[Market Pulse] From Research and Development to New Industry Innovation

Korea’s R&D Paradox Persists Amid Budget Constraints
Building a Cooperative Ecosystem and Sharing Risks
to Drive Innovation and Growth

Not long ago, I rode in a commercially operated unmanned robotaxi in San Francisco, United States, and felt no sense of anxiety at all. Even on narrow roads crowded with numerous vehicles and pedestrians, I saw with my own eyes from the empty driver’s seat how the vehicle skillfully maneuvered itself, using data measured by various sensors such as LiDAR and cameras to assess its surroundings. This experience convinced me that the widespread adoption of autonomous vehicles is imminent and that a wave of tremendous innovation will soon sweep into our daily lives.

What is the current situation in Korea? Ten years have passed since the "Autonomous Vehicle Road Demonstration Event" was held in Seoul in 2015, but unmanned buses are still only operated in limited forms during late-night hours with low traffic in certain areas. Although government and corporate investments have continued and the startup ecosystem has grown, the pace of innovation lags behind that of competing countries. The situation is similar in other fields that are considered future growth engines. While the absolute scale of funding and manpower invested in research and development and innovation is insufficient, many also point out the lack of a systematic and continuous pan-government national innovation strategy tailored to our reality.

The so-called "Korea Research & Development (R&D) Paradox," which claims that "there is a lot of investment in R&D but insufficient results," is repeatedly raised, but its basis and substance remain unclear. Nevertheless, the previous administration drastically cut the research and development budget due to reasons such as insufficient visible outcomes, causing tremendous confusion and aftereffects in the research ecosystem. In contrast, the Lee Jaemyung administration has made technology-led growth its core strategy and has allocated next year’s research and development budget at 35.3 trillion won, a 19.3% increase over the previous year?the largest ever.

The government’s role is crucial in fostering future growth engines. However, government determination and investment alone clearly have their limits. As of 2023, Korea’s R&D expenditure as a percentage of GDP ranks second in the world (4.96%), and total R&D spending ranks fifth globally (119 trillion won). Of this, 76% is borne by companies, with the top 20 companies accounting for more than half of corporate investment. To overcome the current crisis within this structure, the government and companies must join forces to establish a nationwide innovation growth strategy.

First, for government investment to lead to tangible innovation, the scope of existing research and development policies must be broadened. Beyond simple technology development, innovation policies must be closely linked with commercialization efforts to achieve the goals of fostering future industries or maintaining a significant lead in key industries. The pan-government coordination system must be strengthened so that each ministry can effectively utilize its innovation support tools. In addition, the performance management system should be radically overhauled to ensure that outstanding achievements can be rapidly scaled up.

Second, in fields where the domestic ecosystem is still weak, government-funded research institutes should take the lead in driving mission-oriented, integrated (full stack) innovation. It is also essential to build a collaborative ecosystem involving large corporations, mid-sized and small businesses, and universities. The goal should be not just individual technologies but the development of final products and services. If investment remains limited to the development of individual component technologies, the real impact and ripple effects of innovation will inevitably be limited.

Lastly, the government must go beyond simply providing research funding and also play the role of a venture capitalist. In fields such as quantum computing and future energy, where initial uncertainty is high and enormous capital is required, the government must share the risks with the private sector throughout the process of scaling up research and pursuing commercialization. A financial support system for science and technology is also needed to back this up.

The "real growth" of Korea depends on innovation based on research and development. We must establish a new "ladder of success" so that R&D investment does not remain merely a primer but leads to tangible growth. That is the way to meet the public’s expectations for the science and technology community.

Tae Seok Oh, President of the Korea Institute of S&T Evaluation and Planning (KISTEP)