How Korea Became ICT Hotbed

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South Korea: From the Land of Morning Calm to ICT HotbedAuthor(s): Sang M. Lee

Source: The Academy of Management Executive (1993), Vol. 17, No. 2 (May, 2003), pp. 7-18Published by: Academy of ManagementStable URL: http://www.jstor.org/stable/4165947

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'Academy of Management Executive, 2003, Vol. 17, No. 2

..................................................................................................................................................................... .

S o u t h Korea: F r o m t h e l a n d o f

morning c a l m t o I C T hotbed

Sang M. Lee

Executive Overview

For centuries, Korea was known only to its immediate neighbors, China, Japan, andRussia. Not quite strong enough to control its own destiny, while occupying a strategiclocation among ambitious and powerful neighbors, Korea has gone through numerouscrises in its recent history. Japanese colonization, the devastating Korean War, poverty,and a backward social infrastructure left the country ill prepared to face the modernworld. However, these multiple shocks to the nation awakened the Korean people. In less

than fifty years since the end of the Korean War, South Korea has transformed itself froma poverty-stricken country into a leading information and communication technology

(ICT) country, especially in the most critical areas which support the new e-global age:the high-speed Internet and mobile communication.

South Korea's vitality as an ICT hotbed has resulted from a number of factors such asthe changing global economic environment, government policies, and Korean culturalcharacteristics supporting ICT diffusion. The Korean government has made boldinvestment in technological and human infrastructures. These factors have enabled Koreato establish new competitive strategies for high-tech areas, especially ICT. Koreancultural characteristics that have contributed to a favorable environment for ICTdevelopment and diffusion include, among others, valuing efficiency and speed, self-efficacy, a subjective norm of belongingness, and the Korean language. The Koreanexperience, especially its economic transformation and ICT diffusion process, should be of

interest to the governments of developing and developed countries as well as to scholarsand executives involved in international business.......................................................................................................................................................................

Korea was an enigmatic country known as "TheLand of Morning Calm" to all but a few westernersuntil the 20th century. The larger geopolitical com-

munity first paid attention to Korea during the de-

structive Korean War, 1950-1953. Although the warwas devastating, the influx of aid and modern ide-

als of western nations helped wake up the Koreanpeople. Starting from almost below zero after thewar, South Koreans have achieved phenomenal

economic development, transforming the nationfrom an agrarian economy into an industrial coun-

try. According to Bank of Korea statistics, the per

capita GNP leapt from $87 in 1962 to $10,307 in 1997,an average increase of more than 8 per cent per

annum over the thirty-five-year period.' In 1997,South Korea (hereafter Korea) became the 12th rich-

est country in the world. Korean economic devel-

opment was praised with such accolades as "The

Miracle on the Han River" and being one of the five

"Asia Tigers" (along with Malaysia, Singapore,Taiwan, and Hong Kong). Peter Drucker calls Korea

the most entrepreneurial nation in the world.2By the late 1980s, Korea had become a major

trading country, with such products as automo-biles, consumer electronics, semiconductors,container and tanker ships, chemicals, and so

forth. The chaebols (the unique Korean form of

conglomerates), the backbone of Korean eco-

nomic development, led the export drive.3 Theirgrowth was based primarily on government-

guaranteed short-term financing by foreign insti-tutions. The burden of debt in the competitiveglobal economy, which demanded accountabil-

ity, transparency, and rule of law, became over-

whelming. The 1997 Asian financial crisis was

another wake-up call to Koreans. The Interna-tional Monetary Fund (IMF) helped save the Ko-

rean economy by infusing $57 billion. Also, a

7



8 Academy of Management Executive May

rapidly developing China began to dominate ex-port trade for low- to mid-tech products.4

The Korean government established prioritiesregarding high-tech industries, enabling Korea todevelop competitive advantage, especially over

China. The Korean government also boldly restruc-tured the chaebols and forced banks to wipe cleanall bad loans from their balance sheets. Aboutone-half of the thirty largest chaebols went bank-rupt (including Daewoo, the second largestchaebol), and most banks were sold, often to for-eign financial institutions. The drastic shock treat-ment has paid dividends in the form of competi-tion-toughened businesses. The main enginebehind Korea's recovery from the 1997 crisis hasbeen the advance in ICT. For example, BusinessWeek's latest report of "The IT 100 Best Performers"lists Samsung Electronics #1, KTF (Korea TelecomFreetel) #4, and SK Telecom #9.5 Korea's ICT-

related accomplishments have also been noted byseveral foreign sources (see Box 1).

The purpose of this article is to examine some of

the important factors behind the emergence of

e-Korea as an information and communication

technology (ICT) powerhouse including its trans-

formation based on Internet-powered growth, the

socio-economic background supporting ICT devel-

opment and diffusion, and the current state of ICTapplication. While most ICT firms around theworld, even such giants as AT&T, NTT, and DT(Deutsche Telecom), have suffered astronomical fi-nancial losses, Korean ICT firms have been report-

ing record earnings. Thus, this article also elabo-rates on the implications of Korean ICT successand the future challenges facing Korea, especiallyits ICT industry. The Korean experience providesvaluable insights to countries trying to improvetheir ICT infrastructure and industry. Also, Korea's

ICT success offers lessons for scholars and execu-tives involved in international business.

Internet-Powered Growth

The early movement toward e-Korea was attribut-able to the government's resolve that the country

would not make the same mistake with the ICTrevolution as it had with the Industrial Revolutionin the late 1800s. Many Koreans believe that theirlate participation in the Industrial Revolution was

the main cause of the country's backwardness andisolation which eventually led to Japanese coloni-

zation."ISince the so-called IMF Period, 1997-2000, the

Korean government has reexamined its economicstructure. The drastic restructuring of chaebols,banks, and even the government itself was in-tended to prevent any recurrence of the 1997 finan-cial crisis and also to chart future economic strat-egies. Korea's primary export items in the 1970s

and 1980s had been light and heavy industry prod-ucts such as apparel, shoes, toys, consumer elec-

tronics, machine tools, automobiles, and ships.'2However, the increase in global competition, espe-

cially China's rapid development as a major ex-

porter with its cheap labor and improving productquality, posed a real challenge. Thus, Korea estab-lished new strategies to concentrate on high-tech,

knowledge-intensive products such as semicon-

ductors, precision goods, and communication

equipment. In brief, the Korean government desig-nated ICT as its strategic industry for the future.

From 1996 to 2001, the Korean government in-

vested $5 billion in ICT infrastructure develop-ment. During this period, the following majorprojects were undertaken:'3

* 144 major cities were connected through high-speed computer networks.

* 10,400 schools (elementary to high schools) were

provided with free broadband Internet service.* Free training in Internet use was provided to

more than 13 million persons (29 per cent of thepopulation) throughout the country-students,

Box 1Evaluation of Korean ICT Success by

Foreign Sources

* The Organization for Economic Cooperationand Development (OECD) analyzed the suc-cess factors of Korea as the world leader inhigh-speed Internet technology and recom-mended Korea as the model for benchmark-ing.6

* The Wall Street Journal reported that Korea isnow the world leader in both quantity andquality of Internet use.7

* The U.S. House of Representatives changedlaws to reinforce government strategies in de-veloping infrastructure for high-speed Inter-net based on the example of Korean success.8

* The Gartner Group reported that the primaryreason for the sudden emergence of Korea asthe world leader in Internet service was itsgovernment's critical role in creating a favor-able competitive environment for ICT firms.9

* The Brown University Public Policy Center an-

alyzed 198 countries for their e-government

efforts. Taiwan was rated as the best withKorea second, followed by Canada and the

United States.10



2003 Lee 9

teachers, home-makers, the handicapped, mili-

tary personnel, and so forth.

. High-speed Internet service using commercial

ADSL (Asymmetric Digital Subscriber Line) was

started for the first time in the world.

. CDMA (Code Division Multiple Access) technol-

ogy was implemented for mobile communica-

tion for the first time in the world.

* Commercial service of International Mobile

Telecommunications (IMT)-2000 technology

was started for the first time in the world.

. Development of ICT specialists was fostered

through investment of $600 million to train

740,000 specialists, including 15,600 master's/

Ph.D. degree holders and 88,500 bachelor's de-

gree holders.

* Seoul City has unveiled an ambitious plan for

the Digital Media City,'4 a living community of

tomorrow based on advanced ICT.

As Gartner reported, Korean government policy

has played a crucial role in leading the country to

"the pinnacle of the global ICT industry."'5 Also

Alvin Toffler, a noted futurist and the author of The

Third Wave, stated when he visited Korea in May,

2001, that Korea should establish its own strategic

directions for its ICT industry as there is no place

in the world against which to benchmark anymore.

The rapid growth of ICT-related industries has

driven Korea's economic recovery and growth

since the financial crisis of 1997. The amount of

value added by the ICT industry grew from $32.6

billion in 1997 to $58.7 billion in 2001. This high rate

of increase resulted in considerable growth in the

ICT industry's share of GDP, jumping from 8.6 per

cent in 1997 to 12.7 per cent in 2001, the highest

among all OECD member countries.16The production growth rate of ICT-related indus-

tries exceeded the GDP growth rate by a large

margin, recording an annual rate higher than 30

per cent during the 1997-2000 period, as shown in

Figure 1. In 1998, while total GDP recorded a neg-

ative 6.7 per cent growth rate because of the finan-

cial crisis, production of ICT-related industries

grew 20.7 per cent. In 1999 and 2000, ICT industries

grew 36.0 per cent and 36.5 per cent respectively

and made a great contribution to the economic

recovery.17

The 1997 financial crisis brought a huge unem-

ployment problem. In particular, university gradu-ates found no employment opportunities waiting

for them. Many of these new professionals turned

their knowledge and efforts into venture creation,

mostly in ICT-related businesses. The share of

venture financial capital invested in ICT-related

industries was 31 per cent in 1998 but increased to

well over 60 per cent by 2001.18The Korean govern-

ment established a comprehensive ICT export plan

called "e-Silk Road." Consequently, the amount of

the ICT industry export grew from $31 billion in

40

Growth 3.rowth 1 ~~~30.5 /t36.0 *3.

Rate (%) 30

20

10.9

10 508.8:1 1~~~~~~~~~~~~~~~~~~~.6 8

H A ~~~~~~~4.4

,0 .ol'*.__ 1,9

1996 1997 1998 1999 2000 Year

- Economic growth rate (%)

* Growth rate of ICT-related industries (%)

* Contribution of ICT-relatedindustries to GDPgrowth (%point)

Source: Kim, K. (Ed.). 2001. Three years after the IMF bailout: A review of the Korean economy's transformations since 1998. Samsung

Economic Research Institute.

FIGURE 1

Contribution of ICT-Related Industries to Korea's Economic Growth (1996-2000)




1997 to $51 billion in 2000 and represented about 30

per cent of the nation's total exports. In short, ICTindustry exports have greatly boosted the Korean

economy. 19

Foreign investment in the Korean ICT industry

has increased over 1,200 per cent since the 1997financial crisis, from $0.4 billion in 1997 to $5 bil-

lion in 2001, which represents 42.3 per cent of thetotal foreign investment in Korea.20 Coupled with

the huge domestic commitment, this increasingforeign investment in the ICT industry has helped

Korea build the world's best ICT infrastructure.The changed landscape of the Korean ICT indus-

try can be summarized as shown in Table 1. It

should be evident that the Korean ICT industry is

indeed world class, and this has greatly helped

Korean economic growth, especially during the

past five years.

Korea's ICT Adoption and Diffusion

Theoretical Background

There exists a rich body of knowledge on technol-

ogy adoption and diffusion. In this section, we will

examine selected theories and models that would

help explain Korea's ICT development and diffu-

sion. Many of the theories discussed here were

developed to explain technology adoption at the

individual (e.g., end user), organizational, or indus-

try level. However, the basic principles also applyto the country level.

Institutional Theory

Institutional theory posits that the institutional en-

vironment contains taken-for-granted social and

cultural meaning systems or norms that define so-

cial reality.2' North further focused on the forma-

tion of political and economic institutions and their

impact on economic performance over time.22 Le-

febvre and Lefebvre defined environmental factors

as conditions that exist in an organization's exter-nal environment and influence its technology

adoption decisions.23 These factors can be: (1) at

the industry level such as the degree of innovative-ness of the industry, the requirements imposed by

major customers and external markets, and overalllevels of competition and technological sophistica-

tion in the industry,24 (2) in the macroeconomic

environment such as financial and human capi-

tal,25 and (3) in national policies such as regula-

tions and policies governing taxes, trade agree-

ments, industrial development strategies, and

so on.26

Technology Acceptance Model

The widely tested technology acceptance model

(TAM)27and its extensions posit that perceivedusefulness and perceived ease of use influence

actual intention and actual use of a technology as

shown in Figure 2. Initially, TAM, which was an-

chored on the Theory of Reasoned Action and The-

ory of Planned Behavior,28 focused on system us-

age by end users in the workplace. However,

recently TAM has broadened its application to

other dimensions of technology adoption. The Ex-

tension of Technology Acceptance (TAM2) elabo-

rates the impact of three interrelated social forces(subjective norm, voluntariness, and image) im-

pinging on an individual facing the opportunity to

adopt a new system.29 TAM2 shows that image, job

Table 1

Changed Landscape of the Korean ICT Industry: 1997-2001

(Korean Population: 47.3 million as of December 2001)

Sector 1997 2001

Informatization Index High-speed Internet subscribers (million) 1.4 7.8

Internet users (million) 1.6 24.4

PCs in use (million) 6.9 20.7

Wired telephone subscribers (million) 20.4 22.7

Mobile telephone subscribers (million) 6.9 29.1ICT Industry Index Production value ($ billion) 62.9 125.0

ICT value added ($ billion) 32.6 58.7

Portion of GDP (%) 8.6 13.4

ICT export ($ billion) 31.3 38.4

ICT trade balance ($ billion) 9.4 10.6

ICT industry employees (thousand) 560 1,163

ICT firms 9,397 17,719

ICT venture firms 636 5,073

Source: Minister's report: ITpolicy direction for building IT-led country. KMIC, 11 October 2002; Mid- to long-term market overview

for the information communications industry (2002-2006). February 2002. Korea Information Society Development Institute.



2003 Lee 11

relevance, output quality, and demonstrability of

results significantly influence perceived useful-

ness as shown in Figure 2. Specifically, "subjective

norms"-that is, people's beliefs about what others

expect of them-exert a significant direct effect on

usage intention over and above perceived useful-ness and perceived ease of use for mandatory (but

not voluntary) systems.

Venkatesh's extension of TAM, also shown in

Figure 2, includes anchoring and adjusting based

on the determinants of system-specific perceived

ease of use.30 This extended model presents condi-

tions conceptualized as computer efficacy, com-puter playfulness, and computer anxiety as an-

Experience Voluntariness I

TAM2

_ - | \ (Venkatesh& Davis, 2000)

SubjectiveNorm

i IImage

* Job \\'iJ

! Relevance

COutput Perceived. Quality _1 Uefulness \ * \*

i* Sef-ficac

Results / '. Demonstrability - .,i

. ,\ * 1 ~~~~~~~~~UsageIntention Behavior

External Perceived____._.____ _ase_s_ e

i .Computer* Anxiety .................................... ..............................

Computer TA/Playfulness AI

_________________ I ~~~~~~~~~~~(Davis,989)

Perceived i

EnjoymentI L Contrl Extension of TAM

(Venkatesh, 2000)

ObjectiveUsability

FIGURE 2

Technology Acceptance Model and Extensions




chors that determine early perceptions about theease of use of a new system. With increased expe-

rience in system use, it is expected that perceived

ease of use will reflect perceived enjoyment and

objective usability of the system.

Diffusion of Innovation Theory

Diffusion of innovation theory (DIT) explains inno-

vation adopters' adoption behavior.3' DIT has sup-

ported much research on how and why innovations

are adopted at different rates by individuals or

organizations. There are many variant types of dif-fusion models. However, their basic forms can be

classified into the following three models:

1. External influence model-In this model, the dif-

fusion process is driven by information and com-

munication technology sources external to the so-

cial system.32 The diffusion rate at a given timedepends on the organization's need for the tech-

nology (intrinsic desire for adoption). Thus, the

assumption is that there is no communication be-

tween early adopters and potential adopters.

2. Internal influence model-This model, also

known as the imitation diffusion model, assumesthat diffusion occurs only through individual con-

tacts. Thus, the diffusion rate of an imitation effectis the result of social interaction or internal com-

munication between early adopters and potentialadopters in a social system. The imitation effect

can be viewed through subjective norms and word

of mouth. A subjective norm can be thought of as

perceived social pressure, that is, whether signif-icant others would want the person to perform, or

to refrain from, the behavior in question.33 Possi-

ble salient referents for the subjective norm, with

respect to ICT adoption, could be friends and co-workers. Word-of-mouth (WOM) is a powerful de-

terminant of technology adoption. In particular,

face-to-face messages have proven to be impor-

tant to consumer attitudes and behaviors toward

technology.343. Mixed influence model-The model is a combi-

nation of internal and external influence models.This model is widely used as it explains reality

more precisely than the two separate models pre-viously discussed.35 In this mixed model, technol-

ogy adoption is influenced by both imitation be-

havior and innovation behavior.36

Major Factors Behind Korea's ICT Diffusion

We shall now discuss Korea's ICT developmentand diffusion based on a framework which inte-

grates the various models and theories describedin the previous section, as shown in Figure 3. Spe-

cifically, we emphasize the importance of the fol-

lowing kinds of factors: external, innovation, and

imitation. Korean culture is clearly the underlyinganchor which encompasses all of the factors dis-

cussed here. For purposes of this article, only a few

important Korean cultural and social characteris-

tics relevant to the innovation and imitation fac-

tors for ICT diffusion will be presented.

External Factors

While numerous external environmental factorsaffect ICT diffusion, we will limit our discussion to

the changing global economy affecting Korea, and

Korean government policies toward ICT.

Innovation FactorsExternalFactors

Usefulnes Ease of Self-Use Efficacy

Global

Economy____________________ ___S)~~~~~~~~~~~~~~~~~~~~~~~netoXCTImitation Factors

GovernmentPolicies

Subjective Wrd-of-

__________________ ~Norm Mouth

FIGURE 3Framework for Korean ICT Diffusion



2003 Lee 13

* Global Economy

The Korean economy relies heavily on interna-tional trade as the country has scarcity in natural

resources but wealth in human capital. Thus Ko-rean economic development has been directly tied

to success in trade. Surrounded by fast-developingAsian countries, especially China, as alluded to

earlier, Korea was unable to maintain a competi-tive position in the manufacture of many light and

heavy industry products. Consequently, Korea hadto reformulate its economic strategies and electedto emphasize knowledge-intensive, high-tech ar-eas. More specifically, Korea chose ICT as its core

competence area and has supported wide diffu-sion of ICT and aggressively developed infrastruc-

ture, research, and new products and services. For

example, domestic research organizations and

teams have developed the following technologies

or products:* TDX(Time Division Switch)-Exchange (loth in the

world)* High-density semiconductor microchips* Mini-super computer (TiCom)* CDMA digital mobile telecommunication sys-

tem* TFT-LCD panel* Broadband Internet-related equipment* Digital TV

* Government Policies

As presented earlier, the Korean government hasplayed the central role in shaping the current sta-tus of Korean ICT. MIC (Korea's Ministry of Infor-mation and Communication) lists the following assuccess factors for Korea's ICT status: (1) the gov-ernment's strong leadership and policies for devel-opment of ICT infrastructure, (2) education and pro-motion of ICT throughout the country to close thedigital divide, (3) development of well-trained ICTtechnicians and core technologies, and (4) creationof a constructive competitive environment for ICTbusinesses. The government has provided leader-ship in the national informatization campaign byestablishing comprehensive processes, strategies,

laws, and an adequate budget.The e-government project, driven by MIC as the

project manager, attempts to transform the govern-ment into a transparent and user-friendly serviceprovider which is digitalized and networked. Mostgovernment services are now provided through theWeb. Procurement for the Korean government isundertaken through more than 200 e-marketplaces.Transactions between government agencies andbusinesses are much more tratnsparent and speedy

than ever before. Today, the government is movingtoward m-government (mobile).

For e-election and e-voting, Korea is the worldleader. Political activists have developed websitesand organized campaign activities online and off-

line. For the general election of 2000, a politicalactivist group targeted 96 candidates as unfit forthe Parliament, and 59 (69 per cent) of them indeedfailed to be elected. In early 2002, the ruling partyelected its presidential candidate using electronicvoting instead of punching paper tickets. It tookonly 15 minutes to tabulate the votes and an-nounce the winner. These government policies andinitiatives have helped Korean citizens everywhereto leam and use ICT for their daily activities.

Innovation Factors

* Usefulness

During the rapid economic development since1962, Koreans created a new word, "ppali ppali,"which means "quickly and quickly." This word rep-resents Korean emotion in economic development.That is, Koreans are restless for fast growth. Con-sequently, Koreans consider usefulness and effi-ciency as important factors for a new technology orinnovation. For example, Korea is the world leaderwhen it comes to mobile payment. SK Telecom, thebiggest mobile telecommunications company inKorea with about 53 per cent of the market share,produces mobile phones with

smart chips inside.Because the smart chip contains and updates thephone owner's financial and personal information,people can purchase goods or services through theInternet by using their mobile phone numbersrather than their credit cards. In Korea, over 10million people use Internet banking, and morethan 70 per cent of stock trading is now done onthe Internet. In 2001, e-business transactionsamounted to more than $80 billion in Korea.

* Ease of Use

Unlike Chinese hieroglyphics, the Korean lan-

guage is supported by phonographic symbols. Thislinguistic characteristic supports the argumentthat culture directly affects ICT diffusion. Hangeul(the Korean alphabet), invented in 1443, has only 24characters. This makes it easy to represent every

expression by using only 10 vowels and 14 conso-nants. In contrast, the technology to support writ-ten expression of Japanese must be capable ofproducing not only the 100 phonetic symbols, butalso about a thousand Kanji (Chinese) characters





2003 Lee 15

1995. In 1996 Korea became the first nation in the

world to implement CDMA for mobile communica-

tion. The International Telecommunications Union

selected CDMA as the industry standard for new

third-generation (3G) wireless systems in 1999.41

Today, Korea has 11,460,000 mobile communicationsubscribers representing about two-thirds of the

population (the world's largest proportion of users),which created a new market worth $150 billion.42

Korean 2.5G mobile communication technology

with Evaluation Data-Optimized System (EV-DO)

can transmit and receive data at a speed of up to

2.4 megabytes per second, seven times faster than

Japan's 3G service.43 Recently, Korean mobile com-

munication firms (KT, SKT, and LGT) have been

under tremendous public pressure to lower their

service rates as they attained over $1 billion profit

for only the first half of 2002. According to the MIC'stally, China is becoming the first export market for

Korean mobile phones, and it reached $291.58 mil-lion in the first half of 2002, a 41-fold increase from

$6.85 million recorded during the same period in2001.44

Korea has 11,460,000 mobilecommunication subscribers representingabout two-thirds of the population (theworld's largest proportion of users).

High-Speed Internet

ADSL (Asymmetric Digital Subscriber Line) is atechnology to deliver digital information at highspeed over the same twisted-pair line used to de-liver telephone service for ultra-fast access to theInternet and corporate networks while also en-abling real-time multimedia services. The down-stream bit rate is higher than the upstream ratebecause most subscribers retrieve much more in-formation than they send. ADSL is nearly 300 timesfaster than 28.8K dial-up modems and 70 timesfaster than paired 128-Kbps ISDN.45

In 1999, Korea started providing high-speed In-ternet service using commercial ADSL for the first

time in the world.46 ADSL use reached more than 60per cent of the population (over 10 million house-holds), the highest rate in the world, and Internetuse is 5th in the world. KT has exported ADSL andother speedy Internet solutions to Mongolia, Hun-

gary, and other Eastern European countries, Japan,and even the USA.47The government is also set toexpand the nation's export of high-speed Internetservice products, aiming to reach US$10 billion ayear by 2006.

DRAM and TFT-LCD

Korea is the world's largest producer of DRAM (Dy-namic Random Access Memory) and TFT-LCD

(Thin Film Transistor-Liquid Crystal Displays). Ac-cording to DRAMeXchange, a memory chip indus-

try news provider, Korea has more than 48 per centof the world market share for the DRAM memorychip, ahead of the U.S., Taiwan, the EU, and Japan,which churned out 18, 16, 12, and 7 per cent of the

total global DRAM chips, respectively.48 Holding40.7 per cent of the global production, three Korean

chipmakers-Samsung Electronics, LG-Philips,and Hynix-became the world's largest producersof TFT-LCD in 2001.49The number of display unitsproduced by these firms outpaced Japan, whose

global market share was 36.6 per cent.

Samsung Electronics developed the industry'sfirst fully working lGbyte DDR and SDRAM in De-

cember 2002 and 4Gbyte DDR in February 2003.Samsung plans mass production of 1Gbyte DDRand SDRAM in the second half of 2003. Samsung isalso the industry leader in advanced memory so-lutions, including DDR333Mbyte, DDR400Mbyte,and DDR512Mbyte. According to Gartner Data-

quest, the market for lGb DDR SDRAMs is expectedto reach $7.4 billion by 2006.

The Future of Korean ICT Development

Building De Facto Global Standards

The Korean ICT industry has been effective in com-

mercializing new ICT such as CDMA, and soonVDMA (Virtual Division Multiple Access), high-speed Internet (ADSL and VDSL:Very-high-bit-rateDigital Subscriber Line), and Semiconductor(DRAM)for the first time in the world, just as Japandid in the past with electronics. Based on new ICTapplications, the Korean ICT industry is attempt-ing to set de facto global standards for new tech-nology applications through continuous R&D. Si-multaneously, the Korean government is in theprocess of forming strategic alliances with Japan,China, and other nations to coordinate standards

development for such technologies as 4G (fourth-generation wireless communication), mobile IP

(Internet protocol), IPv6 (IP version 6), wirelesscommunication transmission, and NGN (NextGeneration Network).

Korea's MIC announced that Internet productswould soon become Korea's third core export item,

following semiconductors and CDMA handsets.MIC forecasts exports of high-speed Internet prod-ucts, which stood at $240 million in 2001, to reach$10 billion in 2006, through the government's sup-port for overseas marketing for firms engaged in




the export of Internet-related products, such as

ADSL and VDSL.

To date, the Korean ICT industry has relied pri-

marily on mobile communication and high-speed

Internet. However, as the markets for these tech-

nologies are becoming saturated, Korea is strivingto develop new core competencies for the future.

Some of these areas are:50

. Wireless LAN

. Contents industry, such as digital animation

movies (cyber Hollywood projects)

. 3GH and 4G wireless communication

* Digital TV (Korea has basic patents for the DTV

receiver chipset)

. Digital life and smart home, based on the con-

verged networks of fixed and wireless ICT.

Future ICT Landscape

Based on solid human and physical ICT infrastruc-

tures, its unique and supportive environment, and its

brand value as an ICT leader, Korea has a vision to

become a global ICT hub for traffic, content, and

R&D.As an ICT traffic hub, it can produce, store, and

distribute digital content in Asia and throughout the

world. In short, Korea aspires to play a pivotal role in

bringing to reality the true digital world by strength-

ening ICT cooperation with other leading ICT coun-

tries. As shown in Table 2, MIC of the Korean gov-

ernment forecasts some dramatic changes in store

for the Korean ICT landscape.5-

Lessons Learned

Since the 1997 financial crisis, Korea has made

progress in the ICT field that is remarkable by any

standard. Almost overnight Korea has become the

country to benchmark against for the application

of value-adding business solutions based on themost advanced Internet and mobile communica-

tion technologies. The speed and scope of ICT

adoption, diffusion, and assimilation in Korea are

unprecedented. While the global ICT market has

been in a worrisome slump since the turn of the

new century, Korea's ICT industry is still booming

with growing markets, revenues, and profits. For

example, Samsung Electronics, KT, SK Telecom,

and LG have become well-known world-class ICT

firms.

The speed and scope of ICT adoption,diffusion, and assimilation in Korea are

unprecedented.

While Korean ICT firms have received many ac-

colades in the world business press, it must be

remembered that the U.S. is still the ICT leader in

the world in terms of sheer size and power. The

Korean ICT industry has so far relied heavily on

imported technologies as most domestic firms

have yet to develop a sufficient set of core technol-

ogies. Thus, Korean firms have been paying very

Table 2

Changes in the Korean ICT Industry

Category Items 2001 2006

Informatization 1. Citizens' ICT use ability

* Internet use 55.6% 90.0%

* PCs provided to schools 1.22 million 1.60 million

2. Business

* Online connection 60.0% 100%

* e-transaction 4.0% 30.0%

* B2B networks 20 industries 50 industries

3. Public organizations

* Online government service 54 types All types

* e-signature user 1.92 million 25.00 million

ICT Industry Production value $125.0 billion $230.0 billionProportion of GDP 12.9% 17.0%

Export amount $38.4 billion $89.5 billion

Employees 1.16 million 1.44 million

ICT Service Wired telephone subscribers 22.73 million (48.0%) 24.48 million (50.0%)

Mobile phone subscribers 29.05 million (64.4%) 39.16 million (80.0%)

High-speed Internet homes 7.91 million (55.0%) 15.00 million (100.0%)

Wireless Internet Seoul and 6 major cities All cities and counties

Homes with digital TVs 3.6% 50.0%

Digitalization of communication network 81.0% 100.0%

Source: Minister's report: ITpolicy direction for building IT-led country, op. cit.



2003 Lee 17

high license or patent royalty fees to foreign firms.It is difficult for a firm to develop a competitiveedge in the ICT market when most of its productsand services are based on imported technology. Asa matter of fact, in 2001 Korea ranked only 19th in

the world based on the Information Society Index.Korea's goal is to be in the top ten by 2006.52How-

ever, in the most crucial technological areas thatare essential for generating new value-addingbusiness solutions and for services that will en-gender digital life for ordinary citizens, for its sizeand recent history, Korea is making highly impres-sive advances.

After the IMF financial crisis, Korea sought anew growth engine in "Cyber Korea 21." Singaporehas focused on industrial R&D and innovation bymeans of capital investment, technology develop-ment, and skill formation in manufacturing andservice.53 Korea, on the other hand, has paid atten-tion to ICT infrastructure development by wiringgovernment, business, and individuals, and rein-forcing growth in software and information-provider industries during the past five years.Moreover, Korea has built the ICT national brandthrough mobile phone, high-speed Internet, DRAM,and TFT-LCD.

Government, Technology Innovation, andEconomic Performance

Korean experiences provide a good case study formany developed countries. The concerted public-

private partnership (PPP) has enabled Korea toleapfrog many advanced countries in terms ofwide diffusion and use of the most advanced ICT.Furthermore, such ICT diffusion has helped Kore-ans develop new patterns of daily life that are notonly supported by technology but also built onnewly formed trust in technology-based systems.While the issues of trust and privacy are still majorbarriers of e-business in many developed coun-tries, Koreans have quickly overcome most of theseobstacles for their B2All and m-commerce trans-actions.

For scholars and executives involved in ICT orinternational business, Korea's ICT experienceserves as good reference material. Korea has beenthe test bed for many new ICT products, services,business solutions, and government initiatives.For example, Korea's experiments in m-govern-ment, B2All, u-commerce (ubiquitous), and enter-prise solutions should provide valuable informa-tion in terms of finding critical success factors ofthese new applications of ICT.

Korea is a good example of how a governmentcan take the initiative to improve a country's eco-

nomic performance based on technology innova-tion. Korea has become a test bed, an incubator, fornew ICT. Close and cooperative working relation-ships between government and industry have pro-duced effective human and technological infra-

structures. The Korean experience, in terms of itsbackground, economic transformation, ICT diffu-sion process, government strategies, and ICT ap-plication, should serve as a good lesson to devel-oping countries as to how the PPP can become acatalyst for developing national competitive ad-vantages.

Endnotes

l See http:/lwww.kusec.or.kr/english/archives/koreainfo/econ-omy/growth.html.

2Drucker, P. F. 2002. Managing in the next society. New York:St. Martin's Press.

3 Steers, R. M. 1999. Made in Korea: Chung Ju Yung and therise of Hyundai. New York: Routledge; Yoo, S., & Lee, S. M. 1987.Management style and practice of Korean chaebols. CaliforniaManagement Review, 29(4):95-110; and Lee, S. M., Yoo, S., & Lee,T. M. 1991. Korean chaebols: Corporate values and strategies.Organizational Dynamics, 19(4): 36-50.

4 Cheong, Y. R. 2002. Korea's option for facing China's eco-nomic challenge. Korea Focus, 10(6): 114-130.

5Information technology annual report. Business Week (Inter-net edition), 24 June 2002. See http:Ilwww.businessweek.coml

magazinelcontent/O2_25lb3788701.htm.6 The development of broadband access in OECD countries.

OECD, 29 October 2001. An OECD report to the working party ontelecommunications and information services policy (TISP).Available at http:/lwww.oecd.orglpdf/M00020000IM00020255.pdf.

7 Wall Street Journal, 3 May 2001.

8The Internet freedom and broadband deployment act. Seehttp://energycommerce.house.gov.; Tauzin, B., & Dingell, J. D.High-speed access will spur growth: Should Congress pass theTauzin-Dingell Internet Freedom and Broadband DeploymentAct? Roll Call. July 23, 2001.

9 South Korea: IT services overview, 2001. October 2002. Gart-ner Group.

10Global E-government, 2002. September 2002. Taubman cen-ter for public policy at Brown University. See http://www.inside-politics.orgIegovt02int.PDF.

" Sunoo, H. H. 1978. Economic development and foreign con-trol in South Korea. Journal of Contemporary Asia, 8(3):322-339.

12 See http://www.aftak.or.krlal_2.html.13 Minister's report: IT policy direction for building IT-led

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14 See www.dmc.seoul.kr.15 Ubiquitous network society: E-Korea Project. Gartner

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tion and communication technology industry (2001-2005). Re-search report 01-04, 2001. Korean Information Society Develop-ment Institute.

1' Kim, K. (Ed.). 2001. Three years after the IMF bailout: Areview of the Korean economy's transformations since 1998.Samsung Economic Research Institute.

18 Digital economy of Korea 2002. August 2002. Korean Infor-mation Society and Development Institute. See http:/lwww.

kisdi.re.kr/advertiseldigital.pdf (in Korean).




"9KoreanWhite Paper. 2001. Korea Ministry of Informationand Communication.

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40 According to the website of Hyundai Motor Company(http://www.hmc.co.kr) nd the websites of a cyber community(http://www.antihyundai.pe.kr)that found defects and publi-cized them on the Internet, May, 2000.

41 See http://www.qualcomm.com/cdma.42Minister's report: IT policy direction for building IT-led

country, op. cit.43 Larkin,J. The future is in South Korea. Far Eastern Eco-

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44 Impe,M. V. Korean mobile phone exports to China surging.Mobile CommerceNet,29 July2002.

45Comer, D. 1999.Computer networks and Internet, 2nd ed.Upper Saddle River, NJ:Prentice Hall.

46 See http:l/event.kt.co.krlkorlaboutktlhistorylhistoryO2_04.html.

47 Korea Times, 9 April 2001.48 See http:llwww.dramexchange.comldefault.asp.49 See The Chosun Ilbo, 21 March 2002;see http://www.dis-

playsearch.com/.

50Minister's report: IT policy direction for building IT-ledcountry, op. cit.

51 Ibid.52 See http://mic.gov.kr.53 Garrett-Jones,S. National science and technology initia-

tives for ESCWAmember countries: Lessons from the South andEast Asian Region. In the expert group meeting on initiatives forscience and technology capability-building in the twenty-firstcentury in Beirut,November 1, 2000.

Sang M. Lee is the UniversityEminent Scholar and RegentsDistinguished Professor atthe University of Nebraska-Lincoln. He received his Ph.D.

degree from the University ofGeorgia. His current researchinterests deal with the strategicuse of ICT for interorganiza-tional collaboration. He haspublished over 200 journal arti-clesand5Obooks.Contact:[email protected].

How Korea Became ICT Hotbed

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