Government Research Institutes as Facilitatorsof Industrial Technology Adaptation

- Korean Experiences -

February, 2007

Sungchul Chungchungsc@stepi.re.kr

Science and Technology Policy Institute

Objectives

To review the roles of the government research in

stitutes (GRIs) as facilitator of industrial technolo

gy adaptation

To evaluate the performance of GRIs and derive i

mplications for latecomers

How far Korea has come since 1960s?

Economic and S&T development GNP p. c.: from $ 87(’61) to $20,000(07) Exports : from $55 M(’61) to $300 B (2006) Unemployment rate : 22.3%(’61) to 3% (2006) From one of the poorest countries in the world to one

of the most dynamic industrial economies From a barren land to a new S&T power

(7th largest spender in R&D, 4th largest producer of patents, etc)

Growth of R&D investment

6th largest R&D investor among OECD countries

Note: Upper portion of the bar refers to industry contribution, and the lower parts that of the government.

Bill

ion W

on

R&D Expenditures in Korea

24,155

17,325

13,84912,186

10,741

4,0351,538773

1982 1985 1990 1995 1997 2000 2002 2005

25,000

20,000

15,000

10,000

5,000

0

Trend of Korea’s R&D structure

Private industries account for over 75% of the GERD Source: Ministry of Science and Technology, Republic of Korea

Factors behind the growth

Demand side : Outward looking development export-orientation pressure from international market for technological competitiveness increased demand for

technology adaptation and/or RDI

Supply side

o Financial resources : Large-firm-oriented industrial development chaebol system increased abilities of private industries to finance long-term, risky R&D projects

o Human resource : Korea prepared itself well for R&D by investing heavily in education and HRD

o Various policy programs to promote private RDIo GRIs to help industries adapt new technologies

As Korea lacked in technological capability required for industrial development in the early stage of development, the government created the Korea Institute of Science and Technology (KIST) in 1966 and the Korea S&T Information Center (KORSTIC) in 1962 in order to make up for the technological weakness of the private industries and help them adapt new technologies Legal entity: Non-government special corp (To provide better job terms

for research scientists and engineers) Financial sources: Government budget and industries Key personnel: Korean S&E from abroad Operation: Independent (But under the control of sponsoring ministries)

Government Research Institutes

Expansion of GRIs In the 1970s, Korea pursued the development of heavy chemica

l industries, with strategic focus on steel, shipbuilding, machineries, chemicals, electronics, and so on.

In order support the development of the HCI, the government created GRI for each of the strategic areas, such as:

(1) Korea Institute of Machineries and Metals (KIMM)

(2) Korea Research Institute of Standard Science (KRISS)

(3) Electronic Technology Research Institute (ETRI)

(4) Korea Research Institute for Chemical Technology (KRICT)

(5) Korea Research Institute of Shipbuilding and Oceans (KRISO)

(6) Systems Engineering Research Institute (SERI), etc

Changes in the roles of GRIs Entering into the 1980s, the environment surrounding GRIs has

changed rapidly

- R&D capabilities of private industries grew remarkably

- Universities also began to reorient their systems toward

research In response, the functions of the GRIs were readjusted such that

they not only assist the industries but also conduct national R&D projects which were designed to develop industrial technologies as well as generic technologies(GRIs today account for about 40% of the government-funded R&D)

GRIs’ contributions to industrial technology adaptation

[Case 1: D RAM technology]

To avoid duplicate research and investment, the government intervened and established a national project for D-RAM research. ETRI played the coordinating role with three large enterprises participating. Samsung was the first among the three that announced the completion of designing 4M D RAM in 1989 and 16M D RAM in 1990, only a few months after Japan.

[Case 2: Electronic switching system]

In 1981, the government(sole buyer) decided to shift the public telephone switching system from an electrical direct dialing (EDD) system to an ESS. In 1986, ETRI organized a consortium with four local companies to develop Korea’s own ESS – Time Division Exchange(TDX) system. The project was completed and the technology was transferred to the participating companies for production. The new system not only replaced the old ones but also was exported to foreign countries.

[Case 3: Optical fibre] When Corning Glass refused to transfer optical fibre produc

tion technology to Korea in 1977, two Chaebol companies entered into a joint project with KIST to develop the technology. After 7 years of research, the locally produced optical cable was tested successfully on a 35 km route in 1983. Although the local effort was terminated due to slow progress, it helped local firms to gain bargaining power in acquiring foreign technologies on a far more favorable term.

[Case 4: Development of strategic industries] Korean government’s plan to launch the then ambitious pla

ns to build the Pohang Steel Mill and shipyards were based on the technical feasibility studies by KIST. KIST not only provided the basic project concepts but also identified technologies required for the construction of the steel mill and shipyard.

[Case 5: Polyester film technology]

When Japanese companies refused to transfer polyester film production technology to Korea for fear of losing market, a Korean chemical company, in collaboration with KIST, successfully reverse-engineered the technology and Korea became one the major suppliers of audio- and video-cassette tape in the world market.

[Case 6: Aerospace industry]

To develop aerospace industry, the government legislated the Aerospace Industry Development Law in 1987, and established the Korea Aerospace Research Institute (KARI) in a way to help the private sectors to adapt aerospace technologies. KARI has been providing satellite technologies for local communication companies and is leading national project on space technology. It is also working with local aircraft companies for the development of various types of aircraft for civilian and military uses.

Recent changes in GRIs

Reorganization of GRIs GRIs were restructuring in 1999 because of two criticis

ms against the GRI system * Inefficiency in GRI operation because of the inter-

institutional barriers to mobility * GRIs tended to work for the interests of their patro

ns (ministries) rather than national interests So, GRIs were regrouped and put under three research c

ouncils which are under the control of the National Science and Technology Council (NSTC)

Current roles of GRIs R&D: GRIs are still the major players in public R&D, accounti

ng for about 40% of government R&D

Assistance for industries

- Technology transfer, technology consultancy, technology iden

tification, technology evaluation, etc

- Operation of regional TLO

- Technology information

GRIs’ performance: an evaluation

GRIs have contributed to industrial development by helping private industries adapt new technologies, in particular, in the early stage of development when Korea lacked in technological capabilities.

- In the 60s and 70s, technical assistance, such as what GRIs provided was far more effectivce than other government support programs, including financial, tax and other subsidies.

They also contributed to the laying of a foundation for S&T development by attracting top talents into S&T and nurturing a culture for research.

- GRIs’ research S&E have spread out to various sectors, playing leading roles in S&T development in the Korean society

- S&E at KIST and other GRIs offered a very attractive role model for young talents back in the 60s and 70s who are now leading research community in Korea.

But as the names of GRIs suggest, they are too much linked to specific industries and lack agility to cope with rapid changes in technology and industry.

In the 60s and 70s, there existed fairly large gaps between what GRIs could offer and what industries could accommodate – GRIs were not familiar with the technical needs at the shop-floor level.

Due to organizational rigidity, GRIs have not been able to adapt to the changing environments and therefore have been subject to external restructuring and reorganization. (Forced by the government)

Implications for latecomers?

For catch-up economies that lack S&T capabilities, Korean GRI can be an effective model as an instrument to promote and facilitate technology adaptation in the early stage of industrial development

- But, for GRIs to perform better, they need be staffed with S&E who are familiar with both technologies and shop-floor needs.

GRIs should be organized in a very flexible way so that they can adapt themselves to the changing needs as the economies go through different stages of development