Pub Date : 2021-11-25DOI: 10.1093/oso/9780192847560.003.0005
Keunchul Lee
Chapter 5 assesses China’s catch-up model, often called the Beijing Consensus, in a comparative perspective. China’s model shares several elements of the East Asian model because it also pursued the export-oriented, outward-looking growth strategies. A further commonality lies in its emphasis on the elements missing from the Washington Consensus, namely, technology policy and higher education revolution. However, the Chinese catch-up model has several unique elements that are not found in that of Taiwan or Korea. These unique features include the following: first, parallel learning from foreign direct investment firms, followed by active promotion of indigenous firms; second, forward engineering (the role of university spin-off firms) in contrast to reverse engineering adopted in Korea and Taiwan; and third, acquisition of foreign technology and brands through international mergers and acquisitions. In general, these strategies help China achieve a “compressed catch-up” and avoid several of the risks involved, including that of the “liberalization trap,” where premature financial liberalization leads to macroeconomic instability.
{"title":"Assessing China’s Economic Catch-up in a Comparative Perspective","authors":"Keunchul Lee","doi":"10.1093/oso/9780192847560.003.0005","DOIUrl":"https://doi.org/10.1093/oso/9780192847560.003.0005","url":null,"abstract":"Chapter 5 assesses China’s catch-up model, often called the Beijing Consensus, in a comparative perspective. China’s model shares several elements of the East Asian model because it also pursued the export-oriented, outward-looking growth strategies. A further commonality lies in its emphasis on the elements missing from the Washington Consensus, namely, technology policy and higher education revolution. However, the Chinese catch-up model has several unique elements that are not found in that of Taiwan or Korea. These unique features include the following: first, parallel learning from foreign direct investment firms, followed by active promotion of indigenous firms; second, forward engineering (the role of university spin-off firms) in contrast to reverse engineering adopted in Korea and Taiwan; and third, acquisition of foreign technology and brands through international mergers and acquisitions. In general, these strategies help China achieve a “compressed catch-up” and avoid several of the risks involved, including that of the “liberalization trap,” where premature financial liberalization leads to macroeconomic instability.","PeriodicalId":167130,"journal":{"name":"China's Technological Leapfrogging and Economic Catch-up","volume":"47 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2021-11-25","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"130198739","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2021-11-25DOI: 10.1093/oso/9780192847560.003.0008
Keun Lee
Chapter 8 explores how Huawei was able to emerge as the leader in the telecommunications system sector, overtaking the incumbent Swedish giant Ericsson. It answers this question by focusing on whether a latecomer firm trying to catch up uses technologies similar to or different from those of the forerunners. The study investigated patents by Huawei and Ericsson and found that Huawei relied on Ericsson as a knowledge source in its early days but subsequently reduced this reliance and increased its self-citation ratio to become more independent. The results of mutual citations, common citations, and self-citations provided strong evidence that Huawei caught up with or overtook Ericsson by taking a different technological trajectory. Huawei developed its technologies by relying on more recent and scientific knowledge; in terms of citations to scientific articles and citation lags, Huawei extensively explored basic research and up-to-date technologies to accomplish its technological catch-up. This study suggests that leapfrogging by exploring a new technological path is a possible and viable catch-up strategy for a latecomer. Moreover, Huawei’s case re-confirms the hypothesis that catch-up in technological capabilities tends to precede that in market share. Huawei overtook Ericsson in terms of quantity and quality of patents before annual sales. In summary, the results suggest that Huawei’s catch-up with Ericsson in the telecommunications equipment market is owing not only to its cost advantage, the large domestic market, or the Chinese government’s support but also more importantly to its technological leapfrogging based on its technological strength and independence.
{"title":"Huawei’s Leapfrogging to Overtake Ericsson","authors":"Keun Lee","doi":"10.1093/oso/9780192847560.003.0008","DOIUrl":"https://doi.org/10.1093/oso/9780192847560.003.0008","url":null,"abstract":"Chapter 8 explores how Huawei was able to emerge as the leader in the telecommunications system sector, overtaking the incumbent Swedish giant Ericsson. It answers this question by focusing on whether a latecomer firm trying to catch up uses technologies similar to or different from those of the forerunners. The study investigated patents by Huawei and Ericsson and found that Huawei relied on Ericsson as a knowledge source in its early days but subsequently reduced this reliance and increased its self-citation ratio to become more independent. The results of mutual citations, common citations, and self-citations provided strong evidence that Huawei caught up with or overtook Ericsson by taking a different technological trajectory. Huawei developed its technologies by relying on more recent and scientific knowledge; in terms of citations to scientific articles and citation lags, Huawei extensively explored basic research and up-to-date technologies to accomplish its technological catch-up. This study suggests that leapfrogging by exploring a new technological path is a possible and viable catch-up strategy for a latecomer. Moreover, Huawei’s case re-confirms the hypothesis that catch-up in technological capabilities tends to precede that in market share. Huawei overtook Ericsson in terms of quantity and quality of patents before annual sales. In summary, the results suggest that Huawei’s catch-up with Ericsson in the telecommunications equipment market is owing not only to its cost advantage, the large domestic market, or the Chinese government’s support but also more importantly to its technological leapfrogging based on its technological strength and independence.","PeriodicalId":167130,"journal":{"name":"China's Technological Leapfrogging and Economic Catch-up","volume":"6 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2021-11-25","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"131963752","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2021-11-25DOI: 10.1093/oso/9780192847560.003.0009
Keun Lee
Chapter 9 discusses the possibility of China falling into the middle-income trap in terms of three checkpoints: innovation capability, big businesses, and inequality. The main finding is that China is performing well in terms of the first two criteria, but there is some uncertainty in the last criterion of whether it generates Kuznets curve-type dynamics of growth leading to better equality. First, China has increasingly become innovative; thus, it differs from other middle-income countries. It has been pushing strongly for considerable R&D expenditure and has been ahead of the typical middle-income countries. Second, China has many world-class big businesses, which is more than its size predicts, not only in finance, energy, and trading as in the past but also increasingly in manufacturing. Thus, it differs from other middle-income countries with few globally competitive large businesses. Third, China faces some uncertainty in terms of inequality. The Gini coefficient continuously increased from approximately 0.3 in 1981 to reach its peak of 0.49 or so in 2008–2009 but has decreased to 0.42 since then. This recent decrease may be a sign that China is following the Kuznets curve. However, China is now facing new sources of inequality, such as wealth (including financial and real estate assets) and non-economic factors (including corruption).
{"title":"Possibility of a Middle-Income Trap in China","authors":"Keun Lee","doi":"10.1093/oso/9780192847560.003.0009","DOIUrl":"https://doi.org/10.1093/oso/9780192847560.003.0009","url":null,"abstract":"Chapter 9 discusses the possibility of China falling into the middle-income trap in terms of three checkpoints: innovation capability, big businesses, and inequality. The main finding is that China is performing well in terms of the first two criteria, but there is some uncertainty in the last criterion of whether it generates Kuznets curve-type dynamics of growth leading to better equality. First, China has increasingly become innovative; thus, it differs from other middle-income countries. It has been pushing strongly for considerable R&D expenditure and has been ahead of the typical middle-income countries. Second, China has many world-class big businesses, which is more than its size predicts, not only in finance, energy, and trading as in the past but also increasingly in manufacturing. Thus, it differs from other middle-income countries with few globally competitive large businesses. Third, China faces some uncertainty in terms of inequality. The Gini coefficient continuously increased from approximately 0.3 in 1981 to reach its peak of 0.49 or so in 2008–2009 but has decreased to 0.42 since then. This recent decrease may be a sign that China is following the Kuznets curve. However, China is now facing new sources of inequality, such as wealth (including financial and real estate assets) and non-economic factors (including corruption).","PeriodicalId":167130,"journal":{"name":"China's Technological Leapfrogging and Economic Catch-up","volume":"100 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2021-11-25","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"131866857","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2021-11-25DOI: 10.1093/oso/9780192847560.003.0002
Keun Lee
Chapter 2 examines the growth of technological capabilities in the telecommunications industry in China, with a focus on Huawei and ZTE. These companies grew rapidly by localizing the production of fixed-line telephone switches, which were earlier imported or produced by foreign joint venture (JV) companies. While the market used to be completely dominated by foreign products in the 1980s, four locally owned companies caught up with the foreign companies in market shares and became absolute leaders by the end of the 1990s. The catch-up can be explained by three factors, namely, (1) the famous Chinese strategy of technology transfer called “trading market for technology,” (2) the knowledge diffusion from the first foreign JV, Shanghai Bell, to the local R&D consortium and then to other locally owned companies including Huawei, and (3) the government’s explicit promotion measures.
{"title":"The Origins of Technological Catch-up in China","authors":"Keun Lee","doi":"10.1093/oso/9780192847560.003.0002","DOIUrl":"https://doi.org/10.1093/oso/9780192847560.003.0002","url":null,"abstract":"Chapter 2 examines the growth of technological capabilities in the telecommunications industry in China, with a focus on Huawei and ZTE. These companies grew rapidly by localizing the production of fixed-line telephone switches, which were earlier imported or produced by foreign joint venture (JV) companies. While the market used to be completely dominated by foreign products in the 1980s, four locally owned companies caught up with the foreign companies in market shares and became absolute leaders by the end of the 1990s. The catch-up can be explained by three factors, namely, (1) the famous Chinese strategy of technology transfer called “trading market for technology,” (2) the knowledge diffusion from the first foreign JV, Shanghai Bell, to the local R&D consortium and then to other locally owned companies including Huawei, and (3) the government’s explicit promotion measures.","PeriodicalId":167130,"journal":{"name":"China's Technological Leapfrogging and Economic Catch-up","volume":"42 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2021-11-25","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"128737390","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2021-11-25DOI: 10.1093/oso/9780192847560.003.0006
Keun Lee
Chapter 6 assesses China’s catching-up and leapfrogging in key manufacturing sectors compared with the Korean experience. It explains the varying records of market catch-up by referring to diverse aspects of technological and market regimes, such as modularity, degrees of embodied technical change, tacitness of knowledge, knowledge accessibility, and frequency of innovations. Easy access to foreign technologies from developed countries (mobile phones vs. semiconductors), high degree of modularity (mobile phones vs. automobiles and semiconductors), and frequent changes in the generations of technologies or short cycle times of technologies (mobile phones and telecommunications systems vs. automobiles) generally help latecomers catch up. More importantly, sectors with a high degree of tacit knowledge (e.g., automobiles) tend to show a slower speed of catch-up than the manufacturers of telecommunications equipment with a high degree of explicit knowledge. Whether markets feature segmentation (or the existence of low-end niche segments for Chinese latecomers) seems to play an important role in the market regimes. Chinese firms manage to achieve initial success from a low-end market in segmented market conditions (e.g., telecommunications equipment and mobile phones) or markets protected by the government (e.g., telecommunications equipment). Conversely, they face high entry barriers in markets with no such segmentation (e.g., memory chips), which is one of the reasons for their slow progress in the memory chip sector (see also Chapter 4). These cases also suggest that technological regimes are not the only paramount determining factor; the outcomes are affected by the roles of actors, including firms and governments.
{"title":"Catching-up and Leapfrogging in Key Manufacturing Sectors","authors":"Keun Lee","doi":"10.1093/oso/9780192847560.003.0006","DOIUrl":"https://doi.org/10.1093/oso/9780192847560.003.0006","url":null,"abstract":"Chapter 6 assesses China’s catching-up and leapfrogging in key manufacturing sectors compared with the Korean experience. It explains the varying records of market catch-up by referring to diverse aspects of technological and market regimes, such as modularity, degrees of embodied technical change, tacitness of knowledge, knowledge accessibility, and frequency of innovations. Easy access to foreign technologies from developed countries (mobile phones vs. semiconductors), high degree of modularity (mobile phones vs. automobiles and semiconductors), and frequent changes in the generations of technologies or short cycle times of technologies (mobile phones and telecommunications systems vs. automobiles) generally help latecomers catch up. More importantly, sectors with a high degree of tacit knowledge (e.g., automobiles) tend to show a slower speed of catch-up than the manufacturers of telecommunications equipment with a high degree of explicit knowledge. Whether markets feature segmentation (or the existence of low-end niche segments for Chinese latecomers) seems to play an important role in the market regimes. Chinese firms manage to achieve initial success from a low-end market in segmented market conditions (e.g., telecommunications equipment and mobile phones) or markets protected by the government (e.g., telecommunications equipment). Conversely, they face high entry barriers in markets with no such segmentation (e.g., memory chips), which is one of the reasons for their slow progress in the memory chip sector (see also Chapter 4). These cases also suggest that technological regimes are not the only paramount determining factor; the outcomes are affected by the roles of actors, including firms and governments.","PeriodicalId":167130,"journal":{"name":"China's Technological Leapfrogging and Economic Catch-up","volume":"16 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2021-11-25","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"126268874","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2021-11-25DOI: 10.1093/oso/9780192847560.003.0004
Keun Lee
Chapter 4 analyzes China’s semiconductor industry from the sectoral systems of innovation perspective. The industry remained limited in terms of catch-up in market shares and technology. The chapter explains the reasons for the limited catch-up in terms of the characteristics of the technology regime of the industry. In the semiconductor industry, innovations are frequent and technologies are highly cumulative, which places the latecomer in a disadvantageous position in terms of entry possibility. Furthermore, the market for standard integrated circuit chips is not segmented but highly integrated, which implies no low-end niche market for latecomers to enter first. Therefore, latecomer firms encounter difficulty in seizing a market opportunity through differentiated marketing. The situation worsens with the continued increase of the required investment and shortening of life cycles. Furthermore, the existing practice of Western countries restricting the transfer of core technologies to Communist countries, such as China, amplifies the difficulties faced by Chinese firms.
{"title":"Role of Science and Technology Institutions in Limited Catch-up","authors":"Keun Lee","doi":"10.1093/oso/9780192847560.003.0004","DOIUrl":"https://doi.org/10.1093/oso/9780192847560.003.0004","url":null,"abstract":"Chapter 4 analyzes China’s semiconductor industry from the sectoral systems of innovation perspective. The industry remained limited in terms of catch-up in market shares and technology. The chapter explains the reasons for the limited catch-up in terms of the characteristics of the technology regime of the industry. In the semiconductor industry, innovations are frequent and technologies are highly cumulative, which places the latecomer in a disadvantageous position in terms of entry possibility. Furthermore, the market for standard integrated circuit chips is not segmented but highly integrated, which implies no low-end niche market for latecomers to enter first. Therefore, latecomer firms encounter difficulty in seizing a market opportunity through differentiated marketing. The situation worsens with the continued increase of the required investment and shortening of life cycles. Furthermore, the existing practice of Western countries restricting the transfer of core technologies to Communist countries, such as China, amplifies the difficulties faced by Chinese firms.","PeriodicalId":167130,"journal":{"name":"China's Technological Leapfrogging and Economic Catch-up","volume":"32 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2021-11-25","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"114034770","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2021-11-25DOI: 10.1093/oso/9780192847560.003.0003
Keunchul Lee
Chapter 3 elaborates on the origins of large businesses, particularly business groups, which have been leading the economic catch-up in China. The majority of firms listed on the stock markets in China are business groups, which are comparable to their counterparts in Japan (keiretsu) and in Korea (chaebols). However, the chief differences between large business groups in China and those in Korea and Japan are that the former are less diversified and are owned by the state, not by particular families (as in Korea) or commercial banks (as in Japan). Chinese business groups typically maintain a vertical structure, with the core company at the first tier and closely related companies at the second tier. Their performance in the 2000s also had strengths (high growth) and weaknesses (lower profitability) similar to those in neighboring countries, such as chaebols in the 1990s in Korea.
{"title":"Origins and Growth of Big Businesses in China","authors":"Keunchul Lee","doi":"10.1093/oso/9780192847560.003.0003","DOIUrl":"https://doi.org/10.1093/oso/9780192847560.003.0003","url":null,"abstract":"Chapter 3 elaborates on the origins of large businesses, particularly business groups, which have been leading the economic catch-up in China. The majority of firms listed on the stock markets in China are business groups, which are comparable to their counterparts in Japan (keiretsu) and in Korea (chaebols). However, the chief differences between large business groups in China and those in Korea and Japan are that the former are less diversified and are owned by the state, not by particular families (as in Korea) or commercial banks (as in Japan). Chinese business groups typically maintain a vertical structure, with the core company at the first tier and closely related companies at the second tier. Their performance in the 2000s also had strengths (high growth) and weaknesses (lower profitability) similar to those in neighboring countries, such as chaebols in the 1990s in Korea.","PeriodicalId":167130,"journal":{"name":"China's Technological Leapfrogging and Economic Catch-up","volume":"6 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2021-11-25","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"131156191","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2021-11-25DOI: 10.1093/oso/9780192847560.003.0001
Keun Lee
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.
{"title":"Introducing Schumpeter to China","authors":"Keun Lee","doi":"10.1093/oso/9780192847560.003.0001","DOIUrl":"https://doi.org/10.1093/oso/9780192847560.003.0001","url":null,"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.","PeriodicalId":167130,"journal":{"name":"China's Technological Leapfrogging and Economic Catch-up","volume":"17 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2021-11-25","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"127591236","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2021-11-25DOI: 10.1093/oso/9780192847560.003.0007
Keunchul Lee
Chapter 7 analyzes the market and technological catch-up of indigenous Chinese firms in two information technology service sectors, namely, games and business software (enterprise resource planning (ERP) and security software) and focuses on two aspects. The first aspect is about how latecomer firms have been able to access and learn from foreign knowledge bases and acquire their innovation capabilities. The second aspect is the role of the government and regulation in the catch-up process. Indigenous firms in China have selected different learning and catch-up strategies in different technological regimes. For the online game sector, where imitation is easier and incremental innovation is more important than radical innovation, Chinese firms started with handling the publishing (or distribution) of games developed by foreign incumbents and later secured in-house game development capabilities by imitating the products of global leaders. In the business software sector, where imitation and creative innovation are difficult, Chinese firms acquired third-party technologies through mergers and acquisitions and then differentiated their products by taking advantage of local specificities. In general, intellectual property rights (IPRs) are critical in the business of these two segments. Despite the entry barrier effect of IPR protection by the foreign incumbents, the latecomer firms discussed in this chapter seem to have circumvented the barrier to entry and learning and to acquire their innovation capabilities. However, such learning and acquisition would not have led to commercial success without government regulation against foreign companies, such as business restrictions in online gaming and exclusive procurement of indigenous products in applied software (ERP and security software). Such restrictions against foreign companies were a critical constraining factor against their market share expansion in the Chinese market.
{"title":"Catch-up in the IT Service Sector and the Role of the Government in China","authors":"Keunchul Lee","doi":"10.1093/oso/9780192847560.003.0007","DOIUrl":"https://doi.org/10.1093/oso/9780192847560.003.0007","url":null,"abstract":"Chapter 7 analyzes the market and technological catch-up of indigenous Chinese firms in two information technology service sectors, namely, games and business software (enterprise resource planning (ERP) and security software) and focuses on two aspects. The first aspect is about how latecomer firms have been able to access and learn from foreign knowledge bases and acquire their innovation capabilities. The second aspect is the role of the government and regulation in the catch-up process. Indigenous firms in China have selected different learning and catch-up strategies in different technological regimes. For the online game sector, where imitation is easier and incremental innovation is more important than radical innovation, Chinese firms started with handling the publishing (or distribution) of games developed by foreign incumbents and later secured in-house game development capabilities by imitating the products of global leaders. In the business software sector, where imitation and creative innovation are difficult, Chinese firms acquired third-party technologies through mergers and acquisitions and then differentiated their products by taking advantage of local specificities. In general, intellectual property rights (IPRs) are critical in the business of these two segments. Despite the entry barrier effect of IPR protection by the foreign incumbents, the latecomer firms discussed in this chapter seem to have circumvented the barrier to entry and learning and to acquire their innovation capabilities. However, such learning and acquisition would not have led to commercial success without government regulation against foreign companies, such as business restrictions in online gaming and exclusive procurement of indigenous products in applied software (ERP and security software). Such restrictions against foreign companies were a critical constraining factor against their market share expansion in the Chinese market.","PeriodicalId":167130,"journal":{"name":"China's Technological Leapfrogging and Economic Catch-up","volume":"20 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2021-11-25","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"126519324","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2021-11-25DOI: 10.1093/oso/9780192847560.003.0010
Keunchul Lee
Chapter 10 analyzes the issue of whether China would fall into the Thucydides trap, which is defined here as a situation where the US causes China to stop expanding as an economic power. Before the Trump administration, China was navigating steadily to grow beyond the middle-income trap (MIT), building its China-led global value chain (GVC) and localizing formerly imported goods into domestic production. However, it suddenly faced another trap, of Thucydides, because of the US measures for containing the further rise of China as a superpower. China will not collapse unless the US dares to wage an all-out war by taking drastic measures across various fronts of confrontation. The sudden emergence of this new trap disrupted the China-led GVC formed around Asia, which still relies on the West for key high-technology goods. Such disruption would have further repercussions on the prospect of China’s growth beyond the MIT because China must now reallocate resources away from economic competitiveness and “Made in China 2025” to socio-economic stabilization and job creation. China remains a developmental state. Its Asian neighbors have gone through their path of political democratization, but China now faces the challenge of crossing this unknown territory. This situation may be a more challenging trap compared with the MIT and the Thucydides trap. Thus, China now faces triple traps.
{"title":"Thucydides Trap, Global Value Chain, and Future of China","authors":"Keunchul Lee","doi":"10.1093/oso/9780192847560.003.0010","DOIUrl":"https://doi.org/10.1093/oso/9780192847560.003.0010","url":null,"abstract":"Chapter 10 analyzes the issue of whether China would fall into the Thucydides trap, which is defined here as a situation where the US causes China to stop expanding as an economic power. Before the Trump administration, China was navigating steadily to grow beyond the middle-income trap (MIT), building its China-led global value chain (GVC) and localizing formerly imported goods into domestic production. However, it suddenly faced another trap, of Thucydides, because of the US measures for containing the further rise of China as a superpower. China will not collapse unless the US dares to wage an all-out war by taking drastic measures across various fronts of confrontation. The sudden emergence of this new trap disrupted the China-led GVC formed around Asia, which still relies on the West for key high-technology goods. Such disruption would have further repercussions on the prospect of China’s growth beyond the MIT because China must now reallocate resources away from economic competitiveness and “Made in China 2025” to socio-economic stabilization and job creation. China remains a developmental state. Its Asian neighbors have gone through their path of political democratization, but China now faces the challenge of crossing this unknown territory. This situation may be a more challenging trap compared with the MIT and the Thucydides trap. Thus, China now faces triple traps.","PeriodicalId":167130,"journal":{"name":"China's Technological Leapfrogging and Economic Catch-up","volume":"221 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2021-11-25","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"120848410","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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