 1975. Serving Korean Laborers We were aware from the beginning of our days in Korea that Jesuits had universities in other parts of Asia, such as Sophia in Tokyo, the Ateneo de Manila in the Philippines, Fu Jen in Taipei, as well as high schools in Hong Kong. We traded ideas, and from this exchange, Fr. Basil Price worked with Fr. Walt Hogan in Manila, famous for his work with Filipino dock workers, and developed an Institute for Labor and Management at Sogang that would offer short-term training programs for labor union leaders. It operated with great success from 1966 until 2002 and was generously supported by funds from the German government and other sources. Changes In a few short years, the American Jesuits had introduced a number of changes into the higher-education system in Korea. The Ministry of Education not only approved of these innovations but recommended them to all Korean colleges and universities. ●

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English language teaching methods led the way as we opened one of the first language laboratories with tape recorders in 1962, then made our own television programs, and recruited volunteer native speakers for conversation classes. To make our education available to more students, endowed scholarships were established and a three-installment payment plan per semester was offered for tuition payments. In 1961–1962, following the student demonstration of April 19, 1960, that toppled the Syngman Rhee government, a new, required course was added to the curriculum on the history of democracy to teach students the responsibilities as well as the privileges of their new-found freedom. In 1968 Sogang opened the first computer center. In 1974 we opened the first library with “open stacks.”

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The Sogang founders in a sense were social entrepreneurs in transforming Korean education by bringing Western ideas and practices, primarily American, to Korea. All of their initiatives have now become common in all Korean colleges and universities and have given the Korean higher-education system a worldwide status. Today, we can still say, “We went to Korea to teach and we wound up learning so much.” References Bornstein, D. (2007). How to Change the World: Social Entrepreneurs and the Power of New Ideas. New York: Oxford University Press. Breunig, J. (1964). Have You Had Your Rice Today? Chicago: Loyola University Press. Dees, J. G. (2001). The Meaning of “Social Entrepreneurship.” Draft paper. Retrieved August 30, 2005, from http://www.fuqua.duke.edu/centers/case/documents/ dees_SE.pdf. Lee, J. K. (2006). Korean higher education under the United States military government: 1945–1948. Radical Pedagogy 8(1). Retrieved September 3, 2008, from http://radicalpedagogy.icaap.org/content/issue8_1/lee.html. ——— (2000). Main reform on higher education systems in Korea. Revista Electrónica de Investigación Educativa 2(2). Retrieved September 3, 2008, from http://redie.uabc.mx/contenido/vol2no2/contents-lee.html. Lee, S. (1989). The emergence of the modern university in Korea. Higher Education 18: 87–116. Light, P. C. (2005). Searching for Social Entrepreneurs: Who They Might Be, Where They Might Be Found, What They Do. Paper presented at the annual meeting of the Association for Research on Nonprofit and Voluntary Associations, Washington, DC. Milward, P. (1989). The history of Sophia. In The Future Image of Sophia University: Looking Toward the 21st Century, ed. M. Yanase, pp. 55–75. Tokyo: Nansosha. Nam, D. W., S. Y. Lee, and B. K. Kim (1968). Determinants of Money Supply and the Scope of Monetary Policy: 1954–1964. Seoul: Sogang College. Shim, T. Y-J., M.-S. Kim, and J. N. Martin (2008). Changing Korea: Understanding Culture and Communication. New York: Peter Lang.

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7

Teaching English— A Major Opportunity for Entrepreneurship John P. Daly, S. J.

English Education, Survival, and Globalization English proficiency and technology competence have become key factors in determining access to international power, and in Korea the dominance of English and technology has played a great role as an essential element or incentive in many aspects of daily life, for example, entrance to and graduation from the proper university or selection in the right job market. Those who can access these two elements can obtain and secure their position educationally and, ultimately, socially (M. Kim, 2004). English Language Teaching (ELT) and studying English are more than just teaching a subject or learning a foreign language; rather, they are a major educational factor for the survival of businesses in Korea. As a consequence, as government policies and strategies have constantly changed over the past 40 years to meet international standards of English education, and entrepreneurs in the English education industry have continued to grow. The current president of Korea, Lee Myung-bak, shortly after his inauguration in January 2008, issued a decree asking all levels of schools in Korea, from elementary schools to universities, to teach more classes in English. More Koreans needed to be trained not only in reading or writing English but in comprehending the spoken word and speaking the language so that Korea’s economic and political development continues. Prior to assuming the presidency, Lee’s transition team announced that it would implement a nationwide English-immersion program in order to provide

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Table 7.1

Total dollar amount the Korean Government allocates to education

Year

1984 1990 2000 2008

Billion Won Dollar Billion Won Dollar Billion Won Dollar Billion Won Dollar

Government budget

Ministry of education science & technology development budget

Total public educational expenditures

11,173 10 Billion 22,689 20 Billion 93,937 81 Billion 174,985 52 Billion

2,275 2 Billion 5,062 4 Billion 19,172 17 Billion 35,897 31 Billion

4,728 4 Billion 8,524 7 Billion 31,087 27 Billion 55,541 48 Billion

Ratio to GDP

6.3% 4.6% 5.4% 6.1%

* The current exchange rate as of March 2010. Source: Ministry of Education Science & Technology Korean Education Development Institute (Statistical Yearbook of Education), each year, The Bank of Korea (National Accounts).

students with the language tools necessary to be successful in a highly globalized world. Under this program, all classes would have to be taught in English by 2010. However, Lee abandoned the program after facing strong opposition from parents, teachers, and education specialists. President Lee’s new direction for English language education is partially based on Korea’s export-centered economic strategy emphasizing globalization, but it was also partially due to the past decades of ineffective methods of ELT in Korean schools, which was referred to as the “grammartranslation approach.” The practice has been criticized for creating a lack of practical skills of hearing and speaking English that are needed in daily conversation and even more today in global business practices. As a result, this ineffective practice of ELT in schools has given rise to the growth of private institutes, which sometimes even manipulate government politics and policies in ELT, taking advantage of the age-old Korean “fever for education.” In this chapter, I hope to show first how the history of English language education in Korea is closely connected to Korea’s social and political history; then the growth of entrepreneurships in the English education industry in Korea; and finally, how Y. B. Min, who is known as an educator, social entrepreneur, and philanthropist, became known as a person who gave birth to the private English education industry, and created a conglomerate and got wealthy through his tireless entrepreneurial practices. His story shows that it takes a creative individual with fixed determination and an indomitable will to develop and promote constructive ideas that society needs to tackle in English education and to expand human capabilities. From the beginning of the Korean economic modernization process, the government strategy has been an export-centered economy based on Korea’s

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lack of natural resources. Even now, 70 percent of the Korean economy depends on exports. He saw the importance of people having practical English proficiency in international business practices as a tool for achieving the nation’s economic strategy even before there was a government-established English education system. He also recognized the deficiency of the method of ELT at Korean schools, the “grammar-translation approach,” which made it difficult for people to speak practical English. As a solution, he used a method of ELT by understanding the relationships between the English language, culture, and business in the American context. The English Education Industry is Imbued with Political and Social Power ELT in Korea is closely related to the nation’s history, political power, and cultural needs, creating a social power that constitutes Korea’s political landscape and Koreans’ daily life. Korea is one of those proud countries that have their own language and alphabet. Linguists tell us that it belongs to the Ural-Altaic family of languages that include a great disparity of languages, including Japanese, Turkish, Finnish, even Basque. Koreans have used the Chinese language and Chinese characters for writing for centuries, even more than half of the Korean vocabulary was based on Chinese words (Lovmo, n.d.) even though Korea has developed its their own alphabet and language. In 1443 King Sejong asked a group of scholars to devise an alphabet so that they could express Korean words and sentences in pure Korean without using Chinese characters. “Its invention constitutes perhaps the most brilliant achievement throughout the history of Korean culture” (Korea Overseas Information Service, 1978). However, the position, role, and function of foreign languages in Korea, has not been neutral. Korea had a long history of maintaining a “big brother, little brother” relationship with China until the end of the Lee dynasty in 1905. This was not only the case with economic matters and foreign relations but also to their shared cultural heritages and values. The Chinese language and culture were perceived as the language of privilege and superiority, and Koreans accepted them as from a big brother in the context of the Confucian family system. Chinese characters were used by high-ranking officials and scholars, while the pure Korean language was used by women and the masses who did not know Chinese and could not write the Chinese characters. Today 80 percent of the Korean vocabulary is derived from the Chinese language. Until the late 1970s, Koreans used to use different Chinese words and Korean words for the same object, for example, cold water. Telling the time or dates involved a mix of Chinese and Korean.

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Although Korea is now a country willing to embrace any changes to be competent in global market places, it was known as the Hermit Kingdom as it did not have any foreign contact, although French Catholic missionaries came to Korea in the late eighteenth century. The Korean government at this time was under the strong influence of Ch’ing China. Finally, during the nineteenth century, Korea concluded treaties of commerce with the United States, France, and other Western nations The treaty with the United States in 1882 was the first to be signed, and it was ratified that year (K.-B. Lee, 1984). In 1883, the Korean government introduced English language education to the country when it opened an English school for interpreters; it supported the growth of English language education for the next 22 years (Kim-Rivera, 2002). In the Portsmouth Treaty that ended the Japanese-Russian war, the territory of Korea was ceded to Japan in 1905, and it was made a colony and part of the Japanese empire in 1910. The Japanese language then became the language of Korea and was taught in all the schools. The status of other languages including English was weakened and they were maintained only in private institutions such as mission schools run by foreigners. After the military coup in Japan in 1939, the militarists took nearly complete control of the government, and it soon emerged as an imperialistic power. In Korea the local Japanese government sought the total assimilation of Koreans. The governor-general accelerated the extraction of both human and material resources from Korea to support Japan’s military efforts. In order to do so effectively, Japan’s colonial policy put Korea under the draconian rule of a totalitarianism that was unprecedented. The governor-general adopted a Japanese-only language policy that was extended not only to schools but to Koreans’ daily use of language. The Koreans were even forced to adopt Japanese family names. Publishing in Korean was prohibited, and Korean newspapers and magazines were shut down. English education was virtually put to a stop between 1938 and 1945. As the Japanese engaged in war, the government declared English an enemy language and suppressed its use and teaching (Kim-Rivera, 2002). In 1945 at the end World War II, Japan was defeated and Korea became free on August 15. In the meantime, the Soviet Union had finally declared war against Japan on August 9, and since they shared a common border with Korea, they began to occupy the major cities in the north. U.S. forces landed at Inchon a month later and entered Seoul on September 8. The line that artificially divided north and south Korea was drawn at the 38th parallel. This line became the principal external factor that brought division and tragedy to the Korean people in subsequent years. The North established a communist regime under Soviet military command, while in the South, U.S. forces established a military government but allowed

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political activity. As a result more than 50 parties were formed with resulting chaos. Lieutenant General John R. Hodge, commander of the U.S. 24th corps, was named commander of the U.S. armed forces in Korea. His superior was General Douglas MacArthur in Tokyo, who issued a Proclamation to the Korean People on September 7, 1945, in which he clearly stated the control of the territory of Korea south of the 38th parallel by the U.S. forces, and concluded, “For all purpose during the military control, English will be the official language” (U.S. State Department Bulletin, 1948). The United States Army Military Government (USAMG) in Korea then established the education system of six years of primary school, six years of secondary school (divided into junior and senior levels), and four years of higher education. The USAMG then imposed a new ELT system. Although English had been taught at several Christian schools during Japanese colonization, ELT was historically introduced as part of the secondary school curriculum throughout the country during the three-year period of the USAMG. This mandatory use of English by the USAMG has been criticized by scholars as an example of exercising power and control. It was also criticized as promoting American capitalist ideology (M. Kim, 2004). Although there was a certain amount of resistance to this ruling system, English education in general led the Korean people to blame themselves, not the USAMG, for not being able to make their own choice of language for daily use (M. Kim, 2004). Unlike their response to the Japanese forcing them to learn and use only the Japanese language during the colonization period, most South Koreans welcomed America as an ideological ally sharing the common goal of fighting Communists, and they wanted to learn English even though some said that Koreans had no choice but to accept the control of the USAMG. Despite the efforts of the Japanese colonial government’s policies of prohibiting the Korean language, it is estimated that not even 20 percent of Koreans understood Japanese in 1943, more than 30 years after colonial rule had begun (Kim-Rivera, 2002, p. 266). English education was also further affected by the Korean perceptions of “the Self and Other” and “Superiority and Inferiority” (Pennycook, 1999). “Made in America” and capitalism became the symbols of power after World War II, not only in Korea, but worldwide. The desire to learn English was part of the desire to live and compete in this new paradigm. But M. Kim (2004) blamed the USAMG-mediated Western culture for the inferiority complex Koreans developed in relation to Western culture, and especially to American culture. The period between the Korean War (1950–1953) and the early 1960s, however, was marked by a huge advance in the internationalization of

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Korean higher education. In particular, the active participation of foreign agencies for the development of tertiary institutions is worthy of close attention. The major contributing agencies were the United Nations Civil Assistance Command, Korea (UNCACK), the Korean Civil Assistance Corps (KCAC), the United Nations Educational, Scientific, and Cultural Organization (UNESCO), the International Co-operation Administration (ICA), the Agency for International Development (AID), and the United States Operations Mission to Korea (USOM) (J. Kim, 2000, p. 39; J.-K. Lee, 2000, p. 53). The various aid programs provided many Korean people with opportunities to gain American academic knowledge and advanced scientific skills in foreign countries (J.-K. Lee, 2000, p. 54). For example, the contract between ICA/The University of Minnesota and Korea offered graduate study and observation to 225 Koreans from 1954 to 1962 (Adams, 1965, p. 15; J.-K. Lee, 2004). The missionary schools from the North, such as Soong Sil, reopened in the South; Yonsei and Ewha reopened their doors. English was once again taught and used, but there was a lack of native speakers as well as of Korean teachers and adequate textbooks. The effect of Sogang University on ELT in Korea needs to be mentioned. Its doors opened officially in 1960 as Sogang College. It was founded by the American Jesuit fathers. The story of how and why this came about is related in Chapter 6 of this book. It immediately became known as the “American” college with classes taught in English; and the first professors were predominately Americans, so it was easy to have all English classes for the first two years taught by native speakers. The Sogang English Department also made television programs to encourage students to speak English, so speaking and listening became an important part of the university English courses. Sogang recruited young Americans as volunteers to help in the English classes so that all students would have exposure to native English speakers This was years before the American Peace Corps came to Korea in 1966. They also opened the first English language laboratory in Korea and made their own television programs showing the use of English in every day situations. Sogang graduates were hired by foreign-affiliated organizations and various Korean industries that were affiliated with American businesses where spoken English was essential. After 1970, with the trend of modernization and Westernization of the Korean economy and the Korean consciousness of English being prestigious, there was an expansion of study abroad by Korean students and by parents who were willing to invest in their children’s international education. According to Lee (2004), between 1971 and 1999, Korean students who studied abroad increased by approximately 20 times (7,632 to 154,219 persons). Among the 154,219 Korean students including all school levels,

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53,888 students studied in Canada, 42,890 in the United States, 12,746 in Japan, and 9,204 in China. Only 39 of 154,219 were students on Korean national scholarships, and 186 were students invited from 16 different countries. The others were students financing their study from their own sources, that is, mostly from their parents. The Asian economy crisis in the late 1990s and the IMF bailout in 1997 affected enormously Korean business infrastructures and higher education. With the epochal trend of rushing to globalization having a major effect on the severe economic crisis, the Korean government promulgated the Framework Act on Education in December 1997. One of the stipulations of the act emphasized the objective for international education and skills training so that citizens could be equipped as members of the international community. Along with technology, businesses related to ELT became a national and a societal goal in achieving internationalization. Another interesting phenomenon of the effect of the economic crisis and the trend of globalization was the rise of Koreans’ national pride and their awareness of the importance of sustaining their cultural heritage. Korean language education is now considered as important as English language education. The Korea Foundation was established in 1991 to develop Korean studies overseas. “It supported the initiation and expansion of Korean studies courses at 22 universities in 20 countries” (The Korea Foundation Annual Report, 2000, p. 8). Currently, President Lee is trying to implement a program in which all English courses in middle schools and high schools will be taught only in English. This will require the government not only to educate a vast number of teachers in Korea—the number is estimated at 20,000— but to recruit university students studying abroad in English-speaking countries to return to serve as teachers in Korean middle and high schools. To prepare the 20,000 Korean middle-school and high-school English teachers to teach in English, several American universities and other private English language institutes, such as YBM/Si-sa, the YB Min English language company, are responding with TESOL programs for Korean teachers. All schools in Gyeonggi Province will hold English-language classes with English as the medium of instruction starting in 2011, and every school in the province will have native speakers as teaching assistants by 2012. This project is aimed at teaching students to be comfortable speaking with English-speaking foreigners without taking extra classes at private institutions. As part of an employment test started in 2008, applicants have to demonstrate their ability to conduct a class only in English. Some schools with native-speaking teaching assistants have started so-called English immersion classes (Hankyoreh, 2008).

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Universities are also responding, asking their faculty in all areas to teach their courses in English. In 1960, Sogang university taught the majority of classes in English since the faculty was predominantly foreign and Jesuit priests. Korea University today leads the way in teaching courses in English, although Sogang university has 250 undergraduate classes taught in English, about 22 Percent of the total courses. Y. B. Min: “Lord English” Social entrepreneurs are uniquely suited to making headway in areas where they can contribute to making changes in society or to expanding human capabilities. Social entrepreneurs come to understand the areas and issues that need to be changed from the inside. Through their selfdrive and persistence they discover the solutions or ideas they can use to elicit change rather than encourage dependency. In a developing country, such as Korea was from the 1960s to the 1980s, where society and individual citizens worked together with government economic development plans and projects, we can find many successful social entrepreneurs who were passionate in choosing work in areas that allowed them to apply their innovative ideas to support the nation’s goals of improving educational systems and/or expanding human capabilities needed in the process of meeting the goals for the export-focused Korean economy and globalization. They did not choose to work in the traditional big organizations but chose to be independent to pursue their innovative solutions, and they identified a few followers who also believed in their intentions and self-driven commitment. The story of any important system or societal change frequently begins with a single entrepreneurial author: one obsessive individual who sees a need or problem and envisions a new solution; who takes the initiative to act on that vision; who gathers resources and builds organizations to develop and market that vision; who provides the energy and sustained focus to overcome the inevitable resistance; who accepts failures as a lesson one has to learn; and who—decade after decade—keeps improving, strengthening, and broadening that vision until what was once a marginal idea has become a new norm (Bornstein, 2007, p. 3). Y. B. Min is one of those “restless people” who are passionate in looking for opportunities and in providing the services needed to expand human capacities. Min’s spirit of taking endless risks to achieve his dreams, trusting himself and his adventurous instinct, earned him the label of “Lord English” according to a recent newsletter of J. P. Morgan,. Y. B. Min is chairman of the YBM/Sisa company, a conglomerate with a five-decade history of introducing new ways of teaching English and

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integrating technologies to respond to the nation’s needs, and as a result, he responded to the demands of industry and the market changes in ELT. YBM/Sisa has had a tremendous influence on ELT and English education in Korea and in Asia since 1961. For five decades, he has focused on making improvements in the methods of ELT, broadening his uncanny vision to expand his business, and then redistributing his wealth to make Korea and Koreans better known as a part of his effort in helping the government’ with internationalization and globalization. Today, YBM/Sisa has a group of language schools throughout Korea and overseas. In Korea, there are a total of 320 schools that are franchised, 48 that are directly managed for children, and 20 other schools directly managed for adults, a total of 388 schools as of March 2010. During their peak period, they serve approximately 102,000 students. During slow periods the minimum number of students is approximately 80,000. They also employ a total of 570 native English speakers and about 1,100 Koreans at their schools. At the same time, Y.B. Min as an individual and through his foundation and companies continues to make Korea and Koreans better known by establishing chairs at Harvard, MIT, Oxford, and the University of British Columbia as well as Seoul National University, Korea University, and Ewha Woman’s University. He has also established the Korea International School, which is accredited by the Western Association of Schools and Colleges. During the Korean War, over five million North Koreans who belonged to the groups labeled as bourgeois, intellectuals, and land owners escaped from the Communist regime of the North, and Y.B. Min’s family was among them. They are the generation who left their homeland and risked their lives to escape from the communists by crossing the 38th parallel with empty pockets, and their experience of crossing the border made most of them independent opportunity seekers. Min said, in his interview, that this experience and the lessons he learned during these early days of hardship molded him into the entrepreneur he is now. Like other Koreans in general, he believes that education is key to making society better and richer, and the Koreans’ “fever” toward education should not be cooled. He emphasized the importance of education by giving the example of the Puritans and other early American settlers who built churches and schools first and then farms second. He believes that the Puritan primordial value on education made America the Super Power it is today. Here are the characteristics one can identify in him as an educator and business and social entrepreneur. First, he believed in the fruit of hard work and doing one’s best. Even though it is one of the common Confucian values that most Asians share, the most successful Korean businessman and entrepreneurs rely on this

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traditional cultural value as a tool of success. This is especially applicable to the older generation who was raised and have lived with the Confucian value of “working hard,” so that one can endure and overcome hardships. By working hard, one can prepare for the opportunities that will arise. Min’s brother, who was four years older than him, was sent to Seoul during the 1940s to receive a better education. Koreans traditionally believe that every man, especially the eldest son, has to be sent to the capital to learn about the world and to find opportunities for success. His brother used to send him letters advising him that the time had arrived when English proficiency was the means to survive, no matter what profession he would get into. Even after his family migrated to Seoul later during the Korean War, he never neglected to study English and jumped into anything related to learning English. He strongly believes that opportunities come for everyone, but the only person who makes them a reality is the person who has prepared himself by hard work. In 1962, Min wrote a book on how to write in English, and as he reported in his interview, many students came to him asking him how they could write English well and how they could master writing English fast. “I told them there is no way that you can do it fast, do it the right way, take time, and work hard.” Second, his courage to take risks and proceed accordingly was key to his success, as he recalled. For example, when he was working as an associate editor of the English language newspaper after he had graduated from Korea University, where he had majored in English, he was invited to teach English conversation to businessmen in a small private English language institute. He agreed to do it, but with a special method. Instead of using the English conversation books available at that time, he elected to use the magazine section of the Sunday New York Times as the text. Recollecting his experience of reviewing and learning English through articles by prominent scholars and journalists, such as Arnold Toynbee, James Reston, George Kennen, Walter Lippman, and Edgar Snow, who were representing the social landscapes at that time, he saw that learning English is not only about learning the language but about learning English in context, such as, with the American lifestyles, or in social norms, and particularly, learning about the American political scene. It was an exciting time with Park Chung-Hee in the Blue House, and John F. Kennedy in the White House. When the owner of the Sisa English company was planning to sell the business, he saw the opportunity to make it his own. In the beginning, he tried to manage two jobs, working at the Korea Herald in the day and teaching English at night. Eventually he left his secure job and made himself the president, instructor, office manager, and secretary at Sisa, a one-room operation company. Finding a job at that time was

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almost impossible even for college graduates because the nation was still trying to recover from the ruins of the Korean War, and there were no jobs. President Park Chung-Hee (1961–1979) had just started the nation’s first Five-Year Economic Development Plan, which was export-centric, and he saw the potential and long-term need for businessmen with practical English proficiency. He also had confidence that his method of ELT would contribute to the nation’s economic development by producing businessmen with practical English skills. His understanding of the current ineffectual method of ELT, which used the “reading-translation approach” at schools during Japanese colonization and the later “grammar-translation approach,” gave him the added incentive to jump in to the ELT business. His keen eyes observed that Korea, like other Asian countries, had a high context culture, and as a consequence, communication styles were different from those of Americans. That is to say, for Koreans, especially the generation who experienced the Korean War, words are not as important as the environment in which the words are spoken. The full meaning of words, phrases, or sentences can only be understood in the context in which they are delivered. Chairman Min believed that businessmen should learn English through articles that appeared in The New York Times, Newsweek, or Time magazines taking into account the context of American politics, economics, business, religion, and science. He added that people could try whatever ideas they wished, but they should also understand the risks of their investment and possible failure as a consequence. When your idea fails, do not look back at the loss, but remember the lesson. He was always interested in developing businesses related to communication and publishing, such as magazines, newspapers, and television. He started an English language newspaper in 1990, but he stopped publication after nine months because of the limited demand for such newspapers. He also began a cable TV channel in 1995, but sold this as well because of the limited cable audience. Third, Min saw the importance of timing in grabbing an opportunity. The creation of every business should be at the right time, and every part of business should be managed punctually otherwise opportunities will be lost. His uncanny ability to see new markets and his courage to be adventurous often hindered him from being satisfied with sustaining and maintaining his businesses at the levels he had already achieved. When he saw the market changing, his impulse was to grab the opportunities he saw. Many examples can be found. In 1972 he saw the constraints of expanding a business without providing an opportunity for businessmen and students to listen to native English speakers. He also realized that licensing for intellectual property was not known in Korean business practice at that time. He figured out that licensing the cassette text book would be a big

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business while serving the needs of ELT. In his interview in April 2006, he said that he realized that licensing was also a business. I introduced the cassette text book, English 900. I licensed this audio course originally published by Macmillan, New York. It consisted of 6 books and 60 cassettes, 10 cassettes for each book. It was very popular because I think people had no opportunities to listen directly to American voices. During the beginning years there were no production companies for cassette tapes in Korea, so instead I made LPs. Recording was a big problem, so eventually I bought some cassette tapes from the black market. Later on, Korea finally began to produce cassette tapes, and recording was no longer an issue. I believe people came to realize that while reading and writing are important, it is most important to know how to listen to native speakers’ intonation and how they speak English. I think my publication of English 900 audio cassettes was a big motivation for Koreans in realizing the importance of speaking and listening to English.

In 1983, he took the second step of licensing with an American language franchised school, named ELS. This offered him an opportunity to set up the first franchise school in Korea. In 1984, he started the ELS and under the franchise agreement, he had to bring in American teachers. At first, he said that he was not sure if it was legally possible, but he checked with the Ministry of Education and then the Ministry of Justice (the immigration division), but nobody seemed to know the answers and it seemed absolutely impossible. Then he found out that any foreigner having a legal contract with a Korean company could come to work for one year. This law had been put in place only because Hyundai shipbuilding needed to bring in experts from Norway. In 1983, he brought in seven teachers, and this was the first time foreigners legally came to Korea to teach at a hag-won (private institute). Prior to this, foreign teachers were only working at army schools and some universities, such as Sogang and Seoul National Universities. He called the first group of seven Americans the “Founding Fathers.” Today Sisa has 630 foreigners, 570 of whom are native English speakers; the rest are either Japanese or Chinese. In a little over 20 years the number of foreign teachers grew from 7 to 630. Fourth, his advice was, “Trust in your instinct and in yourself. Once you are convinced in your decision, follow your instinct and reason, then all you have to do is to proceed without hesitation.” Even though his method of ELT was recognized by a few businessmen and organizations, he struggled to find customers. The average yearly income for a Korean household during the 1960s was under $100. As a result, few families were able to afford the extra expense of sending their children to an institute for private English education, nor did companies have any extra budget

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to train their employees in English. Min, however, strongly sensed that the age- old Korean Confucian value put on education and the deep desire for status that motivated Korean society to seek English education as a means of survival and to gain that status, would bring him an opportunity to sustain and broaden his entrepreneurial opportunities. Another example of how Min followed his instinct was in his program for students going overseas for education. At the end of the 1970s, the Korean economy was rapidly improving with its export-centered policies, and Koreans’ living standard was improving to allow travel overseas. He understood there would be a demand for overseas training, both for those going to study abroad, for those on business trips, and for those going on vacations. He then, accordingly, built a Korean overseas study division where students could be advised on how to apply to universities and how to meet the criteria for admission. Soon after he opened this overseas division, the Korean president announced in 1981 that the government would allow Koreans, especially the young generation, to go abroad for vacation trips for the first time in history like students from other countries. In the first year, he sent 26 college students to the United States. The following year he sent approximately 600 to the United States and another 100 to the United Kingdom. He was the first in Korea to offer such training for overseas vacation tours. He explained in his interview, “I actually did not plan for this to happen, nor to make money, but I was simply trying to do my best in the beginning years of teaching English outside of schools. This just happened as I followed my instincts and business sense.” Fifth, finally, Min advises future entrepreneurs to “take competition as a challenge, and take a crisis as an opportunity.” The Korean government announcement allowing students to go on overseas tours led to an increase in the number of private English institutes (hag-won) resulting in fierce competition. Min pointed out, “Since I took over the Sisa company in 1961 when there was a proportioned private English language training industry, there has been an unbelievable growth in these institutes.” In 1980 there were 1,334 institutes with 300,000 students; in 1990, the number was 2,359 with 400,000 students; in 2000, 14,043 institutes serving 1,380,000 students, and in 2009, 34,568 institutes with 2,400,000 students (Center for Education Statistics, n.d.). Min continued to add constructive ideas to make his business grow and become viable. In 1986, he invited American instructors to teach ELS programs to have seven hours of classes a day at his institutes. As a result, students who were preparing to study in the United States came to his institute to prepare for the Test of English as a Foreign Language (TOEFL). It was win-win situation for U.S. bound students and for Sisa in confronting his competitors. As the number of students preparing for the TOEFL

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examination grew, he also realized that TOEFL was a test only for students going to American academic institutions. The Korean economy was growing, and large companies needed to recruit tens of thousands of young college graduates every year. They wanted their applicants to take an English test, but they did not know how to handle the issue. He searched and found that a Japanese company had started a new testing method for English proficiency for businessmen in 1980, the TOEIC (Teaching of English for International Communication) exam, and he approached them asking the for use of TOEIC at a fraction of the cost of TOEFL. The Korean Broadcasting Company (KBS) was the first to use TOEIC for testing the English proficiency of 35,000 applicants on their behalf. The next year KBS required all applicants to bring their own scores. After this, other major companies followed suit, and in 1985 and 1986, two million Koreans took the TOEIC test, which was more than the number of Japanese. Until recently, the TOEIC population of Japan and Korea combined was 90 percent of the world’s TOEIC population. In Korea, now, TEPS (Test of English Proficiency developed by Seoul National University) is replacing TOEIC. Lastly, Min’s final advice is to “be honest in your work, and make yourself worthy in every situation.” Teaching English in context was only the beginning. Chairman Min and his successor, Sun-Shik Min, his son, saw new markets and the need to integrate new techniques in ELT and in his other businesses. Sun-Shik Min, after completing his doctoral studies in business administration from Harvard, returned to the company in 1991 to assist his father in recent developments. YBMin/Sisa expanded its ELT institutes to foreign countries, first to Canada, then to the United States, to Beijing in 2004, and more recently, to Manila. In addition to language schools and expanding English proficiency testing activities, YBM/Sisa publishes an extensive list of language-related magazines, books, and dictionaries. In January 2000, the company published the first Korean-language edition of the National Geographic Magazine. As the distributor of Newsweek in Korea, the company designed a monthly Newsweek study product, Newsweek 21, for students of English who were not yet capable of reading Newsweek comfortably. They also publish Cable News Network (CNN) monthly, a video-audio/print package of CNN broadcast materials. In 1961, YBM/Sisa published its first magazine, The Study of Current English. After 41 years and 500 issues, the name and the format of the publication was changed. The new publication, English Netzine, covers English-language related issues, such as electronic communications and the Internet framework. In the spring of 2000, the company launched its ybmsisa.com website and related activities, including software localization, online test registration for the TOEIC, Microsoft Office User Specialist

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(MOUS) skills testing, and cybermall shopping. YBM/Sisa’s strong traditional off-line product and service base supports new online activities. YBM/Sisa announced in a recent publication that it is “meeting the challenges of the 3rd Millennium” with products that expand opportunities for Koreans who live and work in the global environment or who are preparing for the future. Its products respond to the nation’s need for mastery of the English language, for an understanding of other cultures, and the development of skills in fast-emerging and constantly changing cyber technologies. In the April 2005 newsletter of the J. P. Morgan investment firm under the heading, “YBM Sisa.com inc. Lord of E-nglish,” the company was described as the leading online English education content company in Korea with a strong growth outlook. Conclusion The Korean government has constantly endeavored to promote educational policies and approaches that support internationalization and globalization. In addition, the government has promoted the internationalization and globalization of education through several major government-funded research institutes and training agencies, such as, the Korea Educational Development Institute (KEDI), the Korea Research Institute for Vocational Education and Training (KRIVET), the Korea Institute of Curriculum and Evaluation (KICE), the Korea Research Foundation (KRF), the Korea Foundation (KF), (Lee, 2004), and the Korea Culture and Content Agency (KOCCA). As the Korean government continues to direct and implement economic and educational politics and practices; as English has maintained or increased its prestige and marginalized indigenous languages in international politics; as English is demanded extensively in international commerce in globalization; and as national policies of internalization in Korea are to become more market-oriented, privatized, and diversified, the investments of parents for their children’s education, especially in language competency, will become more fierce, while business and entrepreneurial opportunities related to ELT will continue to grow as well. Adventurous entrepreneurs will work with the nation’s collectivistic capitalism. References Adams, D. K. (1965). Higher Educational Reforms in the Republic of Korea. U.S. Department of Health, Education, and Welfare Office of Education: U.S. Government Printing Office.

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Bornstein, D. (2007). How to Change the World: Social Entrepreneurs and the Power of New Ideas. New York: Oxford University Press. Center for Education Statistics (n.d.). retrieved March 22, 2010, from http://std. kedi.re.kr/index.jsp. Hankyoreh (2008, February 1). “Lee Myung-Bak urges participation in Englishlanguage education initiatives.” Retrieved April 30, 2008, from http://english. hani.co.kr/arti/english_edition/e_national/267073.html. Kim, D. K. (2005). The History of Korea. Westport, CT: Greenwood Press. Kim, J. (2000). “Historical Development.” In Higher Education in Korea: Tradition and Adaptation, ed. J. C. Weidman and N. Park, pp. 7–53.. New York: Falmer Press.. Kim, M. (2004). Beyond the Politics of Technology-Enhanced English Language Teaching in Korea. Australia: Monash University. Kim-Rivera, E. G. (2002). English language education in Korea under Japanese colonial rule. Language Policy 1(3). Korea Overseas Information Service, Ministry of Culture and Information. (1978). A Handbook of Korea. Seoul: Samhwa Printing. Lee, J. K. (2000). Historic Factors Influencing Korean Higher Education. Somerset, NJ: Jimoondang International. ——— (2004). “Globalization and higher education: A South Korean perspective.” Retrieved January 17, 2010, from http://globalization.icaap.org/content/v4.1/ lee.html Lee, K.-B. (1984). A New History of Korea. Trans. E. W. Wagner and E. J. Shultz. Cambridge: Harvard University Press. Lovmo, M. (n.d.). “Language purism in Korea.” Retrieved January 14, 2009, from http://www.fortunecity.com/victorian/exhibition/605/page31.html Ministry of Education Science & Technology Korean Education Development Institute, (Statistical Yearbook of Education). Each year. The Bank of Korea (National Accounts). Retrieved January 16, 2009, from http://news.khan.co.kr/ kh_news/khan_art_view.html?artid=200809051756165&code=940401 Pennycook, A. (1999). “Development, culture and language: ethical concerns in a postcolonial world.” Retrieved March 22, 2010, from http://www.languages.ait. ac.th/hanoi_proceedings/pennycook.htm The Korea Foundation Annual Report (2000). Seoul: Yim Sung-joon. U.S. State Department Bulletin (1948). Korea 1945–1948. Washington D.C.

Interview Y. B. Min: Chairman, YBM Sisa Company

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Entrepreneurial Opportunities in Cyberspace: Korea and the United States Judith N. Martin and T. Youn-ja Shim (Theresa Y. Shim)

Introduction: New Media Around the World The impact of new media on contemporary life and human relationships is staggering. According to the most recent statistics, there are currently more than one-and-a-half billion Internet users worldwide, with 2.2 billion predicted by 2013 (17 percent of these will be Chinese) (Internet World Stats, 2010; The World in Figures: Industries, 2010). In 2008 China overtook America as the country with the largest number of Internet users, currently over 360 million (The meek shall inherit, 2008). South Korea has 77 percent of its population online (37.48 million), and the United States has a slightly lower percentage of its population online; as of December 2009, 74 percent of adults and 93 percent of young people in the United States were using the Internet (Rainie, 2010). In fact, a recent study showed that U.S. children, from the ages of 8 to –18, spend almost eight hours (every waking minute except for time in school) on some electronic communication device (smart phone, computer, television, etc.) (Rideout, Foehr, & Roberts, 2010). Korean tech-savvy young people spend 14 hours a day, according to the National Internet Development Agency of Korea’s 2008 Survey on computer and Internet usage (National Internet Development Agency of Korea, 2008). In addition to their pervasiveness, recent communication technologies are important because they have been adopted at such a fast rate.

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Ray Kurzweil’s law of Accelerating Returns (that computer processing power grows exponentially), applied to technology, says that half the changes we have experienced since the Internet started have occurred in the past two years, and the next 18 years will bring 362 years worth of changes (Walmsley, 2008). Wireless and cell phone technologies have spread even faster than Internet technology. With wireless technology, portable devices like phones and laptops afford communication accessibility in almost any location (Goggin, 2006). Since 1983 when cellular services first began, mobile phone use has grown to about 4.6 billion (out of 6.7 billion) people worldwide (Castells, Qiu, and Fernandez-Ardevol, 2006; The apparatgeist calls, 2010) and the number of text messages sent and received every day exceeded the world’s population by the year 2007 (Walmsley, 2008). According to a recent report, 62 percent of all Americans have either used a cell phone or PDA for a non-voice data application or logged on to the Internet away from home or work using a wireless laptop connection or with a handheld device. In fact, when asked how hard it would be to give up a specific technology, those surveyed said that the cell phone would be the most difficult to do without, followed by the Internet, TV, and landline telephone (Horrigan, 2008, 2009; Rainie, 2010). Of course not everyone has the ability to access and use these communication technologies. One’s access to technology depends, among other things, on one’s geographical location, age, income, race, and ethnicity. According to a recent Pew report on Internet and American life, about 25 percent of Americans are not online (Rainie, 2010), and in many countries, only a tiny fraction of the population has access to computers and the Internet. While there is high Internet usage in Western Europe, North America, Oceana, and the hi-tech Asian economies of South Korea, China, and Japan, usage in less industrialized Asian countries, the Middle East, and especially in Africa is scarce (Internet World Stats, 2010). Age is another important factor in computer-mediated communication (CMC). In the United States and South Korea, young people are much more comfortable with new technologies than older folks and they tend to use communication technologies in different ways. Young Americans (Internet users aged 12–32) are more likely than older adults to use the Internet for entertainment and for communicating with friends and family, while adults tend to use the Internet for searching for information, as well as exchanging messages. Young Americans are more likely to play online games, download music and podcasts, create blogs or personal Webpages, and share their own artistic creations online (Jones and Fox, 2009). The same patterns extend to mobile phones; young people are more likely to text and tweet than are older people (Lenhart and Fox, 2009), and email is used much less by teens (ages 12–17) than other generations,

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as they prefer sending text messages on their phone or keeping in touch through social networking sites (SNSs) (Jones and Fox, 2009). However, the stereotype of older people avoiding technology is quickly changing. In fact, the fastest growing group of Internet users in the United States is older people (age 70⫹). A few online activities that were previously dominated by younger generations are now practiced more equally across all generations under 73 years old—such as searching for information and downloading videos (ibid.). One of the most important functions of the Internet is social networking, and exchanging messages is still the most common use of CMC in the United States. The three most popular means of mediated social networking are Social Networking Sites (SNSs), blogs (“Web logs”), and Twitter. Social network sites (SNSs) are “web-based services that allow individuals to (1) construct a public or semi-public profile within a bounded system, (2) articulate a list of other users with whom they share a connection, and (3) view and traverse their list of connections and those made by others within the system” (boyd & Ellison, 2007, p. 210). Blogs are like Internet diaries or journals maintained by individuals who make regular entries, describing events and/or personal opinions/ feelings and can include visual material like photos or videos. Twitter is a social networking and micro-blogging service, that allows its users to send and read other updates (otherwise known as tweets)—text-based posts of up to 140 characters in length. The primary focus of this chapter is a comparison of Korean and American initiatives in the global social networking realm of Internet entrepreneurship. Before describing some of the successes and failures of these attempts, we examine the important role of culture in social networking and online interactions. How Culture Impacts Online Social Networking Scholars have pointed out that communication technology is not a thing, but a human activity and that computer mediated communication as such can never be detached from its place in a social, cultural, and historical context—online interactions happen within specific cultural contexts (Beer, 2008). What do we know about the impact of national culture on people’s online social behavior? Since people bring “constraints and opportunities from their offline lives with them to their online interactions and activities” (Hargittai, 2008, p. 277), there are a number of descriptive studies in various cultures identifying who is and is not online and who does and does not participate in online social connections. For example, several studies investigate

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how social class plays into people’s participation in a variety of cultures (e.g., young people from middle-class, more educated families tend to be on Facebook, those from lower socioeconomic strata on MySpace) (boyd, 2007a; Hargittai and Hinnant, 2008; North, Snyder, and Bulfin, 2008). There are several studies that investigate how young people from different racial and ethnic groups within the United States vary in their participation on particular social networking sites (e.g., Latinos and African Americans on MySpace, Caucasians on Facebook, Asian Americans on Friendster) (Hargittai, 2008). Other studies investigate how young people from different ethnic and racial groups vary in their online identity presentation, and several scholars point out that Facebook does not include “race” as a category in the profile information list; they argue that, by not making race an available category for users, Facebook “reinforces the dominant colorblind mentality and perpetuates the racialized visual classification of others” (Grasmuck, Martin, and Zhao, 2009, p. 164). Scholars have also speculated on the impact of different communication styles in online communication, using E. T. Hall’s (1959, 1966, 1977) concept of low/high context communication styles and Hofstede’s (1980, 1991, 1997) values framework (individualism/collectivism, power distance, masculinity/femininity, high/low uncertainty avoidance). Hall (1977) explains: High-context transactions feature preprogrammed information that is in the receiver and in the setting, with only minimal information in the transmitted message. Low-context transactions are the reverse. Most of the information must be in the transmitted message in order to make up for what is missing in the context (both internal and external). (p. 101)

The low-context communication style, preferred by many in Western societies, emphasizes explicit verbal messages, and the majority of meaning and information is conveyed through the verbal code. In contrast, the high-context communication style is one in which “most of the information is either in the physical context or internalized in the person while very little is in the coded, explicit, transmitted part of the message” (Hall, 1977, p. 79). CMC like emails and text messages are consider low-context messages, since the meaning is contained in the words and there are few contextual (nonverbal) cues. Olaniran (2001) hypothesized that conversations between low- and high-context communicators might be difficult online. The low-context communicator might be very comfortable being direct about feelings and opinions, whereas the high-context communicator might feel rather constrained by CMC (Morse, 2003).

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There are a few culture-specific studies that lend some insight into the role of culture in social networking media. For example, Shim, Kim, and Martin (2008) suggest that Korea’s rapid adoption of broadband and personal computers is partly explained by the strong emphasis on education (children need computers and access to the Internet for education) and the “me-too” culture that emphasizes keeping up with other people’s social, economic, and technological achievements. Further, they show how some technologies, for example, the PC Bang (public computer room), actually reinforce traditional Korean values such as the “togetherness culture.” The PC Bang is a stress-free, fun, and youthdominated environment where groups of friends can meet and engage in a cooperative game. Another culture-specific study examined Japanese adolescents’ cell phone usage (Ito & Okabe, 2005) and showed how these young people use almost constant texting to their friends as a way to establish a space, free from prying eyes and concerns of parents. The authors suggest that text messaging provides a mechanism through which the youth can overcome some of the adult-controlled power structures that govern their everyday lives in Japanese society. The same is probably true for young people in Korea and the United States. There are also a few studies that investigate cross cultural differences in how online interactions function in the lives of young (and not so young) people. For example, Kim and Papacharissi (2003) compared Korean and American personal Webpages and found that Koreans were less likely to reveal personal information such as their origin and present residence than were Americans, and they were more likely to present themselves through visual means such as manipulated graphics, whereas Americans were more likely to present themselves through still photos, textual descriptions, and personal stories. Also, Koreans were more likely to present themselves indirectly through interlinks that described their interests, whereas Americans were more likely to present themselves through direct and personal character description. The authors suggest that these differences reflect the respective national cultures—demonstrating the Korean preference for high context, indirect communication that expresses interdependent self-construals through their use of graphics and interlinks to express themselves (Kim and Papacharissi, 2003; Na and Min, 2000). A similar more recent study of a group of international students’ online intercultural communication also found some cultural differences in how students expressed their identities online (Yang, 2009). Yang reports that American Facebook pages, are “bursting with information about the individual and her/his identity” whereas Facebook pages in El Salvador and Chile tend to have less information about the individual but more updated

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news about the family—perhaps revealing more collectivistic, interdependent self-construals. However, a recent study comparing U.S. and Taiwanese young people’s online friendship patterns found no differences (Chang, 2009). Using a social network analysis methodology, the authors hypothesized that young people in Taiwan and the United States would exhibit different online friendship patterns. Specifically, they hypothesized that Taiwanese young people, having been raised in a collectivistic, high-context culture, would have fewer online friends, but more dense (more connected) social relationships. They also speculated that U.S. young people, reflecting individualistic, low-context values, would have more online friends on their SNSs, but that these friendships would be more loosely connected, with relationships not so integrated with each other. After measuring the young people’s friendship patterns in SNSs in the two countries, the authors found, to their surprise, that there were no differences between the two groups of young people in the number of SNSs friends nor in the density of their social networks. The authors interpret these findings by speculating that perhaps cultural communication on SNSs (and maybe in many areas of CMC) is now “media rich” (relatively high context) due to the inclusion of photos and other visual cues in addition to the traditional more “leaner” text (words), and that this type of rich online social communication has now become homogenized and uniform the world over. This interpretation might suggest that cultural taxonomies like Hofstede’s and Hall’s are becoming less relevant. And indeed, there are scholars who increasingly reject these earlier cultural frameworks as too static and essentializing, asserting that they cannot capture the nuances of postmodern, contemporary identities, more characterized by hybridity than monolithic cultural differences (Ess, 2002; Ess and Sudweeks, 2005; Fougère and Moulettes, 2007, Hewling, 2005). The successes and failures of global Internet companies from both search engines and/or SNSs, however, tell us how entrepreneurs see the importance of the dynamics of the local culture, and how they make their innovative ideas relevant to cultural behavior, considering lifestyles, the formulations of relationships, the use of language, and sometimes the political landscape and the relationship between government and industry. When they try to extend their local success to the outside world, such as from the East to the West or vice versa, they often discover that their original idea and business model that created the entrepreneurial opportunity does not apply when crossing international borders. For example, the most powerful global search engine, Google, has not succeeded in Asia as it did in the United States and Europe, and another example, the most popular social

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network site in Korea since 1996, Cyworld, failed to transfer its success in Korea to Germany, and even the powerful U.S.-based SNS Facebook has little or no presence in the three major markets in East Asia—China, Japan, and Korea. Social Networking Phenomenon: The Rise of Young Entrepreneurs in Korea In the United States, there is a power equality between the societal levels of government, organizations, and families. Consumerism, individualistic capitalism, and a strong industry demand for deregulation stimulate entrepreneurs’ innovations and the value of entrepreneurial ventures. With the rapid increase in Internet penetration in recent years and fastgrowing Internet application technologies, we see not only the rise of entrepreneurs but also the emergence of new types of entrepreneurs in the industries for after-market products and the development of technology applications, bringing real-world impact and creating innovative business models by far-sighted, risk-taking individuals. These entrepreneurs see something that we ordinary people do not see in the surrounding environment. They bring innovative ideas to make their ordinary findings into extraordinary businesses, such as the countless applications for SNSs and smart phones. The powerful SNSs, Facebook and Twitter, have continued to extend services, and their impact has evolved beyond the function of social networking. The smart phone–application industry that emerged from the iPhone ecosystem has also created enormous opportunities for these new entrepreneurs. The industry has created more than 140,000 different iPhone applications since Apple opened its Apps Store on iTunes to outside developers in July 2008, taking the basic ideas that were developed in the very early days of the technology development and making them better—with more crazy, innovative ideas (Gregory, 2010). As David Yoffle, a technology expert at Harvard Business School, points out, we now see the rise of tech application companies consisting of “two kids in a garage” (ibid.). It is most interesting to note that many Americans believe that someday they will be or could be one of the “two kids in the garage” (Ching, Pei, and Yeow, 2008). From the Silicon Valley, the leading high-tech hub because of its large number of cutting-edge entrepreneurs, engineers, and venture capitalists, to Phoenix-Mesa and Charlotte-Gastonia-Rock Hill, North Carolina, young and tech-savvy entrepreneurs have continued to flock into new capitalistic opportunities. In Korea, on the contrary, the nation’s economic development is the collective work of government, industries, and civil society. In the week

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of October 13 to 21, 2010, CNN Asia showed a special report entitled “Eye on Korea.” As a part of this program, “Real science fiction in Korea,” CNN Asia’s anchor, Kristie Lu Stout spoke with Tomi Ahonen, coauthor of “Digital Korea,” about how Korea transformed itself into a technology leader. Ahonen said he found the more he got to know about Korea, the more convincing stories he found. Broadband, virtual reality, blogs, multiplayer games, robots, and new technologies in other fields develop together, showing that collaboration among government, industries, academia, and the whole country enabled Korea to transform itself into an IT superpower from being one of the poorest nations within the span of half a century. The condition of the Korean economy and society until the 1980s was far from, if not in opposition to, the favorable macro- and micro-conditions needed for entrepreneurship. Long-standing Korean industrial policies had focused on the growth of large firms as the major driver of the exportoriented economy, while the central government was to supervise the largescale private sector’s economic activities. Therefore, until the 1980s, neither the entrepreneurial environment nor the development of an appropriate social status for these entrepreneurs was well-established (Jung, 2008). The government made the effort to create the fundamental ground for innovative thinkers when the Korean manufacturing sector began to slowly lose its comparative advantage in international trade due to increased labor costs in the domestic market and the rise of competitors in newly industrialized countries (Evans, 1995). Partly as a result of government infusion of funding into the creation of a massive cellular and broadband network, the nation has the most broadband connections and is one of the global centers for online gaming, electronic homes, consumer electronics, and development work for third-generation and fourth-generation networks (Kanellos, 2006). The government has continued to formulate a clear vision and direction for the industries the nation needs to focus on in order to promote an export-focused economy and has injected funds to promote core industries and entrepreneurs, and industries and academia basically support the government rather than oppose them. For example, KOCCA (Korea Culture and Contents Agency, name later changed to the Korea Creative Contents Agency on May 7, 2009,) was established in 2002 to promote and support the content business in entertainment and the new media industry as an export industry. Academia reinvented new vocabularies, such as cultural contents and Culture Technology (CT), in response to the government’s new direction. Many universities have initiated new degree programs to cultivate experts and entrepreneurs who will be able to promote these new industries, such as game publishing,

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animation productions, mobile content development, and TV productions and their distribution. KOCCA even carries out various domestic and overseas training programs for industry professionals and potential entrepreneurs at government expense. Soon creative professionals, such as actors, game developers, Internet applications developers, and filmmakers rose to the top of the social ladder in a nation very sensitive to social status. The current government has also continued to promote the telecommunications industry. President Lee Myung-bak’s vision is to enhance Korea’s national status and image in the global political and economic landscape as one of the most advanced countries. Among many initiatives to achieve Lee’s vision, the Korean government established a special committee to promote national branding. They choose industries that will promote Korean identity and branding, such as the food industry to market Korean delicacies as cultural products, and the information and communication technologies (ICT) industry, which has a comparative edge in hardware manufacturing, including semiconductors and LCD monitors, as well as high-speed internet connectivity, and now has its sights set on software development. Korean government representatives said in February 2010 that Korea would inject one trillion won (US $870 million) into the nation’s software industry by 2012 to keep it abreast of a new competition structure in the world’s software market, led largely by the iPhone and iPod launches, as well as Google’s Android operating systems. To further enhance Korean entrepreneurs’ global competence, English education starting in elementary schools is now emphasized. At the same time, Korean language and culture education is also emphasized for citizens’ self awareness and national pride. Recently, working together with academia and the English private education industry, the government provided funding to train English teachers through domestic and overseas training courses in order to enable them to teach English in context. As Korea is becoming one of the top economic players in the global market place, Koreans want to nurture creative future entrepreneurs who will have the capacity to identify future growth engines based on their strong intellectual property, like Bill Gates of Microsoft and Larry Page and Sergey Brin of Google (S.-Y. Kim, 2010). To pursue this goal, the Korea Intellectual Property Office (KIPO) has launched an initiative to nurture gifted entrepreneurs of the future who are equipped with a competitive edge in intellectual property. This first move is promoted in cooperation with the Korea Advanced Institute of Science and Technology (KAIST) and the Pohang University of Science and Technology (POSTECH)—both are government financed institutions.

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The impact of the1997 IMF bailout on companies cannot be ignored. The IMF bailout implementation process forced Korea to change the infrastructure of banking practices and regulatory systems, and the government redirected the nation’s economy from the manufacturing sector to a knowledge-based economy. The big businesses, the chaebols, were also forced to change their organizational infrastructure from a traditional lifetime employment system to a merit-based one, and Korean society experienced mass lay-offs and forced early retirement from those big companies. At the same time, there was the younger generation who were raised with computers and were relatively financially comfortable compared to their parents’ generation—who had experienced the Korean War and the resulting poverty. These young people, especially those who had an entrepreneurial bent of mind for risk-taking and who wanted to be independent, voluntarily left their jobs with the large companies. As a result, in the late 1990s and into the 2000s, especially after the financial crisis in Korea, we can identify the rise of a creative class of innovative entrepreneurs, especially in ICT industries, who created startup businesses by translating their local lifestyles or cultural behavior into innovative business paradigms. During this period, we see that Korea produced a great list of startups initiated by young entrepreneurs, such as Cyworld, Naver. com, AhnLab, Webzen, and NcSoft who have contributed to making Korea a hotbed of online social networking; massive multiplayer online roleplaying games (MMORPG) developers, Enbee, Tattertools, Beedeo.com (founded by the original founder of Cyworld); Revu by Opinity, which is an identity 2.0 (online reputation) service; Thinkfree, a leading Web Office service; Ohmynews.com; Wingbus; Han RSS (#1 RSS reader in Korea, in terms of market share and features); and Pandora TV (video sharing). Local Lifestyles, Social Network Sites, and Search Engines: Cyworld, MySpace, and Naver.com The key to making online social networking interesting is to take patterns of important real-life relationships people have and bring them on the Web in ways that empower important applications (boyd, 2007b; boyd & Ellison, 2007). People still care about their offline world, so if one can import the relationships that matter to these people and make them available or provide them as a platform for other people, online social networking becomes important. Hence, even though the users of the SNSs share the common purposes of connecting and sharing something meaningful with others in online communities in the West and in the East, we see different dynamics and interactions among the users country by country, mainly because local lifestyles and cultural communication patterns are different,

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as noted earlier. Social networking actually enables applications that can really change people’s lives. A good example can be seen from the success of the SNS Cyworld in Korea. Cyworld is Korea’s leading social network site/blog/online community with over 20 million users, out of a total population of 48 million with 37.48 million Internet users. Cyworld, the first successful networking site in the world, was developed in Korea (Ching, Pei, and Yeow, 2008). The word, “Cy” refers to “Cyber” and when translated in Korean, means relationships, thus translating the importance of the Korean traditional societal value of maintaining in-group memberships with those who share a similar status and life experience (Shim, Kim, and Martin, 2008). It was launched in 1999 and Yong-Jun Hyung, its founder, had envisioned it to be a site to enhance human interactions in the virtual realm based mainly on preexisting circles of friends. As of September 2005, the membership figures showed that 90 percent of all Koreans in their twenties, around 25 percent of Korea’s total population, were registered with the site. Furthermore, Cyworld added on average 20 million unique visitors to their SNS each month. Originally, Cyworld utilized the traditional Confucian value of the family system in the formation of an online community. Members invited off-line friends and coworkers into their personalized virtual world to reinstate buddy relationships like members of a family. Cyworld’s business plan helps users create their personal homepage or personalized virtual home page, often referred to as the “Minihompy.” Cyworld also initiated a virtual economic center, Cyworld Town, and virtual currency called the “dotori,” Korean for “acorn,” that made possible the evolution of virtual currency in social networking in Asia. Members buy dotori with credit cards or in cash at convenience stores throughout Korea. They purchase furnishings and background music for their minihompy and buy special logos and clothes for avatars. Members also use acorns to purchase gifts for other members. Traditionally, giving gifts is a very important part of Korean lifestyle and is also a very common practice among coworkers and family members, especially during holidays, such as New Year’s day and Chu-suk (the Korean version of Thanksgiving), and is still a common practice among the younger generation. The manner of giving and receiving traditionally should be reciprocal. Cyworld, like other SNSs, allows the community members to take pictures of real-time events and upload them with stories on their sites and send a text message directing friends to the latest update. The popularity of the site spread like wildfire within the 18–29 age group. As the business evolved, the function was extended to people’s mobile phones. Cyworld’s business model and healthy operations led to a takeover in 2003 by the media conglomerate, SK Telecommunications,

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the third largest conglomerate after the Samsung and Hyundai groups in Korea. As of 2008, 35 percent of the company’s revenue was derived from digital song sales and 40 percent from selling digital wallpaper (Ching, Pei, and Yeow, 2008). One of the main reasons for this phenomenon was that the site provided a window for young Koreans to express feelings and to explore their imagination—an escape from problems in their daily lives. The demographics of Cyworld in Korea are those aged between 18 and 29 (Kanellos, 2006), which is older than American SNSs visitors on MySpace, Friendster, or Zanga—SNSs that provide similar services. These differences in demographics may be due to the different educational systems in Korea and in the United States. Koreans are heavily focused on the one-time college entry examination that will impact their careers deeply and the future development of their social networks, which are also very important in a country wired by in-groups. As a result, most parents want their children to concentrate only on studying for college entrance examinations as long as the household can afford basic living expenses—until their children are admitted to a college or even until they get a real job after college graduation. For this reason, most Korean students are less exposed to the real, practical world until they enter college, not even participating in activities common to young Americans, such as learning the value of money from an early age by running a lemonade stand or earning and managing weekly pocket money by mowing lawns or babysitting. Hence young Koreans’ experiences are quite different from that of the same age group in America (between 18 and 29). The minihompy, actually, has provided a platform for users to create their own personalized ideal home and to share and exchange their creative imagination with friends so that they can enjoy freedom from the rigid educational system that creates a barrier between them and the real world. The minihompy is fully customized with wallpaper, furniture, background music, and pets, and acts as the user’s virtual home. The site also offers the common SNSs features such as message boards and a personal photo gallery. This also enables Cyworld users not only to manage their “profiles,” but also to create a personal virtual identity, an “avatar.” The avatar can present a person as someone different from who the person is in real life (a pseudo identity), and someone the person will be in the next life, and more common for reputation management, more likely the way they want people to view them at present. As a result, the proliferation of Cyworld has changed the way Koreans (the younger generation) see themselves. Although SNSs may be similar in nature the world over, according to Ching, Pei, and Yeow (2008), at Singapore Management University, there are recognizable differences in business models because the entrepreneurs

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and organizations who created these sites originated in different parts of the world and are modeled on the local preferences and cultures. The MySpace and Facebook business models originated in the West, and their success motivated the companies to launch customized business models in other countries, but these models did not translate well into other countries, especially in countries where advertising is the main revenue as it is the common business culture of the locals. Facebook, which is just turning six, has achieved a level of maturity most experts thought would never happen. Somewhere along the road to becoming the platform of choice for 350 million users in the world, the company achieved a positive cash-flow status for the first time last year—which was not the primary goal for Mark Zuckerberg, founder and CEO (The world’s 50 most innovative companies, 2010). On the other hand, Cyworld innovated a new business model, and managed to capture an outstanding healthy profit of about $150,000 per day via the users’ virtual micro-transaction (Ching, Pei, and Yeow, 2008). The users purchase furnishings for their minihompies such as wallpaper, background music, and furniture, or buy their avatars special clothes or logos. Compared to other major SNSs, such as MySpace and Facebook, advertising does not account for a large part of the business-model mix. However, Cyworld offers “Happyclicks,” a service that allows users to put ads on their minihompy and be rewarded with acorns. Cyworld benefited from its current business model because its lack of reliance on advertising ensured that it was providing a service for members of its site instead of the advertisers. Cyworld, however, sells music, making it second to Apple’s iTunes for global online music sales. Over the years, Cyworld has grown beyond the function of social networking and evolved into a site that enables celebrities and companies to reach out to fans and consumers respectively (Ching, Pei, and Yeow, 2008). Another example of supporting the relationship between the users’ experience and the local culture and lifestyles, in China, according to The Economist, is as follows: The most dynamic area, and the hardest for outsiders to understand, is that of online communities, many of which are run by a company named Tencent. Its site offers an instant-messaging service and a MySpace-like social networking site, among other services. The basic services are free, but users pay for add-ons, such as new backgrounds for their home pages or more storage space. The members of these communities are people who, because of the single child policy, have no siblings and are searching for virtual friendships. For them and for many users in China, the Internet is not truly a worldwide web: it is only as wide as China. But China’s Internet community is evidently a world unto itself. (Alternative reality, 2008, p. 70)

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Qzone’s Tencent Holdings in China also made over $1 billion last year with just 13 percent coming from advertising revenue. Social networking is just a way to get people together, but if you want to expand users and if you want revenue, you have to sell them something that can make their relationships tighter and more personal through fulfilling emotional needs. According to Goh (2009), what they found was that people in Asia were happy to pay for content related to emotion, status, and entertainment, even in China. By selling an array of virtual products from clothes for avatars and e-pets to e-furniture, Asia’s social networking sites appear to have solved the conundrum of how to leverage big profits from their extensive user bases. They keep growing even though the economy is bad because they keep making millions of dollars by getting cents from millions of people. Asians spend an estimated $5 billion a year on virtual purchases via Web sites such as Qzone, Cyworld in Korea, and mobile-phone based network Gree in Japan, according to Plus Eight Star (Goh, 2009). That’s about 80 percent of the global market for virtual products. MySpace.com The key element that makes SNSs successful from a sociological perspective is that their platforms are continually extending functions of profiles, communications, and messaging, and newsfeeds to respond to their users’ evolving lifestyles and the local cultures. For example, MySpace was launched in Santa Monica, California, in 2003, hundreds of miles from Silicon Valley, the hub of technology development and countless entrepreneurs. According to its cofounder, Tom Anderson (personal communication, August 2, 2007), the founders wanted to start by attracting estranged local Friendster users. After Friendster adopted a fee-based system, users posted Friendster messages encouraging people to join alternate SNSs such as Tribe.com and MySpace. One particular group that encouraged others to switch were indie-rock bands who were expelled from Friendster for failing to comply with profile regulations. While MySpace was not launched with bands in mind, they were welcomed. Indie-rock bands from the Los Angeles region began creating profiles, and local promoters used MySpace to advertise VIP acts for popular clubs. Intrigued, MySpace contacted local musicians to see how they could support them (ibid.). The bands-and-fans dynamic was mutually beneficial: Bands wanted to be able to contact fans, while fans desired attention from their favorite bands and used friendly connections to signal identity and affiliation (boyd & Ellison, 2007). Bands were not the sole reason for MySpace’s growth, but the symbiotic relationship between bands and fans helped MySpace expand beyond former Friendster users, and its capacity for transforming local

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popular culture, expanding niche communities, and understanding the users’ power helped evolve the SNS. An external social networking (ESN) site is public and available to all Web users to communicate and is designed to attract advertisers, although they can also be specialized communities, such as DeviantArt. People are no longer confined to social networks in physically proximate neighborhoods. The bond with family and others spatially near is decreasing, and people now actively construct their social relationships based upon shared interests and common goals. Naver.com While the primary focus of this chapter is on social networking, the lessons learned from entrepreneurial attempts to globalize search engines is instructive. Naver.com, a local search-engine company, was initiated by a former employee of Samsung, Kim San-Hun, in 1999. Naver.com attracts more than 77 percent of all Web searches originating in South Korea—Daum.net follows with 10.8 percent, Yahoo with just 4.4 percent and Google with 1.7 percent of Korean Web searches, according to Internet market research company KoreanClick, and the Naver created “Republic of Naver” (T.-g. Kim, 2007). This success is largely due to user-generated content. Naver’s founders realized that when searching online in Korea, there was hardly anything to be found. So they set out to create the content and database based on Koreans’ common interests and information they look for, so that when Koreans do a search in Korean, they would find content they could access fast and articulately. Naver set up “Knowledge iN” in 2002, enabling Koreans to help each other in a type of real-time question-and-answer platform. On average, 44,000 questions are posted each day with about 110,000 returned answers (Schwartz, 2007). “Knowledge iN” search is an information-sharing tool where users actively participate to answer other users’ questions, and points are awarded to users who provide the best answers. The entire database is made up of users’ contributions to these questions and answers, and this results in quality content and context in a language users are familiar with. The Naver search engine has also been helped by the fact that Korea is a homogeneous society where people often share their common interests (MacManus, 2006).There are 48 million people packed in a small country, slightly larger than the state of Indiana. The society is wired and is interconnected with human Web and mobile networks, and it also has the fastest broadband in the world; the average speed as of September 2009 was 14.6 mbps, and Japan was second with 7.9 mbps (Chin, 2010). Koreans are tightly connected by in-group rather than individual to individual. The user

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experience of one member of an in-group could have a ripple effect and affect other members of the same in-group and other groups through interconnected memberships. In Korea, people who want to look something up on the Internet do not “Google it.” Instead they “Ask Naver” (Alternative reality, 2008). Naver is ranked as the world’s fifth search service provider, behind Google, Yahoo, Baidu, and Microsoft (WCU Webometrics Institute, 2009). In 2001, Naver changed its name to NHN (Next Human Network), and in 2004, established the game development studio NHN games. Hangame, which is also Korea’s largest game portal, markets games in various genres ranging from Web-based to casual action games. The addition of a game portal seems to be another promise of their success in local markets when it considers Koreans’ love for games, especially MMORPGs. In January 2009, NHN introduced its open information platform in order to make Naver connected in over 165 countries around the world. It was ranked fifth in terms of search queries among global Internet search engines by the U.S. Internet market survey company Comscore in 2007. In 2008, NHN was listed in the “Global 2000” by Forbes, and was also named in the “Asia50” by Businessweek. Newsweek also ranked NHN as the fifth in “2008 Most Profitable Companies internet Service” (NHN global, n.d.). Naver has grown into Korea’s most-visited search portal with groundbreaking service initiatives, such as “United Search” and “Knowledge iN” as well as Mail Blog, online community cafes, and a shopping directory, local information and many features that add convenience to everyday life. Why does Google fall short in Korea? Wayne Lee, an analyst at Woori Investment and Securities said, “No matter how powerful Google’s search engine may be, it doesn’t have enough Korean-language data to trawl to satisfy Korean customers” (Schwartz, 2007). Social Networking Sites (SNSs) in America As we have noted, in recent years, SNSs such as MySpace, Facebook, and Cyworld, have attracted millions of users, many of whom use these sites on a daily basis. There are now hundreds of SNSs, with various technological capabilities and various foci and audiences. Facebook is the largest of the SNSs, with 350 million users and is the second most popular Web site on the Internet, after Google. As one article pointed out, if Facebook were a country, it would be the third most populous after China and India (A world of connections: Special report, 2010). As shown in figure 8.1, the average time spent on social networking in various countries differs significantly, from seven hours daily in Australia to approximately six hours daily in the United States and South Korea.

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Figure 8.1 Social types: Average times spent on social networking sites, October 2009, hours per user Source: A world of Connections, 2010.

Perhaps a brief history of the origin and development of SNS in the United States and their place in the global world of SNSs is useful. According to boyd & Ellison (2007), SixDegrees, the first recognizable social network site was launched in 1997. Users could create profiles, identify friends, and surf the friends lists. It never really took off as a business venture—perhaps because it was simply ahead of its time. SixDegrees was followed by a number of similar sites—AsianAvenue, BlackPlanet, and MiGente—providing the same types of services: the creation of profiles and allowing connections to friends. Cyworld, the Korean virtual world’s site launched in 1999 and two years later added SNS features (Kim and Yun, 2007); LunarStorm, a Swedish Web community became an SNS in 2000. Then there were several SNSs focused on enhancing business networks (Ryze, Tribe.net, LinkedIn, and Friendster), of which LinkedIn became a powerful business service, and Friendster became the most significant but ultimately a disappointment in the United States, though it amassed a huge following in the Philippines, Singapore, Malaysia, and Indonesia. As boyd and Ellison (2007) explain, from 2003 onward, hundreds of SNSs appeared in the United States, some generally focused like Friendster, while others functioned to connect people of similar language, racial,

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sexual, religious, or nationality-based identities and interests. For example, LinkedIn, Visible Path, and Xing (formerly openBC) are for business people. While most SNSs support the maintenance of preexisting social networks, others help strangers connect based on shared interests; for example, Care2 helps connect activists, Couchsurfing helps travelers find hosts where they can stay a night or two, and MyChurch helps connect Christians and churches. Soon, Web sites focused on media sharing began implementing SNS features (e.g., YouTube for sharing videos, Flickr for sharing photos and Last.FM for music) (boyd and Ellison, 2007). Today, businesses are bringing social networking and blog technologies into the workplace with “Enterprise 2.0” (A World of Connections, 2010). At the same time that these SNSs were launched in the United States, similar sites began appearing worldwide. Google’s Orkut became the national SNS of Brazil; Microsoft’s Windows Live Spaces (a.k.a. MSN Spaces) became extremely popular elsewhere. Friendster in the Pacific Islands, Orkut in Brazil and India, Mixi in Japan, LunarStorm in Sweden, Hyves in the Netherlands, and Grono in Poland. Hi5 was adopted in smaller countries in Latin America, South America, and Europe, and Bebo became very popular in the United Kingdom, New Zealand, and Australia (Swartz, 2008). There are now other big national community sites such as Skyrock in France, VKontakte in Russia, and Cyworld in South Korea, as well as numerous smaller social networks that appeal to specific interests such as Muxlim, aimed at the world’s Muslims, and ResearchGATE, which connects scientists and researchers (A world of connections, 2010). Additionally, previously popular communication and community services began implementing SNS features. The Chinese QQ instant messaging service instantly became the largest SNS worldwide when it added profiles and made friends visible (boyd and Ellison, 2007). As noted earlier, the forum tool Cyworld cornered the Korean market by introducing homepages and buddies (Kim and Yun, 2007). As shown in figure 8.2, there have been some changes in the last few years. Windowslive is now the second largest networking site and Myspace has fallen to a distant third. As noted above, the site initially gained users rapidly, However, after it got the attention of business investors and was purchased for $580 million in 2005 by News Corporation, its American share of the social networking market fell from 67 percent in September 2008 to 30 percent one year later. Analysts attribute its fall to a series of strategic mistakes made by the new leadership; specifically, it neglected its technology in favor of revenue targets that proved unpopular—adding job listings and horoscopes, among other things (Global Swap Shops, 2010). Meanwhile Twitter, a service whose members send short, 140-character messages called “tweets,” and LinkedIn, which targets career-minded professionals, have grown substantially.

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Figure 8.2 Who will be my friend? Social networking sites, total unique visitors, October 2009 Source: A world of Connections, 2010.

The top global SNS, Facebook, founded by a Harvard student Mark Zuckerberg, was started in 2004 as a niche SNS—originally open only to Harvard students. It soon became available to anyone with a college or university email address and eventually became available to anyone (boyd and Ellison, 2007). By 2007, Facebook was reported to have more than 21 million registered members, generating 1.6 billion page views each day (Ellison, Steinfeld, and Lampe, 2007). Its largest user base is still in North America, though its growth in every other worldwide region has more than quadrupled. Teens continue to be more avid users of social networking sites than adults, as 73 percent of online American teens ages 12–17 visit SNSs. However, a recent survey found that 47 percent of online adults visit SNSs, growing from 8 percent in 2005. In fact, of those U.S. adults who use SNSs, 54 percent maintain a profile on multiple sites. The most common ones being FaceBook, MySpace, and Linkedin (as of September 2009). Adults over 30 are more likely to be on Facebook and Linkedin (Lenhart et al., 2010). The Social Functions of Social Networking: SNSs, Blogs, Twitter For the most part, most people do not view their off-line/real-life relationships as more “real” or even different from their Internet relationships.

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Rather, many relationships are maintained through multiple media, Internet, telephone and face-to-face encounters. While the Internet is especially useful for maintaining long-distance relationships, there are many local relationships that exist and are managed both online and offline (Baym, Zhang, and Lin, 2005; Beer, 2008). It should also be noted that being active online does not substitute for offline socializing, as was previously thought. In fact, most research findings now indicate that people who socialize most online are also most active offline. Overall, social network users are also “super-communicators,” using all types and methods of communication to stay in touch with their friends with a frequency unmatched by other teens. In fact, in many cases, “those who are the most active online with social media applications like blogging and social networking also tend to be the most involved with offline activities like sports, music, or part-time employment” (Lenhart et al., 2007, p. 9). As mentioned earlier, the primary function of SNSs is generally not to meet new people, but to connect with those already in a social network. For example, Facebook is used to maintain existing offline relationships or solidify offline connections through some common element, such as a shared class at school or perhaps a previous experience such as going to the same elementary or secondary school (boyd and Ellison, 2007; Ellison, Steinfeld, and Lampe, 2007). The unique characteristic of these sites is not that they allow people to connect with each other easily and cheaply, but that they allow users to make their social networks visible, and in some cases this provides opportunities for other people to connect who might not otherwise meet—solidifying latent ties (Haythornthwaite, 2005). People can now, with a few clicks on the computer, let friends—and others—know what is happening in their lives moment by moment. They can send photos, videos, and lots of other content (A world of connections, 2010). Recent comprehensive surveys by the Pew Research Center explore the role that SNSs play in young Americans’ social networking activities and results reveal the importance of SNSs in their daily social lives (Lenhart and Madden, 2007; Lenhart et al., 2010). In 2007, more than 90 percent said that they used the sites to stay in touch with friends they see frequently; 82 percent to stay in touch with friends they rarely see in person. They also use the site to manage their social lives. 72 percent said they use the sites to make plans with friends; 49 percent say they use the sites to make new friends and 17 percent said they use the sites to flirt with someone. It is worth noting that younger people are increasingly passing up traditional online dating sites like Eharmony and Match.com and using Facebook and Facebook’s new online dating sites—Are you Interested and Meet new People—to find romantic partners (Krauss, 2008). In addition, young people, more than older adults, increasingly access SNSs through mobile

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devices like cell phones and PDA’s rather than laptops or desktop computers (Lenhart et al., 2010). How do young people (in the United States) actually communicate with each other on SNSs? Research results show that in 2007 the most popular practices were to post a message to a friend’s profile page or “wall,” send a private message to a friend within the SNS, and post comments to a friend’s blog. It was also common to send a group message to many friends on the SNS or give a wink, poke, “e-props,” or kudos using the features of various social networks (Lenhart and Madden, 2007). A more recent study revealed some changes. The most frequent practice now is still to post messages, comment on pictures, or send IM or text messages. However, U.S. teens are now less likely to send group messages, post comments to a friend’s blog, or send private messages (email) (Lenhart et al., 2010). Whereas earlier surveys found that young women visited SNSs more than young men, this very recent survey found that male and female teens and young adults equally frequent SNSs (ibid.). While the 2007 Pew study surveyed primarily young adolescents (more likely to be on MySpace) a similar study was conducted on a college campus where 94 percent of the students surveyed were Facebook users (Ellison, Steinfeld, and Lampe, 2007). These students reported spending between 10 and 30 minutes on average on Facebook each day and having between 150 and 200 friends listed on their profile. It is likely much higher now, given more recent research findings. Like the Pew respondents, these students also reported that they used Facebook to manage existing friendships that they also maintain offline or to maintain connections with high school friends and acquaintances. These pieces collectively provide insight into some of the ways which online and offline experience are deeply entwined. In addition, participation in SNSs may play an important role in providing strong network connections as students move from college to professional life. As Ellison et al. (2007) report: The strong linkage between Facebook use and high school connections suggests how SNSs help maintain relations as people move from one offline community to another. It may facilitate the same when students graduate from college, with alumni keeping their school email address and using Facebook to stay in touch with the college community. Such connections could have strong payoffs in terms of jobs, internships, and other opportunities. (p. 1164)

Blogs Another way of keeping in touch with others is through personal blogs. These are Web sites maintained by an individual with regular entries of

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commentary, descriptions of events, or other material such as graphics or video, like a journal. According to a recent study conducted by Technorati. com—a blog search engine that tracks in 81 languages around the world— there are now are bout 70 million blogs worldwide and bloggers collectively create almost one million posts every day (“State of the blogosphere,” 2008). Blogging activity has increased exponentially since 1999 partly because mainstream media have increasingly recognized blog content as legitimate news sources, and because blogging software, especially connected to Twitter, allows users the ability to update rapidly and easily—seen most dramatically in the coverage of the election protests in Iran (McClean, 2009). In the beginning, blogs were created for political and technical users, but today’s blogs are increasingly created by nonprofessionals for much smaller audiences (Nardi et al., 2004). People blog for many reasons: to document their life; to express opinions or commentary; for catharsis or as an outlet for thoughts and feelings; to test ideas or to “muse”; and as community forums (ibid.). For example, religious blogs are popular—a place where individuals can express their thoughts and feelings about their own personal faith, connect with others with similar beliefs, as well as to a wider public audience (Cheong, Halavais, and Kwon, 2008; Cheong and Poon, 2009). In addition, some individual blogs create space for community growth, bringing otherwise strangers together around very personal and emotional topics, such as breast cancer, suicide, and depression. For example, Rodgers and Chen (2006) analyzed more than 33,200 postings from an online breast cancer bulletin board, and thematized the life stories of 100 women randomly selected from the bulletin board. They found that there were many psychosocial benefits to participating on the discussion board, including receiving/giving information, receiving/giving social support, affection toward the discussion board, optimism toward breast cancer, increased ability to cope with the disease, improved mood, decreased psychological distress, and strategies to manage stress. Thus, blogging serves not only as a mode of personal expression, but also as a community-building medium. As Nardi et al. (2004) state, “Bloggers aren’t letting 900 million people read their diary, but they are standing before 900 million, sometimes in an attitude of indifference, sometimes with the hope of reaching out to new people in the ever-expanding blogosphere” (p. 231). Online space serves increasingly for political action, as shown in the 2008 U.S. presidential campaign. Three online activities have become especially prominent as the presidential primary campaigns have progressed: watching online political videos, using social networking sites such as Facebook or MySpace to gather information or become involved, especially for younger voters, and making political contributions online (Rainie and Smith, 2008).

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In the United States, young people used to be more active than adults in blogging, 28 percent of online teens reported blogging in 2006, compared to 19 percent in 2004 (Lenhart et al., 2007). However, the most recent surveys show that blogging has declined in popularity among both teens and young adults since 2006. Now only 14 percent of online teens say they blog and this decline is also reflected in the fact that fewer teens now comment on their friends’ blogs (Lenhart et al., 2010). By comparison, the number of adults who blog has remained consistently steady for the past five years, showing that approximately one in ten online American adults maintain a personal online journal or blog. The decline in younger adults (18–29 year olds) is tempered by a corresponding increase in Internet users aged 30⫹ who maintain a personal blog (Lenhart et al., 2010). Twitter The last way we mention in this chapter of how Americans, especially young people, are staying in touch is through Twitter. Twitter allows users to send messages, known as “tweets,” from a computer or mobile device, like a cell phone. They can post text-based messages with up to 140 characters, usually updates about their activities that are then delivered to friends and family who have signed up to receive these messages. Since its creation in 2006 by Jack Dorsey, Twitter has gained notability and popularity worldwide. Currently, about 19 percent of online American adults said they used a service like Twitter or another similar service (Fox, Zickuhr, and Smith, 2009). Twitter’s service also allows users to add a variety of interfaces and applications (photo- and video-sharing applications). Twitter began in a “daylong brainstorming session” that was held by board members of the podcasting company Odeo in an attempt to break a creative slump. During the meeting, Jack Dorsey introduced the idea of an individual using an SMS service to communicate with a small group, a concept partially inspired by the SMS group messaging service TXTMob—where one could send an update from anywhere and receive updates from anywhere (Twitter, n.d.). As with other online activities, young people are leading the way and are using Twitter for more than just activity updates. Approximately 33 percent adults online aged 18 to 29 have used Twitter or similar services, compared to 22 percent of those aged 30 to 49, 9 percent of those aged 50 to 64, and only 4 percent of those 65 and older (Fox, Zickuhr, and Smith, 2009). According to recent accounts, Twitter has been used to help organize and disseminate information during major events like the recent American elections, the 2008 California wildfires, and the Mumbai massacre. Twitter and other status updates have also been used for many

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other purposes, including the airing of complaints against companies, sharing ideas, forwarding interesting material, documenting events, conversing, and flirting (Lenhart and Fox, 2009). Similar to other online activities, the use of Twitter is highly interrelated with the use of other social media. People who use Twitter are also likely to participate in blogging and social network use. About 35 percent of online adults who use SNSs also use Twitter or a similar service—compared to 6 percent of those who do not use SNSs. The correlation between status updates and social network use is less surprising given that many social network sites offer opportunities to post status updates and read the updates of others (Fox, Zickuhr, and Smith, 2009) Twitter users are hyper-connected. That is, the more devices someone owns, the more likely they are to use Twitter or another service to update their status. Fully, 39 percent of Internet users with four or more Internetconnected devices (such as a laptop, cell phone, game console, or Kindle) use Twitter, compared to 28 percent of Internet users with three devices, 19 percent of Internet users with two devices, and 10 percent of Internet users with one device (Fox, Zickuhr, and Smith, 2009). Conclusion Technology and its applications are now playing a central role in shaping contemporary culture and continue to enfold our lifestyles with one act following another, featuring waves of entrepreneurial innovation, revitalization, and change. In each step of entrepreneurial development, culture continues to play a subtle role to meet local needs and wants, investing in priorities and in practices of particular lifestyles while fulfilling universal human needs. As a result, entrepreneurs seem to have had similar experiences in the limitations of applications for technical features and business models. As we reflect on the success and/or failure of Cyworld, Facebook, MySpace, and even Google, the world’s leading search engine, and its difficulty in penetrating the Asian market, it would be hard to imagine that there could be a single system in the arena of social media to serve all global citizens, but it seems there will be several systems that will serve both specific and/or general interests. Both Facebook and MySpace are being heavily marketed overseas. We, however, see a very small presence in China, Korea, and Japan. Even though Mark Zuckerberg, founder and CEO of Facebook, said achieving a positive cash flow status was not the primary goal for him—Facebook is one of the world’s 50 most innovative companies—when we consider that Facebook is a well-funded project, and the people behind the funding are a

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group of Silicon Valley venture capitalists, they probably have thought out the ideology they hope to spread worldwide and eventually create revenue from its advertising model. We saw the same phenomenon when Cyworld attempted to transfer its success in the local market in Korea, where it enjoys a mature payment infrastructure and good digital culture, to Germany and the United States, and failed. When Cyworld started in the Korean market in 1999, it enjoyed the advantage of being the first when there was less of a concept of blogging in the West, but by the time it entered Germany and the United States, there were strong regional competitors that already had a strong foothold and following among Europeans, including StudiVZ and Skyrock in Germany, and Facebook and MySpace in the United States. Eventually, Cyworld withdrew from both markets. Cyworld keenly understands the lifestyles of the target group and their meaningful relationships in the Korean context, but according to Mr. Chin, president of SK Telecom, USA, Cyworld underestimated the phenomenon of the local culture and the users’ experiences. Cyworld USA has now moved to the Silicon Valley, looking for entrepreneurs and opportunities to consolidate ideas that will bring SK Telecom into a circle of potential growth in the virtual limitless market for social needs. It seems there will be enormous innovations and a constant stream of new creative applications from online interactive social media that will propel restless young entrepreneurs to take the basic ideas of social networking developed in the early days and make them more effective in breaching social boundaries. References Alternative reality (2008, February 2). The Economist, 386 (8565), 69–70. A world of connections: Special report (2010, January 30). The Economist. Retrieved February 7, 2010, from http://www.economist.com/specialreports/displaystory. cfm?story_id=15351002. Baym, N. K., Y. B. Zhang, and M.-C. Lin (2004). Social interactions across media: Interpersonal communication on the Internet, telephone and face to face. New Media & Society 6(3): 299–318. Beer, D. (2008). Social network(ing) sites . . . revisiting the story so far: A response to danah boyd & Nicole Ellison. Journal of Computer-Mediated Communication 13: 516–29. boyd, d. m. (2007a, June 24). Viewing American class divisions through Facebook and MySpace. Apophenia Blog Essay. Retrieved February 18, 2008, from http:// www.danah.org/papers/essays/ClassDivisions.html. ——— (2007b). Why youth (heart) social network sites: The role of networked publics in teenage social life. In Youth, Identity, and Digital Media, ed. D. Buckingham (MacArthur Foundation Series on Digital learning). Cambridge, MA: MIT Press.

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Jung, N. (2008, March). Technology, Innovation and Scale Questions. Manuscript submitted for publication to IJURR. Kanellos, M. (2006, August 11). Korean Social-networking site hopes to nab U.S. fans. Retrieved April 7, 2010, from http://www.zdnetasia.com/korean-socialnetworking-site-hopes-to-nab-u-s-fans-39390226.htm. Kim, H., and Z. Papacharissi (2003). Cross cultural differences in online selfpresentation: A content analysis of personal Korean and US home pages. Asian Journal of Communication 13: 100–19. Kim, K.-H., and H. Yun (2007). Cying for me, Cying for us: Relational dialectics in a Korean social network site. Journal of Computer-Mediated Communication 13(1): 298–318. Kim S.-Y. (2010, February 2). KIPO launches training institutes for future entrepreneurs. Retrieved April 7, 2010, from http://korea.net/detail. do?guid=43796. Kim, T.-g. (2007, June 4). Dark side of republic of naver. Retrieved April 7, 2010, from http://www.koreatimes.co.kr/www/news/tech/2010/02/129_4145.html, Krauss, A. (2008, February 20). Piggybacking on Facebook. The New York Times, H0, p. 7. Lenhart, A., and S. Fox (2009). Twitterpated: Mobile Americans increasingly take to tweeting. Pew Internet & American Life Project. Retrieved February 17, 2009, from http://pewresearch.org/pubs/1117/twitter-tweet-users-demographics. Lenhart, A., and M. Madden (2007). Social networking websites and teens. Pew Internet & American Life Project. Retrieved December 2, 2008, from http:// pewresearch.org/pubs/118/social-networking-websites-and-teens. Lenhart, A., M. Madden, A. R. Macgill, and A. Smith (2007). Teens and social media. Pew Internet & American Life Project. Retrieved August 20, 2009 from http://pewresearch.org. Lenhart, A., K. Purcell, A. Smith, and K. Zickuhr (2010). Social media & mobile internet use among teens and young adults. Pew Internet & American Life Project. Retrieved February 7, 2010, from http://www.pewinternet.org/~/ media//Files/Reports/2010/PIP_Social_Media_and_Young_Adults_Report.pdf. MacManus, R. (2008, March 30). Facebook vs Asia’s top social networks. ReadWriteWeb. Retrieved April 7, 2010, from http://www.readwriteweb.com/ archives/facebook_vs_asia_top_social_networks.php. ——— (2006, August 3). Top Korean web 2.0 apps. ReadWriteWeb. Retrieved April 7, 2010, from http://www.readwriteweb.com/archives/top_korean_ webapps.php. Mashraqi, F. (2008, May 4). The business of Facebook applications—Reid Hoffman Message posted to http://mashraqi.com/2008/05/business-of-face book-applications-reid.html. McClean, J. (2009, October 19). State of the blogosphere 2009—Introduction. Retrieved April 8, 2010, from http://technorati.com/blogging/article/state-ofthe-blogosphere-2009-introduction/. Morse, K. (2003). Does one size fit all? Exploring asynchronous learning in a multicultural environment. From http://www.sloan-c.org/publications/jain/ v7n1/v7n1 morse.asp.

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The apparatgeist calls. (2010, January 2). The Economist, 394(8663), 56–58. The meek shall inherit the web. (2008, September 6). The Economist, 388(8596). Retrieved February 16, 2009, from http://proquest.umi.com.ezproxy1.lib. asu.edu/pqdweb?index=40&sid=3&srchmode=1&vinst=PROD&fmt=3 &startpage=&clientid=25164&vname=PQD&RQT=309&did=1550803151& scaling=FULL&ts=1234829438&vtype=PQD&rqt=309&TS=1234829446& clientId=25164&cc=1&TS=1234829446.The world in figures: Industries (2010, January). The Economist (Special Issue: The world in 2010), p. 14. The world’s 50 most innovative companies (2010, March). Fast Company, 143: 52–92 Twitter (n.d.). Wikipedia. Retrieved April 7, 2010, from http://en.wikipedia.org/ wiki/Twitter. Walmsley, A. (2008, October 20). Startling statistics in the age of digital. Marketing Magazine. Retrieved April 13, 2010, from http://www.marketingmagazine. co.uk/news/855163/Andrew-Walmsley-Digital-Startling-statistics-age-digital/. WCU Webometrics Institute (2009, September 18). Rationale for the naver. Yang, P. (2009). Knowing through asynchronous time and space: A phenomenological study of students’ online interactions. Unpublished dissertation, completed at Arizona State University.

9

Entrepreneurial Leadership of Korean Companies in the Global Market Yongsun Paik and In Hyeock Lee

Introduction The global economy can benefit from entrepreneurship in the following two ways: First, new and emerging firms play a crucial role in the innovations that lead to technological change and productivity gain. Creativity and entrepreneurial spirit are the driving forces behind global economic growth. Second, entrepreneurship represents an essential mechanism by which millions enter the economic and social mainstream of our global society. Entrepreneurial ventures enable a number of people, including women, minorities, and immigrants, to fulfill their dreams and achieve their career goals. In this context, this chapter will address the two main issues facing Korean entrepreneurs in the global market. The first issue concerns how small- and medium-sized enterprises (SMEs) will be able to take advantage of business opportunities in the global market. While chaebols, large conglomerates, aggressively expanded into the overseas market to overcome their small domestic market, most SMEs’s remained at home due to lack of resources and required skills. However, the economic crisis in 1997 brought a paradigm shift in their business approaches. As many SMEs, which were suppliers for large conglomerates, went bankrupt along with their customers, they began to realize that global expansion of their businesses would become inevitable in order to survive the competition in both the domestic and overseas market. Nevertheless, internationalization poses a great challenge to these companies since it requires a new approach to entering an unfamiliar market

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and a business model that led to success in the domestic market might not bring similar results in a foreign market. The second issue centers around the organizational capability of large conglomerates like the chaebols to encourage entrepreneurship and creativity. As such, international entrepreneurship has also been discussed as part of the competitive strategies of large multinational companies. As Korean companies continue to emerge as global competitors, new ideas about product development and marketing should come not only from headquarters but also from any overseas subsidiaries. To sustain the competitive advantage in the global market, they should learn how to make the best use of global organizational networking in generating and disseminating new knowledge and information. Finally, this chapter will examine an organizational culture and the type of leadership that is most appropriate and desirable to encourage entrepreneurship in Korean contexts. Will the traditional style of Korean management be effective enough to bring success in the midst of global competition? International entrepreneurship requires a combination of innovative, proactive, and risk-seeking behaviors that cross national borders. What are the key characteristics of managers who have mastered these kinds of behaviors? This chapter will be organized as follows: In the next section, we will describe the main characteristics of internationalized small- and mediumsized enterprises (SMEs) in Korea based on the survey data collected by the Small & Medium Business Administration (SMBA) in 2002. In the third section, we will discuss the competitive strategies of large-sized Korean multinational enterprises (MNEs), focusing on their corporate entrepreneurial efforts through overseas subsidiaries by suggesting several successful cases. In the fourth section, we will examine the most appropriate type of leadership effective for fostering successful international entrepreneurship in the Korean context based on the four dimensions of national culture identified by Hofstede (1980). The last section will conclude this chapter. Characteristics of Internationalized SMEs in Korea Although their contribution has not been recognized as much as the chaebols, small- and medium-sized enterprises (SMEs) are the backbone of the Korean economy. According to the OECD, Korea has SMEs that provide almost 90 percent of the nation’s total employment, and around 50 percent of its manufacturing output. SMEs employ almost 20 million people, while conglomerates have only 1.3 million employees (Korea Times, 5/7/2008). SMEs are also estimated to occupy around half of

ENTREPRENEURIAL LEADERSHIP OF KOREAN COMPANIES

Table 9.1

Korean SMEs and internationalization Domestic SMEs

# of SMEs %

181

3,247 54.0

Internationalized SMEs

Total

One country

Multiple countries

No data

2,671 44.4

5 0.1

91 1.5

6,014

the country’s business investment. As such, fostering innovative SMEs is deemed critical to developing the nation’s growth engines and easing economic polarization. The Small & Medium Business Administration (SMBA) in Korea, a government branch that promotes the development of Korean SMEs, conducted a vast survey in 2002. It collected firm-level data on the characteristics of Korean entrepreneurial firms with under 500 employees, resulting in 6,014 companies in the data set. As can be seen in table 9.1, 2,761 companies (46 percent of the sample) have international reach in at least one country, and there are only five companies with multiple presences in foreign countries. Since the countries of destination are not available for 91 companies, the total number of observations used for the subsequent discussion is 2,684. Entry Mode, Regional Strategy, and Industry Segmentation Exports represent the most popular mode of entry by Korean SMEs in foreign countries with 1,794 cases (66.8 percent) from the total sample, followed by establishing a subsidiary (18.4 percent). According to the internationalization process theory (Johanson and Vahlne, 1977), multinational enterprises go through a step-wise evolutionary process from license to export to international joint venture to wholly owned subsidiary by 100 percent foreign direct investment (FDI) in order to reduce the information costs and potential risk from operating in foreign countries. Table 9.2 shows that this traditional theory in international business is not readily applicable to SMEs in Korea. This may be because rapid technological advancement and globalization have dissuaded startups from developing required capabilities for international operations over time to acquiring them across geographical boundaries. In other words, companies chose to gain the learning experiences rather quickly by simultaneously expanding their businesses over a number of countries rather than following an incremental approach from one market to another. Although it is beyond the scope of this chapter to identify the specific reasons for Korean SMEs to internationalize their businesses, no one would deny that the

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Table 9.2

# of SMEs %

Table 9.3

# of SMEs %

Table 9.4

# of SMEs %

Internationalized Korean SMEs and entry mode Subsidiary

R&D Unit

Equity Investment

IJV

Export

Total

494 18.4

14 0.5

123 4.6

259 9.6

1,794 66.8

2,684

Internationalized Korean SMEs and regional strategy Asia-Pacific

North America

Europe

Others

Total

1,571 58.5

706 26.3

230 8.6

177 6.6

2,684

Internationalized Korean SMEs and industry segmentation Manufacturing

Service

Others

Total

1,917 71.4

693 25.8

74 2.8

2,684

impacts of globalization have empowered startups and SMEs to compete internationally (Beamish and Lee, 2003; Lu and Beamish, 2001). When they go abroad to identify business opportunities in foreign markets, it is interesting that they look for their home region of the triad. According to table 9.3, it should be noted that 1,571 cases of the sample (58.5 percent) internationalize into the Asia-Pacific region—the home region of Korean SMEs. This evidence coincides with recent studies that most MNEs realize the majority of their sales within their home region, leading to regional strategies of international operations (Rugman and Oh, 2008; Rugman, 2005; Rugman and Verbeke, 2004). These empirical findings have been discussed and supported in terms of diverse theoretical bases, including the liability of regional foreignness (Rugman and Verbeke, 2007), incremental internationalization process (Johanson and Vahlne, 1977), semi-globalization (Ghemawat, 2001, 2003), and, most recently, the institution-based view of strategy (Peng, 2002; Peng and Delios, 2006; Peng and Zhou, 2005). Table 9.4 indicates that the internationalization of Korean SMEs is prevailing in manufacturing industries, not in service industries. Over 70 percent of the sample (1,917 cases out of 2,684 observations) are those companies operating in manufacturing industries. This is partly due to a higher liability of foreignness that multinational enterprises face within customer-end services than in production activities when they operate in unfamiliar foreign markets (Rugman, 2005).

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Characteristics of Founders and CEOs Founders of internationalized Korean SMEs typically exhibit the following characteristics when they found their companies: They are in their thirties (1,440 cases out of 2,684: 53.7 percent), have majored in engineering (1,399 cases out of 2,684: 52.1 percent), and possess an educational achievement of bachelor’s degree (1,378 cases out of 2,684: 51.3 percent). CEOs of internationalized SMEs in Korea show a similar picture, but it should be noted that the proportion of CEOs in their twenties and thirties (1,462 cases out of 2,684: 54.5 percent) is smaller than that of the founders in the same age range (1,609 cases out of 2,684: 60 percent). This observation implies that new international ventures are founded by younger entrepreneurs, but are managed by older and experienced CEOs later on for further growth and development. This is consistent with the previous findings that founders create their new firms, but they soon become liabilities to the organizations leading to poor performance as the new firms get older and larger (Jayaraman, Khorana, Nelling, and Covin, 2000; Covin and Slevin, 1997; Hanks, Watson, Jansen, and Chandler, 1993). In their recent study on family firms, Kellermanns et al. (2008) did not find a significant relationship between CEO age and either entrepreneurial behavior or employment growth. They suspect that this may be

Table 9.5

Internationalized Korean SMEs and founders’ age 20s

# of SMEs %

Table 9.6

# of SMEs %

Table 9.7

# of SMEs %

169 6.3

30s 1,440 53.7

40s

50s

60s

Total

849 31.6

188 7.0

38 1.4

2,684

Internationalized Korean SMEs and founders’ major Engineering

Natural Science

Business/ Economics

Human/Social Science

Others

Total

1,399 52.1

231 8.6

515 19.2

215 8.0

324 12.1

2,684

Internationalized Korean SMEs and founders’ education PhD

Master

Bachelor

Others

Total

298 11.1

564 21.0

1,378 51.3

444 16.5

2,684

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Table 9.8

Internationalized Korean SMEs and CEOs’ age 20s

# of SMEs %

Table 9.9

# of SMEs %

131 4.9

30s

40s

50s

60s

Total

1,331 49.6

963 35.9

221 8.2

38 1.4

2,684

Internationalized Korean SMEs and CEOs’ major Engineering

Natural Science

Business/ Economics

Human/Social Science

Others

Total

1,396 52.0

218 8.1

538 20.0

220 8.2

312 11.6

2,684

Table 9.10 Internationalized Korean SMEs and CEOs’ education

# of SMEs %

PhD

Master

Bachelor

Others

Total

291 10.8

579 21.6

1,382 51.5

432 16.1

2,684

a unique finding for family firms. Although entrepreneurial behavior in general may be strongly associated with age, it is possible that pressures in family firms may mitigate such an effect. So even if a family firm member becomes a CEO at a young age, he or she may not have the power to enact entrepreneurial behavior. Financial and Technological Network Small- and medium-sized entrepreneurial firms are subject to resource scarcity partly due to the liabilities of smallness, and as a result, an effective access to capital has been cited as the most important factor for the successful creation of new firms (Masuda, 2006). The day-to-day challenge of rapidly growing SMEs is cash-flow management (Barringer and Ireland, 2006). Government support is the most important source of funding for the internationalized SMEs in Korea, as illustrated in table 9.11. Of the companies considered, 1,948 (72.6 percent of the total sample) have a financial network with governments at both central and local levels, amounting to 1.57 trillion won (in Korean currency, which is roughly $1.57 billion). Venture capital is the second best source of financial support for the Korean entrepreneurial firms, followed by angel investors and banks.

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Table 9.11 Internationalized Korean SMEs and financial networks

# of SMEs % Amount* %

Government

Venture capital

Bank

Angel investor

Total

1,948 72.6 1.57 38.8

776 28.9 1.27 31.4

304 11.3 0.51 12.6

580 21.6 0.70 17.3

4.05

* In trillion won, Korean currency

Table 9.12 Internationalized Korean SMEs and technological network University # of SMEs %

1,437 53.5

Public R&D Institute

Private Company

636 23.7

893 33.3

Sung, Gibson, and Kang (2003) suggest that one of the most important success factors in the growth of Korean entrepreneurial firms is technical experts. Further, they argue that business incubators provide the firms with cooperative relationships among prospective entrepreneurs, businesses, universities, and governments to foster knowledge transfer, leading to enhanced technical expertise. We already noted that a majority of founders and CEOs of internationalized Korean SMEs had their educational backgrounds in engineering. Table 9.12 shows that a large majority of the internationalized Korean SMEs depend on universities (1,437 cases out of 2,684: 53.5 percent) for their access to technological capabilities and support. It is interesting that the internationalized Korean SMEs have more technical networks with other private companies (893 cases out of 2,684: 33.3 percent) than with public R&D research institutes (636 cases out of 2,684: 23.7 percent). R&D Investment and Intellectual Property Rights Tables 9.13 and 9.14 provide insight into the innovative characteristics of internationalized SMEs in Korea. Of the internationalized Korean SMEs 88 percent (2,362 cases out of 2,684) invest under 1 billion Won (roughly $1 million) in R&D activities every year, with only three companies investing over 10 billion Won (roughly $10 million). As a result, 81.9 percent of the internationalized Korean SMEs (2,198 cases out of 2,684) possess less than ten intellectual property rights registered (including patent, utility model, design, and trademark). There are only 19 companies possessing

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Table 9.13 Internationalized Korean SMEs and R&D investment* 0  R & D  0.1 0.1  R & D  1 1  R & D  10 # of SMEs %

925 34.5

1,437 53.5

319 11.9

10  R & D 3 0.1

Total 2,684

* In billion won, Korean currency

Table 9.14 Internationalized Korean SMEs and Intellectual Property Rights

# of SMEs %

0  IPR  4

5  IPR  10

10  IPR  100

100  IPR

Total

1,763 65.7

435 16.2

467 17.4

19 0.7

2,684

more than 100 intellectual property rights in the sample of internationalized Korean SMEs. Government Policies and Incentives to Promote SMEs In the aftermath of the 1997 financial crisis, the Korean government implemented a series of policies and incentives to encourage those laid-off from large conglomerates to become entrepreneurs and start their own businesses. Many talented and skilled managers participated in these support programs, which resulted in the development of companies involved in advanced technologies. However, these SMEs have experienced difficulties finding international markets since they could assure potential customers of the quality, safety, and performance standards of their products and services. To correct this problem, the Korean government has developed a certification standard program that compares the quality of Korean products with that of similar products on the global market. Government officials believe that the certification programs will assist in their keeping pace with the rapid technological advances of their global competitors (Young, 2007). Yet, the Korean government’s legal and financial support to SMEs has been inadequate relative to its support to large conglomerates. In addition, the chaebols’ unwelcoming and anticompetitive stance along with remaining entry barriers and operating burdens limited the SMEs’ competitiveness, as the OECD lamented in its report (Hlasny, 2008). The very existence of the chaebols seems to discourage SMEs’ entrepreneurship in Korea. Critics have said that Korea, with layers of regulations on establishing startups and new factories, is one of the most difficult places in the world for

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entrepreneurs to start a new business (Hlasny, 2008; Lee, 2008). According to the World Bank’s Doing Business Survey of 2008, Korea is ranked 110 out of 178 countries with relation to the ease of starting a business. To rectify this problem, the Korean government decided to abolish the rule that requires entrepreneurs to have a minimal paid-in-capital of 50 million won, equivalent to $50,000, to launch a stock company. The new government policy will also provide 1.5 million square meters of land for new factories in the next three years and ease environmental rules (ibid.). Internationalized Corporate Entrepreneurship in Korea Although SMEs account for almost 90 percent of Korea’s national employment as mentioned above, it is still the large conglomerates, i.e., the chaebols, that remain key drivers for innovation and entrepreneurship in Korea. While the corporate landscape has changed considerably since the financial crisis of 1997, chaebols continue to dominate almost every aspect of Korean economic activity. This is particularly true in exports, where they account for almost 60 percent of the total amount (EIU ViewsWire, 5/14/2008). Given the relatively small size of the domestic market, it was inevitable for these large Korean companies to target overseas markets for their survival from their inception. This section will examine corporate entrepreneurship or intrapreneurship in large Korean companies that have been at the forefront of innovation in Korea. While definitions of corporate entrepreneurship vary, it can be described as “the process whereby an individual or a group of individuals, in association with an existing organization, create a new organization or instigate renewal or innovation within that organization” (Sharma and Chrisman, 1999, p. 18). From a resource-based perspective, corporate entrepreneurship is a key means of accumulating, converting, and leveraging resources for competitive purposes (Floyd and Wooldridge, 1999), such as developing and improving products, processes, and administrative procedures to rejuvenate and redefine firms and their markets or industries (Covin and Miles, 1999). The growth of corporate entrepreneurship or intrapreneurship can be attributed to such factors as “a rapidly growing number of new and sophisticated competitors, a sense of distrust in the traditional methods of corporate management, an exodus of some of the best and brightest people out of corporations to become small-business entrepreneurs, and an overall desire to improve efficiency and productivity” (Kuratko and Hodgetts, 2004, p. 52). More importantly, interest in corporate entrepreneurship has grown over the past decade, partly because increasing globalization and technological diffusion pressures are creating a need for all organizations

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to become more flexible and learning-oriented (Bettis and Hitt, 1995). The combination of rapid technological advancement, diffusion, and economic exchange across international borders throughout the 1990s has resulted in the emergence of a new competitive landscape characterized by increasing degrees of uncertainty, ambiguity, and risk (e.g., ibid.; Friedman, 2005). What constitutes the key dimensions of corporate entrepreneurship? There are at least two streams of the classification of organizational level entrepreneurship in general. One stream argues that firm-level entrepreneurship has five characteristics: innovativeness, proactiveness, risk-taking, autonomy, and competitive aggressiveness (Lumpkin and Dess, 1996). The other stream contends that corporate entrepreneurship includes three dimensions: venturing, innovation, and self-renewal (Zahra, 1993). Most recently, Covin and Kuratko (2008) described corporate entrepreneurship as being manifested in companies either through “corporate venturing” or “strategic entrepreneurship.” Corporate venturing is an approach to adding new businesses to the corporation while strategic entrepreneurship aims at pursuing highly consequential innovations (Kuratko, 2007, p. 6). Based on observations of the increasing pace and speed of competitive change in the economic landscape, it has been argued that the need for corporations to become more entrepreneurial is increasingly pervasive (Pearce and Robinson, 2005), if not essential in creating strategic renewal for large conservative firms (Wennekers and Thurik, 1999). Given the massive corporate downsizing and restructuring Korean companies underwent throughout the late 1990s, corporate entrepreneurship has become increasingly criticial to sustain their competitive advantage in the global market. Adopting Zahra’s definition of corporate entrepreneurship (Zahra, 1993), we will examine the intrapreneurship efforts of Korean companies to improve their competitiveness in the global market, which encompasses three types of processes: corporate venturing, innovativeness, and self-renewal.

Corporate Venturing As mentioned above, corporate venturing is the creation of new businesses related to existing products or markets, which involves significant resource commitment to business opportunities having a reasonable chance of costly failure. The awareness of the value of corporate venturing among Korean companies started when the 1997 financial crisis brought a wave of entrepreneurship across the country. Although corporate venturing is still in its embryonic stage of development, we can find a few successful cases.

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In December 1997, Samsung Electronics established MagicEyes as the first venture company of Samsung Electronics Co., Ltd. The SMBA appointed MagicEyes as a venture company in November 1998, and the Ministry of Information & Communication selected it as a member of the Competitive Technology Development Project. MagicEyes has provided optimized and leading-edge solutions as an SoC (System on a Chip) solution company for multimedia systems such as PDAs, digital cameras, VCRs, and digital camcorders. MagicEyes’ SoC solutions are designed to be suitable for not only stand-alone applications but also portable applications that require low power consumption together with competitive price and small package size by integrating CPU, image, video, 2/3D graphics, and various functional blocks. MagicEyes has introduced leading-edge multimedia processor solutions such as Multimedia Signal Processor (MMSPTM) and the VRenderTM series successfully since 1997 and its proven and experienced engineering resources are key success factors of the business. The MMSP family is designed especially for multimedia contents users who wish to encode and decode the industrial standard multimedia contents at any place and at any time. The VRender family is designed for game users who want to play games with multimedia player features. Because of its leading technology products, MagicEyes has been recognized as an innovative and prospective venture company in Korea and has received multiple awards from the Korean government and industry partners (from http://www.mesdigital.com/english/Aboutus/ aboutus_overview.asp). Another successful case is NHN Corporation, which was spun off from Samsung SDS in June 1999. It represents the first corporate venture of Samsung SDS. NHN Corporation is Korea’s premier Internet company, operating the nation’s top search portal, Naver (www.naver.com); the leading online game portal, Hangame (www.hangame.com); the nation’s largest children’s portal, Jr.Naver (jr.naver.com); and its first online donation portal, Happybean (happybean.naver.com). Starting from the two business pillars of search and games, NHN has rolled out a wide range of innovative and convenient online services that enable people to enjoy their life. A number of surveys demonstrate that the company is regarded as an undisputed leader in the online-services industry worldwide. NHN has emerged as the largest company in the tech-heavy KOSDAQ market in terms of market capitalization. Such outstanding growth is largely attributable to the company’s efforts to create and introduce stable revenue streams in its core services; for instance, search-oriented advertising services and fee-based games. NHN outgrew the confines of the national borders. Not only did it establish a good reputation in Japan and China, but it also set up NHN USA, forging toward becoming a worldclass Internet company (from http://www.nhncorp.com).

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Innovativeness The innovativeness dimension refers to product and service innovation with an emphasis on development in technology (Zahra, 1993; Knight, 1997). With a strategic entrepreneurship approach (Kuratko, 2007), innovation can be in any of five areas—a firm’s strategy, its product offerings, served markets, internal organization (i.e., structure, processes, etc.), or business model (Ireland and Webb, 2007). Corporate entrepreneurship has transformed Korean companies from marginal imitators to innovators. Particularly, large conglomerates such as Samsung, Hyundai, and LG, started to realize in the late 1990s that they no longer could compete with leading multinational corporations (MNCs) simply based on lower prices, and relentless innovation combined with the promotion of their own brand name was the only way to compete with the global competition. Unfortunately, not all the chaebols survived this transition. While the Daewoo Group, one of the big-five chaebol groups in Korea, collapsed and failed, Samsung has become a world leader in several key manufacturing industries. Samsung now is the world’s largest producer of memory chips and flat-panel monitors, the second largest producer of DVD players, and the third largest producer of cellular phones. As a result, the Samsung Group was able to achieve global efficiency through the synergy effect from its portfolio of products ranging from semiconductors and cellular phones to digital media, and high value-added consumer electronic appliances. At the same time, the Samsung Group started designing and developing aesthetically and technologically superior products. Based on these new target market profiles and brand essence statements, Samsung Electronics began the process of repositioning itself as the premium brand that allows seekers of extravagant lifestyles to push the boundaries of their existence through sensational designs and cutting-edge technology (Yoo and Winsor, forthcoming). Since Samsung became the world’s first producer of 256m DRAM in 1993, it continues to preempt leading competitors in developing the next generations of memory chips. It was almost a gamble when Samsung decided to enter the semiconductor industry, which required a huge amount of capital investment. Despite much skepticism from rival companies, Keun Hee Lee, the former chairman of the Samsung Group, did not stop investing in 4m DRAM projects in the late 1980s while Japanese companies were reluctant to escalate their commitment to the semiconductor industry as their businesses were struggling in the midst of a prolonged recession. Other chaebols such as Hyundai Motor Co. and LG Electronics have also emerged as some of the world’s largest producers of automobiles, air conditioners, and CD-ROM drives, respectively.

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Self-renewal Self-renewal refers to the transformation of organizations through renewal of the key ideas on which they are built. Again, the financial crisis of 1997 was a turning point for the Korean chaebols and led to a process of selfrenewal by streamlining a number of businesses and concentrating on a few profitable core businesses. In the past, chaebols aggressively pursued an unrelated diversification strategy. Such a reckless corporate strategy used to be called an octopus strategy since it encouraged chaebols to expand into new businesses based on hunches or random opportunities without economic rationale (Steers et al., 1989). They basically attempted to realize economies of scale and scope by integrating and coordinating operations around the world and by developing highly standardized products and marketing approaches (De la Torre, Doz, and Devinney, 2000; Doktor, Tung, and Von Glinow, 1991). Major Korean chaebols like Samsung and LG represented a good example of a low-cost leadership strategy in the 1970s and 1980s. Entering the 1990s, however, Korean companies began to realize that a low-cost strategy did not guarantee a sustainable competitive advantage in the long run and they started to pay more attention to enhancing the product quality. They realized that consumers around the world continued to demand locally differentiated products reflecting substantial divergence in standards, tastes, and perceived needs. In addition, internal managerial practices needed to be adapted to fit local cultural and legally mandated expectations. To effectively deal with these differences, Korean MNCs also had to consider local responsiveness. Thus, the challenge to Korean firms was how to transform the organization so that it became centralized enough for global integration and at the same time decentralized enough for local responsiveness. The discussion above leads us to believe that the strategic entrepreneurship of Korean companies calls for employing a so-called transnational strategy (Barlett and Ghoshal, 1988; Lasserre, 1996). This means that internationalized corporate entrepreneurship requires a balanced perspective between global integration and local responsiveness as discussed above. While recent developments in information and communication technology have enhanced the global integration of economic activities, the same technological development enabling customization has also served to intensify competition in each local market where the consumer tastes and preferences of one country can differ significantly from others (Yip, 1993; Sullivan, 1992). Almost all the innovations of Korean companies achieved so far resulted from R&D activities conducted at the headquarters. They should decentralize value-creation activities, R&D and marketing in

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particular, so that new innovative ideas can come from any part of their global networks. Korean companies should be able to tap into the knowledge and skills of talented people not only at their headquarters but also at their overseas affiliates. Korean firms can encourage corporate entrepreneurship when their organization facilitates worldwide learning through its global network. As firms are institutions for integrating knowledge (Grant, 1996), internationalization means a process of transferring a firm’s knowledge across borders. Doz, Santos, and Williamson (2001), characterizing much of the knowledge flow in MNCs as projections from the home country, argue that the successful firm in the future needs to go beyond the transnational approach to what they term a “metanational” strategy. Such a strategy would involve organizational activities aimed at sensing and processing complex knowledge involving new sources of technologies, competencies, and market understanding; mobilizing to translate that broadly dispersed knowledge into innovative products/services, business models, and opportunities; and operationalizing these to realize profit potential (Paik et al., 2007). National Culture, Organizational Context, and Entrepreneurial Leadership in Korea Given the intrinsic organizational inertia that impedes the entrepreneurial spirit usually noticeable in large conglomerates like the Korean chaebols, it comes as no surprise that an increasingly fundamental question of interest focuses on how opportunity-seeking activities might be stimulated and fostered in such corporate settings. In this section, we will discuss both internal and external factors in an organization that encourage the entrepreneurship of both SMEs and large-sized companies in Korean contexts. The organizational system needs to be properly designed in order to cope with the new requirements for entrepreneurship and technological innovations. Top management of an organization should be able to successfully inspire, encourage, and nurture autonomous and creative entrepreneurial behaviors in both SMEs and large-sized companies. This involves providing an environment that fosters creative-minded individuals’ need for autonomy, achievement, and personal control (Sexton and Bowman-Upton, 1986). It also involves attending to organizational characteristics such as incentive systems for innovations and organizational structures dedicated to new product ideas, and managerial support in the form of product champions and resources in a strategically focused way (Sathe, 1985; Hisrich and Peters, 1986; Kuratko, Montagno, and Hornsby, 1990). Similarly, Covin and Slevin (1991) have argued that top managers must create an organizational context that supports entrepreneurial behaviors through structure, culture,

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resources, and competencies. Using the four dimensions of national culture that Hofstede identified in his seminal work (Hofstede, 1980), we first discuss how the organizational structure and culture of a typical Korean company affect its ability to nourish entrepreneurship and then suggest how management can practice entrepreneurial leadership. Power Distance Korea has long been considered a large power-distance culture where one expects an unequal distribution of power between superiors and subordinates in an organization. As mentioned in Chapter 5, the influence of Confucianism made Korean society readily accept a relatively large power gap accorded by age, seniority, status, etc. Such sociocultural characteristics are generally replicated in the organizational setting of Korean companies. They are known to have a hierarchical structure where a top-down decision-making style is the norm rather than the exception. The existing literature on entrepreneurship tends to recognize that a lower power-distance culture offers a more fertile environment for innovation. Researchers found that autonomy and decentralized authority positively affect technology development (Hull and Hage, 1982; Imai et al., 1985). Several studies have revealed that policies that foster inequality among the members of an organization reduce innovation (Maidique and Hayes, 1984; Quinn, 1985). Rigid centralized control has been found to hinder the flexibility needed for innovation (Block and Macmillan, 1985; Sathe, 1988). These research findings support the idea that inequality in a high power-distance country can significantly impede the innovation process of companies. Individualism vs. Collectivism This cultural dimension probably represents one of the most salient characteristics that determine the level of a company’s entrepreneurial orientation. Entrepreneurship literature emphasizes an individual’s goals and desires that drive him or her to succeed in a new venture. Freedom and independence are essential for promoting entrepreneurship and thus innovation (Merton, 1973; Richter, 1981). In individualistic cultures, employees are provided with a great deal of personal freedom and autonomy. Conversely, collective cultures do not usually allow the adequate amount of freedom and independence needed for organizational members to think creatively and thereby fail to cultivate an environment fostering an innovative spirit. Accordingly, the lack of autonomy in collective cultures makes it more

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difficult to develop new technologies. Yet, an empirical study does not fully support this prediction and presents the interesting findings that innovation comes from a balanced need for individual initiative with the spirit of cooperation and team work mainly characterized by collectivism (Morris et al., 1994). They proved that an extensive emphasis on either individualism or collectivism will not result in high levels of entrepreneurship. Hofstede’s research identified Korea as one of the collectivistic societies where a sense of belongingness to a certain group is very strong (Hofstede, 1991). Koreans prefer to identify themselves as members of a certain organization, whether it be a school or a company, rather than self-identification. Although it is true that Korea is a collectivistic society compared to the United States, the country is considered more individualistic than Japan. Job mobility is much higher in Korea than in Japan. Therefore, Korean companies seem to be better-positioned than their Japanese counterparts to take advantage of entrepreneurship. Uncertainty Avoidance It is well documented in the literature that one of the main characteristics of entrepreneurship is associated with risk-taking behaviors (e.g., Morris et al., 2004). Instead of following the safe route, entrepreneurs represent a group of people who do not mind taking risks under uncertain situations. Hofstede’s research identified Korea as a relatively high uncertaintyavoidance culture in which control systems are designed to reduce risks and eliminate uncertainty. Graduates from top universities and colleges traditionally prefer to work for chaebols rather than creating a start-up company. The development of technology or innovation itself is a risky venture because it requires a long-term resource commitment; the success of which is not assured. Innovation also requires a special environment that is conducive to generating new ideas and accepting the outcome of new challenges. Shane (1993) insisted that the acceptance of uncertainty appears to be necessary for innovation because it requires a tolerance for risk and change. In corporate cultures where individuals are reluctant to accept even minor uncertainty and risk, a relentless attempt to develop new technologies may only end up depleting their limited resources. Covin and Slevin (1991) relate higher levels of entrepreneurship to an organizational culture that believes change and innovation are inherently positive and has a lower level of structural complexity and formality. However, Morris et al. (2006) found that neither highly formalized nor highly informal control systems are conducive to corporate entrepreneurship, suggesting

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that the intermediate level of control is most optimal for producing the best performance. Masculinity vs. Femininity Hosfstede (1991) states that a masculine culture is the one that values money, power, and competition. As Kedia and Bhagat (1988) argued, masculine countries are more driven to compete, are more dynamic, and are action-oriented. A masculine society is basically a performance-driven society where rewards and recognition for performance are the primary motivational factors for achievement. Existing research suggests that some major innovations were simply an outcome of the motivation produced by financial rewards, prestige, and a sense of accomplishment (Holthausen, Larcker, and Sloan, 1995; Bessant and Grunt, 1985). In masculine societies, people are supposed to be ambitious, assertive, and risk-takers in order to achieve their lifetime goals. This type of culture tends to give the utmost respect and admiration to successful achievers like an entrepreneur. The absence of performance-driven, assertive, and risk-taking cultural traits in a feminine culture may fail to support an environment in which an innovative spirit can thrive. Although Koreans possess some elements of a feminine culture such as Cheong (affection), they also have some attributes of a masculine culture as demonstrated by a strong work ethic and competitiveness influenced by the Confucian value system that often emphasizes the value of efforts at least as much as results. From the discussion above on organizational culture, it becomes clear what types of leaders are desirable to support the development of entrepreneurship in Korean contexts. Leaders should understand the importance of entrepreneurial actions by managers at any level to establish sustainable competitive advantages as the foundation for profitable growth (Kuratko et al., 2005). In order to achieve this goal, top management should consist of leaders who are willing to delegate power to middle-level managers (lower power distance), value individual creativity and initiative, promote team spirit (balance between individualism and collectivism), encourage healthy competition focusing on processes rather than results (control systems rewarding risk-taking behaviors), and recognize performance as the major motivational factor for achievement (masculinity) within the organization. Furthermore, the emergence of a global market requires additional entrepreneurial leadership characteristics for Korean managers. Thinking globally means extending concepts and models from one-to-one relationships in a specific cultural context to holding multiple realities and relationships

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in one’s head simultaneously, and acting skillfully on this more complex reality. To effectively implement a transnational strategy that combines global integration and local responsiveness, managers cannot simply concentrate on working with the host country’s workforce (HCW) in a specific market but also should learn how to communicate effectively with culturally diverse people and develop global strategic skills. The significance and complexity of these challenges requires new cross-cultural leadership competencies that involve equally complex thinking and problem-solving skills. Consequently, Korean companies need to develop a new leadership style that is capable of more effectively handling the complexity and intricacies of a global business environment, as well as more sensitivity to the perceptions and expectations of members of the HCW at their different foreign sites. They must appreciate the value of an organization’s intellectual capital at all locations within their organizational boundaries, manage knowledge generation and knowledge flows within their organization, and develop an inclusive organizational culture that values knowledge sharing and organizational learning (Paik and Pak, forthcoming). Conclusion In this chapter, we examined the international expansion of Korean SMEs and the corporate entrepreneurship of chaebols that compete in the global market. While large corporations have a long history of serving international markets, it was not too long ago that many SMEs started to look out for overseas business opportunities. We believe that balanced growth between large corporations and SMEs is critical to a healthy Korean economy. SMEs may have great new business ideas but they usually suffer from a lack of resources to commercialize them. Unfortunately, all the hype over entrepreneurship that peaked right after the 1997 financial crisis seems to have disappeared. In 2000, 9 percent of Korean adults were employed by new firms, a figure far higher than in any of the other 20 countries included in the study (Global Entrepreneurship Monitor, 2000). The new ventures were expected to make South Korea’s rigid market more flexible, but it seems that most of these ventures failed to meet this expectation. While some SMEs capable of vision will still remain competitive, very few now want to take risks. Given this downfall of entrepreneurship among SMEs, the Korean government should further remove regulatory obstacles to curb entrepreneurship and step up its effort to provide legal and financial incentives for SMEs to develop their capability to compete in the global market. Meanwhile, corporate entrepreneurship will be the driving force behind the continued growth of Korean chaebols. As the profile of Korean companies will not change overnight, chaebols will remain key contributors

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to the Korean economy, particularly in exports. Yet, challenges facing large corporations will be different from those of SMEs. Although chaebols have resources and favorable regulations that encourage intrapreneurship, there is an intrinsic constraint in a large company that often impedes creative thinking due to organizational inertia and bureaucracy. Accordingly, to support the development of corporate entrepreneurship, the top management of large companies should continue creating an organizational structure and culture conducive to stimulating corporate entrepreneurship. For this purpose, first, risk-taking behaviors should be recognized and rewarded in order to encourage corporate entrepreneurship in organizations. The new compensation system should focus on performance (both individual and group) and labor cost flexibility. Second, employees should not be afraid of failure in case a new idea is not materialized. Top management should develop a forgiving organizational culture so that managers will neither be afraid of nor be penalized for their failure. Instead they should be praised for their strenuous efforts to try something new or to think outside the box. Risk-taking behaviors cannot be encouraged without failure tolerance. Finally, knowledge creation and sharing through global learning constitutes an important dimension of corporate entrepreneurship. A strong desire for relentless learning is a testimony to commitment and dedication to continuous innovation. For this purpose, Korean companies should not only keep benchmarking leaders in their respective industries but also increase the role of overseas subsidiaries in their R&D and innovative marketing practices. References Barringer, B. R., and R. D. Ireland (2006). Entrepreneurship: Successfully Launching New Ventures. New York: Pearson Prentice Hall. Bartlett, C. K., and S. Ghoshal (1988). Organizing for worldwide effectiveness: The transnational solution. California Management Review 31(1): 54–74. Beamish, P. W., and C. Lee (2003). The characteristics and performance of affiliates of small and medium-size multinational enterprises in an emerging market. Journal of International Entrepreneurship 1: 121–34. Bessant, J., and M. Grunt (1985). Management and Manufacturing Innovation in the United Kingdom and West Germany. Aldershot, UK: Gower. Bettis, R. A., and M. A. Hitt (1995). The new competitive landscape. Strategic Management Journal 16(5): 7–19. Block, Z., and I. Macmillan (1985). Growing concern: Milestones for successful venture planning. Harvard Business Review 63: 184–98. Covin, J., and D. F. Kuratko (2008). The concept of corporate entrepreneurship. In The Blackwell Encyclopedia of Technology and Information Management. Oxford. UK: Blackwell Publishers.

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Contributors

David Choi is an Assistant Professor of Entrepreneurship and the Associate Director of the Hilton Center for Entrepreneurship, Loyola Marymount University. He has published articles on entrepreneurship, technology management, and social responsibility in various professional and academic journals, including Strategy & Business, Journal of Private Equity, Business Horizons, Technovation, Academy of Management Executive, and Entrepreneurship Theory & Practice. He received his PhD in management from the Anderson School at UCLA and a MS and BS in industrial engineering from UC Berkeley. John P. Daly, S. J., established the Center for Asia Business in the College of Business Administration, Loyola Marymount University (LMU), Los Angeles, in 1995. As Director, he provides study-abroad programs in Asia. He established endowments for the Daly Summer Scholarships for students and research grants for faculty to provide opportunities for a better understanding of Korea and Koreans. His office initiated and conducted various executive training programs for Korean government-affiliated agencies and conglomerate companies. Prior to working at LMU, Father Daly served as President for 12 years at Sogang University, Seoul, and also taught as a professor of English. He received the Mor-Ran medal from President Park Chung-Hee, recognizing his contributions for the establishment of an infrastructure of American educational practices for Korean higher education through his work at Sogang University. Later he served as Academic Vice President at Creighton University, Omaha, Nebraska. He has an MA from St. Louis University, and a PhD from the University of North Carolina at Chapel Hill. Wayne Le Cheminant is an Assistant Professor of Political Science at the Bellarmine College of Liberal Arts, Loyola Marymount University, Los Angeles. He is also affiliated with the Asian and Pacific Studies Program. He focuses his research and teaching on political culture and how ideas and ideology impact political institutions. He is currently working on editing a book called Mormons and Politics: The Lessons of History, Belief, and Practice with Russell Arben Fox and Nathan B. Oman. He has an article forthcoming in the book Leadership and Politics titled “Leadership, Cognition, and Political Manipulation.” He is also currently working on a book titled Human Nature and the Political Imagination: The Crafting of the Polity. Dr. Le Cheminant also teaches courses on Asian politics. He has spent a considerable amount of time living in South Korea and is fluent in Korean.

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In Hyeock (Ian) Lee is an Assistant Professor of international business and strategy in the Gordon Ford College of Business, Western Kentucky University. He received his PhD in business from the Indiana University at Bloomington. Prior to joining academia, he served as Deputy Director at the Ministry of Commerce, Industry & Energy (MOCIE) in Korea. His primary research interests focus on the location choices of multinational enterprises and entrepreneurial firms contributing to cluster formation. Other research interests involve how regional strategies of multinational enterprises and international new ventures are linked to performance. He has published multiple articles in such journals as Asian Business & Management and European Management Journal and presented numerous papers at nationally recognized academic conferences such as the Academy of International Business (AIB) and the Academy of Management (AOM). He was a recipient of the 2009 McGraw-Hill/Irwin Distinguished Paper Award at the Annual Meeting of the Academy of International Business-Midwest (AIB-Midwest). Judith Martin is Professor of Intercultural Communication, Arizona State University. Professor Martin has published numerous articles in the areas of ethnicity and communication, international sojourning, and cross-cultural training and has coauthored several intercultural communication textbooks. She coauthored the book with T. Youn-ja Shim, Changing Korea: Understanding Culture and Communication (Peter Lang Press). She served as the Jeanne T. Herberger Professor Communication from 2001–2004 at Arizona State University. She received her MA and PhD in Speech Communication at the Pennsylvania State University. Yongsun Paik is a Professor of International Business and Management at the College of Business Administration, Loyola Marymount University. He holds a PhD in international business from the University of Washington. His primary research interests focus on international human resource management, global strategic alliances, and Asian Pacific business studies. He has recently published the book Managing a Global Workforce: Challenges and Opportunities in International Human Resource Management. He has also published numerous articles in such journals as Journal of World Business, Academy of Management Executive, Academy of Management Learning and Education, Management International Review, Journal of International Management, Thunderbird International Business Review, Journal of Business Ethics, and International Journal of Human Resource Management, among others. T. Youn-ja Shim (Theresa Y. Shim) works as the Vice President, Business Affairs, at Loyola Productions, Inc. She also serves the Center for Asian Business at Loyola Marymount University as a consultant and currently teaches the course “Exploring Asian Culture” at the College of Business Administration. Previously, she served as Associate Director of the Center for Asian Business, Loyola Marymount University, Los Angeles, where she developed and was the Director for the International MBA in the media and taught intercultural communication theory. She was the former Director of Global Entertainment Business Initiatives in the Marshall School of Business at the University of Southern California. Earlier, Shim worked as a vice president and branch manager in the banking industry. She is coauthor of the recently published book Changing Korea.

Index

Addon Co. 81 Agency for International Development (AID) 128, 138 agriculture 20–21, 23, 30–33 AhnLab 158 Ahonen, Tomi 156 Allen, Horace N. 115 altruism 53, 97, 102 Apple 155, 161 Arrupe, Fr. Pedro 118 Asian Tigers 18 asset specificity 96–97 authoritarianism. See hierarchy, respect for Avison, O. R. 115 Bachhuber, Fr. 129 Bal-li Bal-li 38 Barclays bank 39 barley fast (spring famine) 21 Beedeo.com 158 Bernbrock, Fr. John 125 Bhagat, R. 195 Bitter, Fr. Bruno 118 Blanchflower, D. G. 98 blogs 150–51, 156, 159, 166–73 Boo-heung 27 Boucher, Fr. Henri 117 boyd, d. m. 165 Breen, M. 4, 7 Brin, Sergey 157 Bu-pyung industrial complex 26 Burns, Fr. Leo 119 Business Goals Network 95

Cairo Declaration 9 capital access to 74, 98, 184, 187, 190 human 45 intellectual 196 venture 78, 155, 173, 184–85 capital markets 75–76, 96–98, 106 capitalism 2, 17, 19, 39–40, 43, 46, 52, 78, 137, 147, 155 cell phones and cell phone usage 150, 153, 169, 171–72 chaebols (conglomerates) 104–6, 158, 192, 194, 196 creativity and 3, 180 family firms and 87, 104–6 financial crisis and 28, 191 first-generation entrepreneurs and 73 overseas expansion of 179 Park and 19–20, 22, 26, 28, 40 power and 3, 6, 11–13 SMEs and 186–87 telecommunications 101 urbanization and 26 value systems and 68–76 See also Daewoo Group; Hyundai Group; LG Group; pre-chaebols; Samsung Group Chang, J. 11 Chang Myun 128 Chang Young-Hee 49 Chang Young-Shin 81 Charles, T. 95 Chen, W. 170

206

INDEX

cheong (Korean cultural ethos) 102, 195 China 8, 10–11, 18, 92–104, 106–7, 161–64, 166, 172 Chinese language 135 Ching, P. N. W. 160 Cho, Ki-Yong- 83 Choe Yeong-Seon 81 Choh Soon-Takh 128 Choi, Man-Lip 50 Choi Chung Ok 86–87 Choson Christian (Yonhi) College 115. See also Yonsei University Chun Doo-whan 12 Chung, Y. I. 8 Chung In Yung 74 Chung Ju-young 18, 22, 24, 33–40, 53, 74 Chung Moon-Sool 76 Cold War 6–7, 9–10, 13 collectivism vs. individualism 19, 69–70, 78, 86–87, 103, 152, 154, 193–95 communication styles 143, 152 community-development programs 30–31 computer telephony integration (CTI) systems 77 computer-mediated communication (CMC) 150–52, 154 Confucian values collectivism 19, 69–70, 78, 86–87, 103, 152, 154, 193–95 group harmony 70–71, 91, 101, 103, 107 hard work 3, 23, 31, 36, 46–47, 55–57, 64, 69, 71–72, 74, 141–42 respect for hierarchy 18–20, 68, 70–72, 88, 101, 121 self-reliance 18, 24, 27–33, 47, 55, 60, 70, 72, 85, 88 Covin, J. 188, 192, 194 creativity 1–4, 19, 33–34, 64, 134, 157–60, 179–80, 192–97 Cukier, K. N. 17

culture and values 21, 52, 59, 69–80, 95–96, 102–3, 151–55, 180, 92–96. See also Confucian values; family values Culture Technology (CT) 156 Cumings, B. 3, 10 Cyworld 28, 155, 158–66, 172–73 Daeryung Precision 76 Daesung Metal 76, 81–82 Daewoo Group 74, 190 Dahlmann, Fr. Joseph 117 Dailey, Ed 129 Dai-rim construction 27, 37 Dan-yang Cement 35 Darby, M. R. 100 Dethlefs, Art 119 Deusen, V. 95 discipline 69, 85 Dorsey, Jack 171 Doz, Y. L. 192 economic liberalization 3 education American 44, 47–52, 54, 64, 120 computers and 53, 153 Confucian value of 18, 34, 47 economic development and 44–45 English language 124–25, 130, 133–47, 157 of founders and CEOs 183–85 handicapped students and 49, 124 history of Korean higher 115–24 investment in and funding for 46, 134 Jesuits and 113–31, 130, 138, 140 Korean language and culture 157 Korean system of 44–54 of Park 78–79 second generation of entrepreneurs and 75 social entrepreneurship and 113–31 of technocrats 18, 26, 44–45, 64

INDEX

technology competences 133–34 See also Korea University; Pohang University of Science and Technology (POSTECH); Seoul National University (SNU); Sogang University; Sophia University Education Ordinance of 1911, 116 Ellison, N. B. 165, 169 Enbee 158 English Language Teaching (ELT) 133–47 entrepreneurs and entrepreneurship commonalities of successful 56–64 conditions of 1–7 corporate 180, 187–97 definitions of 33, 91, 96 first-generation 73–75, 64 Korean and U.S. experiences compared 87–89 second-generation 75–77 social 53, 56–57, 113–31, 134, 140–47 third-generation 77–80 traditional values and 71–75 values of 43, 64, 72–73, 89 women 80–86 youth 83–86, 155–58 expert, definition of 59–60 exports 23–29 external social networking (ESN) 163 Ewha Women’s University 61, 115–16, 120, 138, 141 Facebook 152–53, 155, 160–61, 164, 167–70, 172–73 family firms 91–107, 183–84 family values 91–107. See also Confucian values; culture and values Fialko, A. 104 Filo, David 84 First Republic of Korea, establishment of 11

207

Five-Year Economic Development Plans 21, 56, 61 first (1962–1966) 21–23, 25, 37–38, 127, 143 second (1967–1971) 25, 39, 127–28 third (1972–1976) 25, 39, 127–28 Flanagan, S. C. 73 Flynn, N. 100 Framework Act on Education 139 Franciscan Order 113 Friendster 152, 160, 162, 165–66 Fujitsu 63–64 Gates, Bill 84, 157 GDP 18, 46, 134 General Agreement of Tariff and Trade (GATT) 23, 38 Geppert, Fr. Theodore 118 Gibson, D. V. 185 Global Entrepreneurship Monitor (GEM) 68, 88 Gmarket 79–80 Goh, B. 162 Google 154, 157, 163–64, 166, 172 Gu-ro industrial complex 26 Haan Corporation 82–83 Haan Kyung Hee 82–83 Hall, E. T. 152, 154 Halliday, J. 11 Han RSS 158 Hangame 164, 189 Hangul 115. See also Korean language Hanjin 27 hard work 3, 23, 31, 36, 46–47, 55–57, 64, 69, 71–72, 74, 141–42 harmony, group 70–71, 91, 101, 103, 107 Heath, P. S. 99 hierarchy, respect for 18–20, 68, 70–72, 88, 101, 121 Hodge, John R. 10, 137 Hofstede, G. 95, 101–2, 152, 154, 180, 193–94 Hogan, Fr. Walt 130 Hongjin Crown 75–76 host country’s workforce (HCW) 196

208

INDEX

Hsun-tzu 69 Hyundai Group 18, 22, 27, 33–39, 53, 61, 74, 105, 144, 160, 190 Hyung, Yong-Jun 159 IBM 55–59, 63, 79 individualism vs. collectivism 19, 69–70, 78, 86–87, 103, 152, 154, 193–95 information and communication technologies (ICT) 157–58 information technology 53, 63–64, 79, 83, 156 Ingelhart, R. 72 inmack 74, 78 institution-based view of firms 93–100 intellectual property rights 185–86 International Co-operation Administration (ICA) 138 International Monetary Fund (IMF) 19–20, 77–78, 139, 158 internationalization process theory 181 Internet 28–29, 46, 77–79, 146, 149–64, 167–69, 171–72, 189. See also social networking sites (SNSs) intrapreneurship 187–88, 197 Japan cultural business differences 58 Do-mai freeway in 38 economic development of 17–19 entrepreneurialism in 92–107 Jesuits in 117–20 Korean relations with 11 as masculine culture 102 occupation and colonization of Korea 3, 5–6, 8–9, 21, 24, 31, 44, 50, 61, 63, 116, 136–37 shipyards in 35, 39 Sophia University 117–18, 130 U.S. presence in 10 Japanese-Russian war 135 Jeong Young Hee 84 Jesuits. See Society of Jesus Jinwoong 75, 77

Jochi Daigaku 117. See also Sophia University Ju-an industrial complex 26 Jun Hajin 83, 86 Jung, K.-H. 77 Kang, B. S. 185 Kang Seong-gu 5 Karra, N. 97 KCC Information and Communication 52, 54 Kedia, B. 195 Keijo Imperial University 116. See also Seoul National University keiretsu, Japanese network systems of 97, 104, 106 Kennedy, John F. 142 Kennen, George 142 Killoren, Fr. Ken 119, 122–23, 127, 129 Kim, Byong-kuk 127–28 Kim, H. 153 Kim, M. 137 Kim, M.-S. 36, 71, 73, 78, 85, 121, 153 Kim, Nam-Ju 83–84 Kim, S. H. 4–5, 12 Kim, Sung-Joo 81–82 Kim Dae-Jung 12, 28–29, 78 Kim Daewoo 74 Kim Hyung-Soon 77 Kim Jong-pil 129–30 Kim Jung-Il 9 Kim Mahn-jae 128 Kim San-Hun 163 Kim Soo-Keon 81–82 Kim Woo Choong 74 Kim Young-sam 12 Klein, B. P. 17 Knowledge iN 163–64 Korea Advanced Institute of Science and Technology (KAIST) 79, 128, 157 Korea Culture and Contents Agency/ Korea Creative Contents Agency (KOCCA) 28–29, 147, 156–57

INDEX

Korea Educational Development Institute (KEDI) 147 Korea Foundation (KF) 139, 147 Korea Institute of Curriculum and Evaluation (KICE) 147 Korea Intellectual Property Office (KIPO) 157 Korea Research Foundation (KRF) 147 Korea Research Institute for Vocational Education and Training (KRIVET) 147 Korea University 140–42 Korean Broadcasting Company (KBS) 146 Korean Civil Assistance Corps (KCAC) 138 Korean Employers’ Association 76 Korean language 52, 115, 135–39, 146, 157, 164 Korean Venture Association 83, 86 Korean Venture Business Women’s Association 81 Korean War 2–3, 6–10, 13, 21–23, 27, 31, 34–35, 44, 47–50, 74, 116–20, 123–24, 141–43, 158 KOSDAQ 75, 77, 84, 189 KS mark 53–54, 64 Ku Young-Bae 79–80 Kuratko, D. F. 188 Kwang hye-won (the National Hospital) 115 Kwangju uprising 12 Kyung-boo freeway 37–38 Kyung-nam enterprise 27 Lang, L. H. P. 104 Last.FM 166 Lee, A. R. 73 Lee, Chu-Yong 44, 50, 52–64, 104–105 Lee, H. C. 71, 78, 87 Lee, J. K. 138 Lee, Joanne 52 Lee, Keun Hee 190 Lee, Kun-Hee 105

209

Lee, Sang-Hyun 64 Lee, Wayne 164 Lee Byung-Chul 22–24 Lee Chung-Lim 22 Lee Hoon 76 Lee Myung-bak 35–36, 133–35, 139 Lee Myung-Park 157 Lee Seung-Yun 127–28 LG Group 190–91 Liao, D. 97–98 LinkedIn 165–67 Lippman, Walter 142 literacy 2, 44 Locus 77 LunarStorm 165–66 MacArthur, Douglas 137 MagicEyes 189 Mao Tse-Dung 10–11 Martin, J. N. 36, 71, 73, 78, 85, 121, 153 massive multiplayer online role-playing games (MMORPG) 158, 164 Masuda, T. 98 Matthews, C. 104 May 16, 1961, revolution 22, 24, 29–30 McConaughy, D. 104 McNulty, M. P. 78, 87 Medison 76 Microsoft 79, 84, 146, 157, 164, 166 Min, Sun-Shik 146 Min, Y. B. 134, 139–47 Minn, Andre 50 Minns, J. 14 Mirae Industry 76 missionaries 47, 113–17, 120, 136, 138 Mitsubishi 104 Mitsui 104 Morris, M. H. 194 MU Online 83–84 Mueller, C. 95 multinational corporations (MNCs) 190–92

210

INDEX

multinational enterprises (MNEs) 180, 183 My Life, My Story (Haan) 83 MySpace 152, 160–64, 166–67, 169–70, 172–73 Nam Duckwoo 28, 128–29 Nardi, B. A. 170 NASDAQ 80, 84 National Committee on Educational Planning (NCEP) 116 national culture 95–96, 151, 153, 180, 192–96 Naver.com 158, 163–64, 189. See also Next Human Network (NHN) NcSoft 158 New Community Movement (Sae-Ma-Ul Undong) 21, 29–33 Next Human Network (NHN) 164, 189. See also Naver.com Noh Moo-Hyun 28–29 noon-chi (eye management) 59 North, D. C. 99 North Korea 2–3, 7, 10–12, 23, 27, 39, 47–48, 118, 129, 136, 141 Ohmynews.com 158 Opinity 158 opportunism 96–97 Oswald, A. J. 98 Page, Larry 157 Pandora TV 158 Papacharissi, Z. 153 Park Choong-Hoon 25–26 Park Chung-hee 11, 13, 18, 20–40, 45–46, 53, 56, 61, 63, 74, 124, 127–28, 142–43. See also Five-Year Economic Development Plans Park Dae-Yeon 78–79 Park Geun-Hye 128 paternalism 71, 91, 101–2, 107 PC Bang (public computer room) 153 Pei, A. K. H. 160 Peng, M. W. 99

Phillips, N. 97 Pohang University of Science and Technology (POSTECH) 157 Pope St. Pius X 117 Portsmouth Treaty 9, 136 poverty 11, 20–21, 23–24, 26, 33, 49, 78, 123, 158 pre-chaebols 52, 64 pre-entrepreneurs 20–21, 46, 49–56, 64 Price, Fr. Basil 130 Pye, L. W. 32, 68 quanxi 92, 98 Qzone 162 Reeder, J. 103 relationship culture 100 resource dependence 97–98 resource scarcity 97–98 Reston, James 142 Revu 158 Rhee, Syngman 10–11, 45, 123, 130 Ricci, Mateo 114 risk-taking 33, 39, 43, 53, 64, 97, 155, 158, 199, 194–95, 197 Rockhill, Fr., James 117 Rodgers, S. 170 Roh Moo-hyun 12 Roh Tae-woo 4, 12 Roosevelt, Theodore 9 Rowen, H. S. 97 Ryze 165 Sae-Ma-Ul Undong (New Community Movement) 21, 29–33 Saint Francis of Assisi 113 Saint Francis Xavier 114 Saint Ignatius of Loyola 113 Sam-bu construction company 37 Samsung Group 22, 53, 61, 82, 101, 104–105, 160, 163, 189–91 Santos, J. 192 San-whan enterprise 27, 37 Schuman, M. 40 Scranton, Mary F. 115

INDEX

Sejong, King 136 self-help, philosophy of 21, 29–33 self-reliance 18, 24, 27–33, 47, 55, 60, 70, 72, 85, 88 self-renewal 188, 191–92 seniority 31, 36, 71, 91, 102–103, 107, 193 Seoul National University (SNU) 53–54, 57, 76, 79, 116, 127, 141, 144, 146 Seoul-Pusan Expressway 37, 74 Shane, S. 194 Shim, T. Y-J. 36, 71, 73, 78, 85, 121, 153 shipyards 35, 39, 74 Sisa English company 142–43, 145. See also YBM/Sisa company SixDegrees 165 SK Telecom 159–60, 173 Skillingstad, Fr. M. Delmar 130 Slevin, D. P. 192, 194 Small & Medium Business Administration (SMBA) 180–81, 89 small and medium enterprises (SMEs) 68, 75–78, 103–105, 179–87, 192, 196–97 “Small Town USA,” 125–26 Snow, Edgar 142 social entrepreneurs 53, 56–57, 113–31, 134, 140–47 social networking sites (SNSs) 151, 154–55, 158–69, 172. See also individual sites Society of Jesus (Jesuits) 113–31, 130, 138, 140 Softmax 84 Sogang University 144 English language teaching and 124–26, 138, 40 faculty 127 handicapped students and 49 higher education changes and 130–31 Korean culture and 120–24, 126 origins of 118–20, 138 presidents of 117, 129–30

211

relationship to the government 127–29 School of Economics 127–28 student social life 126–27 Sohmen, P. 97–98 Song, Kil-Saup 83 Sony 84 Soong-sil Union Christian College 116, 138 Sophia University 117–18, 130 stability 70–71 Stalin, Joseph 11 Stout, Kristie Lu 156 Stulz, R. M. 104 Sung, T. K. 100, 185 Sungjoo Group 81–82 Sunshine Policy 12 Tattertools 158 Teaching of English for International Communication (TOEIC) 146–47 teamwork 69–70. See also individualism vs. collectivism technocrats 18, 26, 43–46, 64 technology education and 133–34, 139–41, 147 entrepreneurship 19, 28, 88, 100, 149–73, 179, 184–94 information 53, 63–64, 79, 83, 156 information and communication (ICT) 157–58 Korea as leader in 14, 58, 64, 86 sharing of 58 wireless 77, 150 See also cell phones and cell phone usage; Internet; social networking sites (SNSs) Test of English as a Foreign Language (TOEFL) 145–46 Test of English Proficiency 146 Thinkfree 158 TmaxSoft 78–79 Toynbee, Arnold 142 Toyoda, A. M. 97

212

INDEX

Toyota Motor Company 96 Tracey, P. 97 Tracy, Fr. Norbert 126 transaction costs 94, 96–97, 99, 101, 106 transparency 5, 13, 93–99, 104 Transparency Index 5 Transparency International Korea 5 Treaty of Portsmouth 9, 136 Tribe.net 162 Twitter 151, 155, 166–67, 170–72 Ulsan shipyard 35, 74 uncertainty avoidance 194–95 Underwood, Horace G. 115 United Nations Civil Assistance Command, Korea (UNCACK) 138 Committee for the Unification and Rehabilitation of Korea (UNCURK) 10 Educational, Scientific, and Cultural Organization (UNESCO) 138 United States Army 27, 34–35, 48, 54, 56, 137 United States Army Military Government (USAMG) 137 United States Operations Mission (USOM) 30–31, 138 University of Michigan 50, 54–57, 60–61 uye-ri 36 values. See Confucian values; culture and values; family values

Van Fleet, General James Vietnam War 27, 129 Visible Path 166

22–23

Warburg Pincus 77 Webzen 83–84, 158 Wernz, Fr. Francis Xavier 117 Williamson, P. 192 Windowslive 166 Wingbus 158 Wool-san Industrial Complex 22–23 World Airways 129 World Economic Forum 84 World War I 117 World War II 6, 9, 24, 56, 63, 117–18, 120, 136–37 Xing

166

Yang, Jerry 84 Yang, P. 153 YBM/Sisa company 139–41, 146–47 Yeow, A. Q. C. 160 Yoffle, David 155 Yonsei University 81, 115–16, 120, 122, 128, 138 YouTube 166 Yushin Movement (revitalizing reforms) 63 Zahra, S. A. 188 Zucker, L. 100 Zuckerberg, Mark

161, 167, 172