Abstract
This chapter explores the “black box” of innovation in the electronics production network in East Asia through a mapping exercise of technological capabilities and an econometric analysis of exporting in the People’s Republic of China (PRC), Thailand, and the Philippines. Technology-based approaches to trade offer a plausible explanation for firm-level exporting behavior and complement the literature on production networks. The econometric results confirm the importance of foreign ownership and innovation in increasing the probability of exporting in electronics. Higher levels of skills, managers’ education, and capital also matter in the PRC as well as accumulated experience in Thailand. Furthermore, a technology index composed of technical functions performed by firms (to represent technological capabilities) emerges as a more robust indicator of innovation than the research and development (R&D) to sales ratio. Accordingly, technological effort in electronics in these countries mostly focuses on assimilating and using imported technologies rather than formal R&D by specialized engineers.
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Notes
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Several taxonomies exist. For instance, Dahlman et al. (1987) categorize technological capabilities into production, investment, and innovation. Romjin (1997) develops a simple classification system based on the complexity of products. Making a distinction between competencies and capabilities, Iammarino et al. (2008) distinguish two types of technological capabilities—process organization and product centered. Each taxonomy is useful depending on the purpose at hand.
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Rasiah (2003, 2004) employs a simple process capability measure consisting of four items: equipment, machinery, information technology components and quality control instruments. Furthermore, equipment and machinery are measured by logistic variables based on their average age, ICT is measured using a Likert scale of 1–5, and quality control by a dummy variable.
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This means that all population units are grouped within a homogenous group and simple random samples are selected within each group. This method allows computing estimates for each of the strata with a specific level of precision while population estimates can also be estimated by properly weighting individual observations. The strata for Enterprise Surveys are firm size, business sector, and geographic region within a country. In most developing countries, small and medium-sized enterprises form the bulk of the enterprises. Large firms are oversampled in the firm surveys as they tend to be engines of job creation. For more details of the sampling methodology see www.enterprisesurveys.org/methodology
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Data availability on technical functions performed by firms in the World Bank Enterprise Surveys on the PRC, Thailand, and the Philippines influenced the construction of the TI. The TI is based on the nine technical functions that were common to all three enterprise samples.
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24 % of PRC firms, 26 % of Thai firms, and 21 % of Philippine firms.
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The correlation matrix indicated that there appears to be a significant positive collinearity between TI and FOR in Thailand and the Philippines. The variance-inflation factor and condition indices tests suggest that there is no serious problem of multicollinearity.
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Wignaraja, G. (2016). Understanding Innovation in Production Networks in Firms in the People’s Republic of China, Thailand, and the Philippines. In: Wignaraja, G. (eds) Production Networks and Enterprises in East Asia. ADB Institute Series on Development Economics. Springer, Tokyo. https://doi.org/10.1007/978-4-431-55498-1_9
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