Competition, innovation and competitiveness in developing countries

217 Pages·1999·0.555 MB·English

by  OECD

D E V E L O P M E N T C E N T R E S T U D I E S
The competitiveness of firms in a global economic
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environment is an essential element in development O
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strategy, but simply creating an open economy will not PE
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suffice to stimulate competitiveness if innovation is ITIO
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lacking. This is the major finding of this cross-country and , IN
multi-industry study based on the experience of Brazil, N
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Chinese Taipei, India and Korea. A
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In developing countries and emerging economies, A
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which can be considered technological latecomers, C
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traditional industrial practices can be linked to policy M
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changes which foster innovation, but can equally result in TIT
IV
stagnation if the policy/practice mix is wrong. The case E
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studies demonstrate that where industrial habits tend to S
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reduce competitiveness, policies can make a difference, IN COMPETITION, INNOVATION
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especially where they are directed to managing the timing, V AND COMPETITIVENESS
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sequencing and type of market-opening steps. The book O
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IN IN DEVELOPING COUNTRIES
therefore opens a fresh debate on the industrial policies G
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which developing countries need to adopt in order to O
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compete and grow in a globalised economic environment. T
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BY
LYNN KRIEGER MYTELKA
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(41 1999 07 1 P) FF250 --
ISBN 92-64-17091-X 99
DEVELOPMENT CENTRE STUDIES
COMPETITION, INNOVATION
AND COMPETITIVENESS
IN DEVELOPING COUNTRIES
By
Lynn Krieger Mytelka
DEVELOPMENT CENTRE
OF THE ORGANISATION FOR ECONOMIC CO-OPERATION AND DEVELOPMENT
ORGANISATION FOR ECONOMIC CO-OPERATION
AND DEVELOPMENT
Pursuant to Article 1 of the Convention signed in Paris on 14th December 1960, and which came
into force on 30th September 1961, the Organisation for Economic Co-operation and
Development (OECD) shall promote policies designed:
– to achieve the highest sustainable economic growth and employment and a rising standard of
living in Member countries, while maintaining financial stability, and thus to contribute to the
development of the world economy;
– to contribute to sound economic expansion in Member as well as non-member countries in
the process of economic development; and
– to contribute to the expansion of world trade on a multilateral, non-discriminatory basis in
accordance with international obligations.
The original Member countries of the OECD are Austria, Belgium, Canada, Denmark, France,
Germany, Greece, Iceland, Ireland, Italy, Luxembourg, the Netherlands, Norway, Portugal, Spain,
Sweden, Switzerland, Turkey, the United Kingdom and the United States. The following countries
became Members subsequently through accession at the dates indicated hereafter: Japan
(28th April 1964), Finland (28th January 1969), Australia (7th June 1971), New Zealand
(29th May 1973), Mexico (18th May 1994), the Czech Republic (21st December 1995), Hungary
(7th May 1996), Poland (22nd November 1996) and Korea (12th December 1996). The Commission
of the European Communities takes part in the work of the OECD (Article 13 of the OECD
Convention).
The Development Centre of the Organisation for Economic Co-operation and Development was
established by decision of the OECD Council on 23rd October 1962 and comprises twenty-three
Member countries of the OECD: Austria, Belgium, Canada, the Czech Republic, Denmark, Finland,
France, Germany, Greece, Iceland, Ireland, Italy, Japan, Korea, Luxembourg, Mexico, the
Netherlands, Norway, Poland, Portugal, Spain, Sweden and Switzerland, as well as Argentina and
Brazil from March 1994, and Chile since November 1998. The Commission of the European Commu-
nities also takes part in the Centre’s Advisory Board.
The purpose of the Centre is to bring together the knowledge and experience available in
Member countries of both economic development and the formulation and execution of general
economic policies; to adapt such knowledge and experience to the actual needs of countries or
regions in the process of development and to put the results at the disposal of the countries by
appropriate means.
The Centre has a special and autonomous position within the OECD which enables it to enjoy
scientific independence in the execution of its task. Nevertheless, the Centre can draw upon the
experience and knowledge available in the OECD in the development field.
Publie´ en franc¸ais sous le titre :
CONCURRENCE, INNOVATION ET COMPE´TITIVITE´
DANS LES PAYS EN DE´VELOPPEMENT
THE OPINIONS EXPRESSED AND ARGUMENTS EMPLOYED IN THIS PUBLICATION ARE THE SOLE
RESPONSIBILITY OF THE AUTHOR AND DO NOT NECESSARILY REFLECT THOSE OF THE OECD OR OF
THE GOVERNMENTS OF ITS MEMBER COUNTRIES.
*
* *
(cid:211) OECD 1999
Permission to reproduce a portion of this work for non-commercial purposes or classroom use should be
obtained through the Centre franc¸ais d’exploitation du droit de copie (CFC), 20, rue des Grands-Augustins,
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book should be made to OECD Publications, 2, rue Andre´-Pascal, 75775 Paris Cedex 16, France.
Foreword
This publication was undertaken in the context of the OECD Development
Centre’s research programme on Globalisation and Regionalisation. The programme
seeks to assess the risks and benefits for both developing and OECD Member countries
from international economic opening.
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Table of Contents
Acknowledgements........................................................................................................ 6
Preface ...................................................................................................................... 7
Contributors.................................................................................................................... 9
Executive Summary........................................................................................................ 11
I Competition, Innovation and Competitiveness:
A Framework for Analysis
Lynn Krieger Mytelka................................................................................. 15
II Machine Tool Industries in India and Chinese Taipei: A Comparison
Ashok V. Desai, Marc Lautier and Hanumantha Charya ....................... 33
III Bio–Pharmaceuticals in Chinese Taipei and India
Rohini Acharya........................................................................................... 77
IV The Telecommunications Equipment Industry in Brazil and Korea
Lynn Krieger Mytelka.................................................................................115
V Petrochemicals in Korea and Brazil
François Chesnais and Hwan–Suk Kim...................................................163
VI Competition Policies and Innovation Practices: How the Two Relate
Lynn Krieger Mytelka.................................................................................205
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Acknowledgements
The papers in this volume have benefited immeasurably from comments provided
by Fabio Erber, Martin Fransman, Ulrich Hiemenz, Steffan Jacobsen, Charles Oman
and Sandra Thomas, who participated in an OECD Development Centre Workshop
held to discuss first drafts of these papers.
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Preface
Vigorous inter–firm price competition on domestic markets is a necessary part
of the foundation on which to build an economy’s ability to compete in international
markets. This view, long held by OECD countries, is increasingly shared by
governments in the large number of non–OECD countries that have undertaken the
sea change from highly inward-oriented to more outward-oriented, market-friendly
growth strategies over the last decade. The question many countries in the latter group
now face is: do trade liberalisation and domestic deregulation suffice as policies to
ensure vigorous domestic inter-firm price competition, or are other policies also
required to ensure that competition?
This question is particularly relevant for developing countries and the answer is
not obvious for several reasons. First, the problem of concentrated power structures
and uncompetitive domestic markets is often considerably more acute in developing
countries than it is in developed countries. Second, at the same time, because of the
relatively small size of firms in developing countries (compared to developed countries’
powerful multinational corporations), these countries widely perceive a need to promote
the concentration of capital in the hands of whatever local firms might be able to
compete in global markets. The liberalisation of trade policy in developing countries
and their attempt to compete in global markets has tended, if anything, to reinforce
this perception in recent years.
The present study addresses this crucial policy issue by introducing another
critical variable: innovation. Since competition in the current context of globalisation
is increasingly innovation-based, it is particularly important for technological
“latecomers” — a category to which most developing and newly industrialising
countries belong — to ask how innovation fits into the relationship between competition
and competitiveness. More precisely, how does competition affect innovation and
how does innovation relate to competitiveness in developing countries?
By focusing on the concrete experiences of Brazil, Chinese Taipei, India and
Korea in specific industries — machine tools, pharmaceuticals, telecommunications
and biotechnology — the study seeks to answer this question. Both “success” and
“failure” case studies illustrate that there are no simple answers. However, the study
highlights the importance for latecomers of continuous innovation over time — in the
way they produce as well as in what they produce — so that costs decline and quality
improves constantly. Latecomers thus need policies to stimulate the development of
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appropriate management and organisational techniques as well as the development of
a domestic science and technology base, however thin, that is closely linked to enterprises
and production. The study also underlines the importance of avoiding policy vacillations
that can easily undermine the stability that long–term deepening of industrial capabilities
requires.
Written by a diverse group of distinguished specialists headed by Professor
Lynn Mytelka, this study constitutes an important product of the Development Centre’s
research on Globalisation and Competition.
Jean Bonvin
President
OECD Development Centre
January 1999
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Contributors
Rohini ACHARYA is Senior Research Fellow in International Economics at the
Royal Institute of International Affairs, London, and former Programme Officer in
biotechnology at the International Federation of Institutes for Advanced Study (IFIAS),
Maastricht.
Hanumantha CHARYA is Corporate Economist with Hero Honda Motors Limited,
New Delhi, and formerly Economist at the National Council of Applied Economic
Research, New Delhi.
François CHESNAIS is Professor of Economics, Université Paris–XIII,
Villetaneuse, and former principal administrator in the Directorate of Science,
Technology and Industry at the OECD, Paris.
Ashok V. DESAI is Consultant Editor of the Business Standard, a financial
newspaper published from Delhi and Calcutta, and former Chief Consultant to the
Indian Ministry of Finance.
Hwan–Suk KIM is Assistant Professor, Department of Sociology, Kookmin
University, Korea, and former Head, Industrial Innovation Research Division, Science
and Technology Policy Institute (STEPI) of the Korea Institute of Science and
Technology (KIST).
Marc LAUTIER is Assistant Professor in Economics at the Université Paris–
VIII and former consultant in international development with the Association pour la
Promotion et le Développement Industriel, working in Thailand and Korea.
Lynn Krieger MYTELKA, currently the Director of UNCTAD’s Division on
Investment, Enterprise Development and Technology, in Geneva, was previously
Professor of Political Economy, Institute of Political Economy, Carleton University,
Ottawa, and a research director at the Centre de Recherches sur les Entreprises
Multinationales (CEREM), Université Paris–X, Nanterre.
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