2005 Annual Meeting: Border-Crossing Sessions

CHINA & INNER ASIA SESSION 131

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Session 131: The Political Economy of Technological Transformation: The Emergence of China as a Technological Power

Organizers: Douglas B. Fuller, Massachusetts Institute of Technology; Dimitri Kessler, University of Wisconsin, Madison

Chair: Douglas B. Fuller, Massachusetts Institute of Technology

Discussant: William Hurst, Bowdoin College

This panel brings together perspectives from political science, economic geography and sociology to analyze the ongoing technological transformation of China. Scholarly work emphasizes the role of the state or the role of production networks in economic development. This panel aims to examine how the interaction of these two factors contributed to the recent technological achievements of China. Stressing the importance of production networks, the panel considers transnational connections between California, Taiwan and mainland China. To understand production networks in their political and socioeconomic context, the panel analyzes how government, geography, firm strategies and ethnic affiliation mediate the effects of these networks. Against a backdrop of larger dynamics, the panel also considers the importance of agency at the level of the individual firms as firms make decisions that collectively affect the development of China’s technology. The panel offers several different perspectives on how a confluence of factors led to China’s technological boom including the formation of transnational networks of innovation, state promotional efforts to attract the attention of MNCs and the role of returnees.


The Pride and Humility of Tech Transfer: Confrontation and Cooperation in Mainland China and Taiwan

Dimitri Kessler, University of Wisconsin, Madison

Firms in developing nations depend on multinationals for access to a variety of advanced technologies. Although multinationals benefit from transferring technology to apprentice firms, the managers of multinationals always consider that today’s apprentice could become tomorrow’s competitor. Apprentice firms take this into account when they manage their relationship with multinationals. This paper analyzes the factors that influence whether firms tend towards a cooperative or antagonistic attitude towards multinationals, drawing primarily from qualitative interviews of entrepreneurs and engineers in Beijing, Shanghai and Taipei.

Comparing trends in the research agendas and patent applications of different firms, I construct two typologies. In the case of mainland China, firms are larger, more willing to invest in fundamental technologies and adopt a more confrontational approach to multinationals. In Taiwan, firms invest in more specialized technologies and maintain a more cooperative relationship with their multinational partners. I then examine the factors that contribute to these trends. These include: how political priorities affect government initiatives to promote domestic technologies; how markets affect the ability of governments and domestic firms to promote their own interests; and how the size and specialization of domestic firms affects their relationship with multinationals.


Hybrid Firms and Technological Upgrading in China’s IT Industry

Douglas B. Fuller, Massachusetts Institute of Technology

This paper identifies four distinct categories of firms in China (favored domestic enterprises, neglected domestic enterprises, foreign-invested enterprises and hybrids), and presents evidence from the IT industry that the hybrid firms stand out in terms of their greater contribution to technological upgrading as measured by workers trained in skills new or rare to China and the relative technological sophistication of the skills transferred. The categories of firms are distinguished by their relationship to China’s formal state-run financial system and the orientation of their operational strategy. The hybrids are able to contribute more to China’s technological upgrading because they are not hampered by the lack of finance as the neglected private firms are nor are they hampered by the soft budget constraints created by unmonitored state finance as the favored domestic firms are. Instead, due to their at least nominal foreign registration, hybrids enjoy both the ability to invest in China with relative ease and access to foreign finance. Borrowing on Jaeyong Song’s work on MNCs’ operational biases affecting the level of technological upgrading in host countries, this paper argues that what separates the performance of hybrids from other foreign-invested enterprises is the China-based operational strategy of the hybrids. Whereas the other foreign-invested firms do not have a bias in favor of locating their core activities in China, the hybrids’ operational strategy is predicated upon making use of China’s resources as the main base of operations.


From Hsinchu to Shanghai: The Governing of Cross-Strait Production Networks in Taiwan’s High Technology Industry

You-ren Yang, National Taiwan University

This research aims to explore the possibilities and limitations of the role played by the interface region in the cross-border economic activities. In the globalizing economy, cross-border business networks prevail and constitute the channels to engender coupling/decoupling effect for each connecting regions. Interface is defined here as a hybrid space where two divergent social and geographical organizations collide and articulate to create the tensions and opportunities in the interconnected economic system. In other words, it is an organizational field that engages the contrasting but overlapping socio-economic spaces. As Taiwan’s high technology industries grew by benefiting from the connection with the technology hub, Silicon Valley, it has extended the production networks to China, particularly Shanghai City and the neighboring regions, since the late 1990s. A number of challenges arose in the cross-border investments: technology diffusion management, subcontracting system constructing, labor regime regulation, and market channel expansion in the contrastingly institutionalized socio-economic space. At the same time, the cross-border business networks meant a knife-edge effect for the headquartering regions: it both created partners to cooperate and fostered rivalries to compete. By elaborating on ANT (Actor-Network Theory) framework, the research will attack these issues and explore the hybridization effects in the governing of the high technology cross-border networks connecting the Hsinchu and Shanghai regions.