[Editorial] Taking Technology from Mid-Sized Companies

They say it is not uncommon for technology developed with much effort by mid-sized companies to then be snatched up by conglomerates that frequently go and get a patent for a similar technology and then drag around smaller companies in lawsuits or threaten not to do business with them until they surrender their know-how. You are shocked to hear some conglomerate executives express their erroneous views when they say their companies cannot compete internationally if they pay royalties for everything.

One of the more serious issues of concern for the Korean economy is the widening difference in the earnings of conglomerates and mid-sized companies. Conglomerates rationalize it by saying the difference is because mid-sized companies are less productive. Differences in productivity usually come from differences in technology. So when conglomerates take technology from mid-sized companies and the difference gets bigger that is not only wrong, it is harmful to both sides. Over the long run mid-sized companies will go bankrupt and conglomerates will suffer the consequences.

The Korean economy is already beyond the stage where high growth can be achieved with larger transfusions of labor and capital. Now the growth has to be powered by technology, and that first and foremost will require that technological development gets the proper compensated. When conglomerates seize technology from mid-sized companies they are destroying any desire that is left to engage in development. They could go to court, but for mid-sized companies with no money that is not easy. By the time the law straightens things out, sometimes the patent does not mean anything anymore.

When executives from conglomerates and mid-sized companies met with president Roh Moo Hyun at Cheong Wa Dae to discuss ways to cooperate it was agreed that they would share their accomplishments. In response, some conglomerates are moving to transfer some of their patents to mid-sized companies. That is a welcome development. But if it is to be praised as part of an effort towards true co-existence, conglomerates have to start by giving technology developed by mid-sized companies the respect it deserves.

The Hankyoreh, 2 June 2005.

[Translations by Seoul Selection (PMS)]