Korea's Strategy for Development of STI Capacity

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Korea’s Strategy for Development of STI Capacity : A Historical Perspective

Korea’s Strategy for Development of STI Capacity : A Historical Perspective

Abstract 1

Abstract This study discusses dynamic development of Korean innovation system in a brief. The

motivation of this paper is to improve understanding of the national innovation system,

by investigating the Korean innovation system, from the start of capacity building, in

consideration of theory of national innovation system. It is frequently pointed out that

modern innovation policy is difficult to be implemented by the developing country, per-

haps because of insufficient framework condition, or social capital. If the national inno-

vation system can be taken as continuity from the capacity building, the policy domain

would be expanded. If so, the policy can be pursued not only focusing on interaction of

the innovation units and flows of knowledge, but also on the process of capacity build-

ing. In this line, we look into the historical evolution of the Korean innovation system.

It is the development of Korean innovation system because it had taken only about four

decades to develop an advanced system. In addition, the development of Korean system

is initiated and driven by the government, and therefore the role of government is dis-

cussed which would provide some important implications to the developing countries.

Double-winged strategy of Korean government was critical; such as promotion of indu-

strialization on demand-pull side, and S&T development on S&T push side by creating

GRI system.

| CONTENTS |

Abstract ··························································································································· 1

Chapter 1. Introduction ································································································ 7

Chapter 2. Evolution of Korean Innovation System ·················································· 9

2.1. Theoretical Approach ························································································ 9

2.2. Dynamic Structure of Korean Innovation System ············································· 13

Chapter 3. Industrial Policy and Industrialization ·················································· 20

3.1. Change of Industrial Structure ········································································· 20

3.2. Industrial Policy and Industrialization ····························································· 23

Chapter 4. S&T Policy and Advancement of Korean Innovation System ············· 26

4.1. Trends of R&D Investment and HRST ···························································· 26

4.2. S&T Policy and Build-Up of STI Capacity ····················································· 29

4.3. HRST Policy ··································································································· 34

Chapter 5. Conclusion ································································································· 39

References ····················································································································· 41

| List of Tables | <Table 1> Major Economic indicators ·········································································· 21

<Table 2> Major R&D Indicators ················································································· 27

| List of Figures | [Figure 1] STI Capacity Building ················································································· 12

[Figure 2] Dynamic Structure of Korean Innovation System ········································ 12

[Figure 3] Incubation Stage (1962~1979) ····································································· 14

[Figure 4] Expansion Stage (1980~1999) ····································································· 16

[Figure 5] Mature Stage (after 2000) ············································································ 18

[Figure 6] World top 30 Exports in 1975 ······································································ 22

[Figure 7] World top 30 Exports in 1995 ······································································ 22

[Figure 8] Korea’s Top 30 Exports in 1975 and 1995 ··················································· 23

Chapter 1. Introduction 7

| Chapter 1 | Introduction The Korean War ended in 1953, and thereby Korea had almost no capacity both in the industrial and technological sectors. Economic development had to start from the bot-tom, with almost no endowment, but people. Korean government had implemented the first five-year economic development in 1962 and since then 7 times up until the middle of 1990s. Through the time period of those plans, the Korean economy has risen to, now, an advanced level from one of the poorest in the world. There would be many factors to influence the economic development of Korea. However, without science, technology and innovation (STI) development, such performance of the Korean economy would be impossible. In the course of economic development, the role of the government had par-ticularly been critical to initiate and build up the national capacity in almost all sectors of the economy. The theory of innovation and/or national innovation system has been developed in the advanced country, whose STI capacity is well developed to greater extent. This is the reason that most studies about national innovation system place a focus on interaction, flows of knowledge, learning, public-private partnership, networking and cluster, etc.,1) In other words, the theory of national innovation system deals, given the national inno-vation system, with dynamism within the system, but not development process over time from the birth. Thus, it is frequently pointed out that modern innovation policy is difficult to be implemented by the developing country, perhaps because of insufficient framework condition, or social capital in comparison with that of the advanced country. If the national innovation system can be taken as continuity from the capacity building, the policy domain would be expanded. If so, the policy can be pursued not only focus-ing on interaction of the innovation units and flows of knowledge, but also on the process of capacity building. Therefore, it would be interesting to investigate the dynamic structure of the Korean in-novation system along with the course of economic development. Korea’s dynamic structure of the national innovation system is very different from those of advanced countries. In general, the potential and/or the efficiency of the national innovation sys-tem may depend primarily on the STI capacities of the innovation units within the sys-tem, such as firms, research institutes and universities, and then interactions at full ca-pacity. The STI capacity in the advanced country has been built up over hundreds of

1) For example, see OECD (1997).

8 Korea's Strategy for Development of STI Capacity : A Historical Perspective

years. However, it has taken only about four decades that Korean innovation system is developed from the start of building STI capacity, which makes very interesting case for the study of national innovation system. In the process of development of Korean inno-vation system, two factors such as S&T push and demand-pull factors must be consi-dered. S&T push can be made by strategic development of S&T, while industrialization increases needs for science, technology and innovation. It is pointed out that both indu-strialization and S&T development were initiated and driven by the government policy. The purpose of this paper is to review historical evolution of Korean innovation system in consideration of theory of national innovation system. A discussion will be made about how Korea builds up STI capacity and sets up the national innovation system, and what kind of strategic approaches the government employed in so doing. The difference of Korea’s innovation system from that of the advanced country will be pointed out. In this line, an emphasis will be placed on the role of the government. Chapter 1 includes a brief introduction, background and motivation of the paper. Chap-ter 2 will discuss the concept and dynamic structure of the Korean innovation system, and in this line some important government policy will be reviewed in chapter 3 and 4, i.e., industrial policy, S&T policy, and HRST policy, which are critical to build up STI capacity in Korea. Finally, concluding remarks will be made in chapter 5.

Chapter 2. Evolution of Korean Innovation System 9

| Chapter 2 | Evolution of Korean Innovation System 2.1. Theoretical Approach Conventionally, technological innovation is defined as the process through which new (or improved) technologies are developed and brought into practical use. In theory, in-novation today takes place when scientific knowledge or opportunity meets the social and/or industrial needs. The theory has shifted its focus, in explaining the process of innovation, from the linear and non-linear models to complex ones. Nowadays, innova-tion takes place increasingly in a complex way. Most indicators regarding innovation are still collected based on the linear model, but the linear model has a limitation to ex-plain innovation process. A better understanding of innovation has been possible when the concept of the national innovation system had been introduced in late 1980s.2) The system-wide approach is not new,3) but the conceptual framework of the national inno-vation system enriches the insight into innovation. The system approach basically has a root in the institutional school. This is why most studies about the national innovation system deals with the system itself, not with the potential or efficiency of the system.4) That is, more important for the analysis are the process of innovation, interaction of the innovation units, flows of knowledge and learning. The definitions of the national innovation system are made in various studies. For ex-ample (OECD 1994), the national innovation system is “… The network of institutions in the public- and private-sectors whose activities and interactions initiate, import, mod-ify and diffuse new technologies” (Freeman 1987); “… The elements and relationships which interact in the production, diffusion and use of new, and economically useful knowledge… and are either located within or rooted inside the borders of a nation state” (Lundvall 1992); “… The national institutions, their incentive structures and their com-petencies, that determine the rate and direction of technological learning (or the volume and composition of change generating activities) in a country” (Patel & Pavitt 1994); and “… The set of distinct institutions which jointly and individually contribute to the development and diffusion of new technologies and which provides the framework

2) For example, see Freeman (1987). 3) Freeman (1995) pointed out that the idea of the national innovation system goes back to Friedrich List (1841) which

provided the concept about the national system of political economy, Godin (2009) argues that the system approach in regard to the national innovation system used to be fundamental to OECD, which might have an influence on the scholars who provided the conceptual framework of the national innovation system in late 1980s and early 1990s.

4) In other words, those studies do not specify the system with an objective function, maximization or minimization and therefore no analysis of equilibrium.


within which governments form and implement policies to influence the innovation process. As such it is a system of interconnected institutions to create, store and transfer the knowledge, skills and artifacts which define new technologies” (Metcalfe 1995). As defined above, the theory of national innovation system in general discusses the inte-raction of innovation units and flows of knowledge in the given system, i.e., dealing with dynamism within the system. (Lundvall, 1992; OECD, 1997, 2002 & 2005). It may be taken for granted that such a theory should be developed by looking the national in-novation system of the advanced country. Historically, it has taken hundreds of year in the advanced country to build STI capacity of the innovation units, such as firms, uni-versities and research institutes, and therefore the concern must be placed on the effi-ciency of the national innovation system (see [Figure 1]). It appears that the critical point of the theory of national innovation system lies in that the capacity of the innovation units is given. Their capacity is already built at the ad-vanced level and the theory does not assume that the level of capacity changes over time. Then, what is more important is to investigate the interaction and the knowledge flow between the innovation units. It could be argued that the conceptual framework of the national innovation system should include the process of building capacity of the inno-vation unit too. Knowledge or resources are available in advanced countries, while not always in developing countries. It would be worthwhile to take account of the national innovation system as continuity from the start of capacity building of innovation units. Thus, there will be a developed, developing and/or underdeveloped system. STI capacity will be in question whether it is fully developed (or degraded after fully developed). Thus, we might take account of the STI capacity as a variable built in the national innovation system. Such a view could expand the policy domain of the government; particularly the governments of the de-veloping countries. Suppose that the potential or efficiency of national innovation system at a given time, S(t), depends on STI capacity of and interaction between innovation units, and other variables. Then, we can write (1) , , , , , , , , … … , where F(t) denotes firm’s capacity; R(t) capacity of research institute; U(t) capacity of universities; E(t) STI environment; G(t) government policy. In Eq(1), the cross terms


represent interaction or knowledge flows between innovation units. In the above equa-tion, if STI capacity of innovation units increases, then the potential or efficiency of na-tional innovation system will be increased. Greater interaction and knowledge flows between innovation units would also increase the potential or efficiency of the system, S(t). Interaction of the units would be made through competition, transactions of goods, services and knowledge, and networking, while knowledge flows through interaction between firms and knowledge-creating institutions, interaction and interdependence be-tween markets, and interaction between market and non-market mechanism (OECD, 2002). Now, STI capacity of innovation units can be written as follows. (2) , , , , , , , , … … , (3) , , , , , , , , … … , (4) , , , , , , , , … … , where K(t) denotes R&D stocks at a given time; P(t) R&D manpower; Y(t) output of manufacturing industry; SM(t) industrial structure; and others are the same as before. STI capacity of innovation units therefore depends on primarily R&D stocks and man-power; capacity of other units, STI environment, and government policy, etc. It can be said that greater R&D stocks and manpower will increase STI capacity of the unit. Since capacity of innovation units is inter-related, the capacity of the unit will be also increased if capacity of other units is greater. That is, the research institutions like GRIs and universities increase their R&D activities, then, the firm will perceive that technol-ogical environment is improved and hence increase R&D investment, which results in greater capacity. According to the system, Eq(1)~Eq(4), the government can directly or indirectly influ-ence STI capacity of innovation units through manipulation of the policy variable, G(t), on R&D investment, manpower, and other. Once STI capacity is increased, the potential or efficiency of innovation system will be directly increased. On the other hand, if STI capacity is increased, interaction between units will be increased, and in turn it increases the potential or efficiency of the system. Taking an example from Korean experience, we may review the innovation system from the birth. Korea has built up STI capacity by creating GRI system at the start as shown in


[Figure 1] STI Capacity Building

Ancient Greece

Rennaissance

Industrial Revolution

STI Capacity Building of advanced country

University

Scientific Knowledge

Industry

POSCO (1973)

Samsung(1983년)

KIST (1966)

STI Capacity Building in Korea

Steel

Semi-conductor

GRIs

SRC/ERC(1990s)

University

IndustryHyundai Motors(1974)

Autos

Hyundai Heavy Industry(1972)

Ship-building

Figure 1. Then, in the course of industrialization, private enterprises built their own technological capacity. For example, Hyundai heavy industry established a shipyard in 1972 in Ulsan area. POSCO, the steel company, completed the first stage of construc-tion of the plants in 1973. Hyundai Motors launched the first model of the passenger car in 1974 and developed its own car engine in 1980s. Samsung developed and produced chips for watches and transistor in 1974. Later, Samsung developed the memory chips in 1980s in cooperation with GRI. Those innovations took a lead in building STI capaci-ty of the private enterprises in Korea. Finally, by the government support policies, uni-versities began to build R&D capacity in 1990s.

[Figure 2] Dynamic Structure of Korean Innovation System5)

Dynamic Structure of KIS

Gov’tUniv Firm

GRIs

1960s~70s

Univ

Gov’t

Firm

GRIs

1980s~90s

Univ

Gov’t

Firm

GRIs

2000s~Now

Note: 1. Redrawn from Bell (2011).

2. The triangles in the figure represent the innovation triangle. For the convenience, we divide the time period into three periods over the historical evolution of Korean innovation system.

5) The triangle in the figure denotes the innovation triangle.


As shown in Figure 2, the dynamic structure of the Korean innovation system is exhi-bited from the start of building STI capacity of the innovation units, and to a ‘firm-centered’ innovation system. Main feature is that an advanced innovation system has been developed after spending about 40 years to build STI capacity. In the process of system development, two factors played a critical role, that is, industrialization on the demand-pull side and S&T development on the science-push side. It can be pointed out that such STI capacity was initiated and developed by and large by the government. More detail can be discussed in the following. 2.2. Dynamic Structure of Korean Innovation System In viewing the development of the Korean innovation system, for the convenience, we might divide the time period into three stages; the incubation stage (1962~1979), expan-sion stage (1980~1999), and mature stage (2000~present).6) Development of Korean innovation system in each stage will be discussed in the follow. 2.2.1. Incubation Stage (1962~1979) After the Korean War (1950~1953), the Korean economy was only sustained by the for-eign aid. However, a new government was established in 1961, and pursued the eco-nomic development. In 1962, the Korean government implemented the first 5-year eco-nomic development plan which continued up to the 7th plan in mid 1990s. Based on the economic development plan, Korea pursued outward-oriented industriali-zation strategy. Korea’s industrialization policy focused on fostering the import substi-tution industry, rather than depending on FDI for industrial development. Export-drive policy was pursued to obtain the investment resources for development and promotion of import substitution industry. Such industrialization strategy had been pursued based on light industry at the early stage. Korean government had taken account of a separate plan to solve the technological problems required for industrialization, while implementing the economic development plan. Such consideration resulted in the establishment of KIST, which is the first GRI in the area of science and technology. Later KIST spun off into various specialty GRIs.

6) According to major changes of the economy, we may divide the time period into the initial stage from 1962 to 1980 in

which there was a coup to change the government, the expansion and deepening stage from 1981 to 1997 in which the foreign exchange crises hit the Korean economy, and S&T-based innovation stage from 1998 to the present.


Subsequent establishment of government institutes formed a unique GRI system. The GRI system expanded in 1970s as the government pursued development of heavy chem-ical industry. GRIs intended to cope with pending technological needs of the industry and had constructed the platform of R&D in Korea.

[Figure 3] Incubation Stage (1962~1979)

Note: 1. The triangle in the figure represents the innovation triangle. The government began to create the industrial complex with the first 5-year economic development plan. The plan was designed to develop the industrial complex for smooth firm activities while the infrastructure was not sufficient elsewhere. The creation of in-dustrial complex was effective for establishing firms and fostering the industry. As an extension of this effort, the government established a plan to construct the research complex for the GRIs, and it became a basis of Korea’s GRI system. At the beginning, Korea imported capital goods from advanced countries in which ad-vanced technology was included. Technology transfer was made on turn-key base in 1960s, and some reverse-engineering was a method of acquisition of foreign technology in 1970s. Most domestic enterprises were lacking technological capacity in this time period.

Plant operation technologies

Machinery embedded technologies

Government

KIST (1966)

Industries

Promotion of labor-intensive export industries in 1960s

Development of strategic heavy and chemical industries in 1970s

Foreign knowledge sources

Contract researches for technology exploration

Contract researches for technology acquisition and assimilation

Turnkey-based technology transfer in 1960s and reverse engineering based technology acquisition and assimilation in 1970s

Specialty GRIs (1970s)

GRIs


In 1973, the government declared to pursue the policy for development of heavy chemi-cal industry. The government selected six strategic industries such as steel, electronics, chemicals, machinery, ship-building and non-ferrous metal. Since these heavy chemical industries could not be developed without technological capacity, the government also decided to expand the GRI system to establish more GRIs. By the end of 1970s, 19 GRIs had been established, and they were ready to undertake research, if funded. As the government offered a privileged compensation, it was possible for the GRIs to recruit the qualified Korean scientists and engineers from the advanced countries. The government creation of the GRIs was the first step to building the R&D capacity. To build up R&D capacity of GRIs instead of universities was an important decision for the government.7) Since GRIs were directly under the control of the government, it was easier to build research institutions, to recruit qualified scientists, and deploy GRIs stra-tegically. Later, such a choice proved to be an effective way to build R&D capacity from the bottom in a relatively shorter time period. As the GRIs grew, enterprises and then universities also started to build R&D capacity in time. Thus, the government initi-ative in 1960s was critical to setting up the platform of STI capacity in Korea. Briefly, Korean innovation system started to be built on the barren ground in this period. However, the establishment of KIST was a seed to build R&D capacity and later devel-oped the unique GRI system. Such R&D capacity was increasingly developed as in-crease and expansion of industrial needs for science and technology. In this time period, however, technological capacity of private enterprises was relatively at the lower level, focusing development of labor-intensive industry. Finally, universities had almost no research capacity at this time. Therefore, government policy focused on industrialization and build-up of R&D capacity, and it was too early to pay attention to innovation policy for increasing dynamism between innovation units in Korean innovation system.

7) Universities in 1960s and 1970s had nothing but teaching facilities; it was made of only teachers and buildings for

classrooms. There was no R&D facility in universities. If the government decided to build R&D capacity in universities, it would have had to work with many university professors, which would bring significant cost for organization and coordination in line with the government policies for economic development.


2.2.2. Expansion Stage (1980~1999)

There was a political change in 1980 led to the establishment of a new government. Pursuing the development of heavy chemical industries, Korea made a sizable invest-ment in strategic areas in the end of 1970s. The Korean economy was also hit by the second oil shock in 1978. With the political turmoil in 1980, unfriendly economic envi-ronment and burdensome investment in heavy chemical industry, the Korean economy recorded a negative rate of growth in 1980. After the new government was established, the economic stabilization policy was pursued and implemented strongly, which re-sulted in not only a structural reform in industries, but also in the GRI system.

[Figure 4] Expansion Stage (1980~1999)

In 1980s, technology protectionism prevailed extensively and technology transfer from the advanced countries was not as smooth as in 1960s and 1970s8). As more investment was made in the area of the heavy chemical industry, Korea needed to acquire foreign enabling technologies from advanced countries. The private enterprise had the absorp-tion capacity to some degree by establishing its own research institute. Therefore, GRIs played a role as a middleman in transferring foreign enabling technology to the domes-

8) In 1980s, Japanese auto-industry emerged particularly in the US market. Competitiveness of the US industry was

seriously threatened by Japanese industry among others.

Foreign enabling

technologies

GRIsRestructuring

in 1980s

Government

GRIsExpansion in 1990s

Assemblers

Suppliers

Enterprise Research Institutes

Dramatic increases since 1980s

Universities

Technology protectionism

Creation of technology industries in 1980s and new industries in 1990s

Various R&D programs

Public research system

Technologyindigenization

Development Of complex technologies

SubstitutionOf imported parts

Increase of industrial R&D investment


tic enterprises whose research institute was in contact with GRIs. On the other hand, the corporate research institute continued to build up its own R&D capacity; for example, Samsung for semi-conductor, and Hyundai Motors for car engine in 1980s. After the reform of the GRI system in early 1980s, the government started to undertake the national R&D programs in 1982 by funding GRIs. Major R&D projects were launched by GRIs in 1980s and 1990s. On the other hand, the private sector made a ma-jor movement to build R&D capacity by establishing corporate research institutes. Since major enterprises (becoming Chaebols later) made investment in the area of heavy chemical industry, the private enterprises needed to secure their own technological ca-pacity. The private enterprises took the R&D initiative in 1982 at the national level, showing greater R&D investment over the public ever since. In the second half of 1980s, economic environment turned in favor of Korea, and the heavy chemical industries of Korea boomed with so-called three lows, i.e., lower rate of inflation and interest rate, and favorable exchange rates to promote export. Korea also moved out of the status of a chronic debtor country in late 1980s, and consolidated the industrial platform. In 1980s, Korean innovation system expanded in the sense of R&D capacity of innova-tion units as industrialization was well in progress, and expansion of industrial needs for science and technology also made the GRI system grow, and then R&D capacity of uni-versities had built up significantly in late 1990s. Although the innovation units were not in full capacity in this time period, Korean innovation system revealed its own shape, with more interactions of innovation units being observed, which allowed the govern-ment to implement various innovation policies since late 1990s. 2.2.3. Mature Stage (since 2000) As Korean innovation system was being developed by growing STI capacity of the in-novation units, the strategic relationship was formed increasingly between the innova-tion units. Perspective of the government policy changed from ‘catching-up’ to ‘creative innovation’. As Korea has been moving into the knowledge-based economy, the gov-ernment increased R&D investment substantially in the public. The government particu-larly emphasized identification of technologies for the next generation growth engines, and large-scale R&D projects were formulated through various foresight activities.9)

9) For example, Korean Delphi is undertaken in every 5 years since 1994, and NTRMs (national technology roadmaps)

in 2002.


In the industrial sector, the private enterprise focused on developing source technologies. The private enterprises achieved a remarkable performance in the world market, but mostly they depended by and large on foreign source technology in producing their products. To secure and maintain competitiveness, the private enterprises and the gov-ernment recognized it necessary to develop own source technology. Such a need led the government policy to foster and strengthen the strategic relationship between the inno-vation units on the one hand and increase investment in basic research on the other; in-cluding support policies for technology start-ups.

[Figure 5] Mature Stage (after 2000)

Meanwhile, IT industry created a number of business opportunities, for which technolo-gy start-ups boomed since the end of 1990s. After the boom of technology start-ups, several venture companies grew rapidly to large-scale business. This stimulate the young entrepreneurs, and technology start-ups constantly rose and fell, spun off from GRIs, universities and large-scale enterprises. It would be said that Korean innovation system exhibited a complete feature of ‘triple helix’ in about 40 years after the economic development started in 1962. As moved into the 21st century, the government increased R&D investment significantly in the public sector and pursued various innovation policies to increase interaction and knowledge flows between enterprises, universities, and GRIs. Based on improved R&D capacity of

Foreign fundamentaltechnologies

Government

GRIs

Assemblers

Technology spin-offs

Enterprises(Research Institutes)

Universities

Technology protectionism

Technological uncertainties

Increase of government R&D with greater focus on basic research

Public research system

Suppliers

Strategic partnership

Preparing future industry

Public needs of quality of life, Sustainable development, etc.


GRIs and universities, the government pursued large-scale R&D projects such “New Growth Engines Project,” and “Global Frontier Projects,” etc. One major characteristics of Korean innovation system is that the government still stands on a strong position in support of S&T-based innovation, while it is dominated by the private sector. The gov-ernment has the control of the GRI system, and makes use of it strategically in pursuing large-scale projects. In summary, Korean innovation system has been developed for only about 4 decades from build-up of STI capacity. In the course of the development, the government made S&T platform by creating and building R&D capacity of GRIs in 1960s and 1970s, and private enterprises followed to build R&D capacity. In 1990s, finally the government policy focused on building R&D capacity of universities. On the other hand, industriali-zation was initiated and driven by the government, and changed the industry to technol-ogy-intensive structure. Fast industrialization rapidly increasing needs for STI. Mean-while, GRI system produced major outcomes underpin to some degree existing and emerging in Korea. As national innovation system was being developed, the interaction and flows of knowledge between the innovation units became increasingly important, on which the government policy started to focus and to implement various innovation policies by the government. In addition, the government policy today places an empha-sis on increase in efficiency of R&D investment and improvement of governance to raise transparency of resource allocation in the public sector. In this line, the govern-ment pursued both restructuring the GRI system for increasing the investment in basic research. In developing national innovation system, double-winged strategy had been implemented by the government, that is, promotion of industrialization and S&T devel-opment by creation of GRI system. Without S&T development, industrialization would not be possible, vice versa.


| Chapter 3 | Industrial Policy and Changes of

Industrial Structure 3.1. Changes of Industrial Structure When the Korean government pursued the economic development policy, Korea’s GDP was about 27,912 billion won in 1961 (prices of 2005), which increased to about 1,042 trillion won in 2010; approximately about 37 times in real term as much as GDP in 1961. On the other hand, GNI per capita was increased from 82 dollars (current prices) to 20,759 dollars over the same period, which is about 253 times in nominal term as big as that in 1961. Such growth of GDP was possible due to fast industrialization over the time period driven by pursuing outward-looking strategy. Over the period of 1961~2010, the industry has been changed from the agriculture-based structure to knowledge-intensive one. In 1961, the agriculture and manufacturing sector accounted for about 39.1 per cent and 15.5 per cent of GDP, respectively. In 2010, the manufacturing sector accounted for about 27.7 per cent of GDP, and the agricultural sector for about 2.3 per cent. On the other hand, the export was increased from about 15.7 billion won about 614 trillion won in 2010 (current prices). Over the same period, the ratio of export to GDP increased from 5.4 per cent 52.4 per cent. In order to look into the industrial structure in consideration of technological innovation, we may classify the products into simple product/process and complex product/process. (Rycroft & Kash, 2000). In this classification,10) it is obvious that complex in both product and process includes more technological components, i.e., technological inno-vation.

By such a classification, the structures of world top 30 export products in 1975 and 1995 are compared. Then, it can be found that the share of simple product-simple process had decreased, substantially, while that of complex product-complex process had increased. It implies that the international tradable had shifted to the goods which

10) Products/processes are classified as ‘complex’, if they cannot be understood in full detail by an individual expert sufficiently to

communicate all the details of them across time and distance to other experts. They are considered as ‘simple’, if they can be understood and communicated by an individual expert. Assessment of products/processes are made by a group of experts. See Rycroft & Kash (2000).

Chapter 3. Industrial Policy and Changes of Industrial Structure 21

contains more S&T-based innovation; and hence to the technology (or knowledge) in-tensive industrial structure.

<Table 1> Major Economic indicators

GDP (billion won)

GDP by Industry (%) Export-GDP Ratios (%)

GNI per capita

(US dollars)Agriculture Manufacturing Service

1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

27,912 28,509 31,259 34,225 36,169 40,518 43,117 48,064 54,722 61,669 68,690 73,122 83,318 91,226 97,923

110,852 124,174 137,059 148,377 145,931 156,526 169,691 190,529 209,081 224,932 252,529 283,505 316,497 337,490 368,753 404,595 427,866 455,429 495,011 539,728 578,360 611,490 576,556 638,378 694,972 722,190 773,941 795,761 831,884 865,241 909,653 956,833 978,505 981,601

1,042,492

39.1 37.0 43.4 46.8 38.0 34.8 30.6 28.7 27.9 26.5 27.0 26.5 24.5 24.2 24.4 22.9 21.7 19.9 18.5 14.3 14.9 13.9 12.6 11.9 11.9 10.5 9.4 9.4 8.8 7.8 7.0 6.8 6.1 5.9 5.6 5.2 4.7 4.5 4.5 4.1 3.9 3.5 3.3 3.3 3.0 2.8 2.6 2.4 2.5 2.3

15.5 16.4 16.3 17.4 20.0 20.5 21.0 21.6 21.7 18.4 18.1 19.6 22.3 21.7 21.6 22.7 22.8 22.8 22.9 23.1 23.6 23.3 24.0 25.3 25.1 26.6 27.5 27.9 26.5 24.7 24.9 24.0 24.1 24.3 24.6 23.6 23.2 24.3 24.6 25.5 23.9 23.4 23.2 25.1 24.9 24.5 24.7 25.2 25.2 27.7

45.4 46.6 40.3 35.8 42.0 44.7 48.4 49.7 50.4 55.1 54.9 53.9 53.1 54.2 54.0 54.3 55.6 57.3 58.5 62.6 61.5 62.8 63.4 62.7 63.1 62.9 63.0 62.6 64.8 67.5 68.1 69.2 69.8 69.8 69.9 71.2 72.1 71.2 70.8 70.4 72.2 73.0 73.5 71.5 72.1 72.6 72.7 72.4 72.3 70.0

5.4 5.1 4.8 5.9 8.6

10.4 11.5 12.8 13.5 14.3 14.5 18.9 27.9 26.1 26.3 29.4 29.7 27.7 25.9 31.2 33.2 31.8 31.7 33.9 32.0 35.1 37.6 35.6 30.2 27.6 26.0 26.8 25.9 26.2 28.5 27.7 31.7 44.3 37.2 38.6 35.7 33.1 35.4 40.9 39.3 39.7 41.9 53.0 49.7 52.4

82 87

100 103 105 125 142 169 210 255 291 322 404 559 607 825

1,043 1,443 1,693 1,660 1,826 1,927 2,113 2,300 2,355 2,702 3,402 4,548 5,556 6,303 7,276 7,714 8,402 9,727

11,735 12,518 11,505 7,607 9,778

11,292 10,631 12,100 13,460 15,082 17,531 19,722 21,695 19,296 17,193 20,759

Note: GDP is in prices of 2005; and others in current prices. Source: Bank of Korea, http://ecos.bok.or.kr/, National Accounts.


[Figure 6] World top 30 Exports in 1975

011041044061321331332641651653673674678841

meat fresh, chiilled, frozenWheatMaizeSugar & honeyCoalCrude petroleumPetroleum productsPaper & paperboardTextile yarn & threadWoven textiiles noncottonIron & steel shapesIron, steel univ., plate, sheetIron, steel tubes, pipesClothing not of fur

512541581599719

Organic chemicalsMedicinal, etc., productsPlastic materialsChemicals, NESElectrical machinery NES

711712714718722724729732734735861

Power machinery, non-electricAgricultural machineryOffice machinesMachines for special industriesElectrical power machineryTelecom equipmentElectrical machinery NESTroad motor vehiclesAircraftShips & boatsInstruments, apparatus

Simple Complex

Complex

PROCESS

PRODUCT

Source: Rycroft & Kash (2000)

[Figure 7] World top 30 Exports in 1995

Simple Complex

Complex

PROCESS

PRODUCT

011333667684699821843851894

Meat fresh, chilled, frozencrude petroleumPearlAluminiumBase metalFurnitureWomen's outwear non knitFootwearToys, sporting goods

334541583641674741749893

Petroleum products refinedMedicinal, tec., productsPolymerization productsPaper & paerboardIron, steel univ., palte, sheetHeating, cooling equip.Non-electrical machine partsArticles of palastic NES

781776752784764759778792772728713874782

Passenger motor vehicles excl. busesTrnasisters, valves, etc.Automatic data processing equip.Motor vehicle parts, acces. Telecom equipments, parts, acces. Office, adp. Machine parts, acces.Electrical machinery AircraftSwitchgear, etc., parts Other machinery for special industriesInternation combustion piston engineMeasuring, controlling equip.Lorries, special motor vehicles

Source: op. cit.


[Figure 8] Korea’s Top 30 Exports in 1975 and 1995

25.8

26.9

47.3

1975

85.2

6.8 8.0

1995

Complex/simple

Complex/complex

Simple/simple

Complex/simple

Simple/simple

Complex/complex

Source: T. Shin (2003)

Over the same period, Korea’s top 30 export products were investigated. The export share of simple/simple was 26.9%, while the export share of complex/simple was 47.3%, and the export share of complex/complex was 25.8% in 1975. On the other hand, while the export share of simple/simple had changed to 6.8%. The export share of com-plex/simple had changed to 8.0%. The export share of complex/complex had increased to 85.2% in 1995. 3.2. Industrial Policy and Industrialization In the background of such a successful industrialization, the role of the Korean govern-ment was very important. It is thus worthwhile to make a remark about the industrial policy pursued by the Korean government. Over the last four decades, the industrial pol-icy includes mainly (i) industrial development, (ii) constructing industrial complex, (iii) industrial technology development, and (iv) fostering technology start-ups.

In 1962, the government made and implemented the first 5-year economic development plan. When the government pursued economic development, it appeared that the leaders of the government had such a vision that Korea should be one of advanced industria-lized countries in the future. Therefore, they already considered development of heavy chemical industry. However, due to deficiency of investment fund, industrial develop-ment started with development of the light industries, by which the foreign exchange


could be earned for investment in heavy chemical industry. In the early 1960s, therefore, the priority was given to the increase in exports to secure the foreign exchange. At the beginning, the government focused on development industries such as fertilizer, cement, plywood and textile. Various export-promotion policies were implemented such as export grant issue (September 18, 1961), export performance link system (January 5, 1963), export promotion measures (June 24, 1964), export promotion fund operation system (September 16, 1964). In 1970s, the government pursued industrial policies fo-cusing on development of heavy chemical industry to create the key industrial founda-tion of national economy. The Korean government started to make ambitious invest-ment in the heavy industrial sector.11) Such export-drive policy intentionally made re-source allocation in favor of a few entrepreneurial families, who grew to ‘Chaebols’ lat-er on. As export grew rapidly in 1960s, the Korean government actively engaged in investing and developing heavy chemical industry. Such a policy was spurred by the successful completion of the first stage of POSCO, the steel plant. The long-term plan for devel-opment of heavy chemical industry, including six key industries such as steel, non-ferrous metal, automotive, machinery, ship-building, electronics and chemicals was made. Such the long-term plan played an important role to finance the investment. The technical aids of UN had changed from fragmented aids to technical cooperation ac-cording to the long-term development plan, enabling large scale investment. In 1980s, the government recognized the limit of economic growth through catch-up strategy during 1960s∼1970s, and competitiveness and advancement of industrial structure through reinforcement of technological innovation were required. However, large-scale investment in heavy chemical industry area in 1970s began to cause after-math. In particular, as the large-scale production facilities and equipments were intro-duced and installed without proper plans, sufficient opportunities were not accumulated for utilization and acquisition of technology. Thus, rationalization plan of industry in 1981 was pursued, and serious adjustment of industries was enforced strongly by the authoritarian government. Nonetheless the economic difficulties of the first half of the 1980s, the government was able to manage the inflation rate with stability. In the second half of the decade, the world economy was in a boom with ‘three low’s’, and it gave an opportunity for the heavy chemical industry in Korea to make a strong founda-tion.

11) The government plan for the development of heavy chemical industry was not accredited by the foreign experts and

investors at that time, but eventually approved.


With the end of the Cold War in early 1990, economic and technological competitive-ness became more important, relative to the military power. A trend was observed that the industry had increasingly changed to knowledge-intensive structure in advanced countries. Technology protectionism became strengthened, since technology is consi-dered as a key factor to determine the industrial competitiveness. Accordingly, the Ko-rean government adopted the technology-drive policy and fostered S&T-based innova-tion. On the other hand, the government had constructed the industrial complex continuously throughout the country for the efficient use of land. It was effective to develop industry because industrial infrastructure was not sufficient elsewhere. Some of the industrial complex had grown as a competitive cluster in the world market. For example, there are Ulsan cluster for automotive and ship-building industries; Changwon cluster for machi-nery industry, and Suwon cluster for semi-conductor industry, etc. The government also pursued actively policies for the industrial technology develop-ment since 1990, by implementing technology foresight and making long-term plans. Such a policy was undertaken by the Ministry of Industry. Technology is recognized as policy area by the plural ministries of the government since then. In the end of 1990s, as the STI capacity of the innovation units such as firms, GRIs and universities grew and business environment improved for the technology start-ups on the other, the government implemented strong policy to foster the technology start-ups, in order to put the economy back on the track after the foreign exchange crisis in 1997. Many technology start-ups made successes and in time became large-scale enterprises; particularly in the IT area. Indeed, the IT revolution in 1990s had brought a window of opportunity to Korea, and the Korean economy was able to jump to a higher dimension, through heavy investment in the IT area. All in all, Korea has risen to an advanced economy through industrialization only over last four decades. There must be many factors to influence the course of such industria-lization; such as, for example, entrepreneurship, political leadership, human resources, and S&T capacity, among others. It is true that industrialization increased and expanded needs for science and technology. Without S&T development, industrialization would be constrained by technology transfer from advanced country, since technology protec-tionism expanded and deepened over time.


| Chapter 4 | S&T Policy and Advancement of

National Innovation System 4.1. Trends of R&D Investment and HRST R&D investment12) was 233.3 billion won in 1970 at the constant price. Over the period of 1970~2010, R&D investment increased 13.7% on annual average, and reached 38,982.0 billion won 2010.13) This increase rate far exceeded the annual growth rate of GDP, 7.3% over the same period. R&D activity in Korea appeared to be undertaken firstly in the public sector when the first 5-year economic development plan started in 1962. At the early stage of the eco-nomic development, the Korean government pursued the development of light industry for import substitution. Accordingly, R&D in this period focused on the adaptation and improvement of imported (production) technology and securing the required manpower. In table 2, the share of R&D investment of the government accounted for 70.3 per cent out of total R&D investment, while that of the private sector for 29.7 per cent. It implies that the R&D activity in Korea was initiated and led by the government at the early stage of economic development. It can be said that the government made R&D platform in 1960s and 1970s by establishing GRI system. The government also started to launch national R&D program since 1982. However, the government share continued to fall down, and in 1982 the share of the private sector exceeded that of the government. Due to the investment in heavy chemi-cal industry in late 1970s, the private enterprises began to build up technological capaci-ty by making investment in R&D. The rapid growth of heavy chemical industries in the second half of 1980s changed the industrial structure to technology-intensive structure. It increased explosively needs for and investment in R&D. The government had pro-vided various support policy for R&D in the private sector.

12) Korea R&D investment was determined with “the first 5-year economic development plan”. While R&D investment

statistics from 1963 appeared in existing data, it was not that systematic survey like the present one. It was in the middle of 1980s when R&D index were developed according to Frascati Manual of OECD, which allowed interna-tional comparison.

13) R&D investment in Table 3 is shown at the current prices.

Chapter 4. S&T Policy and Advancement of National Innovation System 27

<Table 2> Major R&D Indicators

GERD

(billion won)

R&D Exp. By Sources (%) Government R&D Budget (billion won)

Researchers (FTE, person)Government Private

1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

10.5 10.7 12.0 15.6 38.2 42.7 96.9

144.2 183.6 219.4 282.5 368.8 533.1 682.2 907.2

1,237.1 1,606.9 1,985.2 2,425.2 2,817.3 3,349.9 4,158.4 4,989.0 6,153.0 7,894.7 9,440.6

10,878.1 12,185.8 11,336.6 11,921.8 13,848.5 16,110.5 17,325.1 19,068.7 22,185.3 24,155.4 27,345.7 31,301.4 34,499.0 37,929.0 43,854.8

70.3 68.3 66.2 53.4 46.5 66.7 64.3 47.3 48.4 52.5 49.8 53.5 49.4 33.7 27.0 24.6 23.2 24.6 21.3 20.4 19.4 19.4 17.2 16.7 15.9 18.9 22.1 23.4 26.9 26.9 24.9 26.0 26.3 24.5 24.5 24.0 24.0 26.0 26.8 28.7 28.0

29.7 31.7 33.8 46.6 53.5 33.3 35.7 52.7 51.6 47.5 50.2 46.5 50.6 66.3 73.0 75.4 76.8 75.4 78.7 79.6 80.6 80.6 82.8 83.3 84.1 81.1 77.9 76.6 73.1 73.1 75.1 74.0 73.7 75.5 75.5 76.0 76.0 74.0 72.9 71.1 72.0

9.6 11.5 10.6 13.1 12.9 30.5 66.8 80.3 87.1

133.6 168.9 211.2 230.4 251.5 274.0 345.6 368.4 458.1 501.1 552.5 726.4 794.5 962.0

1,159.1 1,476.2 1,984.7 2,379.7 2,994.1 2,937.6 3,275.8 3,748.0 4,484.3 5,158.9 5,578.0 6,096.5 6,737.9 7,234.2 8,138.9 9,346.7

10,630.0 11,959,6

5,628 5,320 5,599 6,065 6,314

10,275 11,661 12,771 14,749 15,711 18,434 20,718 28,448 32,117 37,103 41,473 47,042 52,783 56,545 66,220 70,503 73,275 85,268 93,680 89,018

100,456 99,433

102,660 92,541

100,210 108,370 136,337 141,917 151,254 156,220 179,812 199,990 221,928 236,137 244,077 264,118

Note: GERD denotes gross expenditure in R&D; and R&D expenditures are in current prices.

In 1990s, Korea firstly introduced S&T foresight activity to produce strategic informa-tion about science and technology. S&T foresight activity quickly disseminated over various sectors. S&T foresight made it possible to formulate the strategic R&D pro-grams in a large scale. On the other hand, the private sector and government observed the paradigm shift in technological innovation started from the IT area. Such recogni-tion of both the government and private sector increased R&D investment, particularly


in IT area. Such trends of R&D investment continued in 2000s. The government in-creased considerably R&D investment in order to identify technologies for the next generation growth engines. In terms of government R&D budget, it was 9.6 billion won (current prices) in 1970 and 0.35 per cent of GDP. In 2010, government R&D budget increased to 11,959.6 billion won and 0.91 per cent of GDP. It can be observed in Table 2 that government R&D budget it is increased rapidly after 1990. Such increase in R&D budget was considered to be quite appropriate to cope with drastic change of S&T environment, observing IT revolution. After implementation of the first 5-year economic development plan, the government considered how to secure scientists. The establishment of KIST in 1966 made it possi-ble to recruit scientists and engineers abroad, but limited as a research institute. Thus, the government decided to establish the educational institution for cultivation of scien-tists and engineers, by which KAIST (Korean Advanced Institute of Science and Tech-nology) was established in 1971. The purpose of establishment of KAIST was to culti-vate high-qualified scientific/technical personnel who could support industrialization pursued by the economic development plans. KAIST was inaugurated as the special graduate school in natural science and engineering, first in Korea. The number of research personnel (FTE)14) was 5,628 persons in 1970, and increased to 264,118 persons in 2010; increased about 47 times as much for last 40 years. Out of to-tal number of research personnel in 2010, 54.4 per cent are employed by enterprises, 37.6 per cent in universities, and 8.0% in GRIs. In addition, the government implements various policies and programs to connect and network the research personnel abroad, either foreigners or Korean. Such policies promote exchange and flow of knowledge globally. More detail will be discussed later. In summary, Korea had increased significantly innovation inputs such as R&D invest-ment and personnel in the process of economic development. Such significant increase in innovation inputs might be influenced by formulation of strategic national R&D pro-gram and improvement of transparency of resource allocation in the public sector. Since S&T foresight had been introduced in mid 1990s, Korea was able to produce own stra-tegic information about science and technology, based on which government could for-mulate large-scale national R&D programs in a rational way as well as build up consen-sus among various stakeholders. S&T foresight improved the government capability for

14) FTE denotes full-time equivalent.


S&T planning, simply speaking. On the other hand, the government had constantly made an effort to improve the S&T governance, or decision-making process, which has led to the increase in transparency of resource allocation. The improvement of S&T go-vernance has been reinforced by the development of the evaluation system for the pub-lic R&D. In retrospect, ambitious policies and programs implemented by the govern-ment improved S&T environment and stimulated the business R&D investment and cul-tivation of technology start-ups. Government policies for S&T development will be dis-cussed below in detail. 4.2. S&T Policy and Build-Up of S&T Capacity 4.2.1. Creation of platform: 1960s~1970s In 1966, KIST was established as the first GRI, which was the start point of the modern R&D in Korea. US played an important role in the process of KIST establishment, fi-nancially and schematically. KIST claimed to intensively pursue industrial technology research activities, contributing to the economic development of Korea. The government created MOST (Ministry of Science and Technology) on April 21, 1967 following establishment of KIST. In 1967, MOST firstly made the long-term science and technology plan (1967~86) as the priority project to present the direction of S&T development. MOST planned 20-year long-term scientific/technical personnel supply system required for economic development, and also MOST pursued the policy to encourage the return of Korean scientists abroad. In 1970s, S&T policy had shared the recognition and commitment of the government focusing on heavy chemical industry in the longer term. The government took proactive actions for S&T development including establishment of GRIs that would take the role of technological medium for heavy chemical industry in this period. On the other hand, the government in 1970s had run “Comprehensive Science and Technology Commis-sion (CSTC), chaired by the President, for promotion of science and technology, coor-dination of tasks between related ministries and deliberation of international cooperation with advanced countries. On the other hand, the government decided to construct a research complex for GRIs, with expecting a synergy effect if clustered. In 1973, the plan of the research park was presented in the Daedeok area (27.8 km2). In order to newly create GRIs in Daedeok


Research Park, the government enacted “Act on Development of Specialty Research Institute” (1973). To support technological development of 6 major industries, the gov-ernment established Korea Research Institute of Standards and Science (KRISS) in 1975, Korea Ship Research Institute in 1976, Korea Electro-technology Research Insti-tute, Korea Machine Test Institute, Korea Research Institute of Chemical Technology, Korea Radioactive Waste Corporation, Korea Resource Development Research Institute, Korea Electric Device Test Institute, Korea Communication Technology Research Cen-ter in 1977, and Korea Institute of Energy Research, among others Various laws and promotion policies were made and implemented, for establishment of national S&T basic system and development of its platform. For example, the govern-ment enacted “Science and Technology Promotion Act” (1967) and amended in 1972, “Technology Service Fostering Act,” “National Investment Fund Act” (1973), “Act on Development of Specialty Research Institute” (1974), “Technology Development Pro-motion Act” (1977), and “Venture Capital for Technology Start-ups” (1978), etc. 4.2.2. Expansion and Deepening: 1980s~1990s In 1980s, the national R&D system was reformed and rearranged for effective promo-tion of technology-drive policy. In 1982, national R&D projects firstly launched to in-tensively develop core strategic technology. The project was supplemented and ex-panded in a response to the diversification of national and social needs for science and technology as well as changes in domestic and foreign environment surrounding science and technology. From 1982 to 1991, a total of 964.2 billion won was invested for spe-cific R&D project including 573 billion won by government and 391.2 billion won by the private sector. A total of 5,415 cases of research projects were conducted and achieved considerable performances. In 1980s, domestic enterprises started to create own R&D organizations, as the heavy chemical industries were growing. The government provided various support policies to foster the corporate R&D. The private R&D expenditure surpassed that of the public sector in 1982, and ever since the private sector has led domestic R&D activity. In 1980s, rapid increase of R&D investment in private sectors could be found in the back-ground of fast industrialization and government support. On the other hand, as the gov-ernment enacted “Basic Science and Research Promotion Act” in 1989, universities be-came visualized as an actor of science, technology and innovation, but they were in the incubation stage.


In 1990s, as the private sector led national R&D activities and therefore the importance of private R&D activities increased, government policy placed an emphasis on rein-forcement of technology innovation capacity of private enterprises and advancement of the support system for technology development. It eventually changed to creative inno-vation, beyond the imitation strategy of depending on the overseas source of science and technology. Amid the trend of changes in such policy, national R&D projects were promoted in full scale. Basic research for creative R&D activities and high-class per-sonnel training programs were also promoted. In mid 1990s, the government firstly formulated the national R&D project, HAN project, with plural ministries being partici-pated. Thereafter, technology foresight was regularly undertaken, including large-scale Delphi and many other activities. Such a strategic approach to S&T development made it possible after all to increase government R&D budget continuously in late 1990s. This improved STI environment of the economy, and enterprises also increased R&D investment substantially during the period. In 1999, private-military technology devel-opment projects started using R&D resources in the national defense area as well as pri-vate sectors. Since the second half of 1990s, the government changed its policy for R&D funding from the institutional base to the program base. After the middle of 1980s, the government newly created GRIs or reorganized, and then the increased number of GRIs expanded GRI system. In 1980s, many national R&D project launched and were undertaken by various GRIs. GRIs successfully completed major projects such as 4M D RAM, TDX, Korean standard nuclear reactor, KISTAT-A (satellite), CDMA, and FACTIVE (new drug), among others. R&D projects of GRIs and large enterprises (Samsung, LG, Hyundai, etc.) had developed the source technolo-gy beyond the imitation strategy, emphasizing the creativity for leading the future in-dustry. In 1990s, on the other hand, the government programs were implemented to support university research, and subsequently the universities were able to participate in national R&D projects. Excellent research center (SRC and ERC) projects were carried out to organize research personnel scattered through universities for each specific area. Sup-port policies of university research institute had been actively implemented ever since. The government enacted the “Special Act for Science and Technology Innovation” in l 1997; established the second 5-year industrial technology development plan in 1999 and tried systematization of technology infrastructure and technology expansion projects through this plan. Long-term vision for science and technology development toward 2025 was established in 1999.


MOST reinforced S&T policy increasingly. As more ministries engaged in R&D by in-creasing R&D budget, the government created and operated the National Science and Technology Committee (NSTC), which chaired by the president, to improve effective-ness of resource allocation in science and technology. It was the period of 1990s when the government pursued strategically national R&D projects with the continuous increase in R&D investment. Each ministry established the R&D management organizations for efficient planning and evaluation, and also the government improved the STI governance of the public sector to increase transparency of resource allocation. On the other hand, technology foresight (TF) using various me-thods and the evaluation system were implemented and improved more. Such improve-ment and TF exercise raised transparency in resource allocation and in turn made it possible to increase R&D investment in the public sector. 4.2.3. Toward Efficient Innovation System : 2000s and after As the national innovation system was being developed, the government implemented various innovation policies. Particularly, S&T governance was readjusted to reinforce S&T policies. Turning into the 21st century, science and technology became an impor-tant domain of the government policy, as major socio-economic issues have S&T com-ponents as either cause or cure. STI in the knowledge-based economy has become a critical factor for wide-ranging issues from global issues such as climate change, foods, and energy, etc. to domestic issues such as job creation, industrialization, social welfare and national security, etc. In such recognition, many ministries of the government have paid attention to S&T policy, and undertook R&D projects in their own areas. Therefore, needs for a coordination mechanism was increased across the related ministries. In this line, the government made a major change in the S&T governance in 2004. Main changes were as follows: (i) promoted the S&T minister to the deputy-prime minister and deputy chairman of NSTC; (ii) created the Office of Science and Technology Inno-vation as a secretariat to NSTC; (iii) NSTC was responsible for coordination of national R&D budget; and so on.15) To make new governance workable, improvement of the planning and evaluation sys-tem were made for the national R&D projects and S&T policy. In 2001, the government already enacted “Basic Act on Science and Technology,” based on which the govern-

15) This system continued during the incumbent government, but as new government was established in 2008, MOST

was merged into the Ministry of Education. There was a controversy in removing the control tower of the science and technology community.


ment had to make 5-year S&T Basic Plan every five year. The 5-year plan is approved by NSTC, and then each ministry can make its own action plan on yearly base in accor-dance with the 5-year plan.16) For example, the first and second Science and Technology Basic Plan was made and implemented.17) The evaluation system, which is operated by the secretariat to NSTC, collects and analyzes data of all public R&D’s. Then, NSTC makes use of the evaluation results for coordination of R&D budget in next year. Some other plans made by the government were “Comprehensive Basic Research Promotion Plan (2006~2010)” in 2005, “Space Development Mid- and Long-Term Basic Plan (2006~2010),” based on “Space Development Promotion Act.” The government also pursued policy for securing creative HRST in 2008. Strategic government R&D became large-scale increasingly, focusing on the frontier technologies and/or critical technologies determining industrial competitiveness. “New Growth Engine Project” was undertaken to identify technologies for sustainable growth of the national economy. In 2003, the government identified technologies for top 10 next-generation growth engines such as intelligent robot, future car, next generation semi-conductor, digital TV and broadcasting, mobile communication, display, intelli-gent home network, digital contents, S/W solution, battery of next generation, new bio medicine and organs. “Global Frontier Projects” started in 2010, in which each project can be funded on average about 100 billion won over 10 years. The government implemented policy for the balanced regional development, based on S&T innovation. It pursued the policy of cultivating the local universities as the core entities of regional development, regional science complex and regional innovation cluster, and reinforcing cooperation and linkage between universities, industry and re-search centers. It also pursued various projects in full scale with introduction of the con-cept of regional innovation system (RIS). Meanwhile, international cooperation and globalization of science and technology was strengthened for promotion of S&T coop-eration with major countries in partnership, participation in solution of global problems, and effective mobilization and utilization of overseas S&T resources. On the other hand, major industries was able to have an influence to some degree in the world market, such as TV, semi-conductor, mobile phones, ship-building, automobiles and others. To secure strong competitiveness, the private enterprises in those industries recognized that the development of advanced technologies is critical and hence in-

16) In 2002, the government carried out technology foresight to make “National Technology Road Maps” (NTRMs) in-

cluding 99 strategic technologies and future science with S&T vision in 10 years. NTRMs was an important refer-ence for the priority setting among government R&D projects.

17) The first and second plan were made for the period of 2002~2006 and 2007~2011, respectively.


creased R&D investment substantially. It appears that the government R&D has a com-plementary effect on the private R&D (T. Shin 2004). In summary, over the time period, the government policy pursued development of effi-cient national innovation system, with increasing R&D investment and securing man-power in science and technology. In so doing, the government created the GRI system strategically and built up R&D capacity. Later, the government also fostered to build R&D capacity of universities. Once R&D capacity had developed to some extent, the government made an effort to increase the efficiency of national innovation system and to create improved environment which was technological innovation friendly. It would be said that the government policy had been consistent over time from the start of build-ing STI capacity to setting the national innovation system. In this course, double-winged development strategy of the government played a critical role, i.e., promotion of industrialization and creation of GRI system. 4.3. HRST Policy 4.3.1. Demand for HRST18) The demand for scientific/technical personnel increased in response to the course of economic development in 1960s and 1970s. Technical personnel was more demanded for development of light industry in 1960s, while scientists and field engineers were more demanded for the development of heavy chemical industry in 1970s. In 1980s, with fast Industrialization, demand for scientific and technical personnel with professionalism increased considerably. Basic direction of S&T policy in 1990s focused on improvement of S&T competitiveness by investing greater resources. The increase in R&D investment increased demand for R&D personnel. In 2000s, the demand for high-qualified manpower increased quantitatively and qualitatively that suited the structure of new knowledge-based economy.

18) The HRST can be divided into 3 types: First, the scientists and engineers who are also scholars and professionals

with creative activities; Second, the field engineers who are engaged in production technology activities; Third, the technicians who are engaged in functional activities.


4.3.2. Historical Perspectives of HRST Policy In 1960s, the government began to engage in industrialization and economic develop-ment in full scale. The institutional system was formed from the aspects of scientif-ic/technical personnel policy, which was pursued in consideration of manpower supply to support economic development. The government policy focused on securing of tech-nicians for development of light industry through expansion of vocational schools. Vo-cational education promotion policy in 1960s was implemented with enactment of voca-tional high school curriculum in 1963. In 1970s, HRST policy was pursued in accordance to economic development strategy and development of heavy chemical industry. The HRST policy emphasized to specify the educational institutions and to supply three types of manpower such as scientists, field engineers and technicians to the industrial area. It is noted that KAIST was estab-lished in 1971 for development of HRST and the invitation of overseas scientists. The “National Technical Qualifications Act” was enacted in 1973 to link the contents of education and training with the technical capability required by the industry. In 1980s, the government focused on development of the heavy chemical industry and securing the technological capability for it. Therefore, HRST policy changed to cultiva-tion of the scientific and technical personnel at the university level. In 1980s the de-mand for scientific and technical personnel increased substantially according to fast in-dustrialization. In 1990s, the HRST supply policy placed an emphasis on cultivation of scientific and technical personnel in the university. The government increased the quota of the natural science and engineering departments in the university. University was encouraged the specialization and functional separation in the education and research. Rapid growth of the graduate school was the most remarkable in higher education policy in 1990s. In 2000s, the government more focused on the balance of supply of and demand for master and doctoral graduates in high-tech industry. The government made the basic plan for cultivation of scientists and engineers with the cooperation across ministries. The government support was also expanded to create the conditions for effective utiliza-tion and training of high-qualification personnel, as innovation-led growth strategy is increasingly required in the knowledge-based economy.


On the hand, WISE (Women in Science and Engineering) project, executed as pilot project in 2002, launched to cultivate and support women scientific/technical personnel. The project included (i) quota employment system for women scientists and female pro-fessor appointment system, (ii) women scientist support project, (iii) scholarship to women students in natural science and engineering, (iv) project to support leading uni-versities of engineering education for female students, (v) WATCH21 project, and (vi) installation and operation of national women scientist support center (NIS-WIST). 4.3.3. Major HRST Policies

(1) Establishment of HRST Training and Supply System Korea aimed to improve the S&T level by securing HRST required to achieve the first 5-year economic development plan. The goal of the employment ratio of engineers, technician and skilled workers was set to be 1:5:25 during the period of the first 5-year plan. To achieve the goal, it is required (i) to estimate the requirement and available quantity of technical personnel according to the value in human resource examination report in 1961, (ii) to improve the technology level, supply of and demand for engineers, technician and skilled workers for the target year, and (iii) to establish the first 5-year technology promotion plan. In particular, with a focus on securing of technicians for development of light industry, the industrial education and vocational training system was established for quantitative expansion and qualitative improvement. Such policy direction continued in subsequent plans, and the second 5-year plan stipu-lated policy for quantitative expansion and qualitative improvement of industrial high. From the third 5-year plan, the system was reorganized by converting the industrial high school to 2-year college. In addition, the government had expanded the public vocation-al training with overseas aids and government investment, mandated the in-house voca-tional training at the firm with the size of over 300 employees, and introduced the sys-tem to increase the accredited vocational training of corporation type. In 1975, National Technical Qualifications Act was enacted, which generalized, classified and systema-tized various qualification licenses according to the demand pattern of industrial tech-nology. In addition, national qualification and certification was mandated to graduates from universities in natural science and engineering, industrial university, graduates from industrial high school and those who completed the vocational training courses.


(2) Utilization of HRST Abroad Korea began to bring in scientists and technologists, who went abroad to study, by im-plementing the overseas HRST invitation policy in order to fill up the required HRST in 1960s. Overseas Korean HRST invitation project targeted on the professionals with over 2 years of experience in the related areas after obtaining Ph.D. degree in foreign countries. It is divided into 2 types such as permanent invitation for over 2 years, and the temporary invitations for short-term lecture or consulting. Government arranged and provided job opportunity and information to overseas scien-tists as well as administrative and financial supports. Due to successful case of overseas brain invitation in the public sectors, the private enterprises began utilization of over-seas HRST invitation actively since 1980s.

(3) Utilization of Overseas HRST : Construction of Diaspora Network Offline Network Overseas Scientists & Engineers Association consists of overseas Korean scientists and engineers located in 12 countries; USA, Germany, UK, France, Japan, Canada, China, Australia, Russia, Kazakhstan, Uzbekistan, and Austria. Korean Federation of Science and Technology Societies (KOFST) plays a central role to support and cultivate overseas scientists and engineers association. It supported for joint academic workshop, symposium and academic workshop between overseas scientists and engineers association as well as mutual information exchange through publication of bulletins, general survey and joint research. Global Convention of Ethnic Korean Scientists and Engineers is held at the interval of 1 or 2 years since first event in 1974. The network was made to improve S&T capability through exchange and cooperation between Korean scientists and engineers throughout the world. It has made a contribution to globalization of science and technology as well as domestic S&T development. Online Network Global Network of Korean Scientists and Engineers (KOSEN) is the cyber network for forming the community and exchange of information of Korean scientists and technolo-


gists. It started in 1999 and operated by KISTI (Korea Institute of Science and Technol-ogy Information). This network was constructed to reinforce the link between Korean scientists and engineers, to support excellent scientific and technical personnel, and to provide the information of science and technology portal nature, rather than simple manpower network. KOSEN distributes information on jobs at home and abroad, hold meetings through cyber café, exchange information and knowledge among members through electronic boards and discussion room on online for scientists and engineers at home and abroad. In sum, in order to secure HRST, Korea firstly established GRI and invited Korean scientists abroad. Later, the establishment of KAIST made it possible not only to culti-vate scientists and engineers, but also to secure more high-qualified scientists from abroad. On the other, in the process of industrialization, vocational schools were estab-lished to meet the demand of industry for technicians.

Chapter 5. Conclusion 39

| Chapter 5 | Conclusion So far, we have discussed the dynamic structure of Korean innovation system in consid-eration of theory of national innovation system, and the government policies focusing the process of building STI capacity in the course of industrialization. It cannot be over-emphasized that the development of national innovation system was initiated and driven by the government. The Korean government made two major decisions for it such as the development of import-substitution industry and creation the GRI system. In the process of development of national innovation system from the start of building S&T capacity to an advanced system, double-winged strategy of the government had played a critical role, that is, promotion of industrialization and S&T development. At the start of the economic development plan, it appears that the government already considered the development of heavy chemical industry, which would be impossible without the S&T development. The six industries were strategically selected on the one hand, and the plan was made in order to cope with technological issues emerging with the development of heavy chemical industry on the other. In mid 1990s, due to such government policies among others, the industrial structure turned to be technology-intensive structure. Major exporters were automobile, computers, electronics, telecom-munication equipments, ship-building and petroleum products, etc. By such industriali-zation, the needs for science and technology increased rapidly. On the other hand, the government decided to make the GRI in order to meet the pending needs for science and technology, created/increased by the industrial development. KIST was the first one, which spun off into many specialty research institute in the S&T area. Those GRIs formed eventually the GRI system, which played an important role in the process of building S&T capacity. Due to industrialization and establishment of GRI system, R&D investment and personnel increased rapidly and played an important role to build R&D capacity. Conventionally, the theory of national innovation system has a root in the advanced economy whose STI capacity has built up for several centuries. Therefore, the theory has been developed to explain innovation, looking into the interaction and knowledge flow between innovation units given the system. Most studies on national innovation system focus on interaction of firms, universities and research institutes, flows of know-ledge, learning, networking, public/private partnership, and clusters, etc.


However, if we would take account of the dynamic process of build-up of STI capacity in the theory of national innovation system, it could enrich the analysis of innovation and policy implications. In this sense, we considered the national innovation system as continuity from the start of capacity building. Then, there would be a developed, devel-oping or underdeveloped innovation system. If it is a developing or underdeveloped one, for example, innovation policy might place priority onto building STI capacity of the units in the national innovation system, rather than implementing fashionable policies in advanced countries. As an empirical example, we made an investigation of Korean in-novation system and discussed the role of government in the process of development of national innovation system. On the final note, this study has a large room for further development, and exhibits the limitation of the theoretical framework for the dynamic analysis for national innovation system. Such will be remained for future studies.

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Authors

ㆍTaeyoung ShinㅣSenior Research Fellow STEPIㅣ

ㆍSungjoo Hongㅣ Associate Research Fellow STEPIㅣ

ㆍJuyoun KangㅣResearcher STEPIㅣ

: : Policy Reference 2012-01

Korea’s Strategy for Development of STI Capacity :

A Historical Perspective

2012년 3월 일 인쇄

2012년 3월 일 발행

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Korea's Strategy for Development of STI Capacity

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