Rigas Arvanitis y Zhao Wei
External sources of knowledge.The extremely rapid growth of China in the last twenty years was first due to a mushrooming of local TVEs16. Whereas the failure of large soviet-type conglomerates was the previous example of a “transition” economy (as well as in China), China experienced an extremely rapid growth of entreprises. But this divine surprise was short lived and growth was soon relayed by FDIs. First, FDI coming from the Chinese abroad (Hong Kong, then Taiwan), followed by Asian neighbours (Korea and Japan), and the US & European companies. The last flow of FDI from Japan, the US and Europe was looking both at entering the “huge” market and exploiting the low cost, whereas the first flow was more interested in lowering costs. None of this had the objective of helping the development of technology or the innovation system of China. On the contrary, FDI run companies were rather tuned at producing low-end products (shows, assemblage electronics). But progressively, the strong world competition and globalization benefited China. Local owned firms entered in the markets. But it also made the Chinese economy strongly dependent on foreign sources of capital and technology. As in other Asian countries, learning by external sources has been instrumental in the creation of the new economic dynamics.
Chinese companies are quick learners and they engage actively in looking abroad for sources of knowledge. It is this linkage to external sources of knowledge that makes the difference. And this external linkage has to be monitored by internal learning. The epitome of this strategy in China is Huawei, a telecomm equipment provider based in Shenzhen, with 12.000 personnel of which more than 9.000 are engineers, that has three research centers: one in Shenzhen, one in Dallas and a common lab in Sweden with Ericsson. Apart from those firms, like Huawei, which have had the special favours of the state because of strategic reasons, the basic question is then: can Chinese firms, like the Korean and Taiwanese did before them, enter the technology markets? Many more examples seem to point toward a positive answer, but on the whole these are somewhat rare examples in such a large country. The example of JL seems to pint to a new emerging learning model.
Local authorities in China have been active in creating businesses. Jean Oi has coined the term “local state corporatism” to qualify them (Oi 1995). Local governments play an important role in the promotion of local businesses, in publicity, in giving access to official documentation, in negotiating better prices for the costs of the land, for helping manage problems with the authorisations and fines an entreprise has to pays for pollution or for “unlegal” use of workers (an inevitable situation given today’s legal systems on housing permits in China), giving support for acquisition of passports and visas. They never give direct economic support, but choose among the entreprises their favourites. They also know they can be accused of corruption so they manage their relations to entreprises in a very cautious ways. Local officials can all to benefit from the presence of entreprises either by playing the game and participation individually in the companies or by using the economic successes as a promotion inside the structure of the Communist Party. Local state corporatism exists, no doubt, and has been part of the 19 rapid growth of new businesses (and, some say, of corruption). Cities (shi) and towns (zhen) have acquired a real autonomy in the last twenty years, the richer the more autonomous. Whereas this seemed a perfect engine for the promotion of the “private” sector in China, and wealth that goes with it, it is an inadequate political structure for the promotion of an innovation system. An innovation system, by definition relies on multiple links, a strong network of institutions, across countries, across sectors, and across disciplines. This challenges strongly the regional competition and autonomy of local governments in China. The fragmentation of the economic space of China is not only problematic for business and internal transport; it is also a hindrance for the innovation system.
Industrial cluster recently appeared, in particular in the World Bank literature, a new sort of panacea, because everywhere in Asia, such clusters appear to have included high performer companies (Yusuf and Evenett 2002). We extensively studied a small cluster in a traditional industrial sector (Sun and Xu 2002). In this cluster, in the town of Shuikou, relations with competitors are very few, and providers are also quite few. Most production relations appear in case of need they help each other occasionally (mainly when a very large contract cannot be produced totally in the same factory). Providers are mostly resellers of raw materials. Factories located locally produce all parts that can be fitted in the faucets except for the central valves of the faucets, which are imported from another region. Although officially, Shuikou is an industrial cluster, it is difficult to say that the links are organic inside the cluster; the cluster is by no means a system of innovation. In higher technology clusters things may be different –everybody cites the case of Haidian in Beijing. But in many cases, clusters appear as an administrative denomination not an organic cluster with strong linkages between enterprises.
National or regional innovation policy. The Chinese central government has promoted innovation as one of its central aims –and after much recommendations by foreign evaluators. But it S&T policy is oriented towards either large entreprises in “strategic” sector (aviation, electronics, communications, aeronautics) or in basic and engineering sciences. Technology policy is very real in China but is a central government business. Those research centres that were disappeared or reformed in the eighties have become instrumental in this technology policy or –if not disappeared—have become entreprises themselves. The number of entreprises created by the large universities is impressive. But when one goes to the middle range local productive structure, one finds an absence of policies. Recently, Guangdong Government has promoted through its S&T department the creation of innovation centres in industrial clusters. More than twenty such centres have been created which, at the beginning, mean money for infrastructure and buildings and some two or three qualified persons. After one or two years, the innovation centre needs to find its own resources, usually selling consultancy in product design, electronic networking, quality management or business management issues. Somehow competition rises among government offices and sometimes it is difficult to avoid some overlapping measures. But this local policy has little if nothing to do with the national technology policy, and the local authorities have little interest and no means to make these two ends meet. As a result learning from companies is difficulty socialized to other entreprises. So it is difficult to speak of a regional innovation space, al20 though no doubt there is a real regional industrial space.
This picture that we try to outline shows that the growth of China cannot be reduce to one simple figure, for example the growth of large enterprises (Nolan 2001) or the explosion of Townships and Village Entreprises (TVEs). China’s peculiarities come from the existence of the large state-owned entreprises, the effectively state-owned banking system and the fact that the emerging productive systems have been produced on top of, or around, the state owned industrial system. But the more extraordinary feature is the creation of the private sector, including the collective owned entreprises, what we call the emerging productive sector (Wei, Miège and Arvanitis 2003). This feature by itself is intriguing. Moreover, econometric models of the growth of China have repeatedly fallen in erroneous predictions, greatly due to unverifiable assumptions on the functioning of the enterprises (Huchet 2002). We propose, thus, to look at the detail of the enterprises functioning, in the region that has seen their most rapid and early emergence.
What we found was both surprising and very usual.
Surprising was the rapidity with which enterprises are set up, the rapidity of the learning process and also the speed at which entreprises top on barriers to their growth.
Surprising is the process of industrialization by itself: twenty year ago, nobody would think that Guangdong would become an industrial region as opposed to a commercial region. Surprising is also the difficulty entreprise have in getting in touch with their foreign clients on a permanent basis. Also, for most small enterprises competition is very harsh and is limited to a price competition, it is practically never a competition based on quality or a specificity of the offer. More usual is the fact that enterprises learn and grow in a manner that could be seen elsewhere, say South Korea, Taiwan, Thailand or even India. The way its appears when sociologists, economists and managers take the pain of looking at the detailed learning processes.