Ranking of Korea in innovation index

By Chang Se-moon

On Jan. 22, Bloomberg released the Bloomberg Innovation Index, which is intended to rank countries based on several factors related to innovation in technology.

The factors include expenditures on research and development, manufacturing capability, concentration of high-tech public companies, quality of post-secondary education, number of research personnel and number of patents.

Data for the index were obtained from the World Bank, the International Monetary Fund, the World Intellectual Property Organization, the United States Patent and Trademark Office, the International Labor Organization, the Organization for Economic Cooperation and Development, the World Intellectual Property Organization, and the United Nations Educational, Scientific and Cultural Organization.

Korea, called South Korea in the ranking, is ranked No. 1 in the index, meaning that Korea is the most innovative country in the world. Korea is followed in order by Germany, Finland, Switzerland, Israel, Singapore, Sweden, the U.S., Japan, and France at No. 10.

An interesting question is whether Korea will be able to hold onto the lofty ranking in future years. The good news is that even if Korea falls in the rankings, the fall will not likely be steep. The bad news is that once Korea falls in the rankings, it will be difficult to climb back up to No. 1. The policies of the Korean government will play a vital role in keeping Korea on top of the world in technological innovation.

Understandably, world-class technologies here have mostly been developed by Korean conglomerates, called chaebol. Current government policies are to force chaebol to share their resources, if not profits, with their smaller supplier firms. I have a better idea.

Since Korean chaebol are the ones that were instrumental in placing Korea at the top of the world, it needs to encourage chaebol to continue what they have been doing.

In the latest index, Germany almost caught six-time champion Korea on the basis of manufacturing and research intensity contributed by such industrial giants as Volkswagen AG, Robert Bosch GmbH, and Daimler AG. A lesson from German experience is that Korea needs to encourage, not discourage, the innovative activities of chaebol.

Note also that China's steady improvement in the rankings, although still outside the top 10, is due to the research and development efforts from their giants, Huawei Technologies Co. and BOE Technology Group.

To encourage smaller, independent companies to join the innovative group, Korea may want to leave chaebol alone, and select some of the smaller, independent companies through competition to provide financial support for their efforts. Korea may also want to encourage technology patent filing by these firms by providing generous financial support.

When you look at the key components that make up the index, actual policies will have to be quite comprehensive for Korea to stay at or near the top for many years.

First of all, research and development (R&D) efforts do not provide immediate results. Quite often, they may fail to provide a return on investment. This means that government policies need to be long-term in nature and supportive of risk-taking efforts of individual pioneers.

Secondly, world-class manufacturing is not a game that policymakers can play around with. I once reviewed court cases in the U.S. in which the early models of Hyundai cars were the target of numerous lawsuits. I truly believe Hyundai paid a price to be where they are now in global competition.

We all know that Hyundai is not the only world-class manufacturer Korea has. Samsung Electronics, Hankook Tire, and many more Korean brands are competing in the global market place. All these world-class manufacturers may not even need government support. All they want is likely to be left alone within the laws of the land.

Arbitrary determination of minimum wages, inflexible working hours through government intervention, permission to strike by employees earning near $100,000 per year, and the like are policies that will eventually push Korea from the top ranks of the Bloomberg Innovation Index.

Another reason why manufacturing giants in Korea should be allowed to be flexible is that manufacturing requires advances in engineering and design, which requires long-term R&D support.

As the world economy progresses, all low-tech industries move to countries that lack human resources. Continuing development of high-tech industries is a prerequisite to the long-term survival of world-class manufacturing companies that Korea now enjoys.

In the third place, development of cutting-edge technologies relates directly to the quality of post-secondary education, another component of the Bloomberg Innovation Index. Universities and vocational technical schools need to be left alone within the rules of academia.

Any interference such as removal of presidents simply because he or she is not supportive of the incumbent political leaders is a sure way of pushing Korea away from the top ranking in the Bloomberg Innovation Index.

Finally, my heart-felt congratulations on Korea for being ranked No. 1 in the Bloomberg Innovation Index. I am sure Korea can hold on to that precious spot for many years to come.

Chang Se-moon (changsemoon@yahoo.com) is the director of the Gulf Coast Center for Impact Studies.