AI Adoption Highlights Divide Between Large and Small Businesses in South Korea

Despite the South Korean government's push for artificial intelligence (AI) transformation as a national growth strategy, many small businesses are struggling to adopt AI due to high costs and a lack of skilled personnel. While large corporations and public institutions are rapidly integrating AI, small businesses face significant barriers, raising concerns about widening productivity gaps between companies.

According to a report released by the Korea Labor Institute on June 24, the AI adoption rate among domestic businesses was recorded at 5.0% by the end of 2023, a more than threefold increase from 1.5% in 2022.

The analysis utilized data from the Business Panel Survey conducted from 2019 to 2023.

However, the adoption of AI remains concentrated among a few large corporations and public institutions, with limited diffusion across the broader industry. The AI adoption rate for conglomerates was 20.0%, while the public sector reached 22.1%. In contrast, small businesses reported only a 2.4% adoption rate. Among companies with over 500 employees, the adoption rate was 16.9%, while those with 30 to 99 employees had a mere 3.5%.

Regionally, the Gyeongsang region (7.6%) and the capital region (6.0%) exceeded the national average, while Jeolla and Jeju recorded only 0.8%. This indicates a concentration of AI capabilities within specific business groups and regions.

The disparity in investment capacity among businesses was also evident. Companies that adopted AI had significantly larger assets and revenues compared to those that did not, and they were more active in research and development. The average assets of AI-adopting companies were three times greater than those of non-adopters, and their average revenue and added value were also higher.

Furthermore, AI-adopting companies possessed more intangible assets and software, as well as higher research and development investments, suggesting that the transition to AI is primarily occurring among financially robust and technologically capable firms.

However, the introduction of AI did not immediately lead to increased productivity. The report indicated that productivity growth among AI-adopting companies actually slowed shortly after adoption. Although these companies were initially more productive, the early stages of AI implementation were hindered by the challenges of system integration and investment burdens.

Concerns about significant job losses due to AI adoption have not yet materialized, as both AI-adopting and non-adopting companies exhibited similar employment growth rates. Nonetheless, a shift in employment structure was observed in AI-adopting firms, with an increase in the proportion of highly skilled workers and a decrease in low-skilled workers. The institute concluded that AI is influencing job composition and labor demand rather than the total number of jobs.

The challenge lies in the fact that while small businesses recognize the need for AI, they are confronted with practical barriers. The survey revealed that companies that adopted AI cited the most significant obstacles as a lack of technology for AI implementation and utilization (49.8%) and excessive cost burdens (48.7%). This indicates that securing skilled personnel and managing initial investment costs are the primary hurdles to AI expansion.

Kim Gi-min, a senior researcher at the Korea Labor Institute, stated, "As AI adoption is primarily occurring among large enterprises, it is essential to support small businesses with initial infrastructure development costs and expand AI training programs. Additionally, a support system should be established to assess the long-term effects, such as productivity improvements."