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Journal of the Asia Pacific Economy
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Explaining technological catch-up in
Rajah Rasiah a , Yeo Lin b & Yuri Sadoi c
a Faculty of Economics and Administration , University of Malaya ,
Kuala Lumpur, Malaysia
b College of Public Administration and Industrial Development
Research Centre , Zhejiang University , Hangzhou, Zhejiang
c Faculty of Economics , Meijo University , Nagoya, Aichi, Japan
Published online: 15 Jul 2010.
To cite this article: Rajah Rasiah , Yeo Lin & Yuri Sadoi (2010) Explaining technological catch-up in
Asia, Journal of the Asia Pacific Economy, 15:3, 221-224, DOI: 10.1080/13547860.2010.494897
To link to this article: http://dx.doi.org/10.1080/13547860.2010.494897
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222 R. Rasiah et al.
growth following liberalization initiatives. China’s open-door policy since 1978, Malaysia’s
return to liberal policies in 1986 following heavy industrialization initiatives in 1981–1985,
Thailand’s and Indonesia’s liberalization efforts since 1986, Vietnam’s Doi Moi in 1989
and India’s liberalization since 1991 have been considered as watersheds in the advent of
market forces and its positive role in transforming them into rapid developers. Whereas
the World Bank (1993) for the first time conceded that the Northeast Asian economies
of Korea and Taiwan had developed rapidly through interventions the conclusions simply
dismissed their relevance, claiming that they were neither possible anymore because of the
changed pressures in global markets nor worthy of the risks associated with government
failure (Fishlow et al. 1994).
Contrary to mainstream accounts, heterodox economists advocating industrial policy
and catch-up argue that all latecomers have achieved rapid growth and improvements in
living standards only through focusing on the increasing returns activities characterized by
manufacturing. 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 been
the critical explanation in these accounts. Whereas Marx and later Schumpeter focused on
identifying 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 of
growth, Nelson and Winter (1982) focused on the institutions that drive technical change (in-
cluding incremental engineering and upgrading) and catch-up. Central to Nelson’s (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 different
Taken together, the papers in this issue seek to discuss important policy-relevant learning
and innovation experiences from the rapidly growing Asian economies. Captured through
Nelson’s (2008) evolutionary lenses, these experiences have been driven by on the one
hand, a combination of, policy instruments by governments, flows of knowledge from
multinationals 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 have
even become shapers of global technology – e.g. Samsung in dynamic random access mem-
ories and Taiwan Semiconductor Manufacturing Corporation in logic circuits (see Mathews
and Cho 2000, Rasiah et al. 2008, Lee and Mathews 2008). To provide a sufficiently broad
coverage 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 firm
level the interface between policy instruments and technological capability development.
3. Issue outline
The case experiences were carefully selected from Asia on the basis of significance of
particular industries to national growth, as well as at least some technological catch-up. Si
Hyung Joo and Keun Lee discuss Korea’s Samsung’s catch-up strategies against Japan’s
Sony. Yuri Sadoi examines the nature and extent of technology transfer from foreign to
local firms in the automotive industry in Thailand. The remaining papers discuss the extent
of learning, innovation and technological catch-up in the semiconductor industry in China
and Taiwan, the software industry in Bangalore, the electronics industry in Malaysia, the
automotive industry in Indonesia and the garment industry in Laos.
Journal of the Asia Pacific Economy 223
In this introductory paper, as guest editors we have provided the theoretical anchor for
the evolutionary approach to examining technological catch-up. The six papers that follow
underscore the view that technological catch-up is shaped by institutions and institutional
change 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 the
initial incorporation in multinational value chains through direct operations in Taiwan in
the 1960s and in China in the 1980s only transformed into the higher-value-added wafer
fabrication and designing operations in semiconductor manufacturing when the government
launched effective high-tech support through labs and design houses. As firms mature
into higher-value-added wafer fabrication and designing activities, most of Taiwanese
labour-intensive semiconductor assembly operations have been relocated to China and
Southeast Asia. Because of its large population, semiconductor manufacturing and exports
in China are still dominated by labour-intensive foreign-dominated assembly operations.
However, local firms have increasingly increased their participation in wafer fabrication
and design activities, suggesting that these set of local firms may be on the Taiwanese path
of technological catch-up in semiconductor manufacturing.
Balaji Parthasarathy argues in the third paper that industry must learn to deploy borrowed
technology efficiently in production and compete internationally beyond the subsidies that
states provide. This paper is particularly interesting from an evolutionary standpoint, as
it provides evidence to show that the marginal cost of producing software is negligible
from the outset, and hence lumpy investments and huge high-tech labs are not a necessary
investment 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 that
Samsung Electronics’ catch-up with Sony happened around the early 1990s in qualitative
terms and mid-1990s in quantitative terms. In addition, Samsung Electronics has also be-
come independent of Sony by producing novel knowledge, quickening the techno-cycles
and knowledge appropriation.
Rajah Rasiah and Abdusy Syakur Amin examine in the fifth paper the development of
technological capabilities in local automotive parts firms’ vis-à-vis foreign firms, following
increased liberalization from the late 1990s. The authors argue that there were no obvi-
ous statistical differences in human resource and process technology capabilities between
foreign and local firms in 2006. The empirical evidence they provide shows that local
firms have invested more in research and development than foreign firms to compensate
for the superior product technologies accessed by the foreign firms from their parent firms.
Although foreign firms showed higher export intensities, the evidence they have amassed
also shows that the liberalization experience has driven rather than discouraged stronger
initiatives in local firms to raise technological capabilities.
In the sixth paper, Rajah Rasiah examines the development of technological capabilities
and economic performance in electronics firms in Malaysia. Although the evidence shows
substantial improvement of technological capabilities in both electronics and the special-
ized semiconductor firms, the incidence of participation of firms in the highest levels of
knowledge-intensity activities was very low. The evidence also shows that technological
deepening through increments in skills and research and development personnel will raise
labour productivity in the industry.
The final paper by Yuri Sadoi analyses the development of technological capabilities
of engineers in automobile parts suppliers in Thailand. The evidence shows that Thailand’s
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 some
amount of technological catch-up in the industry. To upgrade further the Thai automobile
firms, government policy should focus on strengthening the automotive cluster by stepping
up the supply of high-tech human capital to provide the technological deepening necessary
for the suppliers to upgrade.
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