IDEAS home Printed from https://ideas.repec.org/p/pra/mprapa/111035.html
   My bibliography  Save this paper

Diverse Tools of Industrial Policy in Korea: A Schumpterian and Capability-based View

Author

Listed:
  • Lee, Keun

Abstract

The current chapter presents a Schumpeterian and capability-based view of industrial policy, reflecting upon its practices in Korea over the last several decades. Given that it is typical for many developing countries to suffer from capability failure, industrial policy should go beyond correcting market failure but aim at overcoming capability failure. In this sense, it is not picking winners but picking good students and allow them a time for learning and building capabilities until they became able to compete with incumbent firms from developed countries. Specifically, this chapter discusses the following tools of industrial policy which has been practiced in Korea at different stages of development: first, tariff to protect infant industry; second, technology import by licensing to promote building of absorptive capacity; third, entry control which guaranteed rents to be paid for fixed and R&D investment; and fourth, public-private joint R&D to break into higher-end products and sectors. While these tools look different in their concrete contents, they share the important commonality of allowing some rents for the targeted sectors or firms so that such rents (extra profits) may be used to pay for building variants of capabilities, such as production capabilities in the case of tariffs or technology licensing in the 1970s, investment capabilities in entry control in the 1980s, and technological (R&D) capabilities in the case of public-private joint R&D in the 1990s.

Suggested Citation

  • Lee, Keun, 2020. "Diverse Tools of Industrial Policy in Korea: A Schumpterian and Capability-based View," MPRA Paper 111035, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:111035
    as

    Download full text from publisher

    File URL: https://mpra.ub.uni-muenchen.de/111035/1/MPRA_paper_111035.pdf
    File Function: original version
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. repec:wbk:wbpubs:2536 is not listed on IDEAS
    2. Kyoo-Ho Park & Keun Lee, 2006. "Linking the technological regime to the technological catch-up: analyzing Korea and Taiwan using the US patent data," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 15(4), pages 715-753, August.
    3. Philippe Aghion & Jing Cai & Mathias Dewatripont & Luosha Du & Ann Harrison & Patrick Legros, 2022. "Industrial Policy and Competition," World Scientific Book Chapters, in: Globalization, Firms, and Workers, chapter 15, pages 349-380, World Scientific Publishing Co. Pte. Ltd..
    4. Hochul Shin & Keun Lee, 2012. "Asymmetric trade protection leading not to productivity but to export share change," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 20(4), pages 745-785, October.
    5. Lee,Keun, 2019. "The Art of Economic Catch-Up," Cambridge Books, Cambridge University Press, number 9781108460705.
    6. Lee, Keun & Kim, Byung-Yeon, 2009. "Both Institutions and Policies Matter but Differently for Different Income Groups of Countries: Determinants of Long-Run Economic Growth Revisited," World Development, Elsevier, vol. 37(3), pages 533-549, March.
    7. Keller, Wolfgang, 1996. "Absorptive capacity: On the creation and acquisition of technology in development," Journal of Development Economics, Elsevier, vol. 49(1), pages 199-227, April.
    8. Beason, Richard & Weinstein, David E, 1996. "Growth, Economies of Scale, and Targeting in Japan (1955-1990)," The Review of Economics and Statistics, MIT Press, vol. 78(2), pages 286-295, May.
    9. Mowery, David C & Oxley, Joanne E, 1995. "Inward Technology Transfer and Competitiveness: The Role of National Innovation Systems," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 19(1), pages 67-93, February.
    10. Lee, Jaymin, 1996. "Technology imports and R&D efforts of Korean manufacturing firms," Journal of Development Economics, Elsevier, vol. 50(1), pages 197-210, June.
    11. World Bank, "undated". "World Bank East Asia and Pacific Economic Update 2010, Volume 2 : Robust Recovery, Rising Risks," World Bank Publications - Reports 2536, The World Bank Group.
    12. Kojima, Kiyoshi, 1973. "A Macroeconomic Approach to Foreign Direct Investment," Hitotsubashi Journal of Economics, Hitotsubashi University, vol. 14(1), pages 1-21, June.
    13. Cohen, Wesley M & Levinthal, Daniel A, 1989. "Innovation and Learning: The Two Faces of R&D," Economic Journal, Royal Economic Society, vol. 99(397), pages 569-596, September.
    14. World Bank, 2005. "Economic Growth in the 1990s : Learning from a Decade of Reform," World Bank Publications - Books, The World Bank Group, number 7370, December.
    15. Kiyota, Kozo & Okazaki, Tetsuji, 2005. "Foreign technology acquisition policy and firm performance in Japan, 1957-1970: Micro-aspects of industrial policy," International Journal of Industrial Organization, Elsevier, vol. 23(7-8), pages 563-586, September.
    16. Linsu Kim, 1998. "Crisis Construction and Organizational Learning: Capability Building in Catching-up at Hyundai Motor," Organization Science, INFORMS, vol. 9(4), pages 506-521, August.
    17. Giovanni Dosi & Christopher Freeman & Richard Nelson & Gerarld Silverberg & Luc Soete (ed.), 1988. "Technical Change and Economic Theory," LEM Book Series, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy, number dosietal-1988, March.
    18. Mathews, John A., 2002. "The origins and dynamics of Taiwan's R&D consortia," Research Policy, Elsevier, vol. 31(4), pages 633-651, May.
    19. Keun Lee, 2006. "The Washington Consensus and East Asian Sequencing: Understanding Reform in East and South Asia," Palgrave Macmillan Books, in: José María Fanelli & Gary McMahon (ed.), Understanding Market Reforms, chapter 3, pages 99-140, Palgrave Macmillan.
    20. Moosup Jung & Keun Lee, 2010. "Sectoral systems of innovation and productivity catch-up: determinants of the productivity gap between Korean and Japanese firms," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 19(4), pages 1037-1069, August.
    21. Yusuf , Shahid & Nabeshima, Kaoru, 2009. "Can Malaysia escape the middle-income Trap ? a strategy for Penang," Policy Research Working Paper Series 4971, The World Bank.
    22. Vandana Chandra, 2006. "Technology, Adaptation, and Exports : How Some Developing Countries Got It Right," World Bank Publications - Books, The World Bank Group, number 7118, December.
    23. Lee, Keun & Lim, Chaisung & Song, W, 2005. "Emerging Digital Technology as a Window of Opportunity and Technological Leapfrogging: Catch-up in Digital TV by the Korean Firms," MPRA Paper 109777, University Library of Munich, Germany.
    24. Keld Laursen & Valentina Meliciani, 2002. "The relative importance of international vis-ý-vis national technological spillovers for market share dynamics," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 11(4), pages 875-894, August.
    25. Si Joo & Keun Lee, 2010. "Samsung's catch-up with Sony: an analysis using US patent data," Journal of the Asia Pacific Economy, Taylor & Francis Journals, vol. 15(3), pages 271-287.
    26. Evenson, Robert E. & Westphal, Larry E., 1995. "Technological change and technology strategy," Handbook of Development Economics, in: Hollis Chenery & T.N. Srinivasan (ed.), Handbook of Development Economics, edition 1, volume 3, chapter 37, pages 2209-2299, Elsevier.
    27. Lee, Jong-Wha, 1996. "Government Interventions and Productivity Growth," Journal of Economic Growth, Springer, vol. 1(3), pages 391-414, September.
    28. Flatten, Tessa C. & Engelen, Andreas & Zahra, Shaker A. & Brettel, Malte, 2011. "A measure of absorptive capacity: Scale development and validation," European Management Journal, Elsevier, vol. 29(2), pages 98-116, April.
    29. Chung, Moon Young & Lee, Keun, 2015. "How Absorptive Capacity is Formed in a Latecomer Economy: Different Roles of Foreign Patent and Know-how Licensing in Korea," World Development, Elsevier, vol. 66(C), pages 678-694.
    30. Keun Lee & John A. Mathews, 2010. "From Washington Consensus to BeST Consensus for world development," Asian-Pacific Economic Literature, The Crawford School, The Australian National University, vol. 24(1), pages 86-103, May.
    31. Chris Freeman & Luc Soete, 1997. "The Economics of Industrial Innovation, 3rd Edition," MIT Press Books, The MIT Press, edition 3, volume 1, number 0262061953, December.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Keun Lee, 2013. "Capability Failure and Industrial Policy to Move beyond the Middle-Income Trap: From Trade-based to Technology-based Specialization," International Economic Association Series, in: Joseph E. Stiglitz & Justin Yifu Lin (ed.), The Industrial Policy Revolution I, chapter 4, pages 244-272, Palgrave Macmillan.
    2. Chung, Moon Young & Lee, Keun, 2015. "How Absorptive Capacity is Formed in a Latecomer Economy: Different Roles of Foreign Patent and Know-how Licensing in Korea," World Development, Elsevier, vol. 66(C), pages 678-694.
    3. Lee, Keun & Juma, Calestous & Mathews, John, 2014. "Innovation capabilities for sustainable development in Africa," WIDER Working Paper Series 062, World Institute for Development Economic Research (UNU-WIDER).
    4. Keun Lee & Calestous Juma & John Mathews, 2014. "Innovation Capabilities for Sustainable Development in Africa," WIDER Working Paper Series wp-2014-062, World Institute for Development Economic Research (UNU-WIDER).
    5. Keun Lee, 2009. "How Can Korea be a Role Model for Catch-up Development?: A 'Capability-based View'," WIDER Working Paper Series RP2009-34, World Institute for Development Economic Research (UNU-WIDER).
    6. Ge, Shuang & Liu, Xielin, 2022. "The role of knowledge creation, absorption and acquisition in determining national competitive advantage," Technovation, Elsevier, vol. 112(C).
    7. Lee, Keun, 2017. "Financing Industrial Development in Korea and Implications for Africa," MPRA Paper 111036, University Library of Munich, Germany.
    8. Keun Lee and John Mathews, 2013. "Science, technology and innovation for sustainable development," CDP Background Papers 016, United Nations, Department of Economics and Social Affairs.
    9. Yuzhe Miao & Jaeyong Song & Keun Lee & Chuyue Jin, 2018. "Technological catch-up by east Asian firms: Trends, issues, and future research agenda," Asia Pacific Journal of Management, Springer, vol. 35(3), pages 639-669, September.
    10. Joo, SH & Oh, C & Lee, Keun, 2016. "Catch-up Strategy of an Emerging Firm in an Emerging Country: Analyzing the Case of Huawei vs. Ericsson with Patent Data," MPRA Paper 109958, University Library of Munich, Germany.
    11. M.ª Magdalena Jiménez-Barrionuevo & Luis M. Molina & Víctor J. García-Morales, 2019. "Combined Influence of Absorptive Capacity and Corporate Entrepreneurship on Performance," Sustainability, MDPI, vol. 11(11), pages 1-26, May.
    12. Minaee, Mohammadreza & Elahi, Shaban & Majidpour, Mehdi & Manteghi, Manoochehr, 2021. "Lessons learned from an unsuccessful “catching-up” in the automobile industry of Iran," Technology in Society, Elsevier, vol. 66(C).
    13. Lee, Keun & Kim, Byung-Yeon & Park, Young-Yoon & Sanidas, Elias, 2013. "Big businesses and economic growth: Identifying a binding constraint for growth with country panel analysis," Journal of Comparative Economics, Elsevier, vol. 41(2), pages 561-582.
    14. Ioanna Kastelli & Lukasz Mamica & Keun Lee, 2023. "New perspectives and issues in industrial policy for sustainable development: from developmental and entrepreneurial to environmental state," Review of Evolutionary Political Economy, Springer, vol. 4(1), pages 1-25, April.
    15. Lee, Keun, 2019. "Economics of Technological Leapfrogging," MPRA Paper 111034, University Library of Munich, Germany.
    16. Kim, Dong-hyu, 2022. "Effects of catch-up and incumbent firms’ SEP strategic manoeuvres," Research Policy, Elsevier, vol. 51(5).
    17. Majidpour, Mehdi, 2017. "International technology transfer and the dynamics of complementarity: A new approach," Technological Forecasting and Social Change, Elsevier, vol. 122(C), pages 196-206.
    18. Scaringella, Laurent & Burtschell, François, 2017. "The challenges of radical innovation in Iran: Knowledge transfer and absorptive capacity highlights — Evidence from a joint venture in the construction sector," Technological Forecasting and Social Change, Elsevier, vol. 122(C), pages 151-169.
    19. Latukha, M. & Veselova, A. & Selivanovskikh, L. & Artukh, E. & Mitskevich, E., 2016. "Re-thinking the role of talent management in a firm’s performance: Talent management practices and absorptive capacity," Working Papers 6442, Graduate School of Management, St. Petersburg State University.
    20. Cusmano, Lucia & Morrison, Andrea & Rabellotti, Roberta, 2010. "Catching up Trajectories in the Wine Sector: A Comparative Study of Chile, Italy, and South Africa," World Development, Elsevier, vol. 38(11), pages 1588-1602, November.

    More about this item

    Keywords

    industrial policy; tariffs; licensing; public-private joint R&D; entry control; infant industry; leapfrogging;
    All these keywords.

    JEL classification:

    • L5 - Industrial Organization - - Regulation and Industrial Policy
    • L52 - Industrial Organization - - Regulation and Industrial Policy - - - Industrial Policy; Sectoral Planning Methods
    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights
    • O38 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Government Policy

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:111035. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Joachim Winter (email available below). General contact details of provider: https://edirc.repec.org/data/vfmunde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.