Creativity and initiatives of enterprises are major factors enabling sustainable growth of the Korean economy. The government should support growth of enterprises through industrial policy which will remove obstacles and provide effective incentives. Furthermore, dynamic growth paradigm of enterprises needs to be restored for establishing globally competitive business ecosystem. It is mostly critical to improve conditions for a high-performing enterprise (HPE), which plays a major role in creating additional value and new employment.

This research explores the growth paradigm of enterprises, which involves diverse relationships between determinants and perfor mance of enterprise growth. First of all, HPE is defined as a firm that has grown rapidly in terms of sales and employment. The scope of this study limits the sample of firms to small and medium-sized firms (SMEs) and independent large corporations. Large corporations that belong to business conglomerates or ‘chaebols’ are excluded from consideration. The theoretical paradigm of enterprise growth follows the framework put forth by OECD (2010) study and reflects other major theoretical researches, taking into consideration of data limitations. The determining structure of firm growth is composed of variables from six major categories: innovation, growth-oriented system, intangible assets, networking, adaptability, and financing. Among these, the study identified the critical axis of firm growth as the growth-oriented system that mediates the innovation. Adaptability to environment is a necessity, while networking and financing are accelerators for the growth. Intangible asset has a mutually accelerating relationship with firm growth.

This study provides three different but complementary approaches in tackling this issue: econometric analysis based on existing firm-level panel data, a survey to a sample of HPEs and a controlled group, and case studies on selected HPEs with conspicuous performance to confirm the identified characteristics of HPEs and determinants of firm growth. First, statistical analysis only focused on innovation, growth-oriented system, intangible assets and networking factors, due to limited data availability. Innovation was the essential factor and some innovation support policy measures and various elements of growth-oriented system, intangible assets and networking are found to exert influence on the growth performance. Second, the survey of 100 HPEs and the same number of ordinary firms investigated determinants of firm growth in more detail. The product and process innovations are confirmed to be still important types of innovation. Ratio of radical to incremental innovation and proportion of market-first innovation are higher in HPEs. Regarding the growth-oriented system, distinct vision and market-leading strategy, performance appraisal, performance- based compensation system and market- and innovation- oriented business culture were emphasized. HPEs have higher volume of intangible assets and among them, design ownership stands out. A division exclusively for training and development, suggestion system, frequency of human resource development (HRD) program clearly affect firm growth. Networking is also important in that HPEs are more likely to be exposed to global market and conduct joint development, technology alliance and joint investment. Impact of adaptability and financing and public policy are also potentially important factors on firm growth, but are neglected aspects in previous empirical researches due to weak data availability, are confirmed through the survey in this research.

Third, case studies on the extraordinary HPEs unraveled the importance of inward-initiated firm specific innovations, distinct vision and mission, flexible long-term business strategy. HPEs are commonly in pursuit of product and service differentiation in highly competitive markets, quick responses to market and technological changes and development of talented employees. They are also deeply involved in building-up systems for performance-based management and long-term HRD. They are actively exploring their business in the global market with international quality standards and differentiation. The adaptability to environmental changes is critical to HPEs, and they have overcome difficulties in financing at each phase of their growth.

This research proposes quite a few directions and tasks of industrial policy to promote enterprise growth based on the theoretical and empirical analysis. In particular, policy alternatives including finance and tax areas that directly influence corporate performance are specified. Most of all, sector-neutral measures with firm-growth focus was emphasized over traditional sector-specific means. Creative policy measures reinforcing six categories of growth determinants need to be developed. It cannot be overemphasized that R&D and innovations of innovative firms should be promoted and higher education is to be strengthened. Growth-oriented system ought to be steadily upgraded at each stage of the growth. Infrastructure of owning and exchanging intangible assets and incentives for accumulating those assets need to be improved. SMEs are to be induced to globalize and explore overseas markets in cooperation with large enterprises. Financing channel for growing SMEs needs to be diversified to capital market with improved institutional mechanism to mitigate information asymmetry.

Financial market should be equipped with institutions of angel and venture investment, loan or indirect financing, initial public offering (IPO) or direct financing, and then merger and acquisition, respectively to support firms at each stage of the growth, while public financing should be focused on firms that are located at early growth stage. Control tower of public financing needs to be established to prevent duplicated or neglected area. SMEs' access to direct capital market must be enhanced. Financial instruments such as on-lending exclusively for medium and intermediate-sized companies are necessary to cope with financial difficulty faced by these firms immediately after losing SME status for public financing benefits as a result of growth.

Tax support mechanism for firm growth is also needed to be strengthened. Especially tax exemption or reduction for capital gains or dividend income from the investment on venture capital is suggested. Extension of tax benefits for SMEs to the SME-graduated firm by phasing-out manner is also proposed to prevent so-called ‘Peter Pan syndrome.’ Tax treatment for innovation and intangible asset to facilitate R&D and HRD activities is required to correct any biases favoring large corporations. In general, over the long run, tax burden on corporations should be lightened to promote growth of firms.