Stimulating high-risk high-payoff research

Defined both as a stock of embodied and disembodied knowledge, human capital is formed through investments in not only schooling and job training but also in research and development (R&D) and informal knowledge transfers. While knowledge and skills embodied in workers augment labor productivity and physical capital inputs, disembodied knowledge manifests in papers, books, patents, and algorithms, contributing to product and process innovations at the firm and industry levels (Ehrlich, 2007). In 2012, Korea’s expenditure in R&D as a percentage of GDP reached 4.3 percent, which was the highest in the world. Korea also had the largest number of researchers per total population among the top 10 countries in R&D expenditure. In particular, Korea is home to several large conglomerate firms such as Samsung and Hyundai, which are world leaders of providing innovative products in some sectors. However, there has been a rising concern that Korean researchers in government-funded research institutes (GRIs) and universities are neither contributing to creating new opportunities for the economy nor solving big societal challenges (Song et al., 2014).