2 July 2010Suk Joon Kim

(President of STEPI, Korea)

Technology Transfer Pol-icy of Korea

Astana Economic Forum1,2 July 2010, ASTANA

2

Contents

Globalization and open innovation

Technology transfer as a source of innovation

Industrialization and S&T development of Korea

Technology transfer in Korea

Policy implications

3

R&D Globalization: a new keyword in technological innovation Globalization of technological source

Localization of R&D with localization of production

R&D global network

Technological fusion and convergence Needs for outsourcing technology, especially in high-tech area Globalization of R&D plays a very important role in the

strategies of multinational companies and it will certainly gain further momentum

Government policy to strengthen the globalization of R&D

Globalization and open innovation

4

Open Innovation Acquisition of external technology (licensing, corporate

VC, M&A, collaborative research) Externalization of R&D results (licensing, spin-offs) Globalization to tap into world-wide talent pools

Globalization and open innovation

Internal Technology Base

Current

Market

R D

External

Technology Base

Technology Insourcing

Technology Spin-off

New Market

Other Firms’ Market

5

What is ‘Technology Transfer’? A process by which a body of technical knowledge, tech-

niques, or tools is transferred from one place to another for use in a production or service environment from where it is generated to where it is used

Importance of Technology TransferProviding the means by which elements of the existing sci-

ence-technology base can be more closely coupled to the innovation process in order to spur productivity growth

Offering the opportunity to obtain a greater return from past investment in R&D

Ability to stimulate and strengthen the innovation process

Technology Transfer as a source of innovation

6

Pros and Cons of International Technology Transfer

Technology Transfer as a source of innovation

The Existence of Absorptive Capacity in LDCs

Yes No

Willingness of DC to transfer technologies

through formal mechanisms to LDCs

YesTransfer takes placeBoth DCs & LDCs

gain

Transfer takes place DCs gain but LDCs Become dependent

NoTransfer takes placeDCs lose but LDCs

gain

Transfer does not take place.

Both DCs & LDCs gain little

7

Learning and diffusion effects of TT

Time

FDI

Licensing

Imitation

IndigenousR&D

Learning &DiffusionEffects

Short-term effects: Licensing, FDI > Imitation, Indigenous R&D

Long-term effects: Indigenous R&D, Imitation > Licensing, FDI

Technology Transfer as a source of innovation

8

Barriers in the International TT from DCs to LDCs Investment Barrier Application Barrier Technology Adaptation Barrier Technical Capability Barrier

Recent Factors Influencing the Environments on In-ternational Technology Transfer Boomerang consideration Shortening product life cycle Reluctance to share results of scientific research Intellectual property concerns

Technology Transfer as a source of innovation

9

S&T Development System and TT

GovernmentAccumulatedKnowledge

TechnologicalEnvironments

EconomicEnvironments

Org’l & socialEnvironments

Invention R&D Market

[Innovation Process]

Univ.

Firms

GRIsTT betweenInstitutions

Vertical TT

Technology Transfer as a source of innovation

10

Policy Directions for activating TT

Cooperative R&D program

Personnel exchange

Technology networks

Active dissemination of

information and output

Spin-off from GRI & Univ.

Cooperative R&D program

Personnel exchange

Technology networks

Active dissemination of

information and output

Spin-off from GRI & Univ.

TT between Institutions Vertical TT

Program for supporting commercialization Professional institutions & manpower for technology market Technomart Legal protection for intellectual property

Program for supporting commercialization Professional institutions & manpower for technology market Technomart Legal protection for intellectual property

Technology Transfer as a source of innovation

11

Acquisition of technologies for development : ’60s and ’70s Development of light industries and heavy chemical industries for

import substitution and export-expansionGenerated enormous demand for technologies that were not avail-

able from domestic sources Policy responsesPromotion of inward transfer of technologiesDeveloping domestic absorptive capacity to digest, assimilate and

improve upon the transferred technologies

Industrialization and S&T development of Korea

DFI and FL played relatively less important role in TT in the process of industrialization of Korea. Korea relied on its HR for learning from foreign technologies transferred through informal channels.

12

Korean economic growth into the 1980sIncreased demand for complex and sophisticated technologiesIncreasing reluctance of foreign countries to transfer

technologies to Korea

Policy response : Launching the NRDP and promoting private industrial R&D

NRDP in 1982Policy incentives for industrial R&D : financial, fiscal, tax,

etc.

Industrialization and S&T development of Korea

13

Chronology of Major S&T Policy Measures

1960’s• Establishment of KIST (1966), MOST (1967)• S&T Promotion Act (1967)

1970’s•Establishment of GRIs in the field of chemical & heavy industries from

mid-1970s •Construction of Daeduk Science Town (Started in 1974)

1980’s•Launching of the national R&D program (1982)•Promoting private firm’s research institutes by reforming financial & tax in-

centives to stimulate R&D investment

1990’s

• Promotion of university research: SRC, ERC, etc.• Introduction of new types of nat’l R&D programs - Highly Advanced Nat’l Program, The 21st Century Frontier R&D Program. • Establishment of inter-ministerial coordination body: NSTC

2000’s

• Introduction of National Technology Road Map (NTRM) - To suggest TRMs for key technologies to secure products/functions. • Introduction of overall coordination system - Office of S&T Innovation in MOST was created in Oct. 2004

Industrialization and S&T development of Korea

14

Key factors that influenced the innovation system of Korea Outward-looking development strategy Pressure for R&D invest-

ment Government policy toward FDI and TT Focus on indigenous R&D Government-led industrial development

o Industry-targeting Inter-industry R&D imbalanceo Favoring large enterprises R&D system biased for large

firms/Financial capability to invest in R&Do S&T for industrialization R&D system biased toward technol-

ogy development Rich pool of well educate HRST High absorptive capacity Government-led development of S&T infrastructure Relative im-

portance of GRIs

Industrialization and S&T development of Korea

15

Technology Transfer in Korea

Technology Import Policy of Korea

Establishing a base for technology import and regulations (’62-’69) Relaxing regulations for technology import (’70-’78) Stepwise freeing technology import (’78-2000)

1960’s : “Act for importation of foreign capital (1962)” specified condi-

tions and permission criteria of technology import Priority for technologies in export-oriented industry, capital

goods, large spin-off impacts Rigid regulations for technology import : Royalty rates should

be within 3% It had worked to make the price of imported technology, but

technology import itself was not activated

16

Technology Transfer in Korea

Technology Import Policy of Korea

1970’s : Larger needs for foreign advanced technology in right time ->

government relaxed conditions and regulations for technology import

Government established GRIs to support selecting appropriate technology and assimilation & diffusion of imported technology

(ex: KIST -> Consulting Center for Technology Import)

1980’s - : Government simplified approving processes of technology im-

port more than 10 times after 1978, step by step Excepting several strategic industries, such as aerospace, nu-

clear and defense, government allowed all technology import without approving process

17

Technology Transfer in Korea

Technology Import Policy of Korea

Technologies for strategic industries were imported form AC 87% of imported technologies : machinery, metal, electric &

electronics, refined petroleum and chemicals Technology import had contributed to increasing plant &

equipment investments, enlargement of production facility and industry developments Turn-key based technology import in chemicals, fertilizer, ce-

ment, iron, paper making industries Technology acquisition by importing capital goods -> machinery

for production facility Amount of capital goods import is 23 times larger than that of

FDI and 70 times larger than that of licensing

18

Technology Transfer in Korea

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008-4,000

-2,000

-

2,000

4,000

6,000

8,000

-0.40

-0.30

-0.20

-0.10

-

0.10

0.20

0.30

0.40

0.50

1,947 2,297 2,415 2,387

2,686 3,063

2,643 2,721

3,236

4,147 4,525

4,838 5,103

5,670

-1,835 -2,189 -2,252 -2,246

-2,493 -2,862

-2,024 -2,083 -2,420

-2,731 -2,900 -2,941 -2,925 -3,140

0.06 0.05 0.07 0.06 0.07 0.07

0.23 0.23 0.25

0.34 0.36

0.39

0.43 0.45

기술수출 기술도입 무역수지 수지비

Technology Exports & Imports(Million US$, %)

Tech. Ex-ports

Tech. Im-ports

Tech. Bal-ance

BalanceRatio

19

USA

Japan

U.K.

Denmark

Germany

China

Slovakia

Hungary

India

Indonesia

-3,500 -3,000 -2,500 -2,000 -1,500 -1,000 -500 0 500 1,000

-3,082

-536

-234

-177

-173

739

260

109

106

82

Technology Transfer in Korea

Technology Exports & Imports (Million US$, 2008)

20

TT Policy of Korea focusing on TT from public to private

GRI have been played active roles for transferring advanced technology to the industry from 1960’s.

From the 1980’s, National R&D Programs initiated coopera-tive research and development between GRI and industry.

Technology Transfer Program for SMEs Technology transfer program to identify marketable technolo-

gies which had been on the shelves of GRIs, and to transfer them to SMEs

In 2000, Technology Transfer Act was announced to en-hance technology transfer between public and private sec-tor, and commercialization of R&D results.

Technology Transfer in Korea

21

Policy Implications

Lessons from Korean experiences Market competition is the very source of motivation for

innovation and technology outsourcing Pressure for technological competitiveness in the market Effectiveness of the outward-looking development strategy

for small economies Needs for advanced technology by technology transfer Human resource is the key to technological innovation “learning by doing” with imported technology Government can play effectively the role of facilitator

and promoter at the early stage of development Supporting technology import in selecting best partner with

reasonable prices

22

Appropriate technology transfer policy is needed with economic development stages Less developed stage : technology import with government

regulations Developing stage : technology import with accumulating in-

digenous R&D capability

Overcome barriers in the international TT from DCs to LDCs Investment Barrier Application Barrier Technology Adaptation Barrier Technical Capability Barrier

Policy Implications

23

Factors to be considered for technology import for developing countries

“Make-some-and-Buy-some” path

Impacts on economy : economic growth, local value-added

Impacts on S&T : innovation capability

Impacts on society : distribution of wealth and income

Dynamic TT rather than static TT

Policy Implications

24

Thank you!

25

Government S&T System of Korea

Prime Minister

President

Presidential Advisory Council

for S&T (PACST)National S&T Council (NSTC)

Ministry of Strategic Planning and Finance

Ministry of Education and S&T

Korea Research Council for Fundamental S&T

MOHW, MOE, MOCT, MOAF etc.

Other S&T related Ministries

Principal Secretary of Education and S&T

for President

Ministry of Knowledge Economy

Korea Research Council for Industrial S&T

[Appendix]