Companies Trapped in the 'Innovation Paradox'... Dragging Down South Korea's Economic Growth Rate (Comprehensive)

R&D Investment Efficiency Worsens Day by Day
Also Cited as a Cause of Economic Growth Rate Decline
Criticism of Companies' Efforts to Improve Efficiency

[Asia Economy Reporter Jin-ho Kim] The efficiency of research and development (R&D) investments by domestic companies is steadily declining. Although companies are boldly investing in innovation to survive, they are caught in the 'innovation paradox,' where these efforts do not translate into results. This has been pointed out as a key reason for the recent sharp decline in South Korea's economic growth rate, emphasizing the importance of not only R&D input but also the 'patent rights acquisition' of outcomes.

According to an analysis of the "Determinants of R&D Firms' Efficiency Report" released by the Korea Intellectual Property Research Institute on the 17th, the efficiency of top R&D investing companies in South Korea has been on a continuous downward trend from 2005 to 2018. During this period, the average efficiency of large corporations was 0.458, showing a steady decline since 2005 (0.55). Mid-sized and small enterprises had even lower efficiencies at 0.421 and 0.423, respectively.

In particular, the electronics and automobile industries, which have driven South Korea's economic growth, showed efficiencies of 0.40 and 0.38, respectively, both below the overall average of 0.43. This is attributed to a lack of support in areas such as ▲promoting R&D investment ▲expanding policy financing to achieve economies of scale ▲institutional support for rapid patent acquisition to enhance corporate efficiency in these sectors.

Researcher So-jin Lim of the Economic and Industrial Research Division at the Korea Intellectual Property Research Institute pointed out, "Companies have driven economic growth through strategies that increased R&D and workforce input, but these growth strategies are showing limitations amid rapidly changing economic and technological environments."

The report recommends securing efficiency relative to investment and emphasizes that alongside R&D input for innovation, outcomes must be 'patented.' Intellectual property rights such as patents not only protect technology and increase market dominance but also serve as a core strategic management tool for securing profits through defensive patent strategies and attracting investment. According to the report, the average efficiency was highest in the pharmaceutical industry (0.54), which was analyzed to be significantly influenced by patents.

The problem is that the deterioration of corporate efficiency is bringing about the adverse effect of 'entrenched low growth' in the Korean economy. Despite high innovation input, the continued slowdown in growth rates raises concerns that the Korean economy is trapped in the 'innovation paradox.'

Especially recently, combined with COVID-19, the potential growth rate from 2021 to 2022 has dropped to 2.0%. The Organisation for Economic Co-operation and Development (OECD) forecasts that if productivity declines due to aging are added, South Korea's potential growth rate will fall to 1.9% during 2020?2030 and 0.8% during 2030?2060. Researcher Lim analyzed, "The fact that the potential growth rate has dropped to around 2% signals that the national economy is effectively entering a stagnation phase."

The economic growth outlook is also bleak. With the COVID-19 crisis and global inflation pressures combined, this year's economic growth rate is expected to fall from the initial forecast of 3.0% to the mid-to-high 2% range.

This content was produced with the assistance of AI translation services.