Emerging geography of technological innovation in China's ICT industry: Region,inter‐firm linkages and innovative performance in a transitional economy

This study critically evaluates the relevance of the existing theory of technological innovation to the case of China's information and communications technology industry. Based on a large‐scale questionnaire survey conducted in China's three most important city‐regions, namely, Beijing, Shanghai and Shenzhen, where the core of China's information and communications technology industry is located, this study reveals a significant regional variation in technological innovation in a political economy undergoing marketisation and globalisation. This research has found no significant relationship between the innovative performance of firms and the extent of production linkages; nor was there a significant knowledge exchange among firms. A further analysis has identified the significant role played by government purchases, research and development capital input and export propensity in the process of technological innovation. The findings of this research cast doubts over the prevailing theory of ‘new economic geography’ in which soft and unbounded relational assets have been overemphasised at the expense of some solid and bounded actors and agents that are pivotal to technological innovation in a developing economy.     

State Characteristics and the Locational Choice of Foreign Direct Investment: Evidence from Regional FDI in Mexico 1989–2006

ABSTRACT Despite the growing importance of foreign direct investment (FDI) in the Mexican economy, statistical evidence on the determinants of the regional distribution of foreign‐owned firms is seriously limited. In this paper, empirical findings are presented from a variety of econometric models that identify several regional characteristics influencing the locational choice of FDI. The main findings are threefold. First, several locational factors appear to be potentially important; these include regional demand, wages, schooling, infrastructure, and agglomeration economies. Second, the effect of agglomeration economies stems from several sources. In particular, the regional presence of agglomerations of manufacturing activity and of foreign‐owned manufacturing firms both have an independent positive effect on the locational decision of new FDI. Third, the locational process of maquiladora firms differs from the locational process of overall FDI. The actual findings suggest that regional demand and infrastructure, as suggested above, are not important locational factors for export‐oriented firms. Furthermore, whereas agglomeration economies from manufacturing and the presence of existing FDI attract new maquiladora investment, the presence of a regional agglomeration of services deters the location of new maquiladora firms. Finally, agglomeration economies appear to be more important in the locational process of maquiladora firms.     

The Importance of Integrating Supply‐Side Factors in Economic Base Models

Economic base (or export‐base) theory (EBT) is often presented as a Keynesian‐inspired theory that only accounts for demand‐side factors. However, the recent integration of supply‐side factors into economic base models (EBMs) can contribute to renewing applications of this type of model in regional economics. This paper proposes a literature review focused on new EBMs that explicitly take into account supply effects and includes both North American and European studies. It first explains why integrating supply‐side factors is relevant for EBMs. Second, the paper shows how to integrate these supply‐side factors into the various types of models, focusing on two production factors: land and its amenities and labor. Third, the paper discusses the conditions for integrating such supply‐side factors into EBMs.     

The Dynamic Firm–Territory Nexus of Taiwanese Informatics Industry Investments in China

ABSTRACT This article explores the transformation of industrial systems in transborder investments made by Taiwanese information technology investors in China. It asks how cross‐border firms would operate in these new territories. The study found that, by and large, Taiwanese investors chose to respond strategically to the tensions in different ways at different stages. At first, regarding China as a land of cheap labor and land, they relocated the Taiwanese industrial system in such a way as to avoid disturbing the hosting regions. The situation changed as China’s market emerged confidently and opened gradually to foreign investors after the mid‐1990s. Exploring this huge new market in China provided a mandate for Taiwanese investors to prosper. They opened up their firm boundaries and added new departments of research, development, and marketing. They developed from being merely export subcontractors to producing their own brand‐name goods. In the most recent stage, Taiwanese investors have created networks to tap into local resources to support new activities. Echoing Yeung (2005) in a recent issue of this journal, this article argues that new investments change the developmental trajectories of the host regions and, at the same time, the regions imbued the incoming firms with their own regional stamp. From this perspective, location and localization decisions by cross‐strait firms may be regarded as geographically sensitive strategies whereby firms, as reflexive agents, protect and reinforce their competence through the evolution of a firm–territory nexus.     

The impact of foreign influence on exporting through open innovation

Foreign direct investment brings both increased competitive pressures and opportunities for domestic Small and Medium Sized Enterprises (SMEs). Competition may force them to seek new international markets, but also provide access to international customers. However, as economies become more knowledge-based in order to access international markets, SMEs must seek to innovate. This study examines how foreign firm presence and innovation influence the exporting activities of SMEs. It contributes to the existing literature by dividing innovation into product/process innovation and in-house/open innovation. With open innovation, products are more likely to be novel and productivity boosted to a larger degree. We interact different types of innovation with foreign influence to examine whether there is a moderating influence on the relationship. The individual firm level data and foreign influence data are from the Longitudinal Small Business Survey and Office for National Statistics. Whether firms are active exporters is explored using multilevel logit regressions. Both innovative activities and the foreign influence increase the likelihood of exporting. In-house product innovation boosts export propensity to a lesser degree in areas with higher levels of foreign influence. The hypothesis that open innovation has more impact on exporting activities when foreign influence is greater is not supported for either type of innovation.     

Some Micro‐Evidence on the “Porter Hypothesis” from Austrian VOC Emission Standards

This paper presents some micro‐evidence relevant to the “Porter Hypothesis” on the techno‐economic consequences of Austrian Volatile Organic Compound (VOC) emission standards, the most restrictive of their kind in the world. Using firm‐level survey data and complementing it with highly disaggregated foreign trade data, the paper explores whether the standards had a palpable impact on the competitiveness of Austrian manufacturers of paints, coatings, printing inks, and adhesives, whether compliance stimulated innovation in this industry, whether the standards crowded out other, more productive Research and Development (R&D), and whether compliance efforts gave rise to unexpected benefits of compliance. It finds no unequivocal aggregate impact on the competitiveness of regulated firms, yet does find some interesting variation with firm size. Moreover, the standards appear to have dampened import competition. The standards gave rise to considerable changes in firms’ product range and appear to have accelerated the rate of product innovation in the regulated industry. R&D spending to develop compliant products is found to be very unevenly distributed, mainly due to technological and, to a lesser extent, organizational factors. There is evidence that compliance efforts displaced or postponed existing R&D projects. However, there is also evidence that search for compliant products yielded unexpected and beneficial ideas, knowledge, and competencies.     

Mapping Regional and Sectoral Characteristics of Knowledge‐Intensive Business Services: Evidence from the Province of Quebec (Canada)

ABSTRACT The study presents original evidence on the characteristic features and innovation activities of knowledge‐intensive business services (KIBS). Based on a wide‐scale survey of 1,124 KIBS firms in Quebec (Canada), we explore empirically the extent to which KIBS from various sectors and regions differ in their characteristics and their uses of innovation practices. The results from the sectoral analysis reveal that KIBS display different characteristic features and innovation behaviours across sectors, thus suggesting that inter‐sectoral differences are important when explaining innovation activities in KIBS. The comparison between KIBS in large, medium, central, and resource regions shows that the characteristic features and the innovativeness of KIBS are rather similar, and little or no significant statistical differences were found between the different regions in the province of Quebec. Thus, overall, the results of our study seem to suggest that a location does not tend to make a difference in respect to characteristic features and innovation performance of KIBS.     

Trade Reorientation and Its Effects on Regional Port Systems: The Korea‐China Link along the Yellow Sea Rim

ABSTRACT Owing to its competitive labor costs, its open‐market policy, and a substantial amount of capital investments, China has become a global manufacturing pole and an export‐based economy replicating the conventional Asian model but on a much wider scale. This is creating acute competition on other Asian export‐based economies such as Korea that have to adapt to the “China effect.” Consequently, many Korean manufacturing companies have repositioned their capital and equipment in China to enlarge their market potential as well as to reduce their production costs. Because Korea is adjacent to China—both are sharing the Yellow Sea Rim—this shift is creating a unique geographical dimension with a high level of functional integration of Sino‐Korean manufacturing supply chains. This transition has also brought substantial changes in the regional logistic network by organizing new flows of raw materials, parts, and final products, most of them along the Yellow Sea Rim. New logistic flows have given substantial influences on regional port competition by creating diverse links. These changes are bringing a reorientation of the regional maritime industry and of the port system.     

Firm Innovation and Co‐Location in Portugal

This paper investigates the geographical distribution and concentration of firms’ innovation persistence and innovation type (product and process) based on three waves of the Portuguese Community Innovation Survey data covering the period 1998–2006. The main findings are: 1) both innovation persistence and innovation type are asymmetrically distributed across Portuguese regions, 2) the degree of correlation between geographical location and innovative output varies with the innovation type, and 3) the correlation between geographical unit and innovation increases when the spatial unit of analysis is narrower. The results suggest that the firms’ choices of geographical location have a long‐lasting effect, engendering no equal probabilities of being persistently innovative.     

The Successful Transition to a Knowledge‐Based Development Path of a Less‐Developed Region

This paper presents the case of a less‐developed EU region—the Pomeranian region of Poland—that is, an example of the successful transformation from a command to market economy and the creation of a new knowledge‐based development path thanks to the upgrading of its innovation model. This successful transformation was based, in part, on the region's specific innovation policy and the activities of pro‐innovative institutions; however, other factors were also important such as the diversified structure of the region's economy. New knowledge‐based industries have developed in the region, while the potential of traditional industries that have gone through a restructuring, has been maintained. The factors that existed prior to the innovation model's transformation included such aspects as the high quality of human and social capital, a strong academic center, a high quality of life, and an open economy and society. Supply factors in the form of qualified personnel were crucial for the growth of employment in new industries and R&D that determined the improvement of the regional GDP per capita. Moreover, the transition to a knowledge‐based economy stimulated an increase in the concentration of population in the metropolitan area of Tri‐City.     

Toward a More Embedded Production System? Automotive Supply Networks and Localized Capabilities in Poland

The article addresses the embeddedness of automotive production in Poland in terms of supply networks. A comprehensive analysis of more than 550 suppliers, supported by company interviews, shows that foreign‐owned producers become embedded in Poland in the automotive supplier networks they have largely created themselves. Numerous local suppliers gain access to export markets and become integrated in a Europe‐wide production system. This trend has been accompanied by significant upgrading of foreign affiliates and domestic firms in terms of product quality, cost efficiency, adaptability, and fast response, but far less in nonproduction competences such as R&D. It is argued that the competences of automotive suppliers in Poland are built upon the localized capabilities, which are a product of the dynamic interplay between the activity of foreign firms and the changing local environment comprising various stakeholders. The localized capabilities constitute elements of a company's sunk costs and are embedding automotive producers in Poland. At the same time, the dependence on decisions and innovations from abroad and the limited development of local design and brands may constrain the future role of suppliers from the semiperipheral economy of Poland.     

Local Embeddedness,Market Focus,and Productivity: Evidence of Taiwanese Manufacturing MNE Subsidiaries in China

There has been considerable literature discussing the characteristics and importance of location‐specific factors in the context of Foreign Direct Investment (FDI), but very little literature linking location‐specific factors to productivity. This study explores, for each location‐specific factor, the relationship between the degree of local embeddedness and the labor productivity. We contribute to the body of literature on location‐specific factors by arguing that market focuses play a pivotal role in determining the impact of local embeddedness on productivity. Based on their strategic choices, we categorize Taiwanese manufacturing multinational enterprise (MNE) subsidiaries in China into two groups: the local‐market‐focus group and the export‐market‐focus group. The paper fits the Ordinary Least Squares (OLS) regression models to the export‐market‐focus group and the local‐market‐focus group separately. For these two groups, each local‐embeddedness variable exerts different effect on labor productivity. Results also suggest that local‐market‐focus FDI is more affected by the host country's local business environment than is export‐market‐focus FDI. Although this study cannot represent all foreign companies in China, its dynamism offers a rich context in which to explore a deeper understanding of foreign companies' business activities in China.     

Import–export nexus and China's emerging trade in environmental goods

International trade in environmental goods (EG) provides a market-based solution to balance the development–environment relationship. How can developing economies gain new growth opportunities through trade liberalisation in the EGs? This study investigates the structural features of products and firms during the early development of China's EG trade. This study defines the import–export nexus as the product relatedness between imports and exports at the firm level, which may promote the technology spill overs and firm cooperation. This study combines two nationwide data sets and constructs a data panel covering 334 prefectures and 248 EGs during 2001–2012. The conditional logit model with fixed effects is used for coefficient estimation. Empirical results reveal that the import–export nexus promotes new EGs in domestic sectors and export baskets, primarily supported by domestic private firms. The import–export nexus allows state-owned firms, which only represent a small market share, to enrich export baskets. It also helps foreign firms to develop new EGs in domestic sectors. These findings suggest revisiting the role of state-owned firms in industrial policy and developing a broad list of EGs to make use of the product relatedness. These will make developing economies like China gain new growth opportunities from the EG trade.     

Outsourcing and Firm Productivity in a Specific Local Production System: Evidence from Reggio Emilia (Italy)

This paper investigates the impact of outsourcing on the labor productivity of firms in a specific local production system. A number of hypotheses about the location‐specific effects of outsourcing are put forward and tested on a sample of firms in the province of Reggio Emilia (within the Emilia‐Romagna region, in North‐East Italy). The relationship between outsourcing and productivity turns out positive only if considering the externalization of high value‐added activities. On the contrary, it is negative in the case of low value‐added activities. This occurs to a greater extent for firms in mature industrial districts, whose socio‐economic conditions however do not arrive to magnify the productivity premium of externalizing high value‐added ones. The technological innovativeness of the firms instead helps with that, pointing to a developmental use of outsourcing in the area.     

Maquiladoras and U.S.‐Bound Migration in Central Mexico

Over the past one and a half decades, smaller cities and nonmetropolitan areas in Mexico have attracted manufacturing plants, led by the export manufacturing sector. Maquiladoras in particular are increasingly locating their plants in such places in the “deep interior” Mexico—outside of the border states. Using 1980 and 1990 Mexican census data for 19 growth centers and 27 high‐emigration municipios (counties) in Central Mexico, this paper suggests that foreign‐owned assembly (maquiladora) jobs decentralized significantly over the 1980s, locating closer to emigrant municipios. An examination of 17 emigrant municipios in the industrialized states of Jalisco and Guanajuato found that an emigrant municipio's accessibility to maquiladora jobs, and jobs indirectly related to maquiladora growth, was positively related to its overall employment growth, which was, in turn, negatively related to its U.S. migration rate over the decade. Although the migration reduction inherent in these relationships is relatively small, it could be accelerated by U.S. and Mexican policies giving incentives for more peripheral locations of export‐oriented and other manufacturing.     

Increasing Returns to Scale in Affluent Knowledge‐Rich Economies

This paper departs from the existing growth literature in not assuming a priori a specific production technology and offering instead a theory of production technology that captures the effects of changes in the level, composition, and forces of accumulation of capital on the productivity of an economy. The theory of production technology shows that an affluent knowledge‐rich economy violates the Inada second condition because of its high level of knowledge, human, and social capital. Substitution of knowledge capital for physical capital and the self‐reinforcing nature of the process of accumulation of knowledge, human, and social capital are the engines of growth in such economies. Poor economies, on the other hand, may exhibit neoclassical production technology of diminishing returns to capital and get trapped into a low‐level steady state owing to their ever‐growing need for physical capital and also to unfavorable supply conditions for knowledge capital, lower levels of knowledge, human, and social capital in these economies being inadequate to trigger the self‐reinforcing dynamics. The mechanics of endogenous growth are essentially different in rich and poor economies because the production possibility surface is non‐convex in the former, and this difference explains the sustained divergence of their growth rates.     

Business networks,social capital and the economic performance of creative and cultural industries: The case of Indonesia

This study examines the ways in which networking characteristics and practices influence the economic performance of creative and cultural industries. The notion of social capital is used to conceptualise the complex nature of networks, including both professional and social relationships that occur on multiple levels. This qualitative study is set in the context of Indonesia, in which two cases are examined: creative apparel entrepreneurs in Bandung and batik producers in Surakarta. The results show that regional environments provide opportunities for creative industries to find specialist suppliers, to gather market information and, importantly, to find and cross‐fertilise new ideas. Although regions provide these opportunities, the firms’ internal social capital is crucial in being able to internalise and transform the knowledge from the environment into innovative values embodied in their products.     

Nothing is in the Air

It has often been argued that “there is something in the air” which makes firms in high‐density environments—such as cities or clusters—more innovative. The co‐location of firms facilitates the emergence of serendipity and casual encounters which promote innovation in firms. We assess this hypothesis using data from a survey of Norwegian firms engaged in innovation partnerships. The results indicate that there may be “much less in the air” than is generally assumed in the literature. The relationships conducive to innovation by Norwegian firms emerged as a consequence of purpose‐built searches and had little to do with chance, serendipity, or “being there.”     

Threshold Firms: Innovation,Design and Collaboration in British Columbia's Forest Economy

This paper assesses the extent to which threshold firms have emerged within British Columbia's wood processing industries. Threshold firms comprise an innovative business segment and are growth oriented, larger than most small firms but not giant, locally owned, international in scope at least with respect to exporting, reliant on skilled, well paid employees, and that have developed knowledge‐based product market advantages. The analysis draws on an extended case study survey of 14 firms located in the lower mainland and Okanagan regions of British Columbia, and selected for their potential as threshold firms. The analysis examines six characteristics associated with threshold firms: size and ownership, internationalization, wood supply, labor relations, innovative design and collaboration, and local embeddedness. These firms reveal attributes of threshold firms, and the paper concludes by suggesting that an innovative forest policy for British Columbia could usefully focus on this type of firm.     

Tourism and transitional geographies: Mismatched expectations of tourism investment in Vietnam*

Abstract: The Vietnamese state's interaction with international capital has been influenced by the Communist Party's strategy to develop a ‘socialist market economy’ which aims to maintain the leading role of the state and its one party dominance while implementing economic reforms. This is at odds with alternatives proposed by neo‐liberal institutions such as the IMF and World Bank who favour a progression towards a more fully‐fledged market economy coupled with political pluralism. As a result, foreign investors and the Vietnamese government have had a turbulent relationship over the past decade stemming in large part from differing perceptions of a market economy and what foreign investment should entail. This paper depicts the principal issues that lay behind the restrictive policies toward foreign tour operators through a case study of their management and regulation in Vietnam throughout the 1990s. It is argued that foreign tour operators and Vietnamese tourism authorities perceive the role of international capital in tour operations quite differently. Over‐regulation has provided little space for foreign tour businesses to operate in a manner that has met their expectations, while government policies have been intent on ensuring that profits remain in the country. This paper also illustrates how social networks undermine top‐down government policy directives and allow foreign tour businesses to continue operating, albeit in a complex and insecure environment.