New Horizons in the Economics of Innovation series
Edited by Bengt-Åke Lundvall, Patarapong Intarakumnerd and Jan Vang
Chapter 8: Performance and Sources of Industrial Innovation in Korea's Innovation System
8. Performance and sources of industrial innovation in Korea’s innovation system Kong-Rae Lee INTRODUCTION Nine years have passed since Korea experienced the economic crisis in 1997. Korea’s industry still maintained competitive advantage in international markets in spite of economic adversity imposed by a crisis-ridden ﬁnancial environment. Advantage has been possible due to the continuous innovations within ﬁrms introducing new products and services. Korean ﬁrms have striven to strengthen the technological capability that enables them to improve the quality of products and innovate new products and processes. Those ﬁrms that gained competitive advantage have showed advancements in their technological capabilities. A study of ﬁrm-level innovation reported that Korean ﬁrms showed aggressive learning activities in order to catch up with advanced technologies and create new products and services in industries after the 1997 economic crisis (World Bank, 2002). It was also found that Korean ﬁrms currently put emphasis on manufacturing, process innovation and system integration. At the same time, they are eagerly attempting to move ‘upstream’ toward research and development and ‘down-stream’ towards distribution, marketing and brand-value development which usually require considerable investment. This shift indicates that there has been a transition of the Korean economy from a simple manufacturing-led economy to a more knowledgeintensive and service-intensive economy. It also implies that the technological development of Korea’s industry is evolving from an imitation stage to an innovation stage. In this transition period, creative learning of technological knowledge is essential for ﬁrms wishing to move further upstream from their base in manufacturing towards...
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