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Korea is the current world champion of R&D spending

Korea is the current world champion of R&D spending

By Matt Phillips @MatthewPhillips June 19, 2014

South Korea punches far above its weight when it comes to spending on innovation. In 2012, Korea spent 4.4% of GDP on research and development. That’s the highest among the developed nations tracked by OECD, the Paris-based rich nation think tank. The private sector is a key driver. Private-sector R&D spending is up 35% between 2008 and 2011, and has more than doubled since 2003.

The surge has pushed Korean patents up 32% since 2008. And South Korea’s share of global patent production was up to 5.7% in 2011, the last year of available data. (It was 2.3% of global in 2003.) There’s a fairly simple reason for Korea’s hypertrophied business R&D: Although much of this growth has been in the private sector, it’s heavily government-subsidized.

Of course there are problems with this system. In particular, R&D tax credits favor large companies that pay higher rates of corporate tax. In other words, those kind of policies tend to favor corporate incumbents, and can have an unintended negative impact on new entrants trying to make their mark.

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About bambooinnovator
KB Kee is the Managing Editor of the Moat Report Asia (www.moatreport.com), a research service focused exclusively on highlighting undervalued wide-moat businesses in Asia; subscribers from North America, Europe, the Oceania and Asia include professional value investors with over $20 billion in asset under management in equities, some of the world’s biggest secretive global hedge fund giants, and savvy private individual investors who are lifelong learners in the art of value investing. KB has been rooted in the principles of value investing for over a decade as an analyst in Asian capital markets. He was head of research and fund manager at a Singapore-based value investment firm. As a member of the investment committee, he helped the firm’s Asia-focused equity funds significantly outperform the benchmark index. He was previously the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. KB has trained CEOs, entrepreneurs, CFOs, management executives in business strategy, value investing, macroeconomic and industry trends, and detecting accounting frauds in Singapore, HK and China. KB was a faculty (accounting) at SMU teaching accounting courses. KB is currently the Chief Investment Officer at an ASX-listed investment holdings company since September 2015, helping to manage the listed Asian equities investments in the Hidden Champions Fund. Disclaimer: This article is for discussion purposes only and does not constitute an offer, recommendation or solicitation to buy or sell any investments, securities, futures or options. All articles in the website reflect the personal opinions of the writer.

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