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Ž.
Research Policy 30 2001 459–483 www.elsevier.nlrlocatereconbase
Technological regimes, catching-up and leapfrogging: findings
from the Korean industriesq
Keun Lee a,), Chaisung Limb,1
aDiÕision of Economics, Seoul National UniÕersity, Seoul 151-742 , South Korea
bDepartment of Management and Information Technology, Korea Christian UniÕersity, San 204, Hwagok 6 Dong, Kangseoku,
Seoul 157-016, South Korea
Accepted 2 February 2000
Abstract
This paper examines the experiences of selected industries in Korea to identify the stylized facts in the process of
technological capability building, and thereby, to sort out the conditions for the catching-up to occur. To explain the process,
we have built a model of technological and market catching-up. A special attention has been given to the question of
whether there has been a case of leapfrogging in any industry in Korea and, if so, what are the conditions for its incidence.
In our framework, we first measure the degree of catching-up in terms of market shares in the world. Then, we focus on
catching-up in technological capabilities in explaining the different record and prospects of Korean industries in market
catching-up. In the model, technological capability is determined as a function of both technological effort and the existing
knowledge base. As determinants of technological effort, we look at the technological regimes of the industries, such as
Ž.
cumulativeness of technical advances, fluidity predictability of technological trajectory, and the properties of knowledge
base.
Using this model, we explain the different technological evolution of the selected industries in Korea, including the
D-RAM, automobile, mobile phone, consumer electronics, personal computer and machine tool industries. We find three
Ž. Ž
different patterns of catching-ups, path-creating catching-up CDMA mobile phone , path-skipping catching-up D-RAM and
.Ž .
automobile , and path-following catching-up consumer electronics, personal computers and machine tools . We interpret the
w
first two case of catching-up as Aleapfrogging.BUnlike the argument by Perez and Soete Perez, C., Soete, L., 1988.
Ž.
Catching-up in technology: entry barriers and windows of opportunity. In: Dosi, et al., Eds. , Technical Change and
x
Economic Theory, Pinter Publishers, London. , we find that important R&D projects, except automobiles where only private
qEarlier versions of this paper were presented at various places, including the 1998 European Summer School on Industrial Dynamics
held in Cargese, France, the Korean Economic Association 1998 Annual Convention, and a seminar for the Technology and Evolutionary
Economics Research Group in Korea. The authors would like to thank two anonymous referees for their two rounds of detailed comments.
The paper has also benefited from the comments by, or the discussion with Morris Theubal, Luigi Orsenigo, Dominique Foray, Greg
Linden, Linsoo Kim, Joonghae Suh, Ji-Soon Lee, Chang-wook Kim, Ha-Joon Chang, Yong-ho Bae, and Min-gi Hong. The authors would
like to thank Cynthia Little and Sharon Kim for editorial help. All remaining errors are ours.
)Corresponding author. Fax: q82-2-886-4231.
Ž. Ž.
E-mail addresses: klee1012@plaza.snu.ac.kr K. Lee , hotlim@mail.kcu.ac.kr C. Lim .
1Fax: q82-2-600-2459.
0048-7333r01r$ - see front matter q2001 Elsevier Science B.V. All rights reserved.
Ž.
PII: S0048-7333 00 00088-3
()
K. Lee, C. LimrResearch Policy 30 2001 459–483460
R&D was involved, involved both private and public capacities, and that entry was not driven by endogenous generation of
knowledge and skills, but by collaboration with foreign companies. q2001 Elsevier Science B.V. All rights reserved.
Keywords: Technological regimes; Catching-up; Leapfrogging; Korean industries
1. Introduction
The rapid economic growth achieved by the newly
Ž.
industrialized economies NIEs since their indepen-
dence after the Second World War, has generated a
huge amount of research on the mechanism behind
the economic take-off. While the main contrast in the
literature has been the role of the government vs.
Ž
markets in catching-up development Amsden, 1989;
.
World Bank, 1993; Chang, 1994 , a somewhat dif-
ferent, technology-based view has also been sug-
Ž
gested Lee, 1997; Porter, 1990; Dahlman et al.,
.
1985; OECD, 1992; Hobday, 1995; L. Kim, 1997a .
Most of the technology-oriented views have focused
on explaining how developing countries, including
the NIEs have tried to catch up with advanced
countries by assimilating and adapting the more or
less obsolete technology of the advanced countries,
which is consistent with the so-called product life
Ž
cycle theory Bae, 1997; L. Kim, 1980; Lee et al.,
1988; Utterback and Abernathy, 1975; Vernon,
.
1966 . In this view, catching-up is considered as a
question of relative speed in a race along a fixed
track, and technology is understood as a cumulative
Ž.
2
unidirectional process Perez, 1988 .
However, more recently, it has frequently been
observed that in the catching-up process, the late-
comer does not simply follow the path of technologi-
cal development of the advanced countries. They
perhaps skip some stages or even create their own
individual path, which is different from the forerun-
ners. This observation is consistent with the emerg-
ing literature on leapfrogging. For example, Perez
Ž.
1988 observes that every country is a beginner in
terms of the newly emerging techno-economic
paradigm, which implies the possibility of leapfrog-
ging by latecomers like NIEs. The idea of leapfrog-
ging is that some latecomers may be able to leap-frog
older vintages of technology, bypass heavy invest-
2Ž.
An exception would be Dahlman et al. 1987 , which recog-
nized the idiosyncrasies of technology transferred and adapted
locally.
ments in previous technology system, and catch-up
Ž.
with advanced countries Hobday, 1995 . The in-
creasing tendency toward globalization and develop-
ment of information technology makes the leapfrog-
ging argument ever more plausible.
As a matter of fact, the stories of catching-up or
leapfrogging have been diverse depending upon in-
dustries and countries. Reviewing the experiences of
Korean industries, we notice that some industries
have achieved a remarkable catching-up or leapfrog-
ging and continue to have good prospects for the
near future, whereas others are facing serious diffi-
culties after a certain amount of catching-up. How
can these differences between industries be ex-
plained? This is the central question of this paper.
We examine the experiences of selected industries in
Korea to identify the stylized facts in the process of
technological capability building and, thereby, to sort
out, if possible, the conditions for a catching-up to
occur. We also build a model of technological and
market catching-up. Special attention has been given
to the question of whether there has been an example
of leapfrogging in any industry in Korea and, if so,
what were the conditions for its incidence. These are
the important questions somewhat neglected in im-
portant works on the Korean industries, such as that
Ž.
of L. Kim 1997a . In other words, this work is an
effort to go beyond the question of how the catching-
up was possible onto the question of what are the
generalizable conditions for the successful catching-
ups and whether there are different patterns of catch-
ing-ups including leapfrogging.
In this endeavor, we pay attention to the techno-
logical regimes of specific industries. Breschi et al.
Ž.
1998 argued that the specific way innovative activi-
ties of a technological sector are organized can be
explained as the outcome of different technological
regimes implied by the nature of technology. The
idea of this paper is that technological regimes also
affect the innovative activities of catching-up firms
and, hence, the chance for successful catching-up. In
our framework, we first measure the degree of catch-
ing-up in terms of world market shares. Then, we
()
K. Lee, C. LimrResearch Policy 30 2001 459–483 461
focus on catching-up in technological capabilities in
explaining the different record and prospects of Ko-
rean industries in market catching-up. In other words,
we posit that the different record of market catching-
up has a lot to do with the degree of technological
capability building. With this in mind, we build a
model to explain the building of technological capa-
bilities as a function of both technological effort and
the existing knowledge base.
Using this model, we explain the evolution of the
selected industries in Korea, including the D-RAM,
automobile, mobile phone, consumer electronics,
personal computer, and machine tool industries. We
find three different patterns of catching-up, which
are defined in comparison with the paths taken by
forerunning firms in the advanced countries. The
Ž
patterns include path-creating catching-up CDMA
.Ž
mobile phone , path-skipping catching-up D-RAM
.
and automobile , and path-following catching-up
Žconsumer electronics, personal computers and ma-
.
chine tools . Our interpretation is that the first two
cases of catching-up may be considered as
Aleapfrogging.BHowever, in contrast to the original
Ž.
argument by Perez and Soete 1988 that leapfrog-
ging or new entry tend to be initiated by research
activities of public R&D capacities, we find that
with the exception of automobiles where only private
R&D was involved, all the important R&D projects
involved both private and public capacities. Also,
Ž.
unlike Perez and Soete 1988 we find that the entry
was not driven by endogenous generation of knowl-
edge and skills but by collaboration with foreign
companies. We will also argue that consumer elec-
tronics and personal computers, which once achieved
a rapid catching-up by Afollowing the pathBtaken by
the forerunner firms, are now experiencing setbacks
primarily due to the continuing substantial gap in
technological capabilities. Our model explains the
persisting gap in terms of the technological regimes
of the industries, which determines the degree of
R&D effort by the latecomer firms.
In Section 2, the paper begins by proposing a
conceptual framework and hypothesis. Section 3 ex-
amines the production and trade data showing the
trend of market catching-up by Korean industries, as
well as patent data showing the characteristics of
industries and speed of technological catching-up.
Based on the model developed in Section 2, Section
4 discusses the experiences of the six industries in
Korea. Synthesizing the experiences of these various
industries, Section 5 provides a summary of the
experiences of the six industries and a discussion of
policy-related issues.
2. The model of catching-up in technological ca-
pabilities and markets
The central question in this paper is, what are the
conditions for catching-up by latecomer firms where
catching-up is measured in terms of both Atechno-
logical capabilitiesBand Amarket shares.BThe two
types of catching-up, namely technological catching-
up and market catching-up, are not identical but are
related to each other. For example, the latecomer
firms can increase their market shares without en-
hancing their technological capabilities by relying on
imported technology combined with cheap local la-
bor. In this case, the two catching-ups are separated.
However, sustained long-term increase in market
shares is very difficult if it is not accompanied by
increases in technological capabilities. If these firms
do increase their technological capabilities, they will
find it more and more difficult and expensive to buy
the technologies needed for higher level market
shares. In this sense, the two catching-ups are inter-
related. Among the many determinants of market
competition, such as manufacturing efficiency, mar-
keting, logistics, and so on, technological capabilities
are one of the most important elements, and, at the
same time, success in market competition can earn
the firm the extra money needed for R&D invest-
ment.
Our interest in this paper is in both types of
catching-up. Thus, we start with an examination of
the trend of Korean shares in selected industries. It
was found that some industries continued to increase
their shares, whereas others suddenly suffered a loss
in market shares after a long period of increase. The
D-RAM, automobiles, and CDMA cellular phone
industries belong to the first group, whereas the
consumer electronics and the personal computer in-
dustries belong to the latter group. To explain the
difference between the two groups in terms of mar-
ket catching-up, we turn to the second type of catch-
ing-up, namely technological catching-up. In the first
()
K. Lee, C. LimrResearch Policy 30 2001 459–483462
group of industries, the gap between the Korean and
the world’s best firms in terms of technological
capabilities has been continuously reduced, whereas
in the second group of industries, the gap, after some
reduction, still remains substantial.
It is not easy to measure and compare the level of
technological capabilities. There is no single good
quantitative measure, including patents, and thus,
commonly adopted alternatives are qualitative ones.3
One rough criterion is the distinction between the
following three stages, duplicative imitation, creative
Ž.
imitation, and innovation L. Kim, 1997a . Another
criterion is the distinction between the following
stages, assembly, low-tech part development, high-
tech part development, product design, and finally,
product concept creation. In the case of the forerun-
ner firms, they start with a new product concept and
then develop parts, and finally, assemble them. How-
ever, in the case of the latecomer firms, typically in
the case of Areverse engineeringBby Korean firms,
they started with the assembly production of im-
ported parts, then developed low- to high-tech parts,
and learned to design the existing products with
some modification, and finally, reached the stage of
the new product concept creation. Thus, we are
going to adopt these identified stages as the measure
of technological capabilities reached by the Korean
firms, and we will investigate what makes the differ-
ence in terms of stages of catching-up.
Now, let us turn to a more important aspect of the
model as described in Fig. 1. In our model, the
technological capability of the firms is determined as
an outcome of interaction of the available R&D
Ž
resources and the amount of R&D effort or techno-
.
logical effort . The available R&D resources, among
other things, consist of the internal and accessible
external knowledge base, as well as financial re-
sources. The access can come in diverse forms in-
cluding informal learning, licensing, FDI, strategic
alliance, co-development, and so on.
3In the literature, the indicators of catching up has been
Ž.
productivity growth Abramovitz, 1986 or growth rate of gross
Ž. Ž
national product GNP , per capita GNP, or income Verspagen,
.
1993 . In discussing the rapid catching up by the NIEs, OECD
Ž. Ž.
1992 and World Bank 1993 used Aexport of manufacturesBas
an indicator of industrial growth. However, as you notice, they do
not specifically refer to technological aspect of catching-up.
The level of firms’ R&D efforts depend on the
probability of success of the R&D effort. Here, the
success should be considered in terms of probability
of the actual development of target products, as well
Ž.
as the expected marketability competitiveness of
to-be-developed products. In other words, we are
separating physical development of products from
their success in markets, like the distinction between
invention and innovation. Such separation is needed
because the market success of the products is not
guaranteed even if target product is developed. In
general, firms will devote more R&D resource when
they are sure of the linkage between more R&D
Ž
input and more R & D outputs product
.4
development . The technological regimes come in
as determinants of the expected chance for product
development, whereas such factors as cost edge,
product differentiation, and first-mover advantages
come in as determinants of the expected competitive-
ness of the to-be-developed products. Finally, we
consider the importance of firms’ strategies and the
role of the government, as these factors could also
affect both chance for product development and mar-
ket success, and also, directly affect firms’ level of
R&D inputs.
Ž.
Breschi et al. 1998 argued that the specific way
innovative activities of a technological sector are
organized can be explained as the outcome of differ-
ent technological regimes implied by the nature of
technology. Our idea reflected in the model is that
technological regimes also affect greatly the innova-
tive activities of catching-up firms and, hence, the
chance for successful catching-up. The technological
regime is defined by the combination of technologi-
cal opportunities, appropriability of innovations, cu-
mulativeness of technical advances, and the property
of knowledge base. We conjecture that as far as
catching-up is concerned, not all of them are rele-
vant. For example, for R& D activities by catching-up
firms, appropriability of innovations and appropri-
ability of innovations would have less importance,
4This way to address the linkage is different from the approach
to see whether higher chance for product development leads to
more R&D input or not. The point is that uncertainty and cumula-
tiveness of technology tend to make the firms not sure of whether
their R&D input can bring in tangible results or not.
()
K. Lee, C. LimrResearch Policy 30 2001 459–483 463
Fig. 1. Model of technological and market catch-up.
since in most cases of catching-up, they are trying to
emulate the existing technologies.
Thus, we consider cumulativeness of technical
advance as one of the important determinants of the
chance for catching-up, and add a new element,
namely the predictability of technological trajectory,
as one of the important dimensions of the technolog-
ical regime relevant for catching-up. We also take
into account the degree of access to the external
Ž.
knowledge base technology transfer since it also
affects the late-comer’s R&D chances. Suppose we
measure cumulativeness by the frequency of innova-
Ž.
tions, as in Breschi et al. 1998 , then, we can say
that the higher the incidence of innovation in a given
period time, the bigger the R&D effort necessary for
the latecomer firms. Next, the more fluid the techno-
logical trajectory, the more difficult for the latecomer
firms to fix the R&D target. The fluidity of techno-
logical trajectory can be said to be higher when it is
more difficult to predict the direction of future devel-
opment of technology. For example, we consider
D-RAM as featuring more predictable path of devel-
opment as the industry evolves from, like, 1 kbit
DRAM to 16 kbit and then to 64 kbit D-RAM, and
so on. The fluidity often has something to do with
the AyearBof industry although this is not the sole or
most important determinant of fluidity. In general,
the trajectory can be said to be more fluid for
emerging industry. This is consistent with the styl-
ized fact that during the early life of the industry,
there tends to be more product innovation than pro-
cess innovation, and more product innovation tends
to mean a wider range in future product develop-
ment.5
We posit that the firms, after assessing the ex-
pected chance for product development as well as its
market success, decide on the level of their R&D
effort, namely the financial, human, and physical
resource to be mobilized for the R&D projects. In
this decision, there is an issue of selection of differ-
ent organizational forms by different technological
regimes.6Some firms would feel themselves more
5One might think that frequency and fluidity are equivalent.
But, take D-RAM as an example of the industry with high
frequency of innovation but low fluidity of technological path.
6We can also think of selection of different organizations by
different types of market competition. For example, some firm
would feel more suited in market competition dominated by cost
edge than by quality differentiation or first-mover advantages.
Actually, selection by technological regimes or market regimes is
inter-related, and this is an important issue to be further explored.
But, here, we focus on the former only since that is our interest
and also, to a certain degree, market regimes can be derived from
technological regimes.
()
K. Lee, C. LimrResearch Policy 30 2001 459–483464
fitted to an environment or industry with less fre-
quent and more predictable technical change. For
Ž.
example, Swann and Gill 1993 show by simulation
method that the more predictable the direction of
technical change, the higher the market share by
large multidivisional firms, and that the less pre-
dictable the change, the higher the market shares by
small specialized firms.7The idea of organizational
selection suggests that technological regimes deter-
Ž.
mine the link between the R&D effort input and
Ž
the expected chance for product development out-
.
put of different styles of the firms. In this light, the
discussion in this paper implicitly presupposes con-
glomerate style firms, like Korean chaebols. Then,
we consider the following hypothesis that when the
technological regime of an industry is featured by
higher cumulativeness and more unpredictable tech-
nological trajectory, it is more difficult for catching-
up to occur, by large conglomerate style firms in
particular. We also examine the possibility that diffi-
culty associated with cumulativeness or unpre-
dictableness can be ameliorated by the access to
external knowledge base and the role of the govern-
ment.
Ž
Once R&D outcome and the new level of R&D
.
resources of the latecomer firms in a certain indus-
try is determined as an interaction of both R&D
effort and the existing level of R&D capabilities
Ž.
knowledge and financial resources , then, the new
R&D outcome is combined with the firms’ capabili-
ties in manufacturing, marketing and logistics and so
on, as parts of the value chain to produce a commod-
ity heading for a test in the market.8The profits from
7Ž.
C. Kim 1997a investigates the issue of organizational selec-
tion in the D-RAM industry. The D-RAM industry used to be
dominated by the specialized firms in its early days, and, later on,
it soon changed to be taken over by the conglomerates from Japan
and Korea. He argues that this has to do with the different fitness
Ž
of different firms to the unique technological feature environ-
.Ž.
ment of the industry. Duysters 1996 also discusses the issue of
the organizational types and the natures of the environment.
8During the high growth period before the 1980s, Korean firms
mostly relied on manufacturing advantages using cheap and effi-
cient labour to win the market. However, the potential of this
strategy is being exhausted as new groups of latecomers adopt the
same strategy with even cheaper labor. It is for this reason that the
Korean firms are putting more and more resources into R&D.
the market success are, of course, a source of invest-
ment for future R&D, which thus constitutes one
Ž
element of the firms’ R&D capabilities see the line
connecting the market success box with the available
.9
knowledge and financial resources box in Fig. 1 .
As Porter’s so-called diamond model suggests
Ž.
Porter, 1990 , the determinants of competitive ad-
vantage of industries include the factor conditions,
demand conditions, the conditions of related and
supporting industries, and the firms’ strategies and
rivalries. To an important extent, the loss of market
shares by Korean firms in such industries as con-
sumer electronics and personal computers can be
explained by referring to these factors, in other
words, as rising domestic wages and weak clustering
of related industries. In contrast, the focus in this
paper is on the technological aspects of the story.
While the escape from the current stalemate should
be via more R&D effort to reduce the loyalty bur-
den, differentiate their products, and to develop new
products, the Korean firms have not had much suc-
cess. We think that this has a lot to do with the
nature of the technology of these industries.
In terms of the process of technological catching-
up, we have identified three different patterns. Sup-
pose that there exists a technological trajectory, or
what we can call a path of development of technol-
ogy. Each path or trajectory consists of several stages.
For example, along the path of development of
memory chips, we can perceive such stages as 1M
D-RAM, 4M D-RAM, 16M D-RAM, and 64M D-
RAM. Thus, here, the different stages correspond to
different product innovations within a given series.
Then, we can think of the following three patterns of
catching-up as in Fig. 2.
First, there is a path-following catching-up, which
means that the latecomer firms follow the same path
as that taken by the forerunners. However, the late-
comer firms go along the path in a shorter period of
time than the forerunners. The second pattern is a
stage-skipping catching-up, which means that the
latecomer firms follow the path to an extent but skip
9In this sense, market shares co-evolve with technological
capabilities rather than being solely the results of such capabili-
ties.
()
K. Lee, C. LimrResearch Policy 30 2001 459–483 465
Fig. 2. Three patterns of technological catch-up. Notes: In stage C,
the two technologies, C and CX, represent competing technologies.
some stage, and thus, save time. The third pattern is
a path-creating catching-up, which means that the
latecomer firms explore their own path of technolog-
ical development. This kind of catching-up can hap-
pen when the latecomers turn to a new path after
having followed the path of the forerunners, and
thereby, create a new path. Among the three pat-
terns, the first type is a more traditional pattern,
while the latter two types contain some aspects of
leapfrogging. Of course, the three patterns are not
necessarily a once-and-for-all happening; there can
be a mixed pattern. As a matter of fact, technological
catching-up, more often than not, involves certain
aspects of stage-skipping.
In Section 4, we will use the above-developed
model to explain the processes of technological de-
velopment in the six industries in Korea. Although
the systematic explanation based on a model is the
first object of this paper, the explanation also derives
some stylized facts or hypothesis. Or to put it an-
other way, the explanation can also be considered as
an effort to prove the hypothesis. The hypothesis
includes the statement that the less frequent the
product innovation and the more predictable the
technological trajectory are, the more likely is catch-
ing-up to occur when there is somehow an access to
the existing external knowledge base to be combined
with the indigenous knowledge base of the catching-
up firms. In terms of the three patterns of catching-up,
we will explain that the D-RAM and automobile
industries involved the case of stage-skipping catch-
ing-up, and that the CDMA is a case of a path-creat-
ing catching-up.
3. The trend of market catch-up in the Korean
industries and the technological characteristics
In this section, we examine the actual data from
Korean industries to examine the trend of the market
catching-up with a view to link the market share
trend with the trend of technological capabilities.
Then, Section 4 will investigate the trends of techno-
logical capabilities in six industries. First, Table 1
shows the trend of Korean shares in world exports in
several industries. It is shown that those industries,
which show steady increase of market shares, in-
clude automobiles, D-RAM, and mobile phones. For
example, the Korean shares in passenger cars in-
creased from a mere 0.63% in 1985 to 3.14% in
1995. The Korean shares in D-RAM increased from
nil to almost 30% in the mid-1990s. Although not
reported in the table, Samsung’s shares in the US
mobile phone market has reached 8% in 1997, and is
expected to be around 13% or 14% by the end of
1998. It is interesting to note that the shares of
Ericsson and Nokia producing TDMA phones are
decreasing whereas those of Qualcomm and Sam-
sung are increasing.10 The pattern of a steady decline
after a peak can be observed in audio components
and digital computers. A dramatic setback is most
clear in the case of computers, in which Korean
shares declined from a 7.22% peak in 1989 to a mere
1.76% in 1995. Audio components show a steady
decline after a peak in 1988. The case of machine
tools is somewhat special in that Korean shares are
increasing but very slowly, and their absolute level is
still very low, less than 2%.
In Table 2, we examine the output and export
values in the Korean industries. The period from the
late 1980s to the mid-1990s is divided into two
sub-periods, and growth rates are measured for com-
10 It is reported that the top seller in the US mobile phone
market is Ericsson with 41% share, followed by Nokia with 20%
share, Qualcomm with 17% share, and Samsung with 8% share in
1997. Motorola followed Samsung, who caught up with it in 1997.
Samsung’s exported 450000 units of mobile phones with a value
of US$160 million, and expected to export about 2 million units
by the end of 1998. A total size of the US mobile phone market
was 5.63 million units in 1997. The above information is from
Ž.
Data Quest, reported in Mail Business News 98r8r31 .
()
K. Lee, C. LimrResearch Policy 30 2001 459–483466
Table 1
Trend of Korean shares in World exports
Ž. Ž.
Passenger car SITC 781 Bus SITC 783 D-RAM
World Korean Korean World Korean Korean World Korean Korean
Ž. Ž. Ž.
exports exports share % exports exports share % exports exports share %
1983 1832 0 0.00
1984 3144 2 0.06
1985 82743193 518789 0.63 2750846 4694 0.17 1367 19 1.39
1986 108137502 1342597 1.24 2859641 9054 0.32 1930 67 3.47
1987 127503028 2748395 2.16 3818551 24110 0.63 2616 189 7.22
1988 140420047 3336160 2.38 6376695 27179 0.43 6696 428 6.39
1989 145505897 2048352 1.41 6276777 17382 0.28 9920 1086 10.95
1990 168436663 1849004 1.10 6723643 21545 0.32 6413 1017 15.86
1991 172190341 2123890 1.23 7755190 50891 0.66 6850 1452 21.20
1992 191131106 2534117 1.33 9316742 160836 1.73 8515 2100 24.66
1993 184500730 3883985 2.11 9023787 256072 2.84 14320 3253 22.72
1994 206018872 4470416 2.17 12 109504 279 057 2.30 20 993 5182 24.68
1995 230630527 7241992 3.14 16 600 979 363650 2.19 39 442 11426 28.97
Ž. Ž .
Machine tools Audio component SITC 763 Digital computer SITC 7522
World Korean Korean World Korean Korean World Korean Korean Korean
ab
Ž. Ž. Ž. Ž.
exports export share % exports exports share % exports exports Share I % share II %
1983 8392.8 21.4 0.25
1984 8537.0 21.6 0.25
1985 9685.2 23.4 0.24 11299024 344261 3.05 4258598 74442 1.75
1986 13399.6 27.7 0.21 14 008052 750 932 5.36 5110619 170826 3.34 4.24
1987 15196.8 37.5 0.25 13 506320 1207850 8.94 6823 530 297193 4.36 5.44
1988 17259.9 57.0 0.33 15 375980 1765314 11.48 8712 711 454 685 5.22 7.05
1989 19216.1 80.5 0.42 14 969626 1633147 10.91 8683 563 512 449 5.90 7.22
1990 21233.1 86.9 0.41 15 847977 1407974 8.88 8741 062 347205 3.97 4.93
1991 18754.2 95.4 0.51 15 854698 1544356 9.74 9074 423 482542 5.32 6.40
1992 17230.4 110.6 0.64 17811992 1479384 8.31 9 840 510 263029 2.67 3.20
1993 15209.6 110.5 0.73 17916888 1581845 8.83 10886193 344863 3.17 3.74
1994 16651.1 184.9 1.11 20982027 1756715 8.37 256932 3.31
1995 21396.1 334.3 1.56 21765275 1824208 8.38 169351 1.76
Source: International trade statistics yearbook 1989, 1992, 1995.
Ž.
Machine Tool Statistics handbook 1996–1997 , Korea Machine Tool Manufacturers Association.
aShare I is share of Korea exports in world exports.
bShare II is share of Korea exports in world top seven country’s exports.
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K. Lee, C. LimrResearch Policy 30 2001 459–483 467
Table 2
Ž.
Trend of production and export values US$ million; %
VCRs Audio equipment Personal computer PC peripherals
Ž. Ž. Ž. Ž.
Production Exports Share % Production Exports Share % Production Exports Share % Production Exports Share %
1989 1797 1239 68.9 2524 1776 70.4 1735 973 56.1 1405 1294 92.1
1990 1567 1140 72.8 2569 1737 67.6 1325 633 47.8 1809 1531 84.6
1991 1770 1286 72.7 2693 1832 68.0 1446 721 49.9 1927 1750 90.8
1992 1691 1181 69.8 2572 1859 72.3 841 335 39.8 2770 2371 85.6
1993 1796 1310 72.9 2550 1912 75.0 955 381 39.9 3249 2704 83.2
1994 2025 1480 73.1 2697 2018 74.8 1249 296 23.7 3740 2856 76.4
1995 2120 1499 70.7 2958 1981 67.0 1389 223 16.1 5374 4188 77.9
1996 1937 1195 61.7 2367 1661 70.2 1376 159 11.6 6116 4963 81.1
Ž.
Growth rate 1989–1993 0.00 1.40 0.20 1.90 10.10 20.90 28.80 20.20
Ž.
Growth rate 1992–1996 3.50 0.30 y2.10 y2.80 15.10 y17.00 24.00 20.30
Wireless communications Passenger cars Semiconductors NC machine tools
Ž. Ž. Ž. Ž.
Production Exports Share % Production Exports Share % Production Exports Share % Production Exports Share %
1989 1733 485 28.0 856133 364835 42.6 4846.0 3179 65.6 251 48 19.1
1990 1602 489 30.5 964603 338968 35.1 7044.0 4459 63.3 276 43 15.6
1991 1672 514 30.7 112 8783 376646 33.4 8101.0 5586 69.0 291 40 13.7
1992 1648 502 30.5 1216 532 385312 31.7 9740.0 6804 69.9 228 46 20.2
1993 1819 625 34.4 1449 771 503625 34.7 11264.0 7026 62.4 272 41 15.1
1994 2091 697 33.3 1645 453 586008 35.6 19116.0 12984 67.9
1995 2365 849 35.9 1878 885 814327 43.3 31861.0 22115 69.4
1996 2432 848 34.9 2108 846 1 008 929 47.8 22504.0 17843 79.3
Ž.
Growth rate 1989–1993 5.70 6.60 15.30 13.00 25.40 17.20 2.10
Ž.
Growth rate 1992–1996 12.10 14.00 14.70 27.20 27.60 27.30
Source: Korea Development Bank, Korean Industry in the World 1994, Korea Development Bank Industry in Korea 1997.
()
K. Lee, C. LimrResearch Policy 30 2001 459–483468
parison between the two sub-periods. The consumer
electronics and personal computers all show the slow
down of export growth. This pattern is most clear-cut
in the case of personal computers. During the 1989–
1993 period, Korean PC exports grew at an annual
average of 20.9%, whereas during the 1992–1996
period, annual growth reduced to y17.0%. This
shows that the Korean PC industries discontinued
exports and only served the domestic market as they
lost their price competitiveness. Korean producers
switched to the production of PC peripherals, such as
monitors and disk drives. Exports of audio equip-
ment also declined during the 1992–1996 period.
Passenger car exports show a remarkable increase,
namely from a 13% growth per annum during the
1989–1993 period to a 27.2% growth per annum
during the 1992–1996 period. Thus, now, almost
half of production is exported. A similar pattern can
be observed in the case of semiconductors with more
than 70% of the domestic production now being
exported. The share of exports in total machine tool
production is still very low, less than 20%, which is
similar to the level of PCs and even lower than those
of audio equipment and VCRs.
We interpret the above trends in terms of the
model developed in Section 2, which defines market
shares as a function of technological capabilities
among other things. For example, the continuing
increase of market shares in D-RAM is supported by
the sustained increase of technological capabilities,
whereas PCs have been losing shares as the one-time
high market share was based only on cost advantage
but had no solid basis of technological capability
building. Increasing market shares in automobiles are
supported partly by the increasing technological ca-
pabilities and partly by price edges, and their not-
so-high market shares reflect the still significant
existing gaps in technological capabilities. The same
is true of machine tools where Korean firms are very
slowly increasing their technological capabilities.
One of the reasons for the lower market shares,
compared to automobiles, is simply that cost advan-
tages are less important for machine tools than for
automobiles.
Above, our interpretation has been to relate the
different stories of market catching-up to the differ-
ent stories of technological catching-up. Now then,
the next task should be to relate the different trend of
technological catching-up to technological regimes.
Although this will be mainly done in Section 4
presenting detailed qualitative studies of the six in-
dustries, before doing that, let us present here some
informative figures on the nature of technological
regimes of the different industries and one indicator
of the relative degree of catching-up.
Patent statistics in Table 3 reveal some important
characteristics of the industries. We note the four
industries, which show a higher-than-average fre-
quency of innovation measured by the number of
patents. They are personal computers, D-RAM, con-
sumer electronics, and sound and communication
equipment. By contrast, in machine tools and auto-
mobiles, the number of the patents granted grew
slower than the average. We think that this relative
difference in the frequency of innovation is impor-
tant in terms of catching-up possibilities as explained
in Section 2. Another major characteristic of the
industries is the fluidity of technological trajectory.
In consideration of the product ages and the cur-
rently unfolding technological development, we take
the technological trajectories of automobiles, ma-
chine tools and D-RAM to be less fluid than those of
telecommunications, PC and consumer electronics.
Now let us see how the Koreans are doing in
catching-up in these industries featured by the differ-
ent degrees of cumulativeness and fluidity. Table 3
also examines the growth rates of patents granted in
the US to the Korean firms and the whole world.
Over the 1986–1993 period, US patents by Koreans
grew at an annual average of 50.3%, compared to the
4.8% growth of the US patents in the whole world.
We can take the difference between these two num-
bers as the speed of technological catching-up. The
average speed of catching-up by the Korean indus-
tries is thus shown to be 45.5%. Let us compare
these figures among the different industries. The two
industries that display above-average speed of catch-
ing-up turn out to be D-RAM and sound and com-
munication equipment. In all the other industries, the
speed of technological catching-up is lower than the
average. These figures imply that Korean catching-
ups in these industries were supported more by cost
advantages and less by technological capabilities.
When cost advantages disappear, market shares
plummet as in PCs and consumer electronics. In the
case of automobiles, Korean firms are still maintain-
()
K. Lee, C. LimrResearch Policy 30 2001 459–483 469
Table 3
World and Korean patent grants in the US: annual increase rates between 1986–1993
Annual Annual Speed of
increase rate of increase rate of catching up
US patents US Patents by sbya
Ž. Ž.
registered aKorea b
Whole industry 4.8 50.3 45.5
Machine tool y0.9 38.9 39.8
Automobile 3.0 19.6 16.6
Personal computer 29.4 65.5 36.1
Dram 52.5 105.8 53.4
Consumer electronics 16.9 31.6 14.7
Sound and communication 8.2 103.4 95.2
Ž.
Notes: 1 In the cases of personal computer, DRAM and consumer electronics, the US patents by Korea started to be registered from 1989.
Therefore, the annual increase rate is between 1989 and 1993.
Ž.
2 In the cases of personal computer, DRAM and consumer electronics, the increase rate of the patent of the industry is measured by the
increase of the number of patents which had a key word of Apersonal computerBor ADRAMBor Aconsumer electronicsBin the title or
abstract of the patents. It was assumed that the increase rate of the patents, which had a keyword of Apersonal computerBor ADRAMBor
Aconsumer electronics,Bis the same as the increase rate of the patents in these industries.
Ž.
3 Degree of catching up was measured by deducting the annual patent increase rate in the US from the annual increase rate of US Patents
by Korea
Ž. Ž. Ž.
Source: 1 Data about machine tools, automobiles, sound and communication: US Department of Trade 1994 as cited in Lim 1997 .
Ž.
2 Data about personal computer, DRAM, consumer electronics, sound and communication: patent data provided by US Patent and Trade
Mark Office 1997.
ing cost advantages, which is the reason for the
steady rise in market shares despite a slow catching-
up in technological capabilities.
The above comparisons also present a challenging
task, namely how to explain the different speed of
catching-up in terms of the earlier hypothesis, as
derived in Section 2, that the more fluid and frequent
the technological change is, the more difficult tech-
nological catching-up will be. For example, how can
we explain the fast catching-up in telecommunica-
tion despite its high cumulativeness and fluidity of
technological regimes? Similarly, how about the D-
RAM featured by high frequency of innovation?
Section 4 will try to handle this difficult job by a
more detailed analysis of each industry. As you
notice, patent data presented above can serve only as
a measure of speed of relative catching-up. But, it
does not show how close to the forerunner the
Korean firms have actually advanced in terms of
technological capabilities. Since technological capa-
bilities is more than that can be represented by patent
data but also include both explicit and tacit knowl-
edge, we have no choice but to rely on qualitative
measures. As mentioned in Section 2, the primary
measure of technological capabilities in this paper is
a qualitative one, namely the stages in the reverse
engineering the latecomer firms have reached.
4. The winning and losing stories of catching-ups
4.1. The automobile industry11
Ž.
According to Pavitt’s 1984 classification, the
automobile industry is a scale-intensive industry and
less science-based than electronics. Compared to
electronics, the innovation path is more predictable
and there are less frequent concept changes. Fre-
quency of innovation is also low. The property of
knowledge base of automobile industry has such
feature, as that tacit knowledge is more important
than in other industries. This is related to the fact
that each automobile component is less separable
from the main body of a car of a specific type and,
thus, it is difficult for a global market to be formed
for each component. This is in contrast with PC parts
11 Ž.
This subsection draws on K. Kim 1994, 1997 .
()
K. Lee, C. LimrResearch Policy 30 2001 459–483470
and peripheries, which are sold in different markets
as independent commodities. This is related to the
high degree of standardization of PC parts, which
means producers have to compete with rival produc-
ers worldwide. Such difference between the automo-
bile and the PC implies that to the extent that
producers are able to internalize the important tech-
nology or know-how, they can prolong their compet-
itiveness and latecomers are likely to enjoy more
room for raising their own competitiveness and re-
lated viability.
The above mentioned technological regimes of
the automobile industry gave some advantage to
catching-up firms like Hyundai Motors in Korea that
could mobilize enormous R&D resources on the
specific target. The enormous amount of the R&D
expenditure devoted to engine development was very
critical, and this was supported and pushed through
by the top management headed by Mr. Chung Ju-
Young. Such commitment was also possible because
the R&D target was clear and the risk was not that
great. Hyundai’s engine development was a typical
case of catching-up led by huge investment.
Another interesting aspect of the project, how-
ever, is that it has involved something that can be
Ž
called an AunlearningBNonaka, 1988; K. Kim,
.
1994 . According to Nonaka, unlearning means orga-
nizational restructuring to cut out the existing rou-
tines and rigidities in order to create new capabilities
and synergy. To launch the engine development
project, Hyundai established a new in-house R&D
center in Mabuk-li, which inherited almost nothing
from the old R&D center in Ul-san. It was thought
that the Ul-san center had become AspoiledBby just
assimilating and adapting in a rather passive manner
Ž.
the imported technology including engines , and
thus, was not suitable for the new job of developing
the engine itself.
Hyundai’s development of its own engines, fuel
injection system, and other parts was basically the
fruits of its own initiatives, without help from the
government, which basically provided only the do-
mestic market protection. Of course, Mitsubishi in
Japan did give some help, but for the most part, the
major car assemblers in the world were reluctant to
transfer technology to Hyundai. Hyundai, therefore,
had to get access to the external knowledge of
specialized R&D firms, like Ricardo in England.
Since their business was not to produce and sell the
cars but to sell the technology itself, their attitude
toward latecomers, like Hyundai, was different from
Ž.
that of car assemblers K. Kim, 1997 . This could be
termed something like Aopen protectionism,Bsuch
that although rising techno-nationalism is a fact,
international technology markets are not yet tightly
closed and there exist diverse business entities which
are ready to transfer technology to latecomers if
certain conditions are met.
Hyundai’s technological development also in-
volved a process which can be classified as a stage-
skipping catching-up in our framework. When
Hyundai started to develop engines, the carburetor-
based engine was the standard type. But, knowing
that the trend of engine technology was moving
toward a new electronic injection-based engine,
Hyundai decided to develop this latter type of en-
gine, rather than following the old track in develop-
Ž.
ing the standard engine K. Kim, 1994 . By succeed-
ing in this project, Hyundai was able to reduce the
gap in engine technology in a very short period of
time. Now, technological capability of the Korean
firms represented by Hyundai can be said to have
reached the stage of product design in terms of the
states of reverse engineering. For up to middle-sized
passenger cars, the localization ratio is higher than
90%, although core parts for luxury cars are still
imported.
4.2. D-RAM industry
According to our model, technological regimes of
the D-RAM industry is featured by high frequency
of innovation and more predictable path of techno-
logical trajectory. While less uncertainty in techno-
logical trajectory means fewer handicaps for the
latecomers, high frequency of innovation means more
things to catch-up. Now, let us look into more details
of this industry to see how it can give some chance
for the conglomerate style firms like Samsung, espe-
cially late entry and market success chance based
upon cost advantages.
In the D-RAM industry, technological innovation
within the same generation chip is oriented toward
process innovation to reduce unit costs, and thus,
scale matters in this respect. Between the memory
chips belonging to different generations, for instance,
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K. Lee, C. LimrResearch Policy 30 2001 459–483 471
16–64 Mbit chips, product innovation is oriented
toward upgrading.12 In this memory chip industry,
Ž
the degree of upgrading capacity difference between
.
generations is very big, and thus, different genera-
tion chips cannot coexist for long; old generation
chips are soon replaced by new generation chips.
Furthermore, transferability of technological knowl-
edge between different generations is not so strong
Ž
as to pose serious handicaps to late entries C. Kim
.
1997b . These features mean that conglomerate style
latecomer firms who build a production facility on a
large-enough scale for the new generation chips, can
enter and claim some shares in the market without
much interference from the incumbent firms. Actu-
ally, if one looks at the evolution of D-RAM chips in
the world, one notices that the leaders in this markets
have evolved from the specialized firms from the
Ž
large conglomerate firms such as Samsung C. Kim,
.
1997a .
The above feature of the D-RAM industry gave
important advantages to the Korean firms as late-
Ž
comers. A firm’s innovation effort R&D expendi-
.
ture is a function of not only its own technological
capability but also of expected additional profits
from the next generation chip business. Incumbent
leading firms are less strongly inclined to initiate
next-generation chip development since they want to
fully exploit profits from the current generation chip.
In contrast, additional profits from the next-genera-
tion chip business are bigger for the current follow-
ers than for the current leaders, relatively speaking.13
Owing to their size as conglomerates with strong
financial resources at hand, Korean firms, especially
Samsung, have found it easy to enter this market.14
Korean firms are very experienced in process inno-
vation-driven competition, and also, strong in scale-
intensive R&D and production. Thus, we take the
12 In this sense, it might be said that it is competence-enhancing
rather than competence-destroying if we use the terminology of
Ž.
Tushman and Anderson 1986 .
13 For a more technical treatment of this argument, see C. Kim
Ž.
1997a .
14 In this case, too, like the case of Hyundai’s engine develop-
ment, Samsung’s chairman Lee Byung Chul’s commitment to the
D-RAM business made it possible for Samsung to devote enor-
mous resources to this project.
D-RAM chip industry as an example to show that
the advantages of the latecomers are strong, owing to
the special nature of the technology, and Korean
firms exploited this advantage. In a sense, this case
can be also called a case of technological follower-
Ž.
ship borrowing the word from Bolton 1993 and L.
Ž.
Kim 1997a . In other words, Korean firms, espe-
cially Samsung, watched the growth of the D-RAM
industry led by forerunners like Intel, and entered the
market only after the market size of the industry was
of sufficient size for the large conglomerate firms to
be able to enjoy some of the advantages.15 Late entry
by the conglomerate firm after watching develop-
ment was possible since it had the financial capabil-
ity.Looking back on the path of the development of
the memory chip industry in Korea, we classify this
as a case of stage-skipping catching-up where Ko-
rean firms mostly followed the same path of the
forerunners but skipped several stages. In the 1970s,
several Korean firms started wafer processing and
absorbed low-level technology and the firms took the
form of the DFI firms or private OEM with the
Ž.
facility provided by the foreigners Bae, 1997 . There
was no systemic government help except some mi-
nor assistance from a government research institute
Ž.
GRI called the Korea Institute for Electronics
Ž
Technology KIET; now known as the Electronics
Ž..
and Telecommunication Research Institute ETRI .
The period from the late 1970s to the early 1980s is
the period of absorption of high-level technology and
all foreign companies sold their shares to Korean
firms and Korean chaebols like Samsung took over
these firms. Through its own initiatives without gov-
ernment help, Samsung first started to produce 64
kbit D-RAM chips in the early 1980s. At that time,
the government’s position was said to be such that
Korean firms had to start from 1 kbit D-RAM, but it
was the decision of the private firms to skip the
1–16 kbit D-RAM to enter directly into 64 kbit
D-RAM.
15 Ž.
C. Kim 1997a provided an excellent analysis of how the
D-RAM industry evolved from being initiated by specialized
firms in the beginning to being dominated by large conglomerates
including the Japanese firms during the late stage, and also, he did
simulation to prove this.
()
K. Lee, C. LimrResearch Policy 30 2001 459–483472
How was that possible? Access to the external
knowledge base also holds the partial key to this
question. The time that Korean firms, including
Samsung, were considering the production of 16 kbit
D-RAM was the transition period in the world D-
RAM industry from 16 to 64 kbit. Samsung was able
to buy 64 kbit D-RAM design technology from
Microelectronic Technology, a small US-based ven-
ture company and manufacturing technology from
the Japan-based Sharp. In the case of Hyundai, it
bought design technology from Vitelic but tried,
without success, to develop its own manufacturing
Ž.
technology C. Kim, 1994 . Later, Hyundai had to
borrow manufacturing technology from the Texas
Instrument company. Thus, such stage-skipping
catching-up was made possible by an access to the
external knowledge base in the form of licensing.
A couple of years after starting to produce D-RAM
using borrowed manufacturing technology, Korean
firms began to develop their own circuit design
technology, first developing and producing 256 kbit
memory chips in the mid 1980s. Samsung chose to
develop its own design technology for 256 kbit or
higher D-RAM as it was not easy to buy the design
Ž
or it was not cheap to buy the design L. Kim,
.
1997b . In this process, the role of overseas R&D
outposts in Silicon Valley and returning brains was
critical. It was observed that Samsung’s 256 kbit
D-RAM by its Silicon Valley team turned out to be
Ž
better than the Japanese counterparts L. Kim,
.
1997b . After Samsung’s independent development
of 256 kbit D-RAM, some foreign companies were
willing to sell Samsung their 1 Mbit D-RAM design
technology, but Samsung refused to purchase since it
Ž
thought it could develop it on its own C. Kim,
.
1997a .
Government industrial policy always lagged be-
hind the progress made by the private initiatives
Ž.
Bae, 1997 . Only in 1986 did the government initi-
ate the formation of a semiconductor R&D consor-
tium with the participation of Samsung, LG and
Hyundai to develop successive generation memory
chips starting with 4 Mbit chips and finally, going to
256 Mbit chips. Development of 256 Mbit chips by
the Korean firms was the world’s first event, and in
this sense, the Korean firms have now become a
Apath-leaderBand the technological capability of the
Korean firms has now reached the final stage of
creation of new product concept and its design in the
reverse engineering.
In summary, the case of D-RAM can be consid-
ered as a stage-skipping catching-up that relied upon
access to the external knowledge base in the form of
licensing and overseas R&D outposts and took ad-
vantage of the mass production and investment capa-
bility of conglomerate firms. It should also be noted
that the special characteristics of D-RAM provided
the latecomers with some advantages associated with
the fact that the innovation path and, hence, catch-
ing-up target is well defined. However, continuous
development of the new generation chips involved
some explicit knowledge, and the Korean firms over-
came this gap with the help from the government,
overseas R&D posts, and returning brains from the
USA.
4.3. Telecommunication industry: CDMA cellular
phone
The development of the CDMA cellular phone
system and the initiation of services in Korea is one
of the most successful cases of a path-creating catch-
ing-up or leapfrogging, led by the private–public
collaboration. When the Korean firms and the gov-
ernment authorities considered the development of
the cellular phone system, the analogue system was
Ž.
and still is dominant in the USA, and the TDMA-
based GSM system was the dominant system in
Ž
Europe. However, the Korean authorities Ministry
.
of Information and Telecommunication paid atten-
tion to the emerging CDMA technology with higher
efficiency in frequency utilization and higher quality
and security in voice transmission.
Thus, despite great uncertainty over the develop-
ment of the world’s first CDMA system, as well as
the strong reservations expressed by the telephone
service provider and the system manufacturers, such
as Korea Telecom, Samsung and LG, the Ministry
and the ETRI decided to go along with the CDMA.
One of the main reasons for the decision was re-
ported to be the consideration that if Korea just
Ž.
followed the already established TDMA GSM , the
gap between Korea and its forerunners would never
be reduced and, thus, catching-up would take even
longer. Thus, Korea chose a shorter but riskier path,
and had success. Although it was in 1995 that the
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K. Lee, C. LimrResearch Policy 30 2001 459–483 473
first test of the CDMA system was conducted, the
Korean government first designated the CDMA sys-
tem development as a national R&D project as early
as 1989. This also meant that Korean authorities
were quite well informed in the trend of telecommu-
nication technology and had foresight. In 1991, the
contract to introduce the core technology from, and
to develop the system together with, the US-based
Qualcomm, was forged. In 1993, the Ministry de-
clared CDMA to be the national standard in telecom-
Ž
munication. Now, Korean subscribers more than 6
.
million now accounts for more than 75% of the
worldwide CDMA subscribers, and Korea also started
the CDMA-based PCS service in 1997.
According to our model, the high frequency of
innovation and high fluidity of trajectory, the
telecommunication industry does not give the late-
comers any incentives for the R&D effort. Expected
profits and other related gains from first-mover ad-
vantages served as a strong attraction, and the high
risks were shared by the government-led R&D con-
sortium and knowledge alliance with Qualcomm.
The ETRI also contributed to reducing technological
uncertainty by providing accurate and up-to-date in-
formation on technology trend and by identifying the
correct R&D target that are more promising than the
alternatives.
In achieving the leapfrogging by taking a different
path, the role of the government was very critical in
taking initiatives to form a R&D consortium with
private firms and pushing them ahead. However, it
should be noted that the core technology was bought
from Qualcomm, and thus, Korean producers still
have to pay heavy royalty fees, equivalent of 5.25%
of sales revenue per mobile phone unit, in addition to
a lump sum for the technology licensing. The local-
ization ratio in the mobile phone was only 30%, and
most of the core part including MSM-electronic chip
is imported. However, in 1997, ETRI succeeded in
developing the MSM chip by itself,16 and subse-
quently, Samsung declared in 1999 that it can now
produce most of the core chips required in CDMA
mobile phones. That means the completion of core
16 Despite this development, Korean firms must continue to pay
fees to Qualcomm due to the restrictions in the original contract.
They are now to trying to revise the contract.
part assimilation stage in the reverse engineering.
The Korean firms are now worldwide leaders in
CDMA-based phones, and they are now entering the
final stage of creation and design of new product
concept in the reverse engineering.
4.4. Personal computer17
The personal computer industry in Korea started
with simple assembly in the late 1970s. Small ven-
ture companies, like Sambo and Quenix, manufac-
tured the first time in Korea an 8-byte PC by reverse
engineering. At that time, no foreign companies were
interested in investing in the Korean market through
joint ventures, and were more interested in export
sales in Korean markets. Thus, Korean producers
had to stand on their own feet. However, with the
shift to the 16-byte PC after 1984, they felt the need
to import higher technology by licensing since they
realized it was very difficult to produce the 16-byte
PC by reverse engineering only. Thus, most Korean
PC firms switched to OEM producers targeting ex-
ports. The government also designated the PC as a
target for promotion and provided domestic market
protection; imports were restricted in 1984 and ex-
port requirements were imposed on foreign joint
ventures. However, other than these measures, there
was no direct government involvement in R&D or
collaborative R&D between the public and private
sectors.
The 1985–1989 period was the best time for the
PC firms in Korea, which emerged as the hottest site
for the worldwide OEM production of PC exploiting
economies of scale in the large conglomerates
Ž.
chaebols . This change was triggered by the volun-
tary opening of PC architecture by IBM, which
allowed worldwide licensing of IBM PC BIOS. Nu-
merous manufacturers of IBM compatible PCs
thrived all over the world. Riding this new wave
most successfully were the Korean producers who
had accumulated some know-how in large-scale as-
sembly in electronics and price-based competition
with some learning-by-doing effects. However, even
during this growth period, most Korean firms were
17 Ž.
This subsection draws on C. Kim 1997b .
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K. Lee, C. LimrResearch Policy 30 2001 459–483474
OEM producers conducting SKD-based assembly,
and thus, were able to acquire only low level tech-
nology. With technological capability increasing,
they switched from simple OEM to private OEM,
and at the same time, Korean firms realized the
limits of the OEM production as a window for
technology absorption. It acted rather as a hindrance
since the foreign partner firms designated the spe-
cific manufacturers’ parts to be used in assembling
Ž.
the PC K. Kim, 1997 , and therefore, locally made
parts were hardly ever adopted. Furthermore, foreign
partners were reluctant to contract further licensing
of more advanced technologies.
Thus, Korean producers felt the need to conduct
their own R&D, and at the same time, the role of
government also changed from simple market protec-
tion to R&D support and demand creation by gov-
ernment procurement. The public and private R&D
collaboration began and the Korea Computer Re-
search Association was set up in 1985. The govern-
ment lifted the restrictions on PC imports in 1987
and subsequently, in July 1988, the import restric-
tions on PC-related peripheries were also abolished.
In the late 1980s and the 1990s, Korean producers
succeeded in the local production of the PC mother-
board, memory chips, and other peripheral parts,
such as HDD, dot printer head, laser printer engines,
LCD, and CD-ROM drives. Nevertheless, they still
had to import such items as most logic chips, HDD
head, printer controllers, and LSU for laser printer
engines.
Since the early 1990s, Korean PC industries have
faced a sudden depression; exports have plummeted,
and now, there are few PC exports from Korea, with
an exception of Sambo selling E-machines. Korean
producers are now switching to PC peripherals such
as monitors, hard drives and CD-ROM drives. Sev-
eral factors can be identified as the cause for the
sudden downfall. First, we note change in the nature
of industry by the development of technology. The
importance of a large-scale assembly process de-
clined with the rise of chip-sets, which integrated the
different functions of several chips into one chip.
Thus, Korea lost its comparative advantage as an
assembly site. Secondly, we note the firms’ strategic
mistakes. Korean producers did not respond well to
the rapid shortening of life cycles in PCs. For exam-
ple, the PC industries around the world switched
very promptly from the 286 PC, to the 386 PC, to
the 486 and 586 PC, however, Korean firms, because
of the huge investment made by Korean chaebols in
the 286 PC assembly lines continued too long with
the 286 PC and were left behind. Thirdly, the rising
royalty was also a burden for assembly-oriented PC
firms in Korea.18
Beyond the above-mentioned direct causes for the
weakening of the PC industry, there were more
important structural problems associated with tech-
nological regime of the industry. First of all, it
should be noted that the PC industry is, according to
Ž.
Pavitt’s 1984 classification, a science-based indus-
try where technology or knowledge is more explicit.
This feature makes the catching-up more difficult as
the latecomers rise up the ladder. The PC industry is
featured by very high frequency of innovation, and,
furthermore, the concept change is frequent, and
thus, it is very difficult to predict the direction of
future product development. For example, Korean
producers say that if they concentrate, they should be
able to develop microprocessors. However, they are
concerned that sudden changes in the MPU genera-
tions or technological trajectory will render the de-
velopment by latecomers of the MPU useless or
out-of-date. For example, it is reported that Intel and
TI have recently developed a totally new series of
microprocessor, which will substitute the 286–386–
486–586 series. This means that even if the latecom-
ers succeed in producing the old-style chips, they
might soon become obsolete.
The initial success in the 1980s by the public–
private R&D collaboration to develop PC was possi-
ble because they identified a target product which
meets the market trend. However, after that, the
continuous changes in products and market condi-
tions have made such arrangement ineffective. In
other words, given the high unpredictability, the
latecomers cannot target future development items
with any certainty. Actually, this is a problem that
requires help from the other components of the
national innovation system, such as universities and
GRIs; the network between firms and academia is
18 Some people say that with a large number of small firms in
Taiwan, it is more difficult to impose on them royalties, whereas
with a few large conglomerates, it was much easier.
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K. Lee, C. LimrResearch Policy 30 2001 459–483 475
perceived as weak and universities’ R&D resources
are perceived as having not been effectively utilized
in Korea. Firms’ in-house R&D alone cannot tackle
the problem adequately.
Another factor that must be mentioned is the
peculiar nature of the PC parts markets. Quite differ-
ently from, for instance, the automobile parts, PC
parts are fairly standardized over the world since the
PC is now produced by module-based production,
and thus, there exist markets for every part. This
means that parts producers should compete globally.
This also makes it difficult for the followers to catch
up with the leaders. Given the high uncertainty of
success with parts development and the unreliability
of locally made parts, final assemblers in Korea felt
no need to develop core PC parts or to use locally
made parts. They were pre-occupied with the price
competitiveness of the final goods.
This is the background that caused Korean PC
producers to turn increasingly to domestic markets.
Their technological capabilities are still somewhere
between core-part assimilation and product-design
stages in terms of the stages in the reverse engineer-
ing, and they are still falling short of leading the
industry by developing new products on world mar-
kets. In this light, the situation is similar to the case
of consumer electronics. Both industries are now
relying on Korean-specific tastes or markets. How-
ever, such a strategy cannot be sustained for long.
For example, as Microsoft has further improved its
English–Korean software, the Hancom, the largest
software producer in Korea, is losing its market
share.
4.5. Consumer electronics: audio and Õideo
equipment19
As is well-known, consumer electronics has been
the leading export sector of Korea. Korea was for
some time, the world’s second largest exporter, only
second to Japan. However, after 1988, the peak year,
export growth slowed, and now, China has replaced
Korea as the world’s second largest exporter. Such
change is related to the erosion of competitiveness of
Korean products in the world markets, Korea being
19 Ž.
This subsection draws on Y. Kim 1997 .
somewhat sandwiched between the advanced coun-
tries and the next tier NIEs. Thus, since the 1990s,
Korean producers have been putting more emphasis
on the domestic markets, modifying their products to
capture Korean-specific tastes and demands.
To dig into the cause of the rise and fall of the
Korean consumer electronics industry, we must be-
gin with a brief overview of technological develop-
ment in this industry. In the 1970s, the main chan-
nels of the technology transfer were direct foreign
investments, and Koreans were able to learn from
their joint venture partners. As foreign investors
gradually lost their interests in their Korean business
owing to the export-oriented government policies
and continuing restriction of domestic markets, the
Koreans took over the business and began indepen-
Ž.
dent production from the late 1970s Y. Kim, 1997 .
Thus, the channels of technology transfer changed
from the informal learning from partners to the
formal absorption by licensing. During the 1980s,
Korean producers, mostly chaebol firms, imported
low-level technologies, which enabled them to lo-
cally produce marginal parts. At this stage, the role
of the government was critical in encouraging local-
ization of parts production as well as restricting
foreign penetration by taking restrictive FDI and
import policies.
The pattern of technological development and
innovation in the Korean consumer electronics indus-
try can be said to have progressed from the stage of
Ž.
Aduplicative imitationBL. Kim, 1997a of the stan-
dardized product at its mature stage in the product
Ž.
life cycle to Acreative imitationBL. Kim, 1997a of
the new products since the mid 1980s. During the
duplicative imitation stage, Korean chaebols used the
imported production facility to carry out mass-pro-
duction of standardized products. Any innovation
was mainly process-oriented innovation based on
learning by doing, and there was reliance on the
economy of scale to maintain price competitiveness.
The second step in the duplicative imitation was the
localization of generic-used parts requiring low-level
technology, and there was also some learning-by-
doing in parts production. After duplicative imitation
came the stage of creative imitation of new products.
Now, the Korean producers shifted their effort to
imitating and locally producing, with lower costs,
new products and not mature products, developed by
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K. Lee, C. LimrResearch Policy 30 2001 459–483476
advanced economies like Japan. Localization of the
marginal parts, and more recently, some core parts
also started initially with imitation. Here, some effort
to add AKoreanessBto the Japanese-developed prod-
ucts was also made so that it may be called creative
imitation. However, even at this stage of creative
imitation, Korean producers are weak in new product
innovation, namely in creating new product concepts
and designing them, and they are still relying on
imported core parts for high-end goods.
The difficulty facing consumer electronics can be
explained by our model as follows. First of all, the
Korean firms are having difficulty in securing con-
tinuing access to external knowledge base while their
own R&D capability has not grown sufficiently to
make them stand alone. As they are getting closer to
the forerunners and demanding more advanced tech-
nology, the forerunners in the advanced countries
become more reluctant to allow technology transfer
in the form of licensing. On the other hand, their
lack of product innovation capability can be seen
from the composition of the R&D expenditure by
the Korean firms. In average consumer electronics
firms, the expenditure for Abasic researchBaccounted
for only 8.2% and Adevelopment for mass produc-
Ž.
tionBwas 65.9% Y. Kim, 1997, p. 427 .
Why is it so difficult to acquire innovation capa-
bility or why are the Korean firms not putting enough
money into R&D in this field? This answer had to
do with the technological regime of the industry.
Here, we have to take note of the changing nature of
consumer electronics industry. Consumer electronics
has increasingly become science-based rather than
supplier-dominated as in the past. The trend is that
the product life cycles are getting shorter and shorter,
which means higher frequency of innovation and
increasing technological uncertainty. Lacking the ca-
pability to lead the product innovation, the Korean
firms are just busy in adapting and imitating succes-
sive appearance of the new products developed by
the forerunning firms. Since they cannot be sure of
the chance for market success of their own to-be-
product, they cannot put strong R&D effort either;
they can enjoy neither stable cost margin nor reliable
quality differentiation.
Since the 1990s, as technology licensing is getting
more difficult, Korean firms, like Taiwanese firms,
have started to increasingly resort to overseas R&D
outposts, international M&A and strategic alliance.
At the same time, as we said before, their interests
have turned more to domestic markets, and their
Aproduct innovationsBhave mostly been adaptive
ones to capture Korean tastes. For example, LG
developed a refrigerator, which is especially suited to
storing Korean foods. Of course, this means a smaller
market size, and this strategy can last only as long as
foreign rivals do not develop and sell Korean-specific
products or are forbidden to enter the market itself.
4.6. Machine tool industry
Ž.
In Pavitt’s 1984 classification, the machine tool
industry is a typical specialized supplier industry,
where tacit knowledge accumulated from the inter-
face between producer and customer firms is very
important. The technological regimes of machine
tool industry used to be featured by a relatively low
frequency of innovation and low fluidity of techno-
logical trajectory although increasing introduction of
computer technology into this industry has been
changing the regime from low to medium or high
frequency and fluidity. Despite such technological
features of machine tools, the incentives for R&D
effort by the latecomer firms were low. It has some-
thing to do with the fact that the expected chance for
market success of developed products has been per-
ceived as rather low because they cannot expect
safely any of such benefits as cost edge, quality
differentiation or first-move advantages. The case of
machine tools is different from automobiles and
other consumer durable goods in the sense that late-
comer producers were not able to achieve catching-up
with forerunning firms either simply by importing
production equipment and buying licensing of prod-
uct design and production engineering or by conduct-
Ž.
ing their own R&D Lim, 1997 .
To understand this industry, we have to start with
the observation on the special property of the knowl-
edge base of machine tool industry. In the machine
tool industry, the important knowledge about produc-
tion cannot simply be embodied in production equip-
ment. The equipment used in the production process
is usually general-purpose machines. Therefore, the
skills accumulated by the workforce are more impor-
tant. Furthermore, technical licensing cannot solve
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K. Lee, C. LimrResearch Policy 30 2001 459–483 477
the problem of poor design capability in the product
development stage since technical licensing tends to
be confined to a specific set of models of machines.
The producers who have to produce diverse products
to meet diverse user needs are required to have the
capability to modify machine design, which, how-
ever, cannot be acquired easily by studying abroad or
through technical licensing.20 This is part of the
reason why catching-up has not been easy in the
machine tool industry despite its relatively slow speed
of innovation.
It is also important to note that investment in
R&D alone cannot solve the problem of poor tech-
nological capability in the machine tool industry.
R&D capability originates mainly from the knowl-
edge accumulated during product development. In
terms of accumulation of tacit knowledge, a serious
difficulty lies in the fact that Korean firms are
reluctant to use domestic machine tools due to their
poor quality and low precision level. In this matter,
even government policies to encourage the use of
domestic products were not and cannot be effective.
Since the quality of the machine tools employed
directly determines the quality of the output, cus-
tomer firms, sensitive to the quality of their own
products, cannot afford to use the domestically pro-
duced machine tools. Then, the weak domestic mar-
ket, not to mention the poor export markets, provides
no opportunity to accumulate tacit knowledge by
expanding production and interacting with more cus-
tomer firms. Thus, the latecomer can expect neither
cost advantages nor quality advantages. This aspect
is one of the most fundamental differences between
the machine tool industry as a capital goods industry
and the other final goods industries, such as automo-
biles or consumer electronics. To the extent that
Ž.
numerically controlled NC device production is
scale-intensive, the limited size of the market implies
serious barriers to the development of NC device
industry, let alone the factor of the weak interface
with the customer firms and weak development of
Ž.
small- and medium-sized firms Lim, 1997 .
20 This is because the knowledge for developing products and
production machines are mainly tacit, therefore, formal education
or training will not decrease the time needed for learning.
In general, the difficulties of late-comer firms,
like Korean firms, have to do with both the tacit and
explicit aspects of the technology. However, with the
shift from specific-purpose machine tools to the
generic-purpose machine tools and, furthermore, with
the rise of NC machine tools, the importance of
explicit core technology increased. In particular, the
Ž.
emergence of computerized numerical control CNC
machine tools has given more importance to elec-
tronic know-how than to the skills embodied in the
Ž.
engineers Ryu, 1997 . As the machine tool industry
absorbed the technology from mekatronics, product
innovation has occurred more often, resulting in life
cycles being shortened. In terms of core technology,
such as the NC device, which accounts for the
largest share in the total value of the NC machine
tools, only 30% of the domestic NC machine tool
Ž
products use the locally made NC devices Ryu,
.
1997 . This is due to the low level of precision of the
domestic products, for example, for the generic pur-
pose NC lathe and the high precision lathe, it was
only 50% and 1%, respectively, of the level of the
products from advanced countries like Japan or Ger-
Ž.
many Ryu, 1997 . The Korean firms in this industry
can be said to have reached the stage of developing
some peripheral and core parts in terms of technolog-
ical development.
4.7. The model and the three patterns of catching-up
in the six industries: summary
We have explained above the three different pat-
terns of technological catching-up, namely stage-
skipping, path-creating and path-following using the
cases of six industries. Here, let us try to present a
summary of how the model is used to explain the
different evolution of the six industries.
We will begin with the two cases of stage-skip-
ping catching-up in automobile and D-RAM indus-
tries. The Korean firms skipped the stage of carbure-
tor engine to jump into a fuel-injection engine in
automobiles, and skipped 1–16 kbit D-RAM to jump
directly into 64 kbit D-RAM. In both industries, the
innovation path and, hence, the catching-up target,
were more clearly defined, and the latecomers just
skipped some stage in the path.
First, in terms of the model, automobile industry
is featured by low frequency of innovation and more
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K. Lee, C. LimrResearch Policy 30 2001 459–483478
predictable technological trajectory, thus, incentives
for R&D effort was greater than otherwise, and the
Korean firms were able to rely on cost advantage for
market success. However, even in this case, access
Ž.
to external knowledge base e.g. Ricardo was criti-
cal. According to the stages of development of tech-
nological capabilities, the Korean companies, espe-
cially Hyundai, can be said to have reached the stage
capable of designing their own products. However,
the Korean carmakers still rely on cost edge, rather
than quality differentiation or first-mover advantages
in market competition.
Second, we classify D-RAM as industry with high
Ž.
cumulativeness high frequency of innovation and
more predictable trajectory. Thus, we must say that
incentives for R&D effort is mixed for latecomer
firms, but for the Korean firms with conglomerate
structure, the expected chance for market success
based on cost edge was perceived to be great, and
the Korean firms were able to purchase production
facility and product designs during the initial stage.
Thus, given a predictable technological trajectory,
the Korean firms, in collaboration with the GRIs,
poured enormous amount of R&D inputs and over-
came difficulties posed by high cumulativeness. Suf-
ficient financial resources for R&D were critical
since the frequent product innovation, namely chip
generation change, for example, from 1 to 4 Mbit,
tended to make each successive round of the re-
quired investment bigger and bigger, and occurring
at an increasing speed. Also, critical was the access
to the external knowledge base in the form of reverse
brain drain and overseas R&D posts. Now, the
Korean D-RAM industry has reached the final stage
of technological development, namely the creation of
new product concept and design.
The CDMA is an example of a path-creating
catching-up or leapfrogging. Given the high fre-
quency of innovation and high fluidity of trajectory,
the telecommunication industry does not give the
latecomers any incentives for R&D effort. However,
this difficulty was ameliorated since the Korean R&
D consortium gained access to the external knowl-
edge base by the co-development contract with a
US-based venture company, Qualcomm. Further-
more, by taking a different path from the forerun-
ners, the Korean firms were able to expect market
success based on first-mover advantages and the
high risks were shared by the government-led R&D
consortium. The consortium also contributed to re-
ducing technological uncertainty by providing accu-
rate and up-to-date information on technology trend
and by identifying the appropriate target for R&D
project and collaboration. In this light, our finding is
somewhat different from the observation in Perez
Ž.
and Soete 1988 , as we find that the Korean entry
and leapfrogging were not driven by endogenous
generation of knowledge and skills, but by collabora-
tion with foreign companies. Anyway, the Korean
firms have now reached the stage of creating and
designing new products in terms of the stages in the
reverse engineering.
Now, let us turn to the cases of consumer elec-
tronics and PC, which we perceive as having taken
the path-following strategy in catching-up. Up to a
certain stage, the strategy was successful and re-
sulted in increasing market shares, especially in PC
and consumer electronics when the Korean firms
were able to buy mature technology with licensing
from the leading companies, and enjoyed price com-
petitiveness associated with cheap labor and produc-
tion engineering capability. However, as the licens-
ing started to become difficult or more expensive,
and the second tier NIEs emerged, the Korean firms
suddenly faced a setback in market shares. At the
same time, their technological capabilities had not
grown sufficiently to allow them to stand alone. The
Korean firms in these industries are characterized by
weak product design ability and low localization of
core part production.
According to our model, the difficulty over tech-
nological development in the PC and consumer elec-
tronics has a lot to do with the technological regimes
of these industries featured by the high frequency of
innovation and high fluidity of technological trajec-
tory. In these industries, important production, as
well as design technology, tend to be embodied in
Ž.
core information technology IT components and
software. Therefore, simply purchasing production
equipment was not enough to enable the latecomers
to catch up with the forerunners. Furthermore, the
Korean firms were not able to expect market success
because they cannot enjoy the benefit from either
costs edge or product differentiation for a long pe-
riod of time. In sum, both the R&D capabilities and
the incentives for R&D effort were low for these
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K. Lee, C. LimrResearch Policy 30 2001 459–483 479
industries. Given the frequent product innovation and
fluid trajectory, the R&D target was difficult to fix
for public and private joint efforts. Thus, in these
industries, even the government help is not enough
to overcome the fundamental difficulties imposed by
the technological regimes of these industries. Any
reliable chance for market success based on either
quality differentiation or first-mover advantages is
not guaranteed, and therefore, the government lim-
ited its role to providing protection for domestic
producers. In these two industries, technological ca-
pabilities of the Korean firms are still somewhere
between the stages capable of developing core parts
and designing their own but imitative products.
Finally, the machine tool industry is a somewhat
unique case. Machine tool industry used to have a
relatively low frequency of innovation and fluidity of
technological trajectory. Despite such technological
features of machine tools, the expected chance for
market success with product development by the
latecomer firms appears low; they cannot expect
safely any of such benefits as cost edge, quality
differentiation or first-move advantages. In the case
of machine tools, the government also found it diffi-
cult to impose protection for domestic producers.
The reason was related to the fact that in this indus-
try, the customer is not an ordinary consumer but the
domestic firms that are producing exportables for
world markets. The Korean firms were reluctant to
use domestic machine tools due to their low quality
and low level of precision. The Korean firms in this
industry can be said to have reached the stage of
developing some peripheral and core parts in terms
of technological development.
These complex stories of the six industries are
summarized and presented in a table form below,
although we are concerned with possible misleading
owing to its very simplified nature.
5. Several policy-related issues
5.1. Technological regimes Õs. institutions: policy
issue 1
To the extent that tacit knowledge is important in
R&D and to the extent that tacit knowledge is
acquired by experience in production engineering
and product development, the existence or creation
of markets is important. Without markets, the accu-
mulation of knowledge from the experience of pro-
duction is impossible. Then comes the first role of
the government, which gives the latecomers the
guaranteed markets through domestic market protec-
tion and export subsidies. Another role of the gov-
ernment includes joint R&D with the private sector
to conduct the product innovation when the R&D
target requires more explicit knowledge that could
not be acquired simply by accumulating production
experience. Specifically, the desirable scope of the
government activism and the effectiveness of it can
depend on the technological regimes of specific in-
dustries, among other factors. In other words, we
consider the technological regime as the Afundamen-
tals,Bbased on which other policy or institutional
variables act. In addition, we allow another Afunda-
mentals,Bthat is, market competition. In other words,
the firms have to win the markets based on cost
edge, quality differentiation or first-mover advan-
tages. The government cannot easily manipulate these
two fundamentals without incurring substantial costs.
Then, what can the government do?
As discussed above, the Korean government con-
ducted joint R&D with the private sector in D-RAM
and CDMA mobile phones, whereas they provided
market protection only for automobiles, consumer
electronics, and the PC industry, and offered incen-
tives for the use of domestic products in the case of
the machine tools industry. These stories help us
delineate the role of the government.
First, we would like to state that when there is
greater technological uncertainty, namely more fluid-
ity, the role of government in catching-up had better
be limited to providing market protections of fixed
duration. We think that in the cases of PC and
consumer electronics, direct government involve-
ment in R&D would not be effective or at least too
costly in overcoming fundamental technological un-
certainties. The story of short-lived public–private
R&D consortium in PC can be an example in reveal-
ing the limits of such program in terms of its dura-
tion and scope. The case of CDMA appears to
violate this principle. The CDMA case, of course, is
somewhat exceptional. The risky and exceptional
nature of this case can be seen from the still uncer-
tain future of competition between CDMA and GSM.
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K. Lee, C. LimrResearch Policy 30 2001 459–483480
An important point regarding the case of CDMA was
the fact that a promising R&D target with possible
first-mover advantages, as well as partner for collab-
oration, were clearly identified with the help from
the GRIs. This point indicates that there might also
be a way for the government to give the private
sector some help in coping with the problem of
fluidity.
We see that the problem of technological uncer-
tainty is, to a certain extent, associated with the
ignorance about the trend or directions of recent
Ž.
research know-what in concerned technological ar-
eas and about the distribution of worldwide R&D
Ž
personnel and their expertise know-who-knows-
.
what . Then there is a room for contribution by the
GRIs in keeping track of the research trends and
personnel and in sharing this information with the
private sector. This is what is exactly done by the
ETRI in the case of CDMA development, which
provides accurate assessment of the alternative tech-
nology in wireless communication and identified the
Qualcomm as a target for partnership. Thereby, the
ETRI contributed to reducing the unpredictability
regarding the development of wireless communica-
tion technology. In this sense, we can say that the
government involvement can be helpful to the extent
that, and only when, it can contribute to reducing
technological uncertainty associated with identifying
promising R&D target.
Second, when the industry is featured by more
predictable technological trajectory, the desirable
form of the government involvement can either be
joint R&D or simply market protection, depending
upon the other aspects of technologies, such as cu-
mulativeness, required size of R&D capital or risks
involved. When the industry is subject to less fre-
quent innovation, such as in automobiles, the in-
house R&D by private firms could handle R&D
projects. In the case of automobile, the Korean gov-
ernment provided domestic market protections, as
well as export promotion measures to get access to
foreign markets to achieve economy of scale. In
contrast, there are industries, like D-RAM, that is
featured by high frequency of innovation and more
risks. For these cases, we see a more room for direct
government involvement in the form of joint R&D.
In other words, some differences between the D-
RAM and automobiles in terms of the frequency of
innovation seem to have resulted in different degrees
of the government involvement.
The above observations are consistent with the
view that the direct government involvement is bet-
ter suited to handle the problem of cumulativeness
Ž.
high frequency than the unpredictability of techno-
logical trajectory. However, even in the cases of
government involvement in joint R&D to tackle the
problem of cumulativeness, once the risk and financ-
ing problem is solved, the degree of government
involvement should decrease so that private compa-
nies may take over. That was the case of D-RAM in
Korea.21 In this connection, we should emphasize
again the importance of the in-house R&D con-
ducted by private firms. In other words, when pro-
cess innovation becomes more important, following
the stage dominated by product innovation, it is
natural for in-house R&D to take over because
in-house R&D tends to be more effective in adapta-
tion and improvement-oriented innovation. Of course,
in general, even in the case of industries with more
predictable trajectory or less frequent innovation, we
cannot deny the possibility of positive contribution
of direct government involvement in R&D; it might
help to shorten the time required for catching-up.
However, there is an issue of opportunity cost of the
government resource involved, in consideration of
the fact that the private sector alone can handle
R&D project of such nature. Providing market pro-
tection and so on, would be a less costly way of
government involvement than direct R&D.
5.2. Importance of the internal and external knowl-
edge base and the access strategy: policy issue 2
We note the fact that leapfrogging occurred at the
time of the technological paradigm shift, namely
when new technologies or know-how had emerged.
However, although new knowledge and technology
tend to reside in the public institutions giving rela-
Ž
tively easier access than otherwise Perez and Soete,
21 In this regard, of course, there is an issue of timing of the
retreat of the government so that too early disengagement may not
jeopardize the stable growth of the industries. Actually, this issue
of the length of infant stages is a controversial issue in the
literature.
()
K. Lee, C. LimrResearch Policy 30 2001 459–483 481
.
1988 , this does not mean that they are in a state
ready-to-be-used in factories. ADevelopmentBor
commercialization effort is still required in which the
absorption capacity of the recipient firms or coun-
tries is critical. The case of the CDMA development
signifies the importance of the absorption capacity
Ž.
internal knowledge base of the Korean firms and
GRIs in internalizing the external knowledge. On the
other hand, emerging techno-nationalism does not
simply mean that it is impossible for the latecomer
firms to acquire the needed technology and thereby
catch up, and that international technology market is
a closed one. There were cases of Aopen techno-pro-
tectionism,Bas the examples of Hyundai Motors and
Samsung Semi-conductors show. These firms were
able to get help from the specialized R&D or ven-
ture firms. More important in this regard is the
absorption capacity of the latecomer firms since this
determines the detailed conditions of the technology
transfer contract and nature of the access.
We should also emphasize the importance of ac-
cess to the external knowledge base, namely the
issue of technology transfer. The experience of con-
sumer electronics, PC, D-RAM and mobile phones,
all indicates the importance of access to the external
knowledge base when indigenous development of
technology is difficult given a higher frequency of
innovation and a higher fluidity of technological
trajectory. Up to a certain point in their development,
consumer electronics and PCs were able to catch-up
market shares as the leading companies provided
already mature technology in the form of licenses.
However, as licensing became difficult or expensive,
their catching-up slowed or even stopped. In the case
of the CDMA development, the Koreans firms got
access to not mature, but emerging technology, with
the license not from the leading, but from a venture
company. Since the Korean firm’s contribution in
commercializing the original technological was im-
portant in the CDMA case, their technological posi-
tion was more sustainable than in the case of the PCs
or consumer electronics.
In contrast, when the trajectory is more pre-
dictable and the innovation is less frequent, the
strategy in getting access to foreign technology may
well be different. The often-discussed example is the
contrasting experience of Hyundai and Daewoo auto-
Ž.
mobiles K. Kim, 1994; L. Kim, 1997a . As is well
known, Hyundai did not share management control
with any of its shareholders, including Mitsubishi,
and took the sole responsibility of key R&D projects
such as engine development. With the help from the
specialized R&D companies like Ricardo, Hyundai’s
technological capability grew in a steady manner. In
contrast, although Daewoo shared its management
with GM, Daewoo’s perception was that GM was
reluctant to transfer core technologies to Daewoo.
Thus, this company experienced management con-
flicts among its major shareholders, and finally, Dae-
woo separated from GM to become independent in
the early 1990s. Only after this independence and
since the mid-1990s has Daewoo begun to realize the
achievements from its own R&D effort. This experi-
ence suggests that just following the FDI strategy
from beginning to end is not likely to generate a
stage-skipping or path-creating catching-up. How-
ever, it should also be noted that having once arrived
at the higher stage of technological development, the
catching-up firms might want to form international
alliances or even joint ventures to cope with the
increasingly fierce global competition and to keep
ahead. It is our opinion that several Korean firms
have now reached this stage, and the old standing-
alone strategy might not be effective anymore. Dae-
woo Automobiles itself is now again actively seek-
ing international alliance with foreign carmakers in-
cluding GM. This strategy might work fine this time
since Daewoo now commands higher technological
capability than before, which affects its bargaining
positions. In other words, the existing technological
capability and base of local firms matter since they
determine the concrete terms of the technology-re-
lated contract between the local and foreign firms.
5.3. Remarks on further technological deÕelopment
of Korean industries
We have attributed difficulty of Korean firms in
PC and consumer electronics to the peculiar nature
of technological regimes of these industries, espe-
cially uncertainty, and warned against any direct
involvement by the government in these industries.
Then, what can they do? Should they give up these
industries? Despite this situation, should the govern-
ment stay idle and do nothing? In these industries,
()
K. Lee, C. LimrResearch Policy 30 2001 459–483482
our warning is primarily concerned with the govern-
ment involvement in terms of direct R&D, and
actually, in these industries, all R&D projects are
currently private initiatives and there is no direct
government involvement. This does not mean that
the government cannot participate in other ways. As
discussed above with CDMA as an example, the
government or the GRIs can contribute to cope with
the problem of fluidity by keeping track of the
research trends and personnel and in sharing this
information with the private sector. Furthermore, we
should note that because a path-following catch-up
in these industries would not work or take forever,
the critical issue is how to generate stage-skipping
along the path-following catch-up or an alternative
path. Given that the private sector alone cannot deal
with this problem successfully, we should approach
the problem from the perspective of a sectoral or
national innovation system that requires coordination
among the firms, government agencies, and
academia. To generate stage-skipping or alternative
path, what is needed is more Acreativity.BHere
comes the importance of the universities as suppliers
of creativity, and of the financial system as a sup-
Ž.
porter of creativity new business idea . In this re-
gard, one great achievement by the Korean govern-
ment was the establishment of the KOSDAQ stock
market, like the NASDAQ in the USA. Only two
years after its establishment, KOSDAQ has emerged
as the mother of hundreds of small- and medium-
sized venture companies and startups. Many ambi-
tious youths are joining KOSDAQ firms from uni-
versities and many talents are leaving the giants
Ž.
conglomerates chaebols to join these new styles of
the firms. Having financed their investment from
stocks rather than from the banks like chaebols, these
new and flexible firms are better suited to handle the
problem of uncertainty than the big and rigid chae-
bols. Actually, the Sambo Computer, the rising star
in PC, is an outgrowth of an originally small venture
company. This new phenomenon tells what the gov-
ernment can do in the area of national innovation
system to deal with the uncertainty-related problems.
6. Concluding remarks
It is not easy to spell out in any simple manner
the conditions for a technological catching-up or its
failure without the risk of over-simplification. The
conditions differ between different industries facing
different technological and market conditions. The
process is an outcome of a complex interplay of
in-house R&D, the government, the modes of tech-
nology transfer, market conditions, absorption capac-
ity, and the nature of the technology or knowledge
itself. What we have done is a first step toward some
generalization drawing on the experiences of the
Korean industries. The Korean experiences suggest
that a path-following or skipping catching-up is more
likely to happen largely by private initiatives in
industries where innovations are less frequent or
cumulative and the innovation path is more pre-
dictable, and thus, the catching-up target is more
easily identified, whereas a path-creating catching-up
is more likely to happen by public–private collabora-
tion where the involved technology is more fluid and
the risk is high with bigger capital requirements.
Ž.
Malerba and Orsenigo 1995 and Breschi et al.
Ž.
1998 have differentiated two kinds of technological
regimes, namely Schumpeter Mark I Pattern featured
by low technological opportunities, low appropriabil-
ity, low cumulativeness, and less science-oriented
knowledge base, and Schumpeter Mark II with oppo-
site features. One might say that technological catch-
ing-up is more difficult in those industries belonging
to the latter group since it is characterized by high
degree of concentration of innovative activities, high
stability in the ranking of innovations and low rele-
vance of new innovations. But, the process of tech-
nological catching-up is more complicated than this.
Industries evolve and their technological character-
istics also change depending upon the stages in the
life cycles. If we take into account the issue of
leapfrogging, things are getting more complicated.
Ž.
Although Malerba and Orsenigo 1995 classified
road vehicle and engines, telecommunications and
semiconductors as belonging to Schumpeter II group,
these three industries, however, are exactly where
Korean firms achieved substantial catching-ups or
leapfrogging, though this does not necessarily mean
that it will also happen in other countries.
In this light, one might want to say that Korean
cases are more of the exceptions rather than the
rules. Then, such consideration brings back the issue
of organizational selection, such that different styles
of firms show different degrees of fitness to different
()
K. Lee, C. LimrResearch Policy 30 2001 459–483 483
environments. For conglomerates, like the Korean
chaebols, the predictability of technological trajec-
tory was very important as it makes them easy to fix
catching-up targets and concentrate all resources they
can mobilize on the projects. This is one important
aspect of the technological regime, which is particu-
larly relevant in the context of catching-up and ig-
nored in the literature on the Schumpeterian pattern
of innovations centered on the experiences of the
advanced countries.
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