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Riskier investments urged

Roughly 200 participants attend the K-Tech Global R&D Forum 2014 yesterday at the EL Tower in Yangjae, southern Seoul. [NEWSIS]

A senior economist from the Organization for Economic Cooperation and Development says Korean R&D policy makers need to be less averse to the risk of failure when selecting projects to fund.

The government should invest if the potential outcome is innovative enough to contribute to the national interest and the government’s creative economy initiative, he said.

Alistair Nolan yesterday unveiled an OECD review of 10 years of data related to Korean R&D policies in industrial technology at the K-Tech Global R&D Forum at El Tower in Yangjae-dong, southern Seoul.

The review ranked Korea sixth among OECD’s 34 members in terms of total investment in R&D projects, spending $49.2 billion in 2012. The United States was first and Japan second.

In spending as a share of gross domestic product, Korea ranked second with spending equal to 4 percent of GDP in 2012, behind Israel at 4.4 percent.

However, Nolan said Korea ranked low on productivity.

For every one million people, Korea registered 34.3 patents, slightly higher than the OECD average of 33.8. Japan, which spent $35 billion, had 107.2 patents per one million population. Nolan said more investment should be distributed to start-ups, which are typically considered risky in Korea, instead of projects with higher probability of success.

He said venture capital investment has grown faster in Korea than in any other OECD country since the 2008-9 global financial crisis.

Nonetheless, according to an OECD entrepreneurship study in 2013, Korea ranked seventh in terms of total venture capital investment, spending 0.05 percent of its gross domestic product in 2012.

Nolan said policy makers need to re-examine the structure of the government’s tax credit system to make it more accessible for start-ups in industries like gaming and software.

“Innovation and development in such creative industries happen in a collaborative effort across multiple teams, rather than a single R&D company,” he said.

The government should also extend tax benefits to small businesses in their early stages. In the OECD entrepreneurship data for 2013, Korea didn’t even record early-stage investment.

Nolan said Korean experts take too little time when deciding whether or not to invest. They picked funding recipients after an average of an hour, compared to a few weeks in the United States, 2.5 weeks in the United Kingdom and 10 days in Israel.

BY kim ji-yoon [jiyoon.kim@joongang.co.kr]