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Analysis of Service Convergence Innovation Capabilities on the Corporate Performance: Focusing on the Service Convergence Patent

Author Koh Daeyoung et al. Date 2019.12.23 Page

Growth is slowing as the competitiveness of the Korean manufacturing industry wanes amid continuing uncertainties and rapid technological developments brought on by the Fourth Industrial Revolution. In this environment, convergence in manufacturing and service is considered one of the most effective ways to strengthen and differentiate the competitiveness of manufacturing companies and secure new growth engines. On the other hand, the positive expected effects of convergence in the manufacturing and service industries can be more effectively achieved if a manufacturing company creates a new manufacturing-service convergence business model that can generate substantial profits. Therefore, it is very important for manufacturing firms to have innovation capabilities for a manufacturing-service convergence business model or service convergence innovation capabilities.

The problem is that service R&D and the service convergence innovation capacity in Korean manufacturing companies has not adequately improved, despite the increasing importance of innovation capacity at manufacturing firms using a manufacturing-service convergence business model and the implementation of various policies at the government level. Pulling out detailed policy measures is also difficult. There may be many different reasons for this, but one important factor is the lack of empirical analysis on the manufacturing-service convergence levels of manufacturing companies and the impact of innovation capacity on corporate performance.

Previous studies have empirically analyzed the effect on manufacturing-service convergence levels and the performance of the manufacturing industry or manufacturing companies in considering this problem. However, the research literature has failed to identify levels of business model innovation or service convergence innovation capability, and their impact on manufacturing owing to an exclusive reliance on quantitative indicators such as service intermediaries or sales

figures. A lack of this essential analysis is a key limitation of previous studies. Identifying the levels and impacts of innovation capacity creates opportunities to generate more fundamental and substantial profits.

Under this situation, a business method or business model (BM) patent by a manufacturing company is meaningful in that it is the most objective and measurable indicator. BM patents can represent the business model innovation capacity of manufacturing-service convergence and can contribute to the generation of newand vital revenue streams. BM patents are defined by the Korea Intellectual Property office as “patents granted to new business systems or methods that implement business ideas, such as business methods, using information and communication technologies such as computers and the Internet”.

Unlike commonly-used servicification indicators, which are measured on the basis of superficial results or inputs, the BM patents of manufacturing companies represent more fundamental evidence of new service convergence business models and the retention level of service convergence innovation capabilities due to the characteristics of the patents.

Studies analyzing the relationship between BM patents and the economic performance of firms are scarce; Chan et al (2018) and Kimmel et al (2017) are the only two major works. The studies of Chan et al and Kimmel et al are also limited in that they contain no analysis of the determinants of BM patents. In Korea, there are virtually no empirical studies of BM patents.

In summary, an empirical analysis on BM patents is needed in order to produce basic evidence for the establishment of more concrete manufacturing-service convergence policy. BM patents represent innovative manufacturing-service convergence business models and can contribute to generating higher and more consistent profits for Korean manufacturing companies. In addition, comprehensive empirical studies are needed to analyze the determinants of BM patents and their impact on corporate performance.

This study assumes that BM patents of manufacturing companies are

the most objective and measurable indicators of innovation capacity of manufacturing-service convergence business models with high profit potential. Under this assumption, the purposes of this study are as follows: 1) to analyze the status of domestic and overseas BM patents in a variety of ways, 2) to empirically analyze the determinants of BM patents and the impact on the labor productivity of Korean manufacturing companies considering the effects of servicification using the expanded CDM (Crepon, Duguet, Mairesse) model, 3) to survey the policy demand of Korean manufacturing companies, either BM patent-owned or non-owned, regarding service (convergence) innovation and BM patents, and 4) to derive policy implications that can contribute to the innovation of manufacturing-service convergence and the vitalization of BM patents.