Korean Technopark’s Clustering Role and Development Direction

Byungho SeongDaegu Technopark, Korea

Parallel Session 1.5: Accelerating Cluster Growth in Asian Countries

Table of Contents

Ⅰ. Introduction

Ⅱ. Concept and types of clusters

Ⅲ. Changing role of Korean technoparks

Ⅳ. Development direction of Korean technoparks

Ⅰ. Introduction

4

Changes to the industrial complex development policies in accordance with changes to the basic industrial policy trends of Korea

1. History of Korean industrial complex policies

Planned geographical development

Locations of export-oriented light industries

Concentrated around the capital

- Suppressing the growth of the region around the capital- Creating large industrial com-plexes

-

-

--

Light Industries

Heavy Chemical Industries

Technology-intensive Industries

Informationand

communication Industries

Knowledge-intensiveIndustries

Ulsan Industrial Center

Export industrial complex (Seoul Guro Industrial Complex)

Zones for promoting the de-velopment of regional industries

Large industrial complexes in the southeastern re-gion

Large industrial complexes in the southwestern re-gion

Development of agricultural industrial complexes

Apartment-type factories

Changing the name of in-dustrial complexes

Simplifying development procedures

Increasing individual lots

Creating Technoparks

-Urban cutting-edge indus-trial complexes

-Cultural industry com-plexes

-Software development promoting complexes

-Pilot Cluster Com-plexes

Policy target

Basic policy

Indus-trial

struc-ture

Major indus-trial

comp-lexes

2. Pursuit of policies for the creation of innovative clusters 5

After the 1990s, policies of innovative clusters were pursued.

1980s Regionally dispersed the population concentrated in and around the capital, and narrowed regional gaps through the balanced development of Korea

(Vertical industrial policies) government-led development of strategic industries → (Horizontal industrial policies) promoting private R&D and creating industrial ecosystems

(Policies to develop industrial complexes) simply providing industrial lots → creating an environment for reinforcing the innovative capacity of companies in the complexes

1990sPursued policies to create regional innovation clusters and had organizations supporting companies form cooperative networks within each region so that the clusters would function as footholds of innovation1994 Plan for the development of Regional Cooperation Research Centers / 1995 Five-year plan for the expansion of Korea’s technology infrastructure→ Pursued a project for Technology Innovation Centers(TIC) and Regional Cooperation Research Centers (RRC)

1997 Pursued a project for the creation and management of technoparks and selected pilot TP businesses

1999~2002 Started pursuing the first stage of a project to promote regional industries in four regions

2003~2007 Pursued the second stage of the project to promote regional industries / expanded the pursuit to nine regions

2009~2014 Pursued a project to develop leading industries in metropolitan economic zones

2015 Pursuing a project to develop regionally specialized industries

2. Pursuit of policies for the creation of innovative clusters (continued) 6

Changes to the regional industry policies

Category Kim Dae-jung administration (people’s government)

Roh Moo-hyun administration (participatory government) Lee Myung-bak administration Park Geun-hye administration

IssueOvercoming the financial crisis and developing

endogenous regions were important issuesDeveloping regional industries (strategic

industries)

Reinforcing the competitiveness of regional industries

(realizing economies of scale)

Creating regional jobs(Reinforcing inter-regional cooperation)

Major laws and systems

Special act on designation and management of free economic zones (2002)

Industrial cluster development and factory es-tablishment act (2002)

Special law for balanced national development (enacted in 2004 and amended in 2009)

Amended (January 2014)

Five-year plan for balanced national de-velopment (2004~2008)

Basic plan for bolstering industrial clus-ters (2004)

Five-year plan for regional development (2009 - 2013)

Basic plan for bolstering industrial clusters (2009)

Regional pol-icy paradigm

Development of lagging regions Balanced national developmentReinforcing regional competitiveness

(introduction of the metropolitan zone concept)

Regional competitiveness + residents’ happi-ness

(introduced regional happy living zones)

Developing regional in-

dustries

Metropolitan city-led first stage (2009 - 2012)

Metropolitan city-led second stage (2012 - 2014)

Industrial cooperation zones(2014 -2018)

First stage development of strategic industries in four re-

gions (1999 - 2004)In nine regions (2002 - 2007)

Second stage development of strategic industries in four regions (2004 - 2009)

Project to promote regional strategic industries 4+9 regions

(2008 - 2012)

New specialized indus-tries

(2013 - 2014)

Main force industries(2015~2018)

System to support re-

gional indus-tries

Technopark-Pursuit of a project to create industrial tech-

nology infrastructure (1995)-Designation of demonstration technoparks

(1997)

Korea Industrial Technology FoundationKorea Institute of Industrial Technology

Evaluation and PlanningTechnopark

Korea Institute for the Advancement of TechnologyKorea Evaluation Institute of Industrial Technology

Leading industries support force (Institute for Regional Program Evaluation)Technopark

- Kim Dae-jung administration (1998-2003) : quickening period of regional industry policies - After the enactment of the Special law for balanced national development (2004), policies to support regional industries fully spread.- Technoparks played the centripedal role of developing regional industries and creating regional innovation clusters

Ⅱ. Concept and types of clusters

1. Concept of clusters

Concept of clusters

8

- Innovation cluster Refers to a concentration of horizontally and vertically related companies and innovating entities (universities, research centers, government agencies, and supporting agencies) that create new knowledge and technology based on mutual interaction. Or it refers to a region where such activities are held. (Presidential Committee for Balanced National Development, 2007)

- Technologically innovative cluster A network of mutually interacting companies, universities, research institutes, and various participating entities that are related to a particular industry and are concentrated in a limited region

- Industrial cluster A new form of industrial space that creates price and technology competitiveness by building a close network of companies specializing in a particular industrial field and engaging in various relevant activities (Yong-tak Kim, 2014)

★ The clusters are not just companies concentrated in a limited space, but the connectivity and networking of various innovating entities are important

★ An innovation cluster is a concept that emphasizes the system of sharing and spreading knowledge, as well as the role of knowledge creating institutions (universities and research centers, etc.)

★ Korean industrial complexes are the combination of government-led industrial clusters and innovation clusters

1. Concept of clusters (continued)

Concepts similar to clusters

9

Concept Definition

Industrial district

The positive externality generated in industrial clusters where mutually related companies aggre-gate, develops the industrial district.

Externality is generated by the three factors of knowledge spreading among companies, the in-troduction of special factors and services in supported industries, and the large expert workforce that a region possesses.

An industrial district is expected to bring about achievements greater than the simple sum of indi-vidual units present in the district (Peneder, 1999, p.340).

Agglomerations / regional

industry cluster Cluster regions, consisting of entities sharing a common geographical location, is defined in terms

of metropolitan areas and functional economic units.

Industry cluster Entry into a cluster in itself binds companies with non-profit organizations, as well as procurers

with parts manufacturers, largely impacting the competitiveness of individual companies. Com-mon technologies, procurers, distribution channels, or workers pool tie them together (Enright 1997:191).

Value Chain industry cluster

A value chain industry cluster is an industrial cluster with expanded introduction-calculation or procurer-supplier chains.

Strategic partnerships of production networks of mutually connected independent companies, universities, research centers, knowledge-intensive business services, mediating agencies, and consumers in a value added production chain, are also included in these clusters.

Industrial complex An industrial complex is based on the connection of companies not only developing new tech-nologies, but also using similar technologies.

Technological system A network of entities mutually interacting in a particular technological field, system, and infrastruc-

ture for the creation, spread, and use of technologies. A technological system consisting of a dynamic knowledge and capacity network is defined from

a knowledge viewpoint and not general goods and services.

* Source: Korea Institute for Industrial Economics & Trade (2014), Best Global Practices and Success Factors of Innovation Clusters

2. Diversification of cluster types

Changes to cluster types in tandem with industrial economic development stages

10

- Creation of exporting industrial complexes in the 1960s

light industry-centered industrial complexes were built to provide lots and cheap labor,

as well as draw investment into light exporting industries.

- Development of large-scale industrial bases in the 1970s

created large-scale industrial clusters that developed industrial footholds and intensively supported

the workforce, technology, and funds necessary for the upgrading of industrial structures,

beyond the simple provision of industrial lots.

- Creation of innovation clusters after the 1990s

Industrial lots that were more than simple production bases, were built using various means,

such as the creation of regional innovation clusters based on R&D.

- Establishment of technoparks in the 2000s

Innovation networks within a region were formed and managed by creating technoparks in each region,

under the goal of creating regional innovation clusters for balanced national development.

★ Technoparks started to be created under the goal of supporting the creation

and spread of technologies, as well as companies, based on technology systems,

which is a cluster similar to a technopark.

2. Diversification of cluster types (continued)

Diversification of cluster types in accordance with management methods / purpose of creation

11

- Types according to industrial complex management method National industrial complex, general industrial complex, urban cutting-edge industrial complex,

agricultural industrial complex, SME cooperative complex, foreign investment zone, free trade zone,

and free economic zone, etc.

- Types according to the purpose of industrial complex creation Science research complex, industrial technology complex, software promotion complex,

cultural industry complex, R&D special zone, venture firm developing and promoting zone,

knowledge-based industrial agglomeration zone, and cutting-edge comprehensive medical complex, etc.

★ The creation of industrial lots for these various types was the outcome of various policy attempts made to develop the industrial economy. ⇒ Endogenous to the development of various industrial complex types,

were the industrial policy goals of each era.

⇒ Industrial complexes upgraded and developed into industrial clusters of various types

with each development stage of the industrial economy.

★ (Changes to the industrial location policy goals) simply providing an industrial lot ⇒ supporting the innovation of companies in an innovation cluster and building networks in order to enhance their competitiveness

3. Key factors for sustainable clusters 12

Beyond clus-ters and for

cities

Connecting to regional

characteris-tics

Specialization

Creation and not just production

Continued introduction of innova-tive indus-trial fields

Opportunities to participate

Balance be-tween exist-ing and new industries

Partnership

Ⅲ. Changing role

of Korean Technoparks

1. Definition of technopark

Definition of technopark

14

- A non-profit organization aggregating the capacities of regional industries, universities, research centers, and government agencies in order to promote their mutual interaction, build a system for regional technological innovation, create a new technology corporate ecosystem, bolster the technological innovation of companies and the establishment of business startups based on new technologies, as well as develop the relevant region

- Selection and concentration of resources to plan industries and create growth engines- For effective company support based on achievements made and demand- Building a regional foothold system by enhancing the connection between industries, universities, research centers, and government agencies

Purpose of and legal basis for establishing technoparks

- Purpose of establishment Building a network of companies inside a park with research centers, universities, and companies in a region, in order to support venture firm startups, as well as technology transfer from universities and research centers to companies- Legal basis Article 32 of the Civil Code Special act for supporting industrial technological complexes and Industrial cluster development and factory establishment act

Main functions of Technoparks

2. Changing role of technoparks

Role and function by stage

15

1998 - 2003

2004 - 2013

2014 - Leaping forward stage

Growing stage

Maturing and developing

stage

Complex management type

TP 1.0

TP 2.0

TP 3.0

• Created technological complexes• Built centers• Built equipment

Comprehensive support type

• Incubated business startups• Jointly developed• Education and training• Information exchanges

Footholds of regional industrial development

• Reinforcing the regional industries plan-ning function

• Reinforcing the function of a hub that supports companies

• Building a comprehensive support sys-tem to create jobs and bolster a creative economy• Built regional innovation systems

• Used equipment• Pilot production• Supported companies

Ⅳ. Development direction

of Korean Technoparks

1. Changes to the regional policy paradigm

Changes to the regional policy paradigm

17

Category Old paradigm New paradigm

Recognized problems Income, infrastructure, employment gaps between regions

Weak regional competitiveness and the potential of little used regions

Policy goal Enhance fairness through balanced development Enhancing competitiveness and fairness

Policy framework

Temporarily compensatingto offset the geographical disadvantages of lagging regions

Tapping on all the potentials of each regionnot yet used in order to enhance regional competitiveness

Intervention unit Administrative unit Functional economic zones

Policy target Lagging regions All regions

Approach One-size-fits-all for each field Considering regional characteristics(location-based approach) Comprehensively approaching various development projects

Focus Drawing external investment and transferring resources Utilizing assets and resources endogenous in each region

Entity pursuing the

policyCentral government

Multiple layer government (central, regional, and local)Various stakeholders (participation of the private sector)

Policy tool SubsidiesState funds support

Combining hard and soft capital (capital stocks, labor market, corporate environment,social capital, and networks, etc.)

* Source: OECD(2009), Regions Matter: Economic Recovery, Innovation and Sustainable Growth, Paris OECD(2010), Regional Development Policies in OECD Countries, Paris Jae-gon Park (2015), The issue of and direction for the smart specialization of Korea regional industry policies (material presented at the First Regional Policy Forum in 2015)

1. Changes to the regional policy paradigm (continued)

New paradigm of projects to support regional industries

18

[Autonomous → creation] Reinforcing the autonomy of regions with regional industry development plans - Preparing a framework that encompasses all projects that support regional industries

[Value → achievement] Making actual achievements as a regional economy growth factor - Building a system for comprehensive and mid-to long-term management of achievements made

[Open → win-win] Win-win growth through connected cooperation among regions - Connecting and cooperating among cities and provinces based on regional autonomy and creativity (economic cooperation zones) to generate achievements

[Convergence → leaping forward] Structurally changing regional industries in order to respond to the convergence trends - Responding to the convergence trends of technologies and industries, as well as creating convergence-friendly industrial ecosystems

[Planning → future] Pioneering the future with regional differentiation development plans - Establishing specialization development strategies led by each region, which reflect the regional industrial structure and conditions, and consolidating new projects

2. Development direction of Korean technoparks

(1) Reinforcing its function as a regional innovation foothold

19

- Reinforcing its functions of overall planning / arbitrating / mediating ⇒ expand its role and status as a foothold organization

(Past) TP of the technology complex management type

(Present) TP of the company supporting type

(Future) Combined TP

- Drawing companies into technological complexes- Managing the incubation of business startups- Managing government support projects

- Supporting R&D/non-R&D - Comprehensively supporting the technological development, test product manufacturing, certification, equipment, workforce training, marketing, and other services of companies

- Oversee and supervise regional industry development plans

- Arbitrate and mediate organizations supporting each region

- Expand the function of providing comprehensive business support

2. Development direction of Korean technoparks (continued)

(1) Reinforcing its function as a regional innovation foothold (continued)

20

Ideas and technologies

Bolstering business startups

and their incubationDeveloping

SMEsBolstering

industrial ecosystems

R&D R&D, commercialization

Support customized to

each growth stage

Establish and pursue industrial

policies

Feedback

Build a comprehensive support system for all processes by converging and collaborating among government agencies in a TP

Science and technology center

Company supporting agency

Science and technology center

Company supporting agency

Specializing center

Specializing center

Specializing center

Policy planning agency

Company supporting agency

Specializing center

Specializing center

Specializing center

Specializing center

Specializing center

Contribute to Bolstering

a creative economy and enhancing

the competitiveness of regional industries

- Build a comprehensive support system throughout the plan-do-see stages

based on convergence and collaboration among government agencies

so that technoparks may actually settle as regional industry development foothold organizations

2. Development direction of Korean technoparks (continued)

(2) Reinforcing its platform function by building a comprehensive company supporting system

21

One-stop Company

support center

Prospective business starter

Business startup incubation center

(BI)

Incubation after startup

(Post-BI)

Developing small but Powerful

companies

Developing Star Companies

and middle-grade enterprises

Entering World Class300

·Developing Hidden

Champions

Supporting each stage of corporate growth

Providing divided support based on individual programs → integrated support by connecting company projects

Reshape scattered support programs from a company’s viewpoint (task matrix)Consolidating

technologyConsolidating

workforce Marketing Production Networking

• R&D• A&D• C&D• Technology trans-

fer• Strategic partner-

ships, etc.

• Introduce experts• Customized in-

tensive training• Practical training• Guide technology• Advisory panel

support, etc.

• Planning products and market re-search

• Marketing strate-gies

• Consolidating transaction lines

• Business meet-ings at exhibitions

• Strategic partner-ships, etc.

• Molding and de-sign

• Test product pro-duction

• Mass production test

• OEM and ODM• Consolidating raw

materials, etc.

• N/W for project discovery

• N/W for the pur-suit of projects

• N/W with experts• N/W for national

and global coop-eration

Mixing services +

joining projects

(3) Lead and pursue policies for smart specialization

22

Need to switch the direction of regional industrial policies in order to respond to the changing environment in Korea and globally

Weak actual regional economic growth despite visible achievements made and quantitative expansion of investment in regional R&D - Fragmented investment because of complicated programs of the central government

and the consolidation of excessive budget for new projects of local governments

- Lack of focused strategic investment that takes into consideration regional characteristics and conditions

Need to strategically approach and selectively merge various central government projects, as well as expand investment in regional R&D - Need to pursue policies for smart specialization that induces the restructuring and switch of regional projects

2. Development direction of Korean technoparks (continued)

Globally

- globalization is progressing : need to consolidate global competitiveness- Rapid technological changes : weakening effectiveness of industry targeting strategies because of the convergence of technologies and industries, as well as the shortening of industrial life cycles

In Korea

- increasing demand for welfare because of a low birth rate and aging society : limitations to the method of local governments relying on state funds- Continued basic low growth trend : maintaining economic growth is a major challenge to tackle- Need to switch from catching up strategies to pioneering strategies : the need for a creative economy has been presented.

2. Development direction of Korean technoparks (continued)

※ Background to and concept of smart specialization

23

Background to the emergence of smart specialization strategies - European paradox : Europe’s economic achievements made were mediocre

compared to the level of their basic and original technologies.

- Self-reflected the problem of the European public research system :

Investment in R&D resources dispersed in different regions

⇒ not achieving economies of scale / standardization by region / weak global competitiveness

- In 2009, Knowledge for Growth proposed smart specialization

as an alternative investment strategy to the central and local governments of EU

- In 2010, the European Commission announced the Europe 2020 strategy :

Set European Research Areas (ERAs) in order to create economies of scale and ripple effects

Adopted the concept of smart specialization as a key strategy in order to realize ERAs

- In 2011, the EU Cohesion Policy demanded the application of smart specialization

as an advance condition in 2014 ~ 2020

* Smart specialization strategies are being emphasized as a key concept of economic development

and growth policies in various reports recently published in Europe.

(ex) Barka Report, EU2020 Strategy, Innovation Union, Regional Policy Contributing to Smart Growth in European 2020,

and EU Budget Review, etc.

2. Development direction of Korean technoparks (continued)

※ Background to and concept of smart specialization

24

Smart specialization strategy - The purpose of the strategy lies in investing in long-term growth potential

in order to respond to the rapidly changing technologies and globalization,

while also overcoming financial limitations (OECD, 2013)

- As a policy that entails selecting fields that specialized regional clusters should develop first,

it includes discovering the priority of fields to develop through entrepreneurial discovery (Foray, 2009)

Six stages of applying smart specialization into regional industrial policies (EC, 2012)

Stage 1 Analyzing the regional characteristics, assets, and potential : need to differently approach in accordance with regional conditions

Stage 2 Building a private governance system, wherein various stakeholders participate

Stage 3 Setting and sharing future visions together with regional stakeholders: establishing endogenous development strategies

Stage 4Setting the priority : priority fields include not only particular industries or fields, but also new activi-ties

Stage 5Establishing comprehensive policies : maintaining uniformity, mutually connecting, and comprehensively pursuing policies, roadmaps, execution plans, and pilot projects

Stage 6Comprehensively monitoring and evaluating : improving, executing, and evaluating plans, providing feedback, and re-introducing the improved knowledge

2. Development direction of Korean technoparks (continued)

(3) Lead and pursue policies for smart specialization (continued)

25

Establish and lead regional industrial policies based on smart specialization as a regional innovation foothold - Unify the capacity and know-how accumulated so far while planning regional industrial policies, providing comprehensive company support services, incubating business startups, developing companies, as well as building and managing innovation cluster networks to set the priority of fields to develop in each region and promote their activities.

Industry targeting(selecting/exclusion)Investment

on Infra

Lack of HR and N/W

Poor innova-tion perfor-

mance

Low GRDP growth rate

Protracted regional economy slump

The influx of

out-standing

HR

population growth/Growth

of city/ Im-proved Set -

tlement Envi-ronment

SimultaneouslyLocalization

And urbaniza-tion

Increased number of companies/

consolidation of competitive power

Activation of startups, R&D,

innovation

Development human

resources

ImprovementDiversity

and Tolerance

Thank you for your attention!