Welcome to 1869, The Cornell University Press Podcast. I'm Jonathan Hall. In this episode, we speak with Robyn Klingler-Vidra and Ramon Pacheco Pardo, authors of the new book, Startup Capitalism: New Approaches to Innovation Strategies in East Asia. Robyn Klingler-Vidra is Reader in Entrepreneurship and Sustainability at King's Business School, King's College London. Ramon Pacheco Pardo is Professor of International Relations at King's College London and the KF-VUB Korea chair at the Brussels School of Governance of Vrije Universiteit Brussels. We spoke to Robyn and Ramon about the different strategies that China, Japan, Korea and Taiwan take in emulating the Silicon Valley approach to economic growth, how these East Asian countries want their big businesses to, quote, gain innovative DNA by working with startups, and how these evolving new strategies from Asia directly challenge, and will certainly influence, the current Silicon Valley playbook. Hello, Robyn and Ramon, welcome to the podcast.
Thanks for having us. Jonathan,
thanks for the invitation.
Our pleasure. Of course, of course. So we are here today talking about your new book, Startup Capitalism: New Approaches to Innovation Strategies in East Asia. Tell us the backstory to this book. How did it come to be?
sure, so maybe I'll start and Ramon I can pass to you. So the book comes from our different areas of expertise, and how they converged almost 10 years ago. They say that good books take 10 years. So by that measure, we're encouraged. So my research is on venture capital startups, the role of government and how models diffuse. Ramon is an international relations expert focused on East Asia, specifically Korea, and about 10 years ago, we had conversations, because we used to be in the same department at King's College London, conversations about what we were observing, that even in Korea and Japan, we were observing the rise of efforts and interest in startups, governments promoting venture capital startups. And so it sparked the question of, are we seeing a real change, right? Does this mark a change on the model that's been understood in the sort of post war literature and developmental state? Is this something that's new or different? So we set out on a research project that eventually became the four countries in comparison, but ultimately interested in are we seeing continuity or change. What is this interest in startups represent?
Yes, and I think the as a result of those conversations, we thought we could launch a joint research project, which can have been the main output, of course, this book in which we would be looking at the countries in Northeast Asia. So I think from from the beginning, we understood that it wasn't enough to look only at Korea and Japan. It was necessary to look at other countries as well. So we end up looking at China,
and we also end up looking at Taiwan as well, also to provide this comparative element, because these four economies sometimes are lumped together, it is said by some that they have the very similar, even the same, economic model. And I think one of the things that we try to in the book is to show that, yes, there may be some similarities, but they're also important, important differences, and that's part of the story that we try to tell, that the four of them supported startups, but not necessarily in the exact same way and not necessarily for the exact same reasons. Nice, nice. That makes sense.
So yeah, that's that sounds fantastic. You. Your book looks at startup capitalism in China, Japan, Korea and Taiwan, and governments around the world look to Silicon Valley as a model for growth, and that's where this you know, the original startups innovations occurred. But tell us to listeners who may not know that, what is a startup? And then what exactly is startup capitalism?
Yeah, great point to start with. So startup, we use Schumpeterian theory and not to turn off listeners who aren't keen in economic theory, but this idea is that you have a high growth, high technology startup. So as you mentioned Jonathan, which has become synonymous with Silicon Valley. Silicon Valley is sort of shorthand. For this model of entrepreneurship, this type of innovation, and Schumpeterian theory says that these types of startups drive innovation and economic growth for economies so startup capitalism, and starting with the initial question that motivated the research project, is all about the role of startups in this model. So we define startup capitalism as an economic and political system in which startups contribute, and that contribute, word does a lot of heavy lifting. They contribute to employment, innovation and growth. And it can take multiple forms. And this is really important, because, as you insinuated, it's not sort of only Silicon Valley startups are encouraged supported by governments all over the world, but as Ramon mentioned before, for different reasons and in different ways, and so startup capitalism to bring Schumpeter back in can either Be that startups are conceived as the driver of innovation, and they're sort of the beneficiaries or the targets of policy supports, or that startups can be the resources for large firms and prevailing big business. And so startup capitalism, we hope, is helping to give sort of language to what people all over the world are observing. Where you see like here in London, we see the Silicon Roundabout as we were just now in Northeast Asia talking about the book, you have silicon Island, right? You have this sort of either silicon or valley sort of monikers all over the world. But as Ramon said, they take different forms for different reasons, and so startup capitalism is meant to provide a language and an understanding of the range of outcomes and approaches that that can contain.
One of the things we look at the book is why these four countries are providing support for startups. And we look at both domestic reasons, job growth, for example, creating new jobs, the development of an innovation system that includes startups as well, more of an open innovation system, economic growth, per se, but we also look at foreign policy, International goals, especially security, economic security. So that's something that we do focus on in the book. And it is fair to say that most of the literature may focus less on the second aspect of the security component of of of startups, and focuses more on on the domestic component, or domestic reasons why startups are supported. And that's something that we try to bring into the discussion and and we find out that China and Taiwan, for example, this international component is quite important to understand why they follow this startup capitalism model. Interesting,
interesting. I have one additional question, as far as definitions, the cover of your book is amazing and there's a unicorn on it, and people that may not know what that is, why is there a unicorn on the book?
Great question. So, unicorn is a startup or a privately held high growth company that achieves a valuation in excess of a billion dollars. And Unicorn has become shorthand for the aim of engaging and supporting startups. It's a symbol of an ecosystem having a really vibrant set of activities that you can create firms that really go global and win markets and disrupt
and disrupt. Okay, excellent, nice, nice. Thanks for telling me that. Okay, your book debunks two myths underpinning the how and why of startup capitalism. The first myth is that startup promotion is intended for startups. Tell us more about what you mean.
So I think the point that we try to make is that when governments across the world, not only in Northeast Asia, they launch policies to support startups, the assumption is that the goal is to create the startups that will grow into bigger firms that potentially will challenge incumbents, and that overall will support the creation of New York and economic growth. But one of the points that we make in the book is that if we focus on the Northeast Asian environment, especially the case of Korea and Japan, there are these large conglomerates that have been very successful for decades and are key drivers of economic growth. And sometimes, or even often, support for startups, indirectly is supporting these big conglomerates to be into. Nationally competitive, so that they compete at the international level. So in a sense, what point we make is that these governments seem to be happy for disruption at the international level. Their companies disrupting those in other countries. But they don't necessarily want to start up to disrupt the existing economic model. They want the startups to work together with these bigger firms. We have also made the point in different articles and opens that have come out of this project, linked to the book, that this is not only on Northeast Asia. So we see this in other parts of the world. This area, the startups could be working together with big conglomerates, including, the case of the United States big firms as well. But we do say that this is something that has to be made clear, that when garnell says we're supporting the startups, there are other goals that need to be taken into consideration, and they include support for bigger firms, which makes perfect sense, because you don't want necessarily the convict model that has worked for many decades to be completely distracted to the extent that you're creating a new model that may or may not work into the future?
Yeah, absolutely. And just to add, I think one of our favorite interview quotes is hearing that the aim of supporting startups is to inject innovative DNA into the large firms, into the big businesses, so as to go back to the unicorns. Jonathan, often in the framing and the language of government initiatives and policies around startups, you see this language that aligns with disruption creating unicorns being, you know, radically innovative, but peeling back and looking under the layers, you see, well, actually the aim is to inject this innovative DNA by giving large firms access to creative ideas, ways of working, talent, maybe the tech as well, but it's helping to, You know, change or sort of maintain change and innovation in in large firms, and you know, Ramon, you give examples often that they work really well, that we've heard also in our interviews that the policymakers don't want to have their national champion. Champions go the way of Kodak. Of you know, these large firms that, at one point were market leaders, but then the entire industry that they dominate, and the technology that they were leading in becomes obsolete. And so the myth that we're busting is exactly that startups aren't only the beneficiary, and it's not only about disruption, it's about reinforcing comparative advantage.
I like that a lot. That makes sense. I like that idea of adding innovative DNA to booster the strength of the existing companies and the leaders. That makes sense, rather than trying to undermine them. That wouldn't make sense for a government to try to do that. So that's, that's, that's good to know. And then there's a second myth about startups that your book helps debunk, and that is that it's merely a means of entrepreneurship or employment policy. And in fact, you state that it's actually kind of a contemporary form of industrial policy. Tell us more about this. Happy
to start on this one. So startups, we have to differentiate in some ways from entrepreneurship more broadly, right? So you asked at the beginning, what's a startup? And so a startup is, you know, tech enabled high growth, a particular form of a new firm, if we think about, you know, the point of supporting startups, again, often the framing is that it's around enabling potential entrepreneurs to build their business and to sort of live their entrepreneurial dream. And so the policy support for startups in that framing would be in terms of level market access, sort of horizontal in its orientation, and in our work on startup policies, you know, the point of supporting startups in the way that policy approaches, it is much more like industrial policy in the sense that it's industry targeted, technology focused, selective. It's not about enabling the wider markets and those sort of antecedent conditions, but about boosting this mode, this very specific mode of ecosystem activity, and creating or fostering that sort of unicorn building or birthing environment. So in that sense, it feels more like a contemporary version of industrial policy,
and we think that this has become even more prominent as more and more governments have become open about the need to launch or relaunch industrial policies, especially across Europe and North America. Or maybe we had forgotten about but this had never been forgotten in Northeast Asia. China has been drawing industrial policy basically since it started to open up in the late 1970s early 1980s but even if we look at Japan, Korea and Taiwan, they have had industrial policy for a longer period of time as well, especially Japan and Korea. And from this perspective, it makes sense that if you're going to support startups, you are going to do it in a way that you know, and the way in these countries, they know how to do economic policies by integrating industrial policy or making industrial policy central to their to their economic to their economic model. And as Robin was saying, I think that that's quite important point, that when we focus on startups that this tech, focus startups in different sectors, semiconductor, electric, batteries, etc, etc. And these are sectors in which you need huge investment. You need huge investment for a long period of time. So it does make sense you have an industrial policy in which startups are integrated as part of a larger ecosystem. Wouldn't make sense to support these tech oriented startups for two or three, even five years, when you may 1015, 20 years for them to actually become successful. I mean moving beyond the startup phase, so to speak. And that's something that we've seen in this part of the world. There's a support for startups, and they grow to a certain extent. They may benefit from investment from previous startups. They may benefit from government startups that government gives to startups and then supporting these companies that have become bigger. So there's this whole idea that industrial policy has to be embedded into the system with the Star Wars part of it that makes sense. That makes sense. So
we've been given like the big picture. And now if you could tell us what you found, perhaps similarities and differences between these four different countries. Was there anything surprising? Is there one country that you think is more effective than others. What are your overall thoughts? And then And again, the in the beginning of the question is, what were the what were the differences that you saw in each of these different approaches for each of the four countries?
So I think we find that that Korean Japan are close to each other, and that also has to do with their economic development model that was very similar. Japan started in post Second World War with this economic growth model with a big conglomerates. And Korea from the 1960s also had this, this similar model, with the big conglomerates being central to the economy of the country, and we see that this continues to evade in the sense that the startups are really integrated into this model in which the conglomerates are and will continue to be central to the international competitiveness of these countries. We also find that these two countries their focus. There is an international security component by all means, but it's very much domestic. This idea that startups support economic growth, support innovation and also support job creation. So we went over hundreds of documents, policy documents from the four or four countries in Northeast Asia. We did hundreds of interviews with policy makers, experts, entrepreneurs, you name it across across the region as well. And that's what we found out, I think Lorin can talk a bit more about China and Taiwan, because we did find differences between Korea and Japan on the one hand and Taiwan and China on the other hand.
Yeah, absolutely. I mean, I think it's worth saying that we analyze the four cases in terms of that continuity or change question, as Ramon said, so we're interested in where did each of the countries start from, and where are they now, and how have they been sort of path dependent, or how have they been sort of contextually rational, consistent with their own practice. And in that, we look at, you know, labor markets. How have labor markets been purposefully adapted or changed to enable or encourage startup activity? So, for example, in in Japan, we see the loosening or the enabling of of pension fund portability. So until the end of the 20th century, you wouldn't leave your your comp, your sort of salary job, because it would mean losing your your life savings. Until that point, we look at the way in which financing is enabling startup activity or encouraging the product. Dominant, if it's a large firm, centric innovation system. So, for example, the the boost of venture capital. So in the the Japan and Korea context, as Ramon sketched those domestic aims, you know, employment creation in recent years, the sort of inclusion that can be across the country, so to enabling more activity across Japan, for example, geographically, boosting more venture capital in Japan is an interesting one that it's we see a huge growth in venture capital, but the venture capital is coming from Japan, Inc, if you will, large companies and the main banks in Taiwan and China, similar. It's a persistence of, you know, the prevailing sort of starting system, but starting from different places. So Taiwan, as a developmental state, it was always a bit different in the sense that it's SME focused. So large small firms were the thrust of innovation capacity in new technological frontier areas. And there was that sort of security motivation for many years, and we see that persist over time. We see it ever more enabling labor markets, more equity funding, more venture capital available in Taiwan. But a move where the technologies and the disruption, let's say it's not in in the Taiwanese case, it doesn't become about supporting semiconductors and TSMC, right? So in Taiwan, it stays persistent in the sense that the point of startups for Taiwanese policy is to build new and emerging technology capacity, which is really interesting, because maybe there would have been that tendency to say, well, startups become resources for our silicon shield or Something like that. And in the Chinese case, there's sort of hybrid movements over time. And we make in the case in the book that it depends on the technology in the sector as well. So Ramon mentioned semiconductors in the critical technologies across the cases, but especially in China, startups can be purposed to support, you know, government backed or large firms in other sectors, say, platform economy, and depending upon the sort of political cycle, you'll sometimes see that sort of mark one much more competition centric mode of startups are really As Kai fu Lee terms it, which I love, this phrase, the gladiatorial entrepreneur, right? So, really competitive, really out there to disrupt. So in China, we see expansive of equity investment for startups. We see the increase in the sort of point being about economic security or the external that Ramon mentioned, but then it depends on the technology, the sector, and sort of what's happening at a particular point in time.
Interesting, interesting. So a question I have, we have this concept coming from California that spreads out to the rest of world, because it's so successful. But ideas are constantly evolving. Do you see the potential for some of these ideas coming back to the west and influencing government interactions with the West and startup capitalism in the West?
I think, I think we do, yes. And actually, last year, we published an article in Foreign Affairs, and after this hour, have an article coming with international affairs in which we actually, which is more academic, in which we actually talk about this same idea you have just described in the context of the US and Silicon Valley, that it is being influenced by this model, among other reasons, because you see growing investment into the startup ecosystem in Silicon Valley, coming from, from from These countries, especially from from Japan, Korea and, to an extent, China as as as well. So, so, yeah, there is, there is an influence there. For example, something that we have mentioned already, this idea that maybe big firms have to work with smaller firms with, with the startups, because startups come with with, with new ideas may income with new products. But in the other direction, you know, startups may need the distribution channels that big firms have. They need mentoring as well. So, so, so this idea, I think, is in this com in this context in which we see us China, economic and. Competition in which we see this focus on industrial policy, this focus as well on economic security. I think it's becoming more and more common for governments, we mentioned the US, but also in Europe, to look at how these countries in Northeast Asia are working in this area. And interestingly, we have heard this, you know, especially cases of Korea and Japan are very appealing. Obviously, China has a fairly different economic model to that we have in Western countries. And Taiwan, as showing indicated, is slightly different because its economic growth model is very much based on smaller firms. There's some big firms that is many smaller firms. So creating Japan has become a model from for many countries, we know policy makers, especially from Europe, who have gone to both countries to see how it works The startup ecosystem. In them, I mentioned investment from, from firms and startups, former startups, on the countries, banks as well, into Silicon Valley, because the same is happening in Europe, for example, in France, a result of cooperation with Korea in this area. So yeah, that's certainly happening. So we tried to make the point that the Silicon Valley model is not one size fits all countries adapted, but in the opposite direction, we're seeing this, this happening as well.
Yeah, absolutely. And I would just add, so for example, in the forthcoming International Affairs article, we we argued for return diffusion effectively. So the idea that there is a model and then it has sort of shaped, but then it's never affected by all the things that are happening all over the world. It seems too static, and so we test and we show how the rise of venture capital and startup activity in East Asia in particular has led to a rise in defense tech. You know, security motivated investments and rhetoric in Silicon Valley, a rise of corporate venture capital activity. Right? The world's largest venture capital firm at the moment is Japanese, right? Softbank, Masayoshi Son. And so the influx of activity from Northeast Asia is normalizing, or sort of encouraging, more corporate venture for corporate venture capital activity in Silicon Valley. And then also, there's a sort of growing impatience, because there's so much activity globally, the rise of things like exploding term sheets and sort of particular style of investing that's evolving in Silicon Valley because of this as well. I mean, I think that, just to add also to Ramones point about the so what right the why, the value of that open innovation approach that we see, especially in Japan and Korea, is related to that imperative, the geo economic, strategic to compete today, especially in, you know, capital intensive, cutting edge technologies, there's a need for this openness, or at least, if not a need a very strong case for governments to consider what's our unique advantage. You know, how do we how do we compete, and how do we disrupt, especially when market leaders are foreign to us?
Yeah, yeah. What's really interesting in on top of all of that is that you've, you've taken this book on a tour of the countries you studied, and it's a gutsy move to go to these countries and say, here's what we find. What we found. So you just came back from a tour of Japan, Korea and Taiwan. Tell us, this is my final question. Tell us, what was your experience and what were what were some of the feedback and questions that you received from from your talks? Yeah,
I think one of the themes that stands out is that economic security is Top of Mind across not only in Northeast Asia, here in the UK as well, but the idea that startups are part of the new military industrial complex in a more explicit way, the salience of the idea that startups are part of a national innovation system in an explicit way. I think it was really nice to hear how those findings, which Ramon mentioned, you know, this is hundreds of documents and interviews that we conducted over over several years. But it was really nice to hear that our findings about the social purpose and that external motivator in partnership with the domestic aims, resonated in in the different cases.
I agree. I mean, we got positive. Feedback, we presented the book both to policy and academic audiences and think tanks as well, and with experts in the region as also government officials and they recognize what we're talking about. As we said previously, we interviewed hundreds of hundreds of people in the region as well. So So in a sense, we have heard from them, and we have used this as the data for, for, for for our book and but we also found that is and we were explaining in Taiwan, for example, differences between the Taiwanese model and that of Korea, Japan. They recognize this. Actually said, Yes, we this is our assessment as well, that our model is different, and Taiwan especially converts itself a lot against these two countries because, you know, they're neighbors, but they're also larger economies, more diversified, so something that the government is aware of and keen on focusing on. And similarly, when we're in Korean Japan, them very positive feedback, this recognition that, yes, startups have to work within an open innovation system, because they have to be working together, not against government and being conglomerates, otherwise it would be very difficult for them to become successful, and some of them have become extremely successful, not only nationally, but increasing internationally as well. And it also has to be said that some of the questions we're getting also have to do with the current environment, as you can imagine, and we will have this. You can say full blown trade war between the US and China. And this affect there was the other countries, but also when we're there, it was just right after the US had announced new tariffs in many different on many different economies across the world, including Japan, Korea and Taiwan. So there was also this discussion and how what we described from the book might fit with the need to adapt to these different global economic economic reality. And I think that the
arguments that we make in book more related to the international security aspect, or economic security aspect, also resonated very strongly with policy makers and experts in the region. You know, maybe five years ago, it wouldn't have been so much about this security component having more about the other aspects domestic economic policy, but where, where we are today, and that also resonated clearly with with audiences in the interesting, yeah, your book is very, as you said, it's very timely in that will our world has dramatically changed, heightened tensions, both on an international level, militarily, but also with this, With this whole new tariff regime, economic insecurity. And so that term that you were using the very beginning, innovative DNA, is only going to help these countries manage the rough seas that lay ahead. And so anyone that's interested in how that's going to be wrangled by the Asian countries as well as potentially US and European countries, how they potentially can use the lessons learned from East Asia. I strongly encourage anyone that's listening to this to read the new book by Robin and Ramon. Startup Capitalism: New Approaches to Innovation Strategies in East Asia. It was great talking with both of you.
Thanks for having us.
Thanks, Jonathan.
That was Robyn Klingler-Vidra and Ramon Pacheco Pardo, authors of the new book, Startup Capitalism: New Approaches to Innovation Strategies in East Asia their new book is open access, so you can download and read it immediately from our website@cornellpress.cornell.edu. If you'd like to read the affordable paperback, you can save 30% at our website by using the promo code 09 pod. If you live in the UK, use the 30% discount code CSANNOUNCE and visit the website combined academic.co.uk. Thank you for listening to 1869, The Cornell University Press podcast.
