Seoul’s downtown area, where major corporate headquarters are clustered. (Image courtesy of Yonhap)
SEOUL, Jan. 15 (Korea Bizwire) — Nearly one in three mid-sized companies in South Korea say regulatory burdens intensify and government support diminishes as they grow, hampering their ability to scale up, according to a new business survey released Wednesday.
The findings, published by the Korea Employers Federation (KEF), highlight mounting concerns that the country’s so-called “corporate growth ladder”—a policy framework designed to link regulation and support smoothly across different stages of corporate growth—is failing to function as intended.
In a survey of 1,154 mid-sized firms conducted by Mono Research, 29 percent of respondents said the growth ladder does not work properly, more than double the share who said it functions smoothly. About 35 percent reported feeling a sharp increase in regulatory pressure after graduating from small- and medium-sized enterprise status.
Companies cited the reduction of tax benefits as the biggest challenge, followed by tighter access to financial support. Other factors included heavier disclosure and related-party transaction rules, cuts in employment subsidies, growing compliance costs tied to environmental, social and governance standards and carbon neutrality, and restrictions on public procurement.
Four in 10 respondents said size-based regulations had a negative impact on their growth, with many pointing to direct consequences for core management decisions. The most common effects were hiring cuts or hiring freezes, followed by reduced investment. Some companies said they were considering relocating operations overseas or setting up foreign subsidiaries, while others reported scaling back research and development.
The federation said responses related to employment and investment accounted for more than two-thirds of the reported negative impacts, underscoring how regulatory thresholds tied to company size can influence workforce and capital decisions.
When asked about policy priorities to support sustainable growth, the largest share of firms called for a rationalization of tax systems, including corporate, inheritance and R&D tax credits. Expanded policy-based financial support ranked second, followed by measures to help secure skilled workers, support global expansion and ease regulations on mergers, acquisitions and emerging industries.
If size-based regulations were eased in a more rational way, companies said they would be most likely to respond by expanding hiring, followed by increasing investment, pursuing bolder M&A strategies and entering new businesses.
“The current system of size-based regulation is blocking companies from scaling up,” Lee Sang-ho, head of economic and industrial policy at the federation, said in a statement. “A comprehensive review and overhaul is urgently needed so that incentives can function properly at each stage of growth.”
Ashley Song (ashley@koreabizwire.com)
