Innovation and Industrialization in Asia Existing accounts of East Asia’s meteoric growth and structural change has either been explained as one dictated essentially by markets with strong macroeconomic fundamentals, or a consequence of proactive governments This book departs from such a dichotomy by examining inductively the drivers of the experiences Given the evolutionary treatment of each economic good and service as different, this book examines technological catch up with a strong focus on the industries contributing significantly to the economic growth of the countries selected in Asia The evidence produced supports the evolutionary logic of macro, meso and micro interactions between several institutions, depending on the actors involved, structural location and typology of taxonomies and trajectories The book carefully picks out experiences from the populous economies of China, India and Indonesia, the high income economies of Korea and Taiwan, the middle income economies of Malaysia and Thailand, and the transitional least developed country of Myanmar Chapters 1-7 of this book were originally published as a special issue of Journal of the Asia Pacific Economy Rajah Rasiah holds the Khazanah Nasional Chair of Regulatory Studies and is Professor of Technology and Innovation at University of Malaya, Malaysia He is also a Professorial Fellow at UNU-MERIT His research specialization includes science and technology policy, firm-level learning and innovation, healthcare services, foreign investment, cluster mapping and designing technology roadmaps Yeo Lin is Executive Director of the Industrial Development Research Center and Faculty member at the College of Public Administration, Zhejiang University, China Her research focuses on industrial clusters, industrial development and policy, and on low carbon economy Yuri Sadoi is Professor at Meijo University, Nagoya, Japan She specializes on automotive and electronics supplier networks This page intentionally left blank Innovation and Industrialization in Asia Edited by Rajah Rasiah, Yeo Lin and Yuri Sadoi Routledge Taylor & Francis Group LONDON AND NEW YORK First published 2012 by Routledge Park Square, Milton Park, Abingdon, Oxon, OX14 4RN Simultaneously published in the USA and Canada by Routledge 711 Third Avenue, New York, NY 10017 Routledge is an imprint of the Taylor & Francis Group, an informa business © 2012 Taylor & Francis This book is a reproduction of Journal of the Asia Pacific Economy, volume 15, issue The Publisher requests to those authors who may be citing this book to state, also, the bibliographical details of the special issue on which the book was based All rights reserved No part of this book may be reprinted or reproduced or utilised in any form or by any electronic, mechanical, or other means, now known or hereafter invented, including photocopying and recording, or in any information storage or retrieval system, without permission in writing from the publishers Trademark notice: Product or corporate names may be trademarks or registered trademarks, and are used only for identification and explanation without intent to infringe British Library Cataloguing in Publication Data A catalogue record for this book is available from the British Library ISBN13: 978-0-415-50545-1 Typeset in Times New Roman by Saxon Graphics Ltd, Derby Publisher’s Note The publisher would like to make readers aware that the chapters in this book may be referred to as articles as they are identical to the articles published in the special issue The publisher accepts responsibility for any inconsistencies that may have arisen in the course of preparing this volume for print Contents Notes on Contributors vii Explaining technological catch-up in Asia Rajah Rasiah, Yeo Lin and Yuri Sadoi Innovation and learning in the integrated circuits industry in Taiwan and China Rajah Rasiah, Xinxin Kong and Yeo Lin The computer software industry as a vehicle of late industrialization: lessons from the Indian case Balaji Parthasarathy 28 Samsung’s catch-up with Sony: an analysis using US patent data Si Hyung Joo and Keun Lee 52 Ownership and technological capabilities in Indonesia’s automotive parts firms Rajah Rasiah and Abdusy Syakur Amin 69 Are electronics firms in Malaysia catching up in the technology ladder? Rajah Rasiah 82 Technological capability of automobile parts suppliers in Thailand Yuri Sadoi 101 Foreign capital and technological specialization of garment firms in Myanmar Myo Myo Myint and Rajah Rasiah 116 Malaysia’s manufacturing innovation experience V G R Chandran, Rajah Rasiah and Peter Wad 128 Index 151 v This page intentionally left blank Notes on Contributors Abdusy Syakur Amin is a lecturer in Industrial Engineering and Management Department, University of Pasundan, Bandung, Indonesia He holds a PhD in Economics from University of Malaya His teaching and research interests focus on technology and innovations, industrial organization and strategic management His recent research includes technological capability upgrading in Indonesian automotive and electronic industries Si Hyung Joo is a doctoral student in the Technology Management, Economics and Policy Program (TEMEP) at Seoul National University His research investigates changes in technological and knowledge regimes and how these relate to innovation strategies and the performance of firms Xinxin Kong holds a PhD in industrial economics from the Institute of Industrial Economics at the Chinese Academy of Social Sciences (CASS) She is an associate researcher at the Institute of Science, Technology and Society at the Chinese Academy of Science and Technology for Development (CASTED), at the Ministry of Science and Technology, China Her research specialization includes industrial innovation and national and corporate innovation strategies Keun Lee is a professor of economics at Seoul National University and the director of the Center for Economic Catch-Up He is the editor of Seoul Journal of Economics and one of the editors of Research Policy His area of research is in the economics of catch-up, with a focus on innovation and corporate strategies, which can be downloaded from www keunlee.com Yeo Lin is a professor at the College of Public Administration and the director of the Industrial Development Research Center, Zhejiang University, China She had previously served as director of the Industrial Economics Research Center at Industrial Technology Research Institute (ITRI, Taiwan, and director of Industry and Market Research Department at Applied Science and Technology Research Institute (ASTRI), Hong Kong Her research specialization includes technology, industry and capacity building Myo Myo Myint works as a research officer at the Friedrich-Ebert Stiftung office in Yangon She holds a PhD in Economics from University of Malaya and her research interests include technological capability building in Myanmar, garment manufacturing, and the business and institutional environment in which firms are embedded vii NOTES ON CONTRIBUTORS Balaji Parthasarathy holds the ICICI Chair and is associate professor at the International Institute of Information Technology, Bangalore His teaching and research interests focus on the relationship between technological innovation, economic globalization and social change with particular focus on the emerging economies Rajah Rasiah holds the Khazanah Nasional chair of regulatory studies and is professor of technology and innovation policy at the Faculty of Economics and Administration, University of Malaya He is also a Professorial Fellow at UNU-MERIT His research focuses on the impact of regulatory frameworks, transnational corporations and intellectual property rights on domestic industrial upgrading and innovations His latest publications include the edited book of Malaysian Economy: Unfolding Growth and Social Change (Kuala Lumpur: Oxford University Press, 2011) and the co-edited book of The New Political Economy of Southeast Asia (Cheltenham: Edward Elgar, 2010) V G R Chandran is a Principal Analyst of Economics and Innovation Policy at Malaysian Industry-Government Group for High Technology, Malaysia He is also a Senior Research Fellow at University of Nottingham, Malaysia and Adjunct Professor at Management and Science University, Malaysia He holds a PhD in Economics and his research interest is in industrial development, technology and innovation policy Yuri Sadoi is a professor in the Faculty of Economics at Meijo University, Japan She received her Ph.D in human and environmental studies from Kyoto University She is the author of Skill Formation in Malaysian Auto Parts Industry (UKM Press, 2003) She is also a co-editor of Production Networks in Asia and Europe: Skill Formation and Technology Transfer in the Automobile Industry (Routledge, 2004) and of Multinationals, Technology and Localization: Automotive and Electronics Firms in Asia (Routledge, 2008) Peter Wad is associate professor at the Department of Intercultural Communication and Management, Copenhagen Business School, Denmark He is a sociologist with a research interest in global and local Asian automobile industries, and corporate off-shoring and outsourcing of production, and innovation activities to Asia He is a co-author of Strategies in Emerging Markets A Case Book on Danish Multinational Corporations in China and India (Copenhagen Business School Press , 2010) viii Explaining technological catch-up in Asia Rajah Rasiah, bYeo Lin and cYuri Sadoi a Faculty of Economics and Administration, University of Malaya, Kuala Lumpur, Malaysia; bCollege of Public Administration and Industrial Development Research Centre, Zhejiang University, Hangzhou, Zhejiang Province, China; cFaculty of Economics, Meijo University, Nagoya, Aichi, Japan a This chapter provides the theoretical guide and introduction to a selected list of papers evaluating the drivers of technological catch-up experiences from Asia It departs from neoclassical preoccupation with markets as the sole or dominant institution of economic allocation by arguing that the evidence supports the evolutionary logic of macro, meso and micro interactions between several institutions, depending on the actors involved, structural location and taxonomic and trajectory elements of technical change Introduction Asia has become the hotbed for the analysis of rapid economic growth and structural change experiences among the emerging economies since the 1980s China, India, Korea, Taiwan and the Southeast Asian economies have increasingly driven developing Asia’s contribution to global gross domestic product While the primary sectors of agriculture and mining have been important in a number of them, manufacturing has been the engine of growth and structural change There has, however, been little consensus over the drivers of these processes of growth and structural change Also, the pace of technical progress, industrial specialization and its consequent effects on gross domestic product has varied among the fast growing Asian developing economies This volume seeks to showcase the technological and economic catch-up experiences of selected firms and industries from Asia with a view to explaining the key drivers The next section discusses the main arguments of the book before the outline is presented in the final section The main arguments Standard neoclassical explanations of Asian industrialization success have been attributed to export growth, trade liberalization and increased focus on the private sector Despite heavy use of industrial policies Korea, Singapore and Taiwan have generally been classified by mainstream economists as liberal economies (Balassa 1982, Krueger 1997) The other high-performance economies of Asia have also been argued to have enjoyed rapid 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 watersheds in the ... 1928 Increasing returns and economic progress Economic journal, 38 (152), 527–542 Innovation and learning in the integrated circuits industry in Taiwan and China Rajah Rasiah,a∗ Xinxin Kongb and. .. research interest in global and local Asian automobile industries, and corporate off-shoring and outsourcing of production, and innovation activities to Asia He is a co-author of Strategies in Emerging... 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,