Demand-Side Policy and Public Procurement for
Innovation in Korea
UNICAMP Workshop
Campinas, Brazil May 29, 2015
Yongsuk Jang, Ph.D. Senior Research Fellow
• Demand-Side Policies for Innovation in Korea
• Public Procurement for Innovation in Korea
• Capacity Building for Regional Innovation in Colombia
• Global Value Chain and Demand-Side Policies for Innovation
Contents
• Demand-Side Policies for Innovation in Korea
• Public Procurement for Innovation in Korea
• Capacity Building for Regional Innovation in Colombia
• Global Value Chain and Demand-Side Policies for Innovation
Contents
Republic of Korea (South)
A Small Land with Scarce Resource
Industrial Shifts
1960s 1970s
1980s 1990s
Import Protection Foster export-
oriented light industry
Introduce new technology, expand technological capability
Promote import liberalization Expand investment
in technological development, training of skilled manpower
Strengthen
demand–driven technological innovation Establishment of
nationwide IT infrastructure
“Select and Focus” Strategy
STI Meets Industrial Demands
Light Industries
Heavy Industries
Assembly &
Processing Industries
IT Industries
New Growth Engines
Demand Side
Supply Side
•Self-Sustain •Import-
Subs.
•Import Protection •Export-Orient
•Mfg. Capacity
•Industrial Seeds
•Open Market
•Higher Value-added
•Industrial Diversificat
ion
•Import Tech. •Tech.
Capability
•Expand R&D
•Skilled HR
•Demand-oriented
Innovation
•Endogenous Tech.
Industry-Oriented STI Strategy
Roles of STI Policy in Korean Development
Period 1960s 1970s 1980s 1990s 2000s 2010~
Era Export-Oriented
Export-led Economic Liberalization
Democrat. Advancement Global Leading
Focused Industries
Light Industries
Heavy Industries
Assembly & Processing Industries
ICT Knowledge Intensive Industries
Knowl. Service/New Converging/ Green Ind.
Compet. Factor
Cheap Labor Skilled Labor Capital Investment
Technologies S&T Innovation
Advanced S&T Innovation
Demanding S&T HR
Skilled HR Technical HR Higher S&E High Calibre S&E
Creative S&E Creative & Converging S&E
Demanding Tech.
Plant Mgt. Facility M&O Mfg. Core Tech. Endogenous Tech.
Source Tech.
S&T Policy Turn-key Capital Import/ Tech. Learning
Internalizing Imported Tech./ Reverse Eng.
Modify Imported Tech./ Develop Domestic Tech.
Advancing Tech. Catch-up/ Large Gov. R&D Prog.
Focus on endogenous tech./ Systemize S&T Prog.
Globalize S&T/ Focus on Convergence
Imitation Catching-Up Innovation Endogenous Innovation
Paradigm Change
A Case: TDX Development Project (1977-1984)
ETRI (KICT) (1977)
TDTF (Telecom. Dev. TF)
(1981)
MPS (M. of Postal Service)
KIST
KT (KTA) (1981)
TDX-1 (1984)
TDX Op. Team
TDX Dev. Team
MOST (M. of S&T)
Dongyang E&T
LG (Goldstar)
Samsung E.
Spin-off
Crea
te
Establish
Com
mer
cial
ize
Coop.
Part
icip
ate
Form
Develop
Part
icip
ate
• Overview of Korean STI • An Interdisciplinary Journal on STI Policies around the world
• Vol.2, No.4 • Overview of Korean STI • Evolution of Korean STI • Institutional Building Stage • Tech. Catching-up Stage • STI Leadership Stage • Korean Shipbuilding Industry
• STEPI Guide to Korean STI Policies
• www.stipolicyreview.net
STI Policy Review
• Demand-Side Policies for Innovation in Korea
• Public Procurement for Innovation in Korea
• Capacity Building for Regional Innovation in Colombia
• Global Value Chain and Demand-Side Policies for Innovation
Contents
Public Procurements in Korea
From SMEs = $65 B (67.7%)
Total PP = $96 B NET = $1.9 B (9.2%)
SMEs (Product ) PP = $21 B
Source: Kbiz (2012)
Tech-Inno SMEs
SMEs
Inno-Biz SMEs
Venture Firms
SMEs with Business Innovation
Tech-Inno SMEs
Source: Choi et al. (2014) Improvement strategies of public procurement market policy for fostering technology based innovative SMEs, STEPI
Characteristics of Tech-Inno SMEs Venture Firms Inno-Biz SMEs
Registered 28,193 17,298 Experiences
in PP 2,662 (9.4%) 12,162 (70.3%)
PP Size $1.5 B $6 B
Registration Criteria
• Received over $5K from Venture Capital • Investing over $5K on R&D • Evaluated as Excellent in Tech. Appraisal from KIBO • Entitled for Policy Fund of SBC
• SMEs over 3 Years Old • Grades in Tech. Appraisal * Tech. Appraisal on Capabilities in technological innovation, commercialization, management, and performances
Supports ---
• Exempt from PPS Product Qualification • Preferential Purchase • Additional Points in Competition
Source: Choi et al. (2014)
Policy Types for PPI in Korea
R&D-Oriented Policy
Indirect
Direct
Marketing Oriented Policy
Tech Support for SMEs
Marketing Innovation Program
Performance Authentication and Assurance
Accreditation of New Tech & Products
Green Tech Procurement
Obligatory Procurement on New Tech-Inno Products
Preferential Procurement of Tech-Inno Products
Priority Procurement New Product Dev. w/ Approval Purchase
PPS SMBA
MOTIE KATS
Source: Choi et al. (2014)
• Focused on SMEs protection and support • need to re-orient to promote Tech-Inno
• PP based on existing demands • focused on price competition and stable supply • limits in creating new demands
• PP oriented to finished goods • limits in promoting R&D and innovation
• Limited in reflecting private sector demands • limited to construction and defense sectors
• Need to reform Tech Appraisal system and indicators • heavily depend on tech accreditation and quality certification
• Fragmented governance in planning public services
Problems and Challenges
Source: Choi et al. (2014)
• Demand-Side Policies for Innovation in Korea
• Public Procurement for Innovation in Korea
• Capacity Building for Regional Innovation in Colombia
• Global Value Chain and Demand-Side Policies for Innovation
Contents
• Project Period : 2014. 06. 01 ~ 2016. 05. 31 (2Y) • Target Area : Three Regional STI Parks in Colombia
– Bogota : The S&T Park of the National University of Colombia/ Focused on IT • Population : 7,674,366 / Altitude 2,640m
– Palmira : Technology Park of BioPacipico / Focused on Agriculture • Population : 247,986 / Altitude 1,001m
– Bucaramanga : Technology Park of Guatiguara / Focused on BT • Population : 530,900 / Altitude 959m
• Purpose of the Project 1) Capacity building for the Colombian STI policy planning and implementation 2) Support development of Master Plans for Three STI Parks 3) Capacity building of human resources for STI park policy planning, management and operation : Training Program (Korea) & Local Workshops (Colombia)
Project Overview
- Analysis of Colombian STI and industry -Analysis and examination of policy direction for Colombian STI parks legislations and institutions -Suggestions for establishment of STI policy think-tank -Suggestion for establishment of industry-university cooperation agency and cooperation strategies
- Policy Consulting -On-site training -Invitational Training Program in Korea -Local workshops in Colombia
- Analysis and examination of existing national STI park policies and plans for each STI park -Environment analysis for STI parks -Support establishment short-term development strategies, medium-term goal and long-term vision -Strategy development for linkages for industry-academia-research and strategic industry selection based on the characteristics of each STI park -Suggestions for management and operation mechanism, programs, functions and budget and financing of STI parks
Capacity Building for STI Policy
Human Resources
Development for STI
Development of Regional
STI Parks
Capacity Building of Colombian STI
Parks
Project Key Elements
Fostering sustainable Growth and Promoting national Competitiveness of Colombia
Development of Regional STI Parks
Human Resources Development for STI
• Strengthening STI policy
capacity by aligning regional
STI policy with national STI
policy
• Suggestions on establishing
STI policy think-tank
• Suggestions for
establishment of industry-
academia cooperation
agency
• Purpose of strengthening
functions of STI parks as a
base for developing regional
innovative capacity
• Suggestions on establishing
plan of industry-university
cooperation for sustainable
regional development
• Suggestions on management
and operations of STI parks
• Regional STI policy
consulting
• Sharing the Korean
approaches for STI policy
planning and
implementation practices
• Capacity building for STI
park policy making,
management and operation
• On-site training, invitational
training program in Korea,
and local workshops in
Colombia
Capacity Building for STI Policy
Project Purpose
Final Output Implementing Institutions Activities
National Strategy
Policy Think Tank
• Governance • Org. Structure • Research Area • Institutional M&O • Korean Experiences
MP 1
MP 2
MP 3
MA 1
MA 2
MA 3
* Management Agency
M&O Training TT & TC
* Technology Transfer * Technology Commercialization
Interim Success Cases
External Conditions : Governance, NDP, State STI Plan, FTZ, Career System, etc..
* Reform of OCyT * As an Internal Unit of Colciencias * A New Independent Think-tank
* Master Plan
Project Framework: Orientations and Tasks
• Vision 2019 • National Dev. Plan
2010-2014 • STI Strategic Plan
2010-2014
Sustainable regional development
Diffusion to other STI parks
Sustainable Regional Innovation Capacity
Building
Strategies for National STI
Parks
Bogota MP
Palmira MP
Bucara-manga
MP
Existing policies of three STI
parks
Colciencias
STI Policy Think-Tank
Bogota IUC*
Palmira IUC
Training Program
STEPI Working-level
Experts/Advisory Group
Consulting Workshop
• Daedeok Science Complex • Chung-nam Techno park (Automobile/
Electronics) • Pangyo Techno Valley (IT/Bio) • Osong BioValley(Medical Bio) • Korea National Food Cluster (Agriculture)
Team of Colombian
Counterparts (Primary CPs)
* IUC: Industry-University Cooperation Agency
Bucaramanga IUC
Implementation Structure
• No agreed concept and/or strategy on STI Park at national level (STI Park vs. Industrial Park) • General Royalties System (10% of Royalties for S&T Activities) does not function as STI Fund • Weak STI policy function at the national level • High turnover rate of personnel
AT NATIONAL LEVEL
BIOPACIFICO (Palmira, Valle del Cauca)
GUATIGUARA (Bucaramanga, Santander)
BOGOTA (Bogota, DC)
• Clear governance and leading agency (Dr. Miranda) • No strategic direction and plan (ambitious target: Life Science) • Eager to absorb M&O skills and know-hows
• UIS campus, but no clear governance or leaders • No strategic direction or plan with diverse targets including
energy, bio, oil-extraction, petro-chemical • Need to develop M&O practices
• Plan to locate the park in Universidad Nacional campus without clear governance and leaders
• No strategic direction and plan (STI Park with 4 Mega-projects) • Adjacent to Innovation Ring Initiative of Bogota city gov’t
Ruta N (Medellin, Antioquia)
• At Ruta N (Medellin, Antioquia) • 10-year old success case in venture incubating, but still no clear
incentive mechanism
Overview of Current Colombian Status
• Demand-Side Policies for Innovation in Korea
• Public Procurement for Innovation in Korea
• Capacity Building for Regional Innovation in Colombia
• Global Value Chain and Demand-Side Policies for Innovation
Contents
Global Value Chain (GVC)
Source: OECD (2013)
Process Upgrading • increasing the efficiency of internal processes such that these are significantly better than those of rivals
Product Upgrading • introducing new products or improving old products faster than rivals.
Functional Upgrading • increasing value added by changing the mix of activities conducted within the firm or moving the locus of activities to different links in the value chain
Chain Upgrading • moving to a new value chain
Upgrading GVC
Source: Kaplinsky and Morris (2001)