Review of Korean Imitation and Innovation in the Last 60 Years

Abstract

This review is dedicated to analyzing South Korean technological progress, which has shown impressive economic performance, which has earned South Korea a well-deserved place among industrialized countries. Korea’s advances in the electronics, semiconductors, automotive, and shipbuilding industries have demonstrated industrial maturity and high innovative ability. To understand how they reached their position today, we have to understand to the core of the process by researching the roots of these innovations over the past 60 years, identifying specific innovations and tracing their transmission throughout South Korea. The technology transfer and development model of South Korea is unique. After other countries refused to license and transfer modern technologies to this country, Korea resorted to its national research system to add innovative content to its imitative products. This review article summarizes the experience of Korea, from not having access to technology to innovation and economic progress, which led to increases in per capita income, the prosperity of urbanization, and the recovery of markets. The model of technology transfer in Korea is valuable, especially for today’s developing countries. What it offers is not pure theory, but rather a successive series of procedures undertaken by the government of Korea. It has not been a matter of chance, and their economic prosperity was not due to the sudden discovery of natural resources.

1. Introduction

In South Korea, per capita income rose from USD 160 in 1960 to more than USD 32,000 in 2020, a near 200-fold increase [1,2]. South Korea was one of the 10 largest global economies in 2006, as shown by its GDP of about USD 1 trillion, though it does not have rich natural resources [3]. Its total exports increased from nearly USD 2 billion in 1960 to USD 557 billion in 1996, i.e., a 278-fold increase [4].

How could Korea, which was under Japanese colonization from 1910 to 1945 [5,6] and then affected by US occupation/influence and a civil war (1950–1953) [7,8], which fragmented Korea, destroyed its resources and infrastructure, and killed nearly three million Koreans, bridge the technological gap between itself and the developed countries that occupied it and become an innovative country that exports its products, especially electronics, cars, and ships, all over the world? What have been the stages and the time frame of the technological developments in South Korea over the last 60 years?

The answers to these questions are the focus of this article, which analyzes imitation and innovation during this period to identify its causes and stages. It is worth noting that the period of technological absorption in South Korea was short, and the transition from imitation to innovation was fast, thus rendering the South Korean model unique, especially when we analyze reliance on the national research system as a means of feeding innovative local development.

Therefore, this review is dedicated to analyzing the timeline of South Korean technological progress. South Korea has shown impressive economic performance that has gained it a well-deserved place among the industrialized countries. Its advances in the electronics, semiconductors, automotive, and ship building industries demonstrate its industrial maturity and high innovative ability. To determine how it reached its position today, we had to probe the process in depth by researching the roots of these innovations over the past 60 years, identifying specific innovations and tracing their transmission or imitation in South Korea.

Theoretical Approach

We built this model based on the basic hypothesis that a developing nation (e.g., South Korea) becomes an innovative nation through four major stages. First, the developing nation starts by importing foreign products (i.e., innovative products). Second, the developing nation imitates the foreign products to satisfy local needs. Third, the developing nation exports its imitative products to foreign nations, due to their low prices based on low-wage labor. Fourth, the developing nation becomes innovative by adding its local innovative abilities (e.g., by using local R&D system) to its imitative products.

In this study, the theoretical approach was based on the hypothesis above. A general timeframe was developed for South Korea, with reference to the literature, in order to study its transition from imitation to innovation. The history of selected technologies has been tracked, starting from technology importation and leading to imitation, acquisition, and innovation. The general timeframe has been examined for three technologies in which South Korea has become a global leader.

2. South Korean Transitional Periods from Imitation to Innovation

Although researchers have established various periodic divisions in South Korea’s transition from a developing to a developed country, these divisions differ, depending on each author’s point of view and the underlying factors of such divisions. Some have divided South Korea’s progress in terms of the volume of exports and imports; others have divided it on the basis of regulations and legislation; a third group has divided it according to the political chain of command, or the volume of foreign direct investment (FDI) and its role in the South Korean economy [9,10,11,12,13].

However, in this article, we have proposed a new timeline for South Korea’s technological development based on the responses of the governmental policy to the imitation and innovation stages. We have used a different division that intersects and overlaps with the aforementioned ones, but with the underlying rationale of a nation that did not possess certain technologies and thus depended on its ability to copy, imitate, and simulate the innovations of other countries and then develop modern innovations of its own.

Accordingly, we found it more appropriate to set 1910–1960 as the period in which (South) Korea did not have modern innovations, then 1961–1980 as the commencement of copying and imitation, which, in turn, can be divided into two sub-periods: 1960–1970 and 1970–1980. South Korea entered an era of innovation in the late 1980s and early 1990s. The bottom line is that South Korea has gone through three major periods concerning innovation, as shown in Figure 1.

2.1. Pre-Transitional Period in Korea: Pre Innovation Era

In the first period before 1961, Korea was under Japanese occupation, followed by US influence and civil war for 50 years that continued even after independence in 1953 during the era of the First Republic headed by Syngman Rhee (1948–1960) [14]. From 1960 to 1962, four presidents were overthrown, ending with the military coup on 24 March 1962, led by Park Chung-hee, who started what was known as the Third Korean Republic and ruled the country for nearly 17 years until his assassination in 1979 [15]. The precursors of the transition to imitation coincided with the rule of Park Chung-hee. The 2 years preceding his rule witnessed severe political fluctuations under four presidents. Knowing the style and methodology of the country’s political leadership may lead us to identify the source of legislation, strategic directions, and visions for the nation. The transition to innovation (as we have observed in other countries) stems from the legislative authority of the nation, accompanied by the interdependence and overlap of the nation’s institutions, the response of its society, and the country’s relations with innovative nations and ideas of how to adopt the simulation and copying methodology of foreign innovations in the early periods. Accordingly, political authority is the source of legislation and the steering wheel of transformation into an innovative nation.

An analysis of the period before 1961 shows that Korea did not possess modern technologies or advanced industries and could not even simulate or copy any innovations that reached its ports except for what had been established by the Japanese government during its colonization of Korea after the 1910 Japan–Korea Annexation Treaty, which placed Korea under Japan’s protectorate. Companies and factories in Korea under occupation were established in the Japanese style. In previous studies, we explained how Japan became an innovative country in the modern era. Japan transferred some industries to Korea, especially the railway industry, the banking industry, and the holding company system. Japan began building a railway linking the Chun Zechon Port to the Korean capital between 1900–1910 to pave the way for a quick outlet for military forces after landing in the port, as became clear after the occupation. This was to repel any attack or expansion of China in the region [16,17,18].

The precursors of occupation were the movement of foreign investments to Korea, intensification of these interests, and then demands to protect them, ensure their safety, and enhance their success. Just as foreign investments sometimes contribute to the renaissance and growth of countries, they may be a reason to invade them and a pretext for occupying and placing them under protection.

2.2. First Transitional Period in South Korea: Import Substitution Policy

With the beginning of the second period (copying and imitation) in 1961, South Korea implemented the “Import Substitution Policy” by enacting laws and establishing incentive programs that encouraged the industrialization of everything imported, and setting up disincentive programs to reduce imports. A series of restrictions on imported products was initiated in favor of domestic manufacture of a particular product. In order for South Korea to reach this stage in the local industry, it resorted to two measures, namely foreign technological licenses and foreign technological consultation. Through technological licenses, South Korean factories transferred technology to copy, simulate, and imitate the imported foreign products, and through foreign technological consultations, it could train, teach, and maintain and repair the devices and equipment imported for local manufacturing, which were basically copies and imitations of what was imported, but with licenses from the technology owners. At this stage, South Korea needed to build workforce capacity in technological and engineering fields. The process of importing technology required a minimum level of technological capabilities of the local workforce to benefit from the imported technology. Without this, countries cannot even begin copying and imitation, a process that requires skills and infrastructure that are not easy to prepare and qualify. Training and qualification of the local workforce was key to dealing with and operating imported technologies. Re-manufacturing imported products within the country requires support from the country’s government, along with protection by discouraging and restricting the import of products so that the national entities can compete in the beginning [19,20,21].

The South Korean government subsidized the domestic private sector. Foreign companies and branches of international companies move around the world looking for better markets or lower wages, and they are never a reliable source for generating sustainable growth for specific countries. The state’s investment was directed towards developing capabilities in the national private sector.

In 1962–1983, the South Korean government imposed strict restrictions on foreign direct capital entry into the country to reduce and regulate foreign influence and ensure the development of industry and national investment in national capital, especially in the early stages. Some restrictions were later relaxed gradually in 1984–1994, and the activities and projects in which foreign direct capital was prohibited decreased to only 147 projects compared with the previous period. South Korea then began to stimulate foreign direct capital in some fields, starting in 1995. FDI increased from USD 1.36 billion in 1995 to USD 11 billion in 1999, an increase of nearly ninefold in just 4 years after the policy concerning foreign investment changed [19].

The benefits of these restrictions on foreign investments are evident today. They protected the nascent national industries and investments. They were followed by gradual easing in each industrial sector and activity according to the ability of the local industry to grow in terms of simulation, imitation, and copying. The efforts also focused on turn-key factories that did not specialize in producing a specific industry but were used in several industries to keep pace with supply and demand and the transformation of economic activities, especially during the first period of economic growth.

2.3. Second Transitional Period in South Korea: Export Promotion Policy

As an intermediate stage of progress in industrial growth and economic prosperity, South Korea shifted from the “import substitution” policy to the “export promotion” policy in the 1970s. There was a shift in first production volume and then production quality. The goal in the first stage (import substitution) was to create a local industry that was capable of substituting the imported goods. The South Korean government’s direct support accompanied this endeavor on the one hand, along with restrictions on imported products in favor of national products, which were imitations and of poor quality compared with the imported foreign products. However, this created a local economy capable of covering the basic industrial needs and correcting the trade balance between South Korea and foreign exporting countries, which was depleting hard currency to bring foreign products into the country [13,22].

The goal of the “export promotion” phase (an advanced stage of copying, imitation, and simulation) was to bring in foreign currency from abroad and correct the trade balance in favor of South Korea. However, this phase was not easy, as the South Korean products in 1970–1980 were imitations of poor quality compared with products in developed countries. South Korea’s gamble relied on two factors, namely the low-waged Korean labor, which made the cost of the product lower by a profitable difference, allowing it to reach the markets of other foreign countries. Furthermore, the government generously supported the local industries through programs, regulations, and legislation that enabled the local exporting producers (investors) to receive benefits, financing, grants, subsidies, and tax exemptions.

In addition to the low-quality and low-cost South Korean exports in 1960–1980 due to low-waged labor as one of the production inputs, South Korean exports were known in general as low-tech commodities, such as shoes and textiles, which depended largely on low-cost labor. Thus, consumers had the impression that South Korean products were mere imitations, or from simple and uncomplicated industries. The South Korean government began to shift its focus to exports with a higher technological content (or higher added value). In 1960, exports constituted only 2% of GDP. This percentage rose to 10% in 1970 and then 30% in 1980. However, 30% of these exports were shoes and textiles, which were simple and uncomplicated industries. However, the South Korean government’s contribution to programs to transform export quality increased the added value in export quality. Accordingly, the percentage of textiles and shoes decreased from 30% in 1960 to 10% in 1990 and then to less than 3% in 2000. As we mentioned at the beginning of this chapter, the revenue from total South Korean exports rose from USD 2 billion in 1960 to USD 557 billion in 1996 [13], an indication of the change in the quality of South Korean industries during the 40 years between 1960 and 2000.

2.4. Third Transitional Period in South Korea: Building National Research and Innovation Systems

However, in the early 1980s, South Korea received a technological shock because its industries and exports were based on imitation, simulation, and copying. In other words, if the licensing companies stopped their licenses, South Korean companies would not be able to modernize their production lines and introduce developed industries. The technology-licensing countries, such as Japan, the USA, and European nations, sensed that the South Korean industry could be competitive due to low prices and the similar quality of the imitative product (in advanced stages of imitation and copying) and thus tried not to establish further assembly factories in South Korea so South Korea could bit compete with them in the future. Examples included the refusal of the Japanese Mitsubishi Company to renew the technological auto engine license to the Korean Hyundai Company and the refusal of the US companies to sign technological licensing contracts with the Korean LG Company to manufacture color TVs (see the details in the next section).

South Korea’s spending on foreign technological transfer licenses rose from USD 0.8 million in 1960–1966 to USD 1.2 billion in 1982–1988, i.e., more than 500 times. The spending on foreign technological consultancy increased from USD 17 million in 1967–1971 to USD 333 million in 1982–1986 [23].

Thus, research and innovation started to gain momentum. The desire to improve scientific and research capabilities resulted naturally from a natural sequence of events in South Korean industry whose hopes were pinned on local research (the national research system) for its growth and to overcome its challenges in the path towards innovation.

The government policy changed from encouraging exports to supporting the indigenous R&D policy at the end of the 1970s and early 1980s [1,24].

Given the time lag between the inputs and outputs in scientific research projects and activities, it is not easy to trace the development of the national research system across time based on outputs, which may take a decade or more to impact the economy [25,26]. Therefore, we will chronologically track some of the most prominent inputs to these activities contributed by the South Korean government during the transition to a policy of supporting research and innovation. However, we assert that the outputs of these activities did not bear fruit until at least one to two decades later. The government focused on local knowledge stock, the development of which would enable industry to progress and develop without relying entirely on imported foreign technologies, which were no longer available to South Korean companies as they were before in the 1960s and 1970s for fear of competition. The local knowledge stock increased the capacity of local technological absorption and paved the way for developing imported technologies and producing innovations.

2.5. South Korean R&D Policies

The government policies to support research and innovation in a bid to develop the capacity of local industry comprised tax exemptions/relief on the income of research and innovation activities in 1975, income tax exemptions of up to 50% for researchers and engineers in 1980 (and later tax exemptions on the income of profits from the proceeds of patents), tax exemptions for R&D-based SMEs in 1985, a compensation system for investment losses for venture capital companies in 1980, tax exemptions on real estate containing R&D institutes in 1981, and a tax credit system spent on developing the workforce in 1986 [27].

Other government policies included providing incentives and benefits to companies and the private sector as the main players in the innovation process, and keeping the government as a regulator and supporter. The government established Daedeok Innopolis as the first science park in Korea in 1979 in addition to direct government spending to support research. As a comparison, government R&D support in 1963 was KRW 1.2 billion, compared with KRW 211 billion in 1980, an increase of nearly 200-fold in less than two decades. It then rose from KRW 211 billion in 1980 to KRW 3.4 trillion in 1990, i.e., a 3000-fold increase in just two and a half decades, and it later increased to KRW 43 trillion won in 2010. These figures indicate the government’s interest in research and innovation and its expected role in the country’s future, especially after the shock of the non-renewal of technological licenses. The percentage of spending on R&D of the GDP rose from 0.44% in 1976 to 1.59% in 1985 and exceeded 3.7% later in 2010 [19,24].

Given these government measures, the number of full-time researchers increased from approximately 11,000 in 1976 to 100,000 in 1995, i.e., a ninefold increase over two decades, thus raising the number of researchers per 1000 population from 0.33 to 2.24 in the same period and then to 15.4 per 1000 population in 2019 [27,28].

The innovative output of the South Korean research system increased from 50 patents filed with the USPTO for South Koreans in 1980 to more than 5000 patents filed in 2000, i.e., 100 times more within 20 years [1].

The technological content (the added value of goods manufactured in South Korea) increased over time. As a result, decades later, in 2000, 23.4% of South Korea’s exports were classified as advanced technologies. Approximately 68.8% of South Korean exports were electronic exports [27].

Such technological progress was reflected in the average annual GDP growth, from 7.5% in the 1960s to 8.6% in the 1970s and 9.3% in the 1980s, i.e., twice Japan’s economic growth of 4.5% and twice the US’s growth of 3.2% [29].

The governmental measures of support and tax exemptions contributed to a gradual increase in the private sector’s contribution to financing research, as the ultimate beneficiaries of research and innovation outputs to improve production lines and industry in general. The private sector’s contribution amounted to 81% of total spending [30].

Only 10% of R&D was carried out in universities, while the private sector and research institutions took over the rest. Approximately two-thirds of researchers worked in the private sector. In 2000, Samsung spent more than USD 500 billion on research and innovation, prompting a researcher to publish a chapter in a book entitled The Samsung Republic. Its employees exceeded 287,000, and its annual profits amounted to USD 121 billion. Recently, the percentage of Samsung’s spending on R&D exceeded government R&D spending as a whole, as it reached 22%, compared with 20% by the government [23]. Thus, the author who described the company as a republic did not exaggerate.

3. Copying and Imitating Innovations in Electronics, Ships, and Cars in South Korea

This section highlights three specific industrial imitation and innovation models used in South Korea: the automotive industry, shipbuilding, and electronics/semiconductors.

Table 1. The timeline of technology transformation in South Korea in three selected industries.

Target Industry	Technology Source	Korean Key Players	Timeline of Technology Transformation
			Tech Importation	Tech Imitation	Tech Exportation	Tech Local Innovation
Vehicles	Willys Jeep, USA; Ford, USA; Nissan, Japan; Mazda, Japan; Fiat, Italy	Seong Brothers (1955); Seaenera Co. (1962); Kia (1962); Asian Motors (1965); Hyundai (1968)	1953	1955	1970s	1980s
High Tonnage Shipbuilding	Kawasaki, Japan; Appledore, UK; Scott Lightglow, UK; B&W, Denmark; BWS, Denmark; Naiereorm, Germany	Hyundai; Daewoo	-	1962	1974	1980s
Electronics	Matsashita, Japan; Philips, Holland; Hitachi, Japan	LG (Radio); Anam (Color TV); Samsung (DRAM)	1950s	1958	1962	1980s

summarizes the technology transformation timeline and highlights the key players.

3.1. From Imitation to Innovation in South Korean Vehicles

The South Korean government played a significant and prominent role in the automotive industry. It was not only the regulator of this sector but also the architect of policies and executive plans, the supporter of the private sector in this field, and its protector against foreign companies until it, at some stages of the industry’s progress, prevented the import of Japanese cars and doubled taxes on US and European cars to protect the domestic industry, which was in its cradle, against any foreign competition. It also provided many facilities over three decades to the private sector. However, it is clear that government policies were temporary in each period of growth and changed periodically according to the degree of growth and the response of the local automotive industry. We believe that this reduced the time between not owning the technology to imitating it and then innovation.

After the end of the Korean Civil War in 1953, US bases and recruits increased on South Korean soil, which increased the import of small transport vehicles for the army personnel (more than 300,000 soldiers). These transport vehicles needed local spare parts for reduced costs and quick supply, thus establishing a local industry sector for spare parts for transport vehicles for the US Army. In 1955, the Seong brothers set up a vehicle assembly plant (Jeep) for the US Willys Jeep Company. The assembled car was known at that time as Sibal (literally “inception”). Its chassis or body shell was made from manually reshaped leftover US Army oil drums. Sibal became a relatively popular choice for South Korean taxi firms. A replica of a Sibal is on display in the National Museum of Korea. It is noteworthy that the main parts of the car were shipped from the US to be used as inputs in the local South Korean production lines [31,32,33,34].

US and Japanese automotive manufacturers then established many of their production lines inside South Korea, and these factories were wholly owned by foreign companies. In 1962, the South Korean government issued the Automobile Industry Promotion Policy, under which foreign automakers were barred from operating in South Korea, except in joint ventures in which local business entities held a share in the local factory. Accordingly, foreign automotive manufacturers searched for local partners. Three local car manufacturers (assembly lines for foreign products) appeared in addition to Seong, the agent of the US Jeep [10,35].

The Saenera Company was established in 1962 as an assembly factory for the Japanese Nissan Company, alongside Kia, which transformed its activity from the manufacture of bicycles (which it had carried out since 1944, exporting them to Hong Kong) to a factory for the assembly of Mazda cars. Kia produced its Brisa S-1000 car, which was based on the Mazda 1000 model, in 1974; the Brisa K-303, based on the Mazda 323, in 1981; the Pride, based on the Mazda-121, in 1987; the Concordia, based on the Mazda 626, in 1987; and the Potentia, based on the Mazda 929, in 1992. In 1965, the Shinjin Factory turned from making spare parts for US army vehicles, as it had since 1954, to becoming a car manufacturing factory, and it produced the Shin Sungho car in 1963, based on one of the well-known Nissan cars, the Datsun Bluebird 310. Asia Motors Company transformed its activity from assembling transport vehicles to assembling cars at the beginning of 1965. In 1970, it became an assembly line for the Italian Fiat 12M. Hyundai Company was founded later in 1968 in cooperation with the US Ford Company and developed an assembly line for the Ford Cortina, with a production capacity of 614 units per year [36,37,38,39].

With a gradual change in government policies, the automotive industry began to change from a foreign industry in South Korea due to the abundance of low-waged labor and its proximity to points of sale inside South Korea to foreign assembly factories with the participation of local ownership to keep pace with the regulations. Another phase of government policies and plans aimed at increasing local content in the automotive industry began. The plan to localize the automotive industry was launched in 1965, aiming to reach 90% of local content within 3 years. In 1973, the South Korean government again modified its policy regarding subsidizing production lines for car assembly from supporting locally developed South Korean cars to supporting cars manufactured in South Korea, rather than assembly lines for foreign cars, that contained at least 95% local content to enhance independence from foreign companies. Accordingly, local automotive companies began trying to develop their own products in the mid-1970s, but no attempt exceeded copying, imitation, and simulation of foreign cars with a local tinge or a slight change to the structures and designs, in addition to the low manufacturing quality. Attempts continued for more than a decade until innovation took its course [36,40,41].

With the export of South Korean cars, South Korea became known in the West as “Little Japan”, similar to how Japan had been described as the “Britain of the East”. Let us take a South Korean car company that started in the 1960s as an example to become acquainted with the transformation of the South Korean automotive industry. Hyundai can be used as a model to illustrate the technological transformation of the automotive industry from not having technology to having the ability to imitate and simulate, and then to innovation in three to four decades.

As we pointed out earlier, Hyundai started in 1968 as a factory for a Ford Cortina assembly line, 618 of which were manufactured in the same year. In response to government policies implemented in 1973, it developed its first car, the Pony, which was a South Korean-designed car. However, most of its parts still contained technologies licensed from foreign companies, for example, a license by Mitsubishi for the engine and transmission in exchange for a share in Hyundai. Although the local content in this car was 90%, the local content included textiles, leather, iron, and parts that did not affect the main manufacture of the car and did not include the engine, transmission, and chassis [42,43].

Hyundai used these technologies licensed by Mitsubishi to manufacture its Excel model, which was launched in 1980. However, after the development of Hyundai, it exported its Pony and Excel cars and competed with the technology licensing company. Accordingly, Mitsubishi refused to grant a technological license to Hyundai for its new engine, which had better specifications. Hyundai learned that there was no room for the newly developed generation of engines this way and that its future growth could stop due to its inability to keep pace with progress in the automotive industry. After other companies refused to license the technology, Hyundai knew this for certain [42,44].

Hyundai was utterly dependent on imported technology licensed from abroad. From 1973 to 1985, the company signed 54 technological licenses with 26 companies in five countries (Britain, USA, Italy, Germany, and Japan). Even in its external and internal designs, the company resorted to foreign companies. It signed a training contract, a transfer of expertise, and a technological consultancy contract with the Italian company Italdesign, under which it sent five trainees to Italy upon signing the contract to stay for a year and a half to learn car designs under the supervision of the Italian company [45,46,47].

All South Korean automotive companies during the same period (1973–1985) resorted to the same method, but with different foreign partners. Saugn signed nine technological licenses, Kia signed 14 technological licenses, and Daewoo signed 22 technological licenses. These companies opted for local R&D to develop the local automotive industry and introduce developments and innovations that would make local companies obtain not only a share in the South Korean domestic market but also in the global market. Accordingly, the number of researchers in Hyundai Company jumped from 197 in 1975 to 2247 in 1986, then to 3890 in 1994, i.e., a 20-fold increase in less than two decades. In terms of R&D spending, the allocations increased from KRW 1.1 billion in 1975 to KRW 400 billion in 1994, nearly 396 times more in less than two decades [48,49].

In Hyundai’s learning journey of moving from imitation to innovation, the company required 14 months of testing (trial and error) the previous engine licensed by Japan’s Mitsubishi to develop the next generation of engines (the Alpha engine). During these months, 11 engines exploded before the 12th engine operated successfully. Hyundai produced the first South Korean engine in its Accent car in 1984, thanks to development of its R&D capabilities. With the Hyundai Accent, South Korea was the second country in Asia (after Japan) to have a local automotive industry with national designs and capabilities. The company’s share in the local market in 1970 was 19.2%, then 59% in 1976 after the production of the Pony model, which was also the first South Korean car to be exported. In 1979, the company’s share in the local market grew to 74%, i.e., Hyundai acquired nearly three-quarters of the local market [48,49,50].

After introducing the Excel model, it became the best-selling foreign car in the USA in 1987, with more than a quarter of a million cars (263,610 cars per year) sold. In 1993, the Elantra became the best-selling car in Australia. In less than three decades, Hyundai’s production rose from 614 units in 1968 to over 1 million in 1986. In 2021, the company became one of the five largest automotive manufacturers worldwide. After the merger with Kia, the two companies’ sales in the USA became now higher than those of all European companies combined. In 2010, the Sonata and Elantra models entered the list of the top 10 best-selling cars in the world [48,51].

In 2013, Hyundai’s sales of USD 117 billion exceeded those of Germany’s BMW (USD 98 billion), Japan’s Honda (USD 96 billion), and France’s Peugeot (USD 73 billion) [49].

The situation above is not specific to Hyundai or the South Korean automotive industry alone. Still, this represents a transparent model of a specific company in a specific industry in South Korea that shows how South Korea moved in three to four decades from not having technology and being unable to copy and imitate to innovation, competing in global markets, and acquiring larger market shares. The selection of Hyundai was because of its possession of nearly three-quarters of the domestic South Korean market, as mentioned earlier.

However, the reader may note a difference in the composition of companies, as the major industrial conglomerates (chaebols, literally “wealthy families”) control most of the South Korean economy with the support of the government. We will address this in future work. The critical issue here is that this model of corporate structure was initially adapted from the Japanese “zibatsu” model (the major Japanese business conglomerates) developed by the Japanese in 1860 and planted in Korea during the 35 years of Japanese colonization after 1910 [38].

3.2. From Imitation to Innovation in Korean Shipbuilding

Regardless of some historical successes in shipbuilding, which are difficult to link to the current situation as there was no gradual, cumulative correlation over time, such as the case of the turtle ship (geobukseon) built by the Koreans in 1592, which was equipped with 26 cannons and covered with iron plates to repel the gunshots of the Japanese army during the Battle of Sacheon [52,53], the gradual beginning of how South Korea has reached its current position in shipbuilding can be traced back to the 1960s. In the 1970s, South Korea produced low-quality replicas of Japanese ships. It then moved to the ranks of the top shipbuilding countries globally at the beginning of the third millennium.

In the 1960s, there were nine small shipyards for the manufacture and maintenance of steel ships from remnants of the needs of the US Navy fleet, one-third of which left South Korea in 1971. In 1967, the South Korean government issued the Shipbuilding Promotion Law and established the first large shipbuilding port in South Korea in 1970. It was owned by the South Korean government and was called the Korean Shipbuilding and Engineering Corporation (KSEC) [54,55]. This step was followed by a series of government measures to support this industry, including the establishment of large warehouses for the private sector at ports, and the provision of financial credit and tax exemptions to the private sector, the most important of which was the large government ship purchase orders from the private sector. The plan for development of the shipbuilding industry was issued in 1973 by the South Korean Ministry of Trade. In 1973–1974, Korea’s production paralleled the production of Brazil and Taiwan, which was the beginning of its entry into the shipbuilding field. However, these ships were known in the West as Japanese counterfeit ships of low quality. For South Korea to become the largest producer of ships globally despite its humble beginnings and lack of technology, South Korean companies signed 159 technological licenses from foreign companies for shipbuilding from 1962 to 1987 (25 years), with a total value of USD 117 million, including Hyundai’s license from British companies Appledore and Scott Lightglow of USD 1.7 million in 1972, in addition to a share of the company’s future sales (0.5%) The technological licensing contracts signed by South Korean companies included a contract of USD 281,000 with the German Naiereorm Company in 1979 for designs to build a ship with a capacity of 80,000 tons, a contract worth about USD 11 million with the Danish B&W Company in 1982 for the design of a ship with a capacity of 130,000 tons, and a contract worth USD 100,000 with the Danish BWS Company in 1985 for the design of a ship with a capacity of 170,000 tons [54]. There was a turning point that benefited the South Korean government and entrepreneurs. During the global oil crisis in 1973 and the rise in oil prices, Japan and European countries began to reduce their production and stop the expansion of their shipbuilding capacity. South Korea exploited the crisis to increase its production, purchase technologies at lower prices, and attract experts from companies with long experience in this field. The Hyundai Company established the Ulsan Shipyard in 1977 amid the economic oil crisis and the decline in ship consumption [56].

In figures, the production of European countries decreased from 12 million tons of ships in 1975 to 3 million tons in 1990, a quarter of the original production. The workforce in the shipbuilding industry in Europe decreased from 325,000 in 1975 to 155,000 in 1983. In Japan, it decreased from 150,000 in 1975 to 85,000 in 1983. In South Korea, production increased from 410 thousand tons in 1975 to 3.44 million tons in 1990. Thus, the production of South Korea (according to production capacity) became greater than the production of all of Europe. The top three Korean companies in production in 1990 were Hyundai with a capacity of 3 million tons, Daewoo with 2.754 million tons, and Samsung with 0.802 million tons [54].

In 2004, five of the Korean companies became among the top 10 companies globally in the production of ships (according to construction capacity in tons). The production of Hyundai Heavy Industries (HHI) reached 144 million tons, that of Samsung Heavy Industries reached 91 million tons, and that of Daewoo Marine Engineering and Shipbuilding reached 88 million tons [57].

Let us review a South Korean company that built a shipbuilding yard, the largest in Korea at the time, which exceeded the KSEC government shipbuilding dock established in 1970, mentioned above. In June 1970, Hyundai obtained a license to build a shipyard in Ulsan, and construction began after obtaining financing of approximately USD 60 million between 1972 and June 1974. Only USD 10 million of this figure came from the company’s resources and government support sources, as it obtained USD 50 million in funding from a foreign bank (in Britain). The company relied on a group of British and Japanese companies to build the dock, such as the British Appledore Company for the design of the dockyard, the Scott Lightglow Company for ship designs and operations, and the Japanese Kawasaki Company for shipbuilding. It also hired a group of foreign experts during the first 3 years, including the head of the port/dock, Kart Schan of Denmark. It produced the first two ships at the dock in Yilsan in 1974: the Atlantic Baron and the Atlantic Baroness. To increase the technological absorption capacity, the company sent 60 Korean trainees to Japanese and British companies (some of the companies referred to above), and then opened a local training center, which had 3636 trainees in 1975 and then more than 35,000 in 1990. During the first 5 years, it developed the first ship design with local capabilities with a capacity of 25 thousand tons in 1978, although the manufactured model was just a copy of the European and Japanese models, but it was the beginning before it bought technological licenses from many foreign companies. Therefore, this chapter summarized South Korea’s efforts to transform the shipbuilding industry and bring it to its peak [54,56,58].

3.3. From Imitation to Innovation in South Korean Electronics

South Korean companies began dealing with electronics and semiconductors at the end of the 1950s and early 1960s by assembling radio and simple electric fans through techniques imported from Japan and the USA. After nearly 50 years, in 2019, South Korea’s market share of the world’s semiconductor production reached 19% (about one-fifth of the global market share), outperforming all of Europe combined (10% market share) and Japan (10% market share) [59].

Analyzing Korea’s superiority in electronics requires us to go back to the beginnings of imitation and copying that enabled South Korea to innovate later. In 1958, the South Korean LG Company began copying radio technologies and electric fans by establishing assembly lines licensed by the US and Japanese companies. In 1962, it began exporting its products to the US market at attractive prices due to the low labor costs. In 1991, LG sales amounted to USD 11.7 billion and continued to rise to USD 20.2 billion in 1997, and the company’s R&D spending reached USD 1.4 billion in 1997 [60].

In 1975, the South Korean Anam Company manufactured color televisions. It took electronics-related technologies from the Japanese Matsushita Company in return for 2% of sales revenue for color TVs, 5% for CD players, and 7% for video cassette recorders. During the 1970s, the Dutch Philips Company granted a technological license to manufacture CD players to 10 Korean companies. In 1986, the Japanese Hitachi Company licensed its 1 MB memory technology to South Korean companies when it started manufacturing 4 MB memory technologies, believing there would be no future competition from the South Korean startups [60,61,62,63].

The market share of the South Korean Samsung Company in 1984 was zero in the field of dynamic random-access memory (dynamic RAM or DRAM). In 1994, Samsung was one of the first companies to develop 256 MB DRAM. In 1993, the global memory market represented 30% of the semiconductor market. South Korea’s share of the memory market was 29% of the global share, although Japan’s share was still the highest at 48%. However, in 1998, South Korea managed to acquire a higher market share than Japan. An overview of the technological gap and the time lag of technology acquisition in the field of memory would show that South Korea began by producing 1 MB memory in 1986, 1.5 years after this was invented by other countries. The technological gap needed to produce 4 MB memory in 1988 was 1 year (the technology was invented in 1987), then the South Korean performance began to improve gradually, as it produced 16 MB memory in 1990 (the same year it was invented) and 64 MB memory in 1992. It even managed to be one of the first to innovate with 256 MB memory [63,64].

Samsung, which had the highest sales in South Korea for memory technology in the 1990s, had humble beginnings in entirely different fields. Lee Byung-Chul established it in 1938 as a store selling noodles and dried fish, then moved to the wool industry in 1954, then to the insurance field in 1958, starting in electronics in 1968, and black and white televisions in 1970. In 1978, it entered the field of manufacturing electric microwave ovens and air conditioners in 1980, and began manufacturing liquid crystal display screens (LCDs) in 1995 and smartphones in 1996 [65,66,67].

The goal of tracing the sequence of Samsung’s transformation into various technological fields in electronics is to show that the company began copying technologies imported from Japan, the USA, and Europe in the late beginning period, and then managed to become the largest producer of LCDs worldwide in 2010, with a market share of 17.6%. The South Korean LG Company won the third-highest share in the LCD sales market, amounting to 11.8% in 2010. In the smartphone market, Samsung became the largest producer of smartphones (according to production volume) in the fourth quarter of 2011. Samsung surpassed the two US companies Apple and Microsoft combined in the number of patents granted by the USPTO in 2014, with 4936 patents compared with 4832 for both US companies. The South Korean company LG also obtained more than 2000 patents from the USPTO, which exceeded those obtained by Apple [67,68,69,70].

South Korean companies spent part of their profits on R&D, which contributed to multiplying the innovative content of South Korean companies. LG spent approximately 6.9% of its sales on R&D in 1997. Despite the shift in Korea’s sales in the electronics market in general from USD 55 million in 1970 to USD 22.2 billion in 1993, an increase of more than 400-fold in less than two and a half decades [71], content developed by copying and imitation is still the basis on which some South Korean companies have relied. For example, the South Korean company Samsung was fined USD 539 million in 2018 for infringing the intellectual property of the US company Apple and copying its smartphone designs [68].

This article has shown that South Korea did not excel in manufacturing televisions, smartphones, air conditions, and other electronic technologies by working alone and reinventing what was invented by others, especially Japan and the USA. These technologies were imported from foreign countries in various ways (we have explained part of them in this section), but it was not satisfied with the process of copying and imitation. South Korea spent large sums on R&D until it reached the level of innovation. In 2014, it had the highest R&D spending worldwide as a percentage of GDP [72].

4. Conclusions

South Korea’s technological progress and its impressive economic performance have gained it a well-deserved place among the industrialized countries. Its advances in the electronics, semiconductors, automotive, and shipbuilding industries demonstrate industrial maturity and high innovative content.

To trace the technological progress in South Korea over the past six decades, three main technological transitional periods were identified on the basis of the governmental policies regarding imitation and innovation. The governmental policy of import substitutions was the launch of the first formal move toward imitation of successful foreign innovations. Next, the governmental policy of export promotion was the sign of the second stage of imitation. Finally, governmental care of the national research system was the starting point of the innovation era. South Korea looked to its national research system to add innovative content to its imitative products only after many countries refused to license and transfer modern technologies to South Korea. We found a similar pattern in these three transitional periods in South Korean history. A technological shock was a starting step in urging the government to move the country from one period to another.

However, the South Korean model of technology transfer is valuable for developing countries. The role of government was tremendous in shifting the country towards innovation. This model could be useful and applicable in other emerging economies. Further studies need to be conducted to track the timeline of progress and to discover the development of technology policies at different institutional and organizational levels in South Korea. It is unknown how the public and private organizations responded to and interacted with governmental policies on matters of technological development. Although this model was used only to analyze South Korea’s innovation and imitation during a specific period of time (1960–2010), the model might be applicable to other developing nations across different timescales. The model could be also useful for analyzing other types of business activities. Future studies might explore the applicability and utility of this model.