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Click to increase image sizeClick to decrease image size This paper is dedicated to the late Sanjaya Lall, whose influence permeates every page. The paper was drafted initially at the Rockefeller Foundation Study Center at Villa Serbelloni, Bellagio, Italy, where I was a visiting scholar during the month of September 2004. I wish to thank in particular Robert Wade, Mark Dodgson and the late Sanjaya Lall for their ideas that have fed into this paper and for their support. Notes 1. See Paul N. Rosenstein-Rodan, 'Problems of Industrialisation of Eastern and South-Eastern Europe', The Economic Journal, Vol. 53, No. 210/211 (1943), pp. 202–11; and Albert O. Hirschman, Strategy of Economic Development (Yale University Press, 1958). 2. See Alexander Gerschenkron, 'Economic Backwardness in Historical Perspective', in Bert F. Hoselitz (ed.), The Progress of Underdeveloped Areas (University of Chicago Press, 1952); and Alexander Gerschenkron, Economic Backwardness in Historical Perspective (The Belknap Press of Harvard University Press, 1962). 3. For the application of the concept of latecomer to firms, see Mike Hobday, 'East Asian Latecomer Firms: Learning the Technology of Electronics', World Development, Vol. 23, No. 7 (1995), pp. 1171–93; and John A. Mathews, 'Competitive Advantages of the Latecomer Firm: A Resource-Based Account of Industrial Catch-up Strategies', Asia Pacific Journal of Management, Vol. 19, No. 4 (2002), pp. 467–88. 4. See Lin-su Kim, Imitation to Innovation: The Dynamics of Korea's Technological Learning (Harvard Business School Press, 1997). 5. See, for example, the discussion of 'resource leverage' as a strategy for making do with little, and making up for lack of resources by seeking to engage others in a way that makes their resources available, in C. K. Prahalad many parts such as back-end assembly are labour-intensive and low- or medium-technology, but they provide a pathway of upgrading that leads to the more knowledge-intensive activities that are the real breakthrough in industrialisation. 10. For further elaboration on these historical antecedents, see John A. Mathews, 'The Intellectual Roots of Latecomer Industrial Development', International Journal of Technology and Globalisation, Vol. 1, No. 3/4 (2005), pp. 433–50. 11. In a review of Gerschenkron's work by one of his foremost students, Albert Fishlow summarises Gerschenkron's approach as follows: 'The central notion is the positive role of relative economic backwardness in inducing systematic substitution for supposed prerequisites for industrial growth. State intervention could, and did, compensate for the inadequate supplies of capital, skilled labor, entrepreneurship and technological capacity encountered in follower countries seeking to modernise. England, the locus of the Industrial Revolution, could advance with free market guidance along the lines of Adam Smith. France, beginning later, would need greater intervention to compensate for its limitations. In Germany, the key innovation would be the formation of large banks to provide access to needed capital for industrialisation, even as greater Russian backwardness required a larger and more direct state compensatory role.' See Albert Fishlow, 'Alexander Gerschenkron: A Latecomer Who Emerged Victorious', Economic History Services, 14 February 2003, p. 3, http://www.eh.net/bookreviews/fishlow.shtml 12. Rostow's ideas are outlined in popular form in Walt W. Rostow, The Stages of Economic Growth: A Non-Communist Manifesto (Cambridge University Press, 1960) and in more scholarly fashion in Walt W. Rostow, 'The Stages of Economic Growth', The Economic History Review, Vol. 12. No. 1 (1959), pp. 1–16. 13. Hobday treats the matter thus: 'Gerschenkron argued that there were no automatic stages of development and that countries did not and could not pass through the same stages of development that others had passed through before them, precisely because others had passed through them.' See Mike Hobday, 'Innovation in Asian Industrialization: A Gerschenkronian Perspective', Oxford Development Studies, Vol. 31, No. 3 (2003), pp. 293–314. 14. See Hobday, 'East Asian Latecomer Firms', and Mathews, 'Competitive Advantages' for a discussion of firm strategies from the distinctive perspective of latecomer firms. 15. Kaname Akamatsu, 'A Historical Pattern of Economic Growth in Developing Countries', The Developing Economies, Vol. 1 (1962), pp. 3–25. Such a vision also informs the more advanced studies of the Japanese economy and its development, such as Miyohei Shinohara, Industrial Growth, Trade and Dynamic Patterns in the Japanese Economy (Tokyo University Press, 1982). Balassa's step-ladder model is another instance of flying geese thinking; see Bela Balassa, Development Strategies in Semi-Industrialized Economies (Johns Hopkins University Press, 1982). 16. Revealed Comparative Advantage (RCA) is here defined simply by the ratio of share in exports/share in gross domestic product (GDP). 17. See An-Chi Tung, 'Beyond Flying Geese: The Expansion of East Asia's Electronics Trade', German Economic Review, Vol. 4, No. 1 (2003), pp. 35–51, for a discussion of this point. For a Japanese perspective on the flying geese framework, see Terutomo Ozawa, 'The "Hidden" Side of the "Flying Geese" Catch-up Model: Japan's Dirigiste Institutional Setup and a Deepening Financial Morass', Journal of Asian Economics, Vol. 12, No. 4 (2001), pp. 471–91; and Terutomo Ozawa, 'Pax Americana-led Macro-Clustering and Flying Geese-style Catch-up in East Asia: Mechanisms of Regionalized Endogenous Growth', Journal of Asian Economics, Vol. 13, No. 6 (2003), pp. 699–713. 18. While Figure 6 is couched in terms of trade data (imports, exports and RCA), there is no reason why investment flows should not be analysed from the same perspective, taking flows of FDI to the industry level. 19. See UNIDO, Industrial Development Report 2002/03, especially ch. 6, for a discussion of their potential for latecomers. 20. The recent World Bank report on East Asian integration refers to this as 'growth of trade in components or partly assembled goods' or 'production networks' and 'production sharing arrangements'. See Francis Ng Hirschman, Strategy of Economic Development; Gunnar Myrdal, Economic Theory and Under-developed Regions (Duckworth, 1957); Gunnar Myrdal, Asian Drama: An Inquiry into the Poverty of Nations (Twentieth Century Fund, 1968) 23. I am indebted to a referee for pointing out that Nathan Rosenberg's classic history of the US machine tool industry in the 19th century is an industry-specific case of the stimulating consequences of disequilibria; see Nathan Rosenberg, Inside the Black Box: Technology and Economics (Cambridge University Press, 1981). 24. There is a considerable literature on this topic, as reviewed in Geoffrey R. D. Underhill (2) that growth and structural change may best be promoted through a combination of macroeconomic stability with 'productive development policy' covering such matters as technology and industry policy; (3) the success of such an approach calls for government–business cooperation within the framework of a developmental state (through agencies created to guide investment and exports, for example); (4) distributional dimensions of the process are managed to ensure its legitimacy; and (5) regional integration and cooperation policies are pursued as an important element of wider strategic integration, such as through promotion of regional production chains. 33. See successive issues of UNCTAD's Trade and Development Report in the 1990s for discussion of such starting points, or more recently the new flagship report of UNIDO, the Industrial Development Report. 34. The tracking of such movements of industries from country to country, as comparative and competitive advantages change, is one of the most important – but neglected – functions of the international development agencies. This could be a prime responsibility of UNCTAD, for example, consistent with the views of its recent Director-General; see Ricardo Ricupero, 'Nine Years at UNCTAD: A Personal Testimony', in Shigehasa Kasahara and likewise John Humphrey in fact it is more a case of surprise accompanying success. For unsuccessful efforts by Taiwan to enter the Hard Disk Drive (HDD) industry, for example, see David G. McKendrick, Richard F. Doner they are not found in the performance-focused success cases of East Asia. For an insightful discussion of such barriers, see Hernando De Soto, The Mystery of Capital: Why Capitalism Triumphs in the West and Fails Everywhere Else (Basic Books, 2000). 40. Dahmén developed his ideas concerning development blocks during his studies of the Swedish economy, in the 1950s; for a later elaboration, see Erik Dahmén, 'Development Blocks in Industrial Economics', in B. Carlsson (ed.), Industrial Dynamics (Kluwer Academic, 1989). 41. For an informed discussion of upgrading strategies in Taiwan where a judicious blend of IS and EO is emphasised, see Alice H. Amsden Sanjaya Lall John A. Mathews, 'National Systems of Economic Learning: the Case of Technology Diffusion Management in East Asia', International Journal of Technology Management, Vol. 22, No. 5/6 (2001), pp. 455–79; and John A. Mathews, 'Understanding the "how to" of technological change: The case of electronics in Taiwan', MGSM Working Paper 2004-21, Macquarie Graduate School of Management, Sydney, 2004. 43. Development blocs, growth poles and industrial clusters are all expressions of the unbalanced trajectory that development necessarily takes. They are concepts that have no place in the tidy conceptual universe of the neoclassical economic synthesis, which is a victory of deductive economic logic over historical, empirical and inductive reasoning from example. 44. On such MNCs from developing countries, see for example John A. Mathews, Dragon Multinational: A New Model of Global Growth (Oxford University Press, 2002), and John A. Mathews, 'Dragon Multinationals: New Players in 21st Century Globalization', Asia Pacific Journal of Management, Vol. 23 (2006), pp. 5–27), where the terminology 'Dragon MNEs' is utilised. Globalisation has ushered in a set of opportunities where such MNEs can accelerate their internationalisation; they are 'Second wave' MNEs as opposed to the First wave MNEs from the Third World that had to struggle to internationalise. 45. Institutions involving intellectual property protection will have to be created, for example, and firms will have to pay more attention to patenting as a means of building competitive advantage; for an overview of the East Asian experience, and the creation of East Asian 'innovative capacity', see Mei-Chih Hu & John A. Mathews, 'National Innovative Capacity in East Asia', Research Policy, Vol. 34 (2005), pp. 1322–49. 46. Latecomers will recognise that industrial development is a decades-long process that will require the inputs of many agencies, firms and individuals, but a sense of purpose needs to be maintained through this changing cast of participants, and this is best secured through institutional continuity and through generating a clear national ideology grounded in development. As Gerschenkron noted, the later the country comes to its development task, the more powerful has to be its ideology of development to act as cohesive force ensuring that policies pursued across disparate domains, such as housing, transport or infrastructure, are consistent with catch-up development goals. In this sense, institutions are the weapon of the latecomer.
John A. Mathews (Wed,) studied this question.