A Battle for the 'Seoul' of South Korea's Economy
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A Battle for the 'Seoul' of South Korea's Economy

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The bruising Apple-Samsung fight raises major intellectual property rights (IPR) issues that South Korea and Asian economies generally are ill-prepared for. Unless the concerns raised by the Samsung-Apple dispute are resolved, Korea should expect regular trade friction with major partners and frequent accusations of copying and cheating. As wealthy countries like Korea move away from manufacturing and further into services and information, the need for innovative Korean firms will only grow. Neither Korea’s corporate structure –  dominated by mega-oligopolies with strong disincentives to innovate –  nor education system – overwhelmed by rote learning and plagiarism – position Korea well for the future.

Korea’s traditional export strengths are in manufacturing – cars, ships, electronics, and heavy industries. These generate about 40% of GDP and much of Korea’s foreign exchange. However, unless Korea strengthens its service economy, it will increasingly compete ‘backward’ against the BRICS (Brazil, Russia, China, India, South Africa) over manufacturing, rather than ‘forward’ against the US, EU, and Japan over innovative services. The Korean business media generally ignore this to focus on chaebol—Korea’s large, international often family owned business conglomerates– but the costs of doing so are already apparent: Korea’s late arrival to smart phones (some five years after the U.S.) led directly to Samsung’s desperation and Apple’s retaliation in the courts.

Industrial skills diffuse easily. Just as Korean companies were able to attract American manufacturing jobs in the 1980s and 1990s, the BRICS and Southeast Asia now draw manufacturing jobs away from Korea. As South Korea grows richer, fewer Koreans are willing to work in a factory. Of the hundreds of Korean undergraduates I have taught, less than 5% tell me they expect to work in manufacturing. And Korea’s chaebol have scarcely invested locally in the last two decades; new capacity is built either closer to markets to prevent local protectionist backlashes (as in the U.S.), or elsewhere in Asia where labor costs are lower.

These trends are not uncommon. As globalization spreads, more and more people enter the global labor force, pushing down wages. Given that service jobs usually require more education than manufacturing ones, the latter more easily cede ground to foreign competition. The U.S. too had to shift, painfully, from an industrial economy manufacturing “stuff,” to a service economy producing useful information. Manufacturing now accounts for about 15% of the U.S. labor force. But American services – including education, research, film, music, video games, health care, banking, and software design – have become global leaders and, crucially, sit atop the value chain generating massive revenue through innovative “first movement” into new areas (tech giants like Google or Apple being obvious examples). By contrast, Korea’s biggest companies face competition from dozens of other firms (whether old rivals like Sony, or new ones from China) in well-established areas. These firms are successful, of course, but will not lead the future nor generate the long-term innovation Korea needs to fend off rising BRICS competition.

Comments
33
Darren
March 17, 2013 at 14:50

I agree. As I've commented on the Facebook link, South Korea was ranked second for innovation by Bloomsberg in 2012. It is ridiculous to say the economy is built on piracy and copying. Absolutely ridiculous.

It is amazing how the issue of Samsung vs. Apple has clouded so many people's views of a whole country.

MickyTrain
December 3, 2012 at 06:15

@Ryan,
We understand that rounded corners are not the only thing that apple is suing samsung of infringing.
BUT, it is one of the accusations that apple is making, which is just f'ing absurd.

MickyTrain
December 3, 2012 at 06:13

@ Ryan,
Dude your a retard, Hyundai was around before Honda was.

WangKon936
November 28, 2012 at 01:34

Jean Paul,
Are Asian cultures inferior or do they just have a massive head start?  I guess time will ultimately tell.

WangKon936
November 28, 2012 at 01:32

JohnX,
FYI, I am an American citizen.  South Korea is not "my" country.  I am commenting on a flawed and unfair article.  Again, you can't use academic practices to demonstrate business realities without formally connecting the two with supporting evidence.  That would be bad scholarship.  Do you not agree?

JohnX
November 27, 2012 at 16:18

His is not a unique view and many others have seen similar issues.
 
If enough people view and say the same thing then when does it become the norm?
 
I understand your feelings as no one wants to see their nation criticized. Though in my experience as well, copying and using others knowledge as your own is seen as normal in South Korea.
 
Was it in this case? I guess we will never truly know as those who did it, will never say.

JohnX
November 27, 2012 at 16:14

You are so ignorant.

gjijijgga
November 26, 2012 at 14:13

rare to see a diplomat article written not much above a typical blog post's comments section in intelligence.
john chan is unfortunately doing a disservice as his correct stances couched in hypernationalistic pan-asian brotherhood terms comes off as childish. more ebooks are being written (and pirated) in "unoriginal" china than in "daring avant-garde" america

Douglas
November 25, 2012 at 08:05

Not necessarily. If you take the example of two Korean tech companies, the founders/owners are highly associated with the product or company. Ahn Lab is synonymous with its founder Ahn, Cheol-soo and the first name that is associated with Samsung Electronics is Lee, Kun-hee. Not only that, Koreans tend to credit these men for the success of their enterprises.

Jean Paul
November 24, 2012 at 01:21

See that is the problem with a lot of these asian cultures, especially the korean and chinese cultures as they are very similar and close in proximity to eachother. They always say how hard they work and how lazy the west is, however what they do not understand is that their cultures are so strict, so overbearing and almost militaristic in nature.
 
Having such a monolithic oppressive culture suppresses creative thinking and only leads to a stressed out, over-worked, underpaid population. I really feel sorry for all these chinese posters, no wonder they are always so hostile, it is because of their culture. Until the asians can finally free themselves from this culture and accept the western culture as superior, they will always get stuck in the middle income trap.
 
Look at the per capita rate of nobel laureates among the various nations, the top 20 per capita is dominated by the west, so now we know that the "lazy" westerners are much better off, they work less and still have better education and technology as well. Here is the link for proof that asian culture is inferior in many ways http://en.wikipedia.org/wiki/List_of_countries_by_Nobel_laureates_per_capita

WangKon936
November 23, 2012 at 13:53

 
Prof. Jones,
Thank you for your thoughtful comments.  You have first hand experience in Korean post secondary education so there is no need for me to comment on your expertise.  However, because you may see a lot of plagiarism and copying in academia, is that enough evidence to say that Korean companies copy, at least as wholesale as the author says?

JohnX
November 23, 2012 at 08:14

I would ignore most of the comments as many of them seem to be from Chinese posters who seem to either be paid to make complaints or feel inferior in some way and need to promote their hatred of anyone different to them.
 
There were a few good points by WangKong936, but other than those most were simply the same old issues you can read on Global Times or any other issue posted on here. The own goals by China seem to be the only posts that are very quiet in terms of Pro China posts.

Prof. Jones
November 22, 2012 at 22:51

What you are all missing is that myself, as a educator in Korea's Secondary Education… Can see these issues very easily. In teaching business my core class competency in which i have an MBA. Korean students seem unable to grasp the critical thinking and rehtorical themes that are needed. They continue the leader/follower model of learning and I would like to argue that when I have consulted with korean companies on how to improve productivity they run a 1950's style Iron fist managerial style. Long hours, I can't leave until my boss leaves. It's not uncommon for the husband, in a korean family not to see his children during the week. As he will leave at 7am for work, work until 8-9pm and then have "mandatory" dinners and drinking as it's cultural and then arrive home after midnight to do the process again the next day. This 12 hour work day in the office is seen as "hard-working" however it's "looking busy" not actually productive. When this is mentioned in my analysis that workers are "strung out" and "exhausted". I get the "my workers are strong" rhetoric and "they don't need a break"…  These are not business models that encourage creativity… I have seen it first hand, my korean professors slam the students with hours upon hours of busy work. Feeding the "rote learning and plagiarism" that is a problem.

I have seen direct, direct quotes from scholarly works, THANKS SAFEASSIGN,  taken as their own. When I show them that they have plagiarized they say, with bowed heads: "Professor, I am sorry."..and look at me as if it's okay and I should let it slide. Of course, I do not let it slide, and give them the score of a cheat. A big fat 0.00… At the end of the semester they come asking me why the passed with a C, and I say well you got a 0 on your essay or report. They say this is unacceptable and they demand that I make a compromise. Many, are shocked I would even think to do such a thing as hand out a 0 for copying. YES, this is the mentality of the secondary institutes. Copying is ok, as long as you get an A…

So, although this article misses a few areas and makes some rather rash judgements and he may not be a business expert, I can certainly see the points he brings up are logical and relevant to what will be facing Korea in the future. 

 

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