This article articulates the relational capacity of the nation-state, and its role in the growth of information and communication technology (ICT) entrepreneurs and industry cluster formation. In particular, it emphasizes the state's strategic coupling with the private sector and social groups as the main forces that facilitated the rise of ICT entrepreneurs and the high-technology industry cluster in Teheran Valley (TV) in Seoul, Korea, during the post-1997 financial-crisis downturn. Historical analysis shows that the seemingly serendipitous rise of TV is an outcome of the dynamic interplay between the state, ICT entrepreneurs and other social forces in the post-industrial restructuring process. Importantly, while the Korean state still maintained its role as a reformer of industry structure, it continuously and flexibly revised its mode of governing in response to technological change and social demands, forming a governance system that I term ‘relational governance’. During the industrial upgrading period from 1980 to the early 2000s, the governance system for the ICT sector shifted from centralized planning to selective deregulation through close partnership with ICT entrepreneurs, and then later to a more flexible mode of governance whereby the state re-centralized ICT policymaking functions while devising indirect ways of supporting emerging small and medium ICT enterprises.