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Clusters and Economic Growth in Asia
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© Sören Eriksson 2013
All rights reserved. No part of this publication may be reproduced, stored in aretrieval system or transmitted in any form or by any means, electronic,mechanical or photocopying, recording, or otherwise without the priorpermission of the publisher.
Published byEdward Elgar Publishing Limited
The Lypiatts15 Lansdown RoadCheltenhamGlos GL50 2JAUK
Edward Elgar Publishing, Inc.William Pratt House9 Dewey CourtNorthamptonMassachusetts 01060
USA
A catalogue record for this bookis available from the British Library
Library of Congress Control Number: 2012951751
This book is available electronically in the ElgarOnline.comEconomics Subject Collection, E-ISBN 978 0 85793 009 5
ISBN 978 0 85793 008 8
Typeset by Servis Filmsetting Ltd, Stockport, CheshirePrinted and bound by MPG Books Group, UK
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v
Contents
List of contributors vi
Preface ix
1 Cluster policies and entrepreneurial states in East Asia 1
Alexander Ebner
2 Information and communication technology and economicgrowth of four Asian industrialized economies 21
Yanfei Li and Wai-Mun Chia
3 Industrial agglomeration of Taiwanese electronics firms in
Dongguan, China: home effects and implications for industrial
upgrading 40
Felix Haifeng Liao, Karen Zhihua Xu and Bin Liang
4 The rise of the biomedical cluster in Wonju, Korea 66
Jun Koo and Jongmin Choi
5 The global economic crisis as leverage for emerging regionalgrowth paths? Differentiated evidence from China – three years
onwards 85
Daniel Schiller and Henning Kroll
6 Technological intensity of FDI in Vietnam – implications for
future economic development and emerging clusters 119
Curt Nestor
7 The aircraft industry as a tool for economic and industrial
development – the case of Indonesia 141
Sören Eriksson8 Foreign knowledge transfer in the development of aircraft
industry clusters – the case of Chengdu, China 165
Sören Eriksson
Index 183
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vi
Contributors
Wai-Mun Chia obtained her Bachelor’s degree in economics from the
University of London and then pursued her Master’s degree at the
London School of Economics (LSE) with scholarship. She received a
PhD in economics from Nanyang Technological University (NTU) in
Singapore and is currently Assistant Professor at NTU. She is an Assistant
Editor for the Singapore Economic Review. Her research interests are inter-national macroeconomics and economic integration in East Asia. She has
numerous publications in international scientific journals.
Jongmin Choi is a doctoral student in the Department of Public Policy at
the University of North Carolina at Chapel Hill. He received a Master’s
degree in public administration at Korea University. He has a keen interest
in industry cluster, science and technology policy, and urban development.
Alexander Ebner is Professor of Political Economy and Economic
Sociology as well as Director of the Schumpeter Center for Clusters,Innovation and Public Policy at Goethe University in Frankfurt am Main,
Germany. Previously, he was an Associate Professor of Political Economy
at Jacobs University Bremen. Previous research affiliations include the
Institute of Southeast Asian Studies in Singapore. Alexander Ebner’s
research interests involve the matters of entrepreneurship, innovation,
governance and regional economic development.
Sören Eriksson is a Professor of Economic Geography at Jönköping
International Business School, Sweden. His research activities focus on
technology diffusion, globalization processes, logistics issues and regional
economic development. He is an authority on East and Southeast Asia’s
geography and an expert on the international aerospace industry. He has
lectured, conducted seminars and been appointed as external reader and
opponent of doctoral dissertations at a number of foreign universities and
research establishments in Africa, Asia, Europe and North America.
Jun Koo is an Associate Professor in the Department of Public
Administration at Korea University. He holds a doctorate degree in city
and regional planning from the University of North Carolina at ChapelHill. Before joining Korea University he worked for the World Bank and
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Contributors vii
taught at Cleveland State University. He has diverse research interests
including innovation and entrepreneurship, industry cluster and urban
development. His research has appeared in many major international
journals on regional science, management and public administration.
Henning Kroll is an economic geographer and a researcher at the
Fraunhofer Institute for Systems and Innovation Research in Karlsruhe,
Germany. His research interests include the analysis of national and
regional innovation systems in Germany, Europe and Asia, the devel-
opment of regional innovation indicators, as well as the assessment
of regional innovation and technology policies. Recently, he has been
working on projects for the municipal governments in both Northern and
Southern China.Yanfei Li received his BA in economics from Peking University, China,
and a PhD in economics from Nanyang Technological University (NTU),
Singapore. He is currently a Research Fellow at NTU, where he conducts
research in economics of technological change and Asian economies,
serving both academic and consulting constituents. He has several papers
and book chapters published in Emerald and Elsevier journals and
books and with Economic Research Institute for ASEAN and East Asia
(ERIA).
Bin Liang is currently a graduate student in the Department of Family
and Consumer Studies at the University of Utah. Her research interests
include globalization, housing, migration, urban planning, transportation
and public health, with a regional focus on China and the United States.
Felix Haifeng Liao is currently a PhD candidate in the Department of
Geography at the University of Utah. His research interests include eco-
nomic/urban geography, regional development, globalization, industrial
location, GIS and spatial statistics, with a regional focus on China and the
United States.Curt Nestor has a PhD in economic geography and is Senior Lecturer
at the School of Business, Economics and Law at the University of
Gothenburg, Sweden. His research interests and publications focus on
Vietnamese economic development, trade and foreign investment flows,
and regional economic integration.
Daniel Schiller is an economic geographer and a researcher at the Lower
Saxony Institute for Economic Research (NIW) in Hannover, Germany.
His research interests include knowledge-based regional development,
institutions and governance, higher education systems and public finance,
with a regional focus on Europe and Asia (especially Thailand and China).
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viii Clusters and economic growth in Asia
Recently, he has been working on projects about the spatial and organi-
zational transition of the electronics industry in Hong Kong and the Pearl
River Delta.
Karen Zhihua Xu graduated from the Department of Urban Planning and
Design of the University of Hong Kong. Her research interests include
regional development in China, foreign investment, and the cooperation
and interaction between Guangdong and Hong Kong. She is currently
Assistant Director of the Advanced Institute for Contemporary China
Studies, Hong Kong Baptist University.
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ix
Preface
The book is based on invited papers from scholars with the common
research interest in economic growth and cluster development in East
and Southeast Asia. These issues have attracted considerable attention in
recent years, although compared with some other parts of the world there
is a limited choice of literature dealing with Asia. A clear ambition was
to invite authors who were able to contribute with new and interestingdimensions about clusters and economic growth. Hopefully this book will
not only add to the existing literature, but also create new questions and
thoughts about this increasingly important part of the world.
The first chapter by Alexander Ebner deals with the increasing rel-
evance of cluster policies and the need to understand them in the context
of an ongoing institutional and structural transition of East Asian
newly industrializing economies towards an innovation-driven pattern of
development. In this context, the national institutional frameworks are
subject to changes that involve the transformation of the model of the‘developmental state’ towards specific kinds of ‘entrepreneurial states’.
Chapter 2 by Yanfei Li and Wai-Mun Chia investigates the role of
information and communication technology (ICT) in economic growth
since the late 1990s. It follows the growth accounting model to analyse the
role of ICT in economic growth in four Asian economies: Japan, Hong
Kong, South Korea and Singapore. The study also implies the possibility
that ICT development could be a source of potential convergence between
Asian newly industrializing economies and economies such as the USA
and Japan.In Chapter 3 Felix Haifeng Liao, Karen Zhihua Xu and Bin Liang
explore the industrial agglomeration of Taiwanese electronics firms in 32
towns and districts in Dongguan, China. Over the past two decades, the
industrial agglomeration of Taiwanese electronics investment in Mainland
China has resulted in some electronics clusters. Based on firm-level inter-
views and statistics this chapter also has important policy implications for
the upgrading of clusters in developing countries.
The rise of the biomedical cluster in Wonju, South Korea, provides
the subject for Jun Koo and Jongmin Choi in Chapter 4. This studyaims at achieving two things. First, the authors try to unpack the cluster
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x Clusters and economic growth in Asia
development process to better understand factors that play a role in the
take-off stage of an industry cluster. Second, the focus on the biomedical
cluster was chosen as there has been a dearth of literature on such clusters
in Asian countries. The most important finding is that the presence ofsuccessful venture firms in the early cluster development stage can play a
pivotal role in the growth of clusters.
The contribution by Henning Kroll and Daniel Schiller, in Chapter
5, presents a critical discussion and analysis regarding Chinese growth
models. Quite evidently there have been a number of different sectoral
and regional growth models in China before the slowdown in the world
economy. The authors argue that we are in need of a differentiated under-
standing of the impact that the crisis had on different drivers of growth in
China.At the end of the 1980s, Vietnam embarked on an ambitious economic
reform programme with the aim of promoting economic development. The
foreign-invested sector has made contributions to average GDP growth
rates, exceeding 7 per cent over the period. In Chapter 6, Curt Nestor
examines the technology intensity of FDI in Vietnam and the implications
for economic growth and emerging clusters. Finally, proposals for future
industrial cluster policies and economic development are discussed.
For a number of reasons, an increasing number of developing countries
have tried to build up an internationally competitive aircraft industry.During Suharto’s rule the establishment of a domestic aircraft manufac-
turing industry was the largest and most ambitious investment to promote
technology development in Indonesia. Chapter 7 by Sören Eriksson
investigates the main factors behind the long-term failure and discusses
critical arguments against creating this kind of industry for the purpose of
economic and industrial growth.
Already in the 1980s statements were made that aircraft production
would be an important industry in China’s new stages of economic and
industrial growth. The government also expressed the interest in andambition to develop aircraft-related clusters. In Chapter 8, Sören Eriksson
investigates the origin and characteristics of foreign technology transfer
into Chengdu, one of the country’s most important locations for the
aircraft manufacturing industry.
I would like to acknowledge my sincere appreciation to all authors who
have contributed their knowledge, time and support to this book.
Sören Eriksson
Professor of Economic Geography
Jönköping International Business School
Sweden
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1
1. Cluster policies and entrepreneurialstates in East Asia
Alexander Ebner
INTRODUCTION
Cluster policies aim to activate and sustain the competitive interaction of
firms in local and regional business agglomerations. Policy instruments
tend to augment market forces by providing distinct types of collective
goods. As such, cluster policies differ markedly from traditional types
of industrial policy that highlight the nationwide targeting of particular
firms and industries by means of market intervention. Still, the logic of
cluster policies is most convincingly derived from the persistent relevance
of national institutional frameworks, most prominently involving nation-
states, and their ongoing transformation in the process of economicdevelopment. This line of reasoning is most appropriately exemplified by
the East Asian development experience. Indeed, it may be argued that the
increasing relevance of cluster policies in East Asia parallels the advent
of a new model of government–business relations that may be labelled
‘entrepreneurial state’. This concept suggests that entrepreneurial aspects
of state activity, which were already prevalent within the East Asian
developmental states, currently turn out as dominant policy features, thus
changing the dominant rationale of government towards an entrepre-
neurial direction, implying a shift from the developmental assimilation of
technological novelties in catch-up growth to their entrepreneurial crea-
tion in a setting that allows for technological leadership. The related policy
rationale promotes innovation as the source of international competitive-
ness, framed by a multi-level architecture of governance that strengthens
a regionalized type of industrial policies, which points to the formation of
cluster policies.
Therefore, in examining this relationship among clusters, cluster poli-
cies and the advent of the entrepreneurial state in East Asia, the following
explorations proceed in three sections. First, the matter of cluster poli-
cies and the role of the state in the promotion of clusters are brought to
the fore. The discussion highlights the Porterian cluster approach and its
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2 Clusters and economic growth in Asia
policy implications, underlining the impact of the national institutional
framework on the actual orientation of cluster policies. The second section
then takes on the transformation of the East Asian developmental states
and their interventionist industrial policies. As the process of catch-upgrowth proceeds, new types of state functions arise that are well summa-
rized under the label of entrepreneurial states. Corresponding changes in
government–business relations allow for the promotion of cluster policy
as a new kind of multi-scalar approach to industrial policy. Thus, cluster
policies are an extension of the advent of the entrepreneurial state. The
third section illustrates these arguments by pinpointing recent efforts in
East Asian cluster policies.
CLUSTERS, CLUSTER POLICIES AND THE ROLE OFTHE STATE
The competitive advantages of firm-specific interactions within a particu-
lar regional setting of industries and institutions are usually addressed in
terms of industrial clusters. It is a widely shared insight that industrial clus-
ters serve as the backbone of regional competitiveness. This implies that
related approaches to the analysis of clusters provide conceptually sound,
empirically significant and politically viable research perspectives. Tosome, however, the concept of clusters is still controversial (Benneworth et
al., 2003; Martin and Sunley, 2003; Benneworth and Henry, 2004). A para-
digmatic definition by Michael Porter defines clusters as ‘a geographically
proximate group of interconnected companies and associated institutions
in a particular field, linked by commonalities and complementarities’
(Porter, 1998, p. 199). Cluster dynamics are shaped by the competitive
conditions of firms, namely factor supply and demand profile condi-
tions, and the industrial structure in related and supporting industries,
as well as firm strategy and structure. The underlying relationships thatform a distinct cluster within a national economy are either of the vertical
type that links buyers and suppliers, or of the horizontal type that links
common customers, technologies and distribution channels – while the
interchange among industries in a cluster is best organized in geographical
agglomerations (Porter, 1990, pp. 149, 157). This means, in the Porterian
framework, that regional development with its comprehensive innovation,
income and employment effects is driven by the dynamic constellations
of industrial clusters (Porter, 2000, 2003). Yet Porter’s approach has been
repeatedly criticized for its somewhat mechanistic, structurally oriented
cluster concept, which essentially implies that as long as all actors deemed
necessary are present in a region, a cluster with all associated benefits is
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Cluster policies and entrepreneurial states in East Asia 3
likely to emerge. Accordingly, the most pressing research challenges to the
Porterian approach to the ‘microeconomics of competitiveness’ focus on
the institutional and structural match between company sophistication
and the related business environment (Ketels, 2006).Still, Porter’s arguments are said to neglect the institutional substance
of clusters, that is, their social structuration, their organizational outlook
and the related logic of complementarity and coherence (Steinle et al.,
2007). A more interaction-oriented perspective developed in parallel to
Porter’s work, with authors mainly rooted in the preceding Marshallian
tradition of industrial district research (Becattini, 1991). This has been
complemented by research on the ‘innovative milieu’ of interconnected
firms in dynamic regions (Crevoisier, 2004). An innovative milieu can be
defined as ‘the set of relationships that occur within a given geographi-cal area that bring unity to a production system, economic actors, and
industrial culture, that generate a localized dynamic process of collective
learning and that act as an uncertainty-reducing mechanism in the innova-
tion process’ (Camagni, 1995, p. 320). In these views, local culture plays
an important role in cluster formation, with a particular form of collabo-
ration and competition being made possible by a common socialization
and a common ideal of regional allegiance. Consequently, institutional
networks and their impact on cluster dynamics have been assessed more
prominently, for clusters contain inter-organizational networks that areindispensable for generating and disseminating knowledge and innova-
tions (Bergmann et al., 2001; Visser, 2009). In this manner, clusters may
be interpreted as structures of co-located industry insiders that engage in
flexible modes of experimentation with distinct network arrangements
within and among clusters. This implies that the organization of learning
processes becomes a most decisive strategic aspect of economic develop-
ment (Malmberg and Maskell, 2002; Maskell and Lorenzen, 2004).
A delicate balance between competition and cooperation among firms
is a necessary feature of this constellation, as the interlinking of coop-erative partnerships is strategically important to capturing the benefits of
learning-based competitiveness (Asheim, 2007). Thus, concepts such as
the ‘learning region’ correspond with a Porterian cluster structure, which
is augmented by the institutional architecture of regional coalitions for
learning and innovation (Polenske, 2008). In this line of reasoning, the
region is viewed as a geo-institutional set of socioeconomic resources and
relations, involving components such as human capital and production
routines. Spatial proximity matters, too. It enhances the competitiveness
of firms by facilitating interpersonal processes of learning and innovation,
which tend to reduce transaction costs by establishing common symbols
and codes (Maskell and Malmberg, 1999). Crucially, then, the dynamics of
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4 Clusters and economic growth in Asia
economic development are determined by the structure of innovation net-
works with their systemic linkages among knowledge-producing organiza-
tions such as universities, intermediary organizations such as government
agencies, and the regional set of industrial clusters with its profile of bothsmall and large firms (Cooke, 1998; Cooke and Schienstock, 2000).
In addition to that, the assessment of the developmental dynamics of
clusters also requires a reconsideration of the external linkages of the
involved firms and related organizations, quite in line with the overall
developmental pattern of an increasing openness of clusters (Giuliani et
al., 2005). The importance of non-regional networks is decisive for the
absorption of new technologies and organizational practices. The scope
of these strategic interactions contributes to various degrees of external
economies and increasing returns in an evolving setting of organizationalas well as territorial modularity (Whitford and Potter, 2007). Accordingly,
the external linkages of cluster firms in learning regions serve as systemic
carriers of knowledge transfers and learning effects. They support the
systemic openness of clusters and thus tend to obstruct an institutional
and technological lock-in of development trajectories by promoting adap-
tive flexibility, an aspect that becomes paramount when the cluster life
cycle reaches maturity (De Martino et al., 2006; Zucchella, 2006; Menzel
and Fornahl, 2010). Thus, the availability of external partners for inno-
vation is paramount in furthering the openness of clusters. Apart from‘local buzz’ and localized capabilities, the requirement for knowledge
exchange leads to a reconsideration of ‘global pipelines’ in cross-cluster
knowledge flows (Bathelt et al., 2004; Maskell et al., 2006). The underly-
ing capability to integrate new knowledge into local routines depends
on complementarities with established routines and skills, for pieces of
knowledge originating in a context too far away from the recipient may
be difficult to absorb (Loasby, 2001). In summary, these considera-
tions on cluster dynamics acknowledge their multi-scalar structuration,
which is reflected in the multi-level governance structures of internal andexternal cluster linkages. Such a perspective implies the need for a more
elaborate differentiation of external linkages, thus transcending the simple
dichotomy of the local versus the non-local by addressing issues such as
network interactions on different levels and scales (Lagendijk and Oinas,
2005; Ebner and Schiele, 2012). Indeed, the evolution of the competitive
capabilities of cluster firms and related organizations is subject to local,
national and international interactions (Hassink, 2005; Whitley, 2007). In
this context, the national level of the business environment still stands out
in shaping the routines and practices of cluster firms (Gertler, 2001).
At this point, the role of the state needs to be taken into account as
an institutional force that shapes the economic dynamics of clusters by
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Cluster policies and entrepreneurial states in East Asia 5
means of cluster policies. Indeed, the state matters first of all as a provider
of regulatory standards and rules of the diverse national administrative
and legal subsystems. Also, informal institutions such as social norms and
cognitive models that are said to constitute a cultural setting are shapedby governmental activities. As Robert Wade put it during the heyday
of the globalization controversy, ‘National boundaries demarcate the
nationally specific systems of education, finance, corporate management
and government that generate social conventions, norms, and laws and
thereby pervasively influence investment in technology and entrepreneur-
ship’ (Wade, 1996, p. 85). Accordingly, in the setting of local, national and
global linkages, the institutional specificity of the national level may be
assessed as a dominant factor in the external interaction of cluster firms –
despite the fact that the national level is mainly absent in the establisheddiscourse on knowledge spillovers within and across cluster boundaries
(Lundvall and Maskell, 2000; Maskell, 2001; Isaksen, 2009).
This basic assessment is well reiterated in Porter’s notion of the ‘com-
petitive advantage of nations’ that suggests that competitive industrial
clusters mirror distinct advantages that are rooted in the historically
evolving institutional and structural features of national economies.
Porter addresses the persisting role of the national business environment
as follows: ‘Competitive advantage is created and sustained through a
highly localized process. Differences in national economic structures,values, cultures, institutions and histories contribute profoundly to
competitive success’ (Porter, 1990, p. 19). The corresponding national
innovative capacity with its interactions among firms, research institutes,
universities and other innovation-oriented players reflects specialization
patterns that are derived from interlinked factor conditions such as skilled
human resources, adequate R&D endowments and an efficient financial
system (Furman et al., 2002). In this context, Porterian cluster policy puts
the private sector in the focus of proactive efforts in industrial upgrad-
ing. Corresponding prescriptions may be synthesized as follows: first,policy support should be available for all productive clusters, involving
both domestic and foreign companies; second, existing clusters with their
linkages and complementarities across industries should be the basis for
further refinement and upgrading, while attempts to create entirely new
clusters are problematic; third, cluster initiatives should be advanced by
the private sector, while government serves as a facilitator; fourth, policy
strategies should be designed in a bottom-up manner that allows for
deliberation among all stakeholders on various policy levels, in particular
the local level. It follows: ‘Enhancing cluster externalities and spillovers
will increase productivity and prosperity in any cluster. Hence govern-
ment should not choose among clusters but create policies that support
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6 Clusters and economic growth in Asia
upgrading in every cluster present in a location’ (Porter, 2007, p. 6). The
latter argument emphasizes that the Porterian cluster approach underlines
a dynamic understanding of competition as a positive sum game – with
productivity as a key policy concern (Porter, 1998, pp. 248–9). This per-spective differs markedly from those traditional types of industrial policy
that highlight the national targeting of particular firms and industries,
based on government interventions through subsidies, protective meas-
ures and related means, which alter the results of market competition
(Woodward and Guimaraes, 2009).
In summary, Porter’s concern with regional agglomerations of cluster
firms mirrors both the multi-scalar and multi-level qualities of the
innovation-driven process of economic development. Porter’s recent
emphasis on the role of clusters as export-oriented agglomerations withdistinct external linkages points in this direction (Simmie, 2008). This line
of reasoning goes well together with the neo-Schumpeterian systems of
innovation framework and its proposition that industrial structures, the
institutional set-up of a national economy and its policy orientation stand
out in determining the innovation performance of firms and industries,
thus complementing regional and supranational constellations (Freeman,
2002; Lundvall et al., 2002). The national level matters with regard to
learning and innovation, because the policies of national governments,
national laws and a shared culture delineate an institutional arena thataffects the intensity and direction of innovation (Nelson and Rosenberg,
1993; Lundvall, 1998). This persistent relevance of national institutional
frameworks shapes the developmental trajectory of whole economies and
thus plays a key role in the formation of policy approaches to support
industrial clusters – as exemplified most appropriately by the East Asian
development experience. The key question is whether the increasing
relevance of cluster policies goes well together with an institutional dif-
ferentiation of the state and the related national setting. The following
section argues that cluster policies in East Asia parallel the advent ofa new model of government–business relations that may be labelled
‘entrepreneurial state’.
TOWARDS ENTREPRENEURIAL STATES IN EASTASIA
The historically specific developmental impact of government–business
relations in East Asian economies is subject to persistent discussions that
have been most prominently fuelled by the World Bank’s 1993 policy
research report on the ‘East Asian Miracle’. Capital accumulation,
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Cluster policies and entrepreneurial states in East Asia 7
resource allocation and technological catch-up are identified as functions
of economic growth, which have been promoted by a mixture of competi-
tive market processes and supporting public policies (World Bank, 1993,
pp. 10–11). Growth-promoting market interventions in the domain ofindustrial policy are addressed as components of these public policies with
clear cost–benefit considerations and performance criteria (ibid., pp. 5–8).
These considerations point to further discussions on the role of the state
in East Asian economic development. A key issue has been the concept of
the ‘developmental state’, as informed by Chalmers Johnson’s research on
Japanese industrial policy. Johnson maintains that the regulatory function
of states in Western economies that pioneered industrialization focuses on
rules governing the economic process, whereas states in late industrial-
izing economies, such as Japan, exhibit a developmental function, as theyadministratively guide industries and markets (Johnson, 1982, pp. 19–20).
Yet, developmental states exhibit a transitory character, for the notion of
the developmental state covers only a fraction of state functions. The func-
tional priorities of states thus determine their institutional essence while
following situational imperatives (ibid., pp. 305–7). The developmental
imperative of catch-up growth refers to the role of the state in late indus-
trialization, perceived as a process that is based on gradual upgrading and
learning how to improve technology already in use abroad (Amsden, 1989,
pp. 3–4). This process of state-guided adaptive technological learning inlate industrialization may face stagnation as soon as the technology fron-
tier is approached without the formation of local innovation capabilities
(Amsden and Hikino, 1993, p. 259). Thus, the transitory character of the
developmental state reflects its relative success in moving the economy
towards the technological frontier.
The notion of ‘governed markets’ addresses corresponding attempts
in leading the market by political means, which then aim at stimulating
innovation in the private sector. Governing markets thus requires both
institutional capacity and shared knowledge (Wade, 1990, pp. 28–9). Statecapacity serves as the institutional basis for the corresponding policy strat-
egies of developmental states, which foster entrepreneurial perspectives in
the long term by promoting transformative investments and lowering asso-
ciated risks. ‘Embedded autonomy’ then marks the internal organization
of developmental states and their capacity for promoting industrial trans-
formation (Evans, 1995, p. 12). However, the results of this transformation
feed back upon the state itself, for the actors that emerge from the policy-
related state interventions tend to recreate the underlying conditions of
their activity – which is most relevant in terms of the shifting balance of
powers among the social forces and their political articulation. Successful
industrial transformation makes industrial capital less dependent on the
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8 Clusters and economic growth in Asia
state, thus allowing for a reconfiguration of government–business net-
works. Therefore, the reconstructive self-transformation of the transitory
developmental state mirrors an increasing complexity of the socioeco-
nomic domain (ibid., pp. 226–34). This line of reasoning refocuses on thestrategic interdependence between government and business. As exempli-
fied by East Asian development, corresponding modes of governance
involve a ‘catalytic state’, usually acting in cooperation with the private
sector while exercising negotiated leadership in the coordination of policy
networks that support technological upgrading and innovation (Weiss,
1998, p. 67). Transformative capacity then implies that government–
business cooperation is subject to adaptation over time. Accordingly,
the East Asian developmental state is subject to a country-specific trans-
formation with state capacity approaching a less hierarchical mode ofcoordination that relates to ongoing changes in the economic setting (ibid.,
pp. 64–5). Thus, the developmental motive of catch-up growth is gradually
replaced by a strategic concern with continuous technological upgrading in
an internationalizing competitive setting (Weiss, 2000, p. 22).
Echoing these concerns, more recent World Bank policy discussions on
East Asian development highlight the promotion of innovation as means
for enhancing productivity, based on strengthening public–private inter-
actions, local coherence and international connectedness, while claiming
that major policy challenges relate to how East Asian countries cultivatecreativity within their economies (Yusuf et al., 2003, p. 29). Therefore, the
articulation, intensity and content of entrepreneurial effort becomes ever
more knowledge- and science-intensive in approaching the technological
frontier, building on established capabilities that are embedded in nation-
specific institutional frameworks (Lall, 2000, p. 14). In addressing these
tendencies, the theory of the developmental state has become subject to
various modifications. For instance, it is argued that the developmental
state undergoes a transformation towards a new rationale in coping with
staying ahead of or keeping up with international competitors, in particu-lar by assisting in industrial restructuring. A more gradual and continuous
mode of upgrading skills and technologies is at stake – as witnessed by
the maturing of Japanese and Taiwanese industries whose restructuring is
guided by strategic policies that resemble the rationale of a ‘transformative
state’ (Weiss, 2000, pp. 27–9). Related arguments pinpoint the ideal type of
‘transitional developmental state’ that allows for a transition from inter-
ventionism to liberalization – which need not entail a retreat of the state
but even its strengthening with regard to the enforcement of the market
order (Wong and Ng, 2001, pp. 43–7). In associated terms, developmental
and regulatory state functions are differentiated. The ‘neo-developmental
state’ for high-tech industries copes with the promotion of competitive
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Cluster policies and entrepreneurial states in East Asia 9
economies of scale, the support of industrial R&D and employment
creation in industrial change, complemented by the ‘regulatory state’ for
liberalized services, governing competition and international openness
(Amsden and Chu, 2003, pp. 167–72). Moreover, the rationale of govern-
ment shifts towards locational policies in support of industrial networks
and technology-intensive interactions – resembling a pattern of state-led
networking (ibid., pp. 15–16). Clusters and cluster policy thus become
key issues in this institutional transformation of the state and its policy
concerns, which may be interpreted in terms of an ‘entrepreneurial state’.Indeed, the concern with entrepreneurship in the creation, modification
and adaptation of technological and organizational innovations resembles
a distinct set of state functions, which requires a conceptual framework of
its own: the entrepreneurial state. The underlying reasoning suggests that
entrepreneurial aspects of state activity that were already prevalent with
the East Asian developmental states currently turn out as dominant policy
features, thus changing the dominant rationale of government towards
an entrepreneurial direction that implies a shift from the developmental
assimilation of technological novelties to their entrepreneurial creation.The innovation capacity of the entrepreneurial state addresses the poten-
tial for exercising policies that promote innovation on an economy-wide
scale, either by direct interventions in the economic process or by condi-
tioning through institutional and physical infrastructures (Ebner, 2007,
pp. 118–19). Ideal typically, it may be argued that three sets of state func-
tions shape the process of economic development, as outlined in Table 1.1.
They are simultaneously present, yet the overall outlook of the state will
depend on the hegemonic type of function, which is subject to historically
specific variation in the development process.
The commercialization of technology resembles the operations of a
regulatory state, typical for the model of liberal market economies. The
Table 1.1 A typology of state functions and industrial policies
Type of State
Regulatory Developmental Entrepreneurial
Policy rationale Resource
coordination
Factor mobilization Innovation
Ideology Market liberalism Developmentalism Entrepreneurialism
Governance
mode
Rule-based
Hierarchical
Interventionist
Hierarchical
Communicative
Horizontal
Innovation style Commercialization Assimilation Creation
Policy scale National National Multi-scalar
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10 Clusters and economic growth in Asia
policy rationale of regulatory states highlights resource coordination
through an institutional enforcement of the market order. Accordingly,
industrial policies of regulatory states emphasize the guidance of market
forces in the innovation process, which may be termed as an innovationstyle of commercialization. In contrast to that, the developmental state,
which has been prevalent in East Asia, combines its policy rationale of
factor mobilization with long-run goals of national development. The
concern with entrepreneurship in the generation of technological innova-
tions resembles a distinct set of state functions, which is represented by
the notion of the entrepreneurial state. It points to recent transforma-
tions of the state all over the OECD countries – and beyond. Its policy
rationale promotes innovation as the source of international competitive-
ness, framed by a multi-level architecture of governance that strengthensa regionalized type of industrial policies, which involves distinct cluster
policies (Ebner, 2009, pp. 382–3). Furthermore, the scalar policy dimen-
sion of the entrepreneurial state is more differentiated than that of the
regulatory or developmental types. Indeed, the entrepreneurial state
transforms the national policy range towards a multi-scalar setting that
strengthens regional interactions and thus paves the way for distinct
cluster policies.
In summary, the notion of the entrepreneurial state entails the follow-
ing set of preliminary propositions that may be subject to further scrutiny(ibid.):
● The concern with the formation of entrepreneurial capacity in
the generation and carrying out of innovations becomes a crucial
feature of industrial policy. This involves both direct measures
that include selective interventions in the market process as well as
indirect measures involving the moulding of formal and informal
institutions that shape innovation efforts of the private and public
sectors alike. ● Policy efforts shift from catching up within an established techno-
logical paradigm to a rationale of paradigm creation that involves a
potential for technological leadership in an uncertain environment.
State capacity remains crucial for mediating between interest groups
and for communicating broad developmental orientations.
● The reorientation of policy concerns towards self-sustaining
knowledge-based interactions in promoting competitiveness co-
evolves with an institutional transformation of government and
administration. Framed by a common discourse on entrepreneur-
ship and innovation, governance structures evolve as complex
policy networks.
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Cluster policies and entrepreneurial states in East Asia 11
● The institutional architecture of the entrepreneurial state underlines
the role of knowledge transfers and communication in state–society
relations that form reflexive policy modes. Experimentation, learn-
ing and innovation characterize the paradigmatic efforts in govern-ment and administration for problem-solving efforts.
● The policy rationale of entrepreneurial states reflects the diversity
of structural, institutional and spatial patterns of globalization,
highlighting the combination of global production networks and
local clusters of innovation activities. The spatial dimension of
innovation becomes a crucial component of industrial policy.
● The policy orientation of entrepreneurial states combines interna-
tional competitiveness, capability-building and locational strategies
that address the entrepreneurial orientation of both local andforeign firms. The formation of knowledge-based clusters becomes
a key element of related policy efforts.
Thus, stated in terms of the Schumpeterian theory of economic develop-
ment, the institutional dynamism of the entrepreneurial state reflects the
co-evolution of state and market in the process of economic development
(Ebner, 2006, pp. 511–12). In this line of reasoning, the logic of cluster
policies reflects the transformation of East Asian newly industrialized
economies towards an innovation-driven pattern of development.
CLUSTER POLICIES AND THE ‘EAST ASIANRENAISSANCE’
Following the decades of high performance growth from the 1970s to
the 1990s, the East Asian emerging economies have been witnessing the
challenge of the Asian financial crisis of 1997 and its aftermath. While
some observers had argued that this crisis would actually herald the endof East Asian catch-up growth, the empirical situation evolved in a dif-
ferent direction. Indeed, fuelled by the growth dynamics of the Chinese
economy and supported by a reconstruction of transnational business
networks within the East Asian division of labour, former ‘tiger econo-
mies’ such as South Korea, Taiwan and Singapore have regained most
of their developmental strengths while undergoing changes in both their
industrial and institutional settings. Despite its less convincing growth
dynamics, Japan still serves as the regional centre of high value-added and
knowledge-intensive manufacturing and service operations. All of this has
amounted to the World Bank’s slogan of the ‘East Asian Renaissance’.
Decisively, this notion of a resurgence of the East Asian development
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12 Clusters and economic growth in Asia
trajectory has been conceptually linked with specific forces of growth
that involve economies of scale and agglomeration externalities, that is,
key aspects in the competitive performance of firms in regional clusters
(Gill and Kharas, 2007, pp. 12–16). This perception of a persistent growthand development process even holds in the aftermath of the global finan-
cial crisis that hit the US and most European economies especially hard
and thus had a temporarily recessive impact on the export-oriented East
Asian economies, yet without substantially altering their growth dynam-
ics. Indeed, most of these economies are back on track when it comes to a
sound economic performance (Asian Development Bank, 2011, pp. 3–5).
In this context, it may be argued that the new emphasis on cluster policies
and the advent of the entrepreneurial state are, all together, part of this
‘East Asian Renaissance’, as the World Bank has it, involving both theexpansion of transnational business networks and localized government–
business interactions.
A key issue in this resurgence of the East Asian growth and development
performance is the matter of innovation. According to the World Bank,
the formation of innovative clusters is a key thrust in the corresponding
policy recommendations. Yet right at the outset it is obvious that clusters
in East Asia come in vastly different types and structures, involving a
range of manufacturing and service industries with both different levels
of sophistication and capabilities. The complexity of these clusters is wellexemplified by the Pearl River Delta in China with its major light manu-
facturing industries. Also, it represents a cluster that is driven by a distinct
combination of foreign direct investment and public sector enterprises.
These kinds of regional clusters differ already in their extended territo-
rial range from local high-tech clusters, such as Taipei/Hsinchu Park in
Taiwan or Jurong in Singapore (Yusuf et al., 2003, pp. 234–6). Typically,
East Asian clusters include the following components: an initial setting
that combines market opportunities with governmental efforts in industry
promotion; domestically or export-oriented industrial zones with theirparticular infrastructure facilities; institutions for capacity-building in
human resources; and ‘anchor firms’, which play a key role in promoting
the cluster interactions, accompanied by related firms that provide goods
and services within the cluster structure (Kuchiki and Tsuji, 2008, pp. 5–6).
This specific pattern of cluster formation goes together with structural
changes in the East Asian clusters. In particular, firms have been upgrad-
ing their operations from basic manufacturing to higher value-added
and innovative activities. This upgrading pattern exhibits a transnational
dimension, which is shaped by the formation of an ‘Asian triangle’ of
transnational production networks, most of which are nested in Japanese,
Chinese and ASEAN clusters (Kuchiki and Tsuji, 2011, pp. 2–4).
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Cluster policies and entrepreneurial states in East Asia 13
Cluster policies, however, have regularly taken the shape of urban
planning programmes, infrastructure projects or financial assistance
schemes for certain locations such as science parks and export process-
ing zones. These substitute formats for distinct cluster policies have beenlargely insufficient in combining physical, knowledge and social capital to
promote cluster interactions. According to the World Bank, a favoured
pattern of cluster policies in East Asia involves the following aspects:
first, network governance operations, which initiate networking dynam-
ics and cooperation among firms and business associations; second, the
provision of specific kinds of public goods involving the means for tech-
nological information and workforce training, both of which tend to be
under-supplied by private firms; third, well-organized cluster management
that prevents clusters from phenomena such as network closure and thusmaintains their adaptive flexibility in turbulent world markets (Yusuf et
al., 2003, pp. 249–54). Accordingly, East Asian cluster policies are set to
mirror both domestic economic conditions and the actual position in the
international division of labour that is moulded by the informal dynamics
of East Asian regional economic integration (Suehiro, 2009). This array of
distinct responses to the technological and organizational challenges of
catch-up growth and late industrialization, with its new emphasis on
industrial cluster strategies, reflects even more comprehensive institutional
changes that herald the emergence of the East Asian entrepreneurialstates. Yet this tendency does not imply a convergence towards a best
practice model. Rather, it upholds a diversity of institutional frameworks
and structural conditions that is even enlarged through the new strategic
options for firms and governments, which are provided by the cluster per-
spective. The notion of a ‘modular economy’ illustrates this diversity of
strategic options in the East Asian economies:
The organisation of production obeys less and less a single predeterminedmodel which would be a must for everyone, reducing the field of possible
spaces. On the contrary it opens up this field. The agglomerations of enter-prises, districts, clusters or poles of competitiveness can perfectly benefit fromthe variety of their systems of organisation. (Ganne and Lecler, 2009, p. 22)
Accordingly, East Asian production networks become part of multi-
layered ‘global networks of networks’, which combine diverse national
models and their components – with clusters serving as network hubs in
a complex setting of transnational flows of resources, goods and services
(Ernst and Kim, 2002).
These considerations apply first of all to Japan as the regional tech-
nology leader. Indeed, a restructuring of government and administra-
tion lies at the heart of the reorientation of the Japanese development
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14 Clusters and economic growth in Asia
pattern towards a more competitive and entrepreneurial setting (Aoki,
2002, p. 2). Japan’s economy has been gradually opening its competi-
tive structures both domestically and internationally, thus expanding
patterns of competitive pressures that were already prevalent in most ofthe internationally competitive industries (Porter and Sakakibara, 2004,
pp. 35–6). Decisively, in the course of these policy reforms, the rationale
of generating innovations through flexibilization, decentralization and
competitive reorientation of governance structures has become prominent
(Whittaker, 2003, pp. 80–81). Japan’s Ministry of Economy, Trade and
Industry (METI), which has championed Japanese industrial policies on
a national scale for decades, is currently spearheading a set of regional-
ized innovation and entrepreneurship strategies that address the cluster
aspects of innovation, thus allowing for new spatial and institutional com-ponents in industrial policy (Ibata-Arens, 2004, pp. 4–5). Already since
the late 1990s, the emphasis of industrial policy in Japan has refocused
from the support of small business networks in the manufacturing sector
to the restructuring of industries that face the challenge of international
relocation, primarily to China and other East and Southeast Asian coun-
tries. These new types of cluster strategies in terms of distinct policies
that aim to promote regional industrial agglomeration in order to raise
competitiveness and innovation have played a key part in the formation
of complex regional patterns of interaction between firms, universities,research institutes and related organizations (Kitagawa, 2007). During
the 2000s, national government initiatives in the domain of cluster policies
have been promoting diverse cluster projects and models that highlight
cluster formation through regional networking among established firms
and research organizations, as well as through entrepreneurial start-
ups. Yet these top-down approaches are increasingly complemented by
bottom-up initiatives, in particular in support of science-based clusters
(Sanz-Menendez and Cruz-Castro, 2005).
Both South Korea and Taiwan have evolved as major challengers to theJapanese leadership in technological innovation. South Korea is actually
said to be challenged by a paradigm shift from an ‘industrial learning
paradigm’ to a ‘technology creation paradigm’ – with policy-assisted
innovation efforts in biotechnology as an outstanding example that points
to the strategic focus on knowledge-based cluster policies (Wong et al.,
2004, p. 46). Yet this transition towards industrial leadership and cluster-
oriented policies is differentiated with regard to product groups and
market segments within the large Korean conglomerate firms; an aspect
that adds to the diversity of cluster types and their distinct logics (Hobday
et al., 2004, pp. 1455–6). Similar implications hold for Taiwan, where
sustaining competitiveness implies continuous technological upgrading
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Cluster policies and entrepreneurial states in East Asia 15
towards high-tech sectors – involving institutional change, industrial
upscaling and agglomeration economies (Amsden and Chu, 2003).
Taiwan has actually emerged as the most innovative economy among
the East Asian newly industrialized economies, as measured in terms ofR&D indicators. Its performance provides evidence for the argument that
global production networks are also important as sources of knowledge
for firms from late industrializing economies. This holds especially with
regard to the globalized structures of knowledge-intensive and high-tech
industries, which involve clusters of local capabilities that need close con-
nections with global production networks and related operations of multi-
national firms (Hu and Mathews, 2005, p. 1347). The corresponding need
for attracting globalized knowledge flows requires that local and global
resources are adequately recombined. The Singaporean developmentmodel illustrates this case by promoting the vision of a local knowledge
agglomeration in a global knowledge-based economy. In this setting, mul-
tinational enterprises introduce novelty into the local economic system;
yet, also included in the sample of entrepreneurial agents are government-
linked companies, as well as government boards, which may enforce and
coordinate innovation-driven economic change. As Porterian cluster
strategies have been put to use already since the 1990s, it is safe to argue
that the globalizing local economy of Singapore actually pioneered the
logic of cluster policies in an evolving entrepreneurial state (Ebner, 2004,pp. 56–9; Low, 2004).
CONCLUSION
The increasing relevance of cluster policies in East Asia needs to be
understood as a manifestation of an ongoing institutional and structural
transition of the East Asian newly industrialized economies towards an
innovation-driven pattern of development, involving both the expansionof transnational business networks and localized government–business
interactions. In this context, the national institutional frameworks of the
East Asian economies are subject to comprehensive changes that involve
the transformation of the model of the ‘developmental state’ towards spe-
cific kinds of ‘entrepreneurial states’. Corresponding policy efforts have
shifted from a rationale of catching up within an established technological
paradigm to a rationale of paradigm creation that involves a potential
for technological leadership on an international scale. This means that
traditional types of industrial policy, which have targeted certain indus-
tries on the grounds of national development goals, are augmented and
even replaced by industrial clusters policies, which put an emphasis on
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16 Clusters and economic growth in Asia
the competitive performance and innovation capacity of agglomerations
of firms and industries. Entrepreneurial capacities in the generation and
carrying out of innovations and the spatial dimension of production and
innovation become crucial components of this new kind of industrialpolicy. Consequently, the cluster policy approach of East Asian entre-
preneurial states reflects a diversity of structural, institutional and spatial
patterns that highlight the adaptive recombination of global production
networks and local industrial clusters. This strategic combination of inter-
national competitiveness, capability-building and locational strategies
addresses both local and foreign firms. In this manner, it emphasizes the
transnational connectedness of firms and clusters in East Asia – and thus
also points to the transnational range of the related entrepreneurial states
and their cluster policies.
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2. Information and communicationtechnology and economic growth offour Asian industrialized economies
Yanfei Li and Wai-Mun Chia
INTRODUCTION
There has been a widespread debate among economists about the role of
information and communication technology (ICT) in economic growth
since the late 1990s, especially in the progress of the New Economy in the
USA. Despite the Solow Paradox,1 it is generally agreed that ICT produc-
tion and application have been a major force of economic growth in the
USA since 1995 (Jorgenson and Stiroh, 1999, 2000; Oliner and Sichel,
2000; Jorgenson, 2001). Additionally, much effort has been devoted to
investigating why the European countries generally lagged behind in
utilizing ICT to promote growth performance in terms of real GDP and
labour productivity growth, as well as why ICT investment in the USA
declined but labour productivity growth continued to accelerate after the
year 2000 (Gordon, 2004). The literature has suggested that the promotion
of growth performance by ICT does not happen automatically. Rather,
it is conditional on many factors including organizational innovation/
investment (Brynjolffson and Hitt, 2000) and sequential complementary
innovations for ICT as a general purpose technology (GPT) (Helpman
and Trajtenberg, 1996; Basu et al., 2003), as well as sufficient high-skilllabour to apply ICT (Basu et al., 2003). It is also found that those service
industries (mainly wholesale trade, retail trade, finance and insurance)
that invest heavily in ICT are the major non-ICT-producing industries
that contributed to the late 1990s’ labour productivity acceleration in the
USA (Jorgenson et al., 2002; Stiroh, 2002).
While many studies have been found to focus on the contribution of
ICT to economic growth in the USA and EU, only a few studies have
been reported for Asian countries. Japan has been examined in studies
covering OECD countries and in studies for specific cross-country com-parison. Van Ark et al. (2002) and Jorgenson and Motohashi (2005)
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22 Clusters and economic growth in Asia
find that the ICT production industries in Japan enjoyed very similar
efficiency gains to those in the USA. However, with respect to ICT
application, ICT-using industries did not have efficiency gains com-
mensurate with those in the USA and EU. Kanamori and Motohashi(2007) compare the contributions of ICT to economic growth in Japan
and in South Korea. It is found for both countries that the importance
of ICT capital service growth for economic growth has been increasing.
The contribution of non-ICT capital service is much more significant in
South Korea than in Japan. Total factor productivity (TFP) growth of
the non-ICT sector of Japan is faster than that of South Korea. One may
derive the implication from the above observations that ICT application
in the non-ICT sector performs better in Japan than in South Korea.
Accordingly, in terms of the contribution of ICT to economic growth,the ranking sequence is the USA and EU, followed by Japan and then
South Korea. Convergence has been generally predicted in the literature
(Basu et al., 2003).
As Asian industrialized economies have very distinct social and eco-
nomic structures (Young, 1992), the study of the pattern of ICT develop-
ment in Japan and three newly industrialized economies, South Korea,
Hong Kong and Singapore, could potentially provide more understanding
about the constraints and preconditions of fully exploiting ICT advan-
tages. Thus, the central contribution of this study is a comprehensiveanalysis of the contributions of ICT to economic growth of these Asian
economies, using the growth accounting method. The study also implies
the possibility that the ICT revolution could be a source of potential
convergence2 between Asian newly industrialized economies (NIEs) and
leading economies such as the USA and Japan.
The chapter is organized as follows. The next section describes the
growth accounting model. The third section describes the data sources and
data estimation methodology. The fourth section reports the results from
the growth accounting model. The fifth section concludes.
MODEL DESCRIPTION
Following Oliner and Sichel (2000), a growth accounting model at the
national level starts with the production function:
P 3 Y 5 P 3 F A,K ict,K nict,E
P is the aggregate price level of the economy and Y is the output
level. Thus, P 3 Y gives nominal GDP. A is the technology term. K ict
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Information and communication technology and economic growth 23
is the ICT capital stock, K nict is the non-ICT capital, and E refers to
employment.
Total differentiation gives:
P 3dY
dt 5 P 3
0F
0A
dA
dt 1
0F
0K ict
dK ict
dt 1
0F
0K nict
dK nict
dt 1
0F
0E
dE
dt
Dividing both sides by P 3 Y and assuming Hicks-neutral technological
change,3 the above equation becomes:
P 3dY
dt
1
P 3 Y
51
P 3 Y
P 3 0F 3 A
0A
dA
dt
1
A 1
P 3 0F 3 K ict
0K ict
dK ict
dt
1
K ict
1P 3 0F 3 K nict
0K nict
dK nict
dt
1
K nict1
P 3 0F 3 E
0E
dE
dt
1
E b
5 A#
1 S K ict3 K ict
#
1S K nict3K nict
#
1S E 3E #
Y #
5 A#
1S K ict3 K ict#
1S K nict3K nict#
1S E 3E #
(2.1)
Equation (2.1) shows the decomposition of the growth rate of the real
GDP. A#
is the growth rate of total factor productivity (TFP). S K ict, S K nict
and S E are the nominal income share of ICT capital stock, non-ICT
capital stock and labour, respectively. K ict#
and K nict#
are the growth rates
of real ICT capital stock and real non-ICT capital stock, respectively. E
#
is
the growth rate of employment. The model can be easily extended to treat
real ICT capital stock as composed of two subcategories, namely tangible
ICT and software.
To obtain the estimation of real capital stock, the perpetual inventorymethod is adopted:
K t 5 I t 1 (1 2 d)K t21,
where I is the investment term and d the rate of depreciation rate.
Capital service is calculated by multiplying the real capital stock by its
rental price. The rental price of one unit of real capital stock is estimated
as follows:
Rk ,t 5 art 1 d 2 PA,t 2 PA,t21PA,t21 bPA,t21
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24 Clusters and economic growth in Asia
where r is the real net rate of return and PA is the asset price.
Following Jorgenson (2001), the change in labour quality is defined as
q#
5 E #
2L#
. That is, the difference between employment growth (E
#
) and
labour hour growth (L#
). Given E #
5 L#
1 q# , the decomposition of realGDP growth is:
Y #
5 A#
1S K ict*K ict
#
1 S K nict*K nict#
1S E * (L#
1q#
) (2.2)
The decomposition of the average labour productivity (ALP) growth is:
Y #
2L#
5A#
1S K ict* k ict#
1S K nict*k nict#
1 S E *q#
(2.3)
As already suggested by the previous literature, the accuracy of estimat-ing the contribution of ICT to economic growth depends critically on the
measure of the price index of ICT capital goods, as the speed of the decline
in the ICT price index will decide the value of real ICT capital stock as well
as the rental price, which determines the ICT capital service.
Data Description
The study is conducted at the national level. National account data, ICT
price data and ICT fixed capital formation data, which cover the periodfrom 1986 to 2006,4 are required. Since data for different economies were
collected from various sources, the consistency of measurement is assured
for all the four economies by using SNA93 statistical standards.5
National account data
Specifically, nominal GDP, real GDP, GFCF (gross fixed capital forma-
tion) at constant price and GFCF at current price were collected. For
Japan, these series were collected from the Statistics Bureau of Japan.
Additionally, the JIP 2006 database of ESRI (Economic and SocialResearch Institute) provided a benchmark real net capital stock and
capital service estimation.
For South Korea, nominal and real GDP data were collected from
the Bank of Korea. Nominal and real GFCF data and consumption of
fixed capital were obtained from the Organisation for Co-operation and
Development (OECD) STAN database. Information from the National
Wealth Survey has been used to provide benchmark year fixed capital
stock. The money market rate, which was obtained from the UN Statistical
Yearbook , is used as the real net rate of return to general capital stock.
For Hong Kong, national account data came from the CEIC database
for global emerging and developed markets. Real rate of return is the
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Information and communication technology and economic growth 25
merge of interbank overnight rate from the CEIC database and discount
window base rate from the Hong Kong Monetary Authority. Capital
stock per worker data and residential housing stock data were obtained
from the Penn World Table 5.6 to estimate the benchmark capital stock.Singapore national account data also mainly came from the CEIC data-
base. Real net rate of return to capital stock is money market rate from the
UN Statistical Yearbook . Corporate fixed capital stock data were from a
government-conducted corporate sector survey. Together with residential
housing stock data, they are used to estimate the benchmar