Innovation Talent in Korea: Challenges and Responses

SPRIE

Stanford Graduate School of Business

June 3, 2013

Sunyang Chung (sychung@konkuk.ac.kr)

Dean, William F. Miller School of MOT

Konkuk University and

Director, Policy Research Center, Korean Academy of Science and Technology (KAST)

Seoul, Korea

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1. KOREAN ECONOMY

2. NATIONAL INNOVATION SYSTEM IN KOREA

4. INNOVATION TALENT IN KOREA

5. KOREAN FIRMS’ RESPONSES: SAMSUNG, LG

6. CONCLUSIONS & DISCUSSIONS

CONTENTS

2

Korean Economy in General

Seoul at night in 1960

Seoul at night in 2010

5

1960 2010

1960 2010 1960 2010

Population (Million)

24.9

48.9

3.9

1014.6

80

20,759 32

466,384

GDP (US$, Billion)

1960 2010

Exports (US$, Million) GDP per capita (US$)

Source: IMF

Greatest Success Story

Secretes???

Korea has been one of the fast developing countries in the world. - It is now approaching from imitation-based economy through creative imitation stage to innovation-based economy!!!

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Automobile : 5th manufacturer (Hyundai, Kia, Daewoo, Ssangyong) Ship-building : Leader since the 1990s (Samsung, Daewoo, Hyundai) Consumer electronics : Samsung, LG, … Semiconductor : 3rd manufacturer (1st in Memory Chip) CDMA : 1st country in its commercializing Steel : 6th largest manufacturer (e.g.: POSCO) Others : Nuclear power plants, construction, petro-chemical, ……

Two Success factors for Korean economy 1) Innovative Talent 2) Technological Innovations

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NATIONAL INNOVATION SYSTEMS

IN KOREA

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1) Freeman (1987) “…the network of institutions in the public and private sectors whose activities and interactions initiate, import, modify and diffuse new technologies.” 2) Lundvall (1992) “ the elements and relationships which interact in the production, diffusion and use of new , and economic useful, knowledge … and are either located within or rooted inside the borders of a nation state.” 3) Chung & Lay (1997), Chung (2001, 2002) “ a complex of innovation actors (institutions) in a nation which are directly related to the generation, diffusion and appropriation of technological innovations and an interrelationship between these innovation actors.”

National Innovation System

Jeju

Jeonnam

GWANGJU BUSAN Gyeongnam

Jeonbuk

Gyeongbuk

DAEEGU DAEJEON

Chungnam

SEOUL INCHON

Chungbuk

Gangwon Gyeonggi

ULSAN

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South Korea

Very well developed

Less developed

Less developed

Well developed

Periods Development of Korean National Innovation System 1960s - Beginning of scientific education

- Beginning of S&T infrastructure construction (KIST: 1967, MOST: 1968) 1970s - Construction of government-sponsored research institutes (GRIs)

- Construction of Daedeok Science Town (1973) - Technical, scientific and further education (e.g. KAIST) - Beginning of industrial R&D

1980s - Promotion of key technologies through National R&D Program - Activation of industrial R&D - Mass production of high-qualified R&D personnel - Expansion of S&T-related ministries (MOTIE, MOE, MOIT)

1990s

- Expansion of R&D resources and their efficient utilization - Activation of academic R&D and innovation capabilities (ERC program) - Introduction of regional innovation strategies – A Comprehensive Plan for Promoting Regional Science and Technology - Introduction of Research Council (RC) System for GRIs

Development of Korean S&T Policies

Periods Development of Korean National Innovation System 2000

- 2007 - Enactment of Basic Law of Science and Technology - Brain Korea (BK) 21 Program for nurturing innovative talent - Coordination of S&T and innovation policies - Expansion of regional innovation strategies - Promotion of 5Ts and Next Generation Growth Engine Industries - Deputy Prime Minister of Science and Technology - Science, Technology, Innovation Office under MOST

2008- 2012

- Establishment of Ministry of Education, Science and Technology (MEST) by merger of MOST and Ministry of Education (MOE) - Separately positioning of GRIs under MEST and MKE (Ministry of Knowledge and Economy) - Strengthening the R&D capabilities of Korean universities, e.g. initiating the World Class University (WCU) Program - Nurturing R&D Special Zones and International Science Business Belt - Strengthening National S&T Council (NSTC) for better coordination - Establishment of Institute of Basic Science (IBS) for Basic Sciences

2013- Present

- Establishing the Ministry of S&T, ICT, and Future Planning (MISIP) for Creative Economy

- GRIs belong to the MISIP

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Development of Korean NIS: Summary

Industry

Public Research sector

Industry

Public Research sector

Academia

Industry

Public Research sector

Academia

Industry

Public Research sector

1960s 1970s 1980s 1990s 2000s

Source: Chung, S. (2003), “Innovation in Korea,” Shavinna, L. V. (Ed.), The International Handbook on Innovation, Pergamon, Oxford, UK.

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INNOVATION TALENT IN KOREA

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R&D Expenditures in Korea

Source: NSTC/KISTEP(2012), 2011 Survey of R&D in Korea, Seoul, December.

As of 2011, with an amount of about 45,000 US$, Korea ranked 6th in the world, and 2nd in the world regarding the share of total R&D expenditures as a percentage of GDP.

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Increase in R&D Personnel* in Korea

IMF Jurisdiction

Imitation stage

Innovation stage???

*includes researchers, technicians and other staffs

The number of R&D personnel increased dramatically from almost nothing in 1962 to more than 500,000 persons in 2010.

The 2000s showed much stronger increase in innovative talent than the 1980s. The economic recession in the later half of the 1990s led to the decrease in the

number of R&D personnel.

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Total Number of Researchers

Source: NSTC/KISTEP(2012), 2011 Survey of R&D in Korea, Seoul, December.

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Distribution of Researchers by Sector/Degree in 2011

In general, Korea has a relative good balance in the composition of innovative talent, as it has lots of PhDs.

The Korean industry is the biggest customer for creative talent. However, academia (universities ) is the biggest employer for PhD.

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Number of Researchers by Region

The Korean innovative talent are heavily concentrated in Seoul and its outskirts: More than 60% of Korean talent are in Seoul, Incheon and Gyeonggi areas.

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R&D Concentration in Korean Industry

Top 5 companies occupy about 27% of Korean researchers: This domination is much stronger for PhDs.

Top 20 companies occupy about half of PhDs working in the Korean industry.

This indicates that Korean SMEs have lots of difficulties of recruiting and maintaining innovative talent.

Number of Private Companies’ Research Institutes

Source: KOITA, Annual Report of Industrial Science and Technology, 2012. 20

SMEs BEs Total

21

Total Number of Researchers (FTE) by Country

Comparison of R&D Intensity between Countries

Source: KISTEP & MEST, Survey of Research and Development in Korea, Each Year.

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41

50

47

41

2007 2008 2009 2010 2011

수준급 엔지니어 공급정도 순위

Korea’s Level of Supplying Quality Engineers

Source: IMD (2011)

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Historical Challenges Korea has nurtured and increased innovation talent dramatically. This has become a

solid base for economic development of Korea.

Korea is entering into innovation-based economy from imitation-based one. Therefore Korea needs more and better qualified innovative talent than before.

Firms, especially SMEs, have always been in need of recruiting innovative talent. However some innovative talent have been operating their start-up companies very successfully.

Most of Korean innovative talent have been concentrated on universities and public research institutes like the Korea Institute of Science and Technology (KIST).

Korean regions have had big difficulties to recruit well-qualified innovative talent, which has led to the unfair development of the Korean economy.

This government from February 2013 has emphasized the Creative Economy as a main goal of its administration

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Responses of the Korean Government 1. Special Law for Supporting Science and Engineering for Strengthening National

Competitiveness in 2004 - A Master Plan for Nurturing and Supporting Scientists and Engineers - The 1st Master Plan (2004-2010); The 2nd Master Plan (2011-2015)

2. The 2nd Master Plan for Nurturing and Supporting Scientists and Engineers (2011-2015)

1) Strengthening STEAM (Science, Technology, Engineering, Arts and mathematics) education for elementary, middle, and high schools

2) Strengthening the Specialization, Intensification, and Global Research Capabilities of undergraduate and graduate programs: Presidential Science Scholarship, Global PhD Scholarship

3) Program for Utilizing Research Manpower by SMEs

3. Brain Korea (BK) 21 Program - Aims to nurture and train world-class graduate programs (1999-2005; 2006-2012) - Supports master and PhD students as well as post-Docs for their R&D capabilities

4. World Class University (WCU) Program - Aims to enhance the competitiveness of Korean universities in terms of inviting

world-class scientists and engineers to research-intensive universities

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KOREAN FIRMS’ RESPONSES: Samsung, LG

Korean TVs in the 1970s

Samsung TV LG TV

Samsung Electronics

MyMy: Samsung Cassette Player in 1981

Galaxy S3 in 2012

“Creative Management” by Samsung

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Number of people recruited R&D

Design

S/W

Recruitment in 2012 1) New employees: 9,000 persons 2) Careered employees: 5,000 persons 3) Technicians: 12,000 persons

- especially since June, 2003

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“One creative talent can feed more than100,000 people!!!”

New personnel management system: - Global talent; - No discrimination due to regions, universities, regions, and so on - Strong incentive system: 3 times salary difference in the same status

Since 2002, CEO Evaluation based on the number of creative talent recruited

Number of Ph.Ds in Samsung Electronics

Universities of Executives in Samsung Electronics

Samsung as a Hub of Global Talent

Foreign Univ. KAIST

SNU

1. Level “S”: Super - World top level talent

2. Level “A”: Ace

3. Level “H”: High potential - Not fully confirmed, but high potential talent

The number of “S” level talent recruited is about 30% of

annual evaluation on Samsung executives.

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Types of Talent in Samsung

LG Electronics

LG Electronics LG Display LG Innotech LG Chemicals …..

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“LG Techno-Conference” in San Francisco on April 13, 2013

“LG CEOs have to search for global talent regardless of sex, university and nationality!!!”

“Talent Management” in LG

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FURTHER CHALLENGES

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Stage of Development Human Reourrces Development

Imitation Stage (1960s-1980s)

- Studying abroad, but no enough return - Domestic nurturing technicians - Utilizing Korean technicians - Starts the education of well-qualified manpower

Creative Imitation Stage

(1990s-2000s)

- Studying abroad, active return -Domestic nurturing and supplying technicians and researchers

- Utilization Korean foreign technicians

Innovation Stage (2010s - )

- Studying abroad but no enough return of innovative talent

- Domestic nurturing and supplying technicians and researchers

- Lack of technicians and active utilization foreign technicians

- Need to recruit foreign innovation talent

Summary of Innovation Talent in Korea

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Further Challenges 1. How to recruit and utilize global talent??? Korea is entering into the

ageing society and expected to have a big shortage of innovative talent around 2020.

2. How to motivate Korean entrepreneurs to operate their business all over the world?

3. How Korean SMEs recruit and maintain innovation talent???

4. How to induce innovative talent into service industries? For example, can Korea generate the similar successes like PSY and his Gangnam Style? Can it generate them in other service industries?

5. How to induce brilliant Korean middle and high school students to work in science and engineering?

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Many Thanks!!! Vielen Dank!!! 대단히 감사합니다!!!