1 keun lee prof. of economics, seoul nat’l university director, center for economic catch-up ; ;...
TRANSCRIPT
1
Keun Lee
Prof. of Economics, Seoul Nat’l UniversityDirector, Center for Economic Catch-up
www.keunlee.com; www.catch-up.org;
Technology Policy for a Detourto Escape the Middle Income Trap:
Schumpeterian Reflections on the Asian experience
2
Motivating Question :
Why Catching up rare and not sustained?
-> Middle Income country Trap?
Income Groups 1980 1995 Annual growth
Low Income 958 1,280 1.95
High Income 14985 20593 2.14
Upper Middle Income
5001 4616 -0.53
Lower Middle Income 958 1,280 1.95
Middle income country trap: Per capita in 2000 Dollars, 1980-95
Asian 4: Korea, Taiwan, Hong Kong, and Singapore
1980 1995
7041.5 15560.0
Why the Middle Trap important?
To give hope for the Low incomers who are trapped
with the adding-up problem.
Eg) China needs to go beyond the low-end goods based growth, so that it may leave
rooms for other low income countries
Solution for the Middle Trap= Detour
rather than direct emulation
or static specialization
6
1980
Straight Road: but traffic jam (adding-up problem)
Detour: No jam but rough & winding
road-> need skill (tech. capability)
Can take a Detour if you have a high driving skill, when the straight road is jammed
7
Trend of the Income Levels as Percentage of that of Japan:
ÞKorea, Taiwan: No catching up in 60s, 70s:-> only from 1980s:Þ what happened? Just more R&D, in which sector?
8
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
0
2
4
6
8
10
12
14
Cycle time of technologies in the US Patents: Korea & Taiwan vs. Others
High Income countries Middle Income countries
Korea and Taiwan Brazil and Argentina
yrs
Korea & Taiwan
detour: short cycle technology sectors
9
Cycle time = speed of change in the knowledge base of a technol-ogy
Short cycle tech = old knowledge quickly obsolete/useless + new knowledge tend to emerge more often -> less disadvantageous for the latecomers => technological sectors with less reliance on the old technologies but with greater opportunity for emergence of new technologies,
Measured by the mean citation lag = the time difference between the application year of the citing patent and that of the cited patents (Jaffe and Trajtenberg, 2002).
10
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
0
0.02
0.04
0.06
0.08
0.1
0.12
0.14
0.16
Localization of knowledge creation & diffusion
High Income countries Middle Income countries
Korea and Taiwan Brazil and Argentina
Intra-national Citation in Patents (~self-citation)
11
Criterion for Technological Specialization
12
1988 1989 1990 1991 1992 1993 1994 19950
2
4
6
8
10
12
14
16
Tech. Cycle time_KRTech. Cycle time_US
Korean firms
US firms
Catching-up (Korean) vs. Mature (US) firms: The former in short cycle technologies
13
1988 1989 1990 1991 1992 1993 1994 19950
0.02
0.04
0.06
0.08
0.1
0.12
0.14
0.16
Self-citation_KRSelf-citation_US
Catching-up (Korean) vs. Mature (US) firms: The former in low self-citation (localiza-tion)
USA Firms
Regressing growth onto National Innovation systems:
Asian 4 as benchmark
Asian 4High In-come middle Inc. World
Tech cycle time (-)* (+)* (+)* (+)*
Localization of knowl-edge + (+)* + (+)*
Originality + + + +
HH: inventor concentra-tion (-)* (-)* (-)* (-)*
Asian 4 Dummy (+)* (+)* (+) *
Controls: Initial income, Population, Investment, secondary en-rollment
Similar Results with Firm-Level Data
15
0.00
2.00
4.00
6.00
8.00
10.00
12.00
cycle_junki_BOTH
cycle_buru_BOTH_COMBINED
Detour => short cutCycle Time of Korea & Taiwan Patents getting longer recently
16
From Trade Specialization to Technology Specialization
Stages Low or low middle income Upper middle income toward high income
Type of specialization Trade specialization Technology specialization
Source of specialization
Comparative advantages from resource endowment
Absorption/design capabilityfrom learning/R&D effort
Type of sector Labor intensive/resource industries
Short cycle/emerging technologies
End goal competitive export industries Indigenous knowledge creation & diffusion
Background theory Product life cycle (inheriting) Catch-up cycle (leapfrogging)
How: From Middle to High Income Countries
Now, How to drive the Detour:Implementation Strategies
The detour is not just smooth and easy;
-> requires certain level of absorption and technology capacity,
not only firm-level but also at the na-tional-level
3 Steps along the Detour
1) Acquiring Design Capability
(to move beyond OEM/assembly)
2) Targeting/Entering the mature /low-end segment
of short cycle Sectors
3) Leapfrogging into New/Emerging Technologies
in the Short-cycle Sectors
a. Hyundai's development of engine as Mitsubish refuse to transfer its latest engine technology (from 1984 to 1992)
-- Co-dev’t contract with a specialized R&D firms, Ricardo Co. UK. tried more than 1,000 proto types until success after 7 years .
b. 256 K to 64 M Dram by Samsung -- Samsung chose to develop its own design technology for 256 or
higher K Dram as it was not easy to buy the design -- overseas R&D outposts in Silicon Valley and reverse brain drain
c. Taiwan: electronic calculator in mid 1980s : went around the world to study LSI applications, and combined
what they saw and what they learned from Japanese suppliers.
=> Policy Tools: Tariffs and under-valuation important.
Stage 1: Acquiring Design Capability:
Government: R&D by Public labs
(ETRI in Korea)
Private: Manufacturing(private Co’s: Samsung, LG in Korea)
Government: Market protection or Procurement ( local telephone authorities)
Stage 2 Entering Mature Segment of Short cycle Sectors
By public-private partnership (PPP): eg) Telephone switch development in Korea & China
India & Brazil had the same development but not sus-tained without initial protection;
=> Infant protection still matters, together with joint PP R&D
G: R&D by Private & public labs
P: Manufacturing
G: Procurement or Standard Policy
Stage 3: Leapfrogging into Emerging Technolo-gies
eg) Korea: Digital TV, mobile phones (CDMA) ; China: 3G TD-SCDMA, Photovoltaic; electric vehicles
Policy tools: Standards policy matter, eg), exclusive standards in wireless.
22
Learning Objects
operational skills
production/ process technology
design technology
Product Developmenttechnology
Stages of Knowledge Learning/ Creation and Catch-up
Learning Learning by by producing/ in-house R&D Co-develop-mentMechanism doing organizing Overseas R&D strategic al-liance following foreign P&P R&D designs
Three Patterns of Technological Catch-up (Lee & Lim 2001)
Path of the Forerunner : stage A --> stage B --> stage C --> stage D
Path-Following Catch-up : stage A --> stage B --> stage C --> stage D eg. PC, some consumer goods, and Machine Tools
Stage-skipping Catch-up (leap-frogging I) : stage A ---------------> stage C --> stage D eg. Hyunda's fuel-injection engine (cf. carburetor engine)
Samsung' 64 K D-Ram production technology; 256 K D-ram design technology Tlephone switch in in China
Path-Creating Catch-up (leap-frogging II) stage A --> stage B --> stage C' --> stage D' eg. CDMA development, digital TV
( Notes: C and C', represent competin technologies.)
1) Late Entry: Entering Mature Segment of Short cycle Sectors: eg) High speed Train in China, India’s IT service, Middle sized Jets by Brazil Entry into notebooks by P-P in Taiwan
Suggestion: Nigeria can build oil refinery, rather than keep exporting crude oils
2) Leapfrogging into New/Emerging Segments of Shorter-cycle Sectors:
eg) Photovoltaic industry in China, Electric Vehicles by China Ethanole or Biofuels in Brazil
More Examples
Average Cycle Time of China’s top 30 class US patents
= 8.1 years (2000-2005 yrs)
Cf) Korea and Taiwan = 7.7 yrs (avg of 1980-95)
Brazil & Argentina = 9.3 yrs (avg. 1980-95)
Þ China more similar to Korea & Taiwan than to Brazil and Argentina
China and the Middle Trap?
In concluding
Government activism for 2 reasons
1) to handle not market failure but capability failure
in R&D,
2)because they are below the frontier, and less uncertainty with targeting
Market failure: more or less R&D than optimal (assumption = latecomers are capable of doing
R&D)
Capability failure = afraid of R&D = zero R&D
Þ Need not only the provision of R&D money but also various ways to cultivate R&D capability it-
self,
eg) joint public-private R&D consortium
Not market failure but Capability failure in R&D
latecomers are not on the technology frontier but have clearly defined (existing) technologies or projects
to emulate,
-> better chance of success if they mobilize all public and private resources
Assumption behind the caution or warning against techno-logical targeting is that countries are on the frontier.
However, many latecomers rely on imported technologies, but they are often charged with monopoly prices.
Eg) Telephone switches in Korea & China high speed train by China
When not on the frontier, less uncertainty of targeting
In concludingShould allow ‘detour’ for latecomers!
cf) than forcing direct replication of the developed
30
1) Korea used to be more protective; but now most open with FTAs with US:
2) Lowest protection of IPRs in Korea, Taiwan but one of the highest level of IPR protection 3 ) Big Bang vs. Gradualism in system transition
Detour -> capability up -> can afford to open cf) no detour -> no capability up -> cannot
open
31
Tariffs in Korea and of Asymmetric Opening (Source: Shin 2011).
Composition of Major Export Items, (% in total Exports)
Successive Entries: Composition of sales in Samsung
0.8 6
35
35
3.3
6.3
24
18.3
19.9
40
28
3.7
3.5
4825 4.4
1.1
1218
30.224.4
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
1965 (25.8 billion)
1976 (640 billion)
1987 (16,767billion)
1998 (93,766billion)
Insurance(Finance)Food&LeisureTextilesPaperHome ApplianceConstructionVehiclesMachinery, SteelNonmetalicWholsale&Retail TradeTelecomunicationsSemiconductorOther services
2.41.1
3
1
1
1.6
Source : Chang (2003), Notes: numbers are share percentages in sales
34
Gracias!
Meu Amigo! Obrigado!
Thank you!
謝謝大家감사합니다
35
References (www.keunlee.com)
• Lee, Keun, 2012, a book manuscript, “Knowledge and Detour for Sustained Catch-up: Schumpeterian Recipe to escape the Middle income trap.”
• Lee, Keun, Chaisung Lim, and Wichin Song (2005), "Digital Technology as a Window of Opportunity and Technological Leapfrogging: Catch-up in Digital TV by the Korean Firms”, Inter.J. of Tech. Management, Vol. 29, 1/2, pp. 40-64.
• Lee, Keun, “Making a technological Catchup.” Asian J.of Tech. Innovation, 2005.
• Mu, Qing, and Keun Lee (2005), “Knowledge Diffusion, Market Segmenta-tion and Technological Catch-up: The Case of Telecommunication Industry in China”, Research Policy.
36
G5 Class Class Name Patent count
1 514 Drug, Bio-Affecting and Body Treating Compositions 103492 428 Stock Material or Miscellaneous Articles 38833 73 Measuring and Testing 37894 123 Internal-Combustion Engines 34795 424 Drug, Bio-Affecting and Body Treating Compositions 33896 210 Liquid Purification or Separation 28537 435 Chemistry: Molecular Biology and Microbiology 28528 250 Radiant Energy 26399 264 Plastic & Nonmetallic Article Shaping or Treating 2349
10 324 Electricity: Measuring and Testing 2325
Top 10 Classes in Patenting by G5 vs Korea-Taiwan
Korea-Taiwan Class Class Name Patent
count1 438 Semiconductor Device Manufacturing: Process 11892 348 Television 7123 439 Electrical Connectors 4084 257 Active Solid-State Devices ( Transistors, Solid-State Diodes) 3745 362 Illumination 3746 280 Land Vehicles 3557 365 Static Information Storage and Retrieval 3468 70 Locks 3409 360 Dynamic Magnetic Information Storage or Retrieval 313
10 482 Exercise Devices 311
37
G5 Class Class Name Patent count
1 514 Drug, Bio-Affecting and Body Treating Compositions 103492 428 Stock Material or Miscellaneous Articles 38833 73 Measuring and Testing 37894 123 Internal-Combustion Engines 34795 424 Drug, Bio-Affecting and Body Treating Compositions 33896 210 Liquid Purification or Separation 28537 435 Chemistry: Molecular Biology and Microbiology 28528 250 Radiant Energy 26399 264 Plastic & Nonmetallic Article Shaping or Treating 2349
10 324 Electricity: Measuring and Testing 2325
8 mid income's Class Class Name Patent
count1 514 Drug, Bio-Affecting and Body Treating Compositions 1202 424 Drug, Bio-Affecting and Body Treating Compositions 763 435 Chemistry: Molecular Biology and Microbiology 544 75 Metallurgical Compositions, Metal Mixtures 525 65 Glass Manufacturing 446 604 Surgery 447 210 Liquid Purification or Separation 408 423 Chemistry of Inorganic Compounds 409 502 Catalyst, Solid Sorbent or Product 40
10 123 Internal-Combustion Engines 38
Top 10 Classes in Patenting by G5 vs 8 middle-income countries
38
Knowledge and firm performance III: with 3 variables together
US firmsDependent GROWTH ROA ROS SALES/EMP TOBINQH-H Index (+)* (-) (+) (-)** (-)Originality (+) (+) (+) (+)** (+)
Self-citation (+)+ (-) (-) (+)* (+)+No. of workers (+) (-)+ (-) (-)** (-)+
Investment Propensity (+)** (+)** (+)** (-)** (+)**Debt to Equity Ratio (-) (-) (-) (-) (+)Capital Labor Ratio (-)** (-)** (-)** (+)** (-)**
Obs 3468 3472 3471 3472 3355
Korea firmsDependent GROWTH ROA ROS SALES/EMP TOBINQH-H Index (-) (+) (+) (-)+ (-)Originality (-) (+) (+)+ (-) (+)Tech. Cycle (+) (-)* (-)* (+) (-)
No. of workers (-) (-) (+) (-) (-)Investment propensity (+)+ (-)+ (+) (-) (-)Debt to Equity Ratio (+) (-)** (-)** (-)+ (+)Capital Labor Ratio (+) (-)+ (-)** (-) (-)+
Obs 231 232 232 232 122
Every country for IT’s? Another Adding-up?
39
Analogous to the adding-up problem or risk of specialization in labor-intensives by all low-income countries.
Big difference: 1) specialization based on factor endowments : fixed with few opportunities for change, 2) specialization in short-cycle technologies : no fixed list of technologies but rather specializing in a field or sector where new technologies always emerge to replace old ones, as existing technologies become obsolete soon.
40
Three Alternatives for Development: Low, Middle and High Roads
Strategy
Cycle time of
technology.
Originality
ValueSegmentation
ExampleCountries
Low Road
Existing comparativ
eAdvantage
Long LowLow-end
eg) apparel, footwear
Typical low-incomes:Bangladesh; Sri lanka
Korea & Taiwan in 60s, 70s
China in early 1980s
HighRoad
Direct Replication Long High
High-endeg) fabrics; materi-als; machineries,
toolsMedicines
Some middle incomes:Brazil, Argentinain the 1980s, 90s
MiddleRoad Detour Short Low
Middle/High endeg ) high end con-sumer electronics
Successful Middle Incomes:
Korea; Taiwan since 1980s
China now
*Best Scenario: Low Road-> Middle Detour -> High Road
*Muddling through the Middle Road: eg, 2nd tier Asian countries, eg. Malaysia, Thailand
41
1975197619771978197919801981198219831984198519861987198819891990199119921993199419950
0.05
0.1
0.15
0.2
0.25
0.3
0.35
0.4
0.45
Originality= patents based on broad bases of knowledge
High Income countries Middle Income countries Korea and Taiwan
Brazil and Argentina
42
1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 19950
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
Herfindhal index of concentration of inventor
High Income countries Middle Income countries Korea and Taiwan
Brazil and Argentina
43
1988 1989 1990 1991 1992 1993 1994 19950
0.05
0.1
0.15
0.2
0.25
0.3
0.35
0.4
0.45
0.5
Originality_KROriginality_US