[Market Pulse]World's No. 2 in R&D Investment Ratio: Why Is Economic Growth Slowing?

Published 27 Jan.2026 08:30(KST)

Updated 27 Jan.2026 13:57(KST)

Taesuk Oh, President of the Korea Institute of Science and Technology Planning and Evaluation

According to the recently released 2024 R&D Activity Survey, South Korea's total research and development (R&D) investment amounts to approximately 131 trillion won, an increase of 12 trillion won from the previous year. The ratio of R&D investment to gross domestic product (GDP) exceeds 5%, ranking second in the world. However, the country's potential growth rate continues to decline, and the real growth rate has fallen below the potential rate. The competitiveness of key industries such as petrochemicals and steel is clearly weakening, and the technology gap with China has largely narrowed, with China even surpassing Korea in some areas. Why is this happening? The answer lies in the 'details' hidden behind the numbers.

First, it is necessary to examine the overall structure of national R&D investment. Of the total investment, corporations account for about 78%, or 103 trillion won, while the government and other public sectors make up the remainder. Looking at corporate investment details, the top 10 companies-including Samsung Electronics, SK hynix, Hyundai Motor, and LG Electronics-invest more than half of all corporate R&D spending. In other words, a very small number of companies are supporting more than half of all corporate R&D in Korea.

In contrast, R&D investment by the remaining large enterprises, as well as mid-sized and small companies, has stagnated or even declined. The foundation for research and development across the entire industry is, in fact, becoming more fragile. The investment gap between the ICT sector and other industries is also widening rapidly. While competition in advanced technologies such as artificial intelligence (AI), robotics, space, and biotechnology is accelerating, a survey by the Korea Industrial Technology Association suggests that it will be difficult for companies to significantly increase R&D investment and research staff recruitment this year.

The government's role in national R&D investment has evolved through several turning points. Until the 1990s, a system in which the government and corporations actively collaborated on large-scale projects in fields such as semiconductors and displays served as a driving force for industrial advancement. However, since the 2000s, as large companies' research capabilities have advanced and factors such as strengthened restrictions on R&D subsidies under the World Trade Organization (WTO) regime have come into play, direct support for corporations has gradually shifted to focus on small and venture businesses.

At the same time, government R&D policy shifted its focus from short-term commercialization to basic and fundamental research, talent development, and infrastructure building. As a result, visible achievements such as DRAM semiconductor and high-speed rail development may seem to have decreased, but tangible results continue to emerge from mission-oriented research in areas such as space and defense. There are also ongoing success stories in which outstanding research outcomes lead to technology transfer and start-ups, creating market value exceeding 1 trillion won.

The problem is that the environment is changing rapidly. As the technology rivalry between the United States and China intensifies, the government's role is shifting from passive support to more active intervention. Just as China is mobilizing its national capabilities under its 'new whole-nation system,' Korea must also move beyond a structure where the government, corporations, government-funded research institutes, and universities operate separately, and instead build a system that efficiently utilizes limited human and material resources for technology-driven growth. In advanced technology fields at an early stage-such as quantum technology, future energy, and space-the government should not remain a mere 'R&D supporter,' but must act as an 'entrepreneurial government,' taking an active role in capital investment and early market creation to ensure the innovation ecosystem functions effectively.

Mission-oriented R&D projects must be pursued in close connection with demand-side companies or industrial ecosystems, and strategic R&D investment is more likely to succeed when it is closely linked with various policy tools such as tax incentives, financial support, and infrastructure assistance. Taking into account the characteristics of each technology and the realities of industrial ecosystems, it is necessary to develop concrete strategies for government-private sector cooperation tailored to small and venture businesses, mid-sized companies, and large corporations within government R&D support.

To restore the potential growth rate to 3% through technology-driven growth, Korea cannot afford to be complacent with the label of having the 'world's second-highest' R&D investment ratio. Ultimately, it is not the quantity of investment, but the 'details' of strategy and systems that determine competitiveness.

Taesuk Oh, President of the Korea Institute of Science and Technology Planning and Evaluation