A New Geography of Knowledge in the Electronics Industry? Asia's Role in Global Innovation Networks

Abstract

Political debates about globalization are focused on offshore outsourcing of manufacturing and services. But these debates neglect an important change in the geography of knowledge -- the emergence of global innovation networks (GINs) that integrate dispersed engineering, product development, and research activities across geographic borders. This new form of global corporate networking poses new challenges and opportunities for policy-relevant research on globalization. The challenge is to trace and decipher the increasingly complex forms of these networks, which have expanded well beyond the traditional centers of the global economy in the United States, the EU, and Japan.An equally important challenge is to identify the drivers and impacts of these global networks, which are pushing interdependence among national economies and their innovation systems to historically unprecedented levels. Global corporations construct GINs as they seek to increase their return on investment and penetrate high-growth emerging markets. Although governments until recently have been only marginal players, the global economic recession has forced them to redefine and increase their involvement.At the same time, the study of GINs provides a powerful tool for sharpening the research agenda of international economics, economic geography, and international relations (and its most recent offspring, global studies) and for developing new policy responses.The spread of GINs has intensified technology-based global competition, brutally exposing structural deficiencies of current learning and innovation strategies at the firm level and technology policy at the industry level. However, many of these debates are focused on the leading large economies, and the main concern is how to foster breakthrough innovations that can support technology leadership. This monograph draws on a unique database of GINs in the electronics industry to explore the GINs’ drivers and impacts. It specifically highlights Asia’s role and discusses how integration of Asian firms into these networks affects learning, capability formation, and innovation.The argument of this study can be summarized as follows:First, the emergence of GINs is currently taking place, and is not merely something that can be expected to occur in the future. In fact, we are now in the middle of a rapid expansion of these networks. The main driver of these networks is outsourcing, which draws on the relentless slicing and dicing (“modularization”) of engineering, development, and research. This process is complex, involving multiple actors and firms of different size, and has resulted in a diversity of networking strategies and network architectures. This study highlights the systemic nature of the forces that are driving and enabling the geographical dispersion of innovation networks. Second, GINs have expanded well beyond the traditional high-tech regions in the United States, the EU, and Japan. There are now multiple locations for innovation, and even lower-order or less developed centers can still be sources of innovation. Asia’s role in these networks, formerly quite minor, is increasing. The resurgence of China and India as important markets and production sites plays an important role in that increase. The speed of learning in some of the new Asian innovation offshoring hubs is impressive, giving rise to increasingly broad-based portfolios of innovative capabilities. However, the new geography of knowledge is not a flatter world. Instead, the offshoring of research and development (RD 2) Asian firms now must increase RD and 3) integration into diverse networks of production and innovation provide new opportunities for “technology diversification” as a complementary alternative to “technology leadership” strategies that is within the reach of Asian emerging economies.Future research needs to address the potentially game-changing impact of the current breakdown of the financial system and the resultant collapse of international trade and investment. There are now clear signs that Asia’s prospects for investment and employment are grim and that demand and GDP growth will slow down significantly. It is unclear at this stage, however, how this will affect Asia’s innovative capacity and its response to the emerging new geography of knowledge. Future research thus needs to explore whether the crisis will facilitate or disrupt Asia’s integration into global networks of production and innovation.