High-Growth Firms Decline as Negative Growth Rises — Redesign Scale-Up Policy

The "growth ladder" that enables high-growth companies — a core engine of Korea's economy — to advance into mid-sized and large enterprises is failing to function properly. According to a report titled "Rebuilding the Policy Support System for Successful Corporate Scale-Up" by the Korea Development Institute (KDI), the share of high-growth firms among companies with 8 to 19 years of operating history — the stage at which they should be entering a full growth trajectory — fell from an average of 14.4% in 2009–2011 to 7.8% in 2020–2022.

High-growth firms, which account for 10% to 15% of all domestic companies, are responsible for approximately 50% of total corporate revenue growth and 38% of job creation. Yet over the past 15 years, the proportion of high-growth firms has shrunk while the share of firms experiencing negative growth has expanded, KDI noted. The failure of high-growth companies to cross the critical scale-up threshold means the economy faces growing difficulty in securing new growth engines and creating sufficient quality jobs.

The loss of vitality among companies that should be actively pursuing innovation and investment is largely attributable to regulations that multiply as firms grow in size. According to the Korea Chamber of Commerce and Industry (KCCI), 94 new regulations apply when a small or medium-sized enterprise grows into a mid-sized company. When a firm reaches large-enterprise status, the regulatory burden swells to as many as 343. Companies that painstakingly expand see tax and financial incentives vanish while facing a wall of regulations — making it far from uncommon for them to shrink back to SME status rather than scale up. The government's one-size-fits-all approach to corporate growth support is also problematic. Support policies disproportionately focused on research and development, regardless of a company's growth stage or industry sector, cannot address the specific bottlenecks that vary by industry and business maturity.

Sustained growth is difficult to achieve if the economy remains trapped in a structure that relies excessively on the performance of a handful of large corporations in specific industries. To place the economy on a solid growth trajectory, Korea must build an industrial ecosystem in which capable SMEs can grow into mid-sized and large enterprises. Yet the National Assembly remains stuck in the outdated mindset of "protect small businesses, regulate big ones." According to a KCCI survey conducted earlier this year, 149 bills that impose greater disadvantages on companies as they grow have been introduced since the launch of the 22nd National Assembly. This risks pushing the restoration of the corporate growth ladder even further out of reach. To revive fading growth momentum and achieve an economic re-launch, Korea must dismantle the discriminatory regulatory shackles imposed by company size and urgently redesign tailored policies that support corporate growth.