Identification of R&D Paradox after the Global Financial Crisis: Korean Case Focusing on the Smart Convergence and Conventional Industries

Abstract

This article empirically explores whether the Korean research and development (R&D) paradox has been intensified during the post-global financial crisis (2009–2018). We employ the augmented production function model to test the intensified R&D paradox, which is defined as a continuous decline in a firm’s output elasticity of R&D investment. Using a data set of 720 R&D-active firms, which have ever received more than one government funding, this study drew the following major conclusions on the whole sample firms and two sub-sample firms (smart convergence and conventional industries). First, the R&D paradox has been intensified in the post-global financial crisis over the past decade. Second, the smart convergence industry shows higher a firm’s output elasticity of R&D investment than the conventional one does. Third, in recent years, R&D investment failed to even have significant effect on the value-added. Last, a firm’s output elasticity of R&D investment was found to be much more vulnerable in large and semi-large firms than in SMEs in Korea. In sum, this study confirms the intensified Korean R&D paradox during the post-global financial crisis in Korea. We discuss the government’s role in resolving the R&D paradox in Korea.