For this newsletter, we sat with KOTEC to discuss about the history of the Korean KOTEC Technology Rating System (KTRS) that is the backbone of the InnoRate’s Technology Rating System (ITRS). Our interview is available below.
Could you tell us a few words about the history of KTRS?
KTRS (KOTEC Technology Rating System), which inspired the development of ITRS (InnoRate Technology Rating System), is the proprietary technology assessment and rating model of KOTEC (Korea Technology Finance Corporation) used to assess the probability of successful commercialization of technologies. KOTEC, founded in 1989, is a public financial institution specialized for supporting innovative SMEs in the Republic of Korea.
Technology appraisal was an unknown field in Korea until KOTEC opened the first technology appraisal center in 1997. In its early days, KOTEC had no choice but utilize credit rating, which showed its limitations in measuring future values, to screen the eligibility for guarantee support. Thus, KOTEC gradually implemented new systems and organizations for technology appraisal over years. With such infrastructure, it introduced technology appraisal-based guarantee program with primitive technology assessment and scoring system in 1999.
Overcoming internal and external economic crisis, KOTEC has focused its business capabilities on ‘Technology Guarantee’ and ‘Technology Appraisal’ to support SMEs leading technology innovation and job creation. As the size of KOTEC’s guarantee increased, so did the need for risk management as well as the efficient performance of technology financing. In an effort to upgrade its system, KOTEC dispatched its staffs to partnering institutions in Europe and United States to acquire advance methodologies for technology assessment.
In 2004, KOTEC initiated a research project to develop an objective and reliable technology rating system with improved predictive power. By analyzing over 11,000 technology assessment data using the latest statistical techniques, KOTEC created a framework for the new rating system. Then, after several times of verification and correction for practical application, the development was finally completed in 2005. Later, the new system was named KTRS as a result of a naming contest in 2006.
How does KTRS assess companies?
To assess the possibility of successful technology commercialization as well as the risk of insolvency, KTRS was designed to assess aspects of managerial capability, technological competency, marketability, and business feasibility. Through periodic performance review of the rating model, KTRS has been upgraded and elaborated on a regular basis to improve the ability to predict growth potential and insolvency possibility.
Can ITRS set a benchmark for financing innovation in Europe?
Starting with Vietnam in 2016, KOTEC has been sharing its knowhow on technology rating system with foreign countries, and is participating in the development of ITRS since 2019. Inspired from KTRS, ITRS has many similarities with KTRS in its assessment indicators and structure. We believe that ITRS will initiate new standard for financing innovation in Europe as KTRS did in Korea.