[The Editors' Verdict] The Disappearance of Innovation

Even though the year has changed, the spread of the novel coronavirus infection (COVID-19) shows no signs of slowing down. Despite some progress in securing and administering vaccines, public anxiety remains high. Thanks to the active cooperation of the people, K-quarantine, once considered a success story, is now somewhat embarrassing to boast about. According to Statistics Korea, the number of employed people last year decreased by 218,000 compared to the previous year, marking the largest decline in 22 years since the foreign exchange crisis. The sighs of self-employed people pushed to the brink and the sense of deprivation among young people who have never even had a chance to find employment have long become commonplace. Given these circumstances, the government also seems to be struggling just to get through each day. Although the economy being swayed by politics is nothing new, it seems that the line has been crossed due to the COVID-19 crisis. Impromptu, patchwork measures must no longer be repeated.

This year, the global economy is expected to rebound by more than 4% due to vaccine distribution. Our economy is also expected to recover, but the growth rate is unlikely to reach 3%. This year will be an important one in determining where South Korea will position itself in the post-COVID era. As the untact culture rapidly spread due to COVID-19, the core of the 4th Industrial Revolution, ‘digital transformation,’ has accelerated further. Survival in the post-COVID era depends on how actively and well we embrace and prepare for these changes.

With the 4th Industrial Revolution emerging as a key topic, the term ‘creative destruction’ is gaining renewed attention. The 4th Industrial Revolution is characterized not only by the rapid pace of technological advancement but also by extensive industrial restructuring and convergence driven by ‘disruptive technologies’ based on digital and IT foundations, bringing changes to social and economic systems. An era has begun where new value is created by predicting human behavior patterns based on big data analysis accumulated through hyperconnectivity such as the Internet of Things (IoT). Only companies that prepare in advance for these changes can survive.

The problem is that it has become impossible to handle simultaneous technological innovations alone. Collaboration has become a necessity, not a choice. The most important factor in achieving successful innovation through collaboration is openness. The concept of ‘open innovation,’ where companies can develop technologies by jointly utilizing external ideas and research and development (R&D) resources, carries significant implications. IBM achieved great results by leveraging collective intelligence through a program called ‘Innovation Jam’ since the early 2000s. Toyota and BMW, fiercely competing in the finished car market, jointly researched and developed next-generation eco-friendly fuel cells, which is a representative example of open innovation activities that dare to collaborate with rivals.

The government should focus on forming a technology convergence ecosystem and reform regulations to activate open innovation in the private sector. It should not overlook the fact that global large corporations have a significantly higher linkage rate with startups. The half-baked profit-sharing system suddenly proposed by Lee Nak-yeon, leader of the Democratic Party of Korea, is likely to result in outcomes worse than a zero-sum game. A simplistic approach that demands compensation by dividing companies that profited from COVID-19 and those that suffered losses cannot provide a solution. We must devise measures that induce innovation while simultaneously achieving win-win results.

Kang In-su, Professor, Department of Economics, Sookmyung Women’s University