Regional development in China with its tendency to cluster is being influenced by three crucial forces that include commercial/economic as well as political elements. First, China has accepted and encouraged a massive inflow of foreign direct investment by which the government and its agencies endeavor to meet overall economic as well as regional and technological advances. Second, it has accepted and encouraged close economic and industrial relations with outside areas, first with Hong Kong to be followed in a more extensive way by Taiwan and Korea and to a lesser extent with Japan. Hong Kong, now part of China, Taiwan and Korea have initially developed closest contacts with nearby provinces which correspond to the Pearl River Delta region, Yangtze River Delta region and the BoHai Rim region, respectively. Third, these forces have been reinforced by national and regional policies to establish different types of industrial and technological zone/parks, often complemented by provincial and municipal initiatives. The increasing level of FDI in China and its sophistication, particularly in the IT industry, has naturally prompted development of clusters for various types of specialization. Their character has mostly been of an operational nature in order to serve an export sector. It is the natural expectation of technology policy makers in China that the present clusters, with high-tech dominated by foreign MNCs, transform themselves into technological clusters fuelling an innovative environment in the country.
It is the total infrastructure needed to create (innovation), select (entrepreneurship), recognise (venture capital provision), diffuse (spillovers) and commercially exploit (receiver competence) new ideas in clusters of firms. The competence bloc is dominated by human-embodied competence capital that determines the efficiency characteristics of all other factors of production, including the organisation of all economic activities that constitute the competence bloc. This means that the choice of market and hierarchical organisation is part of the competence bloc. Above all, the definition includes the institutions of the market that are needed to activate innovations, entrepreneurship and venture capitalism ... Competence bloc formation concerns the dominant intangible human-embodied competence associated with a particular industrial success, and only secondarily the physical dimension of production.
1. The early commercial and industrial development in China created cities like Shanghai, Tianjin, Wuhan, Guangzhou, Qingdao where foreign powers played an important role until 1949. These cities were only weakly linked to the hinterland, although they played a very important role as commercial centers and budding industrial agglomerations. 2. A second type of cities, located inland or away from major waterways may be connected with political and military power. They are exemplified by Xian, Chengdu, Jinan, Taiyuan etc., and were less dynamic and often very slow in their industrial development. 3. The third type of cities includes primarily emerging industrial and mining cities such as Tangshan, Datang, Anshan etc. They followed the development of infrastructure such as railways and the development of natural resources. Their expansion took place following the strategy of central authorities. They were primarily developed as highly focused on certain products and generally lacked integrated service facilities. 4. A fourth type emerged recently and among them are the industrial cities that have been fuelled through the combination of heavy foreign direct investment, strong local support and new material and knowledge infrastructures. Outstanding examples are Shenzhen and Dongguan in Guangdong, Wuxi and Suzhou in Jiangsu, and Yantai and Weihai in Shandong.
Technological clusters often play an important role and need a conducive environment that provides knowledge, supportive interaction and incentive structures to become successful. Clusters thrive from a skilled and well-educated workforce, research and development with its resulting IPRs, business infrastructure and physical infrastructure. This will require a number of policy measures . First, labor and capital must increase in quality and quantity. Second, the environment for innovation and entrepreneurship must be given special attention to constantly renovate industrial structures. Thus, top-down policies which used to be dominant in China had to be replaced by cooperative relations between local and central institutions where central authorities subsequently have a diminishing role to play. The result has been that regions and also cities have been given a much larger control over various resources for R&D, including education.
In 1991 China launched 24 New and High Technology Industry Development Zones (NHTIDZ) which at the time were perceived to follow the Zhonguanzun model in Beijing. Two years later another 27 NHTIDZs were established, with an additional one that was set up in 1997. Of altogether 53 zones only a single one has an agricultural focus. Using the Chinese division of national regions the East, primarily the costal areas have 29 zones, the Middle which includes the Jilin and Heilongjiang provinces in the Northeast, has 14 zones while the remaining ones are located in the West. By referring to regions, the Bohai Rim region has 9 NHTIDZ, the Yangtze River Delta region has six and the Pearl River Delta also has six zones. By comparing provinces Guangdong is the leader with six zones followed by Shandong with five and Jiangsu with four. See table in appendix for details6. The following description provides an illustration of a general character of a NHTIDZ.
In 2002, a gross income of 19 billion Yuan of RMB was realized from technology, industry and trade in the Development Zone. And among already established enterprises, output values from industries such as electronic information, bio medicine and new materials took over 70%.
In the meantime, the number of workers employed in high-tech parks increased from 140,000 in 1991 to 3.49 million - an increase of nearly 25 fold. In its high-technology development MOST has emphasized, not only for NHTIDZ, that electronics and information technology should be given highest priority followed by bioengineering and new pharmaceutical industry. Zhonguancun (ZGC) in Beijing has been seen as role model for the high-technology development zones in other parts of the country. ZGC benefited greatly from a situation of being in the center of a research environment where a number of high-level research institutes were located, mainly belonging to the Chinese Academy of Sciences. In the same area were also a number of colleges and universities of which the two most famous are Beijing University and Tsinghua University. The loosening of the planned economy in the early 1980s provided completely new possibilities for researchers to become entrepreneurs, also compelled to move because reduced budget allocations. Closeness to the central government and funding agencies in Beijing has continued to favor entrepreneurs, researchers and enterprises in Zhonguancun. The result is that ZGC has become the largest high-tech R&D centre in China and the largest distribution centre for IT products in north China.
Technological clusters signify the other end of a technology chain and represent places where innovations take place. This would include the co-location of activities that lead to the recognition of new market opportunities, the development of new technologies and the design of new products. Such cluster change over time as new firms enter into the technological field and new designs offer or demand major changes in global production networks. Technological clusters, as observed in the manufacture of hard disk drives, are of two different kinds. One involves the design coordination between component makers and enterprises that are in charge of final products, while the other involves coordination between designers of critical product components. In the former type there is usually intensive interaction during the design stage for new products and the design and production of new product prototypes. In the latter type complementary technical changes may be needed in the manufacture of several components when new technology is introduced in one particular component. Naturally, it happens that technological clusters lose their innovativeness which may reflect major changes in the market or management shortcomings or a combination of both. Similarly, operational clusters continue to undergo changes and may occasionally become redundant. Thailand that is still the world’s second largest producer (assembler) of hard disk drives is facing serious competition from operational and possibly technological clusters in China.
After normalizing diplomatic relations in 1992 the two countries entered into a close economic partnership and China has for Korea become number one trading partner in both exports and imports. Trade between the two countries constituted 14 per cent of Korea’s total trade in 2003. Beijing and Tianjin r egions have five per recent of China's total land area and some 20 percent of total national population. By 2025 they could account for two thirds of China's total GDP, a development that in all likelihood would attract large-scale migration. However, central and western China will probably in the meantime create their own urban belts and concentration of cities.
1. As Beijing has a strong information technology industry and Shenzhen a strong manufacturing base, Shanghai focuses on further exploiting an advanced biotechnology base and building the Pudong Bio Science and Technology Park. 2. Preferential tax regime and financial assistance help high technology startups invest in R&D 3. Public resources establish new basic research institutions focused on Shanghai’s strengths and interests, to encourage cooperation between universities and corporations, and to reorganize old research institutes.
The industrial strength in Shenzhen lies in the following five areas. First, the majority of the industrial high-tech companies are private ones, with strong participation from abroad. Second, R&D is carried out within companies. Third, incubators play an important role, with presently more than 1,000 enterprises in incubators. Fourth, all required support services for the electronics sector are available. Fifth, Shenzhen gives strong support to IPR, with many companies having their own IPR sections. Shenzhen is number three in China in terms of IPR. Furthermore Shenzhen organizes annually, since 1999, a High-Tech Fair, held in mid-October.
Shenzhen Special Economic Zone was established in 1980 after the City came into being the preceding year21. The official investment guide22 says that “in a short 23 years, Shenzhen has developed from a frontier town into a garden city with solid economic strength, complete urban functions, good ecological environment, civilized society, sound legal system and rich vitality.” Foreign companies have located in Shenzhen because of labor which is not only attractive for cost reasons but also for its increasing competence levels. Another reason for the increasing attractiveness of Shenzhen lies in its dominance of private companies. As a consequence, more than 90 per cent of all R&D carried out in Shenzhen is carried out inside companies. This is very different from other major cities in China. Government revenues (taxes) from Shenzhen reached RMB26 billion (2002) and exceeds those of Beijing and Shanghai. The GDP of Shenzhen in 2002 reached RMB 223 billion, to be compared with 313 billion for Beijing and 540 billion for Shanghai. Its exports in 2002 amounted to US$46 billion compared with 32 billion from Shanghai. Shenzhen in the same year attracted foreign investment at the level US$4.9 billion which is basically the same figure as for each of other three major cities in China – Beijing, Shanghai and Suzhou. Shenzhen High-Tech Industrial Park (SHIP) is one of the five national science parks. SHIP serves as the base for high-tech industrialization, R&D, incubator and high-tech talents training. 22% total industry output comes from this park. The park has 80,000 staff employed in some 1,500 firms and more than half have university or college degrees. More than 10,000 have master degrees and more than 1,000 have doctoral degrees. Shenzhen Software Park (SZSP), located inside Shenzhen High-Tech Industrial Park, is the national base for the Torch Plan Software Industry that has been designated by the Ministry of Science and Technology. The Software Park with a total of 225 registered firm and 11 firms are among top 100 software firms in China. SZSP is dependent on SHIP for resources and interaction with companies. The software companies employs more than 6,000 and generated software with a value of RMB 2.5 billion in 2001. Shenzhen High-Tech Industrial Belt (SHIB) that comprises 11 parks including 9 high-tech industrial parks, a university town and one ecological agriculture park. SHIB includes the Virtual University with some 8,000 postgraduates and 6,000 undergraduates (2003). SHIB has 40 IT centers, and a number of R&D centers that are operated by companies.
To improve higher education, Shenzhen is partly relying on its Shenzhen Virtual University (SVU), established in 1999, which is a novel approach. A University Town was inaugurated in December 2003 with 10,000 students of which 70% will be all-day students while the rest are “local” part-time students who will study in the evening and on weekends. The University Town will in particular draw on resources from Tsinghua University in Beijing, Beijing University, Harbin Engineering University and Nankai University in Tianjin. The Shenzhen Virtual University offers member universities, enterprises and venture capitalists an opportunity to communicate and cooperate to commercialize technical research. Including the year 2001 more than 4,000 students with Master or Doctor Degrees have graduated from the Virtual University. Shenzhen is part of China’s 211 Project whereby China will have the 100 best universities in the 21st Century.
Tianjin and other cities in the Bohai region provide an almost unlimited supply of cheap labor and Tianjin is well endowed with universities and colleges. TEDA: The administration of this area has, following Toyota’s investment in car manufacture, decided to attract small and medium-scale enterprises to support the development of the car industry. Toyota made a major investment in a joint venture engine plant with Tianjin Automotive Group (TAG) that was already a producer of mini cars and trucks. TEDA27 has also played an important role in the establishment of a State Base for Nanotechnology Industries (SBNI) which became one of the first of its kind in China . The first is to further perfect the construction of information industry parks in Hengshui, Shijiazhuang, Baoding, Langfang, Tangshan and Qinhuangdao. The second is that key focus should be given to the construction of Sanheyanjiao, Shijiazhuang, Baoding and Qinhuangdao 4 provincial level software parks to drive forward the development of relating industries and middle and small software enterprises in the surrounding regions and to strive to establish a national level software industry base in about three years. And the third is to build information technology transformation centers in development zones in Shijiazhuang, Langfang, Sanheyanjiao and Qinhuangdao, and through the construction of industrial parks and transformation centers, to form an information industrial belt and establish an electronic and information industry processing and production base with industrial complementation among Beijing, Tianjin and Hebei so as to build an excellent platform for the development of information industry in priority.
YRD: They have total investment of RMB 55 billion for infrastructure and cover area of 492 square kilometers. These development zones have become hot spots for domestic and foreign investors. In 2002, US$1.8 billion worth of overseas investment which amounted to 58 percent of the total figure in the province was actually used in these development zones. The industrial structure in the development zones has gradually changed to include agriculture and services. Dongguan has a number of industrial and technology parks which include: 1. Xin An Industrial Park specializing in electronics, computer parts, and related products 2. Zhen An Industrial Park is base for a number of capital-intensive facilities 3. Dongguan High-Tech Development Zone is compound for producers of fine chemicals, high-tech materials, and related products 4. Anli Science and Technology Compound is home to capital-intensive facilities in plastics among other industries
In connection with the changeover to the new system, some institutes were merged and restructured. The new National Institute of Materials Science under MEXT and the new National Institute of Advanced Industrial Science and Technology (AIST) under METI are thus quite different from their predecessors. So far there has been little change in the size of government funding to the institutes. The government’s intention with the new system will become more clear after the first round of evaluations have been completed Some funding agencies as well as some R&D-performing organizations have been so-called Special Public Corporations. In the autumn of 2003 most of these were turned into IAI:s. On that occasion a new Japan Aerospace Exploration Agency (JAXA) was formed through the merger of the Institute of Space and Astronautical Science (ISAS), the National Aerospace Laboratory of Japan (NAL), and the National Space Development Agency of Japan (NASDA).
One of the clusters is the “Greater Kansai Cluster” in life sciences, involving both Osaka and Kobe. Resources for developing this cluster, have been channeled through a number of other initiatives as well. A couple of years ago, an initiative to promote regenerative medicine was concentrated here. This was partly in response to criticism that earlier large scale life science programs in fields such as brain science and genomics were all located in Kanto but could also be justified by the scientific competence already accumulated in the region. Osaka has received special funding for development of Saito, a new life science park near its university hospital and medical school, as part of a grant for urban revitalization. At least some prefectures and some of the large cities have special sections devoted to the promotion of industrial development and academia-research cooperation in high technology fields. Another major regional science and technology initiative also focuses on life sciences and biotechnology. The Japanese government has declared that it plans to open a new world-class graduate school university in Okinawa in September 2006 focusing on life sciences and nanotechnology. The plan calls for an investment of 5.7 billion SEK and an annual operating budget of 1.4 billion SEK. The university will be established by the public sector but be run as a private institution. The idea is to invite top scientists from all over the world to teach and do research at the new university. The Japanese government has sought advice from Nobel laureates and other leading international scientists in designing the university.
In their ambition to be bigger than each other, the Chaebols continue to expand through product and sectoral diversification -- in sharp contrast to the current wisdom of down-sizing and industrial devolution Korean SMEs, however, remain closely tied to, and actively supported by, large firms. In the electronics industry in particular, most SMEs, although technically independent, tend to be a part of tightly structured and multi-layered vertical intra-firm production networks orchestrated and governed by the leading Chaebols (Ernst 1994). Such networks are said to have led to qualitative improvements in technical learning, product and process development. Larger firms benefit from the flexibility, especially in terms of labour costs, and the specialised skills and knowledge that small units offer, while SMEs are able upgrade through the financial and technical support offered by large firms.
To support R&D within the industry, the government has used various incentives. In the 1960s and 1970s various tax incentives and preferential financing for R&D activities were offered. The mechanisms were largely ignored by industry owing to the absence of a clearly felt need to invest in R&D and the relatively easy means of acquiring and assimilation of foreign technologies the available from many sources. In the early 1980s preferential loans became the most important means for financing private R&D activities.
Moreover, subcontracting is multi-layered with vertical production arrangements that consist of subcontracting ties from: • foreign firms to large Korean firms; • the large nodal Korean firms to local SMEs as well as firms in low waged economies (especially mainland China); • among SMEs; • SMEs down to low waged female and elderly homeworkers.
This project consists of two parts: product technology development projects and fundamental technology development projects. The former include new drugs and chemicals, broadband technology, next-generation vehicle technology, and high-definition television (HDTV). The latter consist of ultra-large-scale integrated circuit, advanced manufacturing systems, electronics and new material technology in information technologies, energy and environmental technologies, biomaterials and next-generation nuclear reactor.
South Korea’s technology policy is moving from a mission-oriented to a diffusion-oriented one. For instance, the central government has increasingly been supporting the innovativeness of SMEs and interfirm networks. According to Hassink (2001), these SME-oriented innovation policies are more strongly developed than one would expect after reading the literature on South Korea’s economic policy. In the literature and journals stress is often a placed on the strong connection between the government and the chaebol, also involving large support, and thus neglecting SMEs.
The key problem was how to keep upgrading the technological content of the products. To reach this goal an overall strategy of four key components was adopted (Lin, 1998). • Building human resources • Acquiring technology from the more advanced countries. • Creating science and technology capacities • Converting research results into commercial products
It also conducts short-term R&D projects in cooperation with private organizations, generally to improve product performance and process efficiency. ITRI’s research scope covers electronics and IT, machinery, biomedical and advanced materials, energy and resources, and more recently civil aerospace. At the end of the 1980’s the government set up “ key research institute” and “centre of excellence” at each of the four national universities - National Taiwan, National Tsing-Hua, National Chiao-Tung, and National Cheng-Kung - in the fields of applied mechanics, material science, information technology and aviation and aerospace technology.
Of all industries within the HSIP, the Integrated Circuits Industry is the largest. It is also the most important in terms of number of companies, scale of operations and sales revenues. HSIP is one of the world’s main centres of IC manufacture. The second largest industry within HSIP is computers and peripherals. Major Taiwan computer makers such as Acer Incorporated, Mitac International, UMAX Data Systems etc. are located in this science park.
From a technological and economic point of view the development of information industry products has been a success. Taiwan is the world’s third (some years fourth) largest in computer production. Many peripheral products make up a large share of world market, such as monitors, computer mouse devices and printed circuit boards. One important explanation for the expansion can be the modular architecture (Henderson & Clarke, 1990, Ulrich, 1995) of the products manufactured. For example, the PC-industry is a highly open, modularised system with many internationally standardized components and rather easily adjustable interfaces. Even propriety CPUs and memory chips can be purchased from merchant firms. As a result, local firms could enter this industry by initially assembling final products and subsystems (keyboards, monitors, chipsets etc.) based on OEM and OBM terms.
Taiwan’s ”high-tech” IT-sector is largely located in an area from Taipei in the north down to Hsinchu roughly 80 km southwest from the capital. In recent years science-based parks have also been established in Tainan and Taichung. The propensity for risk-taking and experimentation in Taiwan’s SMEs produced an ongoing stream of innovation and the opportunity for some firms to be in the technological forefront. The competitive advantages of this ”bootstrap” were confirmed in the 1990s as Korea’s chaebol fell increasingly behind the acceleration PC product lifecycle and were to source key components from Taiwan
Consideration should be given to the type of demand orientation used in these projects.While projects are initiated on the basis of a beneficiary’s demand, beneficiaries should be helped in formulating these demands based on an analysis of their growth constraints. In this sense, demand orientation is not passive but proactive with the brokers playing an important role in helping the strategic planning process of the enterprises. Especially in developing countries, where small enterprises have a weak capacity to develop a strategic response to market challenges, this approach has proven the most suitable in UNIDO’s experience. Business orientation refers essentially to two components: first, networking must aim at visible improvements in the economic situation and prospects of participating SMEs; and, secondly, it must grant the group a new competitive advantage which the enterprises alone could not reach. Fo cus on production, points to the importance of process and product innovation and structural improvement as opposed to, for instance, an increase of sales resulting from an occasional participation in a fair. While activities like information exchange and joint participation in fairs are important parts of a network work plan, they are not the ultimate objective of UNIDO’s approach, which is rather to improve the business prospects for SMEs by helping them to achieve long-term changes in their production capability and organization.
Networking is a multidimensional concept and does not apply only to enterprises. Institutional networking, networking between the private and public sectors, and country networking (as in the case of the Joint Learning Programme outlined in point 5, below) are equally important concepts in UNIDO’s activities. The idea is to specialize and cooperate to the maximum extent, so that each actor in the economic system can dedicate itself to core functions and perform them to the best of his or her abilities. The key resource in networking initiatives is the people involved (policy makers, brokers, and other service providers). With this in mind, it is important to distinguish four factors that can increase the likelihood of project success: people’s ownership, empowerment, skills, and incentives. The importance of continuous training, as well as the need to diffuse information related to best practices to orient networking agents’ decisions, is most important. A combination of private and public investment appears to be the best way to finance networking development services. The main elements which appear to militate against an exclusive reliance on the market is that networking development services aim at balancing some market failures, as described in this paper’s introduction, and, therefore, the market cannot be expected to entirely cover their costs.
While quantitative evaluation indicators are always auspicious, there are three aspects to consider: a) the scarcity of reliable and comparable data on the performance of small firms; b) the understandable unwillingness of the entrepreneurs to release confidential data about their businesses; c) purely quantitative measures often fail to take into consideration results like institutional capacity building as well as indirect results such as those resulting from the work of second (or third, etc.) generation brokers. The introduction of elements of market cost recovery should be pursued as early as possible in order to avoid that the beneficiaries become accustomed to full subsidies and risk that the enterprise becomes dependent on the service provider. Progressively increasing the share of the costs that enterprises have to cover is one way to reduce such a risk. Lastly, there is no single and pre-defined path to be followed in the implementation of cluster/network promotion initiatives that can be effortlessly replicated across countries, regions and industrial sectors. These initiatives need to be flexible and in tune with the characteristics of the environment where SMEs operate.
Innovation Policies and Places in China Korea Taiwan Japan
Innovation Policies and Places in China, Japan, Taiwan and Korea STPS 590 Burak OĞUZ Instructor: Dr.Erdal AKDEVE
China <ul><li>Accepted and encouraged FDI </li></ul><ul><li>Close economic and industrial relations with outside areas </li></ul><ul><li>Reinforced by national and regional policies </li></ul>
China <ul><li>Competence block </li></ul><ul><ul><li>Functional or Sectoral Cluster </li></ul></ul><ul><li>K nowledge flows and linkages have become key elements in knowledge-based production. A concept that could shed light on high-tech clusters is the competence block, which is defined by a minimum set of competencies that are necessary to profitably identify, generate, select, exploit and expand business ideas. </li></ul>
China <ul><li>Urbanization – 4 Types </li></ul><ul><ul><li>E arly commercial and industrial development </li></ul></ul><ul><ul><li>P olitical and military power </li></ul></ul><ul><ul><li>E merging industrial and mining cities </li></ul></ul><ul><ul><li>I ndustrial cities that have been fuelled through the combination of heavy foreign direct investment, strong local support and new material and knowledge infrastructures </li></ul></ul>
China <ul><li>The Beijing government wants to reduce this dependence and make the nation more self-reliant in developing its own technologies based on advanced research. This ambition rests in a desire to reap more benefits from the ongoing industrialization but also in a national objective to shape its defense capability without being overly reliant on imported technology. In doing so China has in a major way accepted to become a member of an open economic system and actively participate in globalization that in restricted sense “represents the increased speed, frequency, and magnitude of access to national markets by non-national competitors”. </li></ul>
China – Development Zones <ul><li>The government has selected a number of “intelligence-intensive” regions and adopted policies to gradually transform them into high-tech development zones with different characteristics. There are now 53 such zones that are expected to become bases for China’s high-tech industrialization. </li></ul>
Shijiazhuang High-tech Industrial Development Zone <ul><li>The Development Zone is located in the central area of the urban development planning as well as key development areas and investment hotspots with integration of science, industry and trade. Its geographic locations are extremely superb. Currently there are 1520 enterprises that have registered in the Development Zone with total investments in construction projects exceeding 25 billion Yuan of RMB, among which, there are 125 foreign enterprises with total investments of 1 billion US dollars and actual usage of foreign investment of 0.6 billion US dollars including investments from over 10 countries and regions such as the USA, Germany, UK, Italy, Japan, Canada, Sweden, Malaysia, Poland, Korea, Hong Kong, Macao and Taiwan. </li></ul>
China – Development Zones <ul><li>In 1988 the State Council decided to establish Shenzhen, Zhuhai, Shantou, Xiamen and Hainan as comprehensive economic zones which all have broad economic self-management. They provide easier entry for foreign investors with the purpose to attract foreign capital, provide access to advanced technology and international markets. An expected outcome is a close interaction between FDI enterprises, SOEs, collective and private enterprises. </li></ul>
China – Development Zones <ul><li>Similar to NHTIDZs China has during 1984-2002 created 49 economic and technological development zones. Their locations include Dalian, Tianjin, Ningbo, Beijing and Harbin. The purpose is to speed up the economic development of such cities by drawing on their special advantages. </li></ul>
China – Development Zones <ul><li>Within national programs for regional development the New High-Tech Industrial Development Zones play the most important role in fostering China’s continued drive for industrialization and technological advances. Statistics9 from the Ministry of Science and Technology show that from 1991 until 2002, major economic indicators of 53 high-tech development zones in the country grew almost 50 per cent on a year-on-year basis, with an increase of total turnover volume from RMB8.7 billion (US$1.06 billion) to RMB 1,533 billion (US$186.9 billion) in 2002. </li></ul>
China – Op. and Tech. Clusters <ul><li>Earlier studies of HDD manufacturing clearly indicated that clusters in South-East Asia came into existence based on “economies of proximity in input-output relations: speed of throughput, product changeovers, increasingly specialized engineering and assembly labor. Operational clusters may on occasion be sources of new product ideas, but their principal goal is to achieve operational efficiencies, and any new technologies they create are meant to improve production processes of supply chain management ” </li></ul>
China - Three Significant Regions <ul><li>Taiwan Border </li></ul><ul><li>Korean Border </li></ul><ul><li>Beijing and Tianjin </li></ul>
China – Local Governments <ul><li>Provincial and local governments at city and county levels have vital role in economic and technological development. They control about 70 per cent of the state budget and have often their own development strategies, although frequently directed from the central government. </li></ul>
China - Shenzen <ul><li>Hong-Kong Border </li></ul><ul><ul><li>Virgin land for industrialists </li></ul></ul><ul><ul><li>Low wages </li></ul></ul><ul><ul><li>E ntrepreneurs in the Hong Kong environment of dominantly private business quickly sensed immediate prospects of doing good business on the Mainland when the central authorities started to grant special status and privileges to the zones. </li></ul></ul>
China – Shenzhen <ul><li>Shenzhen Special Economic Zone </li></ul><ul><ul><li>Shenzhen High-Tech Industrial Park </li></ul></ul><ul><ul><li>Shenzhen Software Park </li></ul></ul><ul><ul><li>Shenzhen High-Tech Industrial Belt </li></ul></ul>
China - Shenzhen <ul><li>The industrial output of Shenzhen is predicted by 2020 have increased from RMB350 billion to RMB2,000 billion. SHIB only will by 2010 have an industrial output of RMB500 billion, also according to expectations. By 2020 semiconductor manufacture is expected to have become a very important part among the IT industries in Shenzhen. </li></ul><ul><li>Higher education </li></ul>
China – Regional Clusters <ul><li>A successful development of clusters requires capabilities and facilities to meet a number of demands. One is the physical infrastructure such as water and power supplies, physical transportation and telecommunications, and must also include easy access to ports and airports. Equally important is institutional development which must facilitate investment measures and offer transparent tax rules. </li></ul>
China – BoHai Rim (BHR) <ul><li>Availability of human resources </li></ul><ul><ul><li>Tianjin Economic Development Area </li></ul></ul>
China –Regional Clusters <ul><li>Yangtze River Delta (YRD) </li></ul><ul><ul><li>Budding automobile cluster </li></ul></ul><ul><ul><li>China will soon become the world’s third largest producer of cars </li></ul></ul><ul><li>Pearl River Delta Region (PRD) </li></ul><ul><ul><li>Toyota, Honda and Nissan – joint venture </li></ul></ul><ul><ul><li>D esktop and computer parts manufacturing center. The industrial chain in Dongguan is so complete that the city is able to supply 95 percent of all component parts needed to assemble a computer. </li></ul></ul>
China - Education <ul><li>Enrollment of Institutions of Higher Education and Specialized Secondary Schools by Region (2002) </li></ul>
China - Innovation <ul><li>Three Types of Patent Applications Examined and Granted by Region (2002) </li></ul>
Japan <ul><li>In 2004, both Prime Minister Koizumi and the Finance Minister have publicly singled out science and technology as the exceptional area in which discretionary government spending will be allowed to increase. </li></ul>
Japan – Basic Plans for S&T <ul><li>Strengthened cooperation between industry, universities and government research organizations </li></ul><ul><li>Promotion of the establishment of new ventures based on technological seeds or ideas from universities or research institutes </li></ul><ul><li>Increased support for young researchers by drastically increasing the number of post-doctoral fellowships </li></ul><ul><li>Increased mobility of researchers </li></ul><ul><li>More competition for research funds and higher degree of concentration of research funds </li></ul><ul><li>Increase in government resources to R&D </li></ul>
Japan <ul><li>As part of the administrative reform in 2001, the legal status of most national research institutes was changed to Independent Administrative Agencies (IAI). This greatly increases the flexibility of the institutes in terms of personnel and financial management. </li></ul><ul><li>Also transformation of national universities into IAI. </li></ul>
Japan <ul><li>Researchers shall be eligible for funding regardless of what type of organization they belong to as long as they meet the criteria established for a certain research program, such as open publication of results. </li></ul><ul><li>The transformation of national research institutes and national universities into IAI:s will give the researchers a large degree of freedom in designing their own career and employment systems. </li></ul>
Japan – Four priority fields <ul><li>Life sciences, </li></ul><ul><li>Information and communication, </li></ul><ul><li>Environment, and nanotechnology </li></ul><ul><li>Materials </li></ul><ul><li>Similar strategies have been developed for another four areas: energy, manufacturing technology, social infrastructure, and “frontiers” (space and oceans). The four priority fields. represent around 45 percent of total government R&D-spending and the additional four fields another 38 percent. </li></ul>
Japan <ul><li>Support for intellectual property </li></ul><ul><li>Regional development </li></ul><ul><ul><li>An overwhelming part of R&D activities in Japan are concentrated in either the region including and surrounding Tokyo (Kanto) or in the region centered on Osaka, Kyoto and Kobe (Kansai). </li></ul></ul>
Japan <ul><li>Cooperation with other countries in Asia-Pacific </li></ul><ul><ul><li>According to a recent OECD-report1, in 2001 China spent USD 60 billion on R&D. The currency conversion has been done using so-called purchasing power parities (PPP). The corresponding figures for Japan and Korea for the same year were USD 104 billion and USD 22 billion respectively. Added ogether these three countries spent USD 186 billion, which was the almost exactly the same as for the whole of the EU! </li></ul></ul>
Japan <ul><li>At least 60 percent of government R&D-funding to nonuniversity organizations </li></ul><ul><li>Small share of industry R&D directly financed by the government </li></ul><ul><li>20 percent of university project funding from industry </li></ul><ul><li>Life sciences and energy dominate government S&T-spending </li></ul>
South Korea <ul><li>Korean “Chaebols”, or large multisector conglomerates </li></ul><ul><ul><li>Hyundae, Samsung, Daewoo and Lucky GoldStar </li></ul></ul><ul><li>Recent evidence suggests that small and medium sized firms are also gaining in prominence in the Korean industrial economy. </li></ul>
South Korea <ul><li>R&D Expenditure by source of funds </li></ul><ul><li>Number of patents </li></ul>
South Korea <ul><li>Korean industrial development strategy is also known for the active interventionist role taken by the State in shaping industrial, trade, investment and technical policies of manufacturing enterprises. </li></ul>
South Korea <ul><li>Increasing s ignificance of SMEs and l arge f irm- s mall f irm n etworks </li></ul><ul><li>Proportion generated by SMEs increased from 37.6% in 1985 to 47.6% in 1992. </li></ul><ul><li>Within the electronics industry 70% of SMEs are said to be subcontractors </li></ul>
South Korea <ul><li>The most ambitious government vision is the Highly Advanced National R&D Project, also known as the G-7 Project, which is aimed at lifting the nation’s technological capability to the level of G-7 countries by 2020. </li></ul>
South Korea <ul><li>Weaknesses in innovation system: </li></ul><ul><ul><li>research at universities is relatively weak; </li></ul></ul><ul><ul><li>there is a serious lack of interplay between universities and the private sector; </li></ul></ul><ul><ul><li>there are relatively few technological spin-offs; </li></ul></ul><ul><ul><li>there is a dearth of diffusion mechanisms to transfer research results from public research establishments (PREs) to industry and particularly to SMEs. </li></ul></ul>
Taiwan <ul><li>The main challenge facing the Taiwanese economic planners was how to move from a condition of little know-how, inadequate institutions, and an under-supply of trained scientists and engineers to that of a high-tech based economy. </li></ul>
Taiwan - Acquiring technology from more advanced countries <ul><li>If the major purpose of a foreign R&D activity was restricted to the needs of the Taiwan market, foreign firms tended to set up a transfer technology unit (TTU) or an indigenous technology (ITU) unit in Taiwan. If the objective was to enhance technology learning, in recognition of Taiwan’s strategic position in the global market, foreign firms tended to set up international interdependent laboratories (IILs) in Taiwan. Another conclusion was that most of Southeast Asian firms preferred to set IILs, not ITUs, while European firms prefer to set up IILs. According to the authors an IIL made the largest impact on the Taiwanese knowledge flow system, ITU came second, and least impact was from the TTU. </li></ul>
Taiwan - Creating science and technology capacities <ul><li>Industrial Technology Research Institute (ITRI) was established in 1973. ITRI is now the largest industry-oriented research institution in Taiwan. In 1973 it had about 450 employees. By 2000 it grew to 6100 employees, 900 of them hold doctoral degrees and more than 3600 had bachelor or master’s degrees (ITRI, 2000). ITRI receives contracts from the government to develop generic technologies, and transfer the results to the industries in a non-exclusive manner. </li></ul>
Taiwan - Creating science and technology capacities <ul><li>The Hsin-Chu Science-based Industrial Park (HSIP) was established in 1980 under the guidance of national Science Council. Started with a few companies, today it hosts a large number of companies, providing employment for nearly 40 000 people (visit to HSIP, 2000). </li></ul>
Taiwan - Converting research results into commercial products <ul><li>In order to speed up the conversion of R&D results into commercialisation, The Department of Industrial Technology (DOIT) of the Ministry of Economic Affairs, employs the strategy of industry-institute joint research projects. Based on needs of companies with limited R&D facilities, DOIT also promotes a research-based ‘open laboratory’ strategy. These open laboratories give access to companies for the purpose of maximizing existing resources and minimizing investment risks before commercialization can take place. </li></ul>
Taiwan - Shortcomings <ul><li>According to Shyu and Chiu (2002), there are some important issues relevant to Taiwan’s innovation infrastructure: </li></ul><ul><li>1. Insufficient laws and regulations regarding innovation. Taiwan has imposed too many restrictions that discourage the private sector’s interest. </li></ul><ul><li>2. Limited budgets and manpower for innovation. </li></ul><ul><li>3. Some key technologies depend on other leading countries. </li></ul>
Taiwan – IT Sector <ul><li>Taiwan, which served as a source of cheap labour for foreign consumer electronics multinationals as late as the 1970s, is known today as a global centre of IT systems design and manufacturing. Taiwan’s strength lies in PC-related information products and IC (semiconductor) sub sectors. </li></ul>
Taiwan - Hsinchu Science Park <ul><li>It was modelled like Stanford Research Park in Silicon Valley. </li></ul><ul><li>The Silicon Valley-Hsinchu relationship nowadays consists of formal and informal collaborations between individual investors and entrepreneurs, SMEs as well as larger companies. A new generation of venture capital providers and professional associations serve as intermediaries linking decentralized infrastructures of the two regions </li></ul>
Conclusions from UNIDO <ul><li>The experiences gained during five years of UNIDO’s involvement in network/cluster-related projects permit certain conclusions to be drawn. </li></ul><ul><ul><li>Demand orientation </li></ul></ul><ul><ul><li>Business orientation </li></ul></ul><ul><ul><ul><li>Focus on production </li></ul></ul></ul>
Conclusions from UNIDO <ul><ul><li>Multidimensional concept </li></ul></ul><ul><ul><li>People involved </li></ul></ul><ul><ul><li>Training and exposure to best practices </li></ul></ul><ul><ul><li>Combination of private and public investment </li></ul></ul>
Conclusions from UNIDO <ul><ul><li>Evaluation criteria </li></ul></ul><ul><ul><li>Market cost recovery </li></ul></ul><ul><ul><li>No single and predefined path </li></ul></ul>
References <ul><li>Korea’s National Innovation System and the Science and Technology Policy, Deok Soon Yim </li></ul><ul><li>Government Research and Innovation Policies in Japan, Lennart Stenberg </li></ul><ul><li>Industrial Clusters and Networks: Case Studies of SME Growth And Innovation , Khalid Nadvi </li></ul><ul><li>S ME Cluster And Network Development In Develop i ng Countr i es: The Exper i ence Of U NIDO, Cegie G., Dini M. </li></ul><ul><li>The innovation systems of Taiwan and China: a comparative analysis, Pao-Long Chang, Hsin-Yu Shih </li></ul>