KOREAS STRATEGY FOR

LEADERSHIP IN RESEARCH

AND DEVELOPMENT

U.S. Department of Commerce

Office of Technology Policy

Assistant Secretary for Technology Policy

Dr. Graham R. Mitchell

June 1997
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TABLE OF CONTENTS

KOREAS STRATEGY FOR LEADERSHIP

IN RESEARCH AND DEVELOPMENT

PAGE

FOREWORD .................................................................................................. 5

INTRODUCTION ............................................................................................ 7

Economic Background................................................................................. 7

Highlights of Koreas Industrial Development ....................................... 9

Continuing Obstacles ................................................................................ 11

Conclusion .................................................................................................. 12

LEADING SOURCES FOR TECHNOLOGY TRANSFER...................................... 13

KOREAN POLICY TO DEVELOP ADVANCED TECHNOLOGY:

THE HIGHLY ADVANCED NATIONAL (HAN) PROJECTS ........................ 15

METHODS OF TECHNOLOGY TRANSFER ..................................................... 17

Direct Overseas Involvement ................................................................... 17

International Cooperation ........................................................................ 20

Cooperation between Korean and Foreign Companies ....................... 24

Foreign Patents ........................................................................................... 26

Employing Foreign Nationals .................................................................. 28

Foreign Databases ...................................................................................... 32

CONCLUSION ............................................................................................. 35
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FOREWORD

The Republic of Korea (Korea) is one of the United States most significant trading partners and a growing economic ally. It is the worlds

largest producer of dynamic random-access memory (DRAM) chips and

among the top manufacturers of ships, consumer electronics, and automobiles. In recent years, the annual growth in Koreas gross domestic

product (GDP) has remained high, at between 5 and 8 percent, and by

1995 the per capita GDP was $9,990, more than $1,500 higher than in

1994; in 1996, the per capita GDP reached $10,600. Much of Koreas past

growth has been achieved through investment in large-scale facilities,

development of infrastructure, and aggressive acquisition of the most

advanced technology available in the global marketplace. In the process,

the Koreans have developed a range of sophisticated procedures for

transferring technology, some of which may provide insights into practices of other developing countries.

The continuation of Koreas high economic growth will increasingly

depend on technological innovations produced within Korea. As a result,

the government is placing great emphasis on stimulating indigenous

technical advances and on a business climate more conducive to innovation. In 1996, the government spent $1.1 billion on nondefense research

and development (R&D), a 15 percent increase over 1995.

Korean industry also continues to place great emphasis on technical

advances. Despite slower economic growth in 1996, the Korean Industrial

Technology Association (KITA) issued an extremely optimistic 1997

forecast for R&D spending and other R&D indicators. Nearly 80 percent

of KITA members responding to a survey believed company R&D expenditures would increase, compared with just less than 30 percent of U.S.

respondents in a similar survey by the Industrial Research Institute.

Similarly, more than 70 percent of KITA respondents forecast increases in

the number of R&D professionals, compared with about 15 percent of

their U.S. counterparts.

This report, Koreas Strategy for Leadership in Research and Development, is part of a series published by the Office of Technology Policy on

Asian science and technology infrastructure and strategies for technological innovation. Our research suggests the following observations:

n Korea employs a wide variety of methods of technology transfer,

ranging from licensing and stock purchases to academic exchanges and research databases.
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n The majority of technology being transferred to Korea is absorbed by the top chaebols (conglomerates).

n Korea is determined to upgrade its technological infrastructure

and improve its competitiveness by implementing a systematic,

integrated globalization strategy that harnesses the strengths of

business, academia, media, and government.

n Korea continues to engender admiration from U.S. business,

given its achievements since the Korean War, and caution due to

the lack of transparency in its business practices.
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INTRODUCTION

Expanding technology investment and cooperation with U.S. companies

is an urgent objective of the current government. While our business

community has lost its dominant position in light textiles and consumer

goods, the electronic, heavy manufacturing, and chemical industries are

booming and aggressively seeking to make their technologies more

competitive.

H. K. Kim, Korean government official, 1996

Korea is rapidly developing its own industrial infrastructure to ensure

its competitiveness and continued growth in the global marketplace. A key component of this infrastructure development is the assimilation of technology and management techniques developed by more

industrialized nations, especially the United States. Together, the public

and private sectors of Korea have focused strategically on competitiveness through increased technological self-sufficiency and identification

of new sources of technology. The Korean globalization strategy takes

advantage of all opportunities to improve its technological infrastructure

and global competitiveness. This report explains the methods of technology transfer employed by Koreas public and private sectors.

Economic Background

During the past 20 years, Korea has enjoyed a steadily increasing standard of living as its economic strength has grown. The rapid growth

of the 1970s and early 1980s, propelled by the government-led development strategy, was tempered by a slowdown in the late 1980s. This lag

mirrored a variety of socioeconomic changes taking place in Korea,

including further democratization of the political process and pent-up

demand among its consumers. The serious problemsa deficit in the

current account balance, 10 percent inflation, and a dropping GDP

growth ratehave steadily improved during the first half of the 1990s. In

1995, with a population of 45 million, Korea had a GDP of $447.6 billion,

or a per capita GDP of $9,990 (figures 1 and 2).

While the GDP and wage rates continue to rise (wage rates have grown

14.5 percent since 1994), inflation has remained steady at 6 percent. And

between 1979 and 1995, Koreas manufacturing output increased by an

annual average of 9.9 percent. Even Koreas foreign debt remains low, at

$60.5 million (1995). These consistently positive economic indicators,

During the past 20 years,

Korea has enjoyed a

steadily increasing

standard of living as

its economic strength

has grown.
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Figure 1. Koreas GDP, 1990 to 1995 (billions of dollars)

Figure 1. Koreas GDP, 1990 to 1995 (billions of dollars)

Figure 2. Koreas Annual per Capita GDP Growth Rate,

1992 to 1995 (percent)
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crowned by a relatively flat inflation rate, reflect both the increasing

standard of living in Korea and economic stability.

However, while many of the economic indicators paint a pretty picture,

some of the underlying factors are putting pressure on the Korean

economy, including its trade deficit, which totaled $2 billion in 1995, and

the rising wage rates that are boding so well for the individual Korean

worker. These high wage rates are one cause of the decline in Koreas

share of the light industry manufacturing market.

Highlights of Koreas Industrial Development

Koreas industrial and competitive development has advanced through

well-defined stages to reach its present position. This progression reflects

the development of Koreas industrial economy in general and the

development of its competitive advantages in particular.

Korea has already left behind its first competitive development stage,

generally referred to as the factor-driven stage. During this period (the

1960s and 1970s), Koreas key competitive advantages were its abundant

and inexpensive labor and its ability to acquire technology through the

purchase and imitation of foreign capital goods. Korea capitalized on

these competitive advantages by expanding its export-oriented light

industry, investing in large-scale production facilities, and improving its

process technology. At this time, the government began taking a leadership role in the development of Koreas technological competitiveness by

establishing its scientific institutions and providing the foundation for its

scientific infrastructure. The government also launched national R&D

programs for civilian technology to promote the assimilation of imported

foreign technology.

Korea then progressed into its investment-driven stage (the 1980s and

early 1990s), during which it concentrated on acquiring and assimilating

the most advanced technology available in the global marketplace.

Koreas improved manufacturing capability became a competitive advantage, enabling it to expand its technology-intensive industries and

increase its R&D capacity.

The investment-driven stage has been characterized by a pragmatic,

integrated strategy that harnesses the strengths of the private sector,

academia, and government. Together, the public and private sectors of

Korea have strategically focused on competitiveness through increased

Korea capitalized on these

competitive advantages

by expanding its

export-oriented light

industry.
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technological self-sufficiency, identification of new sources of technology

in such places as Russia and China, development of new products from

technological sources other than traditional suppliers, and increased

foreign investment by Korean firms, especially in Southeast Asia, the

United States, and Europe. Technology transfer and assimilation have

formed the basis of the Korean competitive infrastructure.

The Korean government has retained its leadership role, channeling

limited capital into specific industries, promoting risk taking, protecting

its domestic markets to encourage the entry of national firms and the

construction of efficient facilities, stimulating and influencing the acquisition of foreign technology, and encouraging exports. The government

continues to encourage local industries to expand their investments in

R&D through such incentives as accelerated depreciation allowances,

investment tax credits, deferral of income tax payments, and duty-free

import of selected capital goods. The government is also involved with

business development in support of strategic industries and has significantly boosted R&D spending to develop key technologies and thus

increase global competitiveness. A notable example is the planned investment of $27.25 million in the research and design of High-Definition

Television (HDTV) technology.

The Korean government is also active in creating and promoting a climate for science and technology (S&T) within its society to help the

transition to the innovation-driven stage. With the cooperation of the

academic, industrial, and media communities, the government has

initiated a nationwide science movement whose main objective is to

create an environment in which the general public can apply scientific

principles to daily living with a spirit of rationality, efficiency, and creativity (USG DOC.#SM95-10004). This type of nationwide public support for science and education has provided a strong foundation for

individual and community support for technological infrastructure

development.

The Korean government has placed a high priority on developing indigenous technological capabilities and creating a world-class industrial

infrastructure by 2001. It has recognized that economies with a strong

domestic infrastructure in terms of technological assets and capabilities

are better equipped for global competition and that those without such

an infrastructure must utilize other advantages to create incentives for

the technology to come to them. Korea continues to parlay its dominance

as a processor rather than an innovator and is still gathering and assimilating knowledge from outside sources to build technological strength.

Korea continues to

parlay its dominance

as a processor rather

than an innovator and

is still gathering and

assimilating knowledge

from outside sources to

build technological

strength.
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The Korean government and the chaebols have worked both independently and together to make up for the shortcomings of their technological infrastructure and are focusing on obtaining foreign technology from

industrialized nations through direct and indirect methods.

Korea is slowly making the transition from the investment-driven stage

to the innovation-driven stage, in which its major source of competitive

advantage will be its capability for innovation. This transition is fraught

with challenges, the most difficult being the generation of high rates of

technological innovation. Many of the chaebols are already competing in

the sophisticated global market, and consequently, Korea is undergoing

structural changes that favor high-value-added industries. Leading

chaebols such as Samsung, LG, Hyundai, and Daewoo are positioned at

the forefront of their industries and are in the process of globalizing their

R&D centers to develop state-of-the-art technologies. But although these

chaebols have begun to support technological innovation, the Korean

governments national system of innovation is still weak in its creation of

scientific knowledge and technology. The question remains, How will

Korea, while still working to build its technological infrastructure, obtain

enough technology to ignite indigenous innovation?

Continuing Obstacles

Koreas bureaucratic approach to managing foreign investment is incompatible with the needs of many foreign firms, particularly U.S. firms.

Many companies are wary of Korean business practices and continue to

raise questions about Koreas respect for intellectual property rights, its

limited market access for goods and services, its labor and wages, and

the compatibility of management styles and goals. Korea maintains

restrictions on foreign ownership including case-by-case approval for

foreign investment. The terms of trade and the openness of the Korean

market are a source of friction with the United States. U.S. firms have

concerns related to accessing technology in Korea and purchasing Korean

firms. Business deals, according to U.S. firms, have suffered from serious

bureaucratic limitations, and many U.S. firms are simply staying away,

not convinced that they are dealing with Korean companies on a level

playing field. Korean firms and the Korean government are making

steady progress but are still learning how to engage in business and

technology transfer so that a net positive result is ensured for both

parties (figure 3).
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Figure 3. Evolution of the Korean Governments S&T Role

Conclusion

Together, the public and private sectors of Korea have strategically

focused on competitiveness through increased technological

self-sufficiency and identification of new sources of technology. This

report will focus on the opportunities for technology transfer and the

methods Korea uses to obtain cutting-edge technology. The following is a

discussion of a full range of technology transfer methods, from direct

purchases of patents to the more subtle method of academic exchange of

scientists and engineers, all of which are employed by the chaebols and

the government.

Together, the public and

private sectors of Korea

have strategically focused

on competitiveness

through increased

technological

self-sufficiency and

identification of new

sources of technology.
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LEADING SOURCES FOR TECHNOLOGY TRANSFER

I

n its drive to build its technological infrastructure, Korea has acquired

and assimilated technology from a number of more advanced countries. Recently, the United States has been the most favored partner for

strategic industrial cooperation. In 1994, technology imports into Korea

from the United States rose 21.3 percent, from 122 cases to 148 cases;

technology imports from Japan dropped 18.2 percent, from 137 cases to

112 cases. The Ministry of Trade, Industry, and Energy (MOTIE) and the

Ministry of Science and Technology (MOST) have established policies to

engage U.S. companies in broad-based programs of technology cooperation with Korean firms, taking advantage of any opportunity to improve

Koreas technological infrastructure and global competitiveness. Information gathered from Korean newspapers over the past two years shows

the following numbers of press reports that mention a specific country in

the context of technology transfer or plans for technology cooperation:

United States, 62; Russia and Japan, 13; China, 4; Australia and Germany,

3; and Canada, England, France, Israel, Netherlands, Sweden, and

Ukraine, 1 each.

Koreas shift from other Asian-Pacific countries toward the United States

as its preferred source of technology is also evidenced in data reported in

the Korean press on MOSTs brainpool programa program developed to recruit foreign (especially Korean-American) scientists. Combined data for the first two groups of scientists selected in a worldwide

recruitment drive in 1994 and in a separate program in Japan by the

Korea Institute of Science and Technology (KIST) show that 35 scientists

came from the United States, 12 from Japan, 9 from Russia, and 7 from

the Peoples Republic of China (China). Two scientists from Canada and

one each from Australia and Sweden were selected. As with the data

from press reports, the United States is the preferred source by a large

margin.

Korea favors the United States for a variety of reasons. In general, U.S.

companies are looking for capital to expand operations and new markets

for their products, while the Koreans are looking for technology to both

enhance their economic growth and develop indigenous technologies.

Korean firms remain committed to competing on a global scale and view

cooperation with the United States primarily as a means to acquire

needed technologies.

In addition to looking to the United States and other advanced nations,

Korean companies are pursuing available technology in less obvious

In its drive to build

its technological

infrastructure, Korea

has acquired and

assimilated technology

from a number of more

advanced countries.
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places, for example, the Newly Independent States and China. These

nations offer a high level of education, a strong background in basic

R&D, low prices for patented technology, and low labor rates. China, in

particular, offers its geographic location, which facilitates the flow of

products and people, and cultural similarities, which ease business

communication.
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KOREAN POLICY TO DEVELOP ADVANCED

TECHNOLOGY: THE HIGHLY ADVANCED NATIONAL

(HAN) PROJECTS

As part of its globalization strategy, the Korean government developed a plan to select and develop strategic industrial technology

requiring nationwide R&D investment (figure 4). This plan, called the

highly advanced national (HAN) projects, develops and assimilates core

technologies in strategic areas where Korea will have the capacity and

capability to compete on the level of more advanced countries by 2001.

Korea cannot upgrade its capacity in every industry to the level of all

highly advanced nations, but it intends to build and maintain its competitiveness in selected industries by concentrating its limited R&D

resources.

A HAN project is a large-scale R&D project carried out through joint

investment by the government and the chaebols under a long-term

project management system, which is supported by interministerial

cooperation and coordination. Various R&D actorssuch as universities,

industries, and government-supported research institutesparticipate in

each project. For the areas where domestic R&D capacity is lacking,

international cooperation is actively pursued.

The Korean government created two categories of HAN projects. The

first category, product technology development projects, concerns

technologies for specific high-technology products that may have a

substantial share in the world market. The second category, fundamental technology development projects, concerns core technologies that are

absolutely necessary to advance the economy, society, and human life.

Some of the technologies targeted by the HAN projects are aerospace,

automobiles, bioengineering, communications, computers, electronics,

environment, machinery and metals, medical equipment, nuclear power,

and semiconductors. It is under the auspices of these projects that interKorea intends to

build and maintain

its competitiveness in

selected industries by

concentrating its limited

R&D resources.
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Figure 4. The Korean Governments National R&D Program
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national cooperation and technology transfer are currently being

pursued.

Korean firms regularly

send researchers and

technicians to aircraft

manufacturers in the

United States to expose

them to advanced

aerospace technology.
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METHODS OF TECHNOLOGY TRANSFER

Development of advanced communication and information technologies has led to an unprecedented amount of technology transfer and

cooperation through nontraditional avenues or informal relationships.

Methods of indirect technology transfer are becoming more sophisticated

in todays marketplace. The Korean government has successfully organized and implemented a variety of methods to assimilate and acquire

technology: direct overseas involvement, international cooperation,

cooperation between Korean and foreign companies, foreign patents,

employing foreign nationals, and foreign databases.

Direct Overseas Involvement

The Bank of Korea reported in July 1996 that Korean overseas direct

investment amounted to $2.5 billion for 700 projects in the first five

months of 1996. The number of approved overseas direct investment

projects increased by 24 cases from the same period of 1995, and the

total investment amount surged by $950 million.

Overseas Technical Training

Korean companies regularly send employees abroad for on-site training

at overseas companies. This practice exposes Korean technicians to the

technology, operations, and practices of a foreign company; it also exposes the foreign company to Korean business practices and cultural

nuances. This exposure furthers the globalization strategy of Korean

companies and U.S. companies as they build relationships and increase

their understanding of one another.

Korean newspapers have discussed a number of examples of overseas

technical training, most recently in the aerospace industry. As the

U.S.-Korean relationship in the aerospace industry develops, Korean

firms regularly send researchers and technicians to aircraft manufacturers

in the United States to expose them to advanced aerospace technology.

For example, Korean Air sent six employees to participate in the Boeing

Companys 777 aircraft project in order to accumulate manufacturing

design experience. In another instance, Samsung Aerospace sent 60

employees to the United States for technical training, and Halla Heavy

Industries sent an 8-person technology training team to study satellite

technology.

All of the primary

Korean chaebols are

actively setting up

overseas subsidiaries.
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Overseas technical training is also prevalent in the Korean oil refinery

industry. Yukong Ltd., Koreas largest oil refiner, will reportedly increase

the proportion of its employees trained abroad to more than 10 percent of

its workforce by 2000. As part of its globalization strategy, Yukong sent

80 employees to various parts of the world for long-term training

during 1996.

Establishing Overseas Subsidiaries

Building sales, production, and R&D subsidiaries is central to any expansion strategy of a multinational company, and Korean companies are no

exception. As of 1996, LG Electronics alone had sales subsidiaries on five

continents, branch offices on six continents, and nine regional operations

centers in Europe, North America, Asia, and the Middle East. This type

of presence lends itself to technology transfer, especially in production

facilities and research centers, through exposure to the technological

trends of the countries in which they are located. The technology they

build on or develop is incorporated back into the production or development systems of the worldwide operations of the LG Group.

All of the primary Korean chaebols are actively setting up overseas

subsidiaries in an effort to claim markets and take advantage of both

lower production costs and local technical expertise. Samsung Electronics

spent $1 million to set up Image Quest Technology in Silicon Valley

(Santa Clara, California). Image Quest Technology was built to research

and design thin-film technology (TFT) for liquid crystal displays (LCDs)

and is staffed primarily by local hires. Samsung invested in a region of

the world where it believed it could find the best researchers for the task

at hand. Korean newspapers also reported that Samsung Electronics and

another U.S. company jointly developed two state-of-the-art digital

signal processing semiconductors. To ease the development of this

technology, Samsung established a branch office in the United States.

Hyundai Electronics subsidiaries are also active in the development and

assimilation of advanced technology. Hyundai developed a 10.4-inch TFT

LCD at one of its U.S. branches and brought the technology to Korea for

manufacturing. Hyundai Electronics has also set up centers in San Jose,

California; Boston, Massachusetts; and Taipei, Taiwan, for the design of

application-specific integrated circuits (ASICs).

The Korean press also reports that the Korean heavy machinery and oil

refinery industries, as well as factory automation companies, are taking

advantage of their geographic location in nations with advanced technology. One newspaper reported that Poscos new subsidiary in Maryland,

Korean export

manufacturers greatly

expanded these overseas

R&D activities in 1995,

with budget increases of

up to 200 percent.
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Posco International Corporation, would use its position to engage in

technical information gathering.

Overseas Research Centers

The most common motivations for global research and development

centers are the following:

n To monitor foreign technological developments

n To acquire or generate new technology

n To maximize use of specialized skills in a host country

n To support the needs of foreign production operations and the

parent company

By spreading production, product development, and research components around the globe, multinational corporations can reduce the cost

and risk of technological innovation. Korean companies in particular

relieve the serious problem of limited R&D capacity and labor force.

Many research centers established by the Korean government and

chaebols are located in more advanced nations, such as the United States

and Japan, and are thus able to both obtain newly developed technology

and employ experienced local scientists. Others are located in less developed nations, such as Russia and China, and help the parent company to

better understand these rapidly changing markets and to take advantage

of the skills of highly educated researchers and designers. By employing

foreign nationals at their research centers, Korean manufacturers are

attempting to accelerate the globalization of R&D by hiring the technological know-how. The cost of building and operating these centers is

offset by the information about markets and technology that is gathered.

Korean export manufacturers greatly expanded these overseas R&D

activities in 1995, with budget increases of up to 200 percent. The major

Korean-owned, U.S.-based research facilities include Samsung Electronics San Jose Research Institute (85 employees); LG Electronics San Jose

Research Institute (10 employees); LG North American Operations in

Chicago, Illinois (15 employees); Hyundai Electronics SEMR Research

Institute in San Jose (29 employees); and LG Semicon in San Diego,

California, with 60 people conducting semiconductor technology surveys. Samsung Electronics plans to build a research center in Tsurumi,

Japan, at a cost of $125 million. It will employ Japanese scientists and

The Korean government

is supporting, both

verbally and fiscally,

the establishment of

S&T forums.
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technicians for R&D in electronics technology. Both Samsung Electronics

and Samsung Aerospace have set up research centers in Russia to capitalize on Russian expertise in the basic sciences.

Daewoos divisions also have been active in establishing overseas R&D

centers. Daewoo Electronics is setting up a worldwide research network

that includes 12 R&D centers in eight foreign countries. The Korean press

reports that Daewoo Heavy Industries is building an aerospace research

center in Russia and that Daewoo Motor Company plans to build R&D

centers in the United States, Germany, and England to obtain advanced

automotive technologies that manufacturers in advanced countries are

reluctant to transfer to foreign competitors.

Further, MOST, in addition to the three centers it already operates in

Russia, intends to build eight joint R&D centers abroad: two each in

Australia, China, England, and Russia. These centers represent an expansion of Koreas S&T cooperation diplomacy and are part of MOSTs

plan to develop economically useful technology through strategic

cooperative research with the major advanced nations (USG

DOC.#SM95-10004).

International Cooperation

Countries cooperate on a variety of levels, often with the stated purpose

being to transfer technology. For example, international cooperation

trends indicate that governments are willing to share highly advanced

environmental cleanup and protection technology that will benefit the

public good. Some of this technology may then be transferred to other

commercially viable production processes. Forums, foundations, and

academic exchanges have the primary goal of increasing the public good,

but technology transfer or cooperation is often an accompanying positive

outcome.

International Forums and Foundations

The Korean government is supporting, both verbally and fiscally, the

establishment of S&T forums to act as a corridor between Koreas commercial S&T establishment and U.S. high-technology companies to

facilitate the transfer of U.S. technology. The role of both the forums and

the foundations is to remedy Koreas weakness in key industrial sectors

by creating opportunities to interface with scientists working with specific U.S. technologies. These forums and foundations facilitate Koreas
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globalization plan by exposing foreign companies and individuals to

Korean business practices and foci.

In May 1994, the second Korea-U.S. Science and Technology Forum was

held in Washington, D.C. The forum had three stated goals:

n To cooperate to advance national R&D proposals

n To promote joint research in basic sciences and in commercializing the results

n To develop a plan for U.S.-Korean cooperation in advanced

industrial technology

The Korean press reported that the forum provided a technology network room designed to build an informal cooperation network to

promote the exchange of data, human resources, and technology in order

to strengthen S&T cooperation among industry, academia, and research

institutes on an international scale.

The third Korea-U.S. Science and Technology Forum, held in Washington,

D.C., in December 1995, had four goals:

n To promote scientific and technological interaction

n To explore desirable areas and means of cooperation

n To assist scientists and engineers in forming networks for

collaboration

n To deepen mutual understanding of institutions, practices, and

policy environments

The focus of the forum series is to promote continued international S&T

cooperation between the United States and Korea. The most recent forum

sponsored by the Korean government took place in June 1996 in Washington, D.C., and centered on marine S&T. The centerpiece of the forum

was the Korean governments announcement that it intends to create a

cabinet-level Ministry of Ocean and Fisheries. The U.S. private sector, as

well as government officials from both countries, participated.

Additionally, Korea sponsors technomarts, five-day events that

feature seminars, technology presentations, and one-on-one business

Centers of Excellence

operated by leading

foreign institutes provide

Korean researchers with

opportunities to work

with internationally

accomplished scientists

and excellent equipment.
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negotiations. The Korean press reported that Korean companies participated in a series of eight technomarts in 1995 with the purpose of acquiring technology from foreign firms. One example is Techplaza, an annual

technology exchange sponsored by the Korea Trade-Investment Promotion Agency (KOTRA). The largest technomart to date was held in Taejon,

Korea, in May 1995 and was cohosted by MOTIE, the Korea Institute of

Industry and Technology Information (KINITI), and KOTRA for the

Asia-Pacific Economic Cooperation (APEC). More than 100 companies

participated, with at least 50 foreign companies, including representatives from the United States. The press also reported that the relevant

agencies are also discussing the establishment of a permanent

technomart in Korea to build an information distribution system for

technology transfers between companies and related institutions.

In 1994, the Federation of Korean Industries established the Korea-United

States Foundation for Industry and Technology Cooperation (KUFIT),

whose mission is to hasten Koreas technical and industrial collaboration

with other nations, thus further improving the international competitiveness of Korean companies. KUFIT seeks joint-venture projects with U.S.

firms to facilitate technology transfer to Korea. The areas of cooperation

include semiconductors, computers, machinery, aerospace, telecommunications, medical equipment, and environmental protection. KUFIT

expects to have $35 million in public and private sector funding by 1997

that will be used to improve the productivity of small and medium-sized

firms and to support technology imports, joint ventures, and strategic

alliances.

Centers of Excellence

Centers of Excellence operated by leading foreign institutes provide

Korean researchers with opportunities to work with internationally

accomplished scientists and excellent equipment. MOST is encouraging

the Asia-Pacific Theoretical Physics Center and Frances Pasteur Research

Institute to create centers in Korea to help the Koreans catch up with the

more advanced countries in S&T. A program outlined by the KIST director called for establishing Centers of Excellence as a means of attracting

first-rate scientists from more advanced nations, particularly the United

States, to Korea. One Korean press source reported that the Seoul campus

of the Korea Advanced Institute of Science and Technology (KAIST) will

host another Center of Excellence, with a dozen Nobel Prize winners

invited to teach and conduct R&D activities.
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OFFICE OF TECHNOLOGY POLICY

Academic Exchanges

Academic exchanges are common in every field of study and almost

every country. Korea is no exception, and Korean students and researchers are often sent abroad to acquire advanced degrees or study specific

fields of knowledge. For Korea, however, there is a greater sense of

national purpose to these exchanges than for many other countries.

MOST has expanded the number of Korean nationals sent overseas by

the government to obtain Ph.D.s from 182 in 1994 to 250 in 1995. In

addition, the government planned to fund approximately 460 researchers

sent to foreign institutes through the end of calendar year 1995. One

newspaper called for a further increase in the number of Korean students

given scholarships to study abroad in an effort to obtain advanced foreign technology. It has been reported that the Korean Science Foundation

is stepping up S&T exchanges with German academic institutions and

has signed memorandums of understanding with the German Academic

Exchange Agency and the Alexander von Humboldt Foundation to

expand S&T exchanges. The agreements call for exchanging 10 students

each year from both countries in masters and doctorate-level programs,

which the paper said is expected to greatly strengthen the research

capabilities of Korean scientific and technical personnel.

Technical Links with Foreign Universities

The chaebols form international industrial-academic cooperative associations with foreign universities to do joint research in advanced technology. Expanding links with foreign universities allows the chaebols to

improve their industrial capabilities faster, incorporating highly trained

personnel who have professional connections to research institutions.

LG Electronics has reportedly put together a $10 million joint research

cooperative structure that involves 32 foreign universities, including the

Massachusetts Institute of Technology, Stanford University, and Purdue

University. Samsung Electronics is carrying out joint international R&D

projects in memory semiconductors with Stanford University, the University of Texas, and the University of Arizona; in nonmemory semiconductors with the University of Illinois; and in LCDs with Kent State

University.

There are a number of benefits to be gained from cooperation with

foreign academic research institutions. The Electronics and Telecommunications Research Institute (ETRI) teamed up with Stanford University for

the joint development of an operating system for an indigenous Korean

multimedia workstation. Cooperation with Stanford University began in

Cooperative agreements

between Korean and

foreign firms have

long been a source of

infrastructure and

commercial technology

for Korea.
Koreas Strategy for Leadership in Research and Development 25

OFFICE OF TECHNOLOGY POLICY

1991 and includes special technical training and performance test training

for ETRI personnel. When the program is completed, ETRI will transfer

the related technologies to Samsung, LG, Hyundai, and

Daewoo for commercialization.

Cooperation Between Korean and Foreign Companies

Cooperative agreements between Korean and foreign firms have long

been a source of infrastructure and commercial technology for Korea. The

chaebols generally bring cash, production process experience, and access

to new markets with them to the negotiating table; foreign firms generally bring the necessary technology. Strategic technical alliances with

other world market leaders allow the chaebols to penetrate new markets

faster and give them access to a broader range of cutting-edge technology. LG Electronics has forged a number of these cooperative relationships, specifically with Motorola to develop ASIC technology, with Xerox

for Power PC research, and with Philips for video CDs. LG Electronics

was credited with having lined up comprehensive, cooperative relationships with companies in the United States and other nations for multimedia equipment and software, two areas that LG has targeted for

development. In Chicago, LG and the Zenith Electronics Corporation

have been working since 1990 on cable modem design and concepts for

next-generation multimedia set-top boxes. These cooperative efforts have

enabled Korean firms to move rapidly onto the world stage, with LG

leading the way in the multimedia market.

Strategic Cooperation

Strategic cooperation is the process of identifying gaps in indigenous

technologies, seeking out the technology, and then engaging the owner of

the technology in a cooperative relationship that results in the transfer of

the technology. Korea may provide any number of incentives for technology transfer, including funding commercialization, providing plants and

equipment, contributing other technology, or facilitating local market

access. For example, Russian and Chinese companies can provide Korean

firms with strong basic scientific research, and Korean firms can help the

Russians and Chinese turn that knowledge into commercial products.

However, some foreign firms in Korea have filed complaints because it

was not clear to them that technology transfer was part of the cooperative agreement. Korea has had a questionable reputation in the past with

respect to honoring contracts, especially those related to intellectual

property rights. And while the Korean government has recently taken

steps to improve the situation, foreign firms must weigh the cost of fully
26 Koreas Strategy for Leadership in Research and Development

OFFICE OF TECHNOLOGY POLICY

protecting themselves against the potential benefit of doing business with

Korean companies.

The Korean government is often involved at different levels of the strategic cooperation process, specifically in identifying weaknesses in the

indigenous S&T structure, finding foreign companies willing to transfer

their technology for commercial purposes, and subsidizing the actual

transfer. The Korean press reports that MOTIEs Plan to Strengthen

Cooperation with Technologically Advanced Foreign Countries specifies

which technologies are desired from companies worldwide through

cooperative systems. The Korean governments Small and Medium

Business Promotion Corporation is helping transfer U.S. electronic and

computer technologies to Korean firms by acting as an intermediary for

Silicon Valley-based U.S. companies looking for overseas partners. This

corporation receives half a dozen referrals per month through a U.S.

organization specializing in technology evaluation and technology

transfer concerning U.S. firms seeking cooperation on specific projects.

Other types of government aid targeted at facilitating technological

cooperation include MOTIEs allotment of $750,000 to support joint

research with Japanese companies and another $200,000 for basic industrial technological cooperation with Japan.

Joint International R&D

Strategic cooperation can also include participation in joint international

research. Because the initial focus of this research is precompetitive,

companies are reportedly more willing to share their technology. Koreas

expansion of these types of international projects indicates their success.

In fact, Koreas National S&T Advisory Council recently argued that not

enough of the funds set aside for basic industrial technology development were being allotted for joint international R&D cooperation. The

council called on the government to devise a special support plan to

promote joint involvement by Korean industrial, academic, and research

institutions in international high-technology research.

MOSTs Science and Technology Policy Institute (STEPI) is planning to

create cooperative foundation joint institutes with 10 developed countries by 2004 to enable Korea to build a system of international research

data and personnel exchange for globalization in S&T. In the long run,

the institutes will also engage in international R&D projects in such fields

as environment, energy, natural resources, and hygiene and expand

international education and training programs.

Korean firms have been

actively involved in

acquiring patent

portfolios from U.S.

patent brokers.
Koreas Strategy for Leadership in Research and Development 27

OFFICE OF TECHNOLOGY POLICY

Other examples of MOSTs efforts in joint international R&D include

providing $8.1 million in subsidies in 1995 to support joint research and

technical cooperation with foreign companies; ETRI signing international

joint research contracts with SRI International and Syracuse University

for technology relating to a super-high-speed data communications

network; and the Korean governments Systems Engineering Research

Institute (SERI) and Korea Computer signing a research contract with the

Tandem Corporation.

Foreign Patents

Low-Cost Patents

The end of the Cold War and the opening of the Russian market have

been a boon to many international manufacturers in search of basic

research and patents at low prices relative to the global market. Korean

firms and research institutes have been taking advantage of this situation

by obtaining needed technology via the purchase of Russian patents. The

Russian Office of Patent Administration reported in early 1994 that since

October 1993, 41 Korean companies had applied to transfer 365 patented

Russian technologies. The Korean firms involved included 22 chaebols,

14 small and medium businesses, and 5 research institutes, including the

Korea Atomic Energy Research Institute. There were 157 applications in

electricity and electronics, 143 in chemistry, 31 in machinery and metals,

and 34 others. In July 1994, the Russian Office of Patent Administration

announced that a survey team comprising representatives of the Korean

government and private industry, sent to Russia in June 1994, had arranged to transfer 37 high-technology patents. The team had reportedly

been able to negotiate deals on 24 of the 32 technologies it originally

sought, plus 13 other technologies discussed on site.

On the other side of the world, Korean firms have been actively involved

in acquiring patent portfolios from U.S. patent brokers. This profusion of

patent acquisition, in both the East and the West, has recently led to the

rise of sophisticated patent departments within many of the chaebols.

Investments in Foreign Firms

In July 1995, building on a 20-year relationship, LG Electronics purchased

57.7 percent of the stock of Zenith Electronics Corporation. The stock

purchase was instigated by a number of factors, not the least of which

was Zeniths need for a cash infusion and access to new markets. LG

Electronics has a strong multimedia focus, and access to Zeniths patented HDTV technology will be highly beneficial. With this technology,

During 1995 and the

first half of 1996, Korean

companies made between

8 and 10 full acquisitions

of, or minority equity

investments in, foreign

firms.
28 Koreas Strategy for Leadership in Research and Development

OFFICE OF TECHNOLOGY POLICY

LG Electronics hopes to dominate the potentially huge HDTV market

through licensing agreements.

LG is certainly not the only Korean firm to gain control of a company for

the purpose of obtaining patented technology. During 1995 and the first

half of 1996, Korean companies made between 8 and 10 full acquisitions

of, or minority equity investments in, foreign firms. In 1993, Samsung

acquired Harris Microwave Semiconductor, a major U.S. optical semiconductor manufacturer. Samsung bought the firm to secure a world-class

technological capability in nonmemory semiconductors, which it lacked.

Eight months later, Samsung was producing gallium arsenide chips at its

new subsidiary, renamed Samsung Microwave Semiconductor. Samsung

succeeded in converting the chips from military applications to commercial use in mobile communications and high-speed computers, applications for which Samsungs silicon-based chips are not well suited.

Samsung expected to save $7 million annually in import costs ($2 million

more than it paid for Harris) and to increase its competitiveness in

communications equipment worldwide.

Hyundai Electronics purchase of controlling stock and management

rights in the U.S. firm Maxtor, the worlds fifth-largest producer of computer hard disk drives (HDDs), enabled it to obtain accumulated technology and patents on HDD components. The deal also gave Hyundai

ASIC technology, in which Korean firms were reportedly weak. According to press reports, before the sale Samsung Electronics was the only

Korean manufacturer of HDDs; other companies had abandoned their

projects because of technical difficulties. Hyundai also obtained technology to build a laser disk data retrieval mechanism, which would have

been difficult for it to develop alone because of its lack of technological

capability.

Hyundai Electronics invested $340 million to acquire NCRs Microelectronics Products Division (renamed Symbios Logic), the nonmemory

semiconductor division of AT&T Global Information Systems. This

purchase is significant not only because it was the largest single overseas

acquisition by any Korean firm at that time but, more important, because

it secured a base of operations abroad for Hyundai to jump into the

high-value-added sector of nonmemory semiconductors. The Korean

press reported that the contract gave Hyundai rights to Symbios Logics

690 patents and trademarks.

Among the leading

figures in Koreas

aerospace industry are

many who have worked

on advanced aviation

projects in the United

States.
Koreas Strategy for Leadership in Research and Development 29

OFFICE OF TECHNOLOGY POLICY

Employing Foreign Nationals

The chaebols favor hiring foreign experts for Korean operations as an

indirect method of technology transfer. It is recommended by Korean

government experts, facilitated by official and semiofficial Korean organizations, and widely practiced in Korean industries. The Korean press

has reported that the government will match funds spent by companies

recruiting and employing high-level foreign personnel. These funds

include salary incentives for qualified and accomplished foreign personnel at rates well above international standards. The director of KIST

proposed that foreign experts be used to evaluate Koreas research

institutes in order to raise their technical standards and that a special

fund be established to hire foreign researchers for extended periods to

develop Koreas S&T infrastructure.

Among the leading figures in Koreas aerospace industry are many who

have worked on advanced aviation projects in the United States. Technicians working in U.S. production plants are carefully selected by Korean

firms for their experience. Korean newspapers reported that Samsung

Aerospace recruited 140 foreign aeronautical specialists, 40 from the

United States and the remainder from Russia and Ukraine. A Samsung

mission that visited the United States in June 1993 was able to recruit 16

general managers of design, 9 group leaders, and 5 senior technicians.

Korean companies periodically take out full-page ads in Silicon Valley

newspapers to recruit engineers and have been able to scout out talented

personnel.

MOST announced plans to hire as regular employees in its research

institutes foreign scientists and technicians who are not expatriate or

émigré Koreans, as one link in its program to raise the level of specialized

research done in Korea. Some 20 such foreigners were to be hired in the

second half of 1995, and this number is expected to increase annually.
30 Koreas Strategy for Leadership in Research and Development

OFFICE OF TECHNOLOGY POLICY

For the high-technology industries in more advanced nations, this practice

raises concerns about the protection of intellectual property rights and

proprietary information. Both the United States and Japan have taken

issue with Korea over real and perceived illegal acquisition of technology,

and U.S. companies claim that they have lost revenue in licensing royalties to Korean firms.

Koreas government and industry operate systems to identify potential

qualified employees who their would-be sponsors believe are in a position to transfer advanced technology and who, because of their ethnicity,

are predisposed to accept offers to contribute their knowledge to Korea.

The Korean press reported that MOST is operating a system to recruit

scientists and technicians, drawing from the 40,000 ethnic Koreans

working overseas in S&T fields, a third of whom are affiliated with the

General Federation of Korean Science and Technology Organizations.

The purpose of this brainpool is to provide incentives for overseas

Koreans and other foreign scientists to help Korea acquire at an early

date the newest science, technology, and know-how in the R&D stages in

advanced countries (USG DOC.#SM95-10004). Part of the incentive

program stipulates that leading foreign scientists with five years postdoctoral experience abroad will be given airfare and a salary higher than

what they currently receive if they serve a minimum of six months at a

Korean S&T facility. Offers were made to 57 foreign specialists during the

programs first year. The majority had Korean surnames and lived in the

United States. MOST increased its funding for the brainpool program in

1995 from $2.5 million to $3.375 million to pay for an increase in recruitment to more than 100 foreigners and overseas Koreans.

KIST reportedly runs its own brainpool targeting Japanese S&T personnel, 12 of whom were hired in 1994 during the programs first year of

operation. In addition, at least one private Korean corporation is carrying

out a similar brainpool program. Samsung Electronics recruited 150

Ph.D.s in 1994, mostly high-level personnel residing overseas. The company was to be assisted by the Samsung Groups Talented Personnel

Development Research Institute, which uses a database to collect information on researchers worldwide by field so that the company can hire

the expertise it needs in a timely manner. At present, the database holds

information on more than 1,000 overseas scientists and engineers.
Koreas Strategy for Leadership in Research and Development 31

OFFICE OF TECHNOLOGY POLICY

Box 1. Invitation to Apply for Employment in a Brainpool of

High Level Overseas Scientists: ROK Newspaper Advertisement,

February 1994

The General Federation of Korean Science and Technology Organizations, in accordance with the Governments (Ministry of Science and

Technologys) plan to employ high level S&T personnel (a brainpool system), invites superior overseas scientists and technicians to South Korea

for work in research and development, in order to achieve the supreme

national task of helping South Korea enter the ranks of scientifically and

technologically advanced countries by the 2000s. We hope for your wide

participation.

1. Goals. To strengthen national competitiveness in keeping with the

trend toward a global, worldwide, information society, we seek

to employ superior overseas ethnic Korean and foreign scientists

and technicians locally in domestic research and development, to

contribute toward South Koreas entry into the ranks of scientifically

and technologically advanced countries by the 2000s.

2. Fields. All fields of science and technology which are the objects of

national strategic development, including: basic fields (basic research,

measurement, standards, astronomy); machinery and materials

(machinery, ships, aviation, space, materials); electrical and electronic

(electricity, power, electronics, computers, communications, optical

technology); chemical engineering and biological (chemistry,

chemical engineering, biology, agriculture and fishing, sanitation);

resources and oceanographic (resources, oceanography, environment,

construction); energy (atomic power).

3. Positions to Be Filled. 100 or fewer.

4. Personnel Sought. (a) Ethnic Koreans and foreign scientists and

technicians with five years or more experience working overseas

from the time they receive a Ph.D. (b) Ethnic Korean and foreign

scientists and technicians who possess excellent, world class R&D

accomplishment or know-how, regardless of their degree or

experience, as determined by the selection committee.

5. Period of Employment. (a) Between six months and two years (less

than six months is also possible, as determined by the selection

committee). (b) There is also a possibility of extending the

employment period beyond two years (as determined by the
32 Koreas Strategy for Leadership in Research and Development

OFFICE OF TECHNOLOGY POLICY

evaluation committee).

6. Support and Expenses. (a) Expenses incurred entering and leaving

the country (airfare and personal expenses, etc.). (b) Costs in country

(automobile and other support depending on ones experience; salary

on a level higher than the compensation received in ones own

country, to be decided by the selection committee).

7. Institutions of Employment. (a) Government funded research labs

(institutes). (b) National and private research labs. (c) Universities

(except ERC [Engineering Research Centers] and SRC [Science

Research Centers]).

8. Methods of Employment. Conduct joint research as part of an

existing or new R&D team, with the possibility of concurrently giving

lectures in ones specialty, and making presentations in various types

of academic meetings and seminars.

9. Evaluation. The scientists and technicians who are hired will have

their research results evaluated from the perspective of the type of

employment at six month intervals by the Evaluation Committee.

(If found unsuitable support will be discontinued and that part of

the support paid will be recovered from the institution where the

person is employed.)

10. Application Period. 14 February to 10 March (for the first half of the

year). Remaining personnel look for a later notice in the second half

of the year.

11. Documents to Submit. (a) Application for employment with the

brainpool (in a form determined by the individual)1 copy.

(b) Statement of plans (to be drawn up by institution applying)

1 copy. (c) Written introduction from the institution applying1 copy.

12. Information Office. General Federation of Korean Science and

Technology Organizations

13. Miscellaneous. (a) Materials received will not be returned. (b) Please

address detailed inquiries to the General Federation of Korean

Science and Technology Organizations.

Director

General Federation of Korean Science and Technology Organizations

A new automated

machine translation

system has been

developed by the

Korea Research

and Development

Information Center

(KORDIC).
Koreas Strategy for Leadership in Research and Development 33

OFFICE OF TECHNOLOGY POLICY

Foreign Databases

The Korean government ensures that its researchers have access to the

most respected S&T databases available for design and R&D purposes.

These databases, which are generally focused on basic R&D, facilitate the

accumulation of technological know-how.

KINITI spent $7.5 million upgrading its KINITI-IR (Information Retrieval) system, a nationwide data network that provides on-line access

to information on advanced industrial technology in foreign and domestic databases. The network provides industrial, scientific, and technological data from foreign and domestic sources that Korean industry finds

necessary for R&D and technical development. Subscribers can access

eight foreign databases holding some 18 million items from a plethora

of sources.

KINITI has also linked up with two more international data services,

including the Scientific and Technical Information Network (STN) operated by U.S., German, and Japanese companies. The use of these databases prompted one Korean newspaper to comment that Korean database users could now obtain high-quality S&T data inexpensively.

SERI has arranged through its Korea Research Environment Open Network (KREONet) to sign up with the research data network EuropaNet,

operated by the European R&D information center Dante. The link will

provide Korean researchers with easy access to the most up-to-date S&T

information available in Europe. One SERI official called the system a

magic box for Korean S&T development.

A new automated machine translation system has been developed by

the Korea Research and Development Information Center (KORDIC),

an agency affiliated with KIST that enables Korean researchers to use

hangul-based queries to access the JOIS (JST Online Information System),

a database of the Japan Science and Technology Corporation. Plans

reportedly call for expanding services to other leading Japanese database

services and English-based services.

Databases have gained increased importance over the past several years

because of the rapid commercialization of the World Wide Web. Governments have recognized that databases have a wealth of information from

which domestic companies can benefit. More important, international

companies would also be able to have access to the databases via the

The Korean government

and the chaebols have

recognized that the

databases are an excellent

and inexpensive source

of technological

information.
Koreas Strategy for Leadership in Research and Development 35

OFFICE OF TECHNOLOGY POLICY

Internet, thus greatly reducing the costs of information acquisition. Korea

plans to invest $700 million in this technology.

In sum, the Korean government and the chaebols have recognized that

the databases are an excellent and inexpensive source of technological

information. Capitalizing on these databases has allowed the Korean

government to acquire considerable S&T information within a limited

time.

KOTRA, the Korean government-run organization with 82 overseas trade

offices chartered to facilitate the export of Korean products, is also involved in promoting technology transfer. It has initiated a new plan to

provide concentrated support to small and medium-sized Korean companies, particularly those that are technology intensive. This support would

include providing information on competing products.

Korea has been successful

with technology transfer

methods and an integrated

globalization strategy in

its preliminary competitive

development stages.
36 Koreas Strategy for Leadership in Research and Development

OFFICE OF TECHNOLOGY POLICY

CONCLUSION

Korea has developed and implemented a systematic, integrated

globalization strategy that harnesses the strengths of its private

sector, academia, and government. The country has proved its technology transfer and production expertise and more recently has shown its

incipient innovation capabilities. A notable example is the improvement

of assimilated foreign technology, specifically the 4-megabit DRAM

technology transferred to Korea in the early 1980s. The chaebols improved and built upon the original chip, creating a faster, higher-memory

16-megabit DRAM chip that was then marketed to the United States. In

addition, Korea is transferring technology as it moves its production

overseas to lower its manufacturing costs. Korean production facilities

are operating in India, Southeast Asia, Mexico, China, and, in a few cases,

the United States.

Korea has been successful with technology transfer methods and an

integrated globalization strategy in its preliminary competitive development stages. Its strategy has been so successful that a number of developing countries have called on Korea to share its economic development

experience and intermediate technology with them rather than asking for

direct monetary aid.

It is clear that technology cooperation and transfer methods should

increase access to technology for all participating parties, thus creating an

incentive for open cooperation. However, there continue to be calls for

the Korean government to liberalize the investment environment so that

foreign firms may enter the Korean market without bureaucratic barriers.

The United States has complained about Korean government control of

the business negotiation process and the foreign investment approval

process, both of which have been publicly revamped but in practice

remain much the same. U.S. businesses are concerned that the Korean

governments orientation is more national than international, in stark

contrast to the global activities of the chaebols. U.S. companies expect to

be equal partners in any international cooperative ventures, and they

expect a demonstrable return for their willingness to share resources,

including protection of their intellectual property rights. These are all

factors that U.S. companies must weigh against the benefits of tapping

Korean markets and sources of capital.

Despite these problems and complaints, this integrated national development strategy has enabled Korea to advance its technological infrastructure more rapidly than previously thought possible. Rapid and strong

development coupled with a consistent industrial focus has provided the

means for achieving not only its international competitiveness goals, but

also its international political aspirations. Korea was granted full mem-