Is Korea weird for foreign businessmen?

By Lee Jong-buhm

SEOUL: Recently, foreign entrepreneurs and investors have become very interested in Korea's "venture businesses." It is said that one of the reasons why the Korean economy was able to break the fetters of the "IMF management system" earlier than expected is because of the promotion and encouragement of the Korean venture businesses.

Foreign venture businesses and capital firms greatly contribute to the Korean economy in many ways, although there are some negative effects resulting from their activities. Encouraging foreign venture businesses and capital firms to be involved in the Korean venture business sector is one of the most effective government policies for the promotion and encouragement of the technology-intensive industry.

It is desirable not only to Koreans but also to foreigners that foreign venture businesses and capital firms realize a reasonable rate of return on investment in Korea.

The English term "venture business (or venture enterprises)" is commonly used by many Koreans in its original English form. When engaging in a personal or business conversation with Koreans, foreign entrepreneurs and investors will frequently find that Koreans understand and interpret certain English terms in a different way than native English speakers.

The term "venture business" is one of them. It may be safe to define the term as "a technology-intensive business with high risk/high return income structure."

Such differences in understanding certain English terms means it is critical for foreigners who want to carry on a successful business in Korea to understand that the environment and the circumstances of the Korean venture businesses are unique, as in other countries.

A close Korean friend immigrated to the United States at the age of six. He was educated there and worked at a prestigious U.S. high-tech firm as a principal engineer for a long time. He came to Korea and established a venture business to commercialize the technology he had developed himself in the United States. He said, "Korea is a really weird country I cannot understand."

I could sense that he neither understood the customs nor social norms embedded in the environment of the Korean venture business sector.

Recently, I had several opportunities to meet with foreign and Korean managers working in the foreign venture businesses and capital firms for possible joint projects between our respective organizations. It was clear they had many advantages over the native Korean market players.

They had more resources such as capital, technology and personnel compared to their Korean counterparts. They had advanced management systems, know-how and broader experience. Their business operations are carried out in an extremely accurate and thorough manner, and they abide by the fundamental rules of the business operations.

However, they tend to interpret the environment of the Korean venture business in their own way, which might not work well in the Korean market. I am sure they will realize satisfactory return on investment from their business operations only by trial and error.

There have been many so-called "guidelines" for foreign managers working in Korea. While they are helpful to foreign venture business managers and investors, the following are some tips to foreign managers on conducting a venture business in Korea.

Firstly, it is true that a reasonable and systematic review process is necessary to evaluate a project, but one should never overestimate the reliability of the data or material collected in the Korean market during the evaluation. As far as the venture business is concerned in Korea, one would be better off to begin the evaluation of the project on the supposition that there is scarcely reliable market or technical data in the Korean venture business sector.

Secondly, accurate information is one of the most important factors in conducting venture business in Korea, but one should not forget that most of the information obtained from official sources might be, in many cases, impractical, untimely and useless. The critical information necessary for evaluating a business is generally not documented but transmitted through close acquaintances.

Thirdly, in Korea generalists who have knowledge in many business areas tend to be more successful in business than specialists, as is the case in other countries. We often find that managers who are considered competent managers by foreign standards are not necessarily regarded as such in Korea and vice versa. People often say that it is almost impossible for a venture businessman to be successful in Korea without possessing the skills of typical managers and also exercising Machiavellism, like the Korean politicians.

Fourthly, much of the precious marketing and technological information and other valuable resources, such as personnel related to the venture business, are still concentrated in the public sector and are not utilized. One should look into ways to make free use of them.

The Korean government still has a strong influence on the venture business sector, even though the sector in theory should be guided by the principles of the free market economy, more so than any other business sector. Analyzing in depth the critical success factors of the leading Korean venture firms listed on the KOSDAQ, one will learn that they have utilized government programs effectively. Finally, one should completely understand the importance of the human venture network. It is much more important in Korea than in any other countries.

In conclusion, the rules and common sense followed by foreign venture businessmen and investors in their own countries may not apply in the Korean venture business sector. In Korea, many "weird things" which foreigners have never experienced before may happen. The environment of the Korean venture business is very complicated and the circumstances surrounding foreigners may be harsh. Nonetheless, many would agree that the Korean venture market is dynamic and offers many opportunities for high return on investment. A full understanding of the Korean venture business culture is the only way for foreigners to reach a certain desired level of success.

The writer is chief executive/representative director of the Korea-Israel Industrial R&D Foundation, a joint project between the Korean and Israel governments.

-- The Korea Herald/Asia News Network