See discussions, stats, and author profiles for this publication at: https://www.researchgate.

net/publication/266523426

A spiral process model of technological innovation in a developing country: The

case of Samsung

Article  in  African journal of business management · July 2011

CITATIONS READS

11 1,014

3 authors:

Kichan Park Murad Ali

Inha University King Abdulaziz University
13 PUBLICATIONS   114 CITATIONS    30 PUBLICATIONS   318 CITATIONS   

SEE PROFILE SEE PROFILE

Françoise Chevalier
HEC Paris
71 PUBLICATIONS   109 CITATIONS   

SEE PROFILE

Some of the authors of this publication are also working on these related projects:

: The Congruence between Consumer and Company’s Perceived Importance of Corporate Social Responsibility and its Outcomes in Saudi Arabia View project

knowledge and innovation, PLS-SEM, fsQCA, Artificial Neural Network (ANN) View project

All content following this page was uploaded by Murad Ali on 17 March 2015.

The user has requested enhancement of the downloaded file.

African Journal of Business Management Vol.5 (13), pp. 5162-5178, 4 July, 2011
Available online at http://www.academicjournals.org/AJBM
DOI: 10.5897/AJBM10.1370
ISSN 1993-8233©2011 Academic Journals

Full Length Research Paper

A spiral process model of technological innovation in a

developing country: The case of Samsung
Kichan Park1*, Murad Ali1 and Françoise Chevalier2
1
Graduate School of Business Administration, Inha University Incheon, 253 Yonghyun-Dong,
Nam-Gu, 402-751, South Korea.
2
HEC Paris Business School, Department Management and Human Resources,1 Rue de la Liberation, 78350,
Jouy-en-Josas, France.
Accepted 30 December, 2010

This article presents a spiral process model of indigenous technological innovation capabilities (ITICs)
that shows how firms in a developing country initiate, imitate, improve and make innovative
technologies. Any technological innovation passes through four stages: (1) technological innovation
(TI), (2) transfer of technology (imitation), (3) adaptive technological innovation (improvement), and
finally (4) indigenous technological innovation (local innovation). This paper reviews models and
frameworks related to technological innovation capabilities (TICs) which are proposed in the context of
developing countries. It then analyzes the Late-Starter, Samsung Electronics as a case in point to
illustrate how Korean firms have built their ITICs. The model shows four developmental stages at
Samsung Electronics as: (a) Entrance of foreign companies into the Korean market and their refusal to
transfer their technologies to Samsung initiating its ITICs, (b) Samsung started TICs by means of
reversing the engineering of imported foreign technologies and transfer of technology, (c) it improved
TI by means of adaptive technological innovation strategy and finally (4) the capability to establish their
own ITICs, to become one of the leading companies in the world which challenges firms from advanced
countries in the global market. The paper also highlights the developmental changes in the
semiconductor (DRAM technology) of Korea. Keeping past experiences in consideration, we conclude
that this model provides useful implications for newly industrializing countries (NICs) following the
same pattern of technological development.

Key words: Indigenous technology innovation capabilities, innovation in developing countries, spiral process
model of technological innovation, Samsung Electronics Korea.

INTRODUCTION

Technological innovation and management is considered countries. ITICs have grown considerably in the last few
to be a key driving force in the development of an decades and it seems that this growth trend will continue.
economy. The economic growth of both developed and The case of Japan, South Korea, Taiwan (China) and
developing countries depends upon it. Likely, the concept Singapore shows that the development of their ITICs is
of indigenous technological innovation capabilities (ITICs) based on “initiation-imitation-improvement-innovation”.
Is also inevitable in both developed and developing Even the U.S’s development in technology and innovation
is also based on the same model (Kim, 1980; Ozawa,
1974; NAS, 1973; Bolton, 1993).
The electronics industry of South Korea (hereinafter
* Corresponding author. Email: [email protected] Tel: +82 (32) Korea) has made significant contributions in the
860 7741 electronics industry of the world. The Korean electronics
 Park et al. 5163

Figure 1. Global DRAM production share by firm.

Source: Frank (2010) and iSuppli (2010).

industry has also accounted for the lion’s share of prices, and poor quality and design would become one of
economic growth in the country. The electronic industry of the world’s leading companies in the electronics market. It
Korea started its remarkable rapid expansion and was also not predictable that it would become a “challenge
development during 1960s with the production of black to compete with” those companies which once denied to
and white TV sets, stereos and radio communication share and provide technology to it. It does not only
equipment through the international transfer of production catch-up, but also surpassed many leading DRAM
technology (Kim, 1980). In the early stage of Korean manufacturing firms like Micron, Toshiba, Motorola and
development initiation, when the government sanctioned IBM in the global market. More than a decade, it is
imports of consumers electronic products as a means of sustaining its No.1 industry rank in the DRAM market with
“import substitution” as the national industrial policy and the highest market share of 41% in 2010 as shown in
pursued an export-oriented industrialization strategy (Kim, Figure 1.
1997), it created opportunities for local entrepreneurships It is planning to invest a total of KRW 26 trillion (US$23
and companies to develop their ITICs. This creative crisis billion) in 2010, to include a capital expenditure of KRW 18
construction has proven to be a great source of ITICs for trillion (US$16 billion), semiconductors of KRW 11 trillion
the latecomers-Korean electronics companies. During the (US$9.7 billion), memory business of KRW 9 trillion
1970s, these companies have achieved remarkable (US$7.9 billion), system LSI business of KRW 2 trillion
achievement and rapid development in terms of process (US$1.8 billion), LCD of KRW 5 trillion (US$4.4 billion)and
and production, speed and time, size and capacity, TICs an investment in R&D for KRW 8 trillion (US$7 billion)1.
and financial performance, and as such, have had a great Technological capability is “the firm’s ability to make
impact on the electronics market of the world (Lee et al., effective use of technological knowledge in efforts to
2004). implement, assimilate, improve, use, adapt, change and
In its early stages of development, Samsung Electronics create new technology” (Kim et al., 1989). Indigenization
Company (SEC, hereinafter Samsung) had no proper means to create technologies appropriate for the
technical skills and technologies. Many US and Japanese situations where they are applied (Shrivastava, 1985).
companies refused to transfer technology to Samsung, Chen et al. (2006) defines ITICs as “a process to explore
since it was dependent on foreign technologies. potential market with indigenous (in-house) R&D activities
Samsung’s initial strategy was “imitation” acquisition, and foreign (external) knowledge acquisition”. Some of the
assimilation, transformation and exploitation of products factors at a country level which can greatly contribute to
and processes from the US and Japanese companies. At
that time, it was unclear and could not be anticipated that a
company which mostly rely on imported foreign 1
Samsung Website (On-line) Available
technology, having inferior products, with low and cheap http://www.samsung.com/us/aboutsamsung/ir/irfaqs/importantdisclosures/IR_Imp
ortantDisclosures.html, accessed on June 10, 2010
 ITICs are local technological capabilities, research and socio-cultural factors, education and universities,
development investment, expertise of human resources, government support and entrepreneurships.
5164 Afr. J. Bus. Manage.

Table 1. Stage models of technological innovation capabilities.

Stage I Stage II Stage III

Utterback (1969)* Idea generation Problem solving Implementation and diffusion
Utterback and Abernathy (1975)* Fluid Transition Specific
Kim (1980) Implementation Assimilation Improvement
Dahlman et al. (1987) Production capacity Investment capacity Innovation capacity
Lee et al. (1988) Initiation Internalization Generation
Boltan (1993) Imitation Reflective imitation Innovation
Kim (1997) Duplicative imitation Creative imitation Innovation
Xu et al. (1998) Imitation Improvement Self-innovation
Kim (1999) Mature technology Intermediate technology Emerging technology
Lee et al. (2001) Path-following Path-revealing Path-creating
Lee and Lim (2001)* New product concept Low/high-tech parts development Assembly production
Lee and Lim (2001) Assembly production Low to high-tech parts development New product concept creation
Choi (2010) Collective learning Collective recombination Collective creativity
*developed countries

This study is a distinctive departure from the previous of Samsung? This paper also discusses Samsung’s global
studies as it attempts to propose a spiral process model of strategy and its competitive advantages. The paper briefly
TICs which builds up a continuous link in the three reviews theories and concepts related to ITICs. It then
development stages. Since most of the previous studies analyzes Samsung as a case in point to illustrate how
have addressed the developmental prcocess by semiconductor firms in Korea initiated their technological
elucidating a model of three development stages, it did capabilities which made Korea one of the world’s leading
slight to deal with new trends in tecnologocal innovation countries in the electronics industry. Since the current
activities (Choi, 2010). What would probably be the next literature is progressing, it is believed that this paper will
stage or phase is the concern of the researchers. This also make a timely contribution to the existing literature on
study attempts to propose the spiral process on the basis ITICs in developing countries. The remaining parts of the
of a new research scheme and a different model in TICs work are structured as follows. Both the theoretical and
on the firm’s level which differentiate it from the previous empirical researches are discussed to understand how
studies. developing countries developed their ITICs, followed by
This paper also attempts to analyze the ITICs in a how technological capabilities are developed by a spiral
developing country by analyzing various case studies of model of technological innovation capabilities, after which
TICs at Samsung as a case in point. The paper also a case study of Samsung which is applied to the model is
reviews models and frameworks related to TICs which are presented and the work is concluded.
proposed in the context of developing countries. The
objective of this study is to examine the spiral process
model of ITICs (Ali and Park, 2010) by analyzing the case LITERATURE REVIEW
of DRAM technological innovation at Samsung.
Samsung’s rapid technological innovation and emergence Based on both quantity and quality analysis, many
as the first innovative company of Korea in a very short researchers have proposed different analytical
time raises several research questions. (1) If Samsung frameworks and stage models for improving TICs in
was a late comer and many international firms were developing countries (Xu and Chen, 2005; Chen, 1997;
leading the electronics industry, what are the factors that Chen et al., 2006; Xu et al., 1998; Kim, 1980, 1999, 1997;
contributed to Samsung’s success? (2) How has Samsung Lee et al., 1988; Lee, 2001; Kim, et al., 1989; Kim and Lee,
surpassed the market leaders in the electronics industry? 1987; Kim, 1998; Choi, 2010; Dahlman et al., 1987; Lee et
(3) If Samsung has emerged as one of the leader in al., 1988). This paper focuses only on stage models and
electronics industry, especially in semiconductors, LCD frameworks which are related to the spiral process model
and mobile phones, what are the innovative strategies that of TICs. In both developed and developing countries, the
Samsung has developed that led to its success? (4) Can pattern and nature of TI is different (Xu et al., 1998).
other firms in developing countries imitate the TICs model
 The models of TI in developing countries are based on stage and innovation stage. Although many researchers
several stages, for example, imitation stage, improvement have proposed different stages and they have called upon
them with different titles as shown in Table 1, basically

Park et al. 5165

Figure 2. A stage model of technological innovation pattern in Chinese firms.

there are three stages. nology showing that after acquiring foreign technologies,
In developed countries, technological improvement firms assimilate and improve imported technologies.
efforts are based on scientific or applied research, but in Initially firms pursue “duplicative imitation” and establish
developing countries it comes from imitation and through reverse engineering and implementation of
improvement of imported technology. On the basis of imported “packaged” technology from developed
Chinese’s technological innovation experience, Xu et al. countries. Firms then follow “creative imitation” and accu-
(1998) proposed a model “3-I Strategy” or “3-I Pattern” mulate experience in product and process improvement
which stands for imitation, improvement and innovation as providing a basis for their indigenous initiatives for the
shown in Figure 2. assimilation of the imported technology. Finally, to
Some researchers have linked the models and strengthen firms’ competitiveness, assimilation together
frameworks developed in advanced countries to the with imported technology, leads to gradual “innovation” of
models and frameworks proposed in developing countries. imported technology as shown in Figure 4. The specific
Lee et al. (1998) has linked the Korean’s stage model of TI stage in advanced countries can correspond to the
proposed by Kim (1980) with the well-known dynamic acquisition stage in developing countries (for example,
model proposed by Utterback and Abernathy (1975) as Korea) and then moved into the assimilation and
shown in Figure 3. Korea’s three stage model follows a improvement stages, but in a reverse direction. For
dynamic model in a reverse direction and evolves from a developing countries, Xu et al. (1998), Kim (1997) and Kim
mature technology stage to an intermediate technology and Lee (1987) suggest that process innovation is more
stage and finally to an emerging technology stage as crucial than product innovation at the early stage of
shown in the lower part of Figure 2. technological development.
The upper part of Figure 3 shows the Utterback and Using the case of TI in Korea, Lee and Lim (2001) have
Abernathy model which illustrates that a process identified three kinds of technological catching up pro-
innovation follows product innovation through three cesses development which are termed as path-creating,
stages: fluid, transition and specific. Firms in new path-skipping and path-following. Boltan (1993) compared
technology pursue a fluid stage in which the rate of product innovation in American firms and imitation in Japanese
innovation is the largest while the rate of process keiretsu (business groups). She proposed that the
innovation is less. On the basis of product innovation, a competitive strategy as “imitation” is more viable than
“dominant design” emerges and causes a reduction in “innovation”. The industry characterized this as: (1) weak
product innovations in the transition stage. The focus of property rights, (2) technological interdependence, (3)
innovation is shifted to incremental process innovation in high technical and market uncertainty, (4) rapid
specific stage while competitive emphasis is on cost technological change and (5) extensive information flow.
reduction and seeking cumulative improvements in She also states that many firms in the US are pursuing a
productivity and quality. Kim (1997) views Korea’s “learning-by-doing” strategy involving primarily experien-
dynamic process of technological capability through tial learning within the firms. In contrast, Japanese firms
imitation to innovation. He concludes that the are focusing on the external development of new
technological development in Korea passed through three knowledge and importing of ideas and technology across
stages: duplicative imitation, creative imitation and organizational boundaries which are characterized as a
innovation. Earlier, he also proposed a three stage model “learning-by-watching” strategy. It shows that imitation is a
(Kim, 1980) of a development pattern of industrial tech- competitive strategy for developing countries in their early
stage of TCs. Imitation as simply copying and transferring distinguishes between reflective imitation and pure
knowledge is not sufficient but rather adapting current imitation. Many Japanese firms represent “reflective
technology to a new setting which is termed “reflective imitation” which is not simply copying and transferring
imitation” as in the case of Japanese firms. Table 2 knowledge; but rather it is a proper adaptation of

5166 Afr. J. Bus. Manage.

Industrially
advanced countries

Product innovation Process innovation

Rate of innovation

Time

Fluid Transition Specific

(emergency) (consolidation) (maturity)

Technological
Technological Technological Technological
Transfer
transfer transfer transfer

Generation

Catching-up
countries
Improvement

Improvement
Assimilation
Technological
capability

Acquisition Assimilation

Acquisition
Time
Emerging Intermediate Mature
technology stage technology stage technology stage

Figure 3. Linkage models proposed in developed and developing countries.

Source: Kim (1997: 89). This figure borrows ideas from Utterback (1994) and Lee et al. (1988).
technological capability to a new environment and technological capacity. Chen (2005) describes six ways for
constitutes an astute strategy in the early stage of successful TICs, for example, the dominant role of
technology development. companies, technology innovation strategy, technology
The World Economic Forum (WEF, 2000) has been set and research centers, TI resources, TI environment and
up using three indicators for evaluation of TICs: (1) improving entrepreneurs’ motivation for TI. Chen (2005)
indigenous ability to innovate, (2) the ability to obtain also proposes another total innovation management (TIM)
technology transfer from abroad and (3) the overall system as a basis for indigenous TI. The goal and purpose
Park et al. 5167

Improvement Imported technology on the basis of

indigenous initiative
(Innovation stage)

Accumulation Accumulate the experience in product

and and process innovation
(Creative imitation stage)

Implementation Implementation of imported technology

(Duplicative imitation stage)

Figure 4. Three stages of Korea’s technology management.

Table 2. Competitive strategies for developing new knowledge.

Imitation Reflective imitation Innovation

Primary process Transferring Learning-by-watching and adaptation/modification Learning-by-doing
Major source of knowledge External Internal and external Internal
Major asset type Generic Generic first, leading to specialized Specialized
Required R&D investment Low Moderate Heavy
Information flow One-way Two-way Internal
Type of knowledge New to the company Some entirely new and some new to the company Entirely new
Dominant national strategy Peru* Japan United States
Source: (Boltan, 1993).
* It was identified by another author during his study of Peru.

of TIM is to cultivate core competence and enhance core model. He viewed that the Korean innovation model has
competitive capabilities with strategy as direction and TI developed through three phases: (1) collective learning,
as the core. It combines and harmonizes organizational, (2) collection recombination and (3) collective creativity.
culture, strategic, management, market and institutional He calls these three phases “collective creation” which can
innovations (Xu, 2005). correspond with the three-stage model of Kim (1997). His
Although these models and frameworks provide useful study has suggested a search for a new model. What
approach to understanding catch up TI in developing would probably be the next stage or phase is the concern
countries, most of them also show current states of the of the researchers.
TICs environment. Choi (2010) has revisited Korean’s
 indigenous technological innovation (ITI). Most of the TICs
The spiral process model of technological innovation are developed through the spiral process as shown in
Figure 5. Sources of many innovations in developing
Ali and Park (2010) propose a spiral process model of countries are breakthrough innovations in developed
TICs. This model comprised four stages, that is, (1) countries. Even the TICs of advanced countries are based
technological innovation (TI), (2) transfer of technology, on the same process. To cite just one historical example,
(3) adaptive technological innovation and finally (4) Americans imitated British technology (steam engine),
5168 Afr. J. Bus. Manage.

Transfer of
technology
(Imitation)

Stage II

Starting point Adaptive

technological technological
innovation innovation
(Improvement)
(Advance)
Indigenous
technological
innovation
(Innovation)
Stage IV

Figure 5. The spiral model of technological innovation.

Japan imitated the US technology (for example, their problems (Mason, 1974). They are also lacking ability
automobiles) and Korea imitated Japanese and the US in the selection of appropriate technologies to be acquired
technologies (for example, automobiles). Sometimes, the for the “driving sector”, in the selection of appropriate
emergences of multinational firms in a local market also technologies to be developed for the “evolving sector” and
create opportunities for developing TICs in the local firms. emerging technologies to be developed for the “leading
The spiral process model of TI proposed in this study sector” (Salimuddin, 2004). Samsung transferred DRAM
comprised four stages. The first stage is “technological technology by means of acquisition and imitation of the
innovation”. Many developing countries borrow the idea of US and Japanese firms. The third stage is “adaptive
imitation (implementation), improvement (assimilation) technological innovation”. After successfully identifying
and innovation from firms in advanced countries. After and importing appropriate technologies, the firms in
successfully passing through the other three stages of the developing countries do not simply imitate technology but
spiral process model, many firms in developing countries gradually improve the technology by instituting a proper
finally enter into this stage. For instance, in the case of adaption strategy. Since most of the transferred
DRAM technology, Samsung has successfully entered technologies could not fulfill the requirements of receiving
into this stage. Samsung initiated DRAM technology in firms, so these technologies needed to be modified
Stage I. The second stage is “transfer of technology”. according to available resources and the local
Firms in developing countries import foreign technology environment in which the modified technology will be
which is usually known as transfer of technology or operated. Sometimes the receiving firms make attempts
international transfer of technology. Large multinational to make the imported technology more advanced. They
firms are a major source of this technology. Due to the also make efforts using their own resources and
dependence of other stages, this stage becomes crucial. technological capabilities to be less reliant on the firms in
Many recipient countries have no detailed idea of what advanced countries. Adaptive technological innovation
kind of technology they need. They are not only lacking in involves adapting the existing product to the needs of
ability to identify the appropriate technology but also the indigenous markets, adapting the existing process
exact implication of what technology is necessary to solve technologies suitable for indigenous resource
endowments and climate change and adapting a capable of generating their own innovation by using their
technology delivery system and organizational structure own R&D. The recipient firms become competent to
suitable to indigenous social, cultural and political innovate without any assistance from firms once they
environments. Samsung did not simply imitate imported borrowed a technology. Many firms in newly industrialized
DRAM technology, but actively adapted and improved the countries for instance, Samsung, LG and Hyundai in
technology in Stage III. The fourth stage is “indigenous Korea have successfully entered into this stage. After this
technological innovation”. In this stage, the firms are fully stage, many firms enter into Stage I again to complete the

Park et al. 5169

Table 3. Samsung global and domestic market share (%).

Division Product 2007 2008 2009 Remarks

a
Semiconductor DRAM 27.8 30.1 34.0 GMS
LCD TFT-LCD 20.0 21.9 24.5 GMSb
c
Telecommunications Mobile phone 14.4 16.7 20.1 GMS

Color TV 51.6 51.4 54.5 DMSd

Refrigerator 44.1 44.4 44.2 DMSd
Washing machine 45.0 41.9 43.6 DMSd
Digital media
PC 38.4 39.8 42.0 DMSd
Monitor 42.7 44.6 46.0 DMSf
Printer 27.4 30.7 27.1 DMSf
GMS: Global Market Share; DMS: Domestic Market Share.
a b c d e f
Own estimate, Display search, Strategy analytics, GfK, Gartner, IDC Korea (SEC, 2010b; Annual report).

spiral process. As a result, those firms that once imitated exceeded its Japanese rival (Sony) by becoming the
technologies become innovative and lead companies to world’s largest consumer electronics company and was
generate their own innovations. These new emerging ranked nineteenth in Interbrand’s Best Global Brands 2009.
firms are now becoming a “challenge” for established firms In 2007, it surpassed Motorola by becoming the world’s
in advanced countries from which they once borrowed second largest mobile phone maker, while in 2009, it
technologies. Similarly, other poor and less capable firms became the world’s largest technology company by
would follow the same pattern and would imitate those overtaking Hewlett-Packard (HP, USA) and Siemens
firms which once relied on imitation themselves. In Stage (Germany) with a KRW139 trillion (US$125 billion) in
IV, Samsung was fully capable of developing its own sales globally 2 . Samsung profits come from four main
DRAM technology and was not relying on imported businesses as shown in Figure 6.
technology. Finally, Samsung entered in Stage I again and Samsung (meaning “three-stars” in Korean) group,
become a leading company in developing DRAM including Samsung Electronics Company (SEC), which is
technology. the largest conglomerate (termed as chaebol) in Korea
was founded by Lee Bung-Chull in 1938. Its business
primarily focused on trade. Samsung joined the
A spiral process model of technological innovation electronics industry in the 1980s with tremendous efforts
capabilities: The case of Samsung Electronics and investment in the electronics and semiconductors.
Primarily, Samsung emphasized mass production,
reliance on imported foreign technology and a
Samsung Electronics: An overview of the company
follow-the-leader strategy and government support (Kim,
1998) as shown in Figure 7.
Samsung Electronics has grown to become one of the
Samsung was initially famous for producing inferior
world’s largest electronics company with a revenue of
products and low quality with design, in that it was
US$ 119.1 billion and an operating profit of US$ 9,920
exporting cheap, original equipment manufacturer (OEM)
million. It is also the first Korean company that exceeded
products in the early 1990s (Chang, 2008). Most of its
KRW100 trillion (US$88 billion) in sales and KRW10
trillion (US$8.8 billion) in net income. It has achieved a
tremendous market share in domestic as well as in global 2
The New 'Big Blue'". The Korea Times. January 29, 2010. Accessed on June 06,
market as shown in the Table 3. In 2005, Samsung has 2010 & Samsung Electronics 2009-2010 Sustainable Report, page 17
product development strategy was based on imitating its
rivals in Japan and the US. Table 4 shows Samsung’s
technological capabilities and developments from the The spiral process model of technological innovation
1970s to the 1990s. The early infrastructure of Samsung capabilities: The case of Samsung Electronics
which greatly contributed to its internal technological
capabilities is shown in Figure 8. Today, it is becoming a The electronics industry of Korea has passed through the
product innovative company by converging, diversifying spiral process of technological innovation capability.
and integrating its products, technologies and business
into a network as shown in Figure 9.
5170 Afr. J. Bus. Manage.

Digital media Tele- Semiconductor LCD Others

communication
1
Figure 6. Sales of SEC by Division (KRW 3 trillion).

Government
support

[ Reliance on
Mass production Samsung foreign
technology

A follow-the-
leader strategy

Figure 7. Samsung strategies model in the 1980s in electronics industry.

Entering of foreign companies into the electronics industry

of Korea and when they refused to transfer their Stage I: Technological innovation (TI)
technology to local firms originally initiated the
developmental growth in the electronics industry of Korea. In Stage I, in the mid 1960s, many multinational firms from
Considering the case of Samsung, when the multinational the US and Japan entered into Korean markets and
companies refused to share their technology with it, it refused to transfer technology to local firms. It was the
actually initiated Samsung’s technological innovation. developmental start of technological innovation capability
Samsung developed its technological capability by means for local small firms including Samsung. Multinational
of reverse engineering and transfer of technology. It firms such as Toshiba, Motorola, Fairchild, Signetics,
implemented, accumulated and made innovative Control Data and AMI (Kim, 1997) initiated the assembling
imported technology as shown in Figure 10. The four of discrete devices. Their early production line was simple.
developmental stages at Samsung are discussed thus. All components were imported in the form of “package”
from the parent firms and were assembled in a simple
form. The denial of these firms created new Technology, a US semiconductors firm. Table 5 shows
self-development opportunities for the local firms. As a that Samsung originally imported technologies from other
result, a Korean-American scientist with a doctorate foreign firms in developed countries.
degree and experience at Motorola established the first
local semiconductor firm. Already, Samsung had realized
its fortune in the semiconductors business. In spite of Stage II: Transfer of technology
facing huge challenges due to its limitations in technology,
such as lack of technical skills and poor quality, Samsung In Stage II of the spiral model of technological innovation,
ventured into the semiconductor business (Kim, 1980).
Initially, it acquired DRAM technology from Micron
Park et al. 5171

Table 4. Samsung’s technological innovation capability.

1970s 1980s 1990s

Conglomerate Organizational reform,
Key activities Entry into DRAM market
diversification Internationalization

J/V partners, Original

Main sources of OEM buyers, foreign
Equipment Manufacturer Acquisitions, strategic
licensing, reverse
capabilities (OEM) buyers and alliances, in-house R&D.
engineering
overseas training

Broader product range

Level of technological (VCR, MWO and DRAM,
Capabilities in mass Continued weakness in
components), but very
capabilities production (TVs) product development
weak in ability to introduce
a major change of product.

International production of
US and EC for low-end low-end items in peripheral
International production markets (limited success). regions.
and scope of interaction Centralized intra-firm Moving toward decentralized
interaction. intra- and inter-firm
interaction.

Internal infrastructure
Korea-based R&D
Internal Infrastructure

US-based R&D
Internal
technological
Affiliations with suppliers
capabilities

Management strategies

Crisis construction
mode

Figure 8. Internal infrastructure contributing to internal technological capabilities.

the multinational firms had already created opportunities absorptive capacity (Cohen and Levinthal, 1990).
for Samsung to establish new businesses. Samsung Samsung’s initial strategy was imitation. Kim (1997) calls
initiated its developmental progress by implementation of it “duplicative imitation”, that is, an implementation of
imported foreign technologies. Its progression was foreign technology through reverse engineering. Samsung
established through transfer of technology. Since it was had acquired eight years experience in producing
the initial stage, Samsung faced many challenges transistors and integrated circuit production through
regarding technology, source of technological change, transfer of technology and reverse engineering. After that,
technical know-how, capability of skilled human it was ready to enter into the VLSI (very large scale
resources, research and development (R&D) and integrated) semiconductor business. A task force was

5172 Afr. J. Bus. Manage.

Product

Product
innovation
[

Technology Business

Figure 9. Product innovation at Samsung.

 Stage II: Transfer of Technology

Implementation of imported foreign
technologies and reverse engineering such as
Micron Technology
Stage I: Technological Innovation
Absorptive capacity, explicit and tacit

Entering of foreign firms such as Signetics, knowledge
Fairchild, Motorola, Control Data, AMI, Toshiba,
Foreign experts
IBM, Honeywell, Zilog and Intel
“Packaged technology”
into Korea market in 1960s
Successfully assimilated DRAM 64K

Foreign firms refusal to transfer technology to
local firms

Local firms incapability of developing their own
Stage III: Adaptive Technological Innovation
technology
Mobility of personnel with new knowledge

Samsung ventured into semiconductor business
High intensity of indigenous (in-house)
engineering and R&D activity
Stage IV: Indigenous Technological Innovation
Developed DRAM series (64K, 256K, 1M, 4M,

Became the leader in semiconductors, memory 16M, 64M, 256M)
business & LCD monitors
Independent in developing DRAM design and

Challenge for firms in advanced countries mass production

40 nanometer DRAM (16GB, 32GB, 64GB)

No. 19th in Best Global Brands

Global R&D network, MIS, IT systems

Supplier of multinational firms such as HP, Sun
and IBM, Cooperation with global firms

Creating global standards

Figure 10. A spiral process model of Samsung’s technological innovation capabilities.

formed to spend six months in collecting all explicit and suppliers. Although, many established firms refused to
tacit knowledge regarding VLSI. They also conducted a transfer their technologies to Samsung, it succeeded in
market analysis. The team then spent one month in the US acquiring many technologies from foreign firms. For
and met experts in the industry and in the market. They instance, it succeeded to acquire 64K DRAM technology
concluded by identifying the potential technology from Micron Technology (USA) and process technology
Park et al. 5173

Table 5. Technology originally imported from other firms.

Technology Technology imported from other firms Country

Color TV Matsushita Japan
Microwave Ampherex USA
64K SRAM Sharp Japan
256K ROM Sharp Japan
64K RAM and 256K DDRAM Micron Technology USA
High-speed MOS process Zytrex USA
Process technology (DRAM) Sharp Japan

from Sharp (Japan) (Table 3). In the beginning, Samsung succeeded to develop its technological capability in 64K
imported the “packaged technology” and only assembled DRAM. The next challenge it faced was the “process
64K DRAM chips. Having experience in LSI chips, it faced development” for 64K DRAM.
no problem in assembling 64K DRAM chips. In 1983, it
Stage III: Adaptive technological innovation other in Korea, but they were assigned different tasks.
They analyzed the entire available material about the 256
In Stage III, Samsung increased its technological learning K DRAM. This time, they again contacted Micron
by absorptive capacity. Samsung accumulated its existing Technology, but only for circuit design. The development
knowledge base and intensity of effort by assimilating 64K the 64K DRAM provided them enough experience for
DRAM technology and developed its technological developing the process technology for the 256K DRAM. In
capability. It had already successfully implemented DRAM October 1984, the Korean team succeeded in achieving its
technology imported from Micron Technology and diffused assigned task and developed the 256K DRAM, while the
it in Korea. Samsung organized two task force teams, one US based team developed it in early 1985 and its mass
based in the US and another in Korea. These teams were production was also started at the same time.
led by highly experienced Korean-American scientists, Accumulating the explicit and implicit knowledge, licenses
who already had doctorate degrees with experience and from the foreign firms, establishing two R&D centers in the
expertise at international established firms in the US. US and Korea at the same time, mobility of engineers,
These teams also included highly-trained researchers and strong collaboration between the two centers, manage-
engineering personnel from both the US and Korea. They ment strategies such as “crisis construction mode” (Kim,
were paid handsome salary packages. The Korean 1997) and government support, immensely contributed to
engineers also participated in training and research in the Samsung becoming the world’s largest producer of DRAM
US. These teams exchanged their research. However, the technologies. Samsung’s technological capabilities then
mobility of local experienced technical personnel at increased expeditiously. Soon it developed 1M, 4M, 16M,
Samsung also played a pivotal role in the diffusion of 64M and 256M DRAM successfully. The gap between
DRAM technology. These personnel were also trained by Korea and advanced countries (the US and Japan) in
technology suppliers. As a result of these task force developing the 64K DRAM was 4 years. This gap was
teams, Samsung engineers developed the capability to reduced to 2 years in the case of developing the 256K
assimilate the imported technologies of 64K DRAM in a DRAM, while Korea was ahead of Japan and the US in
very short time. The teams then started for their next developing the 256M DRAM (Kim, 1997b). Samsung had
challenge which was to develop the “production process” moved on to “creative imitation” (Kim, 1997) by not fully
for the mass production of 64K DRAM. The teams again relying on foreign technological capabilities.
gathered all explicit and tacit knowledge regarding
mass-production plants and they succeeded to import
Sharp’s process technology for 64K DRAM mass Stage IV: Indigenous technological innovation (ITI)
production. In the middle of 1984, Samsung started the
mass production of 64K DRAM. Samsung became the Increasing its technological capability by absorptive
third country after the US and Japan to introduce DRAM capability and accumulated explicit and tacit knowledge,
chips (Kim, 1997). Samsung is now leading the global market in high-tech
The mass production of 64K DRAM had developed a electronics and e-digital media. Beginning with the
platform to produce the 256K DRAM. Samsung had imitation strategy through transfer of technology and
adopted a “dual strategy” approach for the development of reverse engineering, Samsung has moved on to improve-
the 256K DRAM. Again two teams were formed for the ment strategy, accumulating and adapting imported
development of the 256K DRAM, one in the US and the
5174 Afr. J. Bus. Manage.

Table 6. History of DRAM technology development.

Year 1983 1884 1986 1988 1990

Progress 64K DRAM 256K DRAM 1M DRAM, 1M SDRAM 4M DRAM 16M NAND Flash

Year 1992 1995 1996 1997 1999

Progress 256M DRAM 32M 1GB 64M 256MB NAND

Year 2000 2001 2002 2003 2004

Progress 516MB NAND 1G NAND 90nm 2GB NAND 4GB NAND 60-nano 8GB NAND Flash

Year 2005 2006 2007 2008 2009

Progress 16G NAND 60nm 8GB, 40nm 32GB 30nm 64GB NAND Flash 2GB 50 NANO 40nm DRAM
 Figure 11. Samsung’s patents granted by USPTO in 2009.

technology. Finally, Samsung emerged as the first supply change management and R&D management, is
innovative company of Korea which has been recognized integrated by the information technology (IT) process as
globally. The international firms which refused to transfer shown in Figure 12 (SEC, 2010).
technology to Samsung are now facing big challenges
from it. Samsung is now generating technology innovation
by using its own technological capabilities to challenge E-company and digital convergence
firms in advanced countries in the global market.
Samsung is now relying less on imported technologies. It Today, Samsung is leading the digital convergence
has developed series of DRAM technology as shown in revolution with its effort to become a digital e-company by
Table 6 using totally their own technological innovation developing innovative digital products and e-processes
capabilities and resources. It has been investing treme-n (SEC, 2010). “Digital convergence” is a digital technology
dously in its global R&D network, having six centers in including the convergence of various digital services,
Korea and twenty four centers in North America, Europe networks, devices, platforms and business models.
and Asia. Among the world top DRAM manufacturers, Samsung is now gathering cutting-edge technologies and
Samsung has granted the highest patents of 3,592 in 2009 core competences and striving to re-emerge as a world
as shown in Figure 11. In 1994, it became the world’s first class e-company leading the digital convergence
supplier of 64M DRAM to Hewlett-Packard, Sun and IBM. revolutions. It is focusing on and developing new
Today, Samsung’s quick response to any kind of environ- strategies for mobile network, home network, office
mental change, in all parts of management process such network and core components to achieve its “product
as administration management, customer management, innovation” as shown in Figure 13 (SEC, 2010). It is

Park et al. 5175

R&D Manufacturing

IT Process

Customer Marketing

Figure 12. Samsung’s IT process.

 Leader in digital convergence revolution

Digital e-company

Business portfolio restructuring Business process innovation

Home network Speed Product

Mobile network Driven change

Office network
Efficiency Service

Core components
CRM ERP

GMIT

SCM PDM

Simplicity Empowerment

Digital culture

Challenge Creativity

Figure 13. Samsung’s strategic processes and practices framework for e-company.

making its corporate culture more dynamic by means of of Samsung comprised product, service, speed and
innovation of management processes so that its efficiency as shown in Figure 13.
organizational culture can respond effectively to any
environmental change as shown in Figure 13. Today,
Samsung is establishing a global real time management Globalization strategy and network
information system (MIS) by customer relationship
management (CRM), supply chain management (SCM), Samsung’s globalization was expanded after 1994 when
enterprise resource planning (ERP) and product data its strategic management launched the New Management
management (PDM) into a network (SEC, 2010) as shown Movement in 1993 (Chang, 2008). Today, it has around
in Figure 13. As the businesses are switching from product 196 subsidiaries including production 39, sales 53, R&D
oriented to customer oriented, market driven change centers 24 and other 80 (including distribution centers,
places the market and customer as its main concerns of design centers, branch offices etc) and R&D centers in 61
management. The factors affecting market driven change countries as shown in Table 7. Samsung is currently
5176 Afr. J. Bus. Manage.

Table 7. Samsung global network.

Region Production Sales R&D Others No. of employees

North America 3 6 9 9 7,543
South America 2 6 - 7 3,904
Europe 4 16 4 15 8,985
CIS 1 4 2 6 2,174
China 12 5 6 11 31,995
Middle East - 4 1 11 752
Southwest Asia 1 1 5 3 6,583
Southeast Asia 7 9 - 9 9,898
Africa - 2 - 2 185
 Source: SEC, 2010b.

pursuing strategic alliances with advanced companies innovation strategy. Finally, Samsung got the capability to
from abroad regarding technology cooperation, standar- establish their own ITICs, and achieved the No.1 market
dization, marketing and supplier parts. It is pursuing share in the DRAM technology, to catch-up those firms in
strategic alliances with leading companies in LCD advanced countries (Table 8) that once denied giving their
monitors, high speed memory, semiconductors, DRAMs technologies to Samsung and now it is challenging the
and CDMA mobiles (SEC, 2010). firms from advanced countries in the global market.
It is also pursuing comprehensive corporation with As a late starter, Samsung in the beginning relied on
media companies, products, marketing and advertising borrowed technologies, but aggressively invested on time,
with the prominent companies around the world leading focused on technologies with clear trajectories (Chang,
the IT industry such as Sears-Roebuck, JC Penny, GTE, 2009), followed late comers’ strategies as shown in Figure
RCA, Crown Corporation (SEC, 2010; Kim, 1997, 1997c), 7 and internal infrastructure as shown in Figure 8.
intel, IBA, HP, Dell, NEC, MS, Apple, Sony, Compaq, These are the factors that contributed to Samsung’s
Time Warner, Yahoo, Toshiba and AOL. Consequently, it success. Samsung strong R and D capability, successful
is expected that Samsung will continue to pursue acting integration of process and production innovation as shown
strategic alliances with leading companies and lead the in Figure 9, success in DRAM development, product
global market in the digital media, semiconductor and IT portfolio and solution, production efficiency, cost
industries with the best technology and products. effectiveness and speed are the early competitive
advantages that made it succeed in the industry.
Realizing the sense of a “digital convergence” and
DISCUSSION becoming a digital e-company, Samsung is approaching
three strategic innovation strategies, which are creativity,
Since indigenous technological innovation capability talent and partnership management. Other firms in
building is a new development agenda for developing developing countries and especially the latecomers have
countries, this paper explored how the semiconductor lessons from Samsung’s experience.
industry (DRAM technology) in Korea developed through The late starters having limited resources and less
ITICs. Using the case of Samsung, this paper shows that technological capabilities can learn how to catch-up by
electronics firms in Korea have developed their ITICs initiation, imitation, improvement and innovation. The
through a spiral process model of TICs as shown in model needs empirical research for generalizibility in
Figures 5 and 10. In the mid of 1960s, many multinational different industries and different countries which have
foreign companies entered into the Korean market and similar developmental structures as Korea. It will provide
they refused to transfer their technologies and knowledge useful implications not only for policy makers and
to local firms or Samsung initiated Korea’s TICs. Due to managers, but also for those developing countries which
the lack of resources and technological capabilities, attempt to follow the same pattern of technological
Samsung started their TICs by means of reverse development.
engineering of imported foreign technologies and Future research by the authors will focus on how Korean
succeeded to acquire design and process technology from firms (Samsung and LG, etc) can compete with emerging
Mircon Technology (USA) and Sharp (Japan). Samsung Chinese companies such as Haier in China and succeed
improved TI by means of adaptive technological globally, and what are the features that are critical to

Park et al. 5177

Table 8. Samsung’s catch-up: A gap with advanced countries in the semiconductor industry.

Development 256K
64K DRAM IM DRAM 4M DRAM 16M DRAM 64M DRAM 256M DRAM
time DRAM
Pioneer in the US
1979 1982 1985 Late 1987 Early 1990 Late 1992 Mid- 1995
and Japan

Pioneer in Korea 1983 1984 1986 Early 1988 Mid- 1990 Late 1992 Early 1995

Ahead of the US
Gap 4 years 2 years I year 6 months 3 months Same
and Japan
 Simple
shipment time
Pioneer in the US 1st half of 2nd half of 2nd half of 2nd half of 2nd half of
and Japan 1980 1984 1986 1989 1991

1st half of 1st half of 2nd half of 2nd half of 2nd half of 2nd half of
Pioneer in Korea
1984 1986 1987 1989 1991 1994

1 1 First in the
Gap 3 /2 years 1 /2 years 1 year None None
world
Source: Kim (1997: 158).

succeed in the electronics industry and to become a global GfK (2010). Semiconductors. Retrieved Nov 30, 2010 http://www.gfk.com/
leader? Kim L (1980). “Stages of development of industrial technology in a LDC: A
Model,” Res. Pol., 9(3): 254-277
Kim L (1997). Imitation to Innovation: The dynamics of Korea's technological
learning. Cambridge, MA: Harvard Business School Press.
ACKNOWLEDGEMENT Kim L (1997b). “The Dynamics of Samsung's Technological Learning in
Semiconductors,” California Manage. Rev., 39(3): 86-100.
Kim Y (1997c). “Technological Capabilities and Samsung Electronics’
This Paper has been supported by the Inha University International Production Network in Asia.” BRIE, Alfred. P. Sloan
research grant and the National Research Foundation foundation, Working Paper No. 106
(NRF) of Korea. The authors also thank Michael J. Hladi, Kim Y (1998). “Technological Capabilities and Samsung Electronics’
Inha University and the reviewers and editors of the AJBM International Production Network in East Asia.” Manage. Decision. 36 (8):
517-527
for their comments to earlier drafts and were helpful in Kim L (1980), “Stages of development of industrial technology in a LDC: A
revising this article. Model,” Res. Pol., 9 (3): 254-277
Kim L (2001), "The Dynamics of Technological Learning in Industrialization”
5178 Afr. J. Bus. Manage.
REFERENCES

Ali M, Park K (2010). The Spiral Model of Indigenous Technological

Innovation Capabilities for Developing Countries. Empirical Studies in
Social Sciences - 6th International Student Conference, Turkey, April UNESCO, Blackwell Publishers, USA
14-15, 2010, Izmir University of Economics, Izmir (forthcoming Kim L (1999). Learning and Innovation in Economic Development. Edward
proceedings). Elgar Publishing Limited, UK.
Bolton MK (1993) Imitation versus innovation: Lessons to be learned from Kim L (1999). “Building Technological Capability for Industrialization:
the Japanese. Organ. Dyn., (3): 30-45. Analytical Frameworks and Korea’s Experience.” Ind. Corp. Change,
Chang Sea-Jin (2008) “Sony vs. Samsung: the inside story of the 8(1): 111-136.
electronics giants' battle for global Supremacy Hoboken. NJ: John Wiley Kim L (2001). “The Dynamics of technological learning for industrialization”
and Sons. Int. Soc. Sci. J., p. 168.
Chen Jin (2005) “Towards Indigenous Innovation: Pathways for Chinese Kim L (1998). “Crisis Construction and Organizational Learning: Capability
Firms” The presentation at Workshop of “Technology Innovation and Building in Catching-up at Hyundai Motor,” Organization Science
Economic Development”, May 25-27th, Hangzhou, Zhejiang, China July-August, 9 (4): 506-521.
Chen J, Xu Q (2000). “Innovation strategy for building indigenous Kim L, Utterback, James M (1983). “The Evolution of Organizational
technological innovation capability in China” Journal of 217ejiang Structure and Technology In A Developing Country” J. Manage. Sci.,
University (Science), 1(2): 229- 232. 29(10).
Chen J, Jin X, He Y-B, Yao W (2006). “TIM based indigenous innovation: Kim Y, Kim L, Lee J (1989). “Technological behavior of local pharmaceutical
experiences from Haier Group” IEEE Int. Conference on Manage. firms in Korea: A multivariate analysis,” Technol. Anal. Strateg. Manage.,
Innovation and Technol., (1): 21-23 June 2006 Page(s):207 - 210 1(1): 29-49.
Choi Y (2010). “Korean Innovation Model, Revisited” STI Policy Rev., 1 (1): Kim L, Hosun L (1987). “Patterns of technological change in a rapidly
93-109 developing country: A synthesis,” Technovation, 6(4): 261-276.
Cohen WM, Levinthal DA, (1990), "Absorptive Capacity: A New Perspective Lee J, Bae Z-t, Choi D-k (1988). “Technology Development Processes: A
on Learning and Innovation," Administrative Sci. Quart., 35, 128-152. Model for a Developing Country with a Global Perspective.” R&D Manage.,
Dahlman CJ, Ross-Larson B, Westphal LE (1987). “Managing 18(3) 235-250.
Technological Development: Lessons from the Newly Industrializing Lee K, Chaisung L (2001). “Technological Regimes, Catching-up and
Countries.” World Dev., 15 (6): 759-775. Leapfrogging: Findings from the Korean Industries”, Res. Pol., 30(3):
Display Search (2010). Semiconductors. Retrieved Nov 30, 2010 from 459-483.
http://www.displaysearch.com Lee S-B, Mikyoung L, Michael P (2004). Korea's Electronics Industry.
Frank WAY (2010) DRAM Market Outlook. SEMICON Taiwan 2010 GSA Mason HR (1974). “The Selection of Technology: A Continuing Dilemma”
Memory Conference, Taiwan, Sept, Morgan Stanley Research Columbia Journal of World Business, Summer, 9(2): 6, 29.
IDC Korea (2010). Semiconductors. Retrieved Nov 30, 2010 from
http://www.idckorea.com
Interbrand (2009), Best Global Brands 2009, Interbrand, New York, NY.
Isuppli (2010). Memory & Storage. Retrieved Nov 30, 2010 from
http://www.isuppli.com
Gartner (2010). Semiconductors. Retrieved Nov 30, 2010 from
http://www.gartner.com/technology/home.jsp
 World Economic Forum (2000). The Global Competitiveness Report 2000,
Oxford University Press.
Xu Q (2005) “TIM-Based Indigenous Innovation :Best Practice of Haier &
other Manufacturers” The presentation at the First Forum on Global
Manufacturing and China, Hang Zhou, Zhejiang ,China.
Xu Q, Chen J (1997). “Pathways for the Improvement of Indigenous
Technological Innovation in Developing Countries” IEEE Trans. Eng.
Manage., pp. 179 -182.
Xu Q, Chen J, Guo BJ, (1998). “Perspective of Technological Innovation
and Technology Management in China” IEEE Trans. Eng. Manage.,
45(4): 381-387.
NAS (1973). U.S. International Firms and R, D, & E in Developing Countries
National Academy of Sciences, Washington, D.C.
Ozawa T (1974). Japan's Technological Challenge to the West 1950-/974:
Motivation and Accomplishment. MIT Press, Cambridge, MA.
SEC; Samsung Electronics Co. Ltd. (Producer) (2010) Vision and Strategy
(video show). (On-line) Available
http://www.samsung.com/us/aboutsamsung/ir/newsMain.do, accessed
on June 17.
SEC (2010b). 2009-2010 Sustainability Report. Retrieved June 10, 2010
from Samsung Electronics website.
Shrivastava P (1985). "Technological innovation in developing countries".
Columbia J. World Bus., 19: 23-30.
Utterback JM, Abernathy WJ (1976). “The dynamic model of product and
process innovation” Omega, 3: 639-655.
Utterback JM (1994), Mastering the Dynamics Innovation. Cambridge, MA:
Harvard Business School Press.

View publication stats