Globalization of Technology International Perspectives (1988) / Chapter Skim
Currently Skimming:
Regional and National Consequences of Globalizing Industries of the Pacific Rim
Regional and National Consequences of Globalizing Industries of the Pacific Rim
Pages 106-140
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From page 106... ...
To reach a minimum viable scale, R&D must be subsidized from the cash flow of the mature economic 106
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From page 107... ...
The technology is diffused through exports, foreign investment, and licensing. This produces a cascading flow from highly developed to less developed countries, with progressive loss of comparative advantage to the low-laborcost countries.
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From page 108... ...
or ImpOrtL~ Lousy elf arinin Developed 1/ - I country f ~1 ,~; I I Import ~1~ ~ _ n n n new - h Developing ~ _ _~n n I Imnnr~ 1~- I 2 ~-,rrmrrrlllllllll,li ~I I FIGURE 1 Technology life cycle and international trade. SOURCE: Economic and Social Commission for Asia and the Pacific (1984)
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From page 109... ...
The region demonstrates shifts in comparative advantages; structural changes in the economies, particularly in manufacturing; problems of scale and fragmentation, cultural adaptability, and resistance to change; economic policies from free trade to central planning; and attitudes on the role of the transnational company in globalization ranging from "open arms" policies to controlled cooperation and even concealed or overt distrust. The Mode of Globalization of Technology The means of creating and transferring technologies deeply influence the impacts of those technologies.
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From page 110... ...
In relative terms, the ASEAN nations, the Asian NICs, and Mexico have growth rates that exceed those of the advanced countries, although the base from which they began was low. By 1986 Japan had overtaken all advanced nations in rate of growth and all but the United States in per capita gross domestic product.
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From page 112... ...
The Asian NICs and the ASEAN nations, with the exception of the Philippines, displayed striking resilience during the two postwar oil shocks. GNP growth forecasts, usually based on sophisticated computer models, suggest attenuated continuation of these trends (Findlay et al., 1986; Onishi and Nakamura, 1986~.
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From page 113... ...
. authors for the period 1980 to 1995 are about 5.6 percent for the Asian NICs, 4.7 percent for the ASEAN nations, 4.1 percent for Japan, and 3.4 percent for Australia.
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From page 114... ...
Factors contributing to the expansion of Japan and the United States and to their subsequent influence in the region were local raw materials from Australia and Indonesia for Japan, technology transfer, capital, and cheap labor, which encouraged local investment by both nations. As people, products, knowledge, and capital became more mobile, the effects of the product cycle accelerated.
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From page 115... ...
Australia, with rich resources and high labor costs, coped with declining tern~s of trade for resource-based products by expanding production and improving productivity in agricultural produce and coal. However, Australia's import replacement industries declined, and so far the nation has not benefited greatly from endeavors to participate in integrated international productions, e.g., in the automobile industry.
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From page 116... ...
Australia 1970-1982 + 0.51 + 0.47 - 1.1 Canada 1970-1983 + 2.6 + 0.94 + 1.24 Hong Kong 1970-1982 - 3.6 +4.8 Indonesia 1970-1984 - 3.4 + 8.4 + 1.03 Japan 1970-1982 +3.4 + 10.3 -0.6 South Korea 1970-1984 - 3.8 + 6.4 + 8.9 Malaysia 1970- 1984 + 6.6 + 16.5 Mexico 1970 - 1984 - 14.3 - 10.4a -7.8a Philippines 1970-1984 - 3.6 - 0.3 Singapore 1970-1984 + 4.6 - 11.6 + 8.77 Thailand 1970-1984 + 3.1 + 7.9 United States 1970-1983 + 0.34 + 3.3 + 0.53 aCurrency effects. SOURCE: World Bank world tables, provided and compiled by Connne Boyles, Aus~alia Japan Research Centre, Australian National University, Canberra, Australia.
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From page 117... ...
as an indicator of shifts in comparative advantage and, hence, structure (see Table 51. Thus, in the United States where pharmaceuticals are a research-intensive high-technology industry, the industry has sustained and improved its comparative advantage; by contrast Hong Kong's trade in generic drugs-the formulation of drugs no longer protected by patent is essentially low technology and has declined.
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From page 118... ...
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From page 119... ...
ASEAN AND COMPLEMENTARITY: GROWTH IN AGRICULTURE AND MANUFACTURING Strengths and Characteristics The strengths of the ASEAN economies lie in their raw materials, cheap labor, and the export-oriented strategy of all five countries,3 particularly that
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From page 120... ...
Common characteristics of the ASEAN economies are as follows: · The ASEAN countries have adopted-to varying degrees open economies that have led to increasing external trade, foreign investment, and technology transfer. · As a result of natural endowments and political stability, the area has grown faster than most developing countries.
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From page 121... ...
Although politicians and economists blamed many of the shortcomings of Third World industrialization on the advanced nations, particularly their multinational corporations (MNCs3, it was by interaction with these corporations through direct foreign investment, technology transfer, importation of capital goods, joint ventures, and competition in the open market that the four Asian NICs have advanced rapidly. Some of the factors contributing to their rise will be discussed here, referring to South Korea only for simplicity's sake, since it is typical, although not wholly representative, of the group.
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From page 122... ...
Joint ventures with local companies were given preference; export requirements were imposed, but exceptions were made for high technology and 100 percent export enterprises. Finally, in 1984, direct foreign investment policy was again made more liberal, with some two-thirds of all industries being approved automatically, particularly the high-technology industries.
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From page 123... ...
In contrast, 64 percent of South Korea's general machinery and 67 percent of its electrical machinery exports to the United States came from American MNCs in South Korea (Helleiner, 19791. The pattern of foreign investment reflects the changes in government policy from an emphasis on labor-intensive to labor/technology-intensive and, eventually, technology-intensive industries.
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From page 124... ...
In the future, special emphasis will be placed on higher .1 1 ~ ~ ~c ~ _ TABLE 8 Value of Foreign Investment by Year and by Industry in South Korea, 1962-1980 (in $U.S. million)
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From page 125... ...
125 at 1 Ct Cal C:: Cal Cal Ct .
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From page 126... ...
Several thousand South Koreans will continue to be trained overseas, particularly in the United States, as has been the practice for years. Problems and Challenges Latecomers to the manufacturing sector, particularly to the capital- and technology-intensive sectors, lack comparative advantage in technology.
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From page 127... ...
As a result, a strong Australian mining industry developed, with companies with worldwide stature, such as Broken Hill Proprietary Co. Limited (BHP)
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From page 128... ...
The dual wealth in mineral and agricultural resources made Australia an early island of Western prosperity in the Pacific. Prosperity and the scarcity of labor, particularly in periods of mining booms, at times catapulted Australian wages to levels well above those in Europe and in the process deprived Australia of the comparative advantage of competitive labor.
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From page 129... ...
Because of the small and isolated market, protection by import quotas and, later, by substantial tariffs was necessary. The result was the rapid establishment of an apparently balanced and highly diversified structure of import replacement industries in the 1930s and after World War II.
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From page 130... ...
The problem of converting public-sector science into technology is encountered in most countries. In small countries, however, it is aggravated by the following considerations: · Scale: a fragmented, diverse, import replacement-based manufacturing industry; · The difficulty of competing with international skill, amortized on a world market basis;
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From page 131... ...
for private-sector R&D and some R&D grants in energy and biotechnology; · Government pressure on the private sector to raise R&D from 0.2 percent to more than 0.3 percent of the GDP in 1986 and on the public sector to reorient work toward the manufacturing industries; Change in CSIRO structure management by a corporate-type board with a nonscientist chairman; and · Generation of venture capital. The disadvantages of small scale can be overcome to some extent by creation of specialized niches based on local invention and individual entrepreneurs.
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From page 132... ...
The economy may therefore be able to bear a modest level of cross-subsidization in the form of residual tariffs for the labor-intensive industries to prevent permanent widespread unemployment. Similar dilemmas will be faced by other countries, including the United States, which are major producers of raw materials.
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From page 133... ...
UNITED STATES AND JAPAN: ENGINES OF GROWTH IN THE PACIFIC Investment and Technology Transfer Strategies On the national evolutionary scale of the production cycle, the United States and Japan occupy the top positions. Both nations are passing through the transition from an economy based on mass production to one based on information technology and its application to mass and customized manufacture.6 Their capital (see Figure 4)
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From page 135... ...
The Japanese have gained advances over the United States in production technology, color televisions, video cassette recorders, cars, and the current issue in mass production micron- and submicron-sized microlithography. Even in mature industries where the United States and Western Europeans innovate by incorporating microprocessors, the Japanese have invented new systems approaches greater attention to quality, timing, and customizing
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From page 136... ...
On the other hand, in the United States, government R&D contracts in defense and space and a large and entrepreneurial venture capital market produce a more than comparable concentration of resources. Voices of compromise and cooperation have emerged.
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From page 137... ...
CONCLUSION Globalization of industries by technology flow to the Pacific region has proceeded faster than in other regions if measured by the GDP growth it
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From page 138... ...
It has been facilitated by differing levels of development, comparative advantage, and endowment of raw materials among the countries of the region. Rates of development have also been fast because base levels in some countries are still low and perhaps even more so because many of the economies are open and native skill has been able to cope with rapid change.
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From page 139... ...
used here follows the tables issued by the Pacific Basin Economic Community Member Committee of the Tokyo Chamber of Commerce and Industry International Division, May 1986. Elsewhere, this paper focuses on representative countries of the Pacific Rim the Association of Southeast Asian Nations (ASEAN)
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From page 140... ...
1984. Economic development, export structure and shifting comparative advantage in the Pacific region.
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