Research on the Effect of Knowledge Stock on Technological Advance and Economic Growth in Republic of Korea

Abstract

The Republic of Korea’s R&D investment has been rapidly increasing over the long term. This R&D investment is accumulated as knowledge stock, which means the amount of knowledge held by individual countries. However, is the rapid increase in R&D investment contributing to the advancement of domestic science and technology and economic growth? In general, technological advance will lead to a country’s sustainable economic growth. If so, how much has it contributed? This is a very important question for a neoclassical economist. This study reviewed previous studies on “knowledge stock”, “TFP estimation”, and “R&D investment, TFP and economic growth relationship”, and sequentially analyzed the relationship among knowledge stock, TFP, and economic growth through a three-step process. The analysis procedure first performs data processing and time series trend analysis, then time series characteristics analysis, and finally Orderful Least Squares (OLS). The analysis results showed that all three models had a positive (+) relationship and most of them were derived to be statistically significant. On this basis, three policy implications are presented. First, the knowledge stock is estimated to have had a positive (+) effect on economic growth, and the continuous increase in domestic R&D investment is believed to have acted as a growth engine. In particular, financial of the government by financial resources and the mid-to-high tech industry groups by industrial characteristics are statistically positively significant. Next, domestic knowledge stocks have had a positive effect on TFP but the efficiency is judged to be decreasing. It is implied that high-tech industries need to form knowledge stocks above the threshold through continuous R&D investment. Finally, TFP was analyzed to have had a high impact on economic growth, and this confirmed that innovation-led growth was important. It is still relevant that innovation-led sustainable growth is more important than factor led in the Republic of Korea.