South Korea: From the Land of Morning Calm to ICT Hotbed

Author(s): Sang M. Lee

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

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

South Korea: From the land of

morning calm to ICT hotbed

Sang M. Lee

Executive Overview
For centuries, Korea was known only to its immediate neighbors, China, Japan, and
Russia. Not quite strong enough to control its own destiny, while occupying a strategic
location among ambitious and powerful neighbors, Korea has gone through numerous
crises in its recent history. Japanese colonization, the devastating Korean War, poverty,
and a backward social infrastructure left the country ill prepared to face the modern
world. 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 from
a 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 as
the changing global economic environment, government policies, and Korean cultural
characteristics supporting ICT diffusion. The Korean government has made bold
investment in technological and human infrastructures. These factors have enabled Korea
to establish new competitive strategies for high-tech areas, especially ICT. Korean
cultural characteristics that have contributed to a favorable environment for ICT
development and diffusion include, among others, valuing efficiency and speed, self-
efficacy, a subjective norm of belongingness, and the Korean language. The Korean
experience, especially its economic transformation and ICT diffusion process, should be of
interest to the governments of developing and developed countries as well as to scholars
and executives involved in international business.
......................................................................................................................................................................

Korea was an enigmatic country known as "The "Asia Tigers" (along with Malaysia, Singapore,
Land of Morning Calm" to all but a few westerners Taiwan, and Hong Kong). Peter Drucker calls Korea
until the 20th century. The larger geopolitical com- the most entrepreneurial nation in the world.2
munity first paid attention to Korea during the de- By the late 1980s, Korea had become a major
structive Korean War, 1950-1953. Although the war trading country, with such products as automo-
was devastating, the influx of aid and modern ide- biles, consumer electronics, semiconductors,
als of western nations helped wake up the Korean container and tanker ships, chemicals, and so
people. Starting from almost below zero after the forth. The chaebols (the unique Korean form of
war, South Koreans have achieved phenomenal conglomerates), the backbone of Korean eco-
economic development, transforming the nation nomic development, led the export drive.3 Their
from an agrarian economy into an industrial coun- growth was based primarily on government-
try. According to Bank of Korea statistics, the per guaranteed short-term financing by foreign insti-
capita GNP leapt from $87 in 1962 to $10,307 in 1997, tutions. The burden of debt in the competitive
an average increase of more than 8 per cent per global economy, which demanded accountabil-
annum over the thirty-five-year period.' In 1997, ity, transparency, and rule of law, became over-
South Korea (hereafter Korea) became the 12th rich- whelming. The 1997 Asian financial crisis was
est country in the world. Korean economic devel- another wake-up call to Koreans. The Interna-
opment was praised with such accolades as "The tional Monetary Fund (IMF) helped save the Ko-
Miracle on the Han River" and being one of the five rean economy by infusing $57 billion. Also, a
7
8 Academy of Management Executive
rapidly developing China began to dominate ex-
port trade for low- to mid-tech products.4
The Korean government established priorities
regarding high-tech industries, enabling Korea to
develop competitive advantage, especially over
China. The Korean government also boldly restruc-
tured the chaebols and forced banks to wipe clean
all bad loans from their balance sheets. About
one-half of the thirty largest chaebols went bank-
rupt (including Daewoo, the second largest
chaebol), 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 engine
behind Korea's recovery from the 1997 crisis has
been the advance in ICT. For example, Business
Week's latest report of "The IT 100 Best Performers"
lists Samsung Electronics #1, KTF (Korea Telecom
Freetel) #4, and SK Telecom #9.5 Korea's ICT-
related accomplishments have also been noted by
several foreign sources (see Box 1).
Box 1
Evaluation of Korean ICT Success by
Foreign Sources
* The Organization for Economic Cooperation
and Development (OECD) analyzed the suc-
cess factors of Korea as the world leader in
high-speed Internet technology and recom-
mended Korea as the model for benchmark-
ing.6
* The Wall Street Journal reported that Korea is
now the world leader in both quantity and
quality of Internet use.7
* The U.S. House of Representatives changed
laws 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 primary
reason for the sudden emergence of Korea as
the world leader in Internet service was its
government'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 with
Korea second, followed by Canada and the
United States.10
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-
May
opment and diffusion, and the current state of ICT
application. While most ICT firms around the
world, 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 success
and the future challenges facing Korea, especially
its ICT industry. The Korean experience provides
valuable insights to countries trying to improve
their 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 ICT
revolution as it had with the Industrial Revolution
in the late 1800s. Many Koreans believe that their
late participation in the Industrial Revolution was
the main cause of the country's backwardness and
isolation which eventually led to Japanese coloni-
zation."I
Since the so-called IMF Period, 1997-2000, the
Korean government has reexamined its economic
structure. 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.'2
However, the increase in global competition, espe-
cially China's rapid development as a major ex-
porter with its cheap labor and improving product
quality, 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 major
projects 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 the
population) throughout the country-students,
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.16
The 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
Growth 1 ~~~30.5 /t36.0 *3.3.
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-related industries to GDP growth (%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)
10 Academy of Management Executive May

1997 to $51 billion in 2000 and represented about 30
per cent of the nation's total exports. In short, ICT
industry exports have greatly boosted the Korean
economy. 19
Foreign investment in the Korean ICT industry
has increased over 1,200 per cent since the 1997
financial crisis, from $0.4 billion in 1997 to $5 bil-
lion in 2001, which represents 42.3 per cent of the
total foreign investment in Korea.20 Coupled with
the huge domestic commitment, this increasing
foreign 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.
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 overall
levels 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

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 apply
to the country level.
Institutional Theory
Institutional theory posits that the institutional en-
vironment contains taken-for-granted social and
Technology Acceptance Model
The widely tested technology acceptance model
(TAM)27 and its extensions posit that perceived
usefulness 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 29.1
ICT 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: IT policy 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 not voluntary) systems.

results significantly influence perceived useful- Venkatesh's extension of TAM, also shown in
ness as shown in Figure 2. Specifically, "subjective Figure 2, includes anchoring and adjusting based
norms"-that is, people's beliefs about what others on the determinants of system-specific perceived
expect of them-exert a significant direct effect on ease of use.30 This extended model presents condi-
usage intention over and above perceived useful- tions conceptualized as computer efficacy, com-
ness and perceived ease of use for mandatory (but puter playfulness, and computer anxiety as an-

Experience Voluntariness I
TAM2
_i - | \ (Venkatesh &Davis, 2000)
Subjective
Norm

i IImage

* Job |\\'iJ
! Relevance

COutput Perceived
. Quality _1 Uefulness \ * \*

Results / '
. Demonstrability - .,i
. ,\ * 1 ~~~~~~~~~Usage
i* Sef-ficac Intention Behavior

External Perceived
____._.____ _ s_
_ase_ e

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

Computer TA/
Playfulness AI
_________________ I ~~~~~~~~~~~(Davis,
1989)

Perceived i
Enjoyment
I L Contrl Extension of TAM1
(Venkatesh,2000)
Objective
Usability

FIGURE 2
Technology Acceptance Model and Extensions
12 Academy of Management Executive
chors that determine early perceptions about the
ease 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 time
depends 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, assumes
that diffusion occurs only through individual con-
tacts. Thus, the diffusion rate of an imitation effect
is the result of social interaction or internal com-
munication between early adopters and potential
adopters 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
Innovation Factors
External
Factors
Usefulnes
Global
S )~~~~~~~~~~~~~~~~~~~~~~~neto
IIX3CT
Economy____________________
Imitation Factors
Government
Policies
Subjective
__________________ ~Norm
FIGURE 3
Framework for Korean ICT Diffusion
May
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.34
3. 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 development
and diffusion based on a framework which inte-
grates the various models and theories described
in 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 underlying
anchor 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 factors
affect ICT diffusion, we will limit our discussion to
the changing global economy affecting Korea, and
Korean government policies toward ICT.
Ease of Self-
Use Efficacy
___
Wrd-of-
M outh
2003
* 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-developing
Asian 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 had
to reformulate its economic strategies and elected
to 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 has
played the central role in shaping the current sta-
tus of Korean ICT. MIC (Korea's Ministry of Infor-
mation and Communication) lists the following as
success 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 the
digital divide, (3) development of well-trained ICT
technicians and core technologies, and (4) creation
of a constructive competitive environment for ICT
businesses. The government has provided leader-
ship in the national informatization campaign by
establishing 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 service
provider which is digitalized and networked. Most
government services are now provided through the
Web. Procurement for the Korean government is
undertaken through more than 200 e-marketplaces.
Transactions between government agencies and
businesses are much more tratnsparent and speedy
Lee 13
than ever before. Today, the government is moving
toward m-government (mobile).
For e-election and e-voting, Korea is the world
leader. Political activists have developed websites
and organized campaign activities online and off-
line. For the general election of 2000, a political
activist group targeted 96 candidates as unfit for
the Parliament, and 59 (69 per cent) of them indeed
failed to be elected. In early 2002, the ruling party
elected its presidential candidate using electronic
voting instead of punching paper tickets. It took
only 15 minutes to tabulate the votes and an-
nounce the winner. These government policies and
initiatives have helped Korean citizens everywhere
to leam and use ICT for their daily activities.
Innovation Factors
* Usefulness
During the rapid economic development since
1962, 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 or
innovation. For example, Korea is the world leader
when it comes to mobile payment. SK Telecom, the
biggest mobile telecommunications company in
Korea with about 53 per cent of the market share,
produces mobile phones with smart chips inside.
Because the smart chip contains and updates the
phone owner's financial and personal information,
people can purchase goods or services through the
Internet by using their mobile phone numbers
rather than their credit cards. In Korea, over 10
million people use Internet banking, and more
than 70 per cent of stock trading is now done on
the Internet. In 2001, e-business transactions
amounted to more than $80 billion in Korea.
* Ease of Use
Unlike Chinese hieroglyphics, the Korean lan-
guage is supported by phonographic symbols. This
linguistic characteristic supports the argument
that culture directly affects ICT diffusion. Hangeul
(the Korean alphabet), invented in 1443, has only 24
characters. 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 of
producing not only the 100 phonetic symbols, but
also about a thousand Kanji (Chinese) characters
14 Academy of Management
in regular use.37 A mobile phone keyboard repre-
senting such a large array of Japanese or Chinese
ideograms is clearly impractical. Ease of use of
new ICT in conjunction with the Korean language
has helped diffuse ICT as part of Koreans' work
and daily life.
0 Self-Efficacy
The psychological concept of self-efficacy38 has
been extensively researched and has been used
for information systems research concerning tech-
nology adoption and use.39 For thousands of years,
Koreans were afraid of change. The twentieth cen-
tury's crushing shocks (the Japanese colonization,
the Korean War, the Asian financial crisis, etc.)
broke history's hold on Koreans' concept of them-
selves and their environment, and an alternative
self-concept was enabled by graduate education of
most Korean leaders in the U.S. or other western
nations. Koreans have embraced the knowledge/
information age where informatization and ICT
greatly influence the competitiveness of individu-
als, organizations, and the nation. Self-efficacy,
gained from the successes of e-transformation and
the can-do spirit nurtured through overcoming
countless hardships, has given Koreans the confi-
dence to build an ICT powerhouse in Asia.
For thousands of years, Koreans were
afraid of change.
Imitation Factors
* Subjective Norm of Belongingness
Koreans' adoption of ICT has a social normative
implication. Adopters of new ICT often brag about
their newfound skills and knowledge to their
peers. The need to acquire the same knowledge, to
belong to the group, drives everyone in the group
to become an agent of change in the cycle of ICT
adoption. Because of their Confucian roots, Kore-
ans place a great emphasis on the sense of belong-
ingness as one of their central cultural values. The
basic unit of belongingness is the family, based on
blood ties. Then, the hometown, school, profession,
and organization are important units of belonging.
For example, it has been observed that Koreans
form more alumni groups than any other country.
The sense of belongingness is usually accentuated
by communication and frequent interaction. Kore-
ans desire constant renewal and assurance of be-
longingness through conversation. Advanced LOT
Executive May
has become a convenient means to enrich the
sense of belongingness and satisfy the needs of
constant communication.
* Word of Mouth
In the e-global age, digitalization has created a
customer-driven market. E-customers create their
own communities, and their personal experiences
are quickly communicated throughout the network.
Thus, the impact of word-of-mouth becomes more
important and powerful with networks. Specifi-
cally, word-of-mouth communication is a determi-
nant of ICT mass adoption by Koreans because
most are Internet users living in close proximity,
usually in huge apartment complexes. The word-
of-mouth effect heavily influences e-customers
who are networked. Two out of three Koreans
spend up to 2 hours a day on the Web as a member
of a community. Over 5 million members visit their
community portal websites every day. E-communi-
ties sometimes act as negative or positive market-
ers for a specific product, organization, or social
issue. For example, Hyundai, the biggest auto-
maker in Korea, had to send an apology letter to
each of its new model buyers and issued a recall
when a cyber community found a defect and pub-
licized it.40 The e-community has become the most
powerful reference group for most Koreans.
ICT Applications and Innovations
The downward spiral of the global ICT industry
has drastically decreased investment in ICT by
most organizations around the world. The tum-
bling stock prices of such bellwether firms as
Cisco, Nokia, and Sun Micro Systems and once
leading firms like Lucent, Ericsson, Qwest, and
WorldCom clearly indicate the industry's woes. To
avoid such problems in Korea, MIC is working with
major Korean ICT firms to establish the "ITInvest-
ment Fund." MIC believes the threats of the global
slump of the ICT industry today provide excellent
opportunities for Korea to accelerate its ICT lead-
ership through more investment. With its well-
developed ICT infrastructure, Korea has been in-
novative in developing ICT applications through
businesses, government agencies, and people in
all walks of life. With the influence of additional
investment for ICT innovation, many new applica-
tions may be expected. Some recent ICT applica-
tions are described in this section.
Mobile Phone
Code Division Multiple Access (CDMA) is a digital
wireless technology pioneered by Qualcomm in
2003
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 communication
subscribers 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's
tally, 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 in
2001.44
Korea has 11,460,000 mobile
communication subscribers representing
about two-thirds of the population (the
world's largest proportion of users).
High-Speed Internet
ADSL (Asymmetric Digital Subscriber Line) is a
technology to deliver digital information at high
speed over the same twisted-pair line used to de-
liver telephone service for ultra-fast access to the
Internet and corporate networks while also en-
abling real-time multimedia services. The down-
stream bit rate is higher than the upstream rate
because most subscribers retrieve much more in-
formation than they send. ADSL is nearly 300 times
faster than 28.8K dial-up modems and 70 times
faster 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 60
per cent of the population (over 10 million house-
holds), the highest rate in the world, and Internet
use is 5th in the world. KT has exported ADSL and
other speedy Internet solutions to Mongolia, Hun-
gary, and other Eastern European countries, Japan,
and even the USA.47 The government is also set to
expand the nation's export of high-speed Internet
service products, aiming to reach US$10 billion a
year by 2006.
Lee 15
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 cent
of the world market share for the DRAM memory
chip, 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 Holding
40.7 per cent of the global production, three Korean
chipmakers-Samsung Electronics, LG-Philips,
and Hynix-became the world's largest producers
of TFT-LCD in 2001.49 The number of display units
produced by these firms outpaced Japan, whose
global market share was 36.6 per cent.
Samsung Electronics developed the industry's
first fully working lGbyte DDR and SDRAM in De-
cember 2002 and 4Gbyte DDR in February 2003.
Samsung plans mass production of 1Gbyte DDR
and SDRAM in the second half of 2003. Samsung is
also 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 expected
to 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 soon
VDMA (Virtual Division Multiple Access), high-
speed Internet (ADSL and VDSL: Very-high-bit-rate
Digital Subscriber Line), and Semiconductor
(DRAM) for the first time in the world, just as Japan
did in the past with electronics. Based on new ICT
applications, 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 the
process 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), wireless
communication transmission, and NGN (Next
Generation Network).
Korea's MIC announced that Internet products
would 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
16 Academy of Management Executive May

the export of Internet-related products, such as Lessons Learned

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 striving
to 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.
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 the
most 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.

Future ICT Landscape The speed and scope of ICT adoption,

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-
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 billion
Proportion 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: IT policy direction for building IT-led country, op. cit.
2003
high license or patent royalty fees to foreign firms.
It is difficult for a firm to develop a competitive
edge in the ICT market when most of its products
and services are based on imported technology. As
a 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 that
are essential for generating new value-adding
business solutions and for services that will en-
gender digital life for ordinary citizens, for its size
and recent history, Korea is making highly impres-
sive advances.
After the IMF financial crisis, Korea sought a
new growth engine in "Cyber Korea 21." Singapore
has focused on industrial R&D and innovation by
means of capital investment, technology develop-
ment, and skill formation in manufacturing and
service.53 Korea, on the other hand, has paid atten-
tion to ICT infrastructure development by wiring
government, 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 brand
through mobile phone, high-speed Internet, DRAM,
and TFT-LCD.
Government, Technology Innovation, and
Economic Performance
Korean experiences provide a good case study for
many developed countries. The concerted public-
private partnership (PPP) has enabled Korea to
leapfrog many advanced countries in terms of
wide diffusion and use of the most advanced ICT.
Furthermore, such ICT diffusion has helped Kore-
ans develop new patterns of daily life that are not
only supported by technology but also built on
newly formed trust in technology-based systems.
While the issues of trust and privacy are still major
barriers of e-business in many developed coun-
tries, Koreans have quickly overcome most of these
obstacles for their B2All and m-commerce trans-
actions.
For scholars and executives involved in ICT or
international business, Korea's ICT experience
serves as good reference material. Korea has been
the 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 of
these new applications of ICT.
Korea is a good example of how a government
can take the initiative to improve a country's eco-
Lee 17
nomic performance based on technology innova-
tion. Korea has become a test bed, an incubator, for
new 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 its
background, 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 a
catalyst for developing national competitive ad-
vantages.
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42Minister's report: IT policy direction for building IT-led
country, op. cit.
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50Minister's report: IT policy direction for building IT-led
country, 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 and
East Asian Region. In the expert group meeting on initiatives for
science and technology capability-building in the twenty-first
century in Beirut, November 1, 2000.
Sang M. Lee is the University
Eminent Scholar and Regents
Distinguished Professor at
the University of Nebraska-
Lincoln. He received his Ph.D.
degree from the University of
Georgia. His current research
interests deal with the strategic
use of ICT for interorganiza-
tional collaboration. He has
published over 200 journal arti-
clesand5Obooks.Contact:sleel@
unl.edu.