The Role of Tech Startups in the Economic Growth of Southeast Asia

Introduction

In recent years, Asia has experienced the rapid expansion of technology-oriented startups. With the nascent tech adaptation in sectors such as health, education, business, security and more has brought a huge scope for tech startups in the world. Start-ups have become a vital component of the modern economy, significantly enhancing innovation and competitiveness. According to the report of Startup Genome, there are 12.5k tech scaleups globally out of which 2.8k are from Asia. Based on Tracxn's extensive database, the research claims that Southeast Asia's tech sector received funding totaling $4.3 billion in the year 2023. Start-up ecosystems have formed and developed in various countries, driven by factors such as public-private partnerships, collaboration between cities and regions, and the involvement of companies, public sector organizations, and small and medium-sized enterprises (Demianenko, et al., 2021).

The growth of startups has been significantly supported by the advancement of digital technology, which has had a profound impact on the creative economy. Additionally, startups have leveraged innovative business models, such as the Business Model Canvas, to enable flexible business process transformations and optimize offerings for consumers (Astapov & Zhdanov, 2022). Asia is expected to become the hub of global tech and innovation, and its fintech revenue is assumed to be bigger than North America’s. Research conducted among 21 countries by Boston Consulting Group revealed that Asian consumers are more positively inclined towards artificial intelligence (AI) than those in the West. According to the report published by Google, Temask, and Bain & Company projects, Southeast Asia’s digital economy is to reach a staggering USD 360 billion by 2025. With over USD 8 billion invested in the sector in 2020 alone, this predicted increase has drawn significant investment, demonstrating the region's enormous potential to produce even more unicorns in the years to come (Hill, 2023). Likewise. With the growing population of millennials and GenZ in Southeast Asia, Forbes predicts the tech startup's valuation of $1 trillion by 2025.

Statista Research Department shows the possibility of a growing tech future in the countries of Asia, for example, China holds the world’s highest-value startup among the 400 unicorn and startup companies in the Asia-Pacific region, valued at more than $100 billion. With the rising number of startups, the government hopes to boost economic growth, create jobs, and foster sustainable development. By creating an enabling environment for innovation and entrepreneurship, the nation can boost economic recovery, generate jobs, and enhance overall resilience. All around the world, if the numbers are observed, the percentage of new startups is higher, but their survival or sustainability is comparatively lower. Innovative ideas are not enough to run and expand a successful business; they demand an array of financial sources, suitable policies, supporting trade groups, etc. However, the average growth rate for startups is about 200% per year. It means the number of sizes will double every five years. Observing the nature of startups, each has a different need. For example, when it comes to funding, tech startups need a high level of funding, and for that, they often attract venture capital or angel investors. As entrepreneurs, their advantages as first-movers include seeking patents, setting higher prices, introducing new product technology, and utilizing technology and scientific experts. With the growing trend of startups, many entrepreneurs also believe in second-mover tactics by applying strategic innovation technology (Allen & Stearns, 2004)

Tech startups are a company which is driven by technology and innovation. These companies aim to deliver digital solutions that can reinvigorate economics. The company often focuses on creating new applications and leveraging technology such as virtual reality, AI, and blockchain. There is no doubt that successful tech startups can contribute hugely to the nation’s economy. For example, As per Join the Southeast Asia Startup Revolution, tech startups in Southeast Asia have played a crucial role in the rapid growth of e-commerce. Companies such as Lazada, Shopee, and Tokopedia have effectively provided the platforms for B2B, C2C, and B2C transactions. Therefore the tech market can be considered a significant contributor to the economic growth of Southeast Asia.? The relationship between tech startups and economic growth in Southeast Asia can be analyzed through various factors, including fintech innovation, digital marketing strategies, and the development of startup ecosystems. Fintech innovations, such as crowdfunding and peer-to-peer lending, have improved the performance of micro, small, and medium enterprises (MSMEs) and contributed to economic growth. By providing alternative financing options, these innovations have helped businesses sustain operations and adapt to the evolving economic landscape. By assessing the start-up ecosystem and identifying key driving forces for its development, countries can better position themselves in the competitive global market. Local governments can play a crucial role in fostering and nurturing innovation and entrepreneurship ecosystems by addressing barriers and implementing policies that support start-ups.

However, these tech startup success rate is less than 50%. If we observe the average percentage of failure it is around 63% and during the first year almost 25% shut down and only 10% can survive in the long run (Kapoor, 2023). In the context of economic growth of Southeast Asia Social-cultural capital plays a significant role in youth entrepreneurs. Which is highly dependent on the entrepreneurship ecosystem source or sources of social-cultural capital at the micro, meso, or macro level (Pillai & Ahamat, 2018). The study attempts to identify the role of tech startup companies in the growth of Southeast Asia. For this purpose, all countries in Southeast Asia were studied and explored the top tech startups.

As of December 2023, the total number of tech startups in Southeast Asia reflects the region's vibrant entrepreneurial landscape. Singapore leads with 1,780 startups, boasting a GDP of USD 466,789 million. Indonesia follows with 860 startups and a GDP of USD 1,319,100 million. Vietnam and Malaysia each have 340 startups, with GDPs of USD 408,802 million and USD 406,306 million, respectively. The Philippines has 185 startups and a GDP of USD 404,281 million, while Thailand has 180 startups with a GDP of USD 495,341 million. These figures illustrate the significant role tech startups play in economic growth and innovation across Southeast Asia.

In 2024, Southeast Asia's tech startup ecosystem has seen significant growth, with top startups like Indonesia's eFishery (USD 200 million), Vietnam's Thuocsi (USD 51.5 million), Malaysia's Carsome (USD 607.4 million), Singapore's Bolttech (USD 246 million), and Indonesia's Kredivo (USD 270 million) raising substantial funds. These companies are at the forefront of innovation in their respective sector ranging from aquaculture and pharmaceuticals to automotive and fintech demonstrating the region's potential as a hub for technological advancement and economic development. The substantial investments highlight the confidence of global investors in Southeast Asia's burgeoning tech landscape, driving economic growth and enhancing sectoral efficiencies.

In the first half of 2023, Southeast Asia experienced a 54% year-on-year drop in investment volume to $3.1 billion, marking the lowest H1 investment since 2017. The deal landscape has reverted to pre-COVID and possibly pre-unicorn era standards, with valuations and deal sizes decreasing more slowly than investment volumes. This market correction lagged a year behind the US, only significantly impacting Southeast Asia at the end of 2022. With investment levels firmly below the 2017-2020 baseline, Southeast Asia, along with China, is the only global market to adjust so quickly. Unlike India or Latin America, the 2021-2022 investment boom did not significantly elevate Southeast Asia's capital intake. Consequently, Southeast Asia might see a softer year-on-year drop in investment activity compared to its peers.

1. Review on the trend of growing tech startups in Southeast Asia

Powerhouses like Japan, China, South Korea, and Singapore have long dominated the history of Asian economic growth. These nations have traditionally been the driving forces in the region's economy. However, in today's scenario, economic power has become more distributed across the continent. Countries like India, Vietnam, and Indonesia have emerged as significant players. These nations now play vital roles in both regional and global value chains, contributing substantially to the overall growth and dynamism of the Asian economy. In the year 2021, the Southeast Asian countries broke the record with the desirable number of startup status which includes companies such as Ninja Van, Carro, MoMo, and others. Until now, Southeast Asia has produced 52 unicorns valued at over USD 1 billion (Hill, 2023).?

According to a recent UNCTAD report, the number of start-ups in ASEAN that have raised more than US$1 million in funding almost tripled to 1,920 between 2015 and 2021. The growth rate is 85 percent greater than in Europe and 65 percent faster than in the US. A more detailed overview of the impact tech startups have in each country in the region can be found below.

2.1 Tech startup as encouragement of the economy

The emergence of tech startups has demonstrated significant strengths in various domains, including artificial intelligence, electrical engineering, software development, health sciences, and educational technologies. These strengths have been proven to contribute to increased income from technology licensing. According to research by US economic growth, employment among technology-based startups increased 20%, from 1.2 million to 1.5 million workers. Compared to non-tech startups approximately 6% of tech-based startups experience high employment growth annually.? Digital economy and innovation have a positive impact on the economy for which the government actively designs the schema, through this government sponsors tech startups and creates the appropriate environment for them (Muramalla & Al-Hazza, 2019). These kinds of sponsors are the part of economic development of the country where certain amounts are separated to promote them.?

2.2 Multiple sectors for tech startups for the economic development of Southeast Asia

Tech startups are not only limited to IT industries but are also innovatively included in other sectors such as agriculture, health, education, design, service, etc. There are varieties of opportunities for both investors and tech entrepreneurs. In the context of both macro and micro markets in Southeast Asia, their competitors, the online platform industry, and the success of the Sea Company have brought opportunities for these startup companies to rise. Along with that, the government, especially in Indonesia, supports and encourages the growth of the digital tech market and promotes foreign investment. The macroeconomic and government stability of ASEAN has provided a platform for economic progress, trust, and globalization. The emergence of app-based businesses and e-commerce platforms, including the region's own "unicorn" tech firms, led to a great deal of interest. In terms of Internet usage metrics, such as social media and messaging, Southeast Asia leads the world.

Today terms such as social tech startups are popular. This kind of innovation is more focused on eliminating social issues, It targets increasing employment, reducing poverty, improving education, promoting environmental awareness, etc.?(Arena, Bengo, Calderini, & Chiodo, 2018). Similarly, health sectors are the most popular to adopt the technologies. Health tech startups continuously focus on healthcare service consumers and providers (Chakraborty, Ilavarasan, & Edirippulige, 2021).? The health teach models are highly in demand during and after COVID-19. In addition, Greentech and Agritech startups require long-term investment in the design, testing, prototyping, and certification stages. These startups support the economy through patents and publications if they gain investment from their government, aid agencies, etc. (Vandenberg, Hampel-Milagrosa, & Helble, 2021).

2.3 Support of government and trade ecosystem

Governments and policymakers acknowledge the strategic importance of tech startups in economic recovery. Scholarly literature examines the effectiveness of various policy interventions designed to support the startup ecosystem. Governments, politicians, companies, and non-governmental organizations (NGOs) are all essential players in promoting digital inclusion, which entails providing direct access to technology and the Internet, and digital participation, which involves the direct use of digital goods and services. By 2030, Southeast Asia could have a $1 trillion digital economy, driven by the growth opportunities and pathways established through these efforts. According to a report by IMARC Services Private Limited, the Southeast Asian tech sector is expected to expand rapidly in the coming years (Chadha, 2023).

By observing the growing trend of tech startups in Southeast Asia, the government has launched a digital innovation program to promote smart city development. For example, the Thai government introduced a 4.0 program where they focus on innovation, and along with that, they offer visa and tax exemptions to the tech industry. Likewise, countries like Singapore and Indonesia conducted 1000 digital startups to attract tech companies of the regions. Asian Development Bank forecasts, the economy of Indonesia grow the trend higher by 5% in 2024.? Government regulations have an impact on the growth and innovation of startups, just as innovative businesses have an impact on the economy. While the majority of countries have regulatory environments that are favorable to startups and promote entrepreneurship, other locations confront bureaucratic obstacles and regulatory uncertainties that impede the expansion of businesses. Overall implications for entrepreneurs, investors, and legislators looking to promote economic growth and innovation in the digital era (Gupta, 2024). Through an in-depth understanding of the dynamics surrounding cooperation and networking, resource accessibility, mentorship and support, and the regulatory framework, stakeholders can effectively collaborate to cultivate and maintain dynamic entrepreneurial ecosystems.

2.4 Knowledge gap and future direction

Few studies have comprehensively analyzed the economic impact of tech startups in Southeast Asia and their varied contributions to economic growth. Moreover, the collaborative networks among authors and institutions in this research area remain largely unexplored. Addressing these gaps will enhance our understanding of the evolving role of tech startups in fostering economic recovery. Many entrepreneurs face challenges in scaling their businesses globally due to market knowledge gaps, financial constraints, and government policies. Existing literature emphasizes the positive impact of tech startups on economic development through job creation, labor market improvements, poverty reduction, and innovation promotion. While these factors contribute to economic progress, it is crucial to consider the implications if tech startups fail to secure deals or adequate funding for their products and services. In such scenarios, does their presence continue to positively influence the economy? A lack of adequate literature on the tech startups in Southeast Asia especially those economically backward countries there have brought further direction for the research (Susilo, 2020).?

1. Methods

For the study, the researcher adopted a bibliometric analysis to examine the role of tech startups in the economic growth of Southeast Asia. This method was chosen to identify trends, influential authors, major studies, and their research domains. Data were meticulously gathered and analyzed from various reputable sources to ensure a comprehensive overview of the subject matter.

To gather the necessary data, the researcher utilized the Publish or Perish (PoP) software, which retrieves and analyzes academic citations from reputable academic databases and repositories, such as PubMed and Google Scholar. These databases were selected for their extensive collections of academic articles covering fields related to economics, entrepreneurship, and technology. Additionally, VOS Viewer analysis was used to provide a visual representation of the interconnectedness of the research themes, offering deeper insights into the conceptual relationships within the field. By analyzing this data, the researcher aims to provide detailed insights, which will be presented in the findings section, showcasing the significant impact of tech startups on Southeast Asia's economic landscape.

Search keyword in Publish or Perish (PoP)

To gain the appropriate knowledge of tech startups in Southeast Asia and their economic influence, a set of relevant keywords were included such as, “tech startups”, “entrepreneurship”, “Southeast Asia”, and “innovation”.

The study included a paper which has met the following criteria.

• The paper focuses on the role of tech startups in the economic growth of Southeast Asia.
• Publication year is between 2020-2024.
• Publications are available in English.

From 2019 to 2024, 100 research papers were published, amassing 24,958 citations with an average of 4,991.60 citations per year and 249.58 citations per paper. Each author was cited 12,432.57 times on average, contributing to approximately 46.39 papers, with an average of 2.75 authors per paper. The research achieved an h-index of 87, a g-index of 100, and a normalized h-index of 52, with an annual h-index of 10.40 and a hA-index of 42. Nearly all papers had at least one citation, with 87 papers having 20 or more citations, indicating a significant impact and influence in the field.

The results of this bibliometric analysis highlights the increasing role that tech startups are playing in Southeast Asia's economic development. Massive innovation and a competitive global market continuously encourage entrepreneurs to thrive in a market where fundraising and attracting relevant investors are crucial. Research on top keywords significantly contributes to identifying the role of technology and startups in Southeast Asia's economic growth, particularly through employee opportunities in small businesses, and private sectors, and improving the Meditech and other IT industries.

Ideas such as digital health, machine learning, and fintech have supported the burgeoning transformation of Southeast Asia's economy. Countries like Singapore, Thailand, and Indonesia often leverage venture capital or angel investment to attract funding.

The efficient integration of entrepreneurship, digital transformation, economics, communication, artificial intelligence, and leadership underscores the dynamic impact of tech startups on Southeast Asia's economic growth.

The VOS Viewer analysis provides a visual representation of the interconnectedness of the research theme and offers a deeper understanding of the conceptual relationships within the field. The visualization illustrates the multiple dimensions connected with the main keyword and how closely they are related. The area, color, intensity, and keyword visibility assist in identifying future potential and growth patterns on the related subject, which is the role of tech startups (entrepreneurship) in the economic growth of Southeast Asia.

The clusters revealed through the analysis underscore the multifaceted nature of the contribution of tech startups to the economic growth of Southeast Asia. The findings highlight that the growing entrepreneurship and commerce, alongside the adaptation of artificial intelligence, have positively impacted sectors like agriculture, health, public and private sectors, and education, which are key contributors to the economic and social development of any nation. Collectively, these clusters provide a comprehensive picture of the relationship between tech startups and the economy. This insight can guide researchers, policymakers, governments, and upcoming startups in formulating strategies that promote a sustainable economy.

These articles explore the concepts and challenges encountered over the years related to tech startups, including funding, innovation, contribution, and collaboration. The papers consistently support the impact of both tech and non-tech startups on the economy by analyzing the growing GDP from 2020 to 2024 in Southeast Asia.?

Entrepreneurship, innovation,

Whenever a keyword such as entrepreneurship comes it ultimately carries the word of innovation. Entrepreneurship and innovation keywords are connected, mostly seen in creative businesses or startups. These words represent something unique and problem-solving to society. According to the paper presented by these keywords, Asian countries' growing startups are having trouble with trustable supply chains, securities of patent and publish, logistic problems, etc.? It is believed that educating entrepreneurs and public officials is vital to significantly improving both the entrepreneurial ecosystem and the investment process. To speed up economic development, R&D and continuous innovation are required. Improving the national innovation capacity and technology development are the major strengths of the country Lv et al. (2020).?

Employment, economics?

Employment is one of the major factors that contribute to the economy. The more employment opportunities the more people have purchasing power which is correlated with the GDP of the nation. Employment covers the power of investment, saving, and purchasing power that is related to liquidity circulation which is good for a healthy economy. Employment is a macroeconomic factor, the more the number is positive it impacts accordingly to the economy (Cheah, Ho, & Lim, 2016).?

Economic, Technology

?The enhancement of technology and expansion of tech startups have brought many opportunities for entrepreneurs, global market and overall economy. Tech startup often uplift economy by introducing the problem solving product and service as well as collecting the funds from international investors. This helps in circulating the money all over the world and would not hamper to only one nation’s economy. While being aware of economic finance. Financial systems that run efficiently are essential for growth. An accurate measure of financial development would take into account how well the stock, bond, and bank markets follow out the aforementioned roles in fostering growth Estrada et al. (2010). This is the point where technology made a significant change; many Southeast Asian countries have introduced user-friendly financial management applications (Benedito, 2019)

Digital economy, Southeast Asia

Over the past few years, tech start-ups in Southeast Asia have gained a lot of attention because of the potential of the tech market, the presence of the largest e-commerce, the fact that they have closed more than 250 fintech deals, etc. These keywords help explore the international market of Southeast Asia and the idea of the digital economy. It is assumed that the digital economy will continue to grow faster than the region’s gross domestic product in Southeast Asia’s economy. To unlock sustainable growth opportunities in Southeast Asia, the government, NGOs, policymakers, and businesses play a vital role by accelerating both digital inclusion and digital participation. This activity could potentially gain a $1 trillion digital economy in 2023.

Discussion

Through the findings of the bibliometric analysis, the research highlighted the role of tech startups in the growth of Southeast Asia. The growing number of foreign investors in countries such as Singapore, Indonesia, and the Philippines has had a huge impact on the nation's multiple macro-factors, i.e., employment, national income, loans, etc. According to (Iwasaki, 2018)the rise and demand for fintech all over the world have had an impact on the major issues in finance and investments. However, the most concerning things for entrepreneurs are patents or publications. It is hard for entrepreneurs to trust and show their invention before having any funding or legal agreement. The paper also highlighted the licensing revenue from patents and new technology development in Singapore. It explains how innovative products continuously contribute to the economy and promote research and development practices.

The contemporary issues surrounding tech startups are so fascinating that recently, many articles and journals have been published related to similar subjects. By using the PoP, it was easy to track the number of citations, publication year, h-index, and more. Visualizing Output Similarities (VOS) viewer analysis enhances comprehension of the thematic environment by showing complex keyword correlations. This method helps to study the high-occurrence keyword relevant to the study.

Comparing the success and failure of startups, how have the economies of the world impacted? Kofanov and Zozul`Ov (2018) studied the factors, such as country, specific market, etc., behind the success and failure of startups. It was found that a startup with a favorable external environment (law, policies, technology, etc.) and a reliable internal environment (education, price, promotion, place, etc.) is most successful. The entrepreneurs were advised to identify the acceptable and harmful combination of external and internal environments for successful startups. Likewise, Cheah et al. (2016) support both internal and external strategies for innovation and the startup ecosystem. A good entrepreneur needs to diversify their customer base and expand their costs while dealing globally; only then can they assist in GDP, national income, work, etc. The collaboration of companies has also offered a great deal for innovation and budget in the coming years. Technology is crucial to innovations, but what entrepreneurs should learn is that technology is only an incentive when it provides better results. Economic growth may be hindered by excessively apparent technical inequality. Creating a favorable environment for tech innovation and its usefulness to society is a challenge for many innovators. Therefore, the exploitation of resources to resolve market issues is needed to impact the nation's economy positively. Kheyfets and Chernova (2021). Among the Southeast Asian countries, Singapore, Thailand, Vietnam, the Philippines, Indonesia,), and Malaysia are more developed in tech startups than Brunei, Laos, Cambodia, Burma (Myanmar), and Timor-Leste, These countries are having challenges sustaining them, and which can be easily understandable by decreasing GDP scores. If entrepreneurs are not aware of the Tech startup's challenges it will have negative impacts on the growth of the economy. Last year most of the ASEAN nations faced financial challenges because of geopolitical fighting, Inflation, high interest rates, climate change, etc. Though these challenges are common and uncertain. Therefore prevention strategy need to be adopted by the entrepreneur to stand in favor of the national economy.??

Conclusion

This study has demonstrated the critical role of tech startups in the economic growth of Southeast Asia. The comprehensive bibliometric analysis on the topic presents the importance and impact of tech startups on economic development. Observing the growing metric of Southeast Asia, its digital economy is expected to meet $300 billion in 2025. Most of the keywords in the study reflect digital transformation, innovation, technology, and entrepreneurship with a large economic landscape which connect with both internal and external factors that contribute to the success of startups and economic growth. The scenario for the tech entrepreneur has changed, now more than profit they focus on sustaining the market to get the valuation and further investment in their ideas and it all happened because of the growing number of educated shareholders and stakeholders. Therefore Education is also one of the common keywords in startups and economic growth.?

Tech startups are diversified in different sectors such as medicine, education, administration, security, and more therefore this paper will help the policymakers of the different industries to make effective policies in the future. Due to the growing educated population and their interest in artificial intelligence, the entrepreneurs have advantage of grabbing information about their customers from different digital platforms and designing the products as per their needs.? Southeast Asia's business environment is conducive to entrepreneurship development, such as by providing tax breaks and incentives. Southeast Asia's business environment is conducive to entrepreneurship development, such as by providing tax breaks and incentives. For new firms, easier access to finance and credit guarantee schemes for SMEs, and simplified regulations make it easier to start a business (Alex, et al., 2013)

The main impact of tech startups on the overall southeast economy includes capital reach, high valuation, human resource development, and technological capabilities. This paper will promote and aware entrepreneurs to establish and manage their tech-based businesses with success.