Facilitating innovation in SMEs: the case of public intermediaries in South Korea
Kim, Eun Sun
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This study addresses public sector intermediaries and their role in facilitating innovation in Small and Medium Sized Enterprises (SMEs) in South Korea. The primary aim is to understand and address the informational and relational barriers that SMEs face during the innovation process and how these are resolved through interaction. Although the government has been implementing SME support policies for several decades, the Korean National Innovation System (KNIS) has been characterised with six words: ‘strong large firms, weak small firms’. Korean Government policies for R&D have not been effective in enhancing the economic performance and innovative capabilities of SMEs and the ‘low level of competitiveness’ of SMEs obstructs knowledge interaction between firms. Policies directed at SMEs mainly focus on direct support and do not reflect the interactive nature of the innovation process. This mismatch between policy and desired outcomes has led this study to go beyond examining the informational and relational constraints. It analyses the factors influencing successful (or less successful) innovation and asks whether public intermediaries have provided an effective mechanism in resolving innovation barriers (i.e. system failures). Yet, there has been a lack of research into public intermediaries and SMEs within the National Innovation Systems (NIS) framework. The NIS approach is a loosely configured framework and the intermediary literature is fragmented and has rarely been integrated with the NIS literature. Research has tended to focus on specific functions of private intermediaries and far less on the public intermediaries, which have been playing a crucial role in facilitating innovation in Korean industry for several decades. The central focus of this study is on the knowledge interaction process between public intermediaries and SMEs occurring at multiple levels of interaction in the Korean NIS. This study therefore attempts to integrate the NIS concept and the intermediary approach to provide a robust way to explore the knowledge interaction process at meso- and micro-levels. Four functions of the intermediary are constructed to explore how they might influence SME innovation: knowledge facilitation, learning facilitation, knowledge enabling and managing interfaces. Through in-depth analysis of five case studies encompassing firms in mechatronics and IT, this study explicates the knowledge interaction process and influential factors of successful innovation. The analysis addresses a series of issues that the generic NIS concept cannot fully explain: (1) knowledge interaction at meso- and microlevels; (2) multiplicity of relationships and their evolving nature; (3) the role of public intermediaries in a specific cultural context; and (4) the heterogeneity of SMEs with their pre-existing resources and routines. Sociological perspectives especially provide insights for investigating not only the dynamic nature of interactions but also micro-level factors that determine successful interactions and innovation that are largely neglected in both NIS and intermediary studies; e.g. productive combination of competing rationalities, social learning, and the importance of reflexive individuals. Focusing on a modulated NIS concept for public sector intermediaries and SMEs in a Korean context, the study opens the ‘black box’ of knowledge interaction and learning that resolves the barriers, shapes the successful innovation environment and hence strengthens the innovation system. The findings have implications for policy, including the need to establish new policy measures aimed not simply at achieving a set goal but rather at facilitating the interaction process with a long-term view. The study recommends that public intermediaries need to focus on monitoring activities that integrate and support the knowledge interaction process by facilitating ‘associativeness’ among actors. Furthermore, the heterogeneity of the local contexts and SMEs in the innovation process need to be taken into account in designing the programmes, moving away from one-size-fits-all type services.