Asia Pacific Journal of Management

, Volume 15, Issue 2, pp 247–283

Catching-up Crisis and Industrial Upgrading: Evolutionary Aspects of Technological Learning in Korea's Electronics Industry

  • Dieter Ernst
Article

Abstract

This paper address a puzzle: How is it possible that a country that has established a broad, export-oriented industrial base at record speed, remain vulnerable to the vicissitudes of international finance and currency markets? We argue that the Korean model that was tremendously successful for catching-up has now reached its limits. The focus is on the role of technological learning for development of the electronics industry, a main carrier of Korean's successful late industrialization. It is shown that a heavy reliance on credit and an extremely unbalanced industry structure have given rise to a narrow knowledge base, and a sticky pattern of specialization. Catching-up has focused on capacity and international market share expansion for homogenous, mass-produced products; very little upgrading has occurred into higher-end and rapidly growing market segments for differentiated products and services. Such truncated upgrading is one important reason for Korea's vulnerability to the financial and currency crisis.

Industrialization industrial upgrading industrial policies electronics industry financial crisis Korea 

Preview

Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.

REFERENCES

  1. Aliber, R.Z. 1994. Financial reform in South Korea. In Lee-Jay Cho and Yoon Hyung Kim (eds) Korea's Political Economy. An Institutional Perspective. Boulder: Westview Press.Google Scholar
  2. Amsden, A. 1989. Asia's Next Giant. South Korea and Late Industrialization. New York: Oxford University Press.Google Scholar
  3. Anderson, B. 1997. R&D knowledge creation as a bazaar economy. Paper presented at the OECD Workshop on the Information Society, Institution of Electrical Engineers, London, May.Google Scholar
  4. Arrow, K.J. 1962. The economic implications of learning by doing. Review of Economic Studies, June.Google Scholar
  5. Asia IT Report, 1995. South Korea's Monitor Industry. Market Intelligence Center, Institute for Information Industry: Taipei.Google Scholar
  6. Avramovitz, M. 1989. Thinking About Growth. Cambridge University Press.Google Scholar
  7. Baumol, W.J., Panzer, J.C. and Willig, R.D. 1982. Contestable Markets and the Theory of Industrial Structure. New York: Harcourt Brace Jovanovich.Google Scholar
  8. Bee, Yan Aw, Chen, Xiaomin and Roberts, M.J. 1997. Firm-level evidence on productivity differentials, turnover and exports in Taiwanese manufacturing. NBER Working Paper 6235, October.Google Scholar
  9. Bell, M. and Pavitt, K. 1993. Technological accumulation and industrial growth: contrasts between developed and developing countries. Industrial and Corporate Change, 2(2).Google Scholar
  10. Berger, S. and Dore, R. (eds) 1996. National Diversity and Global Capitalism. Ithaca and London: Cornell University Press.Google Scholar
  11. Bloom, M. 1992. Technological Change in the Korean Electronics Industry. Paris: Development Centre Studies, OECD.Google Scholar
  12. Chang, Ha Joon 1998a. An alternative view on budgetary reform in Korea. Dynamic efficiency, institutions and political economy. Paper presented at Conference on Korea's Transition to a High-Productivity Economy, Korea Studies Centre, University of Hawaii at Manoa, Honolulu, Hawaii, USA.Google Scholar
  13. Chang, Ha Joon 1998b. Korea: The misunderstood crisis. Paper presented at the Nordic Research Seminar on the Economic Crisis in East and Southeast Asia, Centre for Development and the Environment (SUM), University of Oslo, Oslo, January.Google Scholar
  14. Chang, Ha Joon 1994. The Political Economy of Industrial Policy. London: Macmillan.Google Scholar
  15. Chang, Sei-Myung 1998. The semiconductor technological systems in Korea and Taiwan: What explains catching-up? Paper presented at the DRUID Winter Conference, Danish Research Unit for Industrial Dynamics, January.Google Scholar
  16. Dahlman, C., Ross-Larson, B. and Westphal, L. 1987. Managing technological development: Lessons from the newly industrialising countries. World Development, 15(6).Google Scholar
  17. Dataquest 1993. Vendor Profile Samsung Electronics. San José, CA.Google Scholar
  18. Dosi, G., Freeman, C., Nelson, R., Silverberg, G. and Soete, L. (eds) 1988. Technical Change and Economic Theory. London: Pinter Publishers.Google Scholar
  19. Ernst, D. 1998a. Externalization and inter-organizational networks. How globalization transforms the Japanese model. In D. Dirks (ed) Between External Shocks and Internal Evolution: Towards a New Phase in Japanese Management Practices. Berlin and New York: Springer Verlag.Google Scholar
  20. Ernst, D. 1998b. What permits small firms to compete in high-tech industries? The dynamics of inter-organizational knowledge creation in the Taiwanese computer industry. Paper prepared for the Asia-Pacific Journal of Management Conference on Knowledge Creation Strategies in Asia, Singapore, March 1998.Google Scholar
  21. Ernst, D. 1998c. Destroying or Upgrading the Engine of Growth? The Reshaping of the Electronics Industry in East Asia after the Crisis. Report prepared for the World Bank. Washington, D.C.Google Scholar
  22. Ernst, D. 1998d. Globalization and Local Capabilities: Does Knowledge Migrate Within International Production Networks? Copenhagen Business School Press: Copenhagen (forthcoming)Google Scholar
  23. Ernst, D. 1997a. Partners in the China circle? The Asian production networks of Japanese electronics firms. In B. Naughton (ed) The China Circle, Washington, D.C.: The Brookings Institution Press.Google Scholar
  24. Ernst, D. 1997b. High-tech competition puzzles. How globalization affects firm behavior and market structure in the electronics industry. Danish Research Unit for Industrial Dynamics (DRUID) Working paper #97-10, September.Google Scholar
  25. Ernst, D. 1997c. From Partial to Systemic Globalization. International Production Networks in the Electronics Industry. Report prepared for the Sloan Foundation project on the Globalization in the Data Storage Industry, Graduate School of International Relations and Pacific Studies, University of California at San Diego, jointly published as The Data Storage Industry Globalization Project Report 97-02. Graduate School of International Relations and Pacific Studies, University of California at San Diego, and BRIE Working Paper # 98, the Berkeley Roundtable on the International Economy, University of California at Berkeley, April 1997.Google Scholar
  26. Ernst, D. 1994a. Network transactions, market structure and technological diffusion — implications for South-South cooperation. In L. Mytelka (ed) South-South Cooperation in a Global Perspective. Paris: Development Centre Documents, OECD.Google Scholar
  27. Ernst, D. 1994b. What are the Limits to the Korean Model? The Korean Electronics Industry Under Pressure. The Berkeley Roundtable on the International Economy, University of California at Berkeley.Google Scholar
  28. Ernst, D. 1987. U.S.-Japanese competition and the worldwide restructuring of the electronics industry — A European view. In J. Henderson and M. Castells (eds) Global Restructuring and Territorial Development. London: Sage Publications.Google Scholar
  29. Ernst, D. 1983. The Global Race in Microelectronics. Foreword by David Noble. Frankfurt and New York: MIT Campus.Google Scholar
  30. Ernst, D., Mytelka, L. and Ganiatsos, T. 1998. Export performance and technological capabilities — A conceptual framework. In D. Ernst, T. Ganiatsos and L. Mytelka (eds) Technological Capabilities and Export Success — Lessons from East Asia. London: Routledge Press.Google Scholar
  31. Ernst, D. and Lundvall, B.-Å. 1998. Information technology in the learning economy — Challenges for developing countries. In E. Reinert (ed) Evolutionary Economics and Spatial Income Inequality. London: Edward Elgar Press.Google Scholar
  32. Ernst, D. and O'Connor, D. 1992. Competing in the Electronics Industry. The Experience of Newly Industrialising Economies. Paris: Development Centre Studies, OECD.Google Scholar
  33. Evans, P. 1995. Embedded Autonomy. States and Industrial Transformation. Princeton, New Jersey: Princeton University Press.Google Scholar
  34. Fields, K.J. 1995. Enterprise and the State in Korea and Taiwan. Ithaca, N.Y.: Cornell University Press.Google Scholar
  35. Freeman, C. 1982. Economics of Industrial Innovation. London: Frances Pinter.Google Scholar
  36. Fruin, W.M. 1997. Knowledge Works. Managing Intellectual Capital at Toshiba. New York and Oxford: Oxford University Press.Google Scholar
  37. Fruin, M. 1992. The Japanese Enterprise System — Competitive Strategies and Cooperative Structures. London: Clarendon Press.Google Scholar
  38. Gerlach, M.L. 1993. Alliance Capitalism — The Social Organization of Japanese Business. Berkeley: University of California Press.Google Scholar
  39. Gerschenkron, A. 1962. Economic Backwardness in Historical Perspective. A Book of Essays. Cambridge, Massachustts: Belknap Press of Harvard University Press.Google Scholar
  40. Graham, E.M. 1994. Financial liberalization and the environment for U.S. investment — A private U.S. perspective. In Korea's Economy 1994. Vol. 10, Korea Economic Institute of America, Washington, D.C.Google Scholar
  41. Granstrand, O. (ed) 1992. Technology Management and International Business: Internationalization of R{ie280-1}D and Technology. New York: Wiley.Google Scholar
  42. Gu, Shulin, 1996. Toward an analytical framework for national innovation systems. INTECH Working paper #9605, Institute for New Technologies, The United Nations University, Maastricht, Netherlands.Google Scholar
  43. Haggard, 1990. Pathways from the Periphery: The Politics of Growth in the Newly Industrializing Countries. Ithaca, New York: Cornell University Press.Google Scholar
  44. Hikino, T. and Amsden, A. 1992. Staying behind, stumbling back, sneaking up, soaring ahead: Late industrialization in historical perspective. In W.J. Baumol et al. (eds) International Convergence of Productivity, With Some Evidence from History. New York and Oxford: Oxford University.Google Scholar
  45. Inoue, R. 1993. An East Asian industrial policy model. In R. Inoue, H. Kohama and S. Urata (eds) Industrial Policy in East Asia. JETRO, Tokyo, Japan.Google Scholar
  46. Janelli, R.L. and Dawnhee Yim 1993. Making Capitalism. The Social and Cultural Construction of a South Korean Conglomerate. Stanford, CA: Stanford University Press.Google Scholar
  47. Jomo, K.S. 1998. Financial liberalization, crises, and Malaysian policy responses. Paper presented at the Nordic Research Seminar on the Economic Crisis in East and Southeast Asia. Centre for Development and the Environment (SUM), University of Oslo, January.Google Scholar
  48. Jan, Yong-Wook and Kim Sang-Gook 1990. Structure and Strategy in the Korean Electronics Industry. Report prepared for the OECD Development Centre, OECD, Paris.Google Scholar
  49. Kim, Hyong and Kim Chiyong 1991. Comparison of Korean to Western R&D — Project selection factors for new product development. Mimeo, Science and Technology Policy Institute, Korea Advanced Institute of Science and Technology (KAIST), Seoul.Google Scholar
  50. Kim, Hyong and Chung Sunyang 1991. R&D cooperation between large manufacturing companies and suppliers. Mimeo, Science and Technology Policy Institute, Korea Advanced Institute of Science and Technology (KAIST), Seoul.Google Scholar
  51. Kim, Linsu 1997a. Imitation to Innovation. The Dynamics of Korea's Technological Learning. Boston, Massachusetts: Harvard Business School Press.Google Scholar
  52. Kim, Linsu 1997b. Korea's national innovation system in transition. Paper presented at International Symposium on Innovation and Competitiveness in Newly Industrializing Economies. Science & Technology Policy Institute, Seoul, Korea, May.Google Scholar
  53. Kim, Linsu 1993. The structure and workings of the national innovation system in Korea. Paper presented at the Conference on Redefining Korean competitiveness in an Age of Globalization. Center for Korean Studies, University of California at Berkeley.Google Scholar
  54. Kim, Linsu 1992. National system of industrial innovation: Dynamics of capability building in Korea. In R. Nelson (ed) National Innovation Systems: A Comparative Analysis. New York and Oxford: Oxford University Press.Google Scholar
  55. Kim, Pyung Joo 1994. Financial institutions. In Lee-Jay Cho and Yoon Hyung Kim (eds) Korea's Political Economy. An Institutional Perspective. Boulder: Westview Press.Google Scholar
  56. Kim, Ran S. 1996. The Korean system of innovation and the growth dynamics of the semiconductor industry: politics and governance. Manuscript, PRU, University of Sussex, August.Google Scholar
  57. Kim, Sun G. 1995. S&T promotion policy and the incentive scheme for technological capability building in Korea: Facts and characteristics. In STEPI, Review of Science and Technology Policy for Industrial Competitiveness in Korea. Science & Technology Policy Institute, Scoul, Korca.Google Scholar
  58. Kim, Youngsoo 1998. Technological capabilities and Samsung electronics' international production networks in Asia. In M. Borrus, D. Ernst and S. Haggard (eds) Rivalry or Riches: International Production Networks in Asia. Forthcoming. London: Rourledge.Google Scholar
  59. Kogut, B. and Zander, E. 1993. Knowledge of the firm and the evolutionary theory of the multinational corporation. Journal of International Business Studies. 24(4).Google Scholar
  60. Kohama, H. and Utata, S. 1993. Protection and promotion of Japan's electronics industry. In Inoue, R. et al. (eds) Industrial Policy in East Asia. JETRO, TokyoGoogle Scholar
  61. Krugman, P. 1998. What happened to Asia? http: //web.mit.edu/krugman/www/DISINTER.html, January.Google Scholar
  62. Kwon Okyu 1994. Financial liberalization and the environment for U.S. investment. In Korea's Economy 1994. Korea Economic Institute of America, Washington, D.C.Google Scholar
  63. Lall, S. 1997. Technological change and industrialization in the Asian NIEs: Achievements and challenges. Paper presented at International Symposium on, Innovation and Competitiveness in Newly Industrializing Economies, Science & Technology Policy Institute, Seoul, Korea, May.Google Scholar
  64. Langlois, R.N. 1992. External economies and economic progress: The case of the microcomputer industry. Business History Review, #66, Spring 1992.Google Scholar
  65. Langlois, R.N. and Robertson, P.L. 1995. Firms, Markets and Economic Change: A Dynamic Theory of Business Institutions. London: Routledge.Google Scholar
  66. Langlois, R.N. and Steinmueller, W.E. 1997. The evolution of competitive advantage in the global semiconductor industry: 1947–1996. Paper presented at DRUID Seminar on Industrial Dynamics and Competition, June, Skagen, Denmark.Google Scholar
  67. Lee, Jin-Joo 1992. The status and issue of management dynamism and four case studies in the Republic of Korea. In Asian Productivity Organization (APO), Management Dynamism. A Study of Selected Companies in Asia, APO, Tokyo.Google Scholar
  68. Lee, Suk-Chae 1991. The heavy and chemical industry promotion plan. In Lee-Jay Cho and Yoon Hyung Kim (eds) Economic Development in the Republic of Korea. A Policy Perspective. University of Hawaii Press: East-West Center.Google Scholar
  69. Lee, Won-Young 1995. Building Scientific and Technological Infrastructure. Manuscript, Science & Technology Policy Institute, Seoul, Korea.Google Scholar
  70. Linden, G., Hart, J. and Lenway, J. 1997. Advanced displays in Korea and Taiwan. Report for the Alfred P. Sloan Foundation, BRIE, UC Berkeley.Google Scholar
  71. Lundvall, B.A. (ed) 1992. National Systems of Innovation: Towards a Theory of Innovation and Interactive Learning. London: Pinter Publishers.Google Scholar
  72. Lundvall, B.-Å. and Johnson, B. 1994. The learning economy. Journal of Industry Studies, 1(2): 23–42.Google Scholar
  73. Mody, A. 1989. Institutions and dynamic comparative advantage: Electronics industry in South Korea and Taiwan. Industry and Energy Department Working Paper #9, World Bank, Washington, D.C.Google Scholar
  74. Nelson, R. (ed) 1992. National Innovation Systems. London: Oxford University Press.Google Scholar
  75. Nelson, R. and Pack, H. 1995. The Asian Growth Miracle and Modern Growth Theory. Manuscript, School of International and Public Affairs, Columbia University.Google Scholar
  76. Nelson, R. and Winter, S.G. 1982. An Evolutionary Theory of Economic Change. Cambridge, Massachusetts: Bellknap Press.Google Scholar
  77. Nilsson, J.E. 1996. Introduction: The internationalization process. In Nilsson, J.E., Dicken, P. and Peck J. (eds) The Internationalization Process. European Firms in Global Competition. London: Paul Chapman Publishing Ltd.Google Scholar
  78. Odagiri, H. and Goto, A. 1992. The Japanese system of innovation: Past, present and future. In R. Nelson (ed) National Innovation Systems, London: Oxford University Press.Google Scholar
  79. OECD 1996. Transitions to Learning Economies and Societies. Paris.Google Scholar
  80. OECD 1995a. Reviews of National Science and Technology Policy: Korea. Part 1: Background Report. DSTI/STP(95)16, Paris: OECD.Google Scholar
  81. OECD 1995b. Reviews of National Science and Technology Policy: Korea. Part II: Examiners' Report. DSTI/STP (95)15, Paris: OECD.Google Scholar
  82. OECD 1992. Technology and the Economy. The Key Relationships, Paris.Google Scholar
  83. Oki, T. 1993. Technology development in South Korea. RIM. Pacific Business and Industries. Vol. III, Center for Pacific Business Studies, Sakura Institute of Research: Tokyo.Google Scholar
  84. Office of Technology Assessment (OTA) 1991. Competing Economies: America, Europe, and the Pacific Rim. Congress of the United States, Washington, D.C.Google Scholar
  85. Patrick, H.T. and Yung, Chul Park (eds) 1994 The Financial Development of Japan. Korea and Taiwan. New York and Oxford: Oxford University Press.Google Scholar
  86. Penrose, E.T. 1959/1995. The Theory of the Growth of the Firm. Oxford: Oxford University Press.Google Scholar
  87. Ranis, G. 1998. Miracles that don't cease. Financial Times, February 19, 1998, p. 12.Google Scholar
  88. Richardson, G.B. 1960/1990. Information and Investment. Oxford: Oxford University Press.Google Scholar
  89. Richardson, G.B. 1996. Competition, innovation and increasing returns. DRUID Working Paper #96-10, Danish Research Unit for Industrial Dynamics, Department of Business Studies, Aalborg University, July.Google Scholar
  90. Roberts, P.C. 1997. The Asian crisis proves industrial policy doesn't pay. Business Week, December 22, p. 12.Google Scholar
  91. Sachs, J. 1997. The wrong medicine for Asia. New York Times, November 3.Google Scholar
  92. San Gee 1995. Technology Support Institutions and Policy Priorities for Industrial Development in Taiwan, R.O.C. Report prepared for the Ministry of Economic Affairs, Taipei, Taiwan.Google Scholar
  93. San, Gee and Wen-Jeng Kuo 1994. Taiwan's export success and technological capabilities: The case of textiles and electronics. In D. Ernst, Ganiatsos T. and L. Mytelka (eds) Technological Capabilities and Export Success — Lessons from East Asia. London: Routledge.Google Scholar
  94. San Gee and Wen-Jeng Kuo 1998. Export success and technological capability: Textiles and electronics in Taiwan. In Ernst, D., Ganiatsos, T. and Mytelka, L. (eds) Technological Capabilities and Export Success — Lessons from East Asia. London: Routledge Press.Google Scholar
  95. Schumpeter, J. 1912. Theorie der wirtschaftlichen Entwicklung, Leipzig.Google Scholar
  96. Schive, C. 1993. Industrial policies in a maturing Taiwan economy. Council for Economic Planning and Development, Taipei, Taiwan.Google Scholar
  97. Scitovsky, T. 1986. Economic development in Taiwan and South Korea, 1965–1981. In L. Lau (ed) Models of Development: A Comparative Study of Economic Growth in South Korea and Taiwan. San Francisco: Institute for Contemporary Studies.Google Scholar
  98. Stiglitz, J. 1997. How to fix the Asian economies. New York Times, October 31.Google Scholar
  99. UNCTAD 1995. World Investment Report 1995, Transnational Corporations and Competitiveness. New York and Geneva: United Nations.Google Scholar
  100. Veneroso, F. and Wade, R. 1998. The Asian financial crisis: The unrecognized risk of the IMF's Asia Package. Paper presented at the Nordic Research Seminar on the Economic Crisis in East and Southeast Asia. Centre for Development and the Environment (SUM), University of Oslo, January 23–24.Google Scholar
  101. Wade, R. 1990. Governing the Market: Economic Theory and the Role of Government in East Asian Industrialization. Princeton: Princeton University Press.Google Scholar
  102. Wong, Poh Kam 1991. Technological Development through Subcontracting Linkages. Asia Productivity Organization (APO), Tokyo.Google Scholar
  103. Yoo, Jung Ho 1990. The industrial policy of the 1970s and the evolution of the manufacturing sector in Korea. Working paper #9017, Korea Development Institute, Seoul.Google Scholar

Copyright information

© Kluwer Academic Publishers 1998

Authors and Affiliations

  • Dieter Ernst
    • 1
    • 2
  1. 1.Department of Industrial Economics and StrategyCopenhagen Business SchoolDenmark
  2. 2.Berkeley Roundtable on the International Economy (BRIE)University of CaliforniaBerkeleyUSA

Personalised recommendations