The development of technological capability and the transformation of inward FDI in Korea from 1962 to 2000

Abstract

An important factor in developing national economies is not only indigenous research and development (RandD), but this must also be joined by transnational technologies (Pack and Westphal 1986; Mansfield 1971; Wilkinson 1983). As the cost of creating new technologies and new processes increases, the role of multinational firms possessing such resources and technological capabilities as the leaders of innovation increases in importance. Indeed, the total amount of foreign direct investment (FDI) from from multinational firms has increased to 13.3% of total GDP in 1997. The importance of FDI as a channel to transfer technologies between nations became greater than ever before (UN 1999; UN 1995). However Korea is special in that its technological capabilities developed rapidly without large scale inward FDI until the mid-1990s. What is the relationship between the development of Koreas technological capabilities and inward FDI? What were the types of technology-and FDI-related policies instituted by the Korean government? These questions are to be addressed in the following pages. In this paper, it is necessary to explore the relationship between the development of Koreas technological capabilities and the development of inward FDI. This is done in tandem with an examination of technology policies and FDI policies from 1962 to 2000. Several methods are used in this study, including a descriptive survey of Koreas technological capabilities and inward FDI development, as well as interviews and bibliographical analysis to investigate the policies of the Korean government. © Physica-Verlag Heidelberg 2007.