Transitions of Innovation Activities in Latecomer Countries: An Exploratory Case Study of South Korea

World Development Vol. 54, pp. 156–167, 2014 Ó 2013 Elsevier Ltd. All rights reserved. 0305-750X/$ - see front matter www.elsevier.com/locate/worlddev

http://dx.doi.org/10.1016/j.worlddev.2013.07.013

Transitions of Innovation Activities in Latecomer Countries: An Exploratory Case Study of South Korea JAE-YONG CHOUNG KAIST, Daejeon, South Korea HYE-RAN HWANG Daejeon Development Institute, South Korea

and WICHIN SONG * Science and Technology Policy Research Institute (STEPI), Seoul, South Korea Summary. — The main aim of this study is to explore the diverse route of innovation activities and key characteristics during the transition period of the emerging economies using the analytical framework of innovation system and product life cycle. Study distinguishes three archetypes of innovation activities: deepening of the process, architectural, and radical innovations. Study also argues that each route of innovation activities in the transition period of the emerging economies requires corresponding institutional frameworks, different base of capabilities, and different relationships among innovation actors to facilitate the transition from imitator to innovator. Finally, some policy implications of this attribute are considered. Ó 2013 Elsevier Ltd. All rights reserved. Key words — Korea, reverse product life cycle, transition, post catch-up, innovation system

1. INTRODUCTION

arrangement. In this regard, the RPLC approach is needed to expand, considering the institutional rearrangements. This study therefore examines the emerging issues of latecomer countries undergoing transition. In particular, it explores how companies in latecomer countries approach technology creation beyond the utilization and assimilation of existing technologies. In addition, the technological capability-building process in each PLC stage is investigated in conjunction with the innovation system. The IT sector is chosen because it is the largest single export industry, as well as a challenging sector, where technological competencies are essential for competitiveness. First, this study shows that firms do not automatically acquire the capability to create technology by simply accumulating technological capabilities; rather, technological competence must be accompanied by an organizational and institutional infrastructure that supports the acquisition of such capabilities. Successful transition from the adoption to the creation stage depends on the organizational and institutional arrangements that support innovation in a country, in addition to the strategy and resources of a single company. Second, this study argues that the timing of a firm’s entry into RPLC differs in countries undergoing transition. The different paths depend on each country’s level of technological accumulation, organizational capabilities, and firm strategies. Third, achieving organizational reconfiguration and institutional transformation during the transition period is important. As the country enters the fluid stage from the mature stage,

Companies in latecomer countries, particularly in East Asia, are showing a strong tendency to go beyond utilizing existing technology through technology diffusion to compete as frontier players in the global markets with new products and processes. These companies are developing new strategic orientations for capacity building to create new technologies by viewing the product life cycle from a new perspective (Choung, Hameed, & Ji, 2011; Hobday, Rush, & Bessant, 2004; Kim, 1997). Most traditional research on innovation activities of the latecomers is centered on learning and innovation activities in the catch-up period. Among these research activities, the reverse product life cycle (RPLC) theory provides a primary explanation of the evolutionary catching-up process of latecomer firms. Based on RPLC, the evolution of latecomers from adopters to creators of technology is the reverse of the firms’ usual strategy in developed countries. Although the RPLC theory demonstrates the importance of technological accumulation based on learning, assimilation, and adaptation from the mature stage, it provokes a number of questions, particularly under the changing competition environment of the latecomer firms. First, are there no other possible entry strategies except that of the entry into mature stage? Recently, latecomer firms have launched new products in the early stage of the product life cycle. The changing patterns in the latecomer firms’ entry strategy require theoretical expansion of the RPLC approach. Second, which factors in the innovation system contribute to generate varieties in the entry strategies of the latecomer firms? Enabling these factors to create varieties in the firm strategies in the transition period are closely related with the organizational and institutional

* Funding: This work was supported by the National Research Foundation of Korea Grant funded by the Korean Government (NRF-2011-371H00002) Final revision accepted: July 26, 2013. 156

TRANSITIONS OF INNOVATION ACTIVITIES IN LATECOMER COUNTRIES

institutional rigidity or a shortage of institutional assets may become obstacles to transition during the post-catch-up stage. Although this study focused on Korean cases, the exploration of the post-catch-up innovation activities elucidates the understanding of the transition process toward technological advancement in newly emerging economies. This paper is organized as follows: Section 2 presents the literature review and conceptual framework for analysis. Section 3 describes three stylized taxonomies of post-catch-up innovation activities. Section 4 draws policy implications and conclusions from the “post-catch-up” discussions. 2. CONCEPTUAL FRAMEWORK: LATECOMERS’ POST-CATCH-UP INNOVATION ACTIVITIES AND TRANSITION TO A NEW INNOVATION SYSTEM (a) Theoretical review of latecomers’ innovation activities Discussions on the latecomers’ innovation activities have been focused on why so many variations exist in the speed and performance of catch-up efforts by latecomer firms. Such micro-level discussions 1 that focused on the firms’ activities and organization are categorized into three. One involves the product life cycle theory, the second attempts to understand the latecomers’ catch-up and innovation strategies according to their links to the external environment, particularly the global market environment, and the third focuses on the latest frontier products. Utterback and Abernathy (1975) divided the cycle of the product and process innovations into “fluid phase,” “transition phase,” and “specific phase.” The fluid phase occurs from the development of a new product to the emergence of a dominant design. In the transition phase, process innovation is performed after the emergence of a dominant design. Finally, the specific phase occurs when the market has matured completely. A series of research trends borrowed from the product life cycle theory has emerged. In developing countries, the process takes place in the reverse direction (Kim, 1997). In a mature market, universal and stable products and technologies arrive in developed countries without any further need for process innovation. These countries gradually accumulate the technological capabilities that enable them to absorb and improve upon the mature products and technologies. Latecomers use their own technological capabilities to embrace, absorb, and improve on the advanced countries’ technologies. However, this approach is based on a linear perspective in which the technological change occurs from the fluid phase to the mature stage, and thus, catch-up is interpreted as an issue of relative speed (Lee, Keun, Lim, & Song, 2005; Perez & Soete, 1988). Moreover, it ignores the fact that, in the case of the latecomer firms, some firms are capable of catching up whereas others are not, and several patterns of catch-up process can occur (Lee & Lim, 2001). The second approach attempts to understand the latecomer firms’ catch-up and innovation strategies according to their links to the external environment, especially the global marketplace. Hobday’s analysis (1995) combines the technological catch-up process of latecomers in East Asia with the product life cycle theory and export strategy. In accordance with the stages of evolution involving the latecomer firms’ technological capabilities, an export strategy evolves from the original equipment manufacturer (OEM) to the original design manufacturer to the original brand manufacturer in a parallel manner. Latecomer firms overcome resource deficiencies by

157

targeting the areas that are easiest to imitate, least path dependent, and most transferrable. In other words, a strategy that involves low labor costs, imitation, and linking of global corporations through the OEM allows the latecomers to enter the global market more easily (Mathews, 2002). Discussions have been conducted on how latecomer firms acquire external sources of knowledge and accumulate technological capabilities by incorporating into the “global production network” (Ernst, 2002; Ernst & Kim, 2002). The third approach is based on the resources in a broader sense: the technology accumulation process through learning and the accumulation of dynamic corporate capabilities. Many discussions on the latecomer firms deal with the process they employed to accumulate the knowledge needed to consume, use, apply, and modify existing technologies. These studies argued that latecomer firms must acquire three capabilities—production, investment, and innovation (Dahlman, Ross-Larsen, & Westphal, 1987)—and that the technological capabilities to generate and manage technical change can be differentiated with respect to a level. This level can be basic, intermediate, or advanced and is either a primary or a support function (Lall, 1992). Technological capabilities also consist of skills, knowledge, experience, and institutional structures and linkages (Bell & Pavitt, 1993). In addition to the accumulation of internal technological capacity, the theory on dynamic corporate capabilities that considers the dynamics achieved through linkages with external environments falls into this category (Choi, 1996). The theory explains the latecomer firms’ competitive advantage from the perspectives of accumulating internal technological capacity, firm’s position based on various forms of assets, and internal learning process. With regard to the recent innovation activities of the latecomer firms, existing discussions suffer from the limitations in the following areas: first, conventional theories focused mainly on the latecomer firms’ catch-up innovation activities, analyzing how they have achieved catch-up by capacity building, including the spread, imitation, and acquisition of technology. However, this view omits the latecomer firms that have succeeded in competing with advanced companies in the frontier product field after the catch-up. In particular, because both the type of innovation activities and the timing of entry into the product cycle also vary, the fragmented understanding of technology acquisition through adoption, application, and improvement in technology at the mature stage has almost reached its limit. Second, whereas individual latecomer firms should employ strategy to leverage resources, institutional support for innovation is a salient factor in achieving competitiveness. Because latecomer firms have limited resources at the initial stage of entry, national-level institutions play an important role in helping firms overcome such limitations. The latecomer firms’ innovation activities evolve through interactions with the elements of the innovation system, such as the industrial structure, the orientation of government policies, and the public research sector. Therefore, the accumulation of innovative capability by the latecomer firms must be analyzed in conjunction with the innovation system. The effect of institutions and policies differ in each country according to the capabilities and the level of income (Lee & Kim, 2009). Moreover, a system-level approach is important because clashes between catch-up systems and post-catch-up innovation activities can occur at the system level during the transition process. Third, the resource-based approach must consider the internal corporate capacity building and the firm’s interactions with the external environments. However, evolution of the technological capabilities of the latecomer firms does not

158

WORLD DEVELOPMENT

happen only in accordance with a technology’s growth path but in conjunction with how innovation is organized in a national context. Whereas the approaches explained thus far consider the latecomers’ internal capacity building and dynamics driven by interactions with the external environments, how inter- or intra-organizational innovation activities are organized remains insufficient. This study expands on previous innovation studies by examining the transition process of the latecomer firms. The transition process is defined as the stage when the firm moves from building the minimum essential knowledge base to building strategic capabilities and distinguishing itself competitively (Dutre´nit, 2004). Dutrenit pointed out that the existing studies in developing countries have devoted little attention to the accumulation of advanced innovative technological capabilities. Research has mainly focused on the accumulation of technological capabilities to acquire, utilize, and improve existing technologies. The latecomer countries’ transition process is concerned on securing the core/dynamic capabilities and technological leadership. A few studies started to focus on the generation of new technologies (Choung, Hwang, Choi, & Rim, 2000), creation of new paths of innovation (Lee & Lim, 2001; Whang & M Hobday, 2011), and strategizing technological leadership (Hobday et al., 2004; Mathews & Hu, 2007) from the perspective of the latecomer firms. (b) Conceptual framework: How an innovation system interacts with the latecomers’ post-catch-up innovation activities (i) Concept of post catch-up The concept of “post catch-up” can be theoretically and practically distinguished in three ways. First, the organization and innovation activities during the post catch-up differ to some extent from those in the catch-up, even in advanced countries. Broadly speaking, the catch-up innovation activities focus on expanding the production output by applying existing technologies to the acquisition and assimilation of imported technologies and to improve them (Bell, 1984; Dahlman et al., 1987; Lall, 1992; Bell and Pavitt, 1995). By contrast, the post-catch-up innovation by latecomer countries entails using the emerging innovations of the latecomer countries (particularly the first-tier latecomer countries), including new products and processes, from the combination of existing technologies and new technological trajectories based on the specific needs of the local environment. Second, the post-catch-up approach underlines the transition process of the innovation systems in latecomer countries. The post-catch-up approach embraces the continuum of organizational and institutional capabilities accumulated during the catch-up period and the possibilities of discontinuity due to the changing competitive environment. It focuses on understanding the dynamics of the conditions, environments, and strategies during the transition. In particular, it may provide a useful framework for understanding the problems generated by institutional rigidity and system failure during the catch-up to the post-catch-up transitions. Third, the post-catch-up framework is context specific. It accommodates the diverse developmental stages of the countries that are catching up and the driving forces of the domestic socio-economic change. List (1841) pointed out that countries undergo different developmental stages, and they must coexist and interact with the other economies with distinctive institutions (for example, national innovation systems). In addition, the above issues led to the discussion of the variety of capitalism, focusing on the specificity of national economy (Amable, 2003; Hall & Soskice, 2001). The context-

specific approach of the post catch-up means that solutions cannot be found simply by imitating the systems of the advanced countries. Further, certain stage- and country-specific strategies require different policy approaches compared with those implemented in advanced countries. A context-specific approach enables the countries to seek indigenous development paths that overcome behavioral routines and organizational arrangements established during the catch-up period. In summary, the concept of “post-catch-up” innovation can be defined as the “innovation activities in which the latecomer countries establish new technological trajectories for innovation in a changing competitive environment where scarce opportunity for imitation is present.” A post-catch-up innovation system in the transition of a latecomer country to a more advanced economy must encompass the socio-economic systems that surround that country’s techno-economic activities. On the one hand, the post-catch-up system must equip its organizations and institutions to support imitative learning. Further, it must facilitate the creation of new technological knowledge and economic value. (ii) Conceptual framework for an innovation system that supports latecomers’ post-catch-up activities A country’s technological capabilities are part of its innovation system, which includes the externalities and synergy generated by the learning process, ways of doing business, and the knowledge and skills residing in the related institutions to support these technological capabilities (Lall, 2000). The role of the institution is more significant in the developing countries. Dutre´nit, 2007 pointed out the need for national governments to pay attention to the innovation capacity by building and managing an uneven knowledge base, acquiring and maintaining leadership to keep the knowledge frontier, acknowledging the country’s context, supporting a stable technology strategy, and supporting the knowledge creation process by developing the country’s science, technology, and innovation capabilities. The latecomers’ post-catch-up activities must be understood in the context of a national innovation system. When latecomer firms desire to advance from the catch-up to the postcatch-up innovation activities, the specific characteristics of an innovation system will influence how these firms mobilize their human and material resources for the change or institutional support. To accumulate post-catch-up innovation capacity, the organization and operation of the network for knowledge production and diffusion must be changed. In addition, countries that have successfully developed and are operating a catch-up innovation system are more likely to experience conflicts and time lags in the transition process, consistent with the views of Leonard-Barton (1992) who argued that core capacity could emerge as core rigidity in different competitive environments. System lags and conflicts are sometimes critical obstacles that prevent latecomer firms from launching post-catch-up innovation activities. Therefore, considering the continuities and discontinuities that can arise during the transition from the catch-up to the post-catch-up process is important. This study considers three factors in the national innovation system relevant to post-catch-up innovation activities, which all center on the relationship among the actors directly involved in producing knowledge because the relationships among the innovation actors are salient factors on the dynamics of an innovation system. The deepening in the level of technological capabilities of each innovator leads to a change in the relationship among the innovation actors and finally influences the dynamics of an innovation system. In this regard, we consider three factors of the innovation system: (1) the firm’s

TRANSITIONS OF INNOVATION ACTIVITIES IN LATECOMER COUNTRIES

method in organizing its internal innovation activities; (2) inter-firm relationships, and (3) the firm’s relationship with the public sector. Regarding the firm’s internal organization of the innovation activities, during the catch-up stage, quick acquisition of existing knowledge and organization to achieve efficiency in the production process is desirable. Therefore, integrating different organizations to allow process-centric fast problem solving is important. At the same time, integrating the functions within the organization, such as design, production, and marketing, is important in creating new knowledge and securing new market opportunities. Regarding the inter-firm relationships, during the catch-up phase, firms must quickly learn new technology with reduced technological risk by connecting with the actors that already possess the technology. Mathews (2002) pointed out that adoption of existing technology could be an advantage in becoming competitive because it lets the firm bypass the process of technology development and avoid trial and error in its efforts to stabilize its developed technology at the early stage. However, technological capabilities are not accumulated simply because technology is adopted; the absorptive capacity is influenced by the relationship between the user firms, which involves the processes of adoption and resource distribution in education and training. Moreover, connections among actors in the production of new knowledge between the consumer firms and the suppliers may become more important in the post-catch-up stage. Further, whether or not a firm has secured various element technologies through relationship with other firms makes a significant difference in its technological competitiveness. For the public sector, during the catch-up stage, coordinating the process of joint learning in the existing technology or acquiring basic knowledge and supplying a quality engineering workforce are crucial in facilitating the research. During the post-catch-up stage, tapping into the public sector’s original knowledge for new-concept product design can serve as an important source of innovation for a firm. For the public research sector, basic research capabilities may be increasingly demanded from private firms to produce new technology. In this study, we propose an expansion of the RPLC theory by positing that inter-firm and inter-industrial discrepancies exist. Furthermore, the timing of a firm’s entry into the

159

product life cycle has increasingly diversified, and multiple entry points are possible during the post catch-up process as firms interact in different ways with the other innovation actors. One evolutionary path is initiated during the mature technology stage from where a firm moves on to develop frontier products in the reverse direction from the original PLC mainly through technology deepening (path r in Figure 1). This path is almost identical to that suggested by the RPLC. Technology deepening is the most frequently mentioned evolutionary pattern of latecomer firms, which incrementally accumulate technological capabilities in the traditional manufacturing. To achieve deepening in the innovation processes, the learning effect is critical in the manufacturing technologies. Furthermore, as latecomer firms compete with leading companies in manufacturing frontier products, the integration of design and manufacturing and access to the manufacturability of improved product design are important sources of innovation. The public sector institutions that support the coordination of collective learning (to reduce imitative learning) and technology diffusion become relevant. The second evolutionary path begins with the firm’s entry immediately after the establishment of a dominant design. It is typically followed by the production of various applications through architectural innovation (s of Figure 1). Architectural innovation is achieved by the application of new combinations of the installed components or new interface among the components within the systems. Hence, proliferation can be guaranteed when various specialized companies exist. In addition, proliferation can be attained by the system vendors and suppliers of the components, materials, and equipment through collaborative learning between the user and supplier firms. Establishing relationships between the local and global system vendors is therefore an important goal for the latecomers. Institutions, both public and private, must provide support for the technology-intensive firm and the underlying venture ecosystem, as well as stimulate the inter-firm learning network. In the third path, the latecomer firm enters the industry in the fluid phase and produces global-level products based on its original technology (t of Figure 1). Entering the fluid stage of the economy is challenging for latecomer firms because of market and technological uncertainties. To deal with

Figure 1. Coevolution of the reverse product life cycle and a national innovation System.

160

WORLD DEVELOPMENT

this concern, latecomer firms actively participate in international standardization processes or provide pioneer global commercialization services or products to demonstrate their technological capabilities and subsequently win the market. Public research institutes, with their continuous conduct of independent research, simultaneously adapt to the emergence of foreign technology by generating their own. One critical policy challenge is to maintain institutional assets when no routine processes are yet in place for private sector diffusion and creation of proprietary technology. In particular, during the diffusion process of the fluid-stage technology, achievement of system stability through extensive tests becomes the major issues, similar to that in advanced countries. In addition, the innovation actors in the fluid stage must create new game rules for standardization and operation in the global environment. In this regard, a policy regime effective during periods of imitative learning may turn out to be a rigidity during the standardization, technology development, and commercialization processes of the fluid-stage technology in latecomer countries; hence, new policies will be required to overcome these obstacles. In summary, as latecomer firms accumulate their technological capabilities, the entry timing from the mature stage to the fluid stage becomes diverse. In this process, the relationship among innovation actors changes in conjunction with the capability enhancement of each innovator. Finally, the changing patterns of relationship among innovators influence the dynamics of the innovation system. To consider this coevolutionary process, integrative conceptual framework is required, which encompasses the entry strategy of the firms, the relationship among innovators, and the role of the public sector in each stage of the technological development. In the next sections, we examine different product cases to identify the post-catch-up innovation activities at each stage and the characteristics of the organizational and institutional arrangements. 3. TYPOLOGY OF THE POST-CATCH-UP INNOVATION ACTIVITIES AND CHARACTERISTICS OF THE INNOVATION SYSTEM (a) Research method This study is an exploratory study to draw the stylized facts in the transition of innovative activities in latecomer countries. It is based on a qualitative research method using case studies. The unit of analysis is the product. For a product group entering the mature stage, we selected the memory semiconductors. Memory semiconductors are Korea’s flagship products, and they dominate the global market. For products entering the product cycle after establishing a dominant design, we selected the camera phones. Korean camera phone companies launch globally competitive new products using linkages between the Korean component and the equipment makers and system developers. For products at the fluid stage, we chose the Wireless Broadband (WiBro) and Terrestrial Digital Multimedia Broadcasting (T-DMB), developed using Korea’s own original technologies. All the selected products in this study, except the WiBro and T-DMB systems, are globally competitive and have been designated by the Korean Ministry of Knowledge Economy (MKE) as “World-Class Products.” The World-Class Products program, which has been implemented by the MKE since 2001, lists Korean products that rank within the world’s top five products in the market share or that have the potential

to join the top-five ranking within 3 years. Those products are eligible to receive governmental support. Hence, firms whose products are selected for this program can be considered to be performing post-catch-up innovation activities by developing original technology or by successfully developing new products at the global level. We conducted in-depth interviews for the case studies at the firms or in public research institutes that are mainly responsible for each of the products named above. A structured questionnaire was used for the in-person interviews with CEOs, CTOs, or directors of each participating organization. They were asked to address these issues: (1) confirm the product characteristics, market environment, product architecture, value chain of the core products, and global competitive environment as found in the self-conducted preliminary study; (2) identify the direction of technological accumulation, changes in their major product portfolios, and technological superiorities; and (3) describe their technology acquisition strategy as applied to the product development process, inter-firm relationships (for example, vertical and horizontal integration of users and suppliers), and institutional relationships (for example, relationships with the public research institutes and policy support) (Table 1). (b) Innovation pattern 1: Deepening process innovation: Samsung Electronics’ development of memory semiconductors Korea’s flagship company, Samsung has achieved remarkable growth in global competitiveness in the fields of semiconductors and displays, among others. Samsung’s dramatic growth was due to its advances in the semiconductor business in the early 1980s. With its development of the 64-K DRAM as the starting point, Samsung narrowed the technological gap with its rivals in advanced countries through the successive development of the 256-K DRAM (1984), 1-M DRAM (1986), 4-M DRAM (1988), and 16-M DRAM (1989). In 1992, it successfully developed the 64-M DRAM, a first-time accomplishment in the world. In the 2000s, Samsung’s position in the semiconductor industry was further solidified, and it held the largest market share in the world for 14 consecutive years until 2009. Since its development of the 64-K DRAM in 1983, Samsung Electronics has focused its efforts on securing fast production capabilities through technology adoption and acquisition in the early stage. Samsung dispatched its engineers to Sharp of Japan to acquire early-stage process technology. Since the development of the 256-K DRAM, its domestic and overseas development teams have performed concurrent development activities, with the former focusing on the development of the process technology based on the technology adopted from Micron, a US firm. During this stage, the emphasis was on acquiring process technology and building independent development capacity. The development teams acquired the core process technology after trial and error in each of the 309 process stages, thereby accumulating large-scale production capabilities. Samsung Electronics has adopted an aggressive technology strategy in the process technology since the development of the 1-M DRAM. It acquired circuit design technology by adopting the technology from Micron and through analysis of the design data and training. With the 1-M DRAM as the starting point, Samsung Electronics achieved design technology using its own development capabilities without adopting core technology from the outside. With the development of the 4-M DRAM, Samsung Electronics wrested the lead from its rivals even in design technology. In the development of the 4-M DRAM, integrating cells on one plane became techni-

TRANSITIONS OF INNOVATION ACTIVITIES IN LATECOMER COUNTRIES

161

Table 1. Description of companies (2010) Innovation Type

Products

Case companies

Major achievements

Deepening process innovation

Memory semiconductor

Samsung Electronics

Architectural innovation Radical innovation

Camera phone chip WiBro T-DMB

Core Logic ETRI-Samsung ETRI-set maker-service provider

Ranked 2nd in share of world semiconductor market for 15 years 40 times revenue growth (since 2002) Global first to commercialization (2006) Global first to commercialization (2005)

cally impossible. Samsung aggressively adopted emerging alternative technology rather than sticking to the traditional process technology. 2 The organizational strategy of Samsung during this period focused on shortening the learning period. First, it pursued concurrent development. Samsung’s domestic and overseas development teams simultaneously pursued several different technological options. Although this strategy was expensive, it reduced the time required for development (Choi & Lee, 2004). Second, it closely linked the process and product technologies. Rather than undertake serial development from the design to the test process, engineers in each function concurrently participated in all stages of development, which allowed them to spot technical issues early and solve them jointly. Samsung Electronics accumulated fast problem-solving ability by creating a separate organization in charge of integrating the design and production (Choung et al., 2000; Hwang, 1999). This integration of development and production led to a system that can predict the yield in advance even from the test production line and shorten the problem-solving period at the development stage (Shin & Jang, 2006). This organizational structure allows quick resolution of technical issues. Samsung’s expertise in problem solving was the key organizational capability that sped up the firm’s mass production system. With regard to the external relationship with other firms, Samsung Electronics utilized its links in the knowledge production network in overseas equipment and material suppliers to obtain advanced technology in a short period. Because the engineers of the equipment suppliers had experience building existing product lines with advanced semiconductor manufacturers, their knowledge spilled over to the latecomer firms building similar product lines. Samsung’s engineers were dispatched to overseas equipment suppliers to obtain on-site training for 6 months during the early technology-learning period. As Samsung Electronics built its internal technological capabilities, its relationship with the equipment suppliers evolved as well. As summarized in Table 2, Samsung continued to improve its internal technological capabilities with each new product generation, and its relationship with the equipment suppliers evolved from being a passive purchaser to a joint developer of basic technology.

Samsung’s relationship with the public sector also changed with its accumulation of technological capabilities. Government-led joint research and development programs played a pivotal role at the early stage of basic learning. In October 1986, the Electronic and Telecommunication Research Institute (ETRI) formed a consortium for joint research and development with support from the Ministry of Science and Technology and the Ministry of Commerce. Fifty-seven percent of the financing was provided by the government, and the remaining 43% was provided by private firms that participated in the consortium, which consisted of three major conglomerates, seven domestic universities, and ETRI. The consortium’s joint research and development team focused on the development of process technology, primarily by licensing technology from foreign suppliers. Building on the consortium’s achievements, the participating firms then conducted their own individual business-level research (ETRI, 1989). After the successful development of the 4-M DRAM, both the government and the private sector recognized the need to enhance continuously the DRAM technology and developed the 16-/64-M DRAM consortium as a follow-up development project. The 16-/64-M DRAM consortium departed from the technology learning stage and focused on the material and equipment area and generic technology, including gallium arsenide and other new technologies. Whereas the 4-M DRAM consortium has been aimed at learning the design and process technology quickly, the 16-/64-M DRAM consortium concentrated its efforts on cultivating the basic research capabilities and joint growth with the relevant technologies of the equipment and material suppliers. ETRI’s main role in this process was to coordinate and manage the activities of the consortium. These examples demonstrate that the role of the public sector changes as the private sector’s technological capabilities evolve. More specifically, at the initial stage of the industry and technology development, the public sector directly supports the industry and the technology concerned. However, as the private sector accumulates technological capabilities, its role changes to performing basic research and mediating interactions among the innovation actors. With regard to the 16-/64-M DRAM, the public research organizations laid

Table 2. The evolution of relationship Samsung Electronics Co. with equipment suppliers Stage of development

In the case of Steppera

In the case of CVD

256K 1M

Purchase of equipment for mass production Parameter modification for process using mass production equipment Performance assessment of pilot equipment

Assessment and purchase of equipment for mass production Performance assessment of pilot stage equipment

4M 16M

Provide product specifications at the beginning of equipment development

Provide product specifications at the beginning of equipment development Co-operative development of basic process technology

Source: Nikkei Microdevices. (1993) and Hwang (1999). A stepper is a device used in the manufacture of integrated circuits (Ics). Steppers are an essential part of the complex process, called photolithography, that creates millions of microscopic circuit elements on the surface of tiny chips of silicon (Wikipedia). a

162

WORLD DEVELOPMENT

a foundation for the semiconductor firms to learn jointly the core technology areas and create technical knowledge through interactions. (c) Innovation pattern 2: Architectural innovation: 3 MtekVision and Core Logic’s camera mobile phone development Korea is the global leader in the mobile phone market. In 2010, Samsung and LG, Korea’s two major mobile phone makers, jointly accounted for as much as 30% of the global mobile phone market. The mobile phone industry evolved as follows: transition from analog to digital happened with the advent of the two communication standards: GSM and CDMA. This transition resulted in the integration of color LCD, camera, MP3, and radio. Moreover, it triggered the open market represented by the entry into the mobile phone market of the platform-centric businesses and companies in other fields (e.g., Apple i-Phone). The subjects of this case study, MtekVision and Core Logic, grew dramatically owing to the strong drive for convergence. The advent of the camera phones ushered in an important opportunity for mobile phones to depart from being a communication device to a comprehensive multimedia device. In the history of digital mobile phones, the transitions from the flip type to the folder type and from black and white to color mobile phones were considered significant innovations. The introduction of camera phones served as the turning point for mobile phones to go beyond being a simple communication device to becoming a multimedia device, as well as an opportunity for MtekVision and Core Logic to emerge as leading “fabless” companies in Korea in the field of camera video processing processors. The camera phones debuted in Japan in 2001 and were introduced in Korea in the second half of 2002. Camera phones consist of various components and modules. Among the components, the mobile phone’s camera control processor (CCP), in which the image that comes through the lens is transformed into electric signals at the image sensor, is a core component. CCP, which allows compression, editing, and saving of videos or images taken by the mobile phone, is a flagship product of Core Logic and MtekVision. The growth of fabless firms such as Core Logic and MtekVision was linked to the major Korean mobile handset system makers in the global market where both Core Logic and MtekVision launched a new type of business activity, shunning the initial method of responding to the demands of the subcontractors of larger companies in a temporary and passive manner. More specifically, they laid a foundation for coevolving with the system manufacturers by developing technology and products jointly with the system manufacturers (large corporations such as Samsung and LG) based on the existing accumulated capabilities. The architectural innovation through the joint research between the mobile phone makers and component suppliers is well demonstrated by the joint research and development between MtekVision and Curitel. It began as a joint effort to develop an add-on camera module suggested by Curitel but was eventually decided that upgrading the existing interface technology alone would not lead to dramatic improvement in the camera phone’s performance. Accordingly, MtekVision turned its developmental efforts toward changing the connection method of the mobile phone architecture and attempted a transition from the existing method of playing image and video files through a baseband processor to a new method where the CCP transmits the video directly to an LCD screen (Song & Hwang, 2006).

Core Logic’s CEO started his business after accumulating technological capabilities with ASICs and in image processing while working at a large corporation engaged in the semiconductor business. Upon the development of the camera application processor (CAP), Core Logic also attempted to innovate on the mobile phone architecture and develop new processors through collaboration with LG Electronics. The firm went on to launch the CAP in 2003 and supplied it to domestic mobile handset makers, including LG Electronics, and eventually became the supplier of Sanyo and Epson of Japan, which then dominated the early camera phone market. In the camera phone development process, the developer of CAP embedded in the camera phones attempted to innovate on the mobile phone architecture and develop new processors through collaboration with the set makers. Core Logic was able to pursue joint development with the mobile phone makers because it had already undergone a learning process in CAP-related technologies, including the sensors and video image control, through various corporate projects and national R&D projects since its founding (Min & Oh, 2006). Because the company was attuned to current technological and market situations, the mobile phone makers proposed to establish a strategic development partnership with Core Logic, which allowed the company to enter the camera phone processor market. The joint development effort involved simultaneous development of the camera phones and processors, rather than the common method of developing camera phones first and localizing the phone components after. To allow innovation of the new architecture, component suppliers changed their leading technologies, and the assembly companies utilized these innovations in developing new products. Core Logic jointly developed the CAP with LG Electronics to innovate on the mobile phone architecture and to develop new processors. Since the early stage of the CAP development, Core Logic has consulted with the assembly company regarding the specific details and maintained cooperative relationship throughout the entire process of product development. As a result, a dedicated processor for CAP was embedded in mobile phones, which enabled Core Logic’s CAP to take off in earnest. Thereafter, as the mobile phones evolved into multimedia devices, manufacturers felt the need for a multimedia application processor (MAP) that offers multimedia functionality and launched joint development efforts with the component suppliers. Samsung Electronics, one of the biggest mobile phone makers in the world, developed its own MAP jointly with the component suppliers (Song & Hwang, 2006) and started mass production at the end of 2004, thereby successfully making inroads into the multimedia phone market. The source of Core Logic’s competitiveness secured through the process of joint product development, comes from its ability to accumulate various element technologies, combine them quickly, and provide the result to client firms. Core Logic possesses its own intellectual property (IP), 4 which enables it to respond quickly to consumers’ demands. Despite being a component supplier, Core Logic had knowledge of the entire system architecture because it developed its own component technology. A model for post-catch-up innovation activities could be found in the fact that Core Logic performed a lateral joint development with the component suppliers and assembly firms based on the aforementioned knowledge to achieve architectural innovation in handset products. Core Logic not only supplied the newly developed product to its clients through collaboration with LG Electronics at the early stage but also supplied other products in the same product line to other assembly firms based on the new processor, thereby establishing the foundation for growth.

TRANSITIONS OF INNOVATION ACTIVITIES IN LATECOMER COUNTRIES

With regard to the relationship with the public sector, Core Logic and Mtekvision utilized various government support programs for technology-based small- and medium-sized enterprises (SMEs). 5 In particular, to commercialize earlystage technologies, the firms actively participated in various R&D support programs, such as the Industrial Innovation Technology Development Program, the Industry and Technology Convergence Technology Program, the Semiconductor and Display Technology Development Program, the Components and Materials Technology Development Program, and the Electronics, IT, and Device Technology Development Program. Through the 2000s, the three firms were supported by these policy programs for new product innovation; Core Logic and MtekVision participated in 18 programs in the system IC design and related technologies. (d) Innovation pattern 3: Radical innovation (i) T-DMB With increasing technological capabilities, Korea began to demonstrate pioneer developing and commercial technologies, such as mobile TV and Internet. T-DMB (digital multi-media broadcasting via terrestrial transmission), which is known as mobile TV technology, was first developed by a public research institute and was launched as the world’s first commercial mobile TV broadcasting medium in 2005. In addition, the original technology of T-DMB was recognized as a new standard by the European Telecommunications Standards Institute in 2005 and was later registered as an International Telecommunication Union standard in 2007. In the development of the T-DMB technology, the role of the public sector was salient because the public research institute provides the basic original technology. Moreover, throughout the technology commercialization process, the institute played as the coordinator among the innovation actors, including the system firms, suppliers for core components, and content solution providers. In 2005, ETRI, a research arm of the Ministry of Information and Communication (MIC), succeeded in commercializing the world’s first mobile TV broadcasting in cooperation with LG Co. (DMB terminal manufacturer), NETnTV (interactive content solution provider), and Pixtree Co. (DMB chip manufacturer). Niched T-DMB innovation was realized via two routes. First, T-DMB was based on the globally competitive MPEG-4 technology developed by Korean firms and research organizations. Second, the European standard Eureka-147 was applied to T-DMB. A government policy was formulated during the fluid period of the economy to immediately create a strategy that utilizes Eureka-147 as the national DMB standard. Meanwhile, the government modified the broadcasting law and adopted T-DMB as one of the broadcasting services in the country in 2004. Despite this technological success, the business profits from its implementation have been negligible. The failure to create business profits is due to a weak business model and lack of applications, clash of institutional alignments, and shortage in institutional assets. Although the T-DMB handsets boast of a high penetration rate in the Korean market with 10 million units in use, operators are experiencing difficulty realizing profits because of weak advertising sales. According to the Korea Broadcast Advertising Corporation, DMB accounted for a meager 0.1% of the total advertising fees for terrestrial broadcasting in 2008. It was even cited as a primary example of failed policy because the Korean government maintained a high level of regulation of public broadcasting system in the new system. In addition, the failure of the TPEG service as

163

one application of T-DMB has been attributed to institutional rigidities (Choung, Hwang, Ji, & Hameed, 2011). T-DMB and TPEG were developed by two separate groups of networks, with T-DMB led by the MIC, ETRI, and KBS (Korea Broadcasting Service), and TPEG led by MOCIE (Ministry of Commerce, Industry, and Energy), KETI (Korea Electronic Technology Institute), and MBC (Munwha Broadcasting Corp). These opposing sets of networks clashed and collided throughout every stage of the T-DMB and TPEG implementations. Their conflict over the market share was apparent during the operator selection stage and became particularly fierce when the two parties attempted to implement TPEG on TDMB. Clearly, the lack of coordination between the two sets of institutions was primarily responsible for the belated implementation of the DMB and the low return on investment. In summary, institutional adjustment did not follow quickly enough the technological implementation. Business models were not developed, and regulations were not improved. Although T-DMB has been in service since 2006, the operators have not yet realized increase in revenue and are still experiencing deficits. The MIC’s plan was to implement first and then export the equipment and devices to overseas markets, but the export of T-DMB has not yet taken off. (ii) WiBro WiBro (previous known as “High Portable Internet (HPI)) is a mobile wireless Internet technology initiated and developed by the government research institute and private sector in 2001 and first commercialized in 2006. It is the original Korean standard of its global counterpart Worldwide Interoperability for Microwave Access (WiMAX) with some additional mobility features. In addition its technological originality was recognized as a new standard by the International Telecommunication Union (ITU) in 2007. In the first phase of HPI project development, ETRI was involved as the main organization, and in the second phase of commercialization, ETRI-Samsung jointly prepared the technical standard, system design, and four telecommunication service providers (Korea Telecom (KT), Hanaro Telecom, SKT, and KTF) collaborated in the research. Niched WiBro innovation was achieved in two steps. First, WiBro developers independently conceptualized the design involved, formulated communication methods, identified required sub-technologies, and implemented the standardization process. Second, WiBro developers developed their technologies based on IEEE 802.16 international standard. During the early phase of technology development, a government strategy was formed to commercialize the independent standard. However, technology policies changed toward an inter-operable standard that has a wide international scope, such as IEEE standard 802.16. Moreover, various manufacturers and the government utilized Asia’s first WiMAX-authorized testing laboratory in Korea so that domestic service providers achieve international competitiveness. Despite the technological expertise and the successful development of the proprietary WiBro technology, Korea’s lack of market creation capabilities and limited institutional assets reflected similar circumstances to the T-DMB case. First, lack of coordination among the market participants caused a bandwidth issue. The self-inflicted pressure of being the first mobile wireless broadband network in the world resulted in isolation from the global roaming network of mobile WiMAX. The bandwidth for WiBro was set at 8.75 MHz at a frequency of 2.3 GHz, which is different from the global trend of 10 MHz at the 2.5-GHz or 3.5-GHz frequency. The problem with the different frequency ranges can be solved using software, but

164

WORLD DEVELOPMENT

the bandwidth differences necessitate different or modified devices and equipment, a significant obstacle in achieving economies of scale. Second, Korea failed to develop market capabilities. To create effective market conditions, institutions should design policies that provide economic benefits and incentives to promote rapid diffusion. When WiBro was first implemented, the selection of carriers was a hot issue. Many debates ensued on how many carriers would be awarded and which carrier would be favored for the wired versus the wireless services. Among the five proposals, the MIC settled on the “three operator plan,” thinking that competition among three providers would be optimal to accelerate market diffusion (INews, 2004). In 2005, the MIC granted licenses to three large companies—SKT (wireless), KT (wired), and Hanaro (wired) (INews, 2005). However, the objectives of the three carriers in entering into the WiBro business and strategies and capabilities were much different from the intention of the government. Whereas the Korean government expected to achieve economies of scale based on the huge investment of the designated three large firms, the three carriers were not prepared to invest in the market with high uncertainty. 6 (e) Summary In the case studies presented earlier, we have identified three patterns of post-catch-up innovation activities based on different entry timing in the product life cycle. First, the technology-deepening pattern occurs when latecomer firms enter the market at the product’s mature stage and advance all the way to introducing frontier products. In this case, internal development processes or cumulative technology accumulation in the process technology sector serves as the major driver of innovation. From the memory semiconductor case, the technological capabilities in the process technology accumulated from product development after jumping in at the product’s mature stage provide a key foundation for the next-generation product development. An integrated organizational structure centered on process technology is in place to enable fast problem solving and productivity enhancement. In the development of the next-generation products based on the technological capabilities accumulated through prior development of the products, the firms can develop new products and processes through collaboration with back-end firms such as the equipment and materials suppliers. The firms’ relationship with the public research sector also changes as they migrate to frontier product development. At the initial stage of the entry, acquiring government-sponsored institutional arrangements in place is important, which allows the firms to coordinate with large companies on learning the basic technologies and conducting research. Afterward, as the companies built their technological capabilities, the institutional arrangements for cooperation between research-oriented universities and public research institutes also become important in developing new products and processes. A second pattern occurs when latecomers enter the product lifecycle immediately after the dominant design for a system is established. Even though such firms did not develop the dominant design themselves, they possessed knowledge of the system architecture and the ability to apply it quickly to various element technologies, acquired in the previous stages of product development. Their products do not change the market standard; however, these firms still achieve product innovation by changing the architecture of the system products. For these firms, possession of the basic knowledge on the entire system

acquired through experience in product development at earlier stages serves as a springboard for technological growth. Latecomers that demonstrate this pattern evolve to develop applied technologies or architectural innovation by combining various element technologies based on their capacity to absorb early the basic and original technologies. In particular, their linkages with major corporations and system companies as their main clients serve as their major source of innovation. The important result is that market-related and technological uncertainties are overcome through joint product development with the end-product manufacturers (chaebol conglomerates), who face global competitive pressure. These manufacturers also pursue diversification of their knowledge production network rather than perform exclusive vertical integration with conglomerates as they accumulate technological capabilities. Their organizational arrangements also evolve toward the direction that helps expand further linkages with the consumer groups. The third pattern is observed among latecomers that possess original technology and enter the life cycle at the fluid phase. In this pattern, the role of the public sector is salient in terms of providing basic original technology and coordinating with the innovation actors to commercialize new technology. Moreover, market entry at the fluid phase requires coordinating and market creation capabilities. The organization must possess the ability to coordinate the activities of interested parties around the newly emerging technology. This ability to coordinate among domestic systems suppliers, component suppliers, user groups, and service providers is important in creating standards and early markets. However, the Korean firms and government lack the experience in implementing early technologies and lack the institutional capacity to establish world standards in the global market. In addition, the governance structure among government agencies, used to induce fast learning at the catch-up stage, actually worked against its purpose by hampering the technology entry at the early stage. Moreover, the duplicate development structure among the different government agencies caused institutional delay and loss of resources (Table 3). 4. IMPLICATIONS: CHALLENGES AHEAD IN THE TRANSITION TO POST-CATCH-UP INNOVATION SYSTEMS As previously described in the case studies, Korea’s innovation system is currently in a transition period. The catch-up innovation system based on the adoption and imitation of foreign technology has saturated. Firms that emerged as global leaders in some products based on the accumulation of internal technological capabilities face increasing pressure to pioneer new technologies. In accordance with this change in the business environment, latecomer firms with technological abilities are modifying their post-catch-up activities. Moreover, the relationship among organizations encircling such accumulation of technological capabilities is also changing. From the selected case studies in Korea, this study has explored the stylized facts of the post catch-up activities, ranging from the mature to the fluid stage. First, latecomer firms enter the marketplace at all stages of the product life cycle. Some firms produce innovative new products by building on the technological capabilities acquired from their flagship industries (for example, in the case of memory semiconductors). Others, such as system suppliers, develop innovative

TRANSITIONS OF INNOVATION ACTIVITIES IN LATECOMER COUNTRIES

165

Table 3. Typology of post-catch-up innovation activities: sources, organizations, and institutions Overarching character of national innovation system

Deepening process innovations

Architectural innovations

Sources of innovation

– Technological accumulation via – Utilization of institutional assets in – Niche-based commercialization of imitation of foreign technology, large firms proprietary technology especially in process technologies – Window of opportunity in new products and new technologies

Intra-firm

– Integration of product and process technology lead to technological accumulation

– Securing a variety of application providers

Radical innovations

– Absorptive capacity for proprietary technology commercialization

– System-level technology-intensive suppliers Inter-firm

– Process innovations via joint learning among materials, equipment, and manufacturing

Public Research Institute and – Joint learning to reduce Policy imitative learning period – Selection and concentration in strategic areas

– Joint product development among system vendors and suppliers of materials, components, and equipment – Promotion of technology-intensive SMEs

– Joint development of proprietary technologies with private sector – Lack of institutional assets – Issues in inter-ministerial coordination – Uncertainty of market and technology creation

components to secure competitive advantage, whereas component suppliers create new markets (for camera phones). In another emerging type of innovation activity, firms develop original technologies by collaborating with universities and research institutes to take a lead in the global standards and create new markets. Secondly, the key actors and the relationships among innovators are different in each entry stage. In the entry at the mature stage, the key actors are the large latecomer firms with complementary assets for investment and manufacturing. In the entry at the growth stage, the key actors are the technology-based small and medium firms with architectural innovation capabilities. In the fluid stage, the role of the public research institutes is more important than that in the other cases. Thirdly, the relationships among innovators have different characteristics in each entry stage. In the entry at the mature stage, the relationships among the equipment and material suppliers are salient and change in accordance with the accumulation of technological capabilities. In the entry just after the setting of the dominant design, the user–supplier relationships in the cooperative product development are more important. Similar to the previous case, it showed the coevolutionary process between large user firms and the SME supplier firms from subordinate to cooperative relationship. Finally, in the fluid stage, the role of the public sector is critical in terms of knowledge generation, diffusion, and market creation. The institutional assets of an innovation system enable the latecomer firms to achieve technological and market leadership at the global level. However, institutional failures often occur during this stage because the appropriate institutional routines to achieve global leadership have not yet been developed. More importantly, the existing catch-up routines often hinder the shaping of new routines. Theoretically, we have introduced a transitional perspective for understanding the latecomers’ accumulation of technological capabilities to create new knowledge and products at the global level. In contrast to the theories that analyzed the catch-up process as an accumulation of capabilities through

modernization and improvement, we have focused on the transformation that occurred during the firms’ transition to the post-catch-up innovation through an organized evolution process. We suggest that the capabilities of each innovator and the relationships among innovators determine the dynamics of the innovation system. As the capabilities of each innovator are enhanced, the relationships among innovators change. The coevolutionary processes enable the divergent entry strategies of latecomer firms. In each entry stage, we found different key actors and dynamic relationships among innovators. This result implies that the different roles of the institutions, mainly the government and public research institutes, are required to support the transition to post catch-up innovation activities. In particular, policy orientations and policy instruments must be changed in accordance with the capabilities and the dynamics of the innovators. In contrast to the policy of the catch-up period, which focused on the selection of innovators and resource distribution, the new policy should shift to the nurture of new actors, coordination among stakeholders, and support of global standard setting. In this regard, the shaping of new institutional routines would be a great challenge in the transition from the catch-up to the postcatch-up innovation activities. Based on the explorative case studies, we draw some policy implications for latecomer firms in the emerging economies. First, the diversified entry strategies in all product life cycles were enabled based on the enhancement of technological capabilities. Hence, the first aim of the innovation policy should focus on the accumulation of technological capabilities. In particular, nurturing of new innovation actors and enhancing technological capabilities of SMEs are important in the post catch-up period. Second, innovation policy aims and instruments should accommodate the entry strategies to each product life cycle. The establishment of complementary assets is important in the entry at the specific phase. By contrast, the support to enhance absorptive capacity and for the technology-based SMEs would be the major focus of the innovation policy in the entry at the transitional phase. In the fluid phase, coordinating the various stakeholders in the innovation

166

WORLD DEVELOPMENT

process and market creation is important to implement technology commercialization. Third, the innovation policy in the newly emerging economies must consider the dynamics

of the innovation systems to overcome the institutional rigidities during the transition period.

NOTES 1. The recent theoretical explanation of the growth of latecomer countries is divided into macro- and micro-level approaches. In the macro-level approach, the growth factors with regard to the elements of national innovation system are explored in the aggregate level (Castellacci et al., 2013; Fagerberg, Srholec, & Knell, 2007). Recently, technology, tertiary education, and institutional matters have been indicated as the determinants of long-run economic growth (Lee & Kim, 2009), and the knowledge stock of a country grows over time as a function of three factors: innovation intensity, technological infrastructure, and human capital (Castellacci, 2011) in the latecomer context. Although we acknowledge the usefulness of the macro-level approach, we carry out the micro-level investigation, which focuses on the relationship between innovation capabilities and innovation system in the firm and product levels.

innovation refers to the correspondence between functional or structural elements of a product and their production process factors. Product architecture innovation refers to engineering innovations in the design functions and structures of a new product (Fujimoto, 2007).

2. At that time, the industry leaders—Toshiba and NEC—went ahead with the trench method of the traditional process technology, whereas Samsung chose the stack method despite its technological uncertainty and subsequently secured an advantageous position in the yield competition, which then served as an opportunity for Samsung to significantly narrow the gap from the leaders.

6. Three months after being named as WiBro provider, Hanaro opted to return its license to concentrate on its wired broadband Internet business in which the returns were comparatively clear and achievable (Digital Daily, 2005). SKT postponed its investment plan in WiBro because the firm finds the WiBro market as a complementary sector to its core business of 2G mobile services. KT actively invested in WiBro but did not achieve enough economies of scale in the whole WiBro market.

4. IP refers to a block in which functions required to form logic of a semiconductor circuit are organized as hardware and software. IP includes the functional blocks of the processor and device drivers and software needed to run a system. The statement that Core Logic owns IP means that it has the ability to understand and apply standard technology. 5. The Korean government has started to nurture venture firms from the mid-1990s based on the “Act on special measures for promoting venture companies,” which was enacted in 1997.

3. Architectural innovation leaves the existing components and the core design concepts essentially untouched but changes the ways in which the components are linked (Henderson and Clark, 1990). Process architecture

REFERENCE Amable, B. (2003). The diversity of modern capitalism. Oxford University Press. Bell, M. (1984). Learning and the Accumulation of Technological Capacity in Developing Countries. In M. Fransman, & K. King (Eds.), Technological capability in the third world. London: Macmillan. Bell, M., & Pavitt, K. (1993). Technological accumulation and industrial growth contrasts between developed and developing countries. Industrial and Corporate Change, 2(2), 157–210. Castellacci, F. (2011). Closing the technology gap?. Review of Development Economics, 15(1), 180–197. Castellacci, F., & Natera, J. M. (2013). The dynamics of national innovation systems: A panel cointegration analysis of the coevolution between innovative capability and absorptive capacity. Research Policy, 42(3), 579–594. Choi, Y. (1996). Dynamic techno-management capability: The case of Samsung semiconductor in Korea. Aldershot: Avebury. Choi, Y., Lee, E. (2004). No. 1, Made in Korea: Semiconductors. JiSungSa (Text in Korean). Choung, J-Y., Hameed, T., & Ji, I. (2011). Role of formal standards in transition to the technology frontier. Telecommunications Policy, 35, 269–287. Choung, J.-Y., Hwang, H.-R., Choi, J.-H., & Rim, M.-H. (2000). Transition of latecomer firms from technology user to technology generator: Case study of technological capability accumulation of Korean semiconductor firms. World Development, 28(5), 969–982. Choung, J. -Y., Hwang, H. -R., Ji, I., Hameed, T. (2011). Institutional failures in ICT systems innovation, KAIST Tinno Discussion Paper, Korea. Dahlman, C., Ross-Larsen, B., & Westphal, L. E. (1987). Managing technological development. World Development, 15(6), 759–775. Digital Daily. (2005). [WiBro] Hanaro’s announcement on withdrawal from WiBro business. Digital Daily, April 25 (Text in Korean). Dutre´nit, G. (2004). Building technological capabilities in latecomer firms: A review essay. Science Technology & Society, 9(2), 209.

Dutre´nit, G. (2007). The transition from building-up innovative technological capabilities to leadership by latecomer firms. Asian Journal of Technology Innovation, 15(2), 125–149. Ernst, D. (2002). Global production networks and the changing geography of innovation systems. Implications for developing countries. Journal of the Economics of Innovation and New Technologies, 12, 1–27. Ernst, D., & Kim (2002). Global production networks, knowledge diffusion and local capability formation. Research Policy. Special issue in honor of Richard Nelson and Sydney Winter, vol. 31(8/9), 1417–1429. ETRI (1989). VLSI Joint Development Plan: 16M/64M. Taejon, Korea: Semiconductor Division, Electronics and Telecommunications Research Institute (Text in Korean). Fagerberg, J., Srholec, M., & Knell, M. (2007). The competitiveness of nations: why some countries prosper while others fall behind. World Development, 35(10), 1595–1620. Fujimoto, T. (2007). Architecture-based comparative advantage: A design information view of manufacturing. Evolutionary and Institutional Economics Review, 4, 55–112. Hall, P. A., & Soskice, D. (2001). Varieties of capitalism. Oxford: Oxford University Press. Henderson, R. M., & Clark, K. B. (1990). Architectural Innovation: The Reconfiguration of Existing Product Technologies and the Failure of Established Firmsk. Administrative Science Quarterly, 35, 9–30. Hobday, M. (1995). Innovation in East Asia: The challenge to Japan. Aldershot: Edward Elgar. Hobday, M., Rush, H., & Bessant, J. (2004). Approaching the innovation frontier in Korea: The transition phase to leadership. Research Policy, 33, 1433–1457. Hwang, H. -R. (1999). Organisational capabilities and organisational rigidities of Korea Chaebol (D.Phil thesis). Brighton: University of Sussex. INews. (2004). 3-Operator plan likely for WiBro – MIC prepares 5 plans. INews, August 11.

TRANSITIONS OF INNOVATION ACTIVITIES IN LATECOMER COUNTRIES INews. (2005). WiBro licenses to KT, SKT, and Hanaro Telecom. INews, January 20 (Text in Korean). Kim, L. (1997). From imitation to innovation. The dynamics of Korea’s technological learning. Boston, MA: Harvard Business School Press. Lall, S. (1992). Technological capabilities and industrialization. World Development, 20(2), 165–186. Lall, S. (2000). Technological change and industrialization in the Asian newly industrializing economies: Achievements and challenges. In L. Kim, & R. Nelson (Eds.), Technology, learning and innovation: The experience of the Asian NIEs (pp. 13–68). Cambridge: Cambridge University Press. Lee Keun Lim, C., & Song, W. (2005). Digital technology as a window of opportunity and technological leapfrogging: Catch-up in digital TV by the Korean firms. International Journal of Technology Management, 29(1/2). Lee, K., & Kim, B. Y. (2009). Both institutions and policies matter but differently for different income groups of countries: Determinants of long-run economic growth revisited. World Development, 37(3), 533–549. Lee, K., & Lim, L. (2001). Technological regimes, catching-up and leapfrogging: findings from the Korean industries. Research Policy, 30, 459–483. Leonard-Barton, D. (1992). Core capabilities and core rigidities: A paradox in managing new product development. Strategic Management Journal, 13(S1), 111–125. List, F. (1841). The national system of political economy. New Jersey: Augustus M. Kelly (1991 edition). Mathews, J. A. (2002). Competitive advantages of the latecomer firm: A resource-based account of industrial catch-up strategies. Asia–Pacific Journal of Management, 19(4), 467–488.

167

Mathews, J., & Hu, Mei-Chih (2007). Enhancing the role of universities in building national innovative capacity in Asia: The case of Taiwan. World Development, 35(6), 1005–1020. Min, W., & Oh, W. (2006). Technological catch-up in the Korean ICT Industry. Journal of Korea Technology Innovation Society, 9(4), 776–795 (Text in Korean). Nikkei Microdevices. (1993). The challenge of Korean DRAMs’, September, pp. 28–53. Perez, C., & Soete, L. (1988). Catching up in technology: Entry barriers and windows of opportunity. In Dosi, et al. (Eds.), Technical change and economic theory (pp. 458–479). London: Francis Pinter. Shin, J-S., & Jang, S-W. (2006). An anatomy of the technological leadership of Samsung Electronics: Strategy and organization for creating firstmover advantages. Seoul: Samsung Economic Research Institute (Text in Korean). Song, W., & Hwang, H-R. (2006). The technological innovation patterns of component suppliers in the post catching-up period: The case study of component suppliers in mobile phone industry. Journal of Korea Technology Innovation Society, 9(3), 435–450. Utterback, J. M., & Abernathy, W. J. (1975). A dynamic model of process and product innovation, OMEGA. The International Journal of Management Science, 3(6), 639–656. Whang, Y., & Hobday, M. (2011). Local ‘test bed’ market demand in the transition to leadership: The case of the Korean mobile handset industry. World Development, 39(8), 1358–1371.

Available online at www.sciencedirect.com

ScienceDirect