COM0023

Building Competencies:
The Korean Way
Introduction
“A miracle economy”, that is how it is sometimes called. Four decades of extraordinary growth transformed South
Korea (Korea) from one of the poorest agrarian economies1 to the eleventh largest economy by 20032 . Korea set out
with limited natural resources, insufficient domestic market and with virtually no tradition of economic development
experience to establish a stable and independent economy. Once known for the breach of patents and intellectual
property rights, Korea emerged as a leader among developing countries with respect to the number of patents filed.3
Korea’s journey to industrialization began in the early 1960s, which formed its ‘Competitive Development Stage’.

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During this stage it capitalized on its abundant and inexpensive labor and its ability to acquire technology through
purchase and imitation of foreign capital goods. Korea achieved this by expanding its export-oriented light industry4 ,
investing in large-scale production facilities and improving its process technology. Textiles, apparels, toys, wigs, plywood
and other labor-intensive mature products were the items Korea began exporting in the mid 1960s. In the 1970s,
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Korea challenged well-established suppliers in the foreign countries with its flair in shipbuilding, steel, consumer
electronics and construction service industries. The Government at this time established scientific institutions to
provide foundation for Korea’s scientific infrastructure.
In the 1980s and 1990s, Korea then progressed into an ‘Investment Driven Stage’. The emphasis during this stage
was laid on acquiring and assimilating the most advanced technology available in the global marketplace. There was
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a major expansion in technology-intensive industries and an increase in R&D capacity by an integration of the strengths
of government, private sector and the academia. Korea increased competitiveness through increased technological
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self-sufficiency, identification of new sources of technology (places such as Russia and China), development of new
products and increased foreign investment by Korean firms. Technology transfer and assimilation were the main
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planks of Koreas competitive infrastructure. Korea added semiconductor memory chips, automobiles, computers,
videocassette recorders, electronic switching systems, industrial plants and other technology intensive products to its
export kitty in the 1990s. Korea since then advanced to export next generation products like cellular telecommunications
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systems, multi-media electronics and high-density televisions. Exports from Korea increased from a mere $40 million
in 1962 to $143 billion by 1999 with significant structural changes.
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“Korea’s learning orientation and absorptive capacity can explain such a phenomenal growth in technological
capability in the last four decades. Korea has made a rapid transition from ‘learning by doing’ to ‘learning by research’”5 .
Korea progressed from the mature technology stage, undertaking duplicative imitation through reverse engineering, to
the intermediate technology stage, undertaking creative imitation to finally reaching the platform from where innovation
begins.
1
In 1945, Korea was divided into South Korea and North Korea. Most Manufacturing bases and infrastructures happened to be located in North Korea with South Korea left with agriculture and
light industries.
2
http://www.trumanlibrary.org/whistlestop/study_collections/korea/large/truce.htm
3
2947 applications filed in 2003 http://www.cafezine.com/index_article.asp?deptId=6&id=683
4
A conscious policy shift from an inward looking growth strategy of import substitution to the outward looking growth strategy of export promotion.
5
THE DYNAMICS OF TECHNOLOGICAL LEARNING IN INDUSTRIALIZATION by Linsu Kim http://www.intech.unu.edu/publications/discussion-papers/2000-7.pdf

This case study was written by Sharad Gupta under the guidance of G Srikanth, IBSCDC. It is intended to be used as the basis for class
discussion rather than to illustrate either effective or ineffective handling of a management situation. The case was compiled from
published sources.

© 2004, IBSCDC.
No part of this publication may be copied, stored, transmitted, reproduced or distributed in any form or medium whatsoever without
the permission of the copyright owner.
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Building Competencies: The Korean Way

Korea, in 2003,6 was first in shipbuilding7 and primary producer of automobiles, electronics and steel. In 2004, as
the nation became a global leader, it ventured into territories where no one else had beaten a path.8

Learning Through Imitation

“Duplicative imitation of existing foreign mature products through reverse engineering characterizes the initial
stages of industrialization. As industrialization gains momentum, the focus shifts to creative imitation, wherein imitative
products with new features are produced. And finally when the developing country falls in the league of advanced
nations, focus shifts from imitation to original innovation”.9
Park Chung-Hee, the then president of Korea in 1961 pursued a single-minded program of industrialization and
economic growth. He was assisted and advised by competent technocrats and researchers educated in the US. His
approach was a blend of American and the Japanese Models (Annexure 1).
Korean firms initially focused attention on three areas. The first was the mastery of production capabilities, initially
for assembly, but increasingly also for large mass production lines for standard products. Second being the focus on
some related minor change capabilities, ranging from “reverse engineering” techniques to “analytical design” and

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some “system engineering” capabilities that are required for process re-engineering and product customization. And
lastly some investment capabilities, especially the ability to carry out at short notice and at a low cost, the investments
in the capacity expansion and modernization of existing plants. In order to succeed, the Korean firms developed with
time the skills and knowledge that are necessary to monitor, unpack, absorb and upgrade foreign technology10 .
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Duplicative imitation started in Korea in the 1960s in light industries such as textiles, toys, plywood, and consumer
electronics. By the 1970s, it had spread to heavy industries such as automobiles, steel, shipbuilding and machinery.
Knowledge building was the area that was given stress in the duplicative imitation stage. The main mechanisms for it
were education, foreign technology transfer, and deliberate creation of Chaebols11 and mobility of experienced technical
people.
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A major emphasis was laid on educating the young workforce of Korea. The Korean Institute of Science and
Technology (KIST, Estb. 1966) and the Korean Advanced Institute of Science (KAIST, Estb. 1975) two research oriented
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graduate schools of applied science were created in order to facilitate technology diffusion and joint R&D with firms.
Both the institutions undertook promising basic research and supplied R&D human resources.12
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The Korean Government took a variety of measures to raise the intensity with which the firms and the industries
across the nation developed. The Korean government sheltered domestic markets from foreign competition and also
evoked many crisis situations in which firms got engaged in a life or death struggles. In order to survive the crises, the
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Korean firms accelerated their process of technological learning by reverse engineering, importing and rapidly
assimilating production technology from abroad. 1960s was a period when the Korean companies, without developing
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their own technologies, exported the products assembled from imported parts. During the period, Korea relied heavily
on capital goods imports due to the lack of technological capabilities. The government guidelines for foreign licensing
were restrictive and unattractive but imports of foreign capital goods were liberalized and favored (Annexure II) in
order to allow reverse engineering by Korean firms. In the 1970s, the criterion for the import of foreign technologies by
the domestic heavy industries was substantially relaxed. The liberalization measure in 1978 allowed certain industries
to automatically receive permission for importing foreign technologies. Reverse engineering was used as a prime
source for technological learning in catching up with other countries. There was a complete refusal on the part of
Korea to honor foreign copyrights and product patents until 1986.

6
In 2003, South Korea was 3.08 yrs ahead of China but 3.36 years behind Japan in terms of technological prowess, the Federation of Korean Industries. http://www.atimes.com/atimes/korea/
EA30Dg02.html
7
First in terms of orders received and number of ships constructed, accounting for 43.8% of the global market. http://times.hankooki.com/lpage/biz/200404/kt2004041217453711860.htm
8
Korea Bets on a Digital Future by John Alderman http://www.japaninc.net/article.php?articleID=1132
9
THE DYNAMICS OF TECHNOLOGICAL LEARNING IN INDUSTRIALIZATION by Linsu Kim http://www.intech.unu.edu/publications/discussion-papers/2000-7.pdf
10
Catching-Up, Crisis and Industrial Upgrading. Evolutionary Aspects of Technological Learning in Korea’s Electronics Industry by Dieter Ernst http://www.druid.dk/wp/pdf_files/98-16.pdf
11
Chaebol first arose in South Korea in the 1920s and 1930s when the country was under Japanese colonial rule. Japan planned Korea’s economic development to feed its own markets and set
up a series of companies which were privately owned and run but strictly controlled by the central government - through credit, the approval or not of trading licenses, and a host of other
measures. They are conglomerates of many companies clustered around one holding company. One family usually controls the parent company. http://www.megastories.com/seasia/skorea/
chaebol/chaewhat.htm
12
INNOVATION AND TECHNOLOGICAL LEARNING IN KOREA by D Shin http://www.ecole.org/2/RT200298-ENG.pdf

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Building Competencies: The Korean Way

The Chaebols formed the backbone of Korean industrialization. They received preferential finance, concessions
and subsidies for research and development. Chaebols were forced to compete in international markets and export
targets were assigned to each. Competition in international markets and technology learning created demand for
foreign technology transfer and internal technological capacity. It was up to them to take initiatives and take up the
central role in acquiring, assimilating and improving mature foreign technology for duplicative imitation in order to
survive.
The protectionist policies of North America and Europe in the early 1980s led Korea to shift its focus from export-
oriented policies to develop more technology-based industries.13
During this period, their learning orientation shifted from duplicative imitation to creative imitation. Creative Imitation
required a higher level of knowledge base than what existed in the duplicative imitation stage. Formal technology
transfer, reverse brain drain, universities and government research institutes formed the four major sources through
which the Korean firms enhanced their existing knowledge base. The government made serious efforts to repatriate
the Korean scientists and engineers from abroad. These scientists and engineers played a pivotal role in the emerging
Government Research Institutes and R&D centers. The research in the Government Research Institutes was industry
-oriented with focus on sectors like nuclear energy, biotechnology, machinery, electronics, aerospace and system

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engineering. The number of Korean R&D laboratories increased from one in 1970 to 966 by 1992.

Technology Building
Gradually having mastered the intermediate technologies, the Korean Chaebols began to challenge emerging
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technologies for innovation. The innovation stage was characterized by basic research in universities, intense corporate
R&D activities, and globalization of R&D and recruitment of high caliber personnel from abroad. Innovation requires
generating new knowledge through learning and applying it creatively to produce competitive products and services.
“Developing countries look to advanced countries to foster their knowledge base. Technology transfer acts as an
efficient source for new knowledge of firms in developing economies”.14 There was a paramount rise in the informal
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avenues of technology transfer in the 1990s. The Korean government provided for a variety of methods to assimilate
technology: direct overseas involvement, international cooperation, foreign patents, cooperation between Korean and
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foreign companies, employing foreign nationals and foreign databases.

The government gave a fillip to the R&D activities by establishing Science Research Centres and Engineering
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Research Centres in Universities.15 The Government also initiated Industrial Generic Technology Development Projects
(IGTP), for current problems in existing technological areas with high technological externalities and National R&D
Projects (NRP) for future problems in new technologies with high risk and high economic externalities.
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In order to lift Korea’s technological capability to the level of G-7 countries by 2020, Highly Advanced National
(HAN)16 R&D Projects were undertaken by the Government. These projects were classified into two categories. The
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first category of projects, “Product technology development projects” is concerned with technology for specific high
technology products that may have a substantial share in the world market. The second category, “fundamental
technology development projects”, is concerned with core technologies that are absolutely necessary to advance the
economy, society and human life. The main focus areas of these projects were new drugs and chemicals, broadband
integrated services, and digital networks, ultra-large-scale integrated circuits, advanced manufacturing systems, new
materials for information technology, alternative energy technology, next-generation vehicle technology and next-
generation nuclear reactors17 .
Korean firms in the 1990s developed relationships with the US in the aerospace industry. Korean firms regularly
sent researchers and technicians to aircraft manufacturers in the United States in order to give exposure to advanced
aerospace technology. In order to accumulate manufacturing design experience, Korean Air sent six employees to
Boeing’s 777 aircraft project. Samsung Aerospace sent 60 of its employees for technical training to the United States
13
James Kim http://www.mit.edu/people/jkim21/JamesKimFinalEcon.pdf
14
THE DYNAMICS OF TECHNOLOGICAL LEARNING IN INDUSTRIALIZATION by Linsu Kim http://www.intech.unu.edu/publications/discussion-papers/2000-7.pdf
15
Govt. Research Institutes developed significant research results such as 4M DRAM, memory chips, electronic switching system and CDMA mobile telephone system
16
HAN projects are large scale R&D projects carried out through joint investment by the government and the Chaebols
17
INNOVATION AND TECHNOLOGICAL LEARNING IN KOREA by D Shin http://www.ecole.org/2/RT200298-ENG.pdf

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Building Competencies: The Korean Way

and Halo Industries sent an 8-person technology training team to study satellite technology. Yukong Ltd.,18 and other
Korean oil refineries provided their employees with technical training abroad.19
The 1990s was the period when the Korean companies began to establish themselves on a global scale by setting
up subsidiaries and research centers across the globe. The primary advantages of global R&D network were being
able to monitor foreign technological developments and generation of new technology. The Korean budget increase of
upto 200 percent in 1995 gave a tremendous boost to R&D activities. LG, as of 1996 had presence in six continents.
This presence helped in providing exposure to the company to the technological trends in various countries. Hyundai
Electronics subsidiaries were also active at that time in the assimilation and development of advanced technology
The Korean Chaebols favored employing foreign nationals as an indirect method of technology transfer. The
Korean firms for their expertise handpicked technicians working in the United States production plants. Samsung
Aerospace in the early 1990s recruited 140 foreign aeronautical specialists, 40 from the US and the rest from Ukraine
and Russia.
The Chaebols in Korea formed international academic cooperative organizations with foreign universities to do
joint research in advanced technology. Chaebols thus were able to improve their industrial capabilities faster by expanding
their links with foreign universities. LG Electronics carried out joint international projects with Universities of the likes of

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Massachusetts, Stanford and Purdue. Samsung carried out projects in LCDs with Kent State University and in memory
semiconductors with Stanford University among others.
Korean firms and research institutes acquired a number of patents in the 1993-1994 period. Patented technology
was acquired through acquisition of foreign firms who held patents. Forty-one Korean companies had applied for the
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transfer of 365-patented Russian technologies. Korean firms also acquired patent portfolios from the US patent brokers.
Samsung in 1993 acquired Harris Microwave Semiconductor, a major US optical semiconductor manufacturer to
secure a world-class technological capability in non-memory semiconductors. (Exhibit 1)
In order to give a boost to its multimedia focus, LG Electronics purchased 57.7% of the US-based Zenith’s stock in
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July 1995 to acquire Zenith’s patented HDTV technology.

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South Korean firms, as of 2004, particularly in high-tech sectors like automobiles, electronics and chemicals, were
concentrating on increasing their R&D expertise. Focus was on recruitment of R&D professionals and setting up of
R&D centers in major foreign markets. The R&D centers abroad were expected to help the Korean firms in utilizing
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foreign talent in product development and also in absorbing superior technologies.

Samsung Electronics had plans to expand its nine R&D centers in seven foreign countries and also establish a
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new printing machine laboratory in the United States along with a digital media center in Poland. It was looking forward
to utilizing the printer unit in the US as an operating base to make its laser printer a world leader. In order to develop
advanced Light Emitting Diode (LED) technologies, Samsung Electro-Mechanics set up a joint laboratory with Russia’s
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state run institute in St. Petersberg. The numbers of employees at Samsungs technology-oriented businesses like
semiconductors, liquid crystal displays and mobile handsets almost doubled to 22,000 by the month of March 2004
from 12,000 in 1997. The management of Samsung SDI was of the opinion that in-house development of core
technologies is crucial to avoid international disputes.
Hyundai Automotive Group, Korea’s largest automaker (Exhibit II), through its global R&D network was gearing up
to become the world’s fifth largest carmaker by 2010. The group established a worldwide R&D network by linking its
research affiliates overseas. It also had plans to set up R&D centers in Detroit, Los Angles, Japan and Germany.
Hyundai Heavy Industries, the world’s largest shipbuilder, set up a new technology research center with Enova
Systems of the US in October 2003 and also plans to increase the number of researchers from six in 2004 to twenty-
five by 2006.

18
Yukong Ltd., is a central core enterprise of “Senkyo Group,” one of the financial groups typical of Korea and a leading company that is chiefly involved in the petroleum and chemical business.
Yukong has a 37% share of the petroleum products market in Korea, supplying the largest part of energy consumed in Korea. Source: http://www.arofe.army.mil/Reports/webdie/yukon1z.htm
19
KOREAS STRATEGY FOR LEADERSHIP IN RESEARCH AND DEVELOPMENT by Dr. Graham R Mitchell http://www.technology.gov/Reports/Korea/Korea.pdf

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Research and development activities form the essence of LG’s innovation. With more than 23 domestic and 13
foreign-based technology institutes and research centers, their research network supports all LG Electronics operations
in the development of production technologies, core electronic parts, design concepts and next generation product
lines20 .
Korea’s leading chemical firm LG Chem expanded its R&D workforce to 60% in its next generation flagship
businesses, such as information electronic materials like fuel cells and rechargeable batteries.
“As our Korean R&D center develops core future technologies that will be commercialized after five to 10 years
and our Chinese R&D affiliate develops the car parts technologies that are required for immediate commercial production,
there is no need to worry about leakages,” said Mando Corps. president Oh Sang-soo21.

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20
http://www.lge.com/about/rnd/html/rndoverview_worldwide.jsp
21
http://times.hankooki.com/lpage/biz/200401/kt2004011818000211880.htm

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Building Competencies: The Korean Way

Exhibit I
Semiconductors Industry of Korea
Samsung stands as the second largest semiconductor vendor in 2004 according to its market share in 200322 . In the
mid-1990s, Samsung was the largest memory chip producer in the world, the world leader in Dynamic Random
Access Memory (DRAM) and dominant in 4M DRAM, ahead of Japan in 16M and 256M DRAM chips. It all started
from scratch23 .
Korea was far behind the US and Japanese semiconductor manufacturers during the 1970s. It was mainly
dependent on technology transfer for the development of designs and processes. The knowledge that Korean firms
acquired was through assembly contracts with foreign firms, the purchase of technology from distressed US firms
and the reverse engineering projects that they carried out. During the period 1983-86, the Korean semiconductor
firms invested about $1bn in facilities and about $180 bn in R&D activities.
Motorola, Toshiba, AMI and Fairchild opened wholly-owned subsidiaries in Korea (to take advantage of cheap labor)
in the mid-1960s, which was when the Korean semiconductor industry was born. The firms imported parts from
parent companies and were performing simple assembly operations in Korea. So there was little, if any, transfer of
design and engineering capability.

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Ki-Dong Kang was the first to create a semiconductor firm, Korea Semiconductor in 1974. He was a PhD from Ohio
State and had experience in semiconductor design. The firm was sold to Samsung and Dr. Kang transferred the
design and production knowledge to Samsung engineers. This enabled Samsung to produce three-inch wafers with
low yield ratios for consumer electronics. 1983 saw Samsung, Hyundai and LG shifting their funds to make
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investments in VLSI (Very Large Scale Integration24 ) production. Leading foreign firms turned down the Korean firms
applications for providing technology licenses. Texas Instruments and Motorola in the US and NEC and Hitachi in
Japan turned down Samsungs attempts to license 64K dynamic random access memory (DRAM) technology.
Samsung then analyzed the industry structure and collected information to build preparatory VLSI knowledge.
Samsung identified distressed small semiconductor firms in the US and finally purchased a design for a high speed
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metal oxide semiconductor process from Zytrex and also licensed 64K RAM designs from Micron Technology. One
team each in Silicon Valley and Korea was assigned to develop a working production system for 64K DRAM, which
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they successfully did. Samsung in early 1984 then started its mass production.
Hyundai was not far behind Samsung. It also consulted with Dr. Kang and recruited four Korean-American PhDs
having experience with firms like Xerox, Fairchild and System Control. Hyundai acquired Vitelic and started
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assembling DRAMs for Texas Instruments. It also purchased designs for 16K SRAM and 64K DRAM from Vitelic. By
the year 1986, it became the second Korean Chaebol to produce 64K DRAMs.
The development of 356K-DRAM production system led Samsung to focus its research on 1M DRAM in 1985.
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Samsung faced a problem of not being able to find literature on new production processes and also sample chips
from pioneering firms for reverse engineering. Samsung completed its own circuit design within six months of their
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shifting of focus to 1M DRAM. By the tenth month they were able to produce viable process technology for the
production of 1M DRAM.
During the latter half of 1980s, there was a tremendous growth in the R&D expenditure. The government during this
period, to boost the industry, invested heavily and made attempts to prevent duplicative research efforts. The time
gap between the developed countries and Korea for new product development was gradually shortening.
(Annexure III) Samsung was only 6 months behind Japan to complete the 4M-DRAM design. It produced 16M DRAM
concurrently with Japan in 199125 and in August 1992 it became the first firm to develop 64M DRAM and become the
worlds first commercial supplier. In 1994, Samsung asserted its leadership by developing the worlds first fully working
sample of a 256M DRAM26.
Compiled By: IBSCDC

22
David Lammers http://www.techweb.com/wire/story/TWB20040311S0014
23
INNOVATION AND TECHNOLOGICAL LEARNING IN KOREA by D Shin http://www.ecole.org/2/RT200298-ENG.pdf
24
VLSI- allowing for over 100, 000 transistors on a chip
25
The role of technological advance and diffusion in the rapid growth of the Korean Semiconductor Industry. By JAMES KIM http://www.mit.edu/people/jkim21/JamesKimFinalEcon.pdf
26
INNOVATION AND TECHNOLOGICAL LEARNING IN KOREA by D Shin http://www.ecole.org/2/RT200298-ENG.pdf

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Exhibit II
Korean Automobile Industry (Hyundai Motors)
Hyundai Motors catching up with the worlds leading automobile manufacturers in three decades (1965-1995) can be
traced out as a four-stage process. The first being assimilation of assembly operations, second being the
development of a Korean car, third being development of an advanced car and finally the company becoming
independent.
In 1967, Hyundai formed a taskforce by drawing team members from its construction division who had strong project
management and engineering background. In the year 1968, Hyundai entered into an Assembler Agreement with
Ford to assemble Ford cars on a semi-knocked-down (SKD) basis, in Korea. Packaged technology in the form of
blueprints, technical specifications and production manuals were transferred to Hyundai. Ford trained a few of
Hyundai’s engineers and even sent about 10 of its engineers to Hyundai to help the Hyundai workforce transform the
explicit knowledge to tactic knowledge.
The first stage progressed with Hyundai setting up an ambitious goal of completing plant construction and acquiring
production capability in the shortest possible time. While the plant construction was underway. Hyundai’s workforce

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rehearsed production operations by disassembling and reassembling two passenger cars, bus and a truck over and
over again. This enabled the workforce to assemble cars, when the plant was completed, with minimum trial and
error. The company rapidly evolved from semi-knocked down basis to complete knocked down (CKD) basis by
rapidly assimilating production capability.
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The company leapfrogged to the second stage by the change in government policy in the mid-1970s that required the
Korean automobile industry to shift from CKD basis to the development of locally made Korean cars. Hyundai had to
assimilate imported foreign technology in an “unpackaged” form to maintain independence from foreign
multinationals. Hyundai initially organized a project team and began to enhance the teams existing knowledge base.
It then approached about 26 firms in five developed countries to acquire different technologies; 10 firms in Japan and
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Italy for car design, 4 firms in Japan and the United States for stamping shop equipment, 5 firms in the United
Kingdom and Germany for casting and forging plants, 2 firms in Japan and the United Kingdom for engines, and 5
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U.S. and U.K. firms for an integrated parts/components plant27 .

A licensing agreement was sought with Italdesign for body styling and design, and with Mitsubishi for gasoline
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engine, transmission and rear axle designs, as well as casting technology. For their training, engineers were sent to
technology suppliers.
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Hyundai sent a team of its five design engineers to Italy to participate in and gain from the Italian design process.
Hyundai wanted these engineers to assimilate styling technology from Italdesign. For a period of one and a half
years, the engineers took all the inputs from Italdesign as they could and later on after returning, they became the
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core of the style design department.

Hyundai hired technical experts from Britain and Japan for the successful development of its first indigenous model,
Pony, in 1975 with a 90% domestic content, making it the second nation in Asia to have its own domestic automobile.
The oil crisis of the 1980s marked the third stage of development of Hyundai Motors. In order to tap the North
American market, Hyundai looked forward to develop the next generation FF (front engine, front wheel drive) car.
Volkswagen, Ford and Renault were approached for FF technology by Hyundai to diversify its technology sources.
Nothing eventually worked out with the ‘biggies’, as they demanded equity and management participation at Hyundai.
Hyundai finally settled with Mitsubishi licenses for engine, transaxle, chassis and emission control technology against
a 10% equity share without management participation.
Hyundai wanted to lay a strong foundation for developing cars on its own. It thus adopted computer-aided-
manufacturing and computer-aided-design systems along with the assembly line control system.
Contd...

27
Capability Building in Catching-up at Hyundai Motor by Linsu Kim http://www.hyundai.auto.ru/hmc_history.pdf

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Contd...

The FF plant completed in February 1985 had tripled the production capacity from 150,000 units to 450,000 units a
year. In 1986 FF Excel was exported to the US market where in 1987 it became the best selling import car of the year
overtaking Nissan Centra, Honda Civic, Subaru DUGL and Toyota Corolla28 .
In the year 1994 Hyundai unveiled Accent, the first car whose design was in-house and not based on any other car.
This was the final stage of Hyundai’s catching up and there after there was no looking back. Accent was
benchmarked on the Toyota Tercel for performance and the Chrysler Neon for cost29 .
Hyundai as of March 2004 had been ranked fifth in passenger car sales30 .

Compiled By: IBS CDC

Annexure 1
From Imitation, Improvement to Innovation
Imitation involves duplication, no internal R&D investment, no technological learning, and no sustainable competitive

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advantage. This was practiced in the 1960s and 1970s.
Improvement implies creative imitation, internal R&D, technological capacity, sustainable competitive advantage.
This is the Japanese model, practiced in the 1980s and 1990s and still dominates.
Innovation means being a pioneer on the technological frontier. It is possible only with accumulated internal
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technological capacity and intense in-house R&D. This is the American model, where the boundary between
improvement and innovation is blurred. In Korea, it was practiced in the 1990s in a few industries such as
semiconductors, biotechnology and multimedia and now has taken firm ground.

Source: http://www.ecole.org
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Annexure II
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1962-66 1967-71 1972-76 1977-81 1982-86 1987-89

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Foreign Direct Investment 4.4 218.6 879.4 720.8 1766.5 3433.2

Foreign Licensing 8 16.3 96.5 451.4 1184.9 2130.3
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Capital Goods Imports 316 2541 8841 27978 44705 52155

All Figures in $ millions

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Patterns of Technology transfer in South Korea (Song 215)

Annexure III
TIME \ PRODUCT 64K 256K 1M 4M 16M 64M 256M

Pioneer in Advanced
1979 1982 1985 Late 1987 Early 1990 Late 1992 Mid 1995
Countries
Pioneer in Korea 1983 1984 1986 Early 1988 Mid 1990 Late 1992 Early 1995
Gap 4 years 2 years 1 year 6 months 3 months Same Ahead
Source: Linsu Kim (1997) http://www.stepi.re.kr/researchpub/fulltext/R02-11.pdf

28
Capability Building in Catching-up at Hyundai Motor by Linsu Kim http://www.hyundai.auto.ru/hmc_history.pdf
29
Fortune 1995
30
Hyundai Rides Car Sales Boom http://www.hyundai.com.au/company_news_050404.asp