The Race to Innovation in Korea:
The Chaebol Titans vs. The Cluster Theory
South-East Asia is a region on the move. With a diverse basket of nations in such close geographic proximity it is no surprise that this region is transitioning from an emerging market, to an industrialized region, to technological leaders more quickly than other international peers. However, despite the sharp learning curve toward industrialization and technological improvement not all nations in the region are progressing at the same pace.
So what is it that differentiates Thailand from Singapore, Malaysia from Korea? The core of the following analysis is an examination of why and how South Korea has risen to the top of the technological development ladder, using innovation as a measure of progress and growth. For the purpose of structure and comparison, Harvard Business School Professor, Michael Porter's Diamond Model of National Advantage will be the test used to determine if Korea's innovation can be attributed to the presence of clusters.
Factor conditions refers to inputs used as factors of production, such as labor, land, natural resources, capital and infrastructure. This sounds similar to standard economic theory but Porter argues the "key" factors of production (or specialized factors) are created, not inherited. According to Porter, it is not of outstanding importance which factors of production a nation already has, but which factors of production it can deploy efficiently within a short period of time. As such, specialized factors of production are skilled labor, capital and infrastructure. Specialized factors involve heavy and sustained investment. This leads to a competitive advantage as they are more difficult to duplicate or imitate. However, Porter argues that a lack of resources, which leads to selective disadvantages, can turn out to be advantages, as scarcity generates an innovative mindset. Such nations...