The Adoption and Diffusion of Imported Technology: The Case of Korea

The Diffusion of IT in the Historical Context of Innovations from Developed Countries

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If the firm that has suffered the violation chooses to go the administrative route, there are advantages in terms of reduction of cost, time, and processing of the investigation. However, there are also disadvantages due to the fact that administrators are not likely to be qualified or possess expert knowledge regarding technological issues.

Also, because an administrator does not have the power of enforcement, the firm which has suffered the violation needs to take their claim for infringement to back to the patent court if the infringer has not complied with the instructions of the administrators. However, the disadvantage of taking the judicial route is that it takes a long time to solve the conflict, and large financial costs are also incurred. Looking at previous studies into the strength of protection for patents, two dominant opinions can be identified. Firstly, Aghion and Howitt, and Grossman and Helpman claim that providing strong protection power for patents by enacting the patent Act encourages a firm or an individual to increase their level of investment in the invention of new technology, in terms of their input into the innovation process [ 9 , 11 ].

Teece remarks that the degree of protection for patents has tended to have a positive influence on corporate profit whilst Arora et al note that protection power for patents does not have a positive influence on innovation activities, except for pharmaceutical and special chemical sectors, in the case of the US and EU [ 15 , 16 ]. A notable gap exists in patent protection levels, which are weak in largely developing countries [ 17 ]. However, it is another story with regard to the absolute number of patent applications of China.

The current paper utilizes Chinese domestic data to investigate this. The capability of basic scientific research may be the way to narrow the technology gap between the two countries. China holds the second highest rank out of 61 countries for the number of scientific articles published by an original author.

This is, in fact, a far more significant statistic.

The most notable statistic is the number of patent applications, and the total expenditure on acquisition of foreign technology. In the case of the number of patent applications, in the period from , not only the absolute number of patent applications but also the growth ratio exhibited an exponentially high rate of growth compared to those of Korea , in Innovations protected by patents play a key role in securing technological competence at the national level as well as at the business level, in that technological improvement have the power to furnish both individual companies and the entire nation with a competitive advantage.

More importantly, the number of patents per capita could be used as an indicator of the degree of knowledge spillover [ 20 ]. Pakes and Schankerman note that knowledge spillovers to other firms occur gradually, but in a dynamic manner [ 21 ].

JEL classification

The sustained nature of this influence can have an effect on other firms due to the effect of the competition on the equilibrium of the industry structure. They show that there is an inverted U-shaped relationship between innovation and completion. From the data, it can be surmised that, due to knowledge spillover effects, China has the potential to become a country leading in innovation.

Another noteworthy consideration from Table 3 is that China has been trying to buy foreign technology. To secure this, China has been spending vast amounts of money. Figure 3 shows a graphical representation of current trends in the scientific infrastructure of China Figure 3.

Technology imports and R&D efforts of Korean manufacturing firms - ScienceDirect

In terms of the growth rate in patent applications, China was almost on the same level as Japan in However, since , the growth rate of China has been rapidly increasing. This might be an indicator that China will become an advanced country in the future. A comparison of patent applications in three countries Korea, China and Japan between the period Adapted from data from the World Bank Figure 4 gives interesting information about the current strength of enforcement of proprietary rights, including patents. Significantly, China has the lowest level of charges relating to payments and receipts for the authorized use of proprietary rights i.

In spite of sharp increases in the number of patent applications, inventions, and developments in the scientific infrastructure, enforcement of IP rights is relatively weak. It is assumed that in the evolving economy, imitation goods do well in China, unlike Korea. In the evolving economy, innovation and imitation formed one of the key areas of discussion in innovation studies. Innovations start where entrepreneurs take existing inventions and transform them into marketable products and productions.

Therefore, innovation is understood as the creation of product and its launch on the market, not as the creation or discovery of something virtually new [ 23 ]. It is clear that technology is a key determinant of economic growth. However, endogenous growth theory does not explicitly distinguish between innovation and imitation, or discuss the extent to which one is based on the other, or a more profitable alternative.

According to Romer, technology progresses regardless of both innovation and imitation, and has an important effect on the local knowledge spillover effect [ 6 ]. In this way, knowledge stocks which could be used as the basis for innovation activities increase overtime. Learning through imitation may enable firms to improve existing technologies.

Imitation is a more effective method of overcoming the knowledge gap due to the everincreasing size of the pool of potential imitations, and the everdecreasing size of the knowledge gap, which closes with each successive imitation. Korea has a strong level of patent protection, while China is one of the biggest imitative goods markets in the world due to its weak levels of patent protection. This is important in that it may positively affect the growth of the economy as well as the capability for innovation Figure 5. Payments and Receipts for the authorized use of proprietary rights from the period Figure 5 also provides an indication of the technology level in each of the three countries Korea, China and Japan.

Science and Technology in South Korea

The technology gap between Korea and China is narrow, whilst the technology level of Japan far surpasses that of Korea, as well as that of China. Of course, in spite of the fact that Figure 3 does not offer any information about of the specific kinds of technology sectors operating in each country, it does provide a representation of the overall technology gaps between the countries. This can be assumed to be the case because the greater the total knowledge stocks of a country, the higher the likelihood that that innovation and invention will thrive in that country.

So far, this paper has mainly focused on discussing the history of patent law, and various numerical data relating to patent and patenting activities, as well as the publication rate of international scientific research articles in the two countries. It might be premature to conclude that the technology gap between the two countries has narrowed rapidly without an in-depth analysis of both sets of data. In fact, this paper has many limitations.

For instance, in order to measure the technology that has been converted into marketable products, total GDP was used; in addition to that, the total factor productivity should also be considered. Finally, another key insight of this discussion has been that if an innovation is protected by strong intellectual property rights, or if the technology which underlies it is hard for competitors to imitate or emulate, then there is less risk that competitors, and not the original innovator, will profit from it. Patenting and patent propensity activity is an offshoot of the process of technology spillover and diffusion.

The technology gap exists because technology diffusion and knowledge spillover is imperfect, which is due as much to the characteristics of technology itself as to those of the social institutions which regulate its development. In turn, the rapid increase in China of international patenting activities provides Korea with strong impetus to maintain its ongoing technological predominance.

As Fagers pointed out, the technology gap will exist as long as all countries do not share the same pool of knowledge [ 4 ]. If all countries share all knowledge and technology, it is impossible to measure the level of the technology gap exactly because of the inherent characteristics of technology. From the data analysis, we found that the absolute volume of investments into the scientific infrastructure in China is tending to becoming increasingly rapidly compared to that of Korea.

As such, it can safely be assumed that the technology gap will widen over time, not to mention the possibility that China will in fact overtake Korea. In terms of relative indicators, Korea ranks highly compared to China, but it is likely that the current gap will narrow over time. China is weaker than Korea in terms of the strength of its patent protection levels. Considering that weak patent rights are likely to inhibit patenting and may in fact form a barrier to the diffusion of technology, China has a great need to protect its intellectual property IP.

Even though a weak level of patent protection policy may, in the short term, contribute towards the overall knowledge spillover to some degree, in the long run, this may in fact hinder the process of knowledge diffusion [ 17 ]. This paper suffers from several limitations, including the fact that only descriptive statistics were employed without the use of regression, as well as the short period encompassed by the study.

In spite of these limitations, however, it is hoped that the macro approach taken in this comparison of the technology gap between Korea and China will be of use to policy makers and lawmakers, as well as to scholars who are interested in technology and patenting activity. The Case of Korea and China. This is an open-access article distributed under the terms of the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited.

This general shape, however, can take different forms. For example, low-cost innovations may exhibit a rapid take off while innovations with network effects may have faster late-stage growth. Rogers divides the population of adopters into five groups, namely, innovators, early adopters, early majority, late majority and laggards. The size of each group is given respectively as 2. Some authors suggest that these categories can be classified by income level, running from early adopters high to laggards low but until recently no one has attempted a systematic review of the issue.

The exceptional case comprises a data-set compiled from another source by the World Bank For each technology, only countries for which published data exist are included …. The data analyzed here are further restricted to include only those country-technology pairs a data set with one country and data for 7 technologies would have 7 country-technology pairs where the intensity of use has reached at least 5 per cent of the average level of the 10 countries with the highest recorded level of diffusion.

Under this restriction, there are 1, country-technology pairs, of which correspond to developing countries The World Bank , p. The conclusions from these and other data in the Bank report have been clearly stated by The Economist in the following terms:. In emerging markets this is not necessarily so. Where it did catch on, it usually spread as quickly as in the West.

But the more striking finding is that the spread was so rare. Developing countries have been good at getting access to technology — and much less good at putting it to widespread use. Plainly, the curve drawn in Fig. The main difference between the curves is that the one depicting developing countries tends to flatten out at a relatively low penetration rate. Within developing countries it is very likely that diffusion will also be better represented over time by the lower curve shown in Fig.

India, for example, is one of the most technologically sophisticated developing countries with complex industries situated in and around the major cities. But advanced technologies have barely spread to the rural areas where the bulk of the less affluent members of the society is to be found. On a per capita basis, therefore, India has a relatively low level of technology diffusion.

Assuming that domestic competencies were available or created to efficiently use the technologies employed by enterprises at the national frontier, Indian GDP could be 4. A similar story could be told for Brazil and certain other large developing countries.

The next part of the paper will try to show that both patterns of diffusion that have just been described between rich and poor countries and within the latter themselves—can be ascribed to the same source. This is both a cause and effect of being developed: R and D expenditures helped create high incomes, while richer countries could better afford such expenditure. The concentration of global research expenditure thus described would not necessarily constitute a bias in favour of rich countries and rich persons within countries as it is possible in principle that:.

This, however, is patently not the case, the [then] 98 per cent of research and development expenditures in the richer-countries are spent on solving the problems which concern the richer countries , according to their own priorities, and on solving these problems by the methods and approaches appropriate to the factor endowment of the richer countries. In both respects … the interest of the poorer countries would be bound to point in completely new directions Singer , p. These directions would not however be confined, as Singer suggests, to factor endowments.

For, as Stewart and others have pointed out, innovations are generated against the backdrop of a wide range of societal features. I am thinking here for example of labour skills, literacy, infrastructure and institutions. So even countries and regions with per capita incomes equal to the innovating country will tend to be lacking in these other ways. What will emerge in diffusion patterns across and within countries may be termed technological dualism.

One part of the world or a region within a country has access to the innovations designed in and for the innovators while a much larger part is excluded from the benefits of research activity. The location of such activity in particular regions influences patterns of diffusion which in turn help determine the impact of new technologies. As yet however the characteristics of Chinese innovations—whether they are pro-rich or pro-poor-have not been systematically examined. But the increased capacity of this country to absorb foreign technology even when it is complex , will certainly make its diffusion curve look more like the S-Shaped Rogers version discussed above.

In general and in common with other innovations from the R and D intensive countries noted above, one may expect the innovations in IT to follow the systematic patterns of diffusion and adoption that have been described as technological dualism. For one thing, one might expect the new technologies to spread most extensively to regions that closely resemble the socio-economic features of innovating countries, including per capita income as a central variable.

This means the more affluent among developing countries and more advanced urban areas of those parts of the world. Again though, it has to be stressed that these are tendencies rather than iron-laws. Validity may depend among other things on the type of IT with which we happen to be concentrated. Quite a lot of empirical research has already gone into testing these expectations. More precise techniques such as multiple regression analysis have statistically confirmed the role of income and other predicted variables such as education and infrastructure Dewan et al.

These 17 locations in All: Australian National University Library. Open to the public. Open to the public ; Edith Cowan University Library. Open to the public C; Open to the public Held. Open to the public N The University of Melbourne Library. University of Queensland Library. Open to the public University of Wollongong Library. These 2 locations in Australian Capital Territory: These 5 locations in New South Wales: These 2 locations in Northern Territory: These 2 locations in Queensland: This single location in South Australia: This single location in Tasmania: These 2 locations in Victoria:

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