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Industrial, Science, Technology and Innovation Policies in South Korea and Japan

Murat A. Yülek and Hongyul Han

Designing effective industrial and science, technology and innovation (STI) policies is still an ongoing quest for both developed and developing countries. This book examines industrial as well as STI policies in East Asian countries South Korea and Japan comparatively. Japan is one of the largest industrial economies in the world. However, it is experiencing competitiveness problems with a relative fall in its manufacturing industry indicators such as exports. Korea is, on the other hand, a rapidly rising industrial power challenging larger peers including Japan. The two economies are competing in similar markets and are on different cycles of development. This book looks at the competitive positions of the two countries in the field of industrial and STI policies in general and in the sectors of railway equipment, medical equipment, aviation equipment and electronics.

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Chapter 3: STI and Industrial Policies in Korea: Electronics


3.1 Industry Overview

The origin of Korea’s electronics goes back as early as the Korean War in 1950 when the demand for radio erupted. The establishment of Goldstar Company (now LG) was the very start of modern Korea’s electronics industry. Electronics was designated as one of Korea’s strategic export industries in the 1960s. A series of policy instruments were implemented following this which included the decree of ‘Designated Strategic Export Industry’ in 1966, the construction of Gumi Electronics Manufacturing Complex in 1967, the introduction of the Plan for Electronics Industry Promotion in 1969 and the Detailed Plan for Semiconductor Industry Promotion in 1982. The earliest plan of 1966 also included the establishment of Korea Fine Instrument Center, Korea Industry Research Center and the Korean Institute for Science and Technology, etc.

Particularly, Korea’s HCI Drive (Heavy and Chemical Industry Promotion Act of 1973) was a massive and comprehensive set of industrial policy measures in which the electronics industry was included. The policy encompassed a variety of policy measures of financial assistance, tax incentives and budget measures as well as various forms of technical assistance. As a least developed country, Korea was still short on the financial resources necessary for the capital formation in target industries, the Plan was implemented based on the principle of ‘selection and concentration’, that is, ‘picking winners’. The target sectors were selected by the criterion of their linkage effects on other sectors of the Korean economy. For this purpose, the Korean...

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