Competition and Innovation: The Rise of Startups and Its Effects Towards the Philippines Economy

Abstract

The Philippines has a growing startup scene in Southeast Asia and is currently the prime target of many investors like Tencent Holdings, Voyager’s Innovation, and more. Despite this opportunity, in 2018, the Philippines made 31.8million dollars in deals, which is only a 10th of Indonesia’s deals and a 3rd of both Vietnam and Thailand. This study aims to empirically prove the economic benefits of startups to the Philippines economy and positively impact the country’s currency exchange rate. The data was collected from online and publicly accessible websites like the Worldbank and Openstat. Statistical tools used were Eviews 11 and Microsoft Excel. The result shows that the 3 independent variables have a moderate relationship with the dependent variable given the r2 value 77.0365%. Although the results showed that FDI does not affect the currency value of the Philippines and the growth of startups, mainly since the majority of the FDIs are invested in agriculture and income inequality efforts, also the factor that the Philippines is not famous for its tech industry. The results showed that Taxes on income, profits, and capital gains (%), considering the factors that the government is providing tax incentives to new businesses, can ease the burden off entrepreneurs in establishing startups, importing computers, communications, and other services (%). Additionally, since tech startups mostly rely on computers, communication goods and services to fully utilize their business, it shows that these two variables had a significant effect on the currency value of the Philippines. Start-ups are gaining traction in becoming one of the rising industries around the world. This industry challenges traditional business models with its complex utilization of technology. Moreover, the Philippines also has a growing startup scene, although it doesn't have a strong and established tech industry yet. For this reason, foreign investors can possibly be attracted, given the fact that they can take advantage of the lack of competition that exists within the startup scene.