The innovation wave

While policy making and OECD membership helps explain much of Korea’s successes in the last two decades, major firms have had a role to play too. In fact, Korea is associated with several global household brands, as strong demand for the likes of Samsung curved televisions, Hyundai hybrid cars and K-pop hits like “Gangnam Style” jolting the Land of the Morning Calm into the sixth-largest exporter in the world. But while productivity in many large manufacturers has pushed Korea into the world’s top ten producers of cars, ships, mobile phones and DVDs, productivity in smaller firms and the service industry means overall productivity is half the level of leading OECD countries. 

A central element in President Park’s “creative economy” initiative of 2013 is to forge new pathways to boost productivity and long-term growth across the entire economy. A digital economy can support productivity gains by lowering barriers to entrepreneurship, enabling firms to reduce fixed costs and outsource many activities. Building on its position as a world leader in the provision of information and communication technology goods, like LG and Samsung, and benefiting from extensive broadband deployment– according to the OECD, Korea ranks 8th in the OECD for mobile broadband subscriptions, and 99% of businesses have broadband connections, OECD data show–the government’s innovation initiative is particularly focusing on start-ups and high-growth small businesses. Small and medium-sized enterprises (SMEs) represented 99.9% of enterprises in 2013, while microenterprises accounted for 93.1%, both higher than the average for most OECD countries (68% and 89.9% respectively), but the digital economy has still to make its mark in this sector.

While 33.8% of larger Korean companies (>250 employees) sold online, this was only the case for 14.9% of smaller companies (10-49 employees). Overall, 15.7% of Korean companies were engaged in sales via e-commerce in 2013, below the OECD average of 21%. Yet Korean consumers are willing digital customers– for instance 47% of smartphone users made purchases on their phones in 2013, higher than the OECD average of 38%, according to data from the OECD Digital Economy Outlook.

The aim has to be to lift wages and labour productivity among SMEs, which is only a quarter of that of large firms, in order to provoke a beneficial knock-on effect in the wider economy. The concentration of SMEs in the service sector should be an area of policy focus, so that their productivity levels close the gap with manufacturing.

SMEs also need a better understanding of the digital tools available such as cloud computing, which enables easier, more flexible and on-demand access to applications and computing power, and which can be particularly beneficial for smaller firms. In 2014, more than 22% of businesses used cloud computing services in the OECD area; in Korea, however, only 10.4% of all companies relied on it in 2012.

Korea is also integrating digital innovation into other walks of life in with the implementation of the Internet of Things (IoT) project. Rolled out across areas such as public administration and industry, the project aims to improve public services, productivity and efficiency and overall quality of life. To develop the IoT it is important to adapt current regulation in, for example, health care and transport, and in particular to revise medical law to allow for telemedicine.

On the same trajectory, it is important to embed new digital skills into training programmes and education, thus making them even more relevant for labour market needs. The digital economy should be a natural tool in the hands of Korea’s digital savvy youth, and its students who regularly rank among the best performers in the OECD’s PISA test, with tertiary educational attainment among younger Korean adults the highest in the OECD. However, a large proportion of young people aged 15-24 are not in education, training or employment. Among the 15-29 age bracket 42% of men and 44.4% of women are part of the labour force, below OECD averages of 64.1% and 53% respectively.

The promotion of more a positive attitude towards start-ups and the development of a more entrepreneurial spirit will also be a challenge. Survey data indicates that Koreans believe themselves less capable of becoming an entrepreneur than in most other countries. Many fear failure yet should be encouraged to consider entrepreneurship as a real career choice. Claire MacDonald

“Korea: Policy priorities for a dynamic, inclusive and creative economy”, OECD Better Policies Series, report available at

OECD (2015), Digital Economy Outlook

Visit the OECD Broadband Portal at

©OECD Observer October 2016

Economic data

GDP growth: +0.6% Q4 2017 year-on-year
Consumer price inflation: 2.3% Dec 2017 annual
Trade: +4.3% exp, +4.3% imp, Q3 2017
Unemployment: 5.5% Dec 2017
Last update: 23 Feb 2018


Stay up-to-date with the latest news from the OECD by signing up for our e-newsletter :

Twitter feed

Suscribe now

<b>Subscribe now!</b>

To receive your exclusive paper editions delivered to you directly

Online edition
Previous editions

Don't miss

  • Ambassador Aleksander Surdej, Permanent Representative of Poland to the OECD, was a guest on France 24’s English-language show “The Debate”, where he discussed French President Emmanuel Macron’s speech at the World Economic Forum in Davos.
  • The fight against tax evasion is gaining further momentum as Barbados, Côte d’Ivoire, Jamaica, Malaysia, Panama and Tunisia signed the BEPS Multilateral Convention on 24 January, bringing the total number of signatories to 78. The Convention strengthens existing tax treaties and reduces opportunities for tax avoidance by multinational enterprises.
  • Rousseau
  • Do you trust your government? The OECD’s How's life 2017 report finds that only 38% of people in OECD countries trust their government. How can we improve our old "Social contract?" Read more.
  • Papers show “past coming back to haunt us”: OECD Secretary-General Angel Gurria tells Sky News that the so-called "Paradise Papers" show a past coming back to haunt us, but one which is now being dismantled. Please watch the video.
  • When someone asks me to describe an ideal girl, in my head, she is a person who is physically and mentally independent, brave to speak her mind, treated with respect just like she treats others, and inspiring to herself and others. But I know that the reality is still so much different. By Alda, 18, on International Day of the Girl. Read more.
  • Globalisation’s many benefits have been unequally shared, and public policy has struggled to keep up with a rapidly-shifting world. The OECD is working alongside governments and international organisations to help improve and harness the gains while tackling the root causes of inequality, and ensuring a level playing field globally. Please watch.
  • Read some of the insightful remarks made at OECD Forum 2017, held on 6-7 June. OECD Forum kick-started events with a focus on inclusive growth, digitalisation, and trust, under the overall theme of Bridging Divides.
  • Checking out the job situation with the OECD scoreboard of labour market performances: do you want to know how your country compares with neighbours and competitors on income levels or employment?
  • Trade is an important point of focus in today’s international economy. This video presents facts and statistics from OECD’s most recent publications on this topic.
  • The OECD Gender Initiative examines existing barriers to gender equality in education, employment, and entrepreneurship. The gender portal monitors the progress made by governments to promote gender equality in both OECD and non-OECD countries and provides good practices based on analytical tools and reliable data.
  • Interested in a career in Paris at the OECD? The OECD is a major international organisation, with a mission to build better policies for better lives. With our hub based in one of the world's global cities and offices across continents, find out more at .
  • Visit the OECD Gender Data Portal. Selected indicators shedding light on gender inequalities in education, employment and entrepreneurship.

Most Popular Articles

OECD Insights Blog

NOTE: All signed articles in the OECD Observer express the opinions of the authors
and do not necessarily represent the official views of OECD member countries.

All rights reserved. OECD 2018