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Technology-transfer lesson from Korea

| Updated: June 25, 2018 22:01:05


Technology-transfer lesson from Korea

Many developing countries from all across the world-starting from the South Asia, Middle East to South America-have failed in their attempts to master the process of technology transfer. During the course, significant efforts have been made by spending astronomical resources. Technology transfer appears to be an illusive agenda. The basic purpose of technology transfer is to develop the capability to innovate products and processes around imported technologies. And such innovation is supposed to produce profitable revenue in a globally competitive economy. Acquiring the existing technology oftentimes is not good enough, as competitors are continuously improving the technology base. Moreover, complementary assets play an important role to commercialise acquired technology. Upon accessing the existing technology, capability should be developed to assimilate and continuously improve that technology to derive commercial benefits.

It has been argued that fruitful technology transfer to developing countries is likely to fail. Industrialised countries enjoy economies of scale and have significant market power. Their companies have extensive comparative advantages to support research and improve technology, while using recurrent political lobbying to influence the drafting of legislation that provide favourable conditions to monopolisation, not only of their products, but also the knowledge and information. With this given reality, how can a small developing country succeed in transferring technology from advanced ones? How can firms of a small developing country master the success of innovation around transferred technology in competition with global firms? How to overcome local trivial science, technology, engineering and mathematical (STEM) expertise and know-how to succeed in technology transfer is a serious issue for developing countries to address for leveraging technology to support their growth path. 

Korea has been a shining example in the development literature.  In 1960s, when Korea first launched its industrialisation efforts, it was a typical stagnant agrarian country with per capita income of $87 (in 1980 prices). Since then Korea's per capita income has been growing, reaching above USD30,000. In 1960s, Korea was a barren land as far as science, technology and innovation was concerned. To acquire technology capability to drive economic growth, Koreas' strategy was not limited to promoting the inward transfer of foreign technologies, or attracting foreign direct investment, or to increase conventional science and technology indicators. Rather the major focus was on developing domestic absorptive capacity to digest, assimilate and improve the transferred technologies. Like many developing nations, Korea financed the procurement of turnkey manufacturing plants from foreign sources. Unlike other developing countries, they did not only focus on acquiring the know-how to operate and maintain those plants, but most importantly, they gave serious attention on acquiring the capacity to redesign and also upgrade those technologies to produce better products, at lower cost. To pursue this strategy, Korea not only increased borrowing for importing technology-intensive capital machinery, but it also kept increasing budget for research and development to assimilate the technology and to nurture indigenous R&D capability of innovation in upgrading those capital machinery.

As a result, R&D investment underwent a quantum jump from less than USD9.5 million in 1963. As summarized by Sungchul Chung, in his "Innovation, Competitiveness and Growth: Korean Experiences", Korea's R&D investment, which stood at only 368.8 billion Won ($526 million, 0.81 per cent of GDP) in 1981, rose to 10,878 billion Won ($13.5 billion, 2.8 per cent of GNP) in 1996, to 13,848 billion Won ($12.2 billion, 2.7 per cent of GDP) in 2000, and to 31,301.4 billion Won ($33.7 billion, 3.47 per cent of GDP) in 2007. Instead of focusing on conventional indicators like number of publications and graduates, Korean R&D strategy was to acquire the technology capability for commercial success.  Such commercial focus created incentive for private sector to invest in R&D to increase revenue and profit, resulting in private sector dominance in R&D capacity development in Korea. At present, private industries account for about 75 per cent of the nation's gross R&D expenditures in Korea. In 1980, there were only 321 industrial R&D labs with 5,100 researchers, of whom only 56 were Ph.D. degree holders. After 27 years, the number of industrial R&D labs grew to almost 14,975, employing over 190,000 researchers, including about 10,000 Ph.D. degree holders. Due to commercial focus of the total industrial R&D expenditures in 2007, manufacturing industries took up about 90 per cent in Korea.

Instead of encouraging academic institutions to pursue curiosity driven research activities, mostly as a follow up of American, European and Japanese research activities, Korea encouraged them to pursue research to address productivity and quality issues faced by local industry. As opposed to following linear model of innovation, Korea pursued the opposite one. Korean industry did not wait for academic institutions and research laboratories to come up with scientific discoveries and technology inventions for commercial exploitations.

Such strategy of developing indigenous technology capacity by importing and upgrading capital machinery to produce commercial products has also relived Korea to rely on foreign direct investment (FDI). The impact of FDI on Korea's industrialisation appears to be extremely minimal. 

Most of the developing countries like Bangladesh have focused on importing and operating foreign capital machinery. Instead of financing R&D to assimilate and upgrade imported capita machinery, most of the developing countries focused on fiscal incentives, infrastructure and low wages for attracting FDI to drive industrial economy. On the other hand, Korea focused on increasing R&D budget to develop indigenous capacity to assimilate, digest and upgrade imported capital machinery to acquire the capability of increasing the quality and reducing the cost of already commercial products, at faster rate than competition. The journey of Korea offers the lesson to developing countries to acquire technology capability to drive economic growth. Instead of focusing on conventional science and technology indicators and product innovation at the early stage, the focus should be on assimilating and upgrading imported capital machinery to acquire the higher-level productive competence base to accelerate growth.

M Rokonuzzaman Ph.D is academic, researcher and activist on Technology, Innovation and Policy. [email protected]

 

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