Using the service innovation system model, the development of Korean online game industry is
analyzed. The model proposed by Gallouj (2002) is modified in order to reflect IT service
characteristics such as network externalities. Success factors and innovations patterns of Korean
online game industry are examined. First, at the early stage of her growth, Korean online game
industry was not supported or coordinated by any Government policies unlike DRAM, CDMA or
TFT-LCD. Many parts of technical and service innovations were unintentionally initiated by online game
developing ventures without predeterminde strategies. Second, the online game industry is basically a
service industry so that users’ needs and technical and service characteristics are intertwined to
produce innovation. The innovation system of the online game industry is quite different from
conventional product technological innovation systems in a sense that there are no blueprints for
innovation as well as major players in the system. Third, Government’s policies for promotion of IT
industry such as the broadband infrastructure installation policy, the hi-tech venture promotion policy
and the military exemption policy contributed greatly to development of the online game industry.
However, these policy tools were not intended for online game industry but in the end gave a great
impact on the service innovation system of the online game industry.