New Korean Policy Center in Leading US Think Tank Calls for New Economic Playbook to Drive Growth; Plan Emphasizes Technological Innovation, Not Just Exports
SEOUL—A new policy center devoted to Korean innovation and competitiveness unveiled an economic plan this week calling for the South Korean government to shift from its longstanding strategy of export-led growth to a new model emphasizing broad-based technological innovation to boost productivity.
The Center for Korean Innovation and Competitiveness is part of the Washington, DC-based Information Technology and Innovation Foundation (ITIF), the world’s leading think tank for science and technology policy.
“South Korea must shift away from export-led growth to broad-based innovation in order to sustain robust long-term growth and global competitiveness,” said ITIF President Robert D. Atkinson. “The ‘fast follower’ model built on scale manufacturing and exports served Korea well in an era of open markets and stable globalization, but that era is over. With the rise of Chinese tech dominance and U.S. tariffs, Korea’s resilience now depends on addressing internal economic imbalances and modernizing its policy framework to drive broad-based innovation.”
While ITIF has collaborated closely with Korean policymakers, industry leaders, and academics for years, its new Center for Korean Innovation and Competitiveness marks a long-term commitment to supporting Korea’s innovation policy from a full-time presence in Seoul.
Korea’s productivity growth is slowing, its population is aging, and too few innovation-driven firms are scaling into global leaders. In addition, the Korean innovation system must transition more effectively to become a first-in-the-world innovator. These structural challenges demand targeted reforms based on global best practices tailored to Korea’s industrial context. The Center aims to equip policymakers with practical, evidence-based policy recommendations to reverse these trends and revitalize national competitiveness.
“Looking ahead, the Center’s enduring vision is to position Korea as a rule-setter in global tech governance and a stronger partner in the U.S.–ROK innovation alliance,” said Sejin Kim, associate director of the Center. “Our research agenda will tackle Korea’s most urgent industrial and technological challenges—from boosting labor productivity and enabling small and medium-sized enterprises (SMEs) scale-up to advancing digital innovation and high-value trade.”
Priority research areas include AI, semiconductors, robotics, displays, and next-generation digital infrastructure—domains central to Korea’s economic future and global competitiveness.
A central focus of the Center’s work is regulatory modernization. By promoting smart, innovation-friendly rules that align with democratic allies and support business growth, the Center aims to help Korea build a regulatory environment that fosters fair competition, yet enables technology-based firms to achieve the scale needed to compete effectively in global markets.
The Center’s launch is part of a broader ITIF mission to strengthen techno-economic cooperation among U.S. allies, with Korea selected as its first Asia-based hub. Kim serves as ITIF’s lead representative in Seoul.
The Center released its economic plan in a new report outlining why Korea must transition from scale- and export-based growth to a productivity-led strategy grounded in domestic innovation and structural reform.
As the report notes, while SMEs represent 99 percent of Korean firms, productivity remains disproportionately concentrated in a handful of large exporters. These large firms account for just under 14 percent of Korean jobs, compared with nearly 58 percent in the United States and over 40 percent in Germany. Increasing the share of Korea’s economic output generated by mid- and large-sized firms is essential to address national demographic pressures and to create quality jobs for the large number of college-educated Koreans.
To institutionalize this shift, the report, among other measures, calls on the incoming administration to reconstitute the Ministry of SMEs and Startups (MSS) into a new “Ministry of Enterprise Growth.”
“It’s time to scale up, not shelter. The revised Ministry of Enterprise Growth would shift its mandate from protection to progression, focusing on helping competitive SMEs graduate into mid-sized and large firms through digital adoption, platform integration, and mergers and acquisitions,” said Kim. “That also means redesigning policy tools, such as grants, credit, and procurement preferences, around this mission of graduation, with clear productivity thresholds and firm-level performance targets.”
The report outlines a next-generation productivity strategy for South Korea built on four pillars, offering a playbook for expanding the nation's innovation potential and restoring economic dynamism, with twenty actionable recommendations—alongside the proposed ministry—organized under the framework.
The four pillars and key recommended actions include:
1. Embrace Size Neutrality and Help Competitive Firms Expand. Shift away from protectionist, survival-focused SME policies and toward growth-oriented frameworks that reward scale, productivity, and innovation. Eliminate institutional biases that keep firms small and fragmented, and adopt size-neutral rules that empower high-performing firms to grow and compete globally.
Recommended actions:
- Rewrite the Korean Fair Trade Commission’s (KFTC) charter to eliminate explicit or implicit mandates that prioritize the protection of small firms as a class.
- Urge the KFTC to withdraw support for the Platform Competition Promotion Act and the Partial Amendment Bill.
2. Redesign Policy Instruments and Structures to Reward Productivity. Tie SME support to measurable productivity gains—such as the adoption of data analytics and modern tools—while phasing out outdated regulatory protections that entrench inefficiency. Replace fragmented support systems with targeted policy frameworks that scale what works.
Recommended actions:
- Launch a Graduation Accelerator Fund to support consolidation and platform integration in fragmented, low-productivity service sectors.
- Establish a Microbusiness Exit and Reallocation Fund to help inefficient firms exit the market and redeploy workers through reskilling and job placement programs.
3. Diffuse Innovation Across All Sectors and Bridge the Digital Divide. Launch a national digital transformation program tailored to lagging service sectors such as logistics, construction, and agriculture. Extend the reach of modern tools, including AI, cloud, and automation, beyond export-driven manufacturing by bundling tech subsidies with last-mile delivery mechanisms that close adoption gaps.
Recommended actions:
- Replace the positive-list, precautionary principle-based regulatory framework with a negative-list approach that enables innovation by default.
- Build a national productivity dashboard to track sector-level digital adoption and output gains in real time.
4. Modernize Labor Markets and Human Capital for the Innovation Economy. Rebuild labor markets around mobility, flexibility, and reentry. Expand the footprint of mid- and large-sized firms to generate high-quality jobs, and create transition pathways that help workers reskill and reenter the workforce through modular education, safety nets, and flexible labor standards.
Recommended actions:
- Create a “closure-to-reemployment” safety net offering income support, retraining stipends, and job placement for displaced workers.
- Transform universities into lifelong learning hubs with modular, stackable credentials and industry-aligned curricula tied to employment outcomes.
- Introduce flexible labor standards that allow contract and hours-based adjustments while preserving essential worker protections.
“The Trump and China era is not just a policy challenge—it’s a structural test. Korea must make three strategic shifts,” said Atkinson. “First, adopt size-neutral policies that reward growth over fragmentation. Second, ensure digital tools reach lagging sectors and workers. Third, build a labor market designed for flexibility and innovation.”
In connection with the Center’s launch, Atkinson and Stephen Ezell, ITIF’s vice president for global innovation policy, are in Korea until May 22, 2025, for in-person discussions aimed at strengthening institutional and government collaboration. Yesterday, Atkinson joined a roundtable on AI and digital policy hosted by the Federation of Korean Information Industries, where he shared insights on Korea’s digital strategy and potential policy shifts under a second Trump administration.
While Kim will serve as ITIF’s local representative, Atkinson, Ezell, and other U.S.-based ITIF experts will continue returning to the ROK as the Center’s work progresses.
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The Information Technology and Innovation Foundation (ITIF) is an independent, nonprofit, nonpartisan research and educational institute focusing on the intersection of technological innovation and public policy. Recognized by its peers in the think tank community as the global center of excellence for science and technology policy, ITIF’s mission is to formulate and promote policy solutions that accelerate innovation and boost productivity to spur growth, opportunity, and progress.
