Growth of global production and innovation networks

For one of the most prolific writers in this field, Henry Yeung, as domestic firms become increasingly engaged in ‘strategic coupling’ with globalized firms, developmental states simply become less effective in guiding industrial governance (Yeung 2016: 4-6). It is not states but the decisions made by leading firms of global production and innovation networks that have the greatest impact on national development. In such an environment, developmental states simply become less effective or ‘downgraded’ as one writer puts it (Hundt 2014: 511).

Of course, it has long been recognized that large corporations wield ‘structural power’ (Lind- blom 1977) or the power to resist any reforms, which may threaten their interests given their structurally privileged positions within society. The structural power of transnational corporations has taken on even greater significance with the rise of a more open and interdependent world economy and one in which science and technology has taken on special importance in sustaining economic development (Dicken 2015: 164). John Mikler interprets these globalizing processes as culminating in the growth of The Political Power of Global Corporations (2018).

There is little argument that the fortunes of domestic firms are increasingly tied to lead firms of global production networks (GPNs) or global value chains (GVCs). However, the assertion that these processes are occurring at the expense of the developmental role of their home governments throughout East Asia suffers from two major shortcomings. First, even the most globalized firms are still highly dependent on their home governments for sustaining technological competitiveness. As various studies have shown, knowledge-intensive competition involves high levels of risk, which in turn tends to deepen (not reduce) the need for the state’s involvement in high-technology promotion (Warwick and Nolan 2014; Weiss 2005: 744). Perhaps the clearest illustration of mutual dependence between public and private actors is in the gritty world of technological standards-setting especially in inter-governmental standards development organizations such as the International Telecommunications Union (ITU). The enormous success of firms such as Samsung in transitioning into technological leadership simply could not have been possible without the coordinative role of government agencies in getting national technolog)' standards (e.g. CDMA) recognized by the ITU and other standards development organizations (Kim 2013: 189).

The second limitation is that claims of the developmental state’s downgrading provide a lopsided view from the perspective of globally leading firms while underplaying the activist role of governments. In Japan, while policymakers are shy to admit as such, the Ministry of Economy, Trade and Industry’s (METI) ‘Japan Smart Community Alliance’ has a membership of 255 firms

(including large firms such as Toyota) whose core goal is to drive the development of energy resilient smart microgrids (DeWit 2018). Parallel efforts in Korea and Taiwan also provide interesting examples (Kim 2019). In 2014, the MOTIE established the Korea Micro Energy Grid (K-MEG) Consortium and Korea Smart Grid Association (KSGA) to coordinate the creation, testing and export of smart microgrids for a variety of settings. The MOTIE delegated large conglomerates such as Samsung C&T to exert project leadership of networks composed of other public and private actors including large firms and SMEs. Their Taiwanese counterparts include the Taiwan Smart Grid Industry Association (TSGIA) and Taiwan Smart Grid General Projects, led by government agencies such as ITRI. As I have argued, these bodies reflect the Korean and Taiwan states’ efforts to build ‘hybridized industrial ecosystems’ as a means to spearhead the global market for smart grids (Kim 2019). As a number of other studies (of Korea) have shown, the idea behind linking SMEs with large firms in development alliances was to create new sources of competitive advantage for both Korea’s leading chaebol and their suppliers (Kim 2012a: 157—158; Kim and Kvvon 2017).

The main point is that while many domestic firms have globalized their operations and become more technologically sophisticated (which provides one measure of their independence), they continue to depend on the transformative capacity of their home governments. Nowhere is this becoming more apparent than in sharing the risks involved in developing new technologies in promising growth sectors such as green energy.

Conclusion

To what extent are East Asia’s developmental states still useful as innovation-led development as the technological frontier takes precedence over imitation-led, technology followership? I have discussed four issues at stake in the debate: strategizing for competing at the technological frontier; the political appetite for sustaining support for high-risk and/or uncertain technologies; the organization of the state in promoting innovation; and growth of global production and innovation networks. If my discussion of these issues tells us anything, it is that the debate over East Asia’s developmental state is far from settled, not least because of the state’s propensity to evolve in unexpected and creative ways. This is a reality often underplayed by developmental state sceptics in their haste to reach (premature) conclusions over the erosion of the state’s power to guide industrial development. Interest in East Asia’s economic transformation and the idea of the developmental state is therefore likely to remain a vibrant research agenda in studies of I EE in the years ahead.

 
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