Introducing Schumpeter to China

Abstract

Economic catch-up is defined in the literature as the narrowing of a latecomer firm’s or country’s gap vis-à-vis a leading country or firm. However, latecomers do not simply follow the advanced countries’ path of technological development; rather, they sometimes do something new, skip certain stages, or create a new path that is different from those of the forerunners. Although the path-following strategy based on the initial factor–cost advantages helps in the gradual catch-up of late entrants’ market shares, a sharp increase in the latecomers’ market shares is likely to occur when a shift in technologies or demand conditions occurs. Such a shift is utilized by the path creation or stage skipping of latecomers, both of which can be considered a case of leapfrogging. That is, leapfrogging is a latecomer doing something differently from forerunners, often ahead of them. Technological leapfrogging is a precondition for success in technological catch-up or in closing the gap with incumbents in terms of technological capabilities. Then, such technological catch-up in several sectors may lead to economic catch-up in terms of the growth of per capita GDP or economic power. This eventual linkage from technological leapfrogging to economic catch-up via technological catch-up is what we mean by the title of this book. We focus on this main hypothesis with the Chinese experience in this book. One conclusion from this book is that China’s successful rise as a global industrial power has been due to its strategy of technological leapfrogging, which has enabled it to move beyond the middle-income trap and possibly the Thucydides trap, although at a slower speed.