1.3.1 Goals and Tasks
Th e theory of catch-up industrialization has been the standard view of the development of latecomer countries. It has two core propositions:
fi rst, economic growth depends on technological progress; and second, a latecomer may achieve technological progress faster than advanced countries by exploiting advantages of backwardness. Th e theory com- bines these two propositions and maintains that a latecomer country is equipped to take advantage of the opportunity to attain compressed economic growth. As discussed in Section I, however, the theory is now being challenged by various changes in the Asian countries, especially since the 1990s. Th ere is an urgent need to reexamine our view of the development of latecomers and refi ne the theory of catch-up industrial- ization to acquire a more accurate and comprehensive understanding of the development of latecomer countries and address current trends.
Toward this goal, our study takes on three tasks.
Th e fi rst task is to closely examine the processes of catch-up industrial- ization taking into consideration the aspects that have not been included properly in the conventional theory of catch-up industrialization. More specifi cally, we look at factors other than just technological ones, such as demand for the manufacturing goods produced by latecomer countries, in contrast to the conventional theory, which generally tends to focus on technologies and the supply-side factors. Nontechnological factors may generate opportunities for latecomer countries to build up more diversifi ed development paths, although they may also present obstacles that hinder their development. In addition, we examine the interactions between technological and nontechnological factors.
Th e second task is to analyze the relationship between catch-up indus- trialization and other development mechanisms, particularly forward and backward linkage eff ects. It is highly likely that catch-up industrialization and linkage eff ects and other mechanisms might complement or substi- tute each other. Th e interaction between development mechanisms have not been fully addressed by the conventional theory of catch-up industri-
alization, although Gerschenkron ( 1962 ) briefl y hinted at the combina- tion of linkage eff ects and the advantage of backwardness when citing the example of interactions between the steel industry and the railway industry.
Th e third task is to highlight other newly emerging mechanisms besides catch-up industrialization that make a signifi cant contribution to development. Th is task also includes exploring factors and conditions that have caused these mechanisms to become dominant. Th rough this task, we attempt to place catch-up industrialization as one of various development mechanisms. Furthermore, clarifying the alternative mech- anisms and their foundations is expected to contribute to our review of the conditions for catch-up industrialization.
In addition to these three tasks directly related to our goals, our research also contributes to the reconsideration of the roles of various actors, such as local fi rms, multinational corporations, and governments, as well as the interactions among them. Studies on catch-up industrializa- tion have been closely associated with debate over which actor leads the development of latecomer countries, particularly with respect to the role of government in development. Our study attempts to reassess the role of various actors from an alternate viewpoint of the conventional theory of catch-up industrialization.
1.3.2 Approach
To accomplish the tasks discussed above, our study employs a case study approach at industry and sector levels. Th e industries studied in this project include the semiconductor industry, the fl at panel display industry, the steel industry, the palm oil industry, and the software service industry.
Why do we choose this approach? Th e catching up by a latecomer can be discussed at three levels: the macro level, the industry/sector level, and the fi rm level. At the macro level, catching up means reducing the income gap between the latecomer and advanced countries. In mainstream eco- nomics, this issue is treated as a convergence problem. Indeed, studies on a latecomer’s development originate from a macro-level interest in reducing the income gap between developing and developed countries.
However, macro-level analysis cannot reveal the complicated structure of development mechanisms which are the amalgamation of technolo- gies, markets, management practices, relations among fi rms, government policies, social conditions, and so on, as these factors are abstracted and reduced to aggregate variables such as ‘capital’, ‘labor’, and ‘aggregate production function’. To address development mechanisms more specifi - cally, we need to conduct more detailed analysis that looks at how one or some industries in a latecomer economy develop. Of course, the research results for one or some sectors may not be applicable to other sectors or to the whole economy. To overcome or at least minimize this limitation, we choose to analyze sectors that are signifi cantly relevant to macro-level development. For example, the targeted sectors for this study have pro- duction scales that are important in the country, represent many other sectors with common characteristics, and tend to induce development in other sectors or pioneer new development models followed by others.
In contrast, a fi rm-level approach would be more suitable than a sector- level approach for investigating complicated phenomena in detail.
Furthermore, it might be more eff ective in analyzing global and border- less economic activities. Th is approach may, however, concentrate on factors specifi c to individual fi rms, which means that social capabilities constructed nationwide can be disregarded and relations among fi rms can be regarded as secondary factors. In other words, fi rm-level analysis leaves little room for a concept such as ‘Korean fi rms’. In an extreme case, an analysis on catching up by one fi rm in a developing country with another fi rm in a developed country cannot be distinguished from an analysis about competition between fi rms in advanced countries. Th is case is far from the original motivation for the development studies based on an interest in reducing the income gap between developing and devel- oped countries.
Sector-level analysis has two advantages over fi rm-level analysis. First, the result of an important industry is generally more relevant to macro- economic performance than even the largest single enterprise. Second, sector-level analysis can comprehend multilayer factors in industrial development. On the one hand, it regards fi rms as important elements of a sector. On the other hand, it also enables us to look at social conditions that aff ect all fi rms in the sector in that country and to examine institutional
similarities and synchronized behaviors among fi rms as well as the inter- actions among fi rms in the sector.
Regarding the fi rst and second tasks, an industry-level approach will enable us to closely and integrally analyze various technological and non- technological factors that interact with one another in the complicated structure of catch-up mechanisms, as well as the interactions between catch-up mechanisms and other development mechanisms. Case studies at the industry level are essential for this third task, the core of which is to discover cases of other development mechanisms besides catch-up indus- trialization. Focusing on the industry level rather than on the macro and fi rm levels has these merits.