An Institutional Perspective
Chapter 4: The Korean Economy: Transition to a Knowledge-based Economy
4.1 INTRODUCTION Another facet of the transition of the Korean economy is its development toward a knowledge-based economy (KBE), which this chapter examines. Caught between rapidly developing, export-oriented neighbouring countries, and in particular China and the technologically advanced countries of the West, as well as Japan, Korea has been forced to replace the export-led industrialization strategy of its past and seek a new strategy for economic growth. Another important imperative for Korea's move to a KBE is its demographic decline and rapid population ageirtg, which will quickly erode Korea's traditional comparative advantage in high-quality, low-cost workers. Recognizing both the increasing importance of knowledge-based industries and the structural weaknesses of the Korean economy, the government released in January 2000 a proposal for a three-year plan to serve as a blueprint for Korea's transformation into a KBE (Pai et al. 2003). Since then, Korea has been active in promoting various aspects of the KBE, whilst not neglecting others (Dahlman and Andersson 2000: 31). Yuen and Griffy-Brown (2001) argue that economic growth in advanced countries is now predicated on the success of a knowledge-based economic development strategy and point out that knowledge-based sectors have been attracting high resources in all leading OECD economies. The OECD (1996: 9) estimated that more than half of GDP in the advanced OECD economies is knowledge-based. In this, Korea is not an exception. For instance, Korea's R&D as a percentage of its GDP was 3 per cent in 2005, the fifth-highest among OECD countries, compared to an...
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