Research and Development (R&D) has long been considered a main driver of innovation and economic growth worldwide, and Korea is in the vanguard of that movement. R&D investment here has continuously risen over the course of the last decade: the annual growth rate of R&D investment reached 10.9% in 2016, with total R&D investments of 59.8 billion USD, good for 5th place among OECD countries. Korea’s R&D intensity--defined as the ratio of R&D investment to GDP--ranks 2nd place, further demonstrating the nation’s commitment to developing new innovations. But Korea has focused on increasing aggregate R&D expenditure without particular concern for the efficiency of said investments based on the belief that greater investment promises better R&D performance and ultimately contributes to economic growth. In this regard, national and regional governments have released explicit targets for R&D investment with a goal of increasing gross outlays on R&D to a specified level of GDP within a set time frame, or by achieving a certain ranking among OECD countries in R&D intensity. Such targets reflect a growing recognition of a kind of formulaic relationship between R&D, innovation and economic growth, and a widespread attempt to use science and technology policy to meet economic objectives. Increased levels of R&D funding are viewed as inputs in an innovation formula, the outputs of which are improved economic performance, productivity boosts, higher wages and a better standard of living.Yet Korea lags behind other OECD countries when it comes to actual R&D performance in spite of rapid increases of R&D investment. When it comes to R&D output, the number of academic papers published in refereed journals by Korean authors since 2013 ranks just 29th among OECD countries. And when taking into account the quality of the journals themselves, R&D performance is even worse. As shown in Figure 2, the number of Korean publications in the top quartile of journals per GDP is just one third that of the top OECD countries. Eco when it comes to actual R&D performance in spite of rapid increases of R&D investment. When it comes to R&D output, the number of academic papers published in refereed journals by Korean authors since 2013 ranks just 29th among OECD countries. And when taking into account the quality of the journals themselves, R&D performance is even worse. As shown in Figure 2, the number of Korean publications in the top quartile of journals per GDP is just one third that of the top OECD countries. Economic performance shows the same figures. GDP per capita in the year of 2015 ranks 18th among OECD countries and the position has not improved since. Productivity indicators also show a low level of performance in Korea. Figure 3 shows the productivity of OECD countries, sorted by GDP per hour relative to the U.S. As the data shows, GDP per hour worked in Korea is just half that of the U.S., and lags well behind most OECD countries.The unbalance between the high level of R&D investment and low performance in Korea implies that R&D policy focusing on the continued expansion of R&D investment neither guarantees innovation performance nor leads to economic performance. It also suggests it is necessary to examine how R&D investment can lead to performance from the perspective of R&D efficiency. This is because if R&D investment doesn’t ultimately result in improvements in economic performance due to inefficiencies in the process itself, R&D outlays can actually result in the loss of resources from an economic point of view.Therefore, R&D efficiency, defined as the ratio of R&D input to performance, is a key factor in performance. Korea can achieve better performance with lower inputs if it can improve its R&D efficiency. Hence, I focus on R&D efficiency rather than R&D investment in this paper and intend to measure R&D efficiency to examine its determinants in Korea
