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Clusters and Economic Growth in Asia


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© Sören Eriksson 2013

All rights reserved. No part of this publication may be reproduced, stored in aretrieval system or transmitted in any form or by any means, electronic,mechanical or photocopying, recording, or otherwise without the priorpermission of the publisher.

Published byEdward Elgar Publishing Limited

The Lypiatts15 Lansdown RoadCheltenhamGlos GL50 2JAUK

Edward Elgar Publishing, Inc.William Pratt House9 Dewey CourtNorthamptonMassachusetts 01060

USA

A catalogue record for this bookis available from the British Library

Library of Congress Control Number: 2012951751

This book is available electronically in the ElgarOnline.comEconomics Subject Collection, E-ISBN 978 0 85793 009 5

ISBN 978 0 85793 008 8

Typeset by Servis Filmsetting Ltd, Stockport, CheshirePrinted and bound by MPG Books Group, UK


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v

Contents

List of contributors vi

Preface ix

1 Cluster policies and entrepreneurial states in East Asia 1

Alexander Ebner

2 Information and communication technology and economicgrowth of four Asian industrialized economies 21

Yanfei Li and Wai-Mun Chia

3 Industrial agglomeration of Taiwanese electronics firms in

Dongguan, China: home effects and implications for industrial

upgrading 40

Felix Haifeng Liao, Karen Zhihua Xu and Bin Liang

4 The rise of the biomedical cluster in Wonju, Korea 66

Jun Koo and Jongmin Choi

5 The global economic crisis as leverage for emerging regionalgrowth paths? Differentiated evidence from China – three years

onwards 85

Daniel Schiller and Henning Kroll

6 Technological intensity of FDI in Vietnam – implications for

future economic development and emerging clusters 119

Curt Nestor

7 The aircraft industry as a tool for economic and industrial

development – the case of Indonesia 141

Sören Eriksson8 Foreign knowledge transfer in the development of aircraft

industry clusters – the case of Chengdu, China 165

Sören Eriksson

Index 183


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vi

Contributors

Wai-Mun Chia obtained her Bachelor’s degree in economics from the

University of London and then pursued her Master’s degree at the

London School of Economics (LSE) with scholarship. She received a

PhD in economics from Nanyang Technological University (NTU) in

Singapore and is currently Assistant Professor at NTU. She is an Assistant

Editor for the Singapore Economic Review. Her research interests are inter-national macroeconomics and economic integration in East Asia. She has

numerous publications in international scientific journals.

Jongmin Choi is a doctoral student in the Department of Public Policy at

the University of North Carolina at Chapel Hill. He received a Master’s

degree in public administration at Korea University. He has a keen interest

in industry cluster, science and technology policy, and urban development.

Alexander Ebner is Professor of Political Economy and Economic

Sociology as well as Director of the Schumpeter Center for Clusters,Innovation and Public Policy at Goethe University in Frankfurt am Main,

Germany. Previously, he was an Associate Professor of Political Economy

at Jacobs University Bremen. Previous research affiliations include the

Institute of Southeast Asian Studies in Singapore. Alexander Ebner’s

research interests involve the matters of entrepreneurship, innovation,

governance and regional economic development.

Sören Eriksson is a Professor of Economic Geography at Jönköping

International Business School, Sweden. His research activities focus on

technology diffusion, globalization processes, logistics issues and regional

economic development. He is an authority on East and Southeast Asia’s

geography and an expert on the international aerospace industry. He has

lectured, conducted seminars and been appointed as external reader and

opponent of doctoral dissertations at a number of foreign universities and

research establishments in Africa, Asia, Europe and North America.

Jun Koo is an Associate Professor in the Department of Public

Administration at Korea University. He holds a doctorate degree in city

and regional planning from the University of North Carolina at ChapelHill. Before joining Korea University he worked for the World Bank and


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Contributors vii

taught at Cleveland State University. He has diverse research interests

including innovation and entrepreneurship, industry cluster and urban

development. His research has appeared in many major international

journals on regional science, management and public administration.

Henning Kroll is an economic geographer and a researcher at the

Fraunhofer Institute for Systems and Innovation Research in Karlsruhe,

Germany. His research interests include the analysis of national and

regional innovation systems in Germany, Europe and Asia, the devel-

opment of regional innovation indicators, as well as the assessment

of regional innovation and technology policies. Recently, he has been

working on projects for the municipal governments in both Northern and

Southern China.Yanfei Li received his BA in economics from Peking University, China,

and a PhD in economics from Nanyang Technological University (NTU),

Singapore. He is currently a Research Fellow at NTU, where he conducts

research in economics of technological change and Asian economies,

serving both academic and consulting constituents. He has several papers

and book chapters published in Emerald and Elsevier journals and

books and with Economic Research Institute for ASEAN and East Asia

(ERIA).

Bin Liang is currently a graduate student in the Department of Family

and Consumer Studies at the University of Utah. Her research interests

include globalization, housing, migration, urban planning, transportation

and public health, with a regional focus on China and the United States.

Felix Haifeng Liao is currently a PhD candidate in the Department of

Geography at the University of Utah. His research interests include eco-

nomic/urban geography, regional development, globalization, industrial

location, GIS and spatial statistics, with a regional focus on China and the

United States.Curt Nestor has a PhD in economic geography and is Senior Lecturer

at the School of Business, Economics and Law at the University of

Gothenburg, Sweden. His research interests and publications focus on

Vietnamese economic development, trade and foreign investment flows,

and regional economic integration.

Daniel Schiller is an economic geographer and a researcher at the Lower

Saxony Institute for Economic Research (NIW) in Hannover, Germany.

His research interests include knowledge-based regional development,

institutions and governance, higher education systems and public finance,

with a regional focus on Europe and Asia (especially Thailand and China).


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viii Clusters and economic growth in Asia

Recently, he has been working on projects about the spatial and organi-

zational transition of the electronics industry in Hong Kong and the Pearl

River Delta.

Karen Zhihua Xu graduated from the Department of Urban Planning and

Design of the University of Hong Kong. Her research interests include

regional development in China, foreign investment, and the cooperation

and interaction between Guangdong and Hong Kong. She is currently

Assistant Director of the Advanced Institute for Contemporary China

Studies, Hong Kong Baptist University.


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ix

Preface

The book is based on invited papers from scholars with the common

research interest in economic growth and cluster development in East

and Southeast Asia. These issues have attracted considerable attention in

recent years, although compared with some other parts of the world there

is a limited choice of literature dealing with Asia. A clear ambition was

to invite authors who were able to contribute with new and interestingdimensions about clusters and economic growth. Hopefully this book will

not only add to the existing literature, but also create new questions and

thoughts about this increasingly important part of the world.

The first chapter by Alexander Ebner deals with the increasing rel-

evance of cluster policies and the need to understand them in the context

of an ongoing institutional and structural transition of East Asian

newly industrializing economies towards an innovation-driven pattern of

development. In this context, the national institutional frameworks are

subject to changes that involve the transformation of the model of the‘developmental state’ towards specific kinds of ‘entrepreneurial states’.

Chapter 2 by Yanfei Li and Wai-Mun Chia investigates the role of

information and communication technology (ICT) in economic growth

since the late 1990s. It follows the growth accounting model to analyse the

role of ICT in economic growth in four Asian economies: Japan, Hong

Kong, South Korea and Singapore. The study also implies the possibility

that ICT development could be a source of potential convergence between

Asian newly industrializing economies and economies such as the USA

and Japan.In Chapter 3 Felix Haifeng Liao, Karen Zhihua Xu and Bin Liang

explore the industrial agglomeration of Taiwanese electronics firms in 32

towns and districts in Dongguan, China. Over the past two decades, the

industrial agglomeration of Taiwanese electronics investment in Mainland

China has resulted in some electronics clusters. Based on firm-level inter-

views and statistics this chapter also has important policy implications for

the upgrading of clusters in developing countries.

The rise of the biomedical cluster in Wonju, South Korea, provides

the subject for Jun Koo and Jongmin Choi in Chapter 4. This studyaims at achieving two things. First, the authors try to unpack the cluster


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x Clusters and economic growth in Asia

development process to better understand factors that play a role in the

take-off stage of an industry cluster. Second, the focus on the biomedical

cluster was chosen as there has been a dearth of literature on such clusters

in Asian countries. The most important finding is that the presence ofsuccessful venture firms in the early cluster development stage can play a

pivotal role in the growth of clusters.

The contribution by Henning Kroll and Daniel Schiller, in Chapter

5, presents a critical discussion and analysis regarding Chinese growth

models. Quite evidently there have been a number of different sectoral

and regional growth models in China before the slowdown in the world

economy. The authors argue that we are in need of a differentiated under-

standing of the impact that the crisis had on different drivers of growth in

China.At the end of the 1980s, Vietnam embarked on an ambitious economic

reform programme with the aim of promoting economic development. The

foreign-invested sector has made contributions to average GDP growth

rates, exceeding 7 per cent over the period. In Chapter 6, Curt Nestor

examines the technology intensity of FDI in Vietnam and the implications

for economic growth and emerging clusters. Finally, proposals for future

industrial cluster policies and economic development are discussed.

For a number of reasons, an increasing number of developing countries

have tried to build up an internationally competitive aircraft industry.During Suharto’s rule the establishment of a domestic aircraft manufac-

turing industry was the largest and most ambitious investment to promote

technology development in Indonesia. Chapter 7 by Sören Eriksson

investigates the main factors behind the long-term failure and discusses

critical arguments against creating this kind of industry for the purpose of

economic and industrial growth.

Already in the 1980s statements were made that aircraft production

would be an important industry in China’s new stages of economic and

industrial growth. The government also expressed the interest in andambition to develop aircraft-related clusters. In Chapter 8, Sören Eriksson

investigates the origin and characteristics of foreign technology transfer

into Chengdu, one of the country’s most important locations for the

aircraft manufacturing industry.

I would like to acknowledge my sincere appreciation to all authors who

have contributed their knowledge, time and support to this book.

Sören Eriksson

Professor of Economic Geography

Jönköping International Business School

Sweden


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1

1. Cluster policies and entrepreneurialstates in East Asia

Alexander Ebner

INTRODUCTION

Cluster policies aim to activate and sustain the competitive interaction of

firms in local and regional business agglomerations. Policy instruments

tend to augment market forces by providing distinct types of collective

goods. As such, cluster policies differ markedly from traditional types

of industrial policy that highlight the nationwide targeting of particular

firms and industries by means of market intervention. Still, the logic of

cluster policies is most convincingly derived from the persistent relevance

of national institutional frameworks, most prominently involving nation-

states, and their ongoing transformation in the process of economicdevelopment. This line of reasoning is most appropriately exemplified by

the East Asian development experience. Indeed, it may be argued that the

increasing relevance of cluster policies in East Asia parallels the advent

of a new model of government–business relations that may be labelled

‘entrepreneurial state’. This concept suggests that entrepreneurial aspects

of state activity, which were already prevalent within the East Asian

developmental states, currently turn out as dominant policy features, thus

changing the dominant rationale of government towards an entrepre-

neurial direction, implying a shift from the developmental assimilation of

technological novelties in catch-up growth to their entrepreneurial crea-

tion in a setting that allows for technological leadership. The related policy

rationale promotes innovation as the source of international competitive-

ness, framed by a multi-level architecture of governance that strengthens

a regionalized type of industrial policies, which points to the formation of

cluster policies.

Therefore, in examining this relationship among clusters, cluster poli-

cies and the advent of the entrepreneurial state in East Asia, the following

explorations proceed in three sections. First, the matter of cluster poli-

cies and the role of the state in the promotion of clusters are brought to

the fore. The discussion highlights the Porterian cluster approach and its


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2 Clusters and economic growth in Asia

policy implications, underlining the impact of the national institutional

framework on the actual orientation of cluster policies. The second section

then takes on the transformation of the East Asian developmental states

and their interventionist industrial policies. As the process of catch-upgrowth proceeds, new types of state functions arise that are well summa-

rized under the label of entrepreneurial states. Corresponding changes in

government–business relations allow for the promotion of cluster policy

as a new kind of multi-scalar approach to industrial policy. Thus, cluster

policies are an extension of the advent of the entrepreneurial state. The

third section illustrates these arguments by pinpointing recent efforts in

East Asian cluster policies.

CLUSTERS, CLUSTER POLICIES AND THE ROLE OFTHE STATE

The competitive advantages of firm-specific interactions within a particu-

lar regional setting of industries and institutions are usually addressed in

terms of industrial clusters. It is a widely shared insight that industrial clus-

ters serve as the backbone of regional competitiveness. This implies that

related approaches to the analysis of clusters provide conceptually sound,

empirically significant and politically viable research perspectives. Tosome, however, the concept of clusters is still controversial (Benneworth et

al., 2003; Martin and Sunley, 2003; Benneworth and Henry, 2004). A para-

digmatic definition by Michael Porter defines clusters as ‘a geographically

proximate group of interconnected companies and associated institutions

in a particular field, linked by commonalities and complementarities’

(Porter, 1998, p. 199). Cluster dynamics are shaped by the competitive

conditions of firms, namely factor supply and demand profile condi-

tions, and the industrial structure in related and supporting industries,

as well as firm strategy and structure. The underlying relationships thatform a distinct cluster within a national economy are either of the vertical

type that links buyers and suppliers, or of the horizontal type that links

common customers, technologies and distribution channels – while the

interchange among industries in a cluster is best organized in geographical

agglomerations (Porter, 1990, pp. 149, 157). This means, in the Porterian

framework, that regional development with its comprehensive innovation,

income and employment effects is driven by the dynamic constellations

of industrial clusters (Porter, 2000, 2003). Yet Porter’s approach has been

repeatedly criticized for its somewhat mechanistic, structurally oriented

cluster concept, which essentially implies that as long as all actors deemed

necessary are present in a region, a cluster with all associated benefits is


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Cluster policies and entrepreneurial states in East Asia 3

likely to emerge. Accordingly, the most pressing research challenges to the

Porterian approach to the ‘microeconomics of competitiveness’ focus on

the institutional and structural match between company sophistication

and the related business environment (Ketels, 2006).Still, Porter’s arguments are said to neglect the institutional substance

of clusters, that is, their social structuration, their organizational outlook

and the related logic of complementarity and coherence (Steinle et al.,

2007). A more interaction-oriented perspective developed in parallel to

Porter’s work, with authors mainly rooted in the preceding Marshallian

tradition of industrial district research (Becattini, 1991). This has been

complemented by research on the ‘innovative milieu’ of interconnected

firms in dynamic regions (Crevoisier, 2004). An innovative milieu can be

defined as ‘the set of relationships that occur within a given geographi-cal area that bring unity to a production system, economic actors, and

industrial culture, that generate a localized dynamic process of collective

learning and that act as an uncertainty-reducing mechanism in the innova-

tion process’ (Camagni, 1995, p. 320). In these views, local culture plays

an important role in cluster formation, with a particular form of collabo-

ration and competition being made possible by a common socialization

and a common ideal of regional allegiance. Consequently, institutional

networks and their impact on cluster dynamics have been assessed more

prominently, for clusters contain inter-organizational networks that areindispensable for generating and disseminating knowledge and innova-

tions (Bergmann et al., 2001; Visser, 2009). In this manner, clusters may

be interpreted as structures of co-located industry insiders that engage in

flexible modes of experimentation with distinct network arrangements

within and among clusters. This implies that the organization of learning

processes becomes a most decisive strategic aspect of economic develop-

ment (Malmberg and Maskell, 2002; Maskell and Lorenzen, 2004).

A delicate balance between competition and cooperation among firms

is a necessary feature of this constellation, as the interlinking of coop-erative partnerships is strategically important to capturing the benefits of

learning-based competitiveness (Asheim, 2007). Thus, concepts such as

the ‘learning region’ correspond with a Porterian cluster structure, which

is augmented by the institutional architecture of regional coalitions for

learning and innovation (Polenske, 2008). In this line of reasoning, the

region is viewed as a geo-institutional set of socioeconomic resources and

relations, involving components such as human capital and production

routines. Spatial proximity matters, too. It enhances the competitiveness

of firms by facilitating interpersonal processes of learning and innovation,

which tend to reduce transaction costs by establishing common symbols

and codes (Maskell and Malmberg, 1999). Crucially, then, the dynamics of


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economic development are determined by the structure of innovation net-

works with their systemic linkages among knowledge-producing organiza-

tions such as universities, intermediary organizations such as government

agencies, and the regional set of industrial clusters with its profile of bothsmall and large firms (Cooke, 1998; Cooke and Schienstock, 2000).

In addition to that, the assessment of the developmental dynamics of

clusters also requires a reconsideration of the external linkages of the

involved firms and related organizations, quite in line with the overall

developmental pattern of an increasing openness of clusters (Giuliani et

al., 2005). The importance of non-regional networks is decisive for the

absorption of new technologies and organizational practices. The scope

of these strategic interactions contributes to various degrees of external

economies and increasing returns in an evolving setting of organizationalas well as territorial modularity (Whitford and Potter, 2007). Accordingly,

the external linkages of cluster firms in learning regions serve as systemic

carriers of knowledge transfers and learning effects. They support the

systemic openness of clusters and thus tend to obstruct an institutional

and technological lock-in of development trajectories by promoting adap-

tive flexibility, an aspect that becomes paramount when the cluster life

cycle reaches maturity (De Martino et al., 2006; Zucchella, 2006; Menzel

and Fornahl, 2010). Thus, the availability of external partners for inno-

vation is paramount in furthering the openness of clusters. Apart from‘local buzz’ and localized capabilities, the requirement for knowledge

exchange leads to a reconsideration of ‘global pipelines’ in cross-cluster

knowledge flows (Bathelt et al., 2004; Maskell et al., 2006). The underly-

ing capability to integrate new knowledge into local routines depends

on complementarities with established routines and skills, for pieces of

knowledge originating in a context too far away from the recipient may

be difficult to absorb (Loasby, 2001). In summary, these considera-

tions on cluster dynamics acknowledge their multi-scalar structuration,

which is reflected in the multi-level governance structures of internal andexternal cluster linkages. Such a perspective implies the need for a more

elaborate differentiation of external linkages, thus transcending the simple

dichotomy of the local versus the non-local by addressing issues such as

network interactions on different levels and scales (Lagendijk and Oinas,

2005; Ebner and Schiele, 2012). Indeed, the evolution of the competitive

capabilities of cluster firms and related organizations is subject to local,

national and international interactions (Hassink, 2005; Whitley, 2007). In

this context, the national level of the business environment still stands out

in shaping the routines and practices of cluster firms (Gertler, 2001).

At this point, the role of the state needs to be taken into account as

an institutional force that shapes the economic dynamics of clusters by


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means of cluster policies. Indeed, the state matters first of all as a provider

of regulatory standards and rules of the diverse national administrative

and legal subsystems. Also, informal institutions such as social norms and

cognitive models that are said to constitute a cultural setting are shapedby governmental activities. As Robert Wade put it during the heyday

of the globalization controversy, ‘National boundaries demarcate the

nationally specific systems of education, finance, corporate management

and government that generate social conventions, norms, and laws and

thereby pervasively influence investment in technology and entrepreneur-

ship’ (Wade, 1996, p. 85). Accordingly, in the setting of local, national and

global linkages, the institutional specificity of the national level may be

assessed as a dominant factor in the external interaction of cluster firms –

despite the fact that the national level is mainly absent in the establisheddiscourse on knowledge spillovers within and across cluster boundaries

(Lundvall and Maskell, 2000; Maskell, 2001; Isaksen, 2009).

This basic assessment is well reiterated in Porter’s notion of the ‘com-

petitive advantage of nations’ that suggests that competitive industrial

clusters mirror distinct advantages that are rooted in the historically

evolving institutional and structural features of national economies.

Porter addresses the persisting role of the national business environment

as follows: ‘Competitive advantage is created and sustained through a

highly localized process. Differences in national economic structures,values, cultures, institutions and histories contribute profoundly to

competitive success’ (Porter, 1990, p. 19). The corresponding national

innovative capacity with its interactions among firms, research institutes,

universities and other innovation-oriented players reflects specialization

patterns that are derived from interlinked factor conditions such as skilled

human resources, adequate R&D endowments and an efficient financial

system (Furman et al., 2002). In this context, Porterian cluster policy puts

the private sector in the focus of proactive efforts in industrial upgrad-

ing. Corresponding prescriptions may be synthesized as follows: first,policy support should be available for all productive clusters, involving

both domestic and foreign companies; second, existing clusters with their

linkages and complementarities across industries should be the basis for

further refinement and upgrading, while attempts to create entirely new

clusters are problematic; third, cluster initiatives should be advanced by

the private sector, while government serves as a facilitator; fourth, policy

strategies should be designed in a bottom-up manner that allows for

deliberation among all stakeholders on various policy levels, in particular

the local level. It follows: ‘Enhancing cluster externalities and spillovers

will increase productivity and prosperity in any cluster. Hence govern-

ment should not choose among clusters but create policies that support


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upgrading in every cluster present in a location’ (Porter, 2007, p. 6). The

latter argument emphasizes that the Porterian cluster approach underlines

a dynamic understanding of competition as a positive sum game – with

productivity as a key policy concern (Porter, 1998, pp. 248–9). This per-spective differs markedly from those traditional types of industrial policy

that highlight the national targeting of particular firms and industries,

based on government interventions through subsidies, protective meas-

ures and related means, which alter the results of market competition

(Woodward and Guimaraes, 2009).

In summary, Porter’s concern with regional agglomerations of cluster

firms mirrors both the multi-scalar and multi-level qualities of the

innovation-driven process of economic development. Porter’s recent

emphasis on the role of clusters as export-oriented agglomerations withdistinct external linkages points in this direction (Simmie, 2008). This line

of reasoning goes well together with the neo-Schumpeterian systems of

innovation framework and its proposition that industrial structures, the

institutional set-up of a national economy and its policy orientation stand

out in determining the innovation performance of firms and industries,

thus complementing regional and supranational constellations (Freeman,

2002; Lundvall et al., 2002). The national level matters with regard to

learning and innovation, because the policies of national governments,

national laws and a shared culture delineate an institutional arena thataffects the intensity and direction of innovation (Nelson and Rosenberg,

1993; Lundvall, 1998). This persistent relevance of national institutional

frameworks shapes the developmental trajectory of whole economies and

thus plays a key role in the formation of policy approaches to support

industrial clusters – as exemplified most appropriately by the East Asian

development experience. The key question is whether the increasing

relevance of cluster policies goes well together with an institutional dif-

ferentiation of the state and the related national setting. The following

section argues that cluster policies in East Asia parallel the advent ofa new model of government–business relations that may be labelled

‘entrepreneurial state’.

TOWARDS ENTREPRENEURIAL STATES IN EASTASIA

The historically specific developmental impact of government–business

relations in East Asian economies is subject to persistent discussions that

have been most prominently fuelled by the World Bank’s 1993 policy

research report on the ‘East Asian Miracle’. Capital accumulation,


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resource allocation and technological catch-up are identified as functions

of economic growth, which have been promoted by a mixture of competi-

tive market processes and supporting public policies (World Bank, 1993,

pp. 10–11). Growth-promoting market interventions in the domain ofindustrial policy are addressed as components of these public policies with

clear cost–benefit considerations and performance criteria (ibid., pp. 5–8).

These considerations point to further discussions on the role of the state

in East Asian economic development. A key issue has been the concept of

the ‘developmental state’, as informed by Chalmers Johnson’s research on

Japanese industrial policy. Johnson maintains that the regulatory function

of states in Western economies that pioneered industrialization focuses on

rules governing the economic process, whereas states in late industrial-

izing economies, such as Japan, exhibit a developmental function, as theyadministratively guide industries and markets (Johnson, 1982, pp. 19–20).

Yet, developmental states exhibit a transitory character, for the notion of

the developmental state covers only a fraction of state functions. The func-

tional priorities of states thus determine their institutional essence while

following situational imperatives (ibid., pp. 305–7). The developmental

imperative of catch-up growth refers to the role of the state in late indus-

trialization, perceived as a process that is based on gradual upgrading and

learning how to improve technology already in use abroad (Amsden, 1989,

pp. 3–4). This process of state-guided adaptive technological learning inlate industrialization may face stagnation as soon as the technology fron-

tier is approached without the formation of local innovation capabilities

(Amsden and Hikino, 1993, p. 259). Thus, the transitory character of the

developmental state reflects its relative success in moving the economy

towards the technological frontier.

The notion of ‘governed markets’ addresses corresponding attempts

in leading the market by political means, which then aim at stimulating

innovation in the private sector. Governing markets thus requires both

institutional capacity and shared knowledge (Wade, 1990, pp. 28–9). Statecapacity serves as the institutional basis for the corresponding policy strat-

egies of developmental states, which foster entrepreneurial perspectives in

the long term by promoting transformative investments and lowering asso-

ciated risks. ‘Embedded autonomy’ then marks the internal organization

of developmental states and their capacity for promoting industrial trans-

formation (Evans, 1995, p. 12). However, the results of this transformation

feed back upon the state itself, for the actors that emerge from the policy-

related state interventions tend to recreate the underlying conditions of

their activity – which is most relevant in terms of the shifting balance of

powers among the social forces and their political articulation. Successful

industrial transformation makes industrial capital less dependent on the


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state, thus allowing for a reconfiguration of government–business net-

works. Therefore, the reconstructive self-transformation of the transitory

developmental state mirrors an increasing complexity of the socioeco-

nomic domain (ibid., pp. 226–34). This line of reasoning refocuses on thestrategic interdependence between government and business. As exempli-

fied by East Asian development, corresponding modes of governance

involve a ‘catalytic state’, usually acting in cooperation with the private

sector while exercising negotiated leadership in the coordination of policy

networks that support technological upgrading and innovation (Weiss,

1998, p. 67). Transformative capacity then implies that government–

business cooperation is subject to adaptation over time. Accordingly,

the East Asian developmental state is subject to a country-specific trans-

formation with state capacity approaching a less hierarchical mode ofcoordination that relates to ongoing changes in the economic setting (ibid.,

pp. 64–5). Thus, the developmental motive of catch-up growth is gradually

replaced by a strategic concern with continuous technological upgrading in

an internationalizing competitive setting (Weiss, 2000, p. 22).

Echoing these concerns, more recent World Bank policy discussions on

East Asian development highlight the promotion of innovation as means

for enhancing productivity, based on strengthening public–private inter-

actions, local coherence and international connectedness, while claiming

that major policy challenges relate to how East Asian countries cultivatecreativity within their economies (Yusuf et al., 2003, p. 29). Therefore, the

articulation, intensity and content of entrepreneurial effort becomes ever

more knowledge- and science-intensive in approaching the technological

frontier, building on established capabilities that are embedded in nation-

specific institutional frameworks (Lall, 2000, p. 14). In addressing these

tendencies, the theory of the developmental state has become subject to

various modifications. For instance, it is argued that the developmental

state undergoes a transformation towards a new rationale in coping with

staying ahead of or keeping up with international competitors, in particu-lar by assisting in industrial restructuring. A more gradual and continuous

mode of upgrading skills and technologies is at stake – as witnessed by

the maturing of Japanese and Taiwanese industries whose restructuring is

guided by strategic policies that resemble the rationale of a ‘transformative

state’ (Weiss, 2000, pp. 27–9). Related arguments pinpoint the ideal type of

‘transitional developmental state’ that allows for a transition from inter-

ventionism to liberalization – which need not entail a retreat of the state

but even its strengthening with regard to the enforcement of the market

order (Wong and Ng, 2001, pp. 43–7). In associated terms, developmental

and regulatory state functions are differentiated. The ‘neo-developmental

state’ for high-tech industries copes with the promotion of competitive


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economies of scale, the support of industrial R&D and employment

creation in industrial change, complemented by the ‘regulatory state’ for

liberalized services, governing competition and international openness

(Amsden and Chu, 2003, pp. 167–72). Moreover, the rationale of govern-

ment shifts towards locational policies in support of industrial networks

and technology-intensive interactions – resembling a pattern of state-led

networking (ibid., pp. 15–16). Clusters and cluster policy thus become

key issues in this institutional transformation of the state and its policy

concerns, which may be interpreted in terms of an ‘entrepreneurial state’.Indeed, the concern with entrepreneurship in the creation, modification

and adaptation of technological and organizational innovations resembles

a distinct set of state functions, which requires a conceptual framework of

its own: the entrepreneurial state. The underlying reasoning suggests that

entrepreneurial aspects of state activity that were already prevalent with

the East Asian developmental states currently turn out as dominant policy

features, thus changing the dominant rationale of government towards

an entrepreneurial direction that implies a shift from the developmental

assimilation of technological novelties to their entrepreneurial creation.The innovation capacity of the entrepreneurial state addresses the poten-

tial for exercising policies that promote innovation on an economy-wide

scale, either by direct interventions in the economic process or by condi-

tioning through institutional and physical infrastructures (Ebner, 2007,

pp. 118–19). Ideal typically, it may be argued that three sets of state func-

tions shape the process of economic development, as outlined in Table 1.1.

They are simultaneously present, yet the overall outlook of the state will

depend on the hegemonic type of function, which is subject to historically

specific variation in the development process.

The commercialization of technology resembles the operations of a

regulatory state, typical for the model of liberal market economies. The

Table 1.1 A typology of state functions and industrial policies

Type of State

Regulatory Developmental Entrepreneurial

Policy rationale Resource

coordination

Factor mobilization Innovation

Ideology Market liberalism Developmentalism Entrepreneurialism

Governance

mode

Rule-based

Hierarchical

Interventionist

Hierarchical

Communicative

Horizontal

Innovation style Commercialization Assimilation Creation

Policy scale National National Multi-scalar


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policy rationale of regulatory states highlights resource coordination

through an institutional enforcement of the market order. Accordingly,

industrial policies of regulatory states emphasize the guidance of market

forces in the innovation process, which may be termed as an innovationstyle of commercialization. In contrast to that, the developmental state,

which has been prevalent in East Asia, combines its policy rationale of

factor mobilization with long-run goals of national development. The

concern with entrepreneurship in the generation of technological innova-

tions resembles a distinct set of state functions, which is represented by

the notion of the entrepreneurial state. It points to recent transforma-

tions of the state all over the OECD countries – and beyond. Its policy

rationale promotes innovation as the source of international competitive-

ness, framed by a multi-level architecture of governance that strengthensa regionalized type of industrial policies, which involves distinct cluster

policies (Ebner, 2009, pp. 382–3). Furthermore, the scalar policy dimen-

sion of the entrepreneurial state is more differentiated than that of the

regulatory or developmental types. Indeed, the entrepreneurial state

transforms the national policy range towards a multi-scalar setting that

strengthens regional interactions and thus paves the way for distinct

cluster policies.

In summary, the notion of the entrepreneurial state entails the follow-

ing set of preliminary propositions that may be subject to further scrutiny(ibid.):

● The concern with the formation of entrepreneurial capacity in

the generation and carrying out of innovations becomes a crucial

feature of industrial policy. This involves both direct measures

that include selective interventions in the market process as well as

indirect measures involving the moulding of formal and informal

institutions that shape innovation efforts of the private and public

sectors alike. ● Policy efforts shift from catching up within an established techno-

logical paradigm to a rationale of paradigm creation that involves a

potential for technological leadership in an uncertain environment.

State capacity remains crucial for mediating between interest groups

and for communicating broad developmental orientations.

● The reorientation of policy concerns towards self-sustaining

knowledge-based interactions in promoting competitiveness co-

evolves with an institutional transformation of government and

administration. Framed by a common discourse on entrepreneur-

ship and innovation, governance structures evolve as complex

policy networks.


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● The institutional architecture of the entrepreneurial state underlines

the role of knowledge transfers and communication in state–society

relations that form reflexive policy modes. Experimentation, learn-

ing and innovation characterize the paradigmatic efforts in govern-ment and administration for problem-solving efforts.

● The policy rationale of entrepreneurial states reflects the diversity

of structural, institutional and spatial patterns of globalization,

highlighting the combination of global production networks and

local clusters of innovation activities. The spatial dimension of

innovation becomes a crucial component of industrial policy.

● The policy orientation of entrepreneurial states combines interna-

tional competitiveness, capability-building and locational strategies

that address the entrepreneurial orientation of both local andforeign firms. The formation of knowledge-based clusters becomes

a key element of related policy efforts.

Thus, stated in terms of the Schumpeterian theory of economic develop-

ment, the institutional dynamism of the entrepreneurial state reflects the

co-evolution of state and market in the process of economic development

(Ebner, 2006, pp. 511–12). In this line of reasoning, the logic of cluster

policies reflects the transformation of East Asian newly industrialized

economies towards an innovation-driven pattern of development.

CLUSTER POLICIES AND THE ‘EAST ASIANRENAISSANCE’

Following the decades of high performance growth from the 1970s to

the 1990s, the East Asian emerging economies have been witnessing the

challenge of the Asian financial crisis of 1997 and its aftermath. While

some observers had argued that this crisis would actually herald the endof East Asian catch-up growth, the empirical situation evolved in a dif-

ferent direction. Indeed, fuelled by the growth dynamics of the Chinese

economy and supported by a reconstruction of transnational business

networks within the East Asian division of labour, former ‘tiger econo-

mies’ such as South Korea, Taiwan and Singapore have regained most

of their developmental strengths while undergoing changes in both their

industrial and institutional settings. Despite its less convincing growth

dynamics, Japan still serves as the regional centre of high value-added and

knowledge-intensive manufacturing and service operations. All of this has

amounted to the World Bank’s slogan of the ‘East Asian Renaissance’.

Decisively, this notion of a resurgence of the East Asian development


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trajectory has been conceptually linked with specific forces of growth

that involve economies of scale and agglomeration externalities, that is,

key aspects in the competitive performance of firms in regional clusters

(Gill and Kharas, 2007, pp. 12–16). This perception of a persistent growthand development process even holds in the aftermath of the global finan-

cial crisis that hit the US and most European economies especially hard

and thus had a temporarily recessive impact on the export-oriented East

Asian economies, yet without substantially altering their growth dynam-

ics. Indeed, most of these economies are back on track when it comes to a

sound economic performance (Asian Development Bank, 2011, pp. 3–5).

In this context, it may be argued that the new emphasis on cluster policies

and the advent of the entrepreneurial state are, all together, part of this

‘East Asian Renaissance’, as the World Bank has it, involving both theexpansion of transnational business networks and localized government–

business interactions.

A key issue in this resurgence of the East Asian growth and development

performance is the matter of innovation. According to the World Bank,

the formation of innovative clusters is a key thrust in the corresponding

policy recommendations. Yet right at the outset it is obvious that clusters

in East Asia come in vastly different types and structures, involving a

range of manufacturing and service industries with both different levels

of sophistication and capabilities. The complexity of these clusters is wellexemplified by the Pearl River Delta in China with its major light manu-

facturing industries. Also, it represents a cluster that is driven by a distinct

combination of foreign direct investment and public sector enterprises.

These kinds of regional clusters differ already in their extended territo-

rial range from local high-tech clusters, such as Taipei/Hsinchu Park in

Taiwan or Jurong in Singapore (Yusuf et al., 2003, pp. 234–6). Typically,

East Asian clusters include the following components: an initial setting

that combines market opportunities with governmental efforts in industry

promotion; domestically or export-oriented industrial zones with theirparticular infrastructure facilities; institutions for capacity-building in

human resources; and ‘anchor firms’, which play a key role in promoting

the cluster interactions, accompanied by related firms that provide goods

and services within the cluster structure (Kuchiki and Tsuji, 2008, pp. 5–6).

This specific pattern of cluster formation goes together with structural

changes in the East Asian clusters. In particular, firms have been upgrad-

ing their operations from basic manufacturing to higher value-added

and innovative activities. This upgrading pattern exhibits a transnational

dimension, which is shaped by the formation of an ‘Asian triangle’ of

transnational production networks, most of which are nested in Japanese,

Chinese and ASEAN clusters (Kuchiki and Tsuji, 2011, pp. 2–4).


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Cluster policies, however, have regularly taken the shape of urban

planning programmes, infrastructure projects or financial assistance

schemes for certain locations such as science parks and export process-

ing zones. These substitute formats for distinct cluster policies have beenlargely insufficient in combining physical, knowledge and social capital to

promote cluster interactions. According to the World Bank, a favoured

pattern of cluster policies in East Asia involves the following aspects:

first, network governance operations, which initiate networking dynam-

ics and cooperation among firms and business associations; second, the

provision of specific kinds of public goods involving the means for tech-

nological information and workforce training, both of which tend to be

under-supplied by private firms; third, well-organized cluster management

that prevents clusters from phenomena such as network closure and thusmaintains their adaptive flexibility in turbulent world markets (Yusuf et

al., 2003, pp. 249–54). Accordingly, East Asian cluster policies are set to

mirror both domestic economic conditions and the actual position in the

international division of labour that is moulded by the informal dynamics

of East Asian regional economic integration (Suehiro, 2009). This array of

distinct responses to the technological and organizational challenges of

catch-up growth and late industrialization, with its new emphasis on

industrial cluster strategies, reflects even more comprehensive institutional

changes that herald the emergence of the East Asian entrepreneurialstates. Yet this tendency does not imply a convergence towards a best

practice model. Rather, it upholds a diversity of institutional frameworks

and structural conditions that is even enlarged through the new strategic

options for firms and governments, which are provided by the cluster per-

spective. The notion of a ‘modular economy’ illustrates this diversity of

strategic options in the East Asian economies:

The organisation of production obeys less and less a single predeterminedmodel which would be a must for everyone, reducing the field of possible

spaces. On the contrary it opens up this field. The agglomerations of enter-prises, districts, clusters or poles of competitiveness can perfectly benefit fromthe variety of their systems of organisation. (Ganne and Lecler, 2009, p. 22)

Accordingly, East Asian production networks become part of multi-

layered ‘global networks of networks’, which combine diverse national

models and their components – with clusters serving as network hubs in

a complex setting of transnational flows of resources, goods and services

(Ernst and Kim, 2002).

These considerations apply first of all to Japan as the regional tech-

nology leader. Indeed, a restructuring of government and administra-

tion lies at the heart of the reorientation of the Japanese development


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pattern towards a more competitive and entrepreneurial setting (Aoki,

2002, p. 2). Japan’s economy has been gradually opening its competi-

tive structures both domestically and internationally, thus expanding

patterns of competitive pressures that were already prevalent in most ofthe internationally competitive industries (Porter and Sakakibara, 2004,

pp. 35–6). Decisively, in the course of these policy reforms, the rationale

of generating innovations through flexibilization, decentralization and

competitive reorientation of governance structures has become prominent

(Whittaker, 2003, pp. 80–81). Japan’s Ministry of Economy, Trade and

Industry (METI), which has championed Japanese industrial policies on

a national scale for decades, is currently spearheading a set of regional-

ized innovation and entrepreneurship strategies that address the cluster

aspects of innovation, thus allowing for new spatial and institutional com-ponents in industrial policy (Ibata-Arens, 2004, pp. 4–5). Already since

the late 1990s, the emphasis of industrial policy in Japan has refocused

from the support of small business networks in the manufacturing sector

to the restructuring of industries that face the challenge of international

relocation, primarily to China and other East and Southeast Asian coun-

tries. These new types of cluster strategies in terms of distinct policies

that aim to promote regional industrial agglomeration in order to raise

competitiveness and innovation have played a key part in the formation

of complex regional patterns of interaction between firms, universities,research institutes and related organizations (Kitagawa, 2007). During

the 2000s, national government initiatives in the domain of cluster policies

have been promoting diverse cluster projects and models that highlight

cluster formation through regional networking among established firms

and research organizations, as well as through entrepreneurial start-

ups. Yet these top-down approaches are increasingly complemented by

bottom-up initiatives, in particular in support of science-based clusters

(Sanz-Menendez and Cruz-Castro, 2005).

Both South Korea and Taiwan have evolved as major challengers to theJapanese leadership in technological innovation. South Korea is actually

said to be challenged by a paradigm shift from an ‘industrial learning

paradigm’ to a ‘technology creation paradigm’ – with policy-assisted

innovation efforts in biotechnology as an outstanding example that points

to the strategic focus on knowledge-based cluster policies (Wong et al.,

2004, p. 46). Yet this transition towards industrial leadership and cluster-

oriented policies is differentiated with regard to product groups and

market segments within the large Korean conglomerate firms; an aspect

that adds to the diversity of cluster types and their distinct logics (Hobday

et al., 2004, pp. 1455–6). Similar implications hold for Taiwan, where

sustaining competitiveness implies continuous technological upgrading


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towards high-tech sectors – involving institutional change, industrial

upscaling and agglomeration economies (Amsden and Chu, 2003).

Taiwan has actually emerged as the most innovative economy among

the East Asian newly industrialized economies, as measured in terms ofR&D indicators. Its performance provides evidence for the argument that

global production networks are also important as sources of knowledge

for firms from late industrializing economies. This holds especially with

regard to the globalized structures of knowledge-intensive and high-tech

industries, which involve clusters of local capabilities that need close con-

nections with global production networks and related operations of multi-

national firms (Hu and Mathews, 2005, p. 1347). The corresponding need

for attracting globalized knowledge flows requires that local and global

resources are adequately recombined. The Singaporean developmentmodel illustrates this case by promoting the vision of a local knowledge

agglomeration in a global knowledge-based economy. In this setting, mul-

tinational enterprises introduce novelty into the local economic system;

yet, also included in the sample of entrepreneurial agents are government-

linked companies, as well as government boards, which may enforce and

coordinate innovation-driven economic change. As Porterian cluster

strategies have been put to use already since the 1990s, it is safe to argue

that the globalizing local economy of Singapore actually pioneered the

logic of cluster policies in an evolving entrepreneurial state (Ebner, 2004,pp. 56–9; Low, 2004).

CONCLUSION

The increasing relevance of cluster policies in East Asia needs to be

understood as a manifestation of an ongoing institutional and structural

transition of the East Asian newly industrialized economies towards an

innovation-driven pattern of development, involving both the expansionof transnational business networks and localized government–business

interactions. In this context, the national institutional frameworks of the

East Asian economies are subject to comprehensive changes that involve

the transformation of the model of the ‘developmental state’ towards spe-

cific kinds of ‘entrepreneurial states’. Corresponding policy efforts have

shifted from a rationale of catching up within an established technological

paradigm to a rationale of paradigm creation that involves a potential

for technological leadership on an international scale. This means that

traditional types of industrial policy, which have targeted certain indus-

tries on the grounds of national development goals, are augmented and

even replaced by industrial clusters policies, which put an emphasis on


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the competitive performance and innovation capacity of agglomerations

of firms and industries. Entrepreneurial capacities in the generation and

carrying out of innovations and the spatial dimension of production and

innovation become crucial components of this new kind of industrialpolicy. Consequently, the cluster policy approach of East Asian entre-

preneurial states reflects a diversity of structural, institutional and spatial

patterns that highlight the adaptive recombination of global production

networks and local industrial clusters. This strategic combination of inter-

national competitiveness, capability-building and locational strategies

addresses both local and foreign firms. In this manner, it emphasizes the

transnational connectedness of firms and clusters in East Asia – and thus

also points to the transnational range of the related entrepreneurial states

and their cluster policies.

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21

2. Information and communicationtechnology and economic growth offour Asian industrialized economies

Yanfei Li and Wai-Mun Chia

INTRODUCTION

There has been a widespread debate among economists about the role of

information and communication technology (ICT) in economic growth

since the late 1990s, especially in the progress of the New Economy in the

USA. Despite the Solow Paradox,1 it is generally agreed that ICT produc-

tion and application have been a major force of economic growth in the

USA since 1995 (Jorgenson and Stiroh, 1999, 2000; Oliner and Sichel,

2000; Jorgenson, 2001). Additionally, much effort has been devoted to

investigating why the European countries generally lagged behind in

utilizing ICT to promote growth performance in terms of real GDP and

labour productivity growth, as well as why ICT investment in the USA

declined but labour productivity growth continued to accelerate after the

year 2000 (Gordon, 2004). The literature has suggested that the promotion

of growth performance by ICT does not happen automatically. Rather,

it is conditional on many factors including organizational innovation/

investment (Brynjolffson and Hitt, 2000) and sequential complementary

innovations for ICT as a general purpose technology (GPT) (Helpman

and Trajtenberg, 1996; Basu et al., 2003), as well as sufficient high-skilllabour to apply ICT (Basu et al., 2003). It is also found that those service

industries (mainly wholesale trade, retail trade, finance and insurance)

that invest heavily in ICT are the major non-ICT-producing industries

that contributed to the late 1990s’ labour productivity acceleration in the

USA (Jorgenson et al., 2002; Stiroh, 2002).

While many studies have been found to focus on the contribution of

ICT to economic growth in the USA and EU, only a few studies have

been reported for Asian countries. Japan has been examined in studies

covering OECD countries and in studies for specific cross-country com-parison. Van Ark et al. (2002) and Jorgenson and Motohashi (2005)


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find that the ICT production industries in Japan enjoyed very similar

efficiency gains to those in the USA. However, with respect to ICT

application, ICT-using industries did not have efficiency gains com-

mensurate with those in the USA and EU. Kanamori and Motohashi(2007) compare the contributions of ICT to economic growth in Japan

and in South Korea. It is found for both countries that the importance

of ICT capital service growth for economic growth has been increasing.

The contribution of non-ICT capital service is much more significant in

South Korea than in Japan. Total factor productivity (TFP) growth of

the non-ICT sector of Japan is faster than that of South Korea. One may

derive the implication from the above observations that ICT application

in the non-ICT sector performs better in Japan than in South Korea.

Accordingly, in terms of the contribution of ICT to economic growth,the ranking sequence is the USA and EU, followed by Japan and then

South Korea. Convergence has been generally predicted in the literature

(Basu et al., 2003).

As Asian industrialized economies have very distinct social and eco-

nomic structures (Young, 1992), the study of the pattern of ICT develop-

ment in Japan and three newly industrialized economies, South Korea,

Hong Kong and Singapore, could potentially provide more understanding

about the constraints and preconditions of fully exploiting ICT advan-

tages. Thus, the central contribution of this study is a comprehensiveanalysis of the contributions of ICT to economic growth of these Asian

economies, using the growth accounting method. The study also implies

the possibility that the ICT revolution could be a source of potential

convergence2 between Asian newly industrialized economies (NIEs) and

leading economies such as the USA and Japan.

The chapter is organized as follows. The next section describes the

growth accounting model. The third section describes the data sources and

data estimation methodology. The fourth section reports the results from

the growth accounting model. The fifth section concludes.

MODEL DESCRIPTION

Following Oliner and Sichel (2000), a growth accounting model at the

national level starts with the production function:

P 3 Y 5 P 3 F A,K ict,K nict,E

P is the aggregate price level of the economy and Y is the output

level. Thus, P 3 Y gives nominal GDP. A is the technology term. K ict


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Information and communication technology and economic growth 23

is the ICT capital stock, K nict is the non-ICT capital, and E refers to

employment.

Total differentiation gives:

P 3dY

dt 5 P 3

0F

0A

dA

dt 1

0F

0K ict

dK ict

dt 1

0F

0K nict

dK nict

dt 1

0F

0E

dE

dt

Dividing both sides by P 3 Y and assuming Hicks-neutral technological

change,3 the above equation becomes:

P 3dY

dt

1

P 3 Y

51

P 3 Y

P 3 0F 3 A

0A

dA

dt

1

A 1

P 3 0F 3 K ict

0K ict

dK ict

dt

1

K ict

1P 3 0F 3 K nict

0K nict

dK nict

dt

1

K nict1

P 3 0F 3 E

0E

dE

dt

1

E b

5 A#

1 S K ict3 K ict

#

1S K nict3K nict

#

1S E 3E #

Y #

5 A#

1S K ict3 K ict#

1S K nict3K nict#

1S E 3E #

(2.1)

Equation (2.1) shows the decomposition of the growth rate of the real

GDP. A#

is the growth rate of total factor productivity (TFP). S K ict, S K nict

and S E are the nominal income share of ICT capital stock, non-ICT

capital stock and labour, respectively. K ict#

and K nict#

are the growth rates

of real ICT capital stock and real non-ICT capital stock, respectively. E

#

is

the growth rate of employment. The model can be easily extended to treat

real ICT capital stock as composed of two subcategories, namely tangible

ICT and software.

To obtain the estimation of real capital stock, the perpetual inventorymethod is adopted:

K t 5 I t 1 (1 2 d)K t21,

where I is the investment term and d the rate of depreciation rate.

Capital service is calculated by multiplying the real capital stock by its

rental price. The rental price of one unit of real capital stock is estimated

as follows:

Rk ,t 5 art 1 d 2 PA,t 2 PA,t21PA,t21 bPA,t21


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where r is the real net rate of return and PA is the asset price.

Following Jorgenson (2001), the change in labour quality is defined as

q#

5 E #

2L#

. That is, the difference between employment growth (E

#

) and

labour hour growth (L#

). Given E #

5 L#

1 q# , the decomposition of realGDP growth is:

Y #

5 A#

1S K ict*K ict

#

1 S K nict*K nict#

1S E * (L#

1q#

) (2.2)

The decomposition of the average labour productivity (ALP) growth is:

Y #

2L#

5A#

1S K ict* k ict#

1S K nict*k nict#

1 S E *q#

(2.3)

As already suggested by the previous literature, the accuracy of estimat-ing the contribution of ICT to economic growth depends critically on the

measure of the price index of ICT capital goods, as the speed of the decline

in the ICT price index will decide the value of real ICT capital stock as well

as the rental price, which determines the ICT capital service.

Data Description

The study is conducted at the national level. National account data, ICT

price data and ICT fixed capital formation data, which cover the periodfrom 1986 to 2006,4 are required. Since data for different economies were

collected from various sources, the consistency of measurement is assured

for all the four economies by using SNA93 statistical standards.5

National account data

Specifically, nominal GDP, real GDP, GFCF (gross fixed capital forma-

tion) at constant price and GFCF at current price were collected. For

Japan, these series were collected from the Statistics Bureau of Japan.

Additionally, the JIP 2006 database of ESRI (Economic and SocialResearch Institute) provided a benchmark real net capital stock and

capital service estimation.

For South Korea, nominal and real GDP data were collected from

the Bank of Korea. Nominal and real GFCF data and consumption of

fixed capital were obtained from the Organisation for Co-operation and

Development (OECD) STAN database. Information from the National

Wealth Survey has been used to provide benchmark year fixed capital

stock. The money market rate, which was obtained from the UN Statistical

Yearbook , is used as the real net rate of return to general capital stock.

For Hong Kong, national account data came from the CEIC database

for global emerging and developed markets. Real rate of return is the


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Information and communication technology and economic growth 25

merge of interbank overnight rate from the CEIC database and discount

window base rate from the Hong Kong Monetary Authority. Capital

stock per worker data and residential housing stock data were obtained

from the Penn World Table 5.6 to estimate the benchmark capital stock.Singapore national account data also mainly came from the CEIC data-

base. Real net rate of return to capital stock is money market rate from the

UN Statistical Yearbook . Corporate fixed capital stock data were from a

government-conducted corporate sector survey. Together with residential

housing stock data, they are used to estimate the benchmar

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