Global value chains, industry structure, and technology upgrading of local firms: the personal computer industry in Korea and Taiwan during the 1980s

Abstract

This article argues that the modular value chains of the personal computer (PC) industry provide similar windows of opportunity to Korean and Taiwanese firms, however, the local firms have incorporated foreign technology and markets in different ways, and this has resulted in the development of distinctive innovation patterns in Korea and Taiwan. The structural coupling argument emphasizes the right strategies linking foreign technology with domestic conditions, given the governance structure of the industry. The paper compares the processes of different strategic coupling in the Korean and Taiwanese PC industries during the 1980s, individual but overlapping technology licences of big Korean firms versus joint licences by the public research institutes in Taiwan, original equipment manufacturing (OEM) as the momentum for the vertical integration within firms in Korea versus those for the expansion of subcontracting network in Taiwan, and overseas R&D investment on an individual firm basis in Korea versus co-funding and joint ventures in Taiwan. The Korean and Taiwanese cases have implications for other developing countries. The chances of successful technology upgrading are high when domestic assets such as industry structure, government policy and human resources are properly combined with the strategic needs of global lead firms in the industry. It is important for firms and governments in developing countries to find suitable ways of strategic coupling based on a good understanding of the global governance structure of the industry, as well as their domestic advantages.