Inderscience Publishers

Two different effects of R&D on innovation in South Korea: evidence from the firm level data

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Innovation can be made through two different processes or effects of R&D, which are the
creative effect
and the
learning effect
. The existing literatures have focused on foreign direct investment (FDI) as the critical method through which R&D exerts its learning effect. However, it should be noted that export activities can also offer an important source of learning – as important as FDI – and may be exceptionally meaningful for firms in countries with export-oriented economies, such as South Korea. I argue that to examine the two true different effects of R&D accurately and offer right implications for the firms, the alternative learning effect of R&D through
export at firm-level
should be included in a unified framework. Using longitudinal firm-level data for the period of 2000 to 2009 in South Korea, empirical tests show that the creative effect of R&D is more important than the other two learning effects in generating innovation.

Keywords: research and development, R&D, innovation, international trade, foreign direct investment, FDI, South Korea

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