Asian Journal of Technology Innovation 16, 2 (2008)
Identifying leading Korean industries and firms based on
patent and export statistics
Lee, Kong-Rae* and Rhee, Wonkyung**
* Science & Technology Policy Institute (STEPI)
26th Fl., Speciality Construction Center, Shindaebang-dong, 395-70, Dongjak-ku, Seoul, 156-714,
South Korea (corresponding author: leekr@stepi.re.kr)
** Global Information and Telecommunication Studies, Waseda University,
Shinjuku-ku, Tokyo 169-8050 Japan (circlek2@gmail.com)
Summary
This paper aims to identify the leading industries and firms of Korea. It tries to make an industry
classification based on the concept of technological trajectories, and identifies leading industries
by analyzing export and US patent statistics and leading firms by analyzing world-class products
and firms.
Based on the results of the analysis on leading industries, the information-intensive type of
industries has the highest lead index, but has a decreasing trend over the three-year period. The
specialized-supplier type and the science-based type tend to increase their position at a rapid speed
during the period of 2004–2006. As for specific industries, the shipbuilding industry appeared to
have the highest lead index, followed by the electronic parts industry. In identifying the leading
firms, it was found that the Chaebol firms have produced many world-class products, for
example, Hyundai Steel’s stern frame casting, Hyundai Mipo Dockyard’s container ships,
Hyundai Heavy Industries’ floating production storage, Samsung Electronics’ memory chip, Sa
msung Electro’s chip scale package, and so on. SMEs, classified as specialized-supplier and sci
ence-based firms, have also innovated technologies and have created good value for foreign
wholesalers, thereby generating a large number of world-class products.
These findings imply that the Korean economy has been moving at a positive direction. It is
believed that the Korean industry has strengthened its technological capability to produce more
high-value-added products with deeper scientific and technological knowledge than in the past.
Certainly, the Korean industry requires creativity in order to accelerate this development and adopt
a new innovation mode.
Key words: leading industries, leading firms, world market share, US patent registration, Korea
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1. Introduction
Korea has been successful in developing her industries over the past four decades. At the
outset of the 21st century, the Korean industry has entered into a new development stage as
many of the large firms have reached the world frontier in terms of sales volume as well as
technological innovation. At the same time, many new types of industries, such as
information, mobile telecoms, broadband, online game, among others, have emerged and have
been exported to foreign countries. Owing to the development of the manufacturing sector,
the per capita income of the Korean economy has continued to grow, reaching more than the
70 percent level of the OECD average (OECD, 2007).
Although Korean industries have been successfully developed, there are many hurdles for
their continuous growth and in maintaining their competitive advantage. First of all, smalland medium-sized firms (SMEs) are less developed, because of their weak technological
capabilities. Thus, they can hardly meet the innovation requirements of large firms, which in
turn restrict the innovation activities of these large firms. The slow development of the parts
and components industry is associated with this problem. Another problem that the Korean
industry has faced is growth without increasing employment. Korean firms have substantially
increased their productivity through the support of new technologies such as automation and
robotics, information, and telecommunication, but have sacrificed the employment of people.
These problems are new to the Korean economy. It implies that the Korean economy is in a
transition from a developing one to a developed one. Many innovation studies (Song, Wichin,
et al., 2007; Kim, Linsu, 1997) have mentioned that Korea has been moving from a catch-up
mode to a post catch-up mode or from an imitation mode to a creation mode. Various
indicators may provide signals that the Korean economy is in a transition. Structural changes
of leading industries can certainly be a sign that the Korean economy is in a transition; this
paper intends to investigate if this is so.
It is important to see which industries expand or lessen their position both in markets and in
the innovation league. It may also be important to find emerging star firms and diminishing
firms in markets, particularly in export markets. Fact findings about these points will give us
clear signals as to whether an economy loses or increases in dynamism. This paper aims to
explore these issues by identifying leading industries and firms. To do this, this paper first
tries to make an industry classification based on the concept of technological trajectories in
Section 2, and then identifies leading industries by analyzing export and US patent statistics
in Section 3. In Section 4, it also classifies leading firms by analyzing world-class products
and firms.
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2. Industry Classification and Research Methods
2.1 Classification of industry types
The classification of industries based on their characteristics of innovation has often been
used for analyzing innovation issues. A number of innovation studies (Pavitt, 1984, 1988;
OECD, 1995; Tidd, et al., 2001) have shown similar and persistent differences among
industries in the sources and direction of technological innovation. The four types of
industrial taxonomy made by Pavitt (1984) have been well known and applied to innovation
studies. Recently, Tidd et al. (2001) developed Pavitt’s taxonomy and applied this to the
classification of firms. They classified five types of firms (supplier-dominated firms, scaleintensive firms, science-based firms, information-intensive firms, specialized-supplier firms)
based on technological trajectories that were originally made by Pavitt.
We adopted Tidd’s typology on the types of firms and applied it to the classification of
industry types. In particular, they are supplier-dominated industries, information-intensive
industries, specialized-supplier industries, scale-intensive industries, and science-based
industries. This typology is deemed to be useful in understanding how much change there has
been in Korean industries’ lead in terms of innovation performance. Structural changes in
those five industry types may reveal many implications not only on the innovativeness of
Korean firms and industries, but also on their international competitiveness and government
innovation policy.
There is one thing worth mentioning regarding industrial classification. The traditional
concept of distinction between firm and industry is in fact ambiguous inasmuch as some large
firms run their business across many industrial sectors. For instance, Samsung Electronics Co.
has operated its business across several industrial sectors, namely, semiconductors,
information, mobile telecommunications, displays, home appliances, and digital media. Some
scholars like Fujimoto (2007) treated firms and industries similarly in innovation research. He
argued that the lowest level of micro unit analysis is not the firm but the factory. This paper
hereafter adopts the typology of the five industry types by which firms and specific industries
are grouped and analyzed. This is shown in Table 1.
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Table 1: Classification of products and services by industry types
Types
Specific Products and Services (Examples)
Supplier-dominated
Food processing (beverage, food stuff, cigarettes, etc.), textiles, metal
products, glass and ceramics, non-ferrous metal, lighting instruments, etc.
Information-intensive
Audio instruments, telecom instruments, office instruments, other services,
etc.
Specialized suppliers
Engine, agricultural machinery, construction and mining machinery, machine
tools, special industrial machinery, general industrial machinery, service
industrial machinery, transmission instruments, electrical industrial
machinery, home appliances, electronic parts, weaponry, shipbuilding,
railroad equipment, etc.
Scale-intensive
Petro chemicals, inorganic and organic chemicals, paint, rubbers, plastics, iron
and steel, TV, automobiles, other transportation equipments, etc.
Science-based
Pharmaceuticals, oil-based products and cosmetics, agro chemicals, other
chemicals, precision instruments, aerospace, and aircrafts
2.2 Research methods
The research methods used in this study to identify the leading industries and firms of
Korea include both quantitative and qualitative techniques. For the quantitative method, we
analyzed export statistics and US patent statistics in order to measure how much each industry
leads in export markets and in the innovation league among global firms. Export sales data of
39 industries were collected over three years (2004, 2005, and 2006) and world export market
shares were calculated. At the same time, US patent data by industry were collected and their
shares in the US patent registration were calculated. These were done to establish lead indices
for the 39 industries on which the degree of the lead of each industry is measured.
The qualitative research method was used in identifying leading firms by industry. We
obtained the list of products and firms with the largest world market shares from the
Ministry of Knowledge Economy (MKE). Products and firms included in the list are
called world-class products or companies. The total number of world-class products was
595 items produced by 657 companies. We classified them into five industry types
and grouped them into large firms and small- and medium-sized firms (SMEs) in
order to find the features of leading firms and products. The results of the analysis are
explained in Section 4.
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3. Identifying the Leading Industries of Korea
3.1 Analysis of export statistics
The export statistics of firms or industries can be one of the indicators accounting for the
degree of lead with respect to innovation performance. Leading industries may show high
performance in export sales because they may be able to sell better quality of products and
services at competitive prices in international markets. Statistics, such as absolute export
values, revealed comparative advantage (RCA) index, royalty income from technology
exports, and trade balance of payment, have been used as indicators of innovation
performance (Lee, Kong-rae, 2003, 2006, 2007). They can also be possible indicators of
industrial lead. This paper used global export market shares to identify which industries are
leading.
Figure 1: Global export market shares of Korea by industry types (%)
Figure 1 reveals the average global market shares of the five industrial types (supplierdominated, information-intensive, specialized suppliers, scale-intensive, science-based).
Table 2 shows the global market shares of the 39 Korean industries. They are compared
between 2004 and 2006 to identify the direction of change in export market shares over time.
The Korean industry as a whole captured 2.85 percent of global export sales in 2004. It
slightly reduced to 2.83 percent in 2006, implying that Korean industries were facing tough
competition in export markets and were not able to expand their position much.
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5. Conclusions
Based on the results of the analysis on leading industries and firms of Korea, we found that
the information-intensive industry, in which items such as audio instruments, telecom
instruments, and office machines are included, are shown to have the highest leading index.
This sector has been leading the Korean industry in the past. It has, however, shown a
decreasing trend in global export markets over the three-year period. While the information
industry has been declining, there is an indication that the specialized-supplier and the
science-based industries are emerging as the new leading industries because they tend to
rapidly increase their position throughout the period of 2004–2006.
As for specific industries, the shipbuilding industry appeared to have the highest leading
index, followed by the electronic parts industry. The shipbuilding industry has consecutively
been the highest over the three-year period with an increasing trend. The electronic parts
industry, which includes semiconductors, displays, and others, captured 6.72 percent of global
export markets in 2006, making it rank second in the leading indices of the Korean industry.
Interestingly, the top ten leading industries are by and large associated with the IT sector. We
also found that precision instruments, regarded as part of the science-based industry, ranked
as the 10th leading industry, implying that Korea is now entering a new development stage in
which the science-based industries possibly lead the growth of her economy similar to many
advanced countries.
In identifying leading firms, it was found that the Chaebol firms have produced many
world-class products, for example, Hyundai Steel’s stern frame casting, Hyundai Mipo
Dockyard’s container ships, Hyundai Heavy Industries’ floating production storage, Samsung
Electronics’ memory chip, Samsung Electro’s chip scale package, and so on. They seem to
have the advantage of collaboratively developing related industries, enjoying positive synergy
effects in their product development. Sister companies of the Chaebols have formed a
technological learning system in which they exchange information and knowledge
complementing each other, making the Chaebols a strong learning network type of
organization.
SMEs producing world-class products are classified as specialized-supplier and sciencebased firms. They have, like Chaebols firms, innovated technologies and created good-value
products for foreign customers. Owing to limitation of funds and human resources, they have
pursued a strategy to concentrate on the development of specific items that can enjoy
competitive advantage for SMEs. Some SMEs have expanded their business over the
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domestic market and have spent much time in developing their own technologies. They are
called the ‘hidden champions’ of the Korean industry.
These findings imply that the Korean economy has been moving at a positive direction. It is
believed that the Korean industry has strengthened its technological capability to produce
more high value-added products with deeper scientific and technological knowledge than in
the past. Certainly, the Korean innovation system requires creativity in order to accelerate this
development and adopt a new innovation mode focusing on the characteristics of the post
catch-up genre (Lundvall, et al., 2006).
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