Newly Industrializing Economies Research Articles

International and Intersectoral R&D Spillovers in the OECD and East Asian Economies

This study empirically explores international and intersectoral R&D spillover effects on the total factor productivity growth of manufacturing and nonmanufacturing sectors based on a pooled time‐series data set of 14 OECD economies and 3 East Asian economies—Korea, Singapore, and Taiwan. The study finds that foreign manufacturing R&D has strong influence on domestic productivity growths of both sectors and that domestic manufacturing R&D has a substantial intersectoral R&D spillover effect on domestic nonmanufacturing productivity growth. The social rates of return to manufacturing R&D are estimated to be two to six times greater than the private rates of return.

R&D in China: an empirical study of Taiwanese IT companies

This study extends the research on R&D (research and development) internationalization to a new environmental context (two Asian newly‐industrialized economies, mainland China and Taiwan). Based on a survey of 56 major Taiwanese information technology (IT) companies, the status of R&D internationalization with Taiwan as the home and mainland China as the host is investigated. Human‐capital‐augmentation is found to be the key motive for Taiwanese IT companies to extend R&D activities to the mainland. Accessing capable yet cost effective local engineers with an additional benefit of geographical and linguistic proximity is the major context of this motive. The location decision is based on three considerations – access to engineers, proximity to manufacturing site, and competition avoidance. Finally, three operational patterns of conducting the international design and development (D&D) activities are categorized, which are ‘home‐base‐integration’, ‘host‐base‐integration’, and ‘product life cycle’.

The future of work: organizational and international perspectives

This paper provides a background context for the further symposium contributions in this issue. It argues that any debate on changes in the workplace must be rooted in specific organizational contexts. The contexts are being altered by changes in technology (telecommunications and information) and heightened competitive pressures brought about by internationalization. However, this does not necessarily mean that traditional forms of work (particularly mass production) have been eradicated. Rather, they have been increasingly dispersed to less-developed economies (LDCs) and newly industrialized economies (NIEs). This process is again set within an organizational context, as multinational corporations have been at the core of such spatial restructuring. Moreover, information technology has been facilitative of such changes. Finally, the paper notes that much of the empirical data, particularly large-scale macro-data, does not point to the transformational change that is described and predicted in some of the more polemic accounts of the future of work. Rather, more incremental changes are indicated. Indeed, a more measured approach to accounts of change is called for, based on rigorous and robust empirical research.

Commercialisation of biotechnology in newly industrialised economies

Biotechnology, the surging wave of economic development in the world, prompted Newly Industrialised Economies (NIEs) in Asia to emulate developed countries in biotechnology development. The stakes are however high and the uncertainty about return on investment has provoked a careful assessment of national scientific and technological strengths. With a focus on Hong Kong, Singapore, and Taiwan, this paper reviews the current market conditions and key factors that may advantage the development of biotechnology industry in the NIEs. It is argued that co-evolution of scientific and technology capabilities are essential, and the NIEs will have to leverage their comparative advantages in technological capabilities and should focus on core competencies in the already locally established biotechnology areas.

Successful factors of the fabless IC industry in Taiwan

Taiwan's fabless industry as a whole is prominent and is the second largest in the world. This success provides some insights into those small economics with limited resources, e.g. Asian Newly Industrialised Economies (NIEs). This research summarises the key success factors of Taiwan's fabless industry. Moreover, the success modes that Taiwanese fabless companies adopted to win out against global competition are also presented. Finally, the challenges Taiwan is facing and the possible future directions are also discussed.

Measuring time-varying capital mobility in East Asia

This paper examines the dynamic capital mobility in East Asia's newly industrialized economies (NIEs). We propose an alternative measure of capital mobility based on an intertemporal current account model that is developed by Shitaba and Shintani [J. Int. Money Financ. 17 (1998) 741]. We present the time-varying parameter estimates to illustrate the different processes of financial liberalization in these developing countries. The results indicate that capital is much more mobile over time, corresponding to the liberalization policies. Our findings are sharply in contrast to the previous studies, which show the lower degree of capital mobility either in developed or in developing countries.

Measuring Productivity Growth in Asia: Do Market Imperfections Matter?

Recent research reports contradictory estimates of productivity growth for the newly industrialized economies (NIEs) of Asia. In particular, estimates using real factor prices find relatively rapid TFP growth; estimates using quantities of inputs and output find relatively low TFP growth. The difference is particularly notable for Singapore, where the difference is about 2-1/4 percentage-points per year. We show that about 2/3 of that difference reflects differences in estimated capital payments. We argue that these differences reflect economically interesting imperfections in output and capital markets, including sizeable economic profits in Singapore and government-directed credit. We derive a measure of technology growth, corrected for the imperfections that we quantify.

Is China's accession to WTO threatening exports of developing countries?

Using the “revealed competitive advantage indices” for exports and imports, the paper is devoted to the analyses of the vulnerability of selected developing countries if China's competitive position is improved due to its entry to World Trade Organization (WTO). In contrast to the existing literature, which concentrates on labour-intensive products as a group, this paper considers products at a disaggregate level because products in the same group are not often homogeneous. It is argued that the competitive effects of China's accession on developing countries are exaggerated in the literature. In labour-intensive manufactured goods, China competes mainly with South Asian countries (e.g., India, Pakistan, Bangladesh, Sri Lanka, and Nepal) and a few Latin American and African countries. However, it also provides them with little demand complementary effects. Nevertheless, some Latin American and African countries may benefit from the expansion of China's imports of foods and agricultural raw materials. In the final market for capital goods, China competes with Asian newly industrializing economies (NIEs) and Association of Southeast Asian Nations (ASEAN) countries and in a limited number of goods with Mexico and Costa Rica. For NIEs, unlike others, such competition involves complementary effects through the import of parts and components, which will overoffset the competition effects in the short and medium run. As China develops its capacity to produce components, however, the “competition” effect may dominate. China's export structure is similar to that of the Republic of Korea and Malaysia in the final market for a number of “finished” capital goods. By contrast, Thailand is vulnerable in clothing, miscellaneous household equipment, and electric machinery. Indonesia has little to worry except for furniture. India concentrates mainly on undergarments and China in outer garments. Bangladesh, Sri Lanka, Pakistan, Viet Nam, and Nepal have similar export structure with China in some clothing items; however, overall, they (particularly Viet Nam) have been aggressive in exportation of these products. Sri Lanka and Pakistan also compete with China in toys and sporting goods, but both have shown some strength in their exports. Except Mexico, Costa Rica, Haiti, and to some extent Uruguay, the export structure of the Latin American countries is mostly different from that of China. Mexico has a strong competitive position vis-à-vis China in a number of clothing items but weaker in a few assembly operations. Costa Rica's competitive advantage has noticeably improved for a number of clothing items and a few assembly operations. Haiti competes with China in eight products, mostly clothing. It has a strong competitive position in footwear, one clothing item, and some base metal. Uruguay's relative competitive position is weak in a number of labour-intensive products. The export structure of African countries is different from that of China, except for Egypt, Morocco, Tunisia, and Malawi. These countries have improved their competitive position in their clothing. China's entry into the WTO will not change, for some time, its market access for textiles and clothing for it to be a threat to other developing countries. Nevertheless, if China attempts devaluation, the situation could change radically. China's devaluation is, however, unlikely. Over a longer term, much depends on what policy China will pursue in its trade and industrialization. China's attempt in increasing domestic value added in exports could lead to improvement in its competitiveness in technology/skill-intensive products of interest to NIEs and the ASEAN.

Innovation in Asian Industrialization: A Gerschenkronian Perspective

This paper interprets the experience of the East and South East Asian electronics industry from a "Gerschenkronian" perspective in order to draw lessons for other developing countries. Following Gerschenkron, the paper argues that it is diversity, rather than unifor mity, in the institutional, technological and development policy arenas (called here "strategic innovation") that characterizes the experience of the Asian newly industrializing economies (NIEs). The experience of the leading export industry shows that the progress of the NIEs can be interpreted as a pattern of substitution of missing prerequisites, in line with Gerschenkron's view of European latecomer industrialization. More broadly, the progress of the NIEs should not be viewed as repetitions of earlier industrialization experiences as they involve significant deviations from the latter, usually entailing distinctive strategic innovations. This interpret ation presents a difficult challenge for those wishing to draw lessons from the Asian NIEs. There are few direct lessons from East and South East Asia for other countries and certainly no transferable or standardized "model" of development. Other paths and patterns of develop ment need to be identified and created that build upon the distinctive resources of individual developing countries. Strategic innovation, trial-and-error learning and variety are likely to continue to characterize successful industrial development in the future.

The alternative classification scheme in the Asian context

This paper essentially shows how a recently‐developed model called the alternative classification scheme (ACS) may be used in the context of the newly‐industrializing economies (NIEs) of the Asia‐Pacific region, possibly the most rapidly‐rising players in the world economy. After nearly a decade of research into Asian economic development strategies, the authors consider future development alternatives. Using the ACS, the authors broadly categorize the range of available strategic alternatives that will drive the NIEs’ development strategies, and discuss the results of such application.

Determinants of foreign patents in China

Abstract This study examines patterns of foreign patents and their determinants in China from 1985 to 1999. It reveals that China’s patent system is not significantly different from those in most countries, though it is more oriented towards promoting technology diffusion rather than protecting inventors’ rights. Since China patent law came into force in 1985, foreign patents, as well as China’s domestic patents have been growing rapidly. The study confirms the substantial differences between foreign patents in China and China’s domestic patents revealed by previous studies. First, foreign patents primarily fall within the category of inventions, whereas the majority of Chinese domestic patents consist of utility models and industrial designs. Second, foreign patents in China are largely awarded to organizations, while individuals comprise the majority of Chinese domestic patentees. Third, foreign patents in China concentrate in a small number of advanced and newly industrialized economies (NIEs). In addition, this study finds that foreign patents in China are primarily driven by demand factors such as imports from the origin countries, while innovative capabilities of the origin countries or their distances from China are not very significant yet. Finally, this study reveals that innovative capabilities of foreign countries are starting to show significant impacts on their patents in China, particularly on inventions, indicating increasing competition in the Chinese market.

Openness and Economic Performance: A Comparative Study of China and the Asian NIEs

Being the world's largest developing economy, China's successful economic performance since 1978 has had a powerful impact on the global economy. Its open policy features an evolutionary process, involving the gradual liberalization of foreign exchange, international trade and foreign direct investments. This paper evaluates how this evolutionary process has contributed to China's economic success in comparison with the development experiences of the Asian newly industrialized economies (NIEs). It concludes that despite the economic crisis in 1997–98, China and the NIEs represent a successful development model, which is built upon openness and huge investments in physical and human capital.

Japanese direct investment in China

This paper uses survey data to study the characteristics of Japanese direct investment in China as compared to those in the newly industrializing economies (NIEs) and in the member countries of ASEAN. Japanese firms invest in China for cost reasons as well as to expand their market shares. This paper also examines the determinants of Japanese direct investment in China using a regional data set from 1990 to 2000. To form a basis of comparison we run similar regressions for the largest foreign direct investor in China: Hong Kong. Local demands affect significantly the inflow of investment from both sources. Wage costs exert a larger influence on Hong Kong investment than on Japanese investment, which can be explained by the difference in the characteristics of investment projects from Hong Kong and those from Japan. Japanese firms appear to be attracted to Economic and Technology Development Zones, whereas Hong Kong firms are more attracted to Special Economic Zones and Open Coastal Cities. The quality of infrastructure matters more for firms from Hong Kong than from Japan. Distance does not affect Japanese direct investment significantly. This may reflect Japan's extensive experience in managing its operations in the global marketplace.

The Global Trading System

Dr Dilip K. Das was educated at the Graduate Institute for International Studies, University of Geneva. He has published extensively on international trade, international finance, and globalization related issues. His most recent books are The Global Trading System at Crossroads: A Post-Seattle Perspective (London and New York: Routledge 2001) and An International Finance Reader (forthcoming 2003).THE SEATTLE MINISTERIALThe principal objective of this article is to give a succinct account of how the global trading system reacted to the well publicized failure at Seattle and the measures it took in various areas during the interim period between the third ministerial conference of the World Trade Organization (WTO) in Seattle in 1999 and the fourth ministerial in Doha, Qatar, in November 2001. Despite, and because of, Seattle a good deal of progress was made during the period, particularly on issues of interest to the developing economies. As the ground to be covered is large, an attempt has been made to deal with the major developments in all of the principal areas, ending with the relevant decisions at Doha, although space constraints preclude exhaustive analysis. The principal sources of material and statistics on various developments in the global trading system and their sequences are WTO publications issued during the interim period and just before the fourth ministerial conference.Disagreements among countries on trade issues, never uncommon, took on a calamitous dimension in 1999 at Seattle,(1) although seeds of discord had existed well before that meeting began. Deep divisions existed along North-South, North-North, and East-West axes, but much of the division of opinion was so complex that it could not be subdivided along any of the conventional axes. Numerous contentious issues that had persisted between major trading economies and country groups were enough to bedevil the preparations for the third ministerial. There was a general belief, however, that these fissures could be narrowed during the Seattle meeting. In addition, the WTO system had a certain proclivity to function in a non-transparent manner. This tendency was a relic of the General Agreement on Tariffs and Trade (GATT) era. Lack of transparency had enormous cost in international negotiations in which 135 country delegations were involved. Hindsight reveals that some of the largest trading countries and country groups tried to manipulate the WTO system, which in turn led to aggravation of mutual distrust and erosion of the credibility of the system. The socalled 'Green Room' consultation process,(2) which had worked well during the GATT era, was found wanting when such a large number of member country delegations were involved.A structural issue came to the surface in Seattle with the presence of a large number of developing countries. Sixty-five developing economies had participated in the negotiations that had led to the formation of the WTO; by November 1999, there were more than 100. Their number reflected strength. A small number of newly industrialized economies (NIEs) were successful traders. Growth and expanding trade had made them more important in the WTO scheme of things. Many developing country members were not satisfied with their past role of sitting on the sidelines; they wanted a larger part in defining the Seattle agenda. The decision-making process of the WTO had not sufficiently evolved to accommodate this new situation.Add to this the growing international backlash against globalization, which was more than an economic or trade issue, an inapt chairperson of the Committee of the Whole,(3) a new and inexperienced director-general of the WTO, and inadequate preparations for the ministerial conference by the WTO secretariat, and it is little wonder then that a new round of multilateral trade negotiations (MTNs) could not be launched in Seattle.(4)Failure at Seattle was a serious setback to the global trading system. …

Technological learning in China’s colour TV (CTV) industry

Despite the significant research progress in the field of technological learning relevant to developing countries, there is very little literature concerning China. This paper aims to start filling this gap in the literature by examining the developement process of China’s CTV industry. This paper suggests that the learning process occurring in China’s CTV industry is inherently the same as that of other NIEs (Newly Industrializing Economies). Meanwhile, there are some differences in technological learning between China and other NIEs. China is a big country with a huge domestic market. Firms in China’s CTV industry can combine marketing skills for the domestic market with imported assembly lines to enter the market and build a brand name in the domestic market. Therefore, it seems that there is a greater opportunity for Chinese firms, compared with latecomer firms from other smaller NIEs, to utilise its cheap labor cost and economies of scale in an international market. Also, this paper draws out lessons from the development of China’s CTV industry, which may be of interest to other developing countries.

Industry evolution and internationalization processes of firms from a newly industrialized economy

Patterns of internationalization processes in industrializing countries seem to differ from the pattern in developed countries as they are reflected in the Uppsala and Innovation models. This study investigates the internationalization process of firms from a newly industrialized economy (NIE) in a mature product sector. The study employs two theoretical perspectives derived from (1) location-centered economic development theories and (2) the firm-centered theories of foreign direct investment (FDI). It explains why firms with few product-oriented specific ownership advantages in an industrializing economy successfully engage in production-related FDI (even from their start-up), and why the elapsed time from start-up to FDI is becoming shorter as the local sector develops. The paper also examines production location choices, showing that tolerance to psychic (cultural) distance increases with successive investments. The hypotheses derived are tested using FDI data from the garment industry of Hong Kong.

Asset-Exploitation Versus Asset-Seeking: Implications for Location Choice of Foreign Direct Investment from Newly Industrialized Economies

This study examined several hypotheses regarding the location choice of foreign direct investment from newly industrialized economies (NIEs). Using a sample of 328 Taiwanese firms in the analysis, this study found that the firms’ motivations had a significant impact on the choice of their investment location (developed countries vs. less developed countries), yet this impact was moderated by the capabilities that the firms possessed. The results suggest that both asset-exploitation and asset-seeking aspects of investments are predictive of the NIE firms’ location choice of investment.

International R&D Spillovers and Trade Expansion: Evidence from East Asian Economies

I. Introduction The rapid growth experience of the Asian newly industrialized economies (NIEs) and the member countries of ASEAN presents an important case study which suggests conditions required for a developing country to catch up. The catch-up hypothesis asserts that in comparisons across countries, the growth rates of productivity in any long period tend to be inversely related to the initial levels of productivity. The basic idea of the hypothesis is related to the level of technology embodied in capital goods. A follower, namely a country whose productivity level is lower can install new capital goods which embody the frontier of technology. Consequently, a follower has the potential to make a larger leap in productivity levels. However, this simple hypothesis also needs qualification. Abramovitz (1986) demonstrated that differences in productivity levels among countries create a strong potentiality for subsequent convergence of productivity levels, provided that countries have an adequate social capability to absorb more advanced technologies. According to Abramovitz (1990), social capability refers to a country's political institutions, its political integration, and the effective consensus in favour of development. Subsequently, with the advent of the new growth theories, a number of studies have provided results supporting conditional convergence. (See Barro and Sala-i-Martin 1991, 1992; Mankiw, Romer, and Weil 1992). Barro and Sala-i-Martin (1995) demonstrated that the growth rate of real per capita gross domestic product (GDP) depends positively on the initial quantity of human capital in the form of educational attainment and health, and negatively on the ratio of government consumption to GDP and political instability. In the endogenous growth framework, many growth models have suggested that a country's productivity depends not only on its own investment in RD Barro and Sala-i-Martin 1995). Since the internationalization of the world economy has reduced the importance of national borders, it is imperative to take into account the influence of international technological spillovers on productivity. In terms of empirical analysis, Bernstein and Mohnen (1994), Branstetter (1996), Coe and Helpman (1995), and Park (1995) explored the effects of international R&D spillovers via production within developed countries. On the other hand, there is little research analysing international R&D spillover effects on developing countries. Two exceptions are Coe, Helpman, and Hoffmaister (1997) who investigated the link between the total factor productivity (TFP) of seventy-seven developing countries and the foreign R&D capital stock, and Basant and Fikkert (1996) who estimated the production function of Indian firms including R&D capital stock in developed countries. However, there is no study focusing on the link between the international R&D spillovers and the rapid industrialization of East Asian economies. (1) This article differs from the existing studies in two important ways. First, it focuses on East Asian economies for the purpose of estimating the relationship between productivity and international R&D spillovers. Second, in order to examine whether there are interactions between the international R&D spillovers and both international trade and foreign direct investment, these factors--as channels of spillovers--are specified in the empirical equations. This article is organized as follows. Section II contains a theoretical justification of the empirical specifications. Section III presents the method of estimation and data description. Estimation results are presented in Section IV. Section V contains concluding remarks. II. An Empirical Specification Coe and Helpman (1995) presented an empirical model based on theoretical models of innovation-driven growth. …

Catching Up in Education in the Economic Catch‐up of Japan with the United States, 1890–1990

I. The Problem and the Approach The record of “modern economic growth” a la Simon Kuznets shows that sustained increases in real national income in advanced market economies depend predominantly on improved efficiency as measured by the growth of total factor productivity (TFP). Real national income is less dependent on increases in conventional inputs, that is, physical capital and labor in personhours. With the strong advocacy of economists such as Theodore Schultz, it has been established that investment in education is a major source of growth in TFP and, hence, national income. Estimations of the contribution of TFP to economic growth in advanced market economies have hitherto been limited to periods after these economies reached a stage of relatively high income. However, recent extensions of growth accounting analysis for earlier stages of industrialization in the United States as well as in Japan show that the contribution of TFP growth to national income growth was relatively minor. These historical findings are also consistent with other studies, indicating that the contribution of TFP growth to economic growth was small in comparison to the contribution of physical capital accumulation in newly industrialized economies (NIEs) in recent decades. Such observations suggest that the role of education may be different between the earlier and the later stages of modern economic growth. The validity of this hypothesis is critical for drawing relevant policy implications for developing economies from the historical experiences of developed economies. Nevertheless, a comprehensive analysis on the role of education covering the entire span of modern economic growth has been stymied by the sheer

Total Factor Productivity Growth in East Asia: Implications for the Future

The total factor productivity (TFP) growth controversy and the recent economic crisis raise many questions about the future growth of East Asia. Our analysis of historical experiences shows that low TFP growth in the East Asian newly industrialized economies (NIEs) is a natural pattern of growth at the initial phase of industrialization. Empirical evidence shows that East Asian NIEs in recent decades have been proceeding toward an efficiency-based growth as developed countries did some time ago. The history of Latin America, however, indicates that the reform of old-fashioned institutions is needed if East Asia is to follow the path of the developed countries.