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Policy Direction for Strengthening Innovation Capacity of Korean Service Firms

Author Kang, Minsung et al. Date 2018.12.13 Page

The consensus of the high proportion of the service industry and low added value is naturally increasing to policy attention to service innovation, that is, service R&D investment.  


Korea’s service R&D investment is still low in scale though it is following an increasing trend, and it is not following the increase of manufacturing R&D of Korea in particular. Basically, more service R&D investment is needed. 


According to the result fromprincipal factor and cluster analysis, the purpose of the innovation of service companies are relatively higher in purpose of product innovation than the cost reduction purpose, and the manufacturing companies have a very high rate of cost reduction. In terms of the importance of information for innovation, service companies prefer closed information. 


The innovation investment in the service industry influenced the growth of the company but had no influence on labor productivity. In addition, the results by clusters show that firms seeking closed information tend to be successful innovations that lead to increased growth and profitability of firms.  


Based on these results, this paper suggests that it is necessary to promote the expansion of private investment and to prioritize the government supporting measures as a policy direction for enhancing innovation of service companies. In addition, Expansion and improvement of tax support system and legalization of related laws are two main instruments to accomplish these purposes.