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Beyond Product Cycles and Flying Geese: Regionalization, Hierarchy, and the Industrialization of East Asia

Published online by Cambridge University Press:  13 June 2011

Mitchell Bernard
Affiliation:
York University
John Ravenhill
Affiliation:
Australian National University

Abstract

Product cycle theory as expressed in the analogy of flying geese has become a widely accepted way of conceptualizing industrial diffusion across East Asia. As the product cycle is repeated for increasingly sophisticated products, so, it is argued, the development trajectory of Japan will be replicated in a succession of sectors and countries. This approach fails, however, to capture the complexities of the contemporary regionalization of industrial production. East Asian industrial production should not be seen as a tightly coupled process in which the rise of national economies parallels successive product cycles. Rather than Japan's development trajectory being replicated in country after country, industrial diffusion has been characterized by shifting hierarchical networks of production and partial diffusion into diverse politicoeconomic contexts at differing historical junctures. It has also resulted in a triangulation of the region's trade patterns that has generated large imbalances in trade both within the region and between the region and the United States.

Type
Research Article
Copyright
Copyright © Trustees of Princeton University 1995

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References

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21 The Plaza Agreement took its name from the Plaza Hotel, New York, where a meeting of the Group of Five (France, Germany, Japan, U.K., and U.S.) agreed in September 1985 on a coordinated strategy to push down the value of the dollar vis-a-vis the currencies of its major trading partners. For details, see Funabashi, Y., Managing the Dollar: From the Plaza to the Louvre (Washington, D.C.: Institute for International Economics, 1989)Google Scholar.

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24 The primary focus of our discussion of this spatial extension of regional manufacturing is on ASEAN, especially Malaysia and Thailand. In the 1990s parts of coastal China have also come to figure prominently in the regionalized production networks. We do not deal with the Chinese case in this article, as the unique features of the Chinese political economy would require separate and protracted discussion. For example, China had developed a large industrial base as part of its pre-1978 development strategy. Unlike other countries in the region, China's recent promotion of export-oriented production is not so much part of a process of “industrialization” as it is one of “re-industrialization.” We believe, however, that recent industrial change and the incorporation of parts of China into regionalized production networks actually buttress our central argument.

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28 These figures are those officially recorded for Taiwanese investment. All of the evidence points to these being only a small fraction of actual Taiwanese overseas investment. The World Bank notes that Taiwan's balance of payments figures suggest that investments are twenty-five times those actually recorded; data on inflows from Taiwan reported by host countries similarly reveal very large discrepancies from official Taiwanese data. World Bank, Foreign Direct Investmentfrom the Newly Industrialized Economies, Industry and Energy Department Working Paper, Industry Series Paper no. 22 (Washington, D.C.: World Bank, December 1989), 10.Google Scholar

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33 See Bernard (fn. 19).

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40 Much of this information is based on interviews conducted by Mitchell Bernard with company representatives, Taipei, June 1991.

41 Original equipment manufacturing is an arrangement whereby a corporation will contract for another firm to manufacture one or more of its products to its specifications and to be marketed under its brand name.

42 In the prerecession year of 1991 domestic production of consumer electronics was in fact higher than in 1986. Nihon Denshi Kikai Kogyokai (Electronics Industries Association of Japan), Chosashitsu Shirabe (Research report) (Tokyo: Nihon Denshi Kikai Kogyokai, various years).

43 Jingjibu Tongjichu (Ministry of Economic Affairs statistics) (1991).

44 Interviews conducted by Mitchell Bernard with representatives of both companies, Taipei, March 1992.

45 See Bernard, Mitchell, “The Post-Plaza Political Economy of Taiwanese-Japanese Relations,” Pacific Review 4, no. 4 (1991)CrossRefGoogle Scholar. Japanese imports of audiovisual equipment and household electrical appliances from Korea and Taiwan fell by one-third from 1989 to 1991; in the same period Japanese exports of these products to these two countries rose by over 40 percent. Consequently, the index of intraindustry trade in electronic goods between Japan and Korea and Taiwan fell from 0.55 to 0.31 in this period. Hiroshi Tanaki, “Overseas Direct Investment and Trade: Investment by Japanese Consumer Electrical Appliance Industries in ASEAN and the Import of Such Products into Japan,” Exim Review 13 (December 1993), 27, table 15.

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48 Ibid., 143.

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51 Interviews conducted by Mitchell Bernard with representatives of various medium-size and large textile companies in Korea and Taiwan in 1991 and 1992. These companies are major users and often manufacturers of textile machinery.

52 Bloom, Martin D., Technological Change in the Korean Electronics Industry (Paris: OECD, 1992), 73Google Scholar; Bank of Korea, List of Import-Inducing Effects of Korea's Major Goods (in Korean) (Seoul: Bank of Korea, 1993)Google Scholar.

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54 See Bloom, Martin D., “Globalization and the Korean Electronics Industry,” Pacific Review 6, no. 2 (1993)CrossRefGoogle Scholar.

55 OECD, Main Science and Technology Indicators (Paris: OECD, 1992)Google Scholar.

56 For several examples relating to Taiwan, see Bernard (fn. 45).

57 Taiwan Institute for Information Industry, Taipei, 1992 (mimeographed statistics).

58 Interview conducted by Mitchell Bernard with representatives of Sampo Corporation, Taipei, March 1992.

59 Petri (fn. 9, 1993), 32.

60 Bernard, Mitchell, “Northeast Asia: The Political Economy of a Postwar Regional System,” University of Toronto/York University Joint Centre for Asia Pacific Studies, Asia Papers 2 (1989), 24.Google Scholar

61 Green, Andrew E., “South Korea's Automobile Industry,” Asian Survey 32 (May 1992), 425-28CrossRefGoogle Scholar.

62 Ibid., 427.

63 Bank of Korea (fn. 52).

64 In Malaysia, for instance, the value of exports of machinery and transport equipment more than trebled in the years 1986–90. By the end of this period they alone accounted for more than a quarter of total exports. Total manufactures contributed more than half of the country's export earnings—up from 36 percent at the start of this period. World Bank, World Development Report (New York: Oxford University Press, 1988 and 1992)Google Scholar.

65 Authors who have applied the flying geese analogy to Southeast Asia include Lim, Hank, “Japan and the Asian Newly Industrializing Economies,” in Kendall, Harry H. and Joewono, Clara, eds., Japan, ASEAN, and the United States (Berkeley, Calif.: Institute of East Asian Studies, University of California, Berkeley, 1991), 216-17Google Scholar; Chen, Edward K. Y., “Trade Policy in Asia,” in Naya, Seiji et al. , eds., Lessons in Development: A Comparative Study of Asia and Latin America (San Francisco: International Center for Economic Growth, 1989)Google Scholar; Okita, Saburo, “The Outlook for Pacific Cooperation and the Role of Japan,” Japan Review of International Affairs 1 (Spring—Summer 1987), 4Google Scholar; and Schlosstein, Steven, Asia's New Little Dragons: The Dynamic Emergence of Indonesia, Thailand, and Malaysia (Chicago: Contemporary Books, 1991), 32Google Scholar. The analogy is applied to the Southeast Asian electronics industry in Chalmers, Ian, “International and Regional Integration: The Political Economy of the Electronics Industry in ASEAN,” ASEAN Economic Bulletin 8 (November 1991)CrossRefGoogle Scholar.

66 Kunio, Yoshihara, The Rise of Ersatz Capitalism in Southeast Asia (Singapore: Oxford University Press, 1988), 111Google Scholar.

67 Data from Bank Negara Malaysia, Quarterly Bulletin 6 (March-June 1991), 50Google Scholar; and World Bank, World Tables 1991 (Washington, D.C.: World Bank, 1991)Google Scholar.

68 For an overview, see Warr, Peter G., “Export Processing Zones: The Economics of Enclave Manufacturing,” World Bank Research Observer 4 (January 1989)CrossRefGoogle Scholar. A survey of the Penang Free Trade Zone in Malaysia found that linkages between firms in the zone and the local economy were not well developed, “despite more than a decade of operation.” Nesadurai, Helen E. S., “The Free Trade Zone in Penang, Malaysia: Performance and Prospects,” Southeast Asian Journal of Social Science 19, nos. 1, 2 (1991), 122Google Scholar.

69 Lim, Linda Y. C. and EngFong, Pang, Foreign Direct Investment and Industrialisation in Malaysia, Singapore, Taiwan and Thailand (Paris: OECD Development Centre, 1991), 110Google Scholar.

70 Thus in 1989 purchases from local companies amounted to ony 14.5 percent of the components utilized by Japanese subsidiaries in the electronics sector. This sector had the highest local content: local companies provided only 3.3 percent of inputs in the transport field. All data in this section are from a JETRO survey of Japanese subsidiaries in Malaysia reported in Aoki (fn. 29).

71 Reich, Cf. Robert B., The Work of Nations (New York: Alfred A. Knopf, 1991)Google Scholar.

72 O'Brien, “Malaysian Manufacturing Sector Linkages,” injomo (fn. 23), 157, 159.

73 Tanaka (fn. 45), 31, table 17.

74 Aoki (fn. 29).

75 This is estimated at 0.5 percent to 0.6 percent of GDP for Malaysia, but the bulk of local expenditure for R and D is devoted to the primary products sector. Ibid., 77. In 1990 Korea spent approximately 2 percent of its GDP on R and D; the equivalent figure for Taiwan was 1.65 percent.

76 For one dimension of state-society relations, the relationship between business and the state, see, for instance, Hawes, Gary and Liu, Hong, “Explaining the Dynamics of the Southeast Asian Political Economy: State, Society, and the Search for Economic Growth,” World Politics 45 (July 1993)CrossRefGoogle Scholar; and Maclntyre, Andrew, ed., Business and Government in Industrializing East Asia (Ithaca, N.Y.: Cornell University Press, 1994)Google Scholar.

77 Fankel, Jeffrey, “Is a Yen Bloc Forming in Pacific Asia?” in O'Brien, R., ed., Finance and the International Economy (New York: Oxford University Press, 1991)Google Scholar; and Petri (fn. 9, 1993).

78 Kreinin, Mordechai E., “How Closed Is Japan's Market? Additional Evidence,” World Economy 11 (December 1988)CrossRefGoogle Scholar. Sakong reports data from a Korean Ministry of Finance study that show that in 1986, 74 percent of the imports of the subsidiaries of Japanese corporations operating in Korea came from Japan, 8 percent from the United States, and 18 percent from other countries. For U.S. subsidiaries 50 percent of imports came from the United States, 20 percent from Japan, and 30 percent from other countries. Sakong (fn. 22), 124, table 5.10.

79 Data from Hirobumi, Takaoka and Takanori, Satake, “Report on Results of FY 1990 Foreign Direct Investment Survey,” Exim Review 11 (July 1991), 18Google Scholar; and Urata, Shujiro, “Japanese Foreign Direct Investment and Its Impact on Foreign Trade in Asia,” in Ito, Takatoshi and Kreuger, Anne O., eds., Trade and Protectionism (Chicago: University of Chicago Press, 1993)Google Scholar.

80 World Bank (fn. 28), 24, table 8.

81 Krugman, Paul, “Introduction,” in Krugman, P. R., ed., Trade with Japan: Has the Door Opened Wider} (Chicago: University of Chicago Press, 1991), 4CrossRefGoogle Scholar. For further discussion, see Ravenhill, John, “The 'Japan Problem' in Pacific Trade,” in Higgott, Richard, Leaver, Richard, and Ravenhill, John, eds., Pacific Economic Relations in the 1990s: Conflict or Cooperation? (Boulder, Colo.: Lynne Rienner, 1993)Google Scholar, chap. 5; and Lincoln, Edward J., Japan's Unequal Trade (Washington, D.C.: Brookings Institution, 1990)Google Scholar.

82 Takaoka and Satake (fn. 79), 17.

83 The share of local, Japanese, and other markets varied considerably across sectors. Local sales were particularly high in transport machinery (over 90 percent) and iron and steel (over 85 percent). It is particularly noteworthy that sales to other export markets were highest (over 35 percent) for the most rapidly growing sector of Japanese manufacturing investment—electrical machinery. See Takaoka and Satake (fn. 79), 17; and additional data from Urata (fn. 79). Japanese subsidiaries operating in Korea do send a larger percentage of their exports to Japan. In 1985, however, one-third of the exports of Japanese subsidiaries in Korea went to the U.S. market. Sakong (fn. 22), 122, table 5.8.

84 In 1992 the United States had a trade deficit of $12.5 billion with the member states of ASEAN (excluding Brunei). The deficit with the People's Republic of China in the same year was $18.3 billion. Malaysia contributed 4.7 percent of the total U.S. trade deficit; Thailand 4.2 percent; Indonesia 2.1 percent; Singapore, 2.0 percent; and the Philippines 1.9 percent. Data from United States Information Service, Wireless File, May 17, 1993.

85 See, inter alia, Amsden (fn. 47); Haggard, Stephan, Pathways from the Periphery: The Politics of Growth in the Newly Industrializing Countries (Ithaca, N.Y.: Cornell University Press, 1990)Google Scholar; Gereffi, Gary and Wyman, Donald, eds., Manufacturing Miracles: Paths of Industrialization in Latin America and East Asia (Princeton: Princeton University Press, 1992)Google Scholar; Wade, Robert, Governing the Market: Economic Theory and the Role of Government in East Asian Industrialization (Princeton: Princeton University Press, 1990)Google Scholar; idem, , “East Asia's Economic Success: Conflicting Perspectives, Partial Insights, Shaky Evidence,” World Politics 44 (January 1992)Google Scholar.

86 The neoclassical theory of growth suggests that economies will converge as they exploit their comparative advantage to pass through successive stages of growth. We find more persuasive the recent endogenous growth theories that emphasize the role of technology in generating increasing returns to scale: rather than convergence, a widening gap may develop between richer and poorer economies. On endogenous growth models, see, for instance, Romer, Paul, “The Origins of Endogenous Growth,” Journal of Economic Perspectives 8 (Winter 1994)CrossRefGoogle Scholar.

87 See Lim and Fong (fn. 69).

88 For an argument stressing the need to broaden research horizons on collective action problems beyond the focus on state strength, see Doner, Richard F., “Limits of State Strength: Toward an Institutionalist View of Economic Development,” World Politics 44 (April 1992)CrossRefGoogle Scholar.

89 Doner, Richard F., Driving a Bargain:Automobile Industrialization and Japanese Firms in Southeast Asia (Berkeley, Calif: University of California Press, 1991)Google Scholar.

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