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#Innovation#, ‘Borrowed Innovation’ of Korea.

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Erick, Online English teacher at Acadsoc and experienced business counsellor.

Erick, Online English teacher at Acadsoc and experienced business counsellor.

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Innovation plays a crucial role in business nowadays, as we all admit. New technologies developed in many territories soon change the outlook of our market and help human beings approach the 4th industrial revolution/the era of Artificial Intelligence. 10 years ago, who could imagine that we can now go through customs and security check by using our face instead of fingerprint or dozens of paperwork? Or, who could even imagine robots conducting classes to students instead of human teachers?

Apparently, not all countries in the world have caught up with the trend, particularly the undeveloped ones. Many third world countries are still looking for economic aid or busy on handling other problems such as politics, war, terrorism…However, the paths to an innovative/creative economy, as a goal set for many developed and quickly uprising economic entities, are different in every single country.

South Korea, as one of the most developed countries in Asia, was once a target to pursue for her neighbours, such as Taiwan, mainland China, Vietnam.  ‘Miracle on the Han River’ back in the 1970s and 1980s set a good model for many developing countries, to imitate Korean mode in economic development when chasing the west. Companies such as Samsung and Hyundai have impressed the entire world a lot by their perfect performance in innovation, quality and price of products.

In a report published by Business Insider listing the most innovative countries in 2016, Republic of Korea ranked 11th, higher than Japan (14th), as her primary competitor in East Asia. However, it depends on how you define innovation: Innovation must be a brand new technology or it can be some further development of an imported technology? Luckily, Korean chaebols benefited a lot from ‘borrowed innovation’, which means to develop a better technology based on imported ones, by the acquisition of other companies from the US and Japan. Unfortunately, ‘borrowed innovation’ becomes a comfort zone for SK, a chronic poison to make big companies highly rely on.

‘Why we don’t have even 1 noble prize winner when Japan has 21 of them?’, it is a very common question among Korean. Ironically, their students perform better than Japanese students in problem-solving skills in PISA (Program for International Student Assessment) held by OCED in 2012 and 2015. What’s more, the proportion of R&D spending out of GDP has reached 4% in Korea by 2012, the highest among 34 OCED members. In my opinion, it indicates the deformation of innovation in Korea, when focusing too much on commercialised technology and ignoring basic science research, focusing too much on the improvement of existed staff instead of encouraging to challenge brand new things.

In the past, Korean government used to invest a lot in R&D, claiming it a national policy to rely their economic growth on technology research and development since the late 1980s. However, the direction of R&D in SK is kind of deformed after taken over by companies funding (Companies contribute 75% of R&D spending), which focus mostly on the improvement of imported and existed technology instead of researching from the very foundation in a territory. I would prefer to describe it as ‘borrowed innovation’ because scientists and researchers are good at absorbing the innovative result from other countries and then further improve it for commercialization. Samsung DRAMSuch strategy contributes a lot to the take-off of the South Korean economy after the 1990s, when their autos (Hyundai and KIA) and electronic products (Samsung) were ‘invading’ the US and Europe market. For instance, Samsung Electronics relied heavily on external technologies from Japan and USA to develop their DRAM chipsets, which is one of their trump cards in the market. Their 64K DRAM design technology was originally from Micron Technology and Zytrex (United States), and wafer process technology from Sharp (Japan)[1].

As discussed above, in recent few years, South Korean public spending on R&D only occupied 1/4 in total spending while companies took over the rest 3/4. But the issue is, most of the projects that backed by large companies focus mainly on Applied Science. Like in the case of Samsung DRAM, they would not initialize a research from very fundamental technologies of semiconductor (physics, chemical, material…) but prefer to import relatively proven technology. Companies, unlike the government, are more willing to chase profit and anything that can turn into profit shortly. Further develop and amend mature technology is, apparently, a shortcut to new products and sales compared with doing researches started from very basic levels. And the risk of basic science research is not affordable for most private companies because it is nearly impossible to predict the result and takes too long to see a fruit.

Samsung acquisitions‘Borrowed Innovation’ worked pretty well in the past, especially before 2008 economic crisis. However, facing the new era of the 4th industrial revolution and deeper globalization, borrowed innovation is gradually moving to a dead end. Unlike China or USA, newly founded innovative companies are hard to find in South Korea. While monopolists such as Samsung and Hyundai are taking too much market share and leading the direction of R&D, new enterers may either follow their direction or, be eliminated due to lack of funding. Or as concluded by Industry watchers, there is a lack of “blue sky innovation”[2], where small but energetic companies show up and challenge the traditional position of giants. Companies, especially supersize companies all face the same problem, inefficiency, bureaucracy, and corruption/financial crime. If one day, Samsung loses its competition power internationally due to the wrong direction in R&D, it will not only affect Samsung itself but destroy thousands of downstream and upstream contractors with Samsung in South Korea, like a disastrous earthquake. That sounds like a conspiracy theory, but back in the 1990s, only a few people agreed that Nokia and Motorola would fall and lose the battle. Clearly, South Korean government and scientists realized the risk to put all eggs in one basket and over-focus on Applied Science.

In 2011, the South Korean government determined to set up Institute of Basic Science (IBS). However, the path of IBS was full of obstacles and debates. In 2009, The Special Act on Establishment of and Support for International Science and Business Belts to establish IBS was first brought up. However, due to the huge budget requirement of basic science research and debate in the locality of the new institute, National Assembly of the Republic of Korea spent 2 years to pass the act. That was not the mere bad news for IBS, later, local government arguing with the central government for their divergence in land cost to build up new buildings. Finally, in 2016, IBS came in full operation and appointed Dr Se-Jung Oh as their president[3].

According to the Nature Index counted by Science as one of the most authorized indexes in evaluating academic contribution among different institutions, by calculating the amount of academic research based on the number of articles and fractions (When there are several co-authors contribute to the same article).  IBS developed quite fast from 2013-2015, with an increase by more than 250% in WFC (Weighted fractional count, which has decreased the weight of research in astronomy and astrophysics work to better compare institutions)[4][5]. The academia admits IBS is growing fast and Korean government decided to fully support Basic Science research on budget and academic freedom, which allows project leaders in IBS to freely apply for new equipment and bring in project attendees as they wish. However, compared with other old-school research institutions, IBS still had a long way to go. The Nature Index of IBS reached 59.15 for their academic contribution in whole 2016 while Chinese Academy of Science (1298.52), The University of Tokyo (380.23)[6], who stands for the highest level in Asian Basic Science Research and two main competing countries to South Korea, still took the lead far ahead.

The most in-depth influence borrowed innovation has brought to Korean is an incentive fear to challenge 100% new things, when others never try it before. With highly educated workforces, Korean companies can quickly improve existed products in the market, but, they rarely created new species in the past.

Using a straightforward metaphor as my conclusion here: Borrowed Innovation makes one good at improving the speed, cost-efficiency, structure or other key indicators of a train, but never to create the very primitive prototype of a train.

[1] OECD (2009), OECD Reviews of Innovation Policy: Korea 2009, OECD Publishing, Paris.
http://dx.doi.org.ezproxy1.library.usyd.edu.au/10.1787/9789264067233-en

[2] https://www.ft.com/content/99450bd8-ba71-11e7-bff8-f9946607a6ba

[3] http://www.ibs.re.kr/eng/sub01_01_02.do

[4] https://www.natureindex.com/annual-tables/2015/institution/all/all

[5] https://www.natureindex.com/annual-tables/2016/institution/all/all

[6] https://www.natureindex.com/annual-tables/2017/institution/all/all

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