Korea is a country with limited natural resources, which has developed through a strategy of industrialisation and the economies of scale. However this is being challenged by the rise of knowledge as a principal driver of competitiveness. This book is the result of a joint study by the OECD and the World Bank to develop a comprehensive set of national policy responses to the knowledge revolution. It concentrates on four areas: 1) an institutional and economic regime that provides incentives for the creation of new knowledge and its efficient use; 2) an educated and entrepreneurial population; 3) a dynamic information infrastructure; 4) an efficient system of innovation.

Korea's development process offers valuable lessons for other developing and less developed economies. In particular, the way Korea uses outside technologies, by accumulating indigenous capabilities, is still valid in the era of the knowledge economy. This volume examines the Korean model and Korea's march toward a knowledge economy from a poverty-ridden economy before the launch of full-scale industrialization in the early 1960s. It also emphasizes Korea's achievements, as well as remaining tasks within the four pillars of the knowledge economy, with a common theme throughout -- how Korea has narrowed the gaps in its knowledge and institutions in global competition with world leaders.

The report reviews the economic transition in Korea, summarizing the challenge of the knowledge revolution, to the country's development strategy, and the analytical, and policy framework for a knowledge-based economy. It explores the needs to increase overall productivity, and areas of relative inefficiency, namely, inadequate conditions for generation of knowledge, and information; insufficient competition, and misallocation of investments. Furthermore, the increasingly global, and interdependent world, requires that Korea become inter-nationalized, and this involves: active participation, and leadership in international forums, particularly those setting rules for the new economy; developing alliances with world-class universities; and, active participation in global knowledge systems, and international telecommunications. Thus, the role of the Korean government will need to be redefined, unleashing the creative power of markets, providing legal and regulatory framework for more competitive markets, and fostering policies conducive to enterprise development, while addressing also, the risks of the "digital divide". The report identifies key areas for the government to move towards a comprehensive approach, where reforms are needed to prod: economic incentive, and institutional regime; education, training, and human resource management; information infrastructure; and, innovation systems.

This report presents the main findings of three major studies carried out as part of Korea and the Bank's Knowledge Partnership. It is divided into three main sections: (a) a Strategic Review which integrates, and summarizes the most important findings, and policy recommendations for Government to consider; (b) the three in depth studies regarding Korea's transition towards a knowledge-based economy, and, (c) detailed annexes. Korea faces complex challenges in moving toward a knowledge-based economy, which will require inspired corporate strategies, and government policies. The three studies represent an important 'triad' of issues that constitute a core part of the foundation of Korea's knowledge economy: the deepening of technological knowledge at the firm-level; the intensification of the use of internet enabled services by firms; and, the educational implications for upgrading of the workforce. At the firm-level, further mastery of technological knowledge is essential for firms to move further 'upstream' from their base in manufacturing, towards higher value added activities based on research, development, and new product innovation. For each of these three themes (firm-level innovation, Internet enabled services, and educational reform), new empirical data are presented for understanding, and promoting knowledge-intensive economic progress. The Strategic Review summarizes several difficulties confronting government policy makers in the aim to promote advances towards knowledge intensive activities. These include the need to ensure: (a) that any new policies are consistent with existing policies designed to ensure good corporate governance, competition, and transparency; (b) that private sector, market-based mechanisms play their proper part in any upgrading efforts (i.e. training and consultancy providers); and, (c) that further evaluation of the scope, and effectiveness of existing policies in the three areas is carried out.