China Techno Development

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China’s Development Model: An Alternative Strategy for Technological Catch-Up

Working paper

Xielin LIU Visiting Professor Institute of Innovation Research Hitotsubashi University March 22, 2005

Abstract The context in which Chinese firms and, as a nation, China is attempting to catch-up is fundamentally different that that facing earlier latercomers such as Japan and Korea. This paper contrasts these contexts and describes an alternative model of catch-up that can be discerned through an examination of the industries in which Chinese firms are competing successfully. The basic elements of their two-stage catch-up strategy is that they first take advantage of the modularization of manufacturing in an industry, source technology externally, and are intensely market-oriented in their product innovation; only later do they pursue internal capabilities in technological development to generate process and product innovations.


1. INTRODUCTION In the decades that the topic has received attention, two approaches and explanations have emerged to explain the process by which developing countries (those far behind the technological and manufacturing frontier) may be able to “catch up”; namely, accelerate their development and reduce the gap between themselves and the technologically and economically advanced countries. One extends the early neoclassical growth models (e.g., Solow, 1956) in which technology freely spills across country borders and this drives convergence. Another, in contrast, is based in historical, institutional and evolutionary Technology and

traditions and rejects such a simplifying assumption about technology.

innovations are not seen as flowing freely across country (or organizational) boundaries. Instead, technology and especially the innovative process from which it arises and is applied is closely related to specific firms, networks and economic institutions (Freeman, 1987, Nelson, 1993). In this perspective, technology and innovation are central to the catching-up

process, and a country (or firm, for that matter) must be able to use a specific “window of opportunity” that may arise in the evolution of a technology system to catch-up; otherwise, it will continue to lag behind (Freeman, 2002). Many countries and economies have

successfully exploited their window of opportunity, such as the USA in the 19th century, Japan from the 1960s, later Korea, Taiwan and Singapore, and most recently China. While the role of government vs. market has been central to some analyses of latecomer Asian countries (e.g., World Bank,1993; Amsden 1989), others approach the analysis from the perspective of technological learning and national systems of innovation (Kim, 1997). Lee and Lim (2001), for example, emphasize that the technological regime plays an important role as context and in explaining why some industries in some countries have caught up and others not. They argue that the technological regime affects the nature and success of the innovative activities of those firms trying to catch-up. To understand

outcomes, they classify industries based on the degree to which industry-related innovations are predictable and frequent. Regimes in which innovation is more predictable and frequent will give latecomers more opportunity to catch up; such as was the case for DRAM and automobile industries in Korea. In the opposite case, latecomers will have less opportunity 2

to catch up; the PC and consumer electronics industries in Korea also illustrate this situation. Although such a perspective may help explain the catch-up process in Korea, it does not match the Chinese case very well. Indeed, in China the automobile and IC industries have

developed much less (in terms of indigenous technological innovation) that the PC and consumer electronics industries. Furthermore, not all countries have the opportunity or ability to capitalize on the chance to catch up. For a...
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