Koreas rapid growth in TFTLCD and the spillover of technological capability crossindustry.docx

Koreas rapid growth in TFTLCD and the spillover of technological capability crossindustry.docx

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KoreasrapidgrowthinTFTLCDandthespilloveroftechnologicalcapabilitycrossindustry

Korea’srapidgrowthinTFT-LCDandthespilloveroftechnologicalcapabilitycross-industry（DRAMandTFT-LCD）

Tae-YoungPark,Jae-YongChoung

CenterforTechnologyandInnovationPolicy（CTIP）,ICU,Daejeon,KOREA

Pa0616@icu.ac.kr,jychoung@icu.ac.kr

Abstract

AlthoughKorea’sgrowthintheTFT-LCDindustryhasbeensurprisinglyrapid,thereareonlyafewstudiesonthereasonsbehindthecountry’ssuccessinthisarea.Mostofthesestudieslackviewsontechnologicalinnovationorhavethelimitationofexpandingtheconceptofknowledgespilloveramongindustriesrelatedtechnicallyintoallareasbutproduction.Fistofall,weprovetherelatednessoftechnologybetweenTFT-LCDandDRAM.WeinvestigatethemechanismofDRAM’stechnologicalcapabilitytransferintoTFT-LCDfromthreepointsofview:

technology,humanresources/organizationandnetwork.WefindthatDRAM’stechnologicalcapabilitytransferredintoTFT-LCDmainlyintheshapeofcapitalpowe􀁓,semiconductortechnologyrequiredforTFT-LCDR&D,productionandqualitymanagementsystems,keylabormovements,andorganizationalsystems.However,thereisalmostnospilloverintechnologytransferandglobalandsuppliernetwork.

1.Introduction

Korea’sgrowthintheTFT-LCDindustryhasbeensurprisinglyrapidinthatKoreanfirms,startingin1995,recordedthelargestworldmarketshareinonly3years.However,thereareonlyafewstudiesonthereasonsforKorea’ssuccessinthisarea.Mostresearcheslackviewsontechnologicalinnovationorhavethelimitationofexpandingtheconceptofknowledgespilloveramongindustriesrelatedtechnicallyintoallareasbutproduction.

Westartfromtheidea（ChoungandHwang,2003;Parketal.,2003）thatTFT-LCDandDRAMaretechnicallyverymuchrelated.Thehighrelatednessoftechnologybetweenthetwoindustriesmeansthatknowledgeaccumulatedinanexistingindustry,DRAM,canspilloverintoanewindustry,TFT-LCD,veryquickly（ChoungandHwang,2000,2003,Forthcoming;Parketal.,2003）andacceleratethegrowthofthenewindustry.Weregardknowledgeaccumulatedinanexistingindustryastechnologicalcapabilitythatisnecessaryforlessdevelopedcountries（LDCs）tocatchupwithadvancedtechnology（Leeetal.,1988;BellandPavitt,1993;Hobday,1994）.OurobjectiveistofindthemechanismforhowDRAM’scapabilitytransferredintoTFT-LCDandwhatkindofcapabilitymovedfromDRAMtoTFT-LCD.

Inordertoachieveourobjectives,firstwereviewtheliteraturesonknowledgespilloverandaccumulationoftechnologicalcapabilityandre-classifyandredefinetechnologicalcapabilities.Second,wesuggestourtheoreticalframeworkandexplainourmethodology.Third,weprovetherelatednessoftechnologybetweenTFT-LCDandDRAMthroughacomparativeanalysisoftheirrespectiveproductionprocessesandtechnologyinnovationsystems.Fourth,weshowtheresultsofacasestudyweconductedwithSamsungandLG.Andfinally,wepresentourpaper’simplicationsandlimitations.

2.LiteratureReview

LiteraturesonKorea’sTFT-LCDsuccessaresummarizedasfollows.

􀂂Atthefirmlevel:

Koreanfirms’successcanbeattributedtohighproductiontechnologyandtheindependenceoftechnology（Chang,2005）,uniquepropensitiesfavoringlargescaleinvestmentandafirstmoverstrategy（Hung,forthcoming）,highverticalintegrationinequipmentandparts/materialfirms,andstrategicallianceswiththeUnitedStates,Japan,ChinaandASEAN（Linden,Hart,Lenway,1998）.

􀂂Attheindustrylevel:

ThecharacteristicindustrialstructureinTFT-LCDisacrystalcyclewhichoffersopportunityofsuccessfulentrytonewfirmswhenthecycleisfacingadownturn（Mathews,2005）.

􀂂Atthenationallevel:

StrongsupportoftheKoreangovernmentsuchasdirectfinancing（Linden,Hart,andLenway,1998）.

􀂂Atthetechnologylevel:

TechnologyrelatednesssuchasproductionprocesstechnologybetweenTFT-LCDandDRAM（ChoungandHwang,2003;Park,etal.,2003）.

However,thepreviousstudieshaveafewlimitations.First,studiesatthefirmlevelarelikelytobeinterpretedpostfactumandcannotexplainthemechanismofsuccess.Second,thecrystalcyclecannotshowwhythesuccessfulfirmsarespecificallyKoreanfirms.Third,inTFT-LCD,theKoreangovernmentdidnotplayamajorrole,unlikeDRAMandCDMA.

2.1KnowledgeSpillover

Knowledgespilloveristhenon-appropriableamountofknowledgethatisproducedbyafirm’sinnovationefforts（Griliches,1992）.Knowledgespilloverhaspositiveexternalityinthatitpreventsinnovationactorsfromcompletelyappropriatingtheirknowledge,therebyallowingevennon-innovationactorstobenefitfromit.Thisdeniesthecompletecompetitionassumptionofclassicaleconomics,acceptsmarketfailureandofferstheexcuseofgovernmentinterruptiontothemarket.Therefore,ifacertainindustryhasknowledgespilloverthatleadstoalotofpositiveexternalities,thegovernmenttriestostrategicallysupportandfosterthatindustry.Theseindustriesarecalled“technologydrivers,”ofwhichthemostrepresentativeexampleisDRAM（Malerba,1985;BaldwinandKrugman,1988;Dick,1991;Gruber,1992;Flamm,1993a;IrwinandKlenow,1994a;UdayagiriandSchuler,1999）.

Themoreindustriestechnicallyrelatetoeachother,themoreknowledgespilloverhappens（UdayagiriandSchuler,1999;MalerbaandMontobbio,2003）.TheconceptsbasedonDRAM’sroleasa“technologydriver”andthetechnologicaldistanceofknowledgespilloversupportthepossibilityofaknowledgetransferfromDRAMtoTFT-LCD.

Weregardknowledgeastechnologicalcapability—everythinggeneratingandmanagingatechnicalchange（BellandPavitt,1993）.

2.2AccumulationofTechnologicalCapabilities

Technologicalcapabilityreferstotheabilitytomakeeffectiveuseoftechnologicalknowledgeineffortstoimitateandassimilateexistingtechnologies,createnewones,anddevelopnewproductsandprocessesinresponsetothechangingeconomicenvironment（Kim,1997a）.

ManyliteraturesmentiontheimportanceofthoseintheLDCsaccumulatingtechnologicalcapabilitiesinternallyinordertocatchupwithadvancedtechnology（Leeetal.,1988;BellandPavitt,1993;Hobday,1994）.

Therehavebeenmanyeffortstomeasurethistechnologicalcapabilityinpreviousstudiesbothatthemacroandmicrolevel.Atthemacrolevel,therehavebeenfivedifferentattemptstomeasuretechnologicalcapabilities:

theWEFTechnologyIndex（WEF,2001,2002,2003;Furmanetal.,2002）;theUNDPTechnologyAchievementIndex（UNDP,2001;Desaietal.,2002）;theArCOIndicatorsofTechnologicalCapability（ArchibugiandCoco,2004）;theRANDIndustrialDevelopmentScoreboard（UNIDO,2002;LallandAlbaladejo,2001）;andtheScienceandTechnologyCapacityIndex（Wagneretal.,2004）2.Atthemicrolevel,themostcommononescanbeplacedintooneofthreedifferentcategories:

R&Dexpenditures,patentstatistics,andstatisticsonnewproductintroductions.Firmtechnologicalcapabilities（FTC）canbedividedintoscaleFTCandqualityFTC（SchoeneckerandSwanson,2002）.Technologicalcapability（TC）alsocanbedistinguishedfromtechnologicalefforts,inputsforTC,andfromeconomicperformances,theeffectsofTC（Jonkeretal.,2006）.Theabovetwoapproachesdonotconsiderthelevelofeconomicdevelopmentofacountry.However,thereareseveralstudiesthatconsiderthefactthatpatternsoftechnologydevelopmentdiffersignificantlybetweenLDCsandDCs（MohanBabuandGanesh,1997;Kim,1999;Yuetal.,2004;ChoandLee,2003）3.

Wesuggestanewclassificationoftechnologicalcapabilitiesthroughreviewingpreviousstudies.Thenewclassificationiscomprisedofthreecategories:

technology,humanresourcesandorganizationnetwork,asshowninTable1.

3.TheoreticalFrameworkandMethodology

OurframeworkisforprovingthepossibilitythatDRAMknowledgecanspilloverintoTFT-LCD,basedonthesimilarityoftheirproductionprocessesandtechnologyinnovationsystems.Itisalsoforfindingthemechanismforknowledgespilloverintermsoftechnology,humanresources/organizationandnetwork（Figure1）.

WecollectedfirmdatafrominterviewswithmanagersofSamsungElectronicsandLGPhilipsLCD,aswellasfrombusinessreportsofferedbyDART4andannualreportssuppliedbyhomepages.Forconsultingontechnologyandpatents,weinterviewedresearchersofseveralresearchinstitutes5.WealsousedAurekaDBof9.0versionforpatentanalysis.

4.TechnologyRelatednessbetweenDRAMandTFT-LCD

4.1.SimilarityofProductionProcessTechnology

InTFT-LCDproductionprocesses,theTFTarrayandcolorfilterprocessesincludearepeatedpatterningprocess:

decomposition,cleaning,PRcoating,exposure,developing,etching,andinspection.ThispatterningprocessisverysimilartothefabricationprocessofDRAM（Figure2）.

4.2SimilarityofTechnologyInnovationSystem

Therelatednessoftechnologybetweenthetwoindustriesmakesthecharacteristicsofinnovators,themajorsourcesofinnovation,thekeycapabilitiesofinnovation,andthechangesofenvironmentandtechnology,similar.Thisisconsistentwiththeconceptthatindustriesinthesamesectoroftenhaveasimilarpatternoftechnologyinnovation（Pavitt,1984）.

AsshowninTable2,almostallthecharacteristicsofthetechnologyinnovationsystems

ofthetwoindustriesaresimilarexceptthatTFT-LCDisconsideredcustomizedgoods,whileDRAMisconsideredcommoditygoods.

5.CaseStudy

TheperiodforcasestudyisrestrictedtothetimeSamsungandLGbeganR&D（mid1980s）towhenthetwocompaniesacquiredsuccessintheworldmarket（late1990s）.

5.