Government Industrial Policy Research Articles

Rethinking the Taiwanese Developmental State

The uniqueness of Taiwan's industrialization is that small and medium-sized enterprises (SMEs) had been the major contributors to exports. What has been responsible for the success of the SMEs? How far and in what ways did the state contribute to their success: can it be attributed to the government's industrial policy? The statist account of Taiwan's development, a dominant approach to explain its economic growth, is weak in answering these questions. This article argues that the existence of a unique industrial structure was key in the explanation of Taiwan's SME-led exports. The industrial structure was basically a consequence of the state's political strategies that determined its public policy towards the private sector. It argues that the market rather than industrial policy was the explanation of the industrial success of SMEs; the economic bureaucracy was a world of politics rather than a range of monolithic institutions; and strongman tactics rather than institutions were the source of state steering capacity and were responsible for the success of industrial policy. It concludes that Taiwan's development was a “politically inspired industrial success” rather than a state-led development.

The Taiwanese system of innovation in the information industry

This paper shows the importance of national systems in the innovation process, based on the illustrative case study of Taiwan's information technology (IT) industry. The study of this case demonstrates that: (1) strong firms, (2) industrial networks, (3) government industrial policy, (4) public R&D organisations, (5) education institutions, (6) financial institutions and (7) transnational corporations, all matter to technological diffusion success.

Südkoreas Regionalentwicklung im Spannungsfeld zwischen nationaler Wirtschaftsentwicklung, Regionalismus und Regionalpolitik

South Korea´s regional development: Between national economic development, regionalism, and regional policy: South Korea’s successful economic growth model, which was based on strong central government trade, industrial and technology policies, has long been emulated by policy-makers from many developing countries. During the last two years of the 20th Century, however, South Korea was faced with the severest economic crisis since the Korean War. The strong central government backing of both the financial sector and the chaebol (large enterprises) has led to inefficient allocations of resources and large enterprise debts. The current crisis might lead to increasing devolution of political power to the regional level. This would enable regions to become more active in tackling the country’s regional inequalities and in promoting innovation networks between large enterprises, small and medium-sized enterprises, universities and public research establishments

Policies for Competitiveness: Comparing Business–Government Relations in the Golden Age of Capitalism. Edited by Hideaki Miyajima, Takeo Kikkawa, and Takashi Hikino. Oxford: Oxford University Press, 1999. Pp. xii, 344. A History of Japanese Trade and Industry Policy. Edited by Mikio Sumiya. Oxford: Oxford University Press, 2000. Pp. viii, 662.

Readers may remember some of the ironies of the 1980s debate—largely an American debate—about Japan and industrial policy, the outlines of which are recounted by Takeo Kikkawa and Takashi Hikino in Policies for Competitiveness. On the one hand were the institutional economists, who believed that government industrial policies could be good for growth, and that Japan was a clear illustration of the fact. Institutionalists were themselves divided into those who drew the conclusion that stagnant America could use a strong dose of industrial policy itself, and those (who became known as Japan-bashers and level-playing-fielders) for whom Japan's industrial policies were simply an unfair, quasi-communist arrangement for taking market share away from virtuous Americans who truly believed in freedom. On the other hand were the Chicago true believers, who knew from first principles that interference with market forces was always bad, and so attributed Japan's success to the dynamism generated by brisk market competition. That argument, since it seemed to be not on price but on quality that American industry was losing market share, rather left them in the unpatriotic position of suggesting that America was intrinsically unable to compete.

UK Industrial Policy: Old Tunes on New Instruments?

This paper discusses the current Labour government's industrial policy--as most recently reflected in its document on manufacturing strategy--in the context of industrial policy in the UK over the last 50 years and the form that it has taken elsewhere in Europe. It concludes that the thematic priorities for UK industrial policy in the 1960s--international competitiveness, innovation, competition, and skills--continue to be the key themes of UK policy today. The paper presents data that illustrate the gaps that exist in key indicators of performance between the UK and its main economic competitors. The difference between the 1960s and the 2000s is that there are new instruments of policy. Two areas in particular are focused on--competition policy and technology policy--and an attempt is made to assess the likely effectiveness of these new instruments. The paper concludes that the international evidence base for these new approaches is reasonably robust but that it is still too soon to tell if they are having the hoped-for impact on the performance of the UK economy. Copyright 2002, Oxford University Press.

Enter the dragon: China's computer industry

China transformed its economy by shifting from technological nationalism to a more pragmatic strategy of developing national capabilities in conjunction with multinational corporations. Consistent with this transformation, China has revamped its industrial and technology policies to become a major producer of computer hardware and a major market for computing products. In 2000, mainland Chinese purchased more than seven million PCs, while computer hardware production grew to $23 billion. China's policies clearly drew on the developmental approach of other Asia-Pacific countries that became leaders in the global computer industry through the strong support of government industrial and technology policies. China has likewise become a major force in the global PC industry, as both the most attractive growth market and as a large producer. New challenges loom as China joins the World Trade Organization and faces more pressure to open its market to foreign competition. The paper considers the regional and national environment.

South Korea's economic miracle and crisis: Explanations and regional consequences

South Korea's successful economic growth model, which was based on strong central government trade, industrial and technology policies, has long been emulated by policy‐makers from many developing countries. Since November 1997, however, South Korea has been faced with the severest economic crisis since the Korean War. The strong central government backing of both the financial sector and the chaebol (large enterprises) has led to inefficient allocations of resources and large enterprise debts. The current crisis might lead to increasing devolution of political power to the regional level. This would enable regions to become more active in tackling the country's regional inequalities and in promoting innovation networks between large enterprises, small and medium‐sized enterprises, universities and public research establishments.

Development and innovation in the Japanese chemical industry

This paper sets out to review the process of Japan's post-war economic development and the role of government's industrial policy from a historical perspective. It also reviews – against the background of the fundamental changes in Japan's economic paradigm in the aftermath of the end of the Cold War – the emergence of the Asia–Pacific region, the bursting of the bubble economy and the sharp appreciation of the yen–dollar exchange rate. In particular, the paper examines how the Japanese chemical industry is trying to meet enormous challenges through the restructuring of business operations, intensification of R&D and strategic alliances at home and abroad.

Local Government Finance and Industrial Policy in China

The paper considers the way in which the system of local government finance in China affects the design of local industrial policy. It starts by using recently collected data from selected cities to demonstrate the importance of indirect taxes for financing local services. It then presents a theoretical model which shows how the financing system can lead local governments to distort local industrial structure. Finally, it uses this model to consider whether the 1994 tax reforms can be expected to reduce these distortions.

Foreign investment, industrial restructuring and dependent development in Singapore

Singapore's industrial development and restructuring are very much dependent on foreign investment. Despite the apparent benefits of foreign investment and Singapore's success in export-oriented manufacturing, there are worrisome aspects arising from the large and growing dependency on such investment in the manufacturing sector as Singapore moves toward a developed country status. This article explores some of the consequences of such dependency. In terms of industrial pattern, foreign investment has created and maintained a dualistic industrial structure in manufacturing. Foreign firms and government industrial policies have suppressed and marginalized local entrepreneurship. Export-oriented industrialization has opened the employment doors for women in manufacturing. However, women are predominantly found in low pay, dead end jobs in the assembly line of Singapore's new industrial order. With the implementation of a new wave of industrial restructuring strategies, new capital and technological intensive foreign investments are welcomed and solicited. However, the local labour supply is unable to meet the increased demands. Foreign labour has been called in to fill the gaps. This inevitably distorts labour market outcomes and heightens the income inequality index.

Government interventions and productivity growth

This article investigates the impact of government industrial policy and trade protection of the manufacturing sector in Korea. Empirical results are provided, using four-period panel data for the years 1963 through 1983, for thirty-eight Korean industries in which trade protection reduced growth rates of labor productivity and total factor productivity, while industrial policies, such as tax incentives and subsidized credit, were not correlated with total factor productivity growth in the promoted sectors. The evidence thus implies that less government intervention in trade is linked to higher productivity growth.

Planning for Change: Industrial Policy and Japanese Economic Development, 1945-1990.

What has been the role of government industrial policy in Japan's extraordinary post-war development? How has the role changed in successive phases of growth? What lessons can be learnt from this experience by other nations, be they in the West, or developing countries or economies in transition attempting to introduce competitive market structures? These are some of the main questions addressed in this absorbing and thorough study. Dividing the period into three main phases, the author shows that policy played a crucial role in the initial period of post-war recovery. It did so not by picking winners but by creating a stable base from which development could occur by spreading the cost of introducing market competition over time. In the succeeding high growth period, and more recently, Japan's industrial policy attempts only to promote the development of new technology, and smoothe the decline of sectors that are no longer globally competitive. That Japan itself no longer practices industrial policy on a wide scale is an irony little appreciated by those advocating the adoption of a Japan-style industrial policy elswhere.

Current Trends and Issues in Studies of Local Economy in Thailand

Many of studies of the Thai economy have so far had little concern for local cities on the premise that Thailand consists of a capital city, that is, Bangkok, and the rural area, that is, the rest of the country. Even when local cities are studied, they used to be regarded just as target areas for administrative control and regional development programs by the central government, and/or for exploitation by external big companies. In short, those studies paid little attention to actors within local economies.In contrast to those studies mentioned above, the current studies increasingly make efforts to understand local economy from some internal viewpoint by putting emphasis on the active behavior of provincial businessmen, some of the most important economic actors in local cities. The aim of this paper is to review the current trends of these studies and to point out issues to be further studied. The results are summarized in the following three respects:First, since the end of 1970's, not a few scholars belonging to the so-called“political economy school (Samnak Setthasat-kanmuang)”have published the results of their research on the history of development and political behavior of provincial businessmen who base their business activities upon local cities.However, these studies statically considered provincial businessmen as merchant capitalists, dependent capitalists, or Jao Pho. As a result, they underestimated the dynamic aspect of their business expansion and the variety of their responses to the changing politico-economic situation.To the contrary, it is necessary to make thoroughly positive researches of the active behavior of provincial businessmen in the changing conditions in the intra-national and international economy, political power structure, the government's economic and industrial policy, and in relation to external capital. At the same time, it is important to avoid defining a priori the existence, form and role of provincial businessmen.Second, full attention should be also paid to the role and function of provincial business associations. It is true that as studies on Jao Pho have already shown, there are big businessmen at the provincial level who can exert great influence (itthiphon) upon provincial government officials and politicians as well as upon the local business world. But at the same time, it should be realized that there are not only such influential businessmen but also many provincial businessmen who make efforts to do business sometimes by cooperating with others through formal business associations at the provincial level (e.g. provincial chambers of commerce). Moreover, provincial business associations increasingly are expanding the scope of their activities.However, those provincial business associations such as provincial chambers of commerce have a relatively short history and have played still limited roles in the policy-making process of the government. It is necessary, therefore, to conduct further research on the roles and limitation of provincial business associations in terms of their historical background of organizing themselves and the relative position of those associations in the local business world.Third and lastly, comparative studies of local cities within Thailand are also necessary. Judging from some cases on which studies of Jao Pho are based, the arguments of those studies may be persuasive. However, studies of other cases indicate that there are at least some cities with a more pluralistic social form to which the Jao Pho model does not apply.What socio-economic factors bring about such differences between areas? This is also one of the issues to be further studied.

Indonesia: From ‘chronic dropout’ to ‘miracle’?

AbstractThis paper reviews Indonesia's development record and policy framework, focusing in particular on its industrial policy regime. Although not matching the Asian Tigers in its economic performance since 1970, the country has one of the most creditable records in the Third World. Indonesia has resembled its East Asian neighbours in its generally conservative macroeconomic management and, since the mid‐1980s, in its export orientation. However, it is difficult to discern any evidence to support the proposition that the government's industrial policy—in the sense of selective, micro‐level interventions—has contributed to Indonesia's rapid industrialization. A case could be made for more non‐discretionary intervention to enhance supply‐side capabilities, especially in the areas of education and training.

Planning for change: industrial policy and Japanese economic development, 1945-1990

What has been the role of government industrial policy in Japan's extraordinary post-war development? How has the role changed in successive phases of growth? What lessons can be learnt from this experience by other nations, be they in the West, or developing countries or economies in transition attempting to introduce competitive market structures? These are some of the main questions addressed in this absorbing and thorough study. Dividing the period into three main phases, the author shows that policy played a crucial role in the initial period of post-war recovery. It did so not by picking winners but by creating a stable base from which development could occur by spreading the cost of introducing market competition over time. In the succeeding high growth period, and more recently, Japan's industrial policy attempts only to promote the development of new technology, and smoothe the decline of sectors that are no longer globally competitive. That Japan itself no longer practices industrial policy on a wide scale is an irony little appreciated by those advocating the adoption of a Japan-style industrial policy elswhere.

Human resources and industrial development: new social roles

The key to successful industrial development is a move away from free market systems. These systems constrain people's talents. They are characterised by concentrated decision–making power, leading to such problems as product market monopolisation, deindustrialisation and constrained technological change. In contrast, it is desirable to cultivate a diffuse, deconcentrated economic process where people are given new roles in society. We advocate a process where communities strategically plan their own futures and do so using markets as an instrument. Government industrial policies – for example measures to influence technological progress – should be designed and assessed in the context of nurturing such democratic economies.

General equilibrium evaluation of industrial policy in Japan

A question of continuing controversy is whether the Japanese economy responded to government industrial policy carried out in the early 1960s. Using a multisectoral computable general equilibrium model, we find that it did indeed respond and that incorporating more realistic features of industrial organization in the model are critical. While sector-specific policy has little effect in a competitive model, the existence of scale economies amplifies the effects of industrial policy on sectoral output, trade flows, and resource allocation. When the effects of all instruments are combined, the steel and transportation equipment industries benefitted the most from industrial targeting, by expanding production levels and promoting exports. ( JEL 053, F14)

Intervention by Outsiders: A Strategic Management Perspective on Government Industrial Policy

ABSTRACTAs the debate throughout the eighties has concluded, the efforts of governments to intervene at the firm level has largely been disappointing. Using two examples drawn from the British experience, Rover and Inmos, this paper offers an analysis as to why the Government has encountered difficulties when it has sought to intervene in a strategic fashion. Essentially, public policy makers lack adequate mechanisms to intervene effectively in technology-based companies. Locked out of the knowledge base of the firm, inappropriate financial control is imposed which reinforces the ‘outsider’ status of the Government. Having addressed the limitations of strategic intervention, the paper, drawing on the comparative experience of other countries, then goes on to address how this policy boundary might be pushed back in the long term.

INDUSTRIAL POLICY AND INDUSTRIAL PARK DEVELOPMENT IN HONG KONG

Abstract Hong Kong government's industrial policy is basically non-intervention. Its role in industrial development is mainly through the provision of infrastructural and development supports and investment promotion programmes. Industrial estate is used as a means for promoting industrial diversification and the development of high technology industries by leasing land to qualified industries at development cost which is substantially lower than the market price. Recently, Hong Kong is considering developing science parks to promote the development of high technology industries. Experience of science park development in other countries shows that the development of science park is not a necessary and sufficient condition for the development of high technology industries. There is a need for other supporting policies and programmes. Much financial, institutional, and policy commitments of the government are needed if high technology industries are to be developed in Hong Kong.

Industry Structure as a Competitive Advantage: The History of Japan's Post-war Steel Industry

This article examines the role of the Japanese government in the development of Japan's post-war steel industry. It argues that the Japanese government's industrial policies facilitated the rapid growth and success of Japanese steel companies in the world market. During the early post-war years, the government instituted a set of comprehensive policies which constrained the supply of steel in Japan's market and contributed to the development of large-scale plants and the full exploitation of the economies of scale in steel manufacturing. The Japanese steel industry's sizable cost advantage, of course, derived from more than government policies alone. But, as this article will argue, through the Ministry of Trade and Industry, the Japanese government used its power to exploit the economics of capital-intensive industries and accelerate the formation of an efficient steel oligopoly in Japan.