Is government investment in R&D and market environment needed for indigenous private R&D in less developed countries?: Evidence from Korea

An effective innovation policy for the less developed countries might be different from that for the advanced ones. Where demand for technology from the private sector is still dormant, the appropriate market environment, such as a well-behaved price mechanism and a competitive market structure, should be established to stimulate indigenous demand for technology, as a prior stage to linkage between demand and supply. Government R&D expenditure has to be made for a certain period of time, as a necessary condition for indigenous private R&D. Employing the time series analysis to the case of Korea, the flow of causality between government and private R&D expenditure is identified as evidence of this argument. Copyright , Beech Tree Publishing.