South Korea and Israel complement each other in tech, report says

With its 51 million residents and a per capita GDP of $35,920 in 2016, South Korea has become the most innovative economy in the world, according to the 2017 Bloomberg Innovation Index, topping the ranks for R&D intensity, value-added manufacturing and patent activity. Israel moved up to number 10 in 2017, included for the first time in the top 10 economies.

A synergistic relationship based on complementary contrasts exists between the State of Israel and the Republic of Korea in the fields of innovation and commerce, a 2017 report by the Israel Innovation Authority published on Monday said.

Similar to the State of Israel, Korea was only declared an independent state in 1948 and has since undergone accelerated economic development; it has been in the midst of a continuous state of conflict with its northern neighbor; and its natural resources are sparse.

The Koreans specialize in the gradual growth of small and medium-sized companies into large corporations, and use advanced technologies as a base to set up a complete production chain. Its largest conglomerate, Samsung, constitutes approximately 17 percent of the entire Korean economy, and includes 80 subsidiaries developing, producing and marketing in a wide range of fields such as electronics, engineering, shipbuilding, construction, retail & leisure, insurance, medical services and others, in which hundreds of thousands of people are employed.

And if until recently these Korean conglomerates were traditionally inclined toward low- to medium-risk technology projects, Korea has recently showed signs of aspiring to prepare for a transition from moderate innovation to groundbreaking innovation, the authority’s report said.

In contrast, Israelis excel in establishing small startup companies around a groundbreaking idea, do well with improvisation and risk, and do not fear failure, according to the Innovation Authority report. Most often however, the idea gets sold to a multinational that then integrates it into a broader-based system or final product.

Israel excels at risk and ideas, Korea grows complete companies

One of the central challenges for Israel is to grow complete companies and entire value chains, something in which the Koreans excel. The idea then, is to bridge the gaps and advance the mutual commercial R&D relations between the two countries, the Innovation Authority said.

“By virtue of the complementary comparative advantages between Israeli and Korean innovation, great commercial potential exists at the point of interface between the two countries,” the report said.

Koreans are interested in investing in advanced technological developments and are constantly searching for innovative components that can be integrated into their products. Israeli entrepreneurs are also interested in technological development but additionally seek manufacturing and scale-up opportunities that the Koreans can provide. The combination of capabilities enables the development of advanced final products and their introduction into global markets, the report said.

Collaborations in high technology are already underway: KORIL (KORIL-DF), the Israeli-Korean binational Research and Development Foundation, was established as the result of a memorandum of understanding signed by the two governments in 1998 with the objective of advancing industrial R&D via joint technology projects. Up to end 2016, over 140 joint Israeli-Korean corporate technological innovation projects were launched, totaling some $54 million.

Samsung’s new office space in Tel Aviv, on September 24, 2016. (Tomer Foltyn)

Samsung Group operates an R&D center in Israel that employs approximately 200 workers. The center was established in 2007, after the acquisition of the Israeli company TransChip Israel Ltd. which developed chips for cellular cameras. Additionally, Samsung invests in Israeli startup enterprises through its own investment channels — Samsung Venture Investment Corporation (SVIC) and Samsung Catalyst; via the innovation program Samsung NEXT Tel Aviv; and by means of the accelerator program Samsung Runway, which invests in early stages technology companies.

The LGE division of LG Corp. also operates an R&D center in Israel, with the aim of identifying Israeli technologies that can integrate into the company’s products and to develop collaborations with Israeli companies.

Academic research also holds “tremendous advantages” for collaborations between Korea and Israel, the report said, with Korea leading the way in applied research that complements basic Israeli research.

Existing cultural differences, however, must be bridged to realize the full potential between the two nations, and professionals seeking cooperation must familiarize themselves with the various cultural habits and costumes: Koreans tend to be risk-averse and may show low flexibility when faced with changes required during the process of technological development, the Innovation Authority said.

Language differences could affect the quality of communication and organizational culture also creates challenges: Israeli companies are a relatively flat organizational structure and generally allow open communication between junior staff and management. In Korea, companies generally have a more rigid hierarchical structure. This can lead to lengthy bureaucratic processes to get the necessary authorizations to start a project, the report said.