Indigenous Innovation Capacity and the Development Trajectories of Individual Firms

Innovation and learning have played a crucial role in Korea’s rapid economic growth. Individual firms’ innovation orientation varies along the continuum of growth and development. Korea was no exception.

Lacking technological competence, Korean firms had to pursue innovation strategies different from technology leaders. Korean firms have laddered from OEM to ODM, then OBM. As they moved along this continuum, they had to build indigenous innovation capacity. Indigenous innovation capacity is multifaceted, involving the blending of technology, marketing and management. Indigenous innovation capacity of a firm is a foundation for its competitive edge.

One of the biggest problems Korea has in terms of technological development is its heavy dependence on foreign supplied core components for electronic goods. Korean firms have been paying high license or patent royalty fees to foreign firms. To overcome this weakness, Korean firms have been trying to catch up on core components.

The Korean high-tech firms’ R&D efforts focused on improving upon foreign technology. When exercising this strategy, searching customers thoroughly for developing specific innovative products works as a core competence. As Korean firms gained technological and marketing capabilities, their innovation capacity to convert market signals into innovative new products has been enhanced. This coupling process was a critical factor for Korean firms’ leap into the high-tech electronics industry of the digital age.

A wide array of policy instruments can be used to nurture innovation and learning of high-tech firms. However, it is under debate that various policies of Korea such as technology policy and industrial policy have been appropriate for doing so. The Korean government may need to take a hard look at what kind of government intervention is necessary for individual firms’ growth in high-tech industries. The Korean government may need to play a more proactive role in promoting indigenous innovation capacity of high-tech firms if it wants to take a market-friendly approach to development instead of guiding the market towards planned structural change.

How have the Korean high-tech firms enhanced indigenous innovation capacity and can further strengthen it after the initial building process? Specifically, how have they accumulated technological competence? How has this process been driven by the government policies? How has the accumulation process of technological competence been connected with their own business strategy? How have high-tech firms employed a wide variety of methods of technology transfer? How have they transferred technological capability gained in one high-tech industry (e.g., semiconductor industry) to another high-tech industry (e.g., display industry)? How have they developed marketing competence and adopted more efficient management practice? How has technological capability been intertwined with marketing skills in the process of a firm’s growth? In a word, what are their growth patterns and development trajectories?