Non-refundable and co-financing instruments Promoting export innovation among SMEs in the Republic of Korea

The term ‘internationalization’ can be defined as ‘the process of increasing involvement in international
operations’ (Calof & Beamish, 1995; Welch & Luostarinen, 1988). This definition is closely related to
the concept of a holistic approach to internationalization, which considers not only outward aspect of
internationalization, but also inward aspect of internationalization (Fletcher, 2001). Inward driven
internationalization can be seen as a mirror image of outward driven activities such as imports of goods
and services, finance and technology; through franchising, licensing, direct investments, alliance
agreements, etc (Luostarinen & Welch, 1990). It has been identified that inward internationalization
have impact on leading importing firms to become exporting firms (Korhonen, Luostarinen, & Welch,
1996; Welch & Luostarinen, 1993).
Considering the wide spreading phenomenon of global value chain (GVC) and the long-run
effects of inward internationalization to local firms, the inward aspect of internationalization must be
considered as one of the most important policy for supporting internationalization of local firms.
However, the term ‘internationalization’ is often used for describing only the outward movement of
firm’s international operations.
Before the introduction of holistic view, the most generally accepted and prevailed concept of
a firm’s internationalization had been ‘Stage model’ (Johanson & Vahlne, 1977). The Stage model
describes internationalization as ‘changes involved with a firm, as it increases its commitment to global
markets,’ and the model focuses on the outward aspect of internationalization. In fact, this concept
emphasizing the outward aspect of internationalization still prevails and dominates the mind of policy
A survey conducted on the policy makers of both Organization for Economic Cooperation and
Development (OECD) and Asia-Pacific Economic Cooperation (APEC) member economies found that
they place a strong emphasis on outward internationalization, with 71.6% of the small and medium sized
enterprises (SME) support programs focusing exclusively on supporting export activities (OECD &
APEC, 2006).
Since the end of Korean War in 1953, the Korean government has been focusing on supporting
internationalization of Korean enterprises, especially on export among the other various measures of
supporting internationalization. In fact, export driven economic development strategy was assessed as one
of the most important and effective policy option for Korea when there was no internal resources to induce domestic consumption and investment. Even though there was an effort at the governmental level to shift
the policy paradigm from ‘supporting export of SMEs’ to ‘internationalization of SMEs,’ supporting
export is still one of the top priorities of Korean authorities that are responsible for the economy.

Fuente: CEPAL

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