ABSTRACT
In the decades that the topic of catching up has received attention, two approaches have developed to understand the catch-up process used in countries around the world. One approach is examining growth at an accounting level: using the number of granted patents as the index for innovation capability, this approach seeks to answer the following question: what are the key factors that enable catching up in developing or newly developed countries? Furman and Hayes (2004) try to find the answer in a qualitative way. Based on a growth model from Romer (1990), the theory of national competitive advantage (Porter 1990) and the definition of national innovation systems provided by Nelson (1993), Furman and Hayes have built a new framework, finding that the factors behind catching up or standing still are the development of innovation-enhancing policies and infrastructure and ever-increasing financial and human capital investment in innovation. However, this approach cannot give a simple explanation for what country-specific factors account for a country’s catch-up and how those factors can work together to catch up at the fastest possible rate. The second approach is more historical and dynamic. Freeman (1987)
explains in his book that government regulations, shop floor innovation and social institutions such as life employment, known as Keiretsu, were the key factors contributing to Japan’s catch-up. According to Imitation to Innovation (Kim 1997), learning is the key activity that allowed South Korean companies to master advanced technology. Lee and Lim (2001) tried to explain Korea’s catch-up in terms of technological regimes, while Hobday used the ladder of catching up, OEM-OBM-ODM (original equipment manufacturer-original brand manufacturer-original design manufacturer), to explain the emergence of Taiwan and other economies (Hobday 1995). Some researchers disagree. For example, the World Bank’s report argued that market, rather than government, was the more significant factor in Asia’s catching up (World Bank 1993). Not all countries, however, have the opportunity or ability to capitalize on
the opportunity to catch up (Fagerberg 1988). For a developing country, it is not easy to proceed from a stage of imitation to a stage of innovation. Bell
and Pavitt (1993) point out that simply installing large plant using foreign technology and foreign assistance will not help build technological capability. In the time of its planned economy, China was a typical country that failed to catch up. China heavily imported technology from the developed world, but did not make any progress from imitation to innovation between 1950 and the 1970s. The former Soviet Union used reverse engineering like Japan. In both China and the Soviet Union, however, much of the responsibility for diffusion and development rested in central research institutes rather than in large industrial firms, as in Japan’s case (Freeman 1988: 336-37). After China opened up and adopted a market economy system, the country
began to catch up very quickly relative to other countries. For economists, China became a highly controversial country in terms of understanding how it emerged in the global market; on the one hand, China has maintained double-digit growth for 30 years and transformed a country in poverty into a country with the second largest gross domestic product (GDP) in the world; China is expected to reach the United States’ level by 2035. China also continues to invest in R&D at a relatively high rate which will allow its R&D to reach 2.5% of GDP by the year 2020 (SCPRC 2006). Of course, such rapid development poses a challenge to the rest of the world and many believe, for example, that China will be the next science and technology superpower (Sigurdson 2006). On the other hand, however, China still relies heavily on technology it purchases from the rest of the world. There are no radical innovations to account for the country’s fast growth. Additionally, a big imbalance exists between China’s GDP level and its innovation level. It is a country with a GDP comparable to that of Germany but a rate of only 500 patents registered in the United States per year. Many of the country’s industries, such as steel, cement, chemicals and coal, are at the top of world levels in terms of volume, yet they still rely heavily on imported technology, such as digital machine tools and integrated circuits (ICs), for operations. The question, therefore, is: how can research explain this contradictory situation? The purpose of this chapter is to identify the key features of the Chinese
catch-up process and propose an alternative model of catch-up that takes the current industrial environment into account. In China, much like other countries that caught up in earlier periods, both the diffusion of new technology and the government’s involvement have played very important roles. However, other factors, such as the use of global outsourcing and knowledge, large market size, market-oriented innovation and foreign direct investment (FDI), have also played a significant role in China’s catch-up process, unlike the processes in Japan and Korea. The remainder of the chapter is organized as follows: first, Japan’s and South Korea’s catch-up processes during the 1960s-1980s are reviewed and key features of their models are highlighted. Next, the framework of China’s experience is introduced and China’s ongoing catch-up process is described in those terms. Based upon several cases, the catch-up process of China’s ICT industry is then explained. Finally, we discuss the general implications of our framework for both research and policy making purposes.
