Explaining technological catch-up in Asia

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This article was downloaded by: [McMaster University]On: 22 December 2014, At: 09:22Publisher: RoutledgeInforma Ltd Registered in England and Wales Registered Number: 1072954 Registeredoffice: Mortimer House, 37-41 Mortimer Street, London W1T 3JH, UKJournal of the Asia Pacific EconomyPublication details, including instructions for authors andsubscription information:http://www.tandfonline.com/loi/rjap20Explaining technological catch-up inAsiaRajah Rasiah a , Yeo Lin b & Yuri Sadoi ca Faculty of Economics and Administration , University of Malaya ,Kuala Lumpur, Malaysiab College of Public Administration and Industrial DevelopmentResearch Centre , Zhejiang University , Hangzhou, ZhejiangProvince, Chinac Faculty of Economics , Meijo University , Nagoya, Aichi, JapanPublished online: 15 Jul 2010.To cite this article: Rajah Rasiah , Yeo Lin & Yuri Sadoi (2010) Explaining technological catch-up inAsia, Journal of the Asia Pacific Economy, 15:3, 221-224, DOI: 10.1080/13547860.2010.494897To link to this article: http://dx.doi.org/10.1080/13547860.2010.494897PLEASE SCROLL DOWN FOR ARTICLETaylor & Francis makes every effort to ensure the accuracy of all the information (theContent) contained in the publications on our platform. 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Terms &Conditions of access and use can be found at http://www.tandfonline.com/page/terms-and-conditionshttp://www.tandfonline.com/loi/rjap20http://www.tandfonline.com/action/showCitFormats?doi=10.1080/13547860.2010.494897http://dx.doi.org/10.1080/13547860.2010.494897http://www.tandfonline.com/page/terms-and-conditionshttp://www.tandfonline.com/page/terms-and-conditionsJournal of the Asia Pacific EconomyVol. 15, No. 3, August 2010, 221224Explaining technological catch-up in AsiaRajah Rasiah,a Yeo Linb and Yuri SadoicaFaculty of Economics and Administration, University of Malaya, Kuala Lumpur, Malaysia;bCollege of Public Administration and Industrial Development Research Centre, ZhejiangUniversity, Hangzhou, Zhejiang Province, China; cFaculty of Economics, Meijo University, Nagoya,Aichi, JapanThis paper provides the theoretical guide and introduction to a selected list of papersevaluating the drivers of technological catch-up experiences from Asia. It departs fromneoclassical preoccupation with markets as the sole or dominant institution of economicallocation by arguing that the evidence supports the evolutionary logic of macro, mesoand micro interactions between several institutions, depending on the actors involved,structural location and taxonomic and trajectory elements of technical change.Keywords: innovation; institutions; technology; catch-up; AsiaJEL classifications: O13, O14, O33, O381. IntroductionAsia has become the hotbed for the analysis of rapid economic growth and structural changeexperiences among the emerging economies since the 1980s. Korea, Taiwan, China, Indiaand the Southeast Asian economies have increasingly driven developing Asias contributionto global gross domestic product. While the primary sectors of agriculture and mininghave been important in a number of them, manufacturing has been the engine of growthand structural change. There has however been little consensus over the drivers of theseprocesses of growth and structural change. Also, the pace of technical progress, industrialspecialization and its consequent effects on gross domestic product has varied among thefast-growing Asian developing economies.This issue seeks to showcase the technological and economic catch-up experiences ofselected firms and industries from Asia with a view to explaining the key drivers. The nextsection discusses the main arguments of the issue before the outline is presented in the finalsection.2. The main argumentsStandard neoclassical explanations of Asian industrialization success have been attributedto export growth, trade liberalization and increased focus on the private sector. Despiteheavy use of industrial policies Korea, Singapore and Taiwan have generally been classi-fied by mainstream economists as liberal economies (Balassa 1982, Krueger 1997). Theother high-performance economies of Asia have also been argued to have enjoyed rapidCorresponding author. Email: rajah@um.edu.myISSN: 1354-7860 print / 1469-9648 onlineC 2010 Taylor & FrancisDOI: 10.1080/13547860.2010.494897http://www.informaworld.comDownloaded by [McMaster University] at 09:22 22 December 2014 222 R. Rasiah et al.growth following liberalization initiatives. Chinas open-door policy since 1978, Malaysiasreturn to liberal policies in 1986 following heavy industrialization initiatives in 19811985,Thailands and Indonesias liberalization efforts since 1986, Vietnams Doi Moi in 1989and Indias liberalization since 1991 have been considered as watersheds in the advent ofmarket forces and its positive role in transforming them into rapid developers. Whereasthe World Bank (1993) for the first time conceded that the Northeast Asian economiesof Korea and Taiwan had developed rapidly through interventions the conclusions simplydismissed their relevance, claiming that they were neither possible anymore because of thechanged pressures in global markets nor worthy of the risks associated with governmentfailure (Fishlow et al. 1994).Contrary to mainstream accounts, heterodox economists advocating industrial policyand catch-up argue that all latecomers have achieved rapid growth and improvements inliving standards only through focusing on the increasing returns activities characterized bymanufacturing. These accounts go back to Smith (1776), Hamilton (1791), List (1885),Young (1928), Gerschenkron (1962), Abramovitz (1956), Kaldor (1960, 1967), Johnson(1982), Amsden (1989), Wade (1990), Chang (2003) and Reinert (2007). Selective gov-ernment intervention to support firm-level technical change and competitiveness has beenthe critical explanation in these accounts. Whereas Marx and later Schumpeter focused onidentifying technology as well as its differentiation into Department I and Department II(in the case of Marx) and Mark I and Mark II (in the case of Schumpeter) as the driver ofgrowth, Nelson and Winter (1982) focused on the institutions that drive technical change (in-cluding incremental engineering and upgrading) and catch-up. Central to Nelsons (2008)argument is that the evolutionary processes of technical change and the critical institu-tions that effect it not only are non-linear in nature but also vary with each differentindustry.Taken together, the papers in this issue seek to discuss important policy-relevant learningand innovation experiences from the rapidly growing Asian economies. Captured throughNelsons (2008) evolutionary lenses, these experiences have been driven by on the onehand, a combination of, policy instruments by governments, flows of knowledge frommultinationals directly (through foreign direct investment) and indirectly (through technol-ogy licensing and experiential knowledge gained by human capital) and, on the other hand,technological catch-up by industrial firms. Some of the firms from these economies haveeven become shapers of global technology e.g. Samsung in dynamic random access mem-ories and Taiwan Semiconductor Manufacturing Corporation in logic circuits (see Mathewsand Cho 2000, Rasiah et al. 2008, Lee and Mathews 2008). To provide a sufficiently broadcoverage of the processes of catch-up and technological change, the issue addresses firm-level catch-up and leapfrogging issues as well as at both a more aggregate level and the firmlevel the interface between policy instruments and technological capability development.3. Issue outlineThe case experiences were carefully selected from Asia on the basis of significance ofparticular industries to national growth, as well as at least some technological catch-up. SiHyung Joo and Keun Lee discuss Koreas Samsungs catch-up strategies against JapansSony. Yuri Sadoi examines the nature and extent of technology transfer from foreign tolocal firms in the automotive industry in Thailand. The remaining papers discuss the extentof learning, innovation and technological catch-up in the semiconductor industry in Chinaand Taiwan, the software industry in Bangalore, the electronics industry in Malaysia, theautomotive industry in Indonesia and the garment industry in Laos.Downloaded by [McMaster University] at 09:22 22 December 2014 Journal of the Asia Pacific Economy 223In this introductory paper, as guest editors we have provided the theoretical anchor forthe evolutionary approach to examining technological catch-up. The six papers that followunderscore the view that technological catch-up is shaped by institutions and institutionalchange through conscious efforts at the macro government-policy level, the meso organiza-tional level and the micro firm level. The process of technological catch-up is thus uneven,varying with time and geographically with industries and institutions.The second paper by Rajah Rasiah, Xinxin Kong and Yeo Lin discusses how theinitial incorporation in multinational value chains through direct operations in Taiwan inthe 1960s and in China in the 1980s only transformed into the higher-value-added waferfabrication and designing operations in semiconductor manufacturing when the governmentlaunched effective high-tech support through labs and design houses. As firms matureinto higher-value-added wafer fabrication and designing activities, most of Taiwaneselabour-intensive semiconductor assembly operations have been relocated to China andSoutheast Asia. Because of its large population, semiconductor manufacturing and exportsin China are still dominated by labour-intensive foreign-dominated assembly operations.However, local firms have increasingly increased their participation in wafer fabricationand design activities, suggesting that these set of local firms may be on the Taiwanese pathof technological catch-up in semiconductor manufacturing.Balaji Parthasarathy argues in the third paper that industry must learn to deploy borrowedtechnology efficiently in production and compete internationally beyond the subsidies thatstates provide. This paper is particularly interesting from an evolutionary standpoint, asit provides evidence to show that the marginal cost of producing software is negligiblefrom the outset, and hence lumpy investments and huge high-tech labs are not a necessaryinvestment to promote software development.In the fourth paper, Si Hyung Joo and Keun Lee discuss Samsung Electronics techno-logical catch-up with Sony. Using the US patents of the two firms, the authors show thatSamsung Electronics catch-up with Sony happened around the early 1990s in qualitativeterms and mid-1990s in quantitative terms. In addition, Samsung Electronics has also be-come independent of Sony by producing novel knowledge, quickening the techno-cyclesand knowledge appropriation.Rajah Rasiah and Abdusy Syakur Amin examine in the fifth paper the development oftechnological capabilities in local automotive parts firms vis-a-vis foreign firms, followingincreased liberalization from the late 1990s. The authors argue that there were no obvi-ous statistical differences in human resource and process technology capabilities betweenforeign and local firms in 2006. The empirical evidence they provide shows that localfirms have invested more in research and development than foreign firms to compensatefor the superior product technologies accessed by the foreign firms from their parent firms.Although foreign firms showed higher export intensities, the evidence they have amassedalso shows that the liberalization experience has driven rather than discouraged strongerinitiatives in local firms to raise technological capabilities.In the sixth paper, Rajah Rasiah examines the development of technological capabilitiesand economic performance in electronics firms in Malaysia. Although the evidence showssubstantial improvement of technological capabilities in both electronics and the special-ized semiconductor firms, the incidence of participation of firms in the highest levels ofknowledge-intensity activities was very low. The evidence also shows that technologicaldeepening through increments in skills and research and development personnel will raiselabour productivity in the industry.The final paper by Yuri Sadoi analyses the development of technological capabilitiesof engineers in automobile parts suppliers in Thailand. The evidence shows that ThailandsDownloaded by [McMaster University] at 09:22 22 December 2014 224 R. Rasiah et al.latecomer firms accumulated their technology primarily from foreign direct investment,particularly from the Japanese car makers. Rising demand and competition have driven someamount of technological catch-up in the industry. To upgrade further the Thai automobilefirms, government policy should focus on strengthening the automotive cluster by steppingup the supply of high-tech human capital to provide the technological deepening necessaryfor the suppliers to upgrade.ReferencesAbramovitz, M., 1956. Resources and output trends in the United States since 1870. 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