On 24 March 2021, I gave a talk “Supporting the cultural industries using venture capital: a policy experiment from South Korea” in the CMCI staff seminar. The talk was based on the findings of my fieldwork in Seoul in 2019, and my paper with the same title is currently being reviewed by a journal. The talk explored the complex relationship between the state, the cultural industries and the financial market by looking into how venture capital is used to support the film and cultural industries in South Korea.
During the past twenty years, many countries have developed policies to support the cultural and creative industries (and even arts sectors). Using finance is one of them. There are many examples such as providing loans (e.g., Creative England’s debt financing), loan guarantees (e.g., France’s IFCIC, Creative Europe’s loan guarantee facility, South Korea’s completion guarantee, and the UK’s Creative Industries Finance, 2012-2017) and incentives for private investors (e.g., France’s SOFICA scheme and the UK’s Enterprise Investment Scheme). Note: those financial tools used by French cultural policy makers were introduced in the 1980s while others were more recently introduced. Yet, there has been a huge lack of research in the nature of such financial tools and their impacts. Lee argues that this is problematic as using finance – that is, bringing financial institutions and products to the domain of cultural policy – raises many challenging questions on the relationship between culture, the state and the (financial) market.
It was against such a backdrop that I embarked on this research into the Korean government’s active use of venture capital financing. It was the beginning of the new millennium when the Korean cultural ministry and the film council began partnering with venture capital companies to raise public-private funds dedicated to the cultural and film industries. In the seminar, I firstly theorised the central roles played by the Korean state in promoting the cultural industries by defining it as a new patron state, and then explained what motivated the government to introduce venture capital financing for public cultural investment. I continued to explore the distinct nature of the cultural venture capital market in relation to the fundamental features of cultural financing, that is, high risk, the prevalence of project financing and the lack of finance capital. I also talked about the tensions and negotiations between three participants in this peculiar financial market.
The use of venture capital, which was an unprecedented, bold policy experiment, has had significant impact on the cultural industries by increasing capital provision, creating a ‘cultural venture capital market’ and transforming the structure of cultural investment. Questioning the dichotomist understanding of state-market relations, I demonstrate that the development of cultural venture capital financing in Korea is a ‘state-led regulated financialisation’ project. In this project, the government has played strategic roles in creating, growing and ‘taming’ the cultural venture capital market. Importantly, profit maximisation in this market is seriously limited by not only government regulations but also the strategic behaviour of private investors.
Cultural venture capital investment occurs in the overlapping zone where the government (and the film council), investors (cultural distributors) and financial institutions (VC companies) interact and negotiate. In this overlapping zone, the government should balance out different interests by both regulation and provision of incentives.
Observing how much the financial environment of the cultural industries is shaped by state intervention and the industry-specific social relations, my research shows that cultural policy has potentially substantial scope to play active roles in supporting cultural producers and businesses. International cultural policy makers can learn helpful lessons from the Korean case, especially the importance of creating a policy that helps to reduce risk borne by private investors, constrains profit-seeking of financial actors, and flexibly responds to the ups and downs of the cultural market. It is also critical to consider the broader impact of state intervention: for example, the restructuring of cultural investment and risk-sharing structure in Korea was an unintended but remarkable consequence of the government’s use of venture capital.
Yet, using finance makes cultural industry policy further complicated. What is interesting about the Korean case is the government’s refusal to choose either ‘culture’ or ‘industry’ and its attempt to nurture both through exceptionally active support from the state. While there is a strong consensus on state support, how the two goals of cultural industry policy can be aligned discursively, institutionally and organisationally is yet to be explored. Bringing in finance to cultural industry policy generates further complexity. So far, the Korean cultural ministry has kept the forces of financialisation under control. But as long as it uses the financial market, it cannot avoid the situation where its policy is evaluated in terms of the return on investment. Even among policy makers, there are divergent perspectives of the purpose of using venture capital for cultural investment. If the cultural ministry focuses more on ‘cultural’ and ‘industrial’ concerns, some members of parliaments and the planning ministry are keen to address ‘financial’ concerns. How cultural ministry negotiates with those other policy makers will hint how the regulated financialisation can sustain in the environment where the success of public policy is increasingly determined by its performance in the financial market. The research findings is research has implications for policy makers in Europe and elsewhere, who are using finance as part of their cultural policy and might be walking on a thin line between cultural, industrial and financial logics.