Keeping pace with globalisation: Innovation capability in Korea's telecommunications equipment industry

Abstract

South Korea is recognised as a world leader in mobile content and its application and its outstanding success has been in the field of broadband technology is now well recognised (International Telecommunications Union 2003; Lee and Choudrie 2003). Korean development experience in general and her success in a number of areas of high technologies is now very well known. Her success in creating and using new technologies for the developmental needs of the country has now become an integral part of the so called Korean model of development. While her success in general has attracted considerable amount of interest in the development economics community, case studies on specific areas of technologies in which she has done exceedingly well is less easy to com by. The focus of the current study is on one such area of high technology development where the country has now emerged as one of the serious global players. This is the case of the telecommunications equipment industry. Like many other areas of high technology development, the telecommunications equipment industry in Korea has emerged out of a judicious mixture of well thought out government initiatives coupled with legendary private sector dynamism. The industry is now an integral and important component of the country's information and communications technology (ICT) industry. Although its share has tended to come down, the telecommunications industry (both equipments and services) account for very nearly a third of the total output of the ICT industry. The basic objective of the paper is to analyse the record of the country with its endeavour towards maintaining its innovation capability in the telecommunications equipment industry. Of specific interest is the mechanisms employed by the Korean state to cope with the challenges paused by two important changes in the external environment namely (a) privatisation of telecommunications services industry and the opening up of the equipment industry to foreign participation; and (b) the Korean financial crisis of 1997 and the consequent need to restructure the sectoral system of innovation of the industry. The study is structured into seven sections. The first section elucidates on the conceptual framework underlying the study and undertakes a review of past studies done on the theme. The unique features of the telecommunications industry in the country are brought out in the second section. Applying the sectoral system of innovation perspective, the third section maps out the innovation system of the country by focusing specially on two of the more important components, namely the government research institute and the manufacturing firms. The fourth section measures the innovation capability of the sector in terms of three separate indicators by focusing on achievements in both fixed and mobile telephony. The fifth section presents the case of one successful innovation capability in fixed telephony and another one in mobile telephony equipments. The sixth one discusses the more proximate determinants of this capability. The seventh one concludes. © Physica-Verlag Heidelberg 2007.