Prof. Dr. Javier Revilla Diez Dr. Wenying Fu

Transcription

1 Prof. Dr. Javier Revilla Diez Dr. Wenying Fu

2 Project Background Our multidisciplinary consortium covers: 1) the informality continuum of governance and institutions facilitating agile firm organization in the GPRD; 2) the regional economic rationale of agile firm; 3) social dynamics that stabilise and smoothen regional agility. 2

3 Agenda Research Context and Aim Survey Data and Evaluation Empirical Results Conclusions and Limitations 3

4 Restructuring Challenge in China Rising Cost and high Inflation Rate Consumer Price Index: record high 5.4% in the first quarter of 2011 Production Price Index: rising to 7.3% in February, 2011 More trade barriers in the developed market high standards on safety and quality from foreign customers exploit the new market opportunities in the domestic economy A major challenge for China is to make its future development economically, socially and ecologically sustainable. Developing the country s innovation capacity is a prerequisite for escaping from a pattern of specialization characterized by intensive use of low-skilled labor and natural resources and a low level of technological capabilities. (OECD, 2007:59) 4

5 Innovation as a Strategy Innovation: Linear v.s. Interactive Process Innovation as linear process Science & technology policy focused on knowledge production R&D incentivized tax reduction, improving intellectual property rights and setting own technological standards Innovation as interactive process (Lundvall, 1992; Cooke et al., 1997; Howells, 1999; Revilla Diez, 2000; Smith, 2000; Asheim and Coenen, 2005) innovation milieu by Aydalot (1986), cluster theory by Porter (1990), national innovation systems by Lundvall (1992), regional innovation systems by Cooke et al. (1997), learning region by Asheim (1996) Knowledge exploitation and knowledge spillover: increasing returns to innovation investment 5

6 Innovation Systems in a Spatial Sense The RIS (Regional Innovation System) Approach INSTITUTIONAL & ORGANIZATIONAL dimension (Cooke et al., 1997): the supporting infrastructure that stabilizes the interactive learning process Supporting Infrastructure: formalized rules and laws as well as informal habits and methods Dynamic ability to meet the challenge of market change and organizational restructuring (Heidenreich, 2004) RIS emerges, develops and adjusts in respond to changes of external environment. 6

7 What does RIS imply in China? Source: own draft based on Cooke et al. (1997), Cooke et al. (2004) 7

8 What does Innovation imply in China? Incremental Innovation: access to knowledge & dissemination mechanism Characteristics of innovation in the Chinese context (OECD, 2005) 1.Transitional institutional system 2.Informality 3.Resource restriction on firm-level 4.Reliance on external sources for innovation 5.Weaker linkages between academia and industry 8

9 Three economic centres in China Westprovinzen Zentralprovinzen Nordostprovinzen Bohai-Region Küstenprovinzen Perl River Delta Yangtze-Delta 9 Source: accessed March 25, 2009

10 Regional Disparities in China 10

11 Regional Disparities on provincial level, Germany federal state level: 10, = 1992 Quelle: Yao 2009:223 11

12 R&D expenses in China in Billion Yuan R&D expenditure in % of GDP (2004) Quelle: Mu, Quan 2008:320 12

13 Perl River Delta and Hongkong front office, back factory -Model Electronics Industry 13

14 14 Quelle: InvestHK 2006:21

15 Hongkong, China Shenzhen, China 15

16 The Pearl River Delta in figures Quelle: Schiller, Meyer 2008:38 16

17 Migration Predominantly from western provinces Low migration flows within the coastal provinces Pearl River Delta as main destination Quelle: Huang, Luo 2009:198 17

18 Final markets Europe, North America, Japan, other countries HK survey: 71% n=103 PRD survey: 50% n=210 Sales Channels: Directly abroad 38% Sales Channels: via Hong Kong abroad or to China 28% Hong Kong Final market Hong Kong or end consumer unknown HK survey: 14% n=103 PRD survey: 13% n=210 Sales Channels: Directly to China 34% Pearl River Delta HK survey: 15% n=103 PRD survey: 38% n=210 People s Republic of China Fig 3.1 Market and Sales Channels of firms in HK and the PRD 18

19 General Research Aim Empirical study in the Pearl River Delta, China 1.the formation of interactive learning processes and its nature 2.the institutional elements of the regional innovation system 3.the spatial difference of RIS development Understanding of these issues is of great relevance to the release of innovation potential in the face of upgrading pressure in China. 20

20 Agenda Research Context and Aim Survey Data and Evaluation Empirical Results Conclusions and Limitations 21

21 Data Collection Questionnaire data of electronics firms PRD cities: Shenzhen, Dongguan, Huizhou, Heyuan Telephone & Fair visiting 422 firms in total 22

22 Agenda Research Context and Aim Survey Data and Evaluation Empirical Results Firm-level Evidence innovation behaviour Regional Insights RIS development Shenzhen and Donnguan Conclusions and Limitations 23

23 Theoretical Discussion The Proximity concept: promote trust and understanding (Kirat and Lung, 1999; Torre and Gilly, 2000; Torre and Rallett, 2005; Boschma, 2005, Menzel, 2008) Organizational proximity & Social proximity Firm Boundary Firm Boundary Domestic customer University Research Institutes Market agencies Social Proximity (Guanxi) Information &Knowledge Parent company Foreign customer Organizational Proximity Geographical Proximity 24

24 Data and Methods Data source: Standardized firm survey data; Mainly investigate the 359 electronics firms in the sample that undertake innovation activities Method 1. Cluster analysis to analyze the innovation behavior related to the use of organizational proximity and social proximity. Focus on the interaction with different partners that bears different proximities Organizational proximate partners: parent companies & foreign customers Organizational distant partners: domestic customers, universities and research institutions, sales agents 25

25 Elements of Cluster Analysis (from factor analysis) Remarks Total explained variance Triggering New Product Ideas (NPI) Obtaining Codified Knowledge (NCK) NPI_external partners NPI_internal efforts NPI_parent comp. & foreign NPCK_customer NPCK_parent comp. NPCK_self purchase Interacting with domestic customers, universities, research institutions and sales agents to gain innovation ideas Making internal learning efforts such as own ideas, license purchasing and reverse engineering Relying on parent companies or foreign customers to gain innovation ideas Interacting with foreign and domestic customers to get codified knowledge Interacting with parent companies to get codified knowledge Purchase equipment self 60% 85% Obtaining Tacit Knowledge (NTK) Interaction Method NPTK_active learning NPTK_passive from customer NPTK_passive from parent comp. NPInteraction _informal NPInteraction _formal searching Sending staff to business partners for training Receiving training and know-how from people sent by domestic and foreign customers Receiving training and know-how from people sent by parent company Interacting with innovation partners within Guanxi networks Interacting with innovation partners by searching via Internet and exhibition 74% 79% 26

26 Results of Cluster Analysis Socially embedded innovator Organizationally dependent innovator Lame innovator NPI_external partner NPI_internal NPCK_customer NPTK_passive from customer NPTK_active learning NPInteraction_informal NPInteraction_formal searching NPI_parent comp. & foreign NPCK_parent comp NPCK_self purchase NPTK_passive from parent comp Number

27 Data and Methods Method 2. Tobit regression to explore the exact relationship between the use of the proximities and product innovation performance by controlling for firmspecific characteristics Dependent variable: Average score of firm s evaluations (1-5 with increasing degrees of improvement) on the degree of improvement of production innovation performance product function expansion product categories upgrading Distribution of product innovation performance 28

28 Independent Variables Innovation Behavior Firm Characteristics Absorptive Capacity Indicators Behavior of using proximities Size Ownership Age Level of technical staff Level of Managerial staff CEO Education Development Capability Initial Product Technology Description Defined by the cluster analysis in the next part; included in the model as a series of dummy variables. Defined according to Chinese firm size standard, 1 as large firms with no less 300 million Yuan sales and no less than 2000 employee, otherwise as small and medium-sized with the value of 0 1 as firms with foreign participation (wholly owned or joint venture), 0 as firms with 100% domestic participation Years since establishment of the firm Percentage of technical staff that have bachelor degree or above multiplied by training frequency Percentage of managerial staff that have bachelor degree or above multiplied by training frequency 1 as CEO below bachelor degree 2 as CEO with bachelor degree 3 as CEO with graduate degree (master or doctor) 4 as CEO with bachelor or above combined with overseas experience 1 as having product development capability, 0 as not Defined according to International Standard Industrial Classification of all Economic Activities, Rev 3 1, 1 as producing low-tech products when starting business, 2 as producing medium-tech products when starting business; 3 as producing high-tech products when starting business 29

29 Regression result Independent variable (1)Product Innovation outcome (Average score of evaluation) (2)Product Innovation outcome (Average score of evaluation) 2.64*** (0.281) (0.001) (0.001) 0.16** (0.065) 0.52*** (0.188) 0.19 Constant 3.01*** (0.282) Level of technical staff Product (0.001) Innovation outcome INDEPENDENT VARIABLE (Average score of evaluation) Level of Managerial staff (0.001) CEO Education Socially embedded 0.16** (0.065) Development Capability vs. Lame 0.52*** (0.188) 0.37** 0.19 Medium tech vs. low tech (0.174) (0.174) Initial Product Innovation Organizationally 0.54** ** Technology High tech vs. low tech Behavior dependent vs. lame (0.251) (0.251) Overall effect * * -0.26** -0.26** Ownership Organizationally (0.127) (0.127) dependent vs Firm Size (0.293) (0.293) socially embedded Firm Age (0.010) (0.010) Number Organizationally of Observations 233 Organizationally dependent vs. socially dependent vs. Innovation Behavior Note: *p<0.10, **p<0.05, (0.246) embedded ***p<0.01. lame Lame vs. socially -0.37** Socially embedded embedded (0.170) vs. lame Prob > chi Number of Observations (0.234) 0.37** (0.170) 30

30 Results So, how is the development stage of the RIS in the Pearl River Delta? Socially embedded innovators & forming innovative synergies on the local scale Insufficient capacity to transform social asset into high innovation performance (yet?) Unprofitability of interaction leads to unstable innovative synergies Burgeoning yet immature Regional Innovation System, and Governance Infrastructure as stabilizing regional orders. 31

31 Agenda Research Context and Aim Survey Data and Evaluation Empirical Results Firm-level Evidence innovation behaviour Regional Insights RIS development Shenzhen and Donnguan Conclusions and Limitations 32

32 Theoretical Discussion Governance as determinant of innovation activities Two dimension of Regional Innovation System : (Cooke, 2004) Business superstructure (Business inter-relationships, including learning) Governance infrastructure (institutional and organizational) Governance infrastructure facilitates cooperation, organize interaction, reduces uncertainty and cuts transaction cost Governance infrastructure evolves according to the needs of market change and industrial organizational restructuring (Cooke et al., 2004). 33

33 Research Question Inter-city comparison: Shenzhen and Dongguan?? Dongguan Shenzhen Source: Own draft based on Cooke et al. (2004) 34

34 Development of Electronics Clusters: Shenzhen Story Dirigiste Approach (Source: Shenzhen electronics yearbook) Started with Compensation trade with Hongkong in 1980s focused on electronics Embedding large-scale foreign investment with large state-owned firms; Joint ventures are promoted Transfer of National Innovation System through the regionalization of stateowned research institutes and state-own firms Since early 1990s, transition to the Network Governance to support upgrading State-level strategic projects Shenzhen city government s technological foresight on preferred industries Entrepreneurs released from old NIS owing to privatization reform 35

35 Development of Electronics Clusters: Dongguan Story Grassroots Approach (Source: Guangdong electronics yearbook; Interviews in 2009) Started with Compensation trade of Garment industry with Hongkong in 1980s Taiwanese investment on electronics has been attracted in the mid 1990s Infrastructure support organized by township and village governments Vested Interests: Distribution of the processing earnings is negotiated between the town and village governments and foreign investors Competency Trap in the face of upgrading after 2000: Networked governance has been formed to attract large-scale high-tech investment Village and town governments lack the institutional competence 36

36 Some Basic Facts YEAR 2009 Shenzhen Dongguan Population 8912, ,000 Gross Domestic Product (billion Yuan) Industrial Output Value (billion Yuan) % of High-tech manufacturing sector 1 69% 39% Employment 6924, ,981 % of High-tech manufacturing and service sector 2 33% 19% Total R&D expenditures (billion Yuan) % of GDP 3.4% 1.1% R&D personnel share of R&D personnel per 1000 employees Firm above designated size* (YEAR 2009) Shenzhen Dongguan Share of domestic firm units 53% 25% Share of domestic firms output value 37% 16% Share of domestic firms added value 47% 15% * firms above designated size include all state-owned firms and firm with no less than five million sales 37

37 Some Basic Facts Output Value of Electronics Industry Unit: Billion Yuan 904 Shenzhen > 5 times Dongguan

38 Econometrical Evidence Large Sample Questionnaire Data: 140 product innovating firms in Shenzhen, 161 product innovating firms in Dongguan Tobit regression to investigate on the factors that foster innovation outcomes Dependent variable: Average score of firm s evaluations (1-5 with increasing degrees of improvement) on the degree of improvement of production innovation performance, i.e. product function expansion and product categories upgrading Shenzhen Data (biased distri.) Dongguan Data (biased distri.) 39

39 Independent Variables Innovation Behavior Firm Characteristics Absorptive Capacity Indicators NPI_external partners NPI_internal efforts NPI_parent comp. & foreign NPTK_active learning NPTK_passive from customer NPTK_passive from parent comp. NPInteraction _informal Size Ownership Age Level of technical staff Initial Product Technology Description Interacting with domestic customers, universities, research institutions and sales agents to gain innovation ideas Making internal learning efforts such as own ideas, license purchasing and reverse engineering Relying on parent companies or foreign customers to gain innovation ideas Sending staff to business partners for training Receiving training and know-how from people sent by domestic and foreign customers Receiving training and know-how from people sent by parent company Interacting with innovation partners within Guanxi networks Defined according to Chinese firm size standard, 1 as large firms with no less 300 million Yuan sales and no less than 2000 employee, otherwise as small and mediumsized with the value of 0 1 as firms with foreign participation (wholly owned or joint venture), 0 as firms with 100% domestic participation Years since establishment of the firm Proportion of technical staff with bachelor degree and above Defined according to International Standard Industrial Classification of all Economic Activities, Rev 3 1, 1 as producing low-tech products when starting business, 2 as producing medium-tech products when starting business; 3 as producing high-tech products when starting business 40

40 Econometrical Evidence INDEPENDENT VARIABLE Product Innovation outcome Whole Model Shenzhen Model Dongguan Model NPI_external partners 0.31*** 0.53*** 0.12 NPI_internal efforts 0.20** 0.39*** 0.05 NPI_parent comp. & foreign 0.25*** ** NPTK_active learning * 0.08 NPTK_passive from customer *** 0.16 NPTK_passive from parent comp NPInteraction_informal Educational Level of Technical Staff 0.004* Ownership (foreign firms=1) -0.30* -0.53* Firm Size (large firms =1) Firm Age * Initial Product Tech. Medium tech vs. low tech High tech vs. low tech ** Prob > R Number of Observations Note: *p<0.10, **p<0.05, ***p<

41 Results Dongguan Shenzhen 42

42 Results Revisted BUT BE CAREFUL, evolutionary investigation is subjective to context and sensitive to path-dependency The two cities in our analysis started the rapid industrialization with weak industrial base (little skills and industrial routines) Grassroots approach Development within the disposal of less competent local authorities; it requires institutional innovation (Abe, 2004) Dirigiste approach plurality of autonomous agents with respective strategic goals in the transition economy 43

43 Agenda Research Context and Aim Survey Data and Evaluation Empirical Results Conclusions and Limitations 44

44 Conclusions What about the signs of the formation of RIS? FDI has facilitated the intra-industry knowledge spillover in Guangdong province. Firms in PRD gradually resort to social proximity aside from organizational proximity in interactive learning processes, but it is not yet stable. What about spatial difference? Development of RIS varies in different locations in PRD What about institutional aspect of RIS in Chinese context? Dirigiste governance is more competent in providing innovation-related resources and adjusting the developmental path than the grassroots one. 45

45 Directions of Future Research Extend the investigation from inter-firm collaboration and cooperation to labor mobility and spin-off activities Link the effect of informal network in innovation with firm capability and external institutional environment Collect data to examine which process and with which partner informal network is applied Further investigation on other sectors that have different logics of industrial organization (pharmaceutical industry, optical industry, auto industry, etc.) 46

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47 Data Collection Response rate in different cities and contacting forms Telephone and posting Fair visiting and posting (or reclaiming on site) Shenzhen Dongguan Huizhou Heyuan Survey firms Contacted firms* Response rate 34% 58% 38% 50% Survey firms Contacted firms* Response rate 90% 64% Sample distribution Shenzhen Dongguan Huizhou Heyuan Survey firms Number of Electronics firms in It refers to Manufacture of Communication Equipment, Computers and Other Electronic Equipment above designated size include all state-owned firms and firm with over five million sales 48