East-Asian Crisis Essay

Has state played a leading role in upgrading technologies in Asia Pacific? Answer with reference to relevant theories and use comparative country or corporate examples. Introduction: The state is a lever that navigates economic process. It is managed by the country government which consists of all educational, socio-cultural, economical and geographical factors. The national innovation systems in Asia have a great significance in the process of technology adjustment (the national institutions, their incentive structures and their competencies, that determine the rate and direction of technological learning (or the volume and composition of change generating activities) in a country.† (Patel and Pavitt (1994: 79)) (4) It sustains governmental institutions and forms economic conditions and opportunities. It influences a market by all restrictions and policies which navigate all import and export activities. The Asia Pacific region includes one of the most economically developed c ountries in the world. According to academic articles(8) developmental states as South Korea, Japan and Taiwan quickened their industrialisation in order to synchronise their economies with globalisation growth. From a historical perspective South Asia went through enormous industrial and state transformation after 2nd World War till the beginning of 21st century. An effective industrialisation process created the need of upgrading technologies and expanding business relations so to sustain the Asian competitive advantage and stabilise its economy. Furthermore a governmental institutional reform appeared to be essential element of the whole adjustment stage. The â€Å"tiger†(9) economies of Hong Kong and Singapore (plus these of South Korea and Taiwan) impressively adapted to balanced level of navigating their market and a â€Å"miracle† GDP growth followed. Examining the transformation processes in these economies creates an objective view of how the state influenced changes in technologies and why it has such a significant part in the East-Asian success. Body: The developmental states Japan: The process of industrialisation is a key developmental factor. It emerged in the beginning of the 20th century by the development of four machine industries: the rolling stock, spinning and weaving machines, machine tools and electric machinery(5)Between all of them the government held strongest influence on the rolling stock-a sub railway system which is an official representative of the system, having trade responsibility and negotiates with suppliers(6).The JNR(Japanese National Railway) policy changed after the 1950s and the private sector started managing its policies with governmental assistance. The rolling stock trading process established the Japanese co-operation with West-European suppliers. Essential approaches like government’s guidance in applying industrial policy, adjustment in labour-management relations, tolerating entrepreneurial firms seen as innovators instead of the zaibatsu-structured equivalents, were taken (3).The mentioned events , concerning Japanese technology adjusting, show the strong relation between state policies and technology level . The state itself is the agent which drives all innovations by the power of its policies and regulations. It played a main role in the factory legislation. Women workers needed protection and they could only receive it by governmental intervention. A report by AAB(Agricultural Affairs Bureau) in 1900 confirmed the negative affect of night shifts onto labour efficiency and technical progress. By taking in consideration this example the state role can be considered as more than crucial. It maintains the economy growth by securing its population conditions (human rights; socio-cultural perspective).In this way it sustains the workforce of the country, which is a main element of stabilising competitive advantage. Despite the fact that most economic articles stress on the â€Å"Japanese Miracle†(1) as a significant period of technology updating and state-system adjustment, the pioneers in technology investment appeared in the Meiji period. These businessmen founded a significant process which contributed to the rapid economic growth after World War II. Japanese role in the Electro-chemical industry has massively influenced the power of Japanese Army. Scientifically educated employees contributed for a better business analysis and strategies. A continuous growth is achieved when a government is concerned both for its trading power and socio-educational system. If both elements are properly maintained a country is able to sustain its competitive status worldwide as its observed in the Japanese case of Toyota-one of the most successful car manufacturer’s. â€Å"The key to the Toyota Way and what makes Toyota stand out is not any of the individual elements†¦. But what is important is having all the elements together as a system. It must be practiced every day in a very consistent manner—not in spurts†(11) Toyota is a great example of brilliant cooperation between increasing labour efficiency and a djusting technology system. Toyota took some fruitful approaches from the Western European managerial model and kept its unique values from the Japanese culture. It is observed that the more an Asian industry is independent from the state the better it adapts to the global business environment. State policies founded initial basis of the most important Asian features that should be taken and not changed in the business-cycle of a company. Toyota managed to follow the roots of the Japanese â€Å"know how† and at the same time keeps attracting professionals from all over the world in order to sustain its competitive advantage. Furthermore as a modern massive share-holder in different sectors it transformed into customer-oriented company targeting more market segments and reassuring to keep the demand of current customers. This is just one of the many great Japanese examples of sustaining a global market share. It can be stated that the more globalisation expands the higher is the need of rapid adaptation m ethods. Strongly centralised firms should transfer into more de-centralised strategic schemes if they want to achieve bigger success on a international level. Korea: From historical perspective Korea was controversially affected by both US (United States-South Korea) and the USSR(Union of Souviet Socialist Rebubplics-North Korea)During the Rhy government period(7) Korea focused on two massive industrial sectors: consumer goods and construction. After the Korean War (1950-1953) they become leading suppliers in these niches. Collaboration between the’’chaebols’’-â€Å"a group of companies, owed by a specific family, has centralised control and business in different industries that are not directly interrelated†((10)Korean Managerial Dynamics p.29) and the state can be considered as a main reason for the rapid industrialisation in the 1960s.The earlier establishment of cartels( Flour Mill, Sugar and Spinning Manufacturers)and corrupted Japanese and American support contributed to the chaebol growth. Hyundai is the major Korean constructor, which used to sustain and still does the Korean economy. Between 1940s and 1970s the ‘’chaebol’’ transformed into a large-multidivisional private system which expanded its business sectors. In this way the new system created economies of scale under a centralised management strategy. The renovated state policies enhanced the labour force and implemented the export industrialisation strategy. In order to (2)The chaebol business structure created highly-controlled production in the 1970s by hiring managers which took the role of supervisors. In the 1980s the government prioritised the need of higher workforce independence. The state shaped the legal frame of Korea, while supporting the chaebol economic and interest policies.((2);p.3)After the KCTU(Korean Confederation of Trade Unions) was established a significant decrease in the chaebol monopolism was noticed. In 1974 a â€Å"concentration of economic power† emerged as a negative issue.(Korean Managerial Dynamics; Chung, Khae and Lee, Hak Chong p.16) The Ko rean bank was forced to take action due to its monopolistic strength: all private businesses provided information to the open capital market. All monopolistic and cartel structures were constricted from entering new markets. Expectedly or not the existing cartels sustained their barriers of entry. Despite the fact Korea was stimulating domestic manufacturing there was a lack of physical technology ability and it has no choice but looking for external â€Å"packaged technology†(Korean Business: Internal and External factors) –component parts, specialised details, product specifications, quality control and professional assistance. In 1980 this resulted in high-inflation rates. Four recovering movements were taken: better managing of market mechanisms and stabilising price levels (led to export of domestically manufactured technologies); transforming domestic monopolism to a free-competitive foreign markets (increasing of social welfare); encouraging foundation of small-medium businesses. It can be concluded that all state reforms derived from either political external or internal problems. The complicated internal reforms caused to a non-balanced upgrading processes. Korea needed a quick re-navigation and focus on catching up with Western Europe rivals. Good examples of chaebol companies are Samsung and Hyundai. Samsung (founded in 1938 (12))business group is the largest one in terms of annual sales-21 billion dollars in 1987 with 160,000 workers in 42 companies (10 p.29) It entered the insurance, security and enterprise sectors. Nowadays it possesses a major shares in electronics, chemical, construction, manufacturing, land development, service and technology markets. By a constant governmental navigation and assistance this great example of East-Asian conglomerate diversified its supply. While the state takes responsibility of providing well-educated and strong workforce the company itself is concerned of the trading process and constant technology upgrading. â€Å"When Samsung has difficulties in transferring technology, it relied on several different strategic avenues: seeking alternative sources of technology, buying it from financially troubled, small American firms; developing its own technology; or entering a consortium with other local competitors to develop technology†((15)â€Å"Korean Business: Internal and External Industrialisation†) By analysing this strategic approach an excellent decision-making skills are observed. The alternative of â€Å"buying† from American small firms shows that the Korean leader constantly generates cash flow in order to afford such activities in a critical moment. Even â€Å"consortium† schemes were made which shows the great adaptation to the market condition and to all supplying competitors. By competing in different markets and upgrading its business structure Samsung enhances Korean economic stability and competitiveness on international level. A leading competitive ad vantage of Samsung is the brilliant combination of price and quality. The possession of well-educated managers and continuously upgraded technology provides a great reputation of top gadget- producer. Taiwan: The favourable geographic location of the country between the Far-East and Southeast Asia made it a desirable trading place between Western Europe and Asia. Different rivals colonised it as well. Taiwan started its technological developmental in a later stage comparing to its bigger neighbours Japan and Korea. After the 1990s Taiwan became one of the leading ICT(Information and technology communications)suppliers(16)Its well-maintained Research and Development sector and patented technology are fair reasons of the current success. Chinese neoliberalism: A slower economic growth in China is observed comparing to the Japanese and Korean one. A high negative influence of the conserved socio-cultural environment is a main reason. The CFB(Chinese Family Business) internal managerial system has a closed-family ideology. There was a conflict between Chinese conservatism and Chinese world-economy adaptation. Its governmentally centralised system suffered lack of managerial professionalism. This introvert attitude of CFB to business created an obstacle for further technologic improvement because establishing new operational system needs well-educated navigators familiarised with the technology. Furthermore loosing the market trading processes of import and export was irreversible. Modernisation schemes were taken: increase of international trades and foundation of FDI(Foreign Direct Investment- investing in country A, by taking advantage of its geographical and labour conditions and controlling from country B which owns all assets and benefit the bigger prt of the incentive) , which was quite beneficial strategy both for China and Japan. It was necessary to minimise the cultural interference and radically involve western techniques. By focusing onto micro-level variables as behaviour China kept losing its macro level of structural and technological competitiveness. The strong communism affected negatively on both industrialisation and technology adjustment. Recent technology-transfer Laws in the Asia Pacific: Setting up Transfer Laws has essential role in the whole Asia-Pacific trade legitimacy. They also determine the significance of technologies and how they are used in a more effective way. In China a warmer attitude to foreign companies is observed. Its entry into the WTO(World Trade Organisation) encouraged cross-continental transfers. In 1999 China accepted the UCL(Unified Contract Law) which gave more freedom by license agreement which can be signed between partners and fasten all transfers. In 2003 The Ministry of Commerce was founded as well as new three-type technology categorisation: prohibited, restricted or permitted. The foundation of such institutions was a necessity in order to exclude all wasting money and time processes, which is both beneficial for suppliers and buyers. The determinant of accepting import transfer is whether it will enhance China’s technological improvement. Furthermore it should not be an environmental and security constraint. Equivalent technology licences(legal and contractual) were formed in Japan. In April 2004 the National University Corporation Law was accepted, providing bigger educational independence which enhances the social welfare and gives more opportunities to young individuals specialise their skills into different sectors. Historically observed, South-Korea always had strictly controlled technology-licensing system in order to preserve newly-founded firms from their out-boundaries rivals and ensures continuous development. Co-operation between education and management led the Asian Pacific to a top place in the technology world. The laws approved in the end of 20th century were turned into a new transfer law in the 21st century. The FIPA(Foreign Investment Promotion Act) is in charge of all foreign investment s. It is an autonomous institution which has the power to simplify and navigate all import activities for the sake of higher country incentive. Its strategy is to attract investment and sustain competitive international advantage. The Monopoly Regulation and FTA(Fair Trade act )(Hill,2006)(19) Conclusion: While the Asia Pacific was struggling to escape out of its cultural constraints and its isolated business system during the first half of the 20th century, it appeared that it adapted rapidly through the second half of the century. It went under serious governmental and structural transforms. It seems that the Asian recovery period after the Second World War was far away more intensive and successful comparing to some European countries. From 1990 to 1997 Asia generated over one-third of the global value-added production by high-technology production industries, higher to the the European and US shares.(13) Investments in the Research and Development sector are significant for successf ul technology adjustment. The establishment of new universities and modifying their educational systems provide scientists and intelligent individuals who can operate and cope with the technology process. The importance of conserving culture-oriented models is of the same sensuality as expanding growth on international level. The Asian ambition of establishing leadership in important world industries contributed to its success. Although there were huge periods of struggling adapting new managerial work-plans the â€Å"tiger economies† managed to survive during tough war and reform periods. Even not really friendly-orientated of cooperating between each other Asian economy survived because of the common adaptation strength and control of markets. The connection between the state and business was not simply one of interference or direction by the state of the market. â€Å"It was rather a positive partnership involving many connections between entities† (Johnson,1997)A geographical advantage of more isolated location in the world enhanced the Asian state independence and its technology orientation. Obviously the bigger sized Asian economies like China and Japan overtook cultural and religion influence.They started their recovering processes more rapidly comparing to the late-comer economies of Korea, Taiwan and Malaysia.(Warner,2007) Bibliography: 1. Maidement, R., Mackerras C., (1998) Culture and Society In The Asia-Pacific, United Kingdom: Routledge 2. Rowley, C., Bae, J., (1998) Korean Business Internal and External Industrialization, Chippenham: Antony Rowe Ltd. 3. 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Wu Y., (2004) The China Quarty, Volume 177, pp 91-114 12. Samsung History, http://www.samsung-mobiles.net/history-of-samsung.html Date accessed 3/12/2012 13. Taiwan’s Technology Industry Marks Global Success http://www.forbescustom.com/DiversityPgs/UnityFirst/3_4_09/UFNAACPTaiwanTechP1.html Date accessed 4/12/2012 http://www.pom.ir/wp-content/uploads/PDF/book/The%20Toyota%20Way.pdf 14. http://www.nsf.gov/statistics/nsf07319/pdf/nsf07319.pdf 15. http://www.jrtr.net/jrtr41/pdf/f14_miz.pdf 16. http://www.economist.com/node/13649520 17. 10) 18. Hill, D., 2006, â€Å"Developments in Asia†,The Licensing Journal