Silicon Valley has long been regarded as the gold standard of the start-up ecosystem, leading the world in numerous metrics critical to entrepreneurial success. It consistently produces more 'unicorns'start-ups valued at over $1 billiondraws in substantial levels of investment, garners higher company valuations, and attracts top-tier talent. This trend has remained largely uninterrupted since the 1980s, establishing Silicon Valley as a beacon of innovation and economic prowess.

However, a recent study conducted by researchers at Kings Business School in London suggests that the burgeoning tech scene in Southeast Asia might find greater success by emulating the collaborative innovation strategies seen in countries like Japan and South Korea. This revelation underlines a crucial point: despite its dominant position, Silicon Valley's competitive, zero-sum approachwhere new start-ups often seek to disrupt and replace established businessesmay not be the sole viable model for innovation.

In stark contrast, nations such as Japan and South Korea have embraced a more open innovation strategy, wherein large corporations actively collaborate with start-ups. In these environments, start-ups serve as enhancers of established companies competitiveness rather than as direct competitors. These younger firms can infuse 'innovative DNA' into their corporate partners while also taking advantage of the latters extensive supply chains, distribution networks, and customer bases.

Robyn Klingler-Vidra, an associate professor of political economy and entrepreneurship at KBS, highlights this paradigm shift in her research, co-authored with Professor Ramon Pacheco Pardo, which will be featured in an upcoming book. Klingler-Vidra asserts, We see the Silicon Valley approach as somewhat outdated and tied closely to the unique economic conditions of the US in the latter half of the 20th century. Now, Silicon Valleys start-ups are giants, and business dynamismboth growth and failureshas been declining. She suggests that the more collaborative frameworks utilized in Japan and South Korea present a robust alternative, allowing large firms to remain agile in rapidly changing markets while also providing the essential resources and networks necessary for start-ups to thrive.

The study also explored the start-up models in China and Taiwan, noting that their approaches are more complex and hybrid. Nevertheless, the clear dynamics of open innovation between large corporations and start-ups are particularly evident in Japan and South Korea.

In contrast to Silicon Valley, where the relationship between big corporations and start-ups can sometimes be shrouded in opacity, the collaboration in East Asia is more transparent. For instance, while major companies in Silicon Valley do engage with start-ups through corporate venture capital, accelerators, or participation in judging panels, their intentions are not always clear-cut. Pardo emphasizes, Governments in Korea and Japan realize they cannot overhaul the economic structure that has been in place for decades. So, in a sense, they dont pretend that they want start-ups to challenge incumbents to the extent that they [the big companies] will essentially go bust.

Despite the potential for beneficial partnerships, the researchers also recognize inherent risks, such as intellectual property theft and pressure for early acquisitions. Klingler-Vidra notes the necessity of having robust legal frameworks to safeguard the interests of both parties. She concludes that, overall, the potential benefits of fostering collaborations between large enterprises and start-ups outweigh the associated risks.

Recent developments in East Asia showcase this collaborative spirit. For example, Toyota made a notable $44.4 million investment in the Japanese start-up Interstellar Technologies, which aims to facilitate the mass production of rockets. This investment not only diversifies Toyotas portfolio into the space industry but also aligns with Japans broader ambitions in aerospace.

Tokyos commitment to corporate involvement in the start-up ecosystem is evident in its five-year startup development plan, which emphasizes 'open innovation promotion with corporates' as a fundamental pillar. Ryohei Gamada, associated with Japans external trade organization, Jethro, elaborates on this focus, indicating how corporate partnerships are structured within the national strategy.

Similarly, South Korea has launched the 'Deep Tech Value-up' program, targeting late-stage start-up investments in burgeoning sectors like artificial intelligence, biotechnology, and green technology, with major players like Hyundai Motor and Samsung Electronics onboard.

Japanese and South Korean corporations have emerged as frontrunners in corporate venture capital, with five firms ranking among the top 11 globally in the last quarter of 2024, according to data from CB Insights. Conor Moore, head of private enterprise at KPMG, attributes this trend to a national desire to catch up with more mature ecosystems, although their investment generally represents only a small slice of the broader venture capital landscape, which tends to favor shorter investment cycles more suitable for start-ups.

According to the Startup Genomes global ranking of startup ecosystems from last year, Tokyo and Seoul exhibited remarkable progress, climbing to tenth and ninth place respectively, while Silicon Valley maintained its top position.

The tech scene in Southeast Asia is rapidly evolving, with Indonesia emerging as a prominent fintech hub and Malaysia leading the region in IPO fundraising in 2024. Furthermore, the Philippines is backing its start-up ecosystem with government support, evidenced by a venture fund that successfully raised $245 million in 2024.

Klingler-Vidra expresses her hope that more governments in Southeast Asia will forge partnerships with large corporations, offering tax incentives for start-ups, akin to Japans J-Startup Initiative and the K-Startup Grand Challenge in Korea.

However, the question remains: Can Southeast Asia effectively learn from the experiences of Japan and South Korea? Tim Jackson, a seasoned early-stage start-up investor and the founder of the Walking Ventures seed fund in London, expresses skepticism regarding this potential. Nevertheless, he notes that the rise of artificial intelligence could significantly alter the start-up landscape in Asias favor. AI enables companies to build MVPs (minimum viable products) much more cheaply, more quickly, and with fewer workers, reducing the necessity to be close to Silicon Valley for funding and talent. That could be a major advantage for Asian start-ups, he concludes.